CLIENT ALERT
OCTOBER 2011
We are in a period of massive change! Two new sets of laws are now upon us. The first deals with the new Australian Consumer Law and the second deals with the Personal Property Securities Act.
Australian Consumer Law (“ACL”)
On 1 January 2011, the ACL came into effect. Most organisations and businesses are now ‘consumers” for the purposes of the ACL. As a result of the commencement of the ACL consumers now have strengthened rights against a manufacturer or supplier in the event that goods or services are supplied that does not meet requirements, called consumer guarantees.
Under the ACL, consumer guarantees are now given to consumers which include:
• Guarantee that goods are of an acceptable quality;
• Guarantee that goods are reasonably fit for any disclosed purpose;
• Guarantee that goods match their description;
• Guarantee that spare parts and repair facilities are reasonably available for a reasonable period after goods are supplied. (An exemption applies where a manufacturer gives reasonable notice, in writing, to a consumer that repair facilities or parts would not be available for a specified period).
Goods will be of acceptable quality where they are fit for all of the purposes for which goods of that kind are commonly supplied, acceptable in appearance and finish, free from defects and are safe and durable as a reasonable consumer, fully acquainted with the state and condition of the goods, would regard as acceptable.
If a defect is considered minor, the manufacturer has the right to say how the defect will be remedied. However, where the defect is considered major, it is for the consumer to say how it will be remedied.
Under the ACL, if there is a major failure to comply with a consumer guarantee, a consumer can elect to receive compensation, or a refund, amongst other remedies.
A major failure to comply with a consumer guarantee will occur where the relevant goods:
• would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure;
• is substantially unfit for the purpose for which they are commonly supplied;
• depart significantly from a sample or description;
• is not fit for a purpose that was disclosed to the supplier; or
• is unsafe.
A consumer also has the ability to recover damages for reasonably foreseeable loss or damage suffered as a result of the failure to comply with a guarantee.
Under the ACL, any person, business or corporation who makes false or misleading representations or breaches the other anti-competitive rules, exposes themselves to criminal penalties of up to $1,100,000 for corporations or $220,000 for individuals.
If a supplier or manufacturer makes a false or misleading representation about a consumer guarantee in supplying goods to consumers, they may be liable for penalties of:
• a fine of $1.1 million for companies;
• a fine of up to $220,000 for individuals; and
• in some cases, prosecution.
Express warranties that are provided with goods must contain prescribed information, and from 1 January 2012, contain a written statement to consumers explaining that they have legal rights against the manufacturer. This is to ensure that consumers are aware of their rights.
All businesses should review and update their trade practices compliance procedures and manuals, existing contracts with dealers and suppliers, and to review warranties/guarantees to ensure compliance with the new laws.
Personal Property Securities Act (“PPSA”)
In 2009 the PPSA became law, but is expected to come into force by 1 February 2012.
The PPSA is a radical departure from the traditional way in which security is taken over personal property. Most businesses will be affected.
Under the PPSA, apart from real property and some other exceptions, all tangible and intangible property is treated as personal property. If a party asserts an interest in personal property because it has a security interest, it will need to perfect its interest, generally by registering that interest.
Under the PPSA, a number of existing registers are replaced by a single national register. The PPSA will apply to debentures, chattel mortgages, retention of title, hire purchase, leases exceeding one year, assignments of debt, consignments, and security trust deeds. The PPSA also fundamentally alters the way in which “retention of title” issues are presently dealt with.
Under the PPSA, the concept of “title” is irrelevant. A party that has a perfected security interest that was registered earlier than another party with a similar interest, has the highest rights to the property despite it not being the owner.
The application of the PPSA is both critical to business and far more complex than what is written above.
You should seek expert legal advice to conduct a due diligence on your business to ensure that you are ready under both the ACL and PPSA.
Bryant & Bryant work closely with Thomsons Lawyers to provide due diligence, advice and solutions to businesses grappling with these issues. Please call Sandy Constantine, Graeme Wolf or Darren Price for further information on 03 9600 1000.