News and Information
Commercial changes in the wind
New requirements from 1 January 2012
Consumer protection laws have been harmonised to ensure that consumers acquiring goods and services have identical rights in all States and Territories in Australia.
Businesses must comply with the Australian Consumer Law (ACL) (based on the consumer provisions of the old Trade Practices Act) when supplying goods and services to customers.
Under the new provisions, if your business provides a “warranty against defects”, it must be accompanied by information that complies with ACL Regulation 90.
A “warranty against defects” is a representation communicated to a consumer, at or around the time of supply, to the effect that if the goods or services are defective, the business will repair or replace the goods, rectify the services or part of them, or wholly or partly compensate the consumer.
From 1 January 2012 (“start date”), a document given to consumers communicating this warranty must include this prescribed text:
Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure. (“mandatory text”)
There are other mandatory requirements under Regulation 90 regarding information required to be given to consumers, such as how consumers may access their rights.
Unfortunately, there is no grace period for compliance, and therefore no opportunity after the start date to “sell through” existing stocks of goods with packaging containing a non-complying warranty.
If your business imports goods into Australia, you will need to check documentation bearing the manufacturer’s warranty against defects.
Australian suppliers will be in breach of the ACL if the warranty documents supplied with the imported goods do not include the mandatory text and other prescribed information.
If the overseas manufacturer cannot change the warranty documents, you will need to amend or replace the warranty document with a compliant document prior to supplying the goods to Australian consumers.
What can you do to comply?
We recommend that businesses review their product warranties, product packaging, documentation and website information (if applicable) – anywhere consumers receive information about a product warranty against defects – to check compliance with Regulation 90.
Have you reviewed your terms and conditions recently?
As you will no doubt be aware, the ACL has changed the law regarding the guarantees and remedies that suppliers and manufacturers must provide to consumers in respect of the supply of goods and services (Consumer Guarantees). These consumer rights apply irrespective of any express warranty provided by a supplier or manufacturer.
A supplier is anyone in trade or commerce (including a not-for-profit business or activity) who supplies goods or services to a customer (whether by sale, exchange, lease or hire).
A manufacturer is a person or business that makes or puts goods together or has their name on the goods (and includes an importer of goods if the maker of the goods does not have an office in Australia).
Consumer guarantees apply to:
> Any goods or services costing up to $40,000;
> Goods or services costing more than $40,000, which are normally used for personal, domestic or household purposes; or
> A vehicle or trailer (any cost), that have been purchased after 1 January 2011. (Goods and services purchased before this date are covered by the previous statutory warranties under the Trade Practices Act 1974 and the various State Fair Trading Acts).
Goods are not acquired as a consumer if they are acquired for the purposes of re-supply, or for the purpose of using them up or transforming them in trade or commerce. So, for example, a manufacturer who supplies goods to re-seller does not owe the consumer guarantees to the reseller. The reseller will owe the consumer guarantees to the end purchaser.
However, manufacturers must comply with any express warranties made by them, provide a guarantee that it will take reasonable action to ensure that facilities for repair of the goods are reasonably available. They are also liable to compensate consumers if their goods or services do not meet the consumer guarantee as to acceptable quality and description (other than if the fault is due to an act or omission by a person other than the manufacturer).
A term in a contract which has the effect of excluding, restricting or modifying the Consumer Guarantees is void, so it is important that businesses review their terms and conditions for compliance with the ACL.
Personal Property Securities Act
The Personal Properties Securities Act (PPSA) provides for sweeping changes to the law regarding personal property securities. It is a single law replacing provisions in over 70 Commonwealth and State laws governing personal property. It also replaces the existing rules governing of priorities of secured parties in insolvency with a statutory registration system, the Personal Property Security Register (the PPS Register)(governing the order in which creditors have access to the property in an insolvency situation).
The Act affects all business and individuals who provide a ‘security interest’ over their ‘personal property’. Although the commencement date has been delayed a number of times, it is anticipated the Act will be in force from 30 January 2012.
The Act is complex and cannot be summarised in this brief article, but we have highlighted some key issues below.
A ‘security interest’ arises where there is a transaction that secures the payment or performance of an obligation in connection with an asset (collateral). A security interest includes the common securities taken over a company’s assets, such as a fixed and floating charge, mortgage, chattel mortgage
and the like. However, the Act draws in many other transactions (some of which cannot be easily recognised as security interests) that have previously not been the subject of a registration system, for example:
> Retention of title (where seller supplies goods but title does not pass until payment is received);
> Consignments (where the seller retains title but places goods for sale with an agent);
> Leases of goods and equipment with a term exceeding one year;
> Conditional sales, hire purchase arrangements;
> Assignment of intellectual property where the assignor is entitled to an assignment back in some circumstances.
‘Personal property’ can be loosely described as property other than land and certain other prescribed rights set out in the Act. It includes tangible goods and equipment of all types (including inventory) and extends to intangible property, for example intellectual property, trade debts, contractual rights and shares.
What is Intellectual Property under the PPSA?
‘Intellectual property’ (IP) under the PPSA can be loosely summarised as the rights of the owner of an Australian and overseas:
> registered design;
> patent;
> registered trade mark;
> registered plant breeders’ right;
> circuit layout rights; or
> copyright.
Rights in relation to unpatented inventions, patent applications and unregistered trademarks are excluded from the definition of IP and are therefore not subject to the PPSA regime. The definition of IP does not cover other intangibles associated with intellectual property, such as brand names, business names, domain names and company names (unless they are registered as trade marks). Nor does it cover trade secrets or confidential information.
An ‘intellectual property licence’ (IP Licence) is also personal property under the PPSA. An IP Licence is not a security interest - it is personal property that a business can use as collateral to grant a security interest (for example, a bank might take a mortgage over the right to receive royalties under a patent licence).
You cannot register IP or an IP licence on the PPS Register - only a security interest granted over the IP or IP License can be registered.
Businesses and individuals should continue to register their rights in relation to IP licences on the registers maintained by the relevant Registrar (trade marks, patent, designs).
Financiers will be geared up for the new legislation, as they are in the business of taking security over assets. However, if you are a business that supplies goods on credit terms or hires or leases equipment where there is an obligation for the customer to return the equipment if payment is not made or at the end of the term, you may be holding a security interest in those goods or equipment which should be registered to avoid a later registered interest taking priority.
Holders of a security interest over personal property may register their interest online on the Register. Failure to register a security interest may result in that security interest being postponed to the rights of a later registered security holder, or of a purchaser or lessee of the personal property in good faith, without notice of the unregistered security.
We recommend that businesses review their trading terms and agreements to identify if there are any terms or contracts that give rise to a security interest, and, if so, ensure the terms fit within the framework of the PPSA.
Purchasers of IP or assignees of an IP license should check the PPS Register to investigate whether any security interests are registered against the proposed acquisition prior to purchasing or taking assignment of the asset. Purchasers and assignees will take the personal property subject to any security interest registered on the PPSR.
Leonie Heaton, Lawyer
Phillips Ormonde Fitzpatrick Lawyers
