Recent amendments to the Australian Consumer Law (ACL) which came into effect on 18 December 2020 have expanded the scope of what constitutes a "major" failure under the consumer guarantee regime. A good will be deemed to have a major failure if it:
- is unsafe;
- departs from the description or sample model;
- is substantially unfit for a common or specific purpose, and the defect cannot be easily and quickly repaired; or
- would not have been bought by a reasonable customer knowing the nature and extent of the failure.
Importantly, a consumer's rights to a remedy depend on whether a fault with a good amounts to a major or minor failure. Where the fault is deemed to be a major failure, a consumer has the right to choose whether to have the good repaired, replaced or refunded from the supplier. And as of 1 July 2021, the monetary threshold for the definition of consumer will rise from $40,000 to $100,000.
Under the new changes, multiple minor failures together may now amount to a major failure, if it has a significant impact on the customer's overall use of the product's core functions. The key question is to ask whether a reasonable consumer would still have chosen to purchase the product (either at all or over an alternative) if they had known that multiple defects would occur within the period for which they owned the product. It is not relevant whether repairs have been made for any of the minor failures.
To an extent, there were already examples of the Courts taking this approach under the previous law. For example, the Federal Court recently found that an RV with many minor, cosmetic and mostly repairable defects constituted a major failure. These defects included poor joinery, bed supports, missing screws, misaligned lights, poor stitching and a failed lifting apparatus. Even though each individual fault was minor, the cumulative effect of the faults over the relevant period was found to have a "significant impact on the customer's overall use of the vehicles" with the effect that the vehicles were deemed to have a major fault entitling the consumer to a full refund of the purchase price of the vehicles.
The amended laws seek to remove any doubt that this approach is what was intended by the Parliament and mean that importers and retailers should expect to see more complaints and requests for refunds from customers. They should update their complaints process, and monitor compliance to avoid breaching the ACL. This may involve updating repair and refund guides to account for multiple minor failures and informing retailers of the changes.