Iphone 5 dilemma, read description?

I bought an iphone 5 last year in november (i also got extended warranty) it was good for a few weeks and then the home button stopped working, so i went to the apple store and they gave me a 'new' iphone 5, i didn't even look at it, as soon as i got it a put it in its cover.about a week ago i got a new cover so when i took the cover off my iphone 5 (black) i noticed there were many scratches on the frame of the phone and even a couple of dints. So i went to the Apple store today and the lady refused to give me a new one even though i have extended warranty, she said i shouldve came when i got the phone, but i didn't even look at it because i put it straight into the cover when i got it and only noticed the scraches very recently.
i thought she was legally required to give me another one having read the apple terms and conditions about iphone 5 warrenty, the folowing is specificly stated in the terms of service in the first paragraph on the apple webside:
Our goods come with guarantees that can't be excluded under 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.
-APPLE WEBSITE

here is the site where i got it from.
http://www.apple.com/...-warranty/

so who's right me or the women in the store, should i have been allowed to get a new phone?

Well, you could possibly have a valid argument there.
Look at it from their side as well. They could think, after you took your replacement from them, you were careless and got scratches onto your phone. Now that you don't like to see scratches on your phone you want a new one. Imagine how many people could fake a legit reason like yours to take advantage of Apple.

I too had a situation like yours some time ago. If I had gone back to the store the same day and told them they had given me bad merchandise, they would have complied. However, I was lazy and a week passed-by by the time I had energy to lift up my *** and go to the store. But I know it would be foolish of me to go then, because according to them a lot could have happened to my phone's cosmetics in the one week I used it. I thought I'll just suck it up.

However, if you really want a new phone now, your best bet would be to damage your silent button or some other thing and go to them. No guilt.