10. Product Liability

10.1 Introduction

The English law relating to product liability is a complex amalgam of common law and statute law (with an EEC Directive also floating in the background). The principal statutory provisions are of course contained within Part I of the Consumer Protection Act 1987 (CPA). The common law contribution largely consists of rules of contract law and tort law. In this paper consideration will not be given to the relevant rules of contract law, such as the satisfactory quality provisions under the Sale of Goods Act 1979. Instead, concentration will be focused upon the relevant rules of the law of tort and upon Part I of the CPA.

10.2 The Law of Tort

The origins of the contribution of the law of tort to product liability can be traced back to the famous case of Donoghue v Stevenson [1932] AC 562. Lord Atkin stated that:

“A manufacturer of products, which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination, and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumer’s life or property, owes a duty to the consumer to take that reasonable care.”

Although this statement of principle constituted a significant improvement upon the law prior to Donoghue, it suffered from a number of restrictions which made it an unsatisfactory basis for the development of the modern law. It was often very difficult for a plaintiff to prove that the manufacturer of the product was at fault in the manufacture of the product. It could also be very difficult to prove that the defect occurred in the course of the manufacturing process (see Evans v Triplex Safety Glass Co Ltd [1936] 1 All ER 283) or that the defect in the product was the cause of the damage to the plaintiff. As we shall see, many of these difficulties have been alleviated by the enactment of the CPA.

But there remains at least one situation in which a plaintiff may wish to resort to the common law rather than bring her case under the CPA. Such a situation arises were the defect lies in the product itself and there is no personal injury or damage to other property of the plaintiff. In such a case the plaintiff cannot bring an action under the CPA because s.5 (2) provides that a defendant shall not be liable in respect of the “loss of or damage to the product itself or for the loss of or damage to the whole or any part of the product which has been supplied with the product in question comprised in it”.

However it is possible to recover damages in the tort of negligence in respect of the cost of repairing a defect in the product itself in certain exceptional situations. An example of such a phenomenon is Junior Books v The Veitchi Co Ltd [1983] 1 AC 520. However Junior Books was interpreted extremely restrictively by the House of Lords in D & F Estates v The Church Commissioners [1988] 3 WLR 368. See also the landmark decision of the House of Lords in Murphy v Brentwood DC [1991] IAC 398, which affirms the approach adopted by the House of Lords in D & F Estates and overrules the earlier decision of the House of Lords in Anns v Merton London Borough Council [1978] AC 728. Lord Bridge stated that damages in tort do not generally extend to the cost of repairing a defect in the product itself. Such a claim lies, if at all, in contract. Lord Bridge stated that:

“[if] the hidden defect in the chattel is the cause of personal injury or of damage to property other than the chattel itself, the manufacturer is liable. But if the hidden defect is discovered before any such damage is caused, there is no longer any room for the application of the Donoghue v Stevenson principle. The chattel is now defective in quality, but it is no longer dangerous. It may be valueless or it may be capable of economic repair. In either case the economic loss is recoverable in contract by a buyer or hirer of the chattel entitled to the benefit of a relevant warranty of quality, but is not recoverable in tort by a remote buyer or hirer of the chattel.”

This statement of principle does not close the door completely on the possibility of recovering damages in tort for the cost of repairing a defect in the product itself. But such a claim can only be brought if the plaintiff can bring herself within the scope of Junior Books. Junior Books has been subjected to an extremely restrictive interpretation. In D & F Estates Lord Bridge stated that:

“the consensus of judicial opinion, with which I concur, seems to be that the decision of the majority is so far dependent upon the unique, albeit non-contractual, relationship between the pursuer and the defender in that case and the unique scope of the duty of care owed by the defender to the pursuer arising from that relationship that the decision cannot be regarded as laying down any principle of general application in the law of tort or delict.”

See to similar effect:

Muirhead v Industrial Tank Specialities Ltd [1968] QB 507

Aswan Engineering Establishment Ltd v Lupdine Ltd [1987] 1 All ER 135

Simaan General Contracting Co v Pilkington Glass Ltd (No. 2 ) [1988] 2 WLR 761 and

Greater Nottingham Co-operative Society Ltd v Cementation Piling and Foundations Ltd [1988] 2 All ER 971.

10.3 Property and Other Property

The distinction which we have been seeking to draw between damage to property and damage to other property is important, not only to the common law of negligence, but also the CPA (s.5 (2)). There is little English authority on this point. In Aswan Engineering Establishment Ltd v Lupdine Ltd [1987] 1 All ER 135, at 152 Lloyd LJ conceded that, in the vast majority of cases, it was not difficult to distinguish between damage to property and damage to other property of the plaintiff. But he did provide some examples where the distinction was not so obvious. What is the position where a tyre, which was bought with the car, bursts and damages the car; where a defect in the cork renders a bottle of wine undrinkable or a buyer purchases lupdine in pails and, as a result of a defect in the pails the lupdine is lost? In all these cases the “provisional view” of Lloyd LJ was that “there is damage to other property of the plaintiff, so that the threshold of liability is crossed.” (See further Owles “Damage to Property” (1988) NLJ 771).

In reality the distinction is one of the policy tools which the courts use to limit the scope of liability for negligence. Therefore boundaries of the distinction can seem somewhat arbitrary.

10.4 What is a Product?

In this section of the paper attention will be switched to the provisions of the CPA. The first question which must be asked is “What constitutes a product for the purposes of the Act?” A “product” is defined in s.1(2) of the Act as:

“any goods or electricity and (subject to subsection (3) below) includes a product which is comprised in another product, whether by virtue of being a component part or raw material or otherwise”.

“Goods” is further defined in s.45 as including:

“substances, growing crops and things comprised in land by virtue of being attached to it and any ship, aircraft or vehicle”.

This definition should be contrasted with the definition contained in Art 2 of the EEC Directive which states that:

“‘product’ means all movables, with the exception of primary agricultural products and game, even though incorporated into another movable or into an immovable. ‘Primary agricultural products’ means the products of the soil, of stock-farming and of fisheries, excluding products which have undergone initial processing. ‘Product’ includes electricity.”

A number of difficult issues are likely to arise in relation to the definition of product. One is the extent to which the following are likely to be caught by the Act:

(a) books,

(b) advice, and

(c) computer software.

(See further Whittaker “European Product Liability and Intellectual Products” (1989) 105 LQR 125 and Walter v Bauer Sup 439 NYS 2d 821).

Care should also be taken in relation to buildings. Although they are prima facie within the scope of s.45(1), s.46(3)-(4) excludes liability under the CPA where goods are supplied by virtue of the creation or disposal of an interest in land. In such a case a plaintiff must seek to invoke the Defective Premises Act 1972 or common law liability.

10.5 When is a Product Defective?

There are broadly speaking two approaches which could be adopted to the issue of “defectiveness”. On one view it could be said that a product is defective when it does not live up to the expectations of consumers (“the contract standard”). On the other hand a product could be said to be defective when the product is in a condition which is unreasonably dangerous to persons or to their property (“the tort standard”) (see further on this issue Clark “ The Conceptual Basis of Product Liability ” (1985) 48 MLR 325). The 1987 Act appears to be closer to the tort standard than the contract standard because s.3(1) provides that there is a defect in the product if:

“the safety of the product is not such as persons generally are entitled to expect; and for those purposes “safety”, in relation to a product, shall include safety with respects to products comprised in that product and safety in the context of risks of damage to property, as well as in the context of risks of death or personal injury”.

Section 3(2) continues by providing that:

“In determining for the purposes of subsection (1) above what persons generally are entitled to expect in relation to a product all the circumstances shall be taken into account, including –

(a) the manner in which, and purposes for which, the product has been marketed, its get-up, the use of any mark in relation to the product and any instructions for, or warnings with respect to, doing or refraining from doing anything with or in relation to the product;

(b) what might reasonably be expected to be done with or in relation to the product; and

(c) the time when the product was supplied by its producers to another; and nothing in this section shall require a defect to be inferred from the fact alone that the safety of a product which is supplied after that time is greater than the safety of the product in question.”

Section 3 should be contrasted with Art 6 of the EEC Directive which states that:

“1. A product is defective when it does not provide the safety which a person is entitled to expect, taking all circumstances into account, including:

(a) the presentation of the product;

(b) the use to which it could reasonably be expected that the product would be put;

(c) the time when the product was put into circulation.

2. A product shall not be considered defective for the sole reason that a better product is subsequently put into circulation.”

The definition of defectiveness is likely to give rise to a number of practical problems:

(a) to what extent can a producer discharge his obligations under the Act by putting a warning on his products? Can he render an otherwise dangerous product safe by an appropriate warning? (See further Clark “ Strict Liability for Product Defects – the Failure to Warn Issue ” (1983) JBL 130).

(b) to what extent will a cost benefit calculus enter into the decisions of the courts? and

(c) to what extent does “defectiveness” depend upon standards which approximate to those at issue in a common law negligence action? (See further Newdick “ The Future of Negligence in Product Liability ” (1987) 103 LQR 288).

10.6 Who is Liable under the Act?

The general principle is contained in s.2(1) of the Act which states that:

“where any damage is caused wholly or partly by a defect in a product, every person to whom subsection (2) below applies shall be liable for the damage.”

Section 2(2)-(5) state that:

(2) this subsection applies to –

(a) the producer of the product;

(b) any person who, by putting his name on the product or using a trade mark or other distinguishing mark in relation to the product, has held himself out to be the producer of the product;

(c) any person who has imported the product into a member State from a place outside the member States in order, in the course of any business of his, to supply it to another.

(3) Subject as aforesaid, where any damage is caused wholly or partly by a defect in a product, any person who supplied the product (whether to the person who suffered the damage, to the producer of any product in which the product in question is comprised or to any other person) shall be liable for the damage if –

(a) the person who suffered the damage requests the supplier to identify one or more of the persons (whether still in existence or not) to whom subsection (2) above applies in relation to the product;

(b) that request is made within a reasonable period after the damage occurs and at a time when it is not reasonably practicable for the person making the request to identify all those persons; and

(c) the supplier fails, within a reasonable period after receiving the request, either to comply with the request or to identify the person who supplied the product to him.

(4) Neither subsection (2) above nor subsection (3) above shall apply to a person in respect of any game or agricultural produce if the only supply of the game or produce by that person to another was at a time when it had not undergone an industrial process.

(5) Where two or more persons are liable by virtue of this Part for the same damage, their liability shall be joint and several.

10.7 What are the Defences Available under the Act?

It is for the person who is alleged to be liable for any defect in a product who must make out any of the defences which are contained in s.4 of the Act. The defences contained in the Act are as follows:

(a) that the defect is attributable to compliance with any requirement imposed by or under any enactment or with any Community obligation; or

(b) that the person proceeded against did not at any time supply the product to another; or

(c) that the following conditions are satisfied, that is to say –

(i) that the only supply of the product to another by the person proceeded against was otherwise than in the course of a business of that person’s; and

(ii) that s.2(2) above does not apply to that person or applies to him by virtue only of things done otherwise than with a view to profit; or

(d) that the defect did not exist in the product at the relevant time; or

(e) that the state of scientific and technical knowledge at the relevant time was not such that a producer of products of the same description as the product in question might be expected to have discovered the defect if it had existed in his products while they were under his control; or

(f) that the defect –

(i) constituted a defect in a product (“the subsequent product”) in which the product in question had been comprised; and

(ii) was wholly attributable to the design of the subsequent product or to compliance by the producer of the product in question with instructions given by the producer of the subsequent product;

(2) In this section “the relevant time”, in relation to electricity, means the time at which it was generated, being a time before it was transmitted or distributed, and in relation to any other product, means:

(a) if the person proceeded against is a person to whom subsection (2) of section 2 above applies in relation to the product, the time when he supplied the product to another;

(b) if that subsection does not apply to that person in relation to the product, the time when the product was last supplied by a person to whom that subsection does apply in relation to the product.

The defence which has attracted the most interest is the “developments risk” defence or the “state of the art” defence (s.4(1)(e)). It is interesting to contrast s.4(1)(e) with Art 7 of the EEC Directive which states that:

“The producer shall not be liable as a result of this Directive if he proves . . . . (e) that the state of the scientific and technical knowledge at the time when he put the product into circulation was not such as to allow the existence of the defect to be discovered.”

It can be seen that there are significant differences between the wording of the two provisions. The wording of the defence is crucial:

(a) what is “scientific and technical”?

(b) what is “knowledge”?

(c) how discoverable must the defect be?

(d) what happens to the ultra-sensitive user?

(e) what happens where there are no comparators to assess the “state of the art”?

(f) what is the relationship between the developments risk defence and the definition of defectiveness?

(g) how significant is the shift in the burden of proof?

(h) what is the relationship between this defence and negligence based standards?

10.8 What Counts as Damage?

We have already seen that damages cannot be claimed under the Act in respect of the defect in the product itself, but damages can be claimed for death or personal injury or any loss of or damage to any property (including land) (s.5(1)). In relation to damage to property the following provisions also have effect:

(3) A person shall not be liable under section 2 above for any loss of or damage to any property which, at the time it is lost or damaged, is not –

(a) of a description of property ordinarily intended for private use, occupation or consumption; and

(b) intended by the person suffering the loss or damage mainly for his own private use, occupation or consumption.

(4) No damages shall be awarded to any person by virtue of this Part in respect of any loss of or damage to any property if the amount which would fall to be so awarded to that person, apart from this subsection and any liability for interest, does not exceed £275.

(5) In determining for the purposes of this Part who has suffered any loss of or damage to property and when such loss or damage occurred, the loss or damage shall be regarded as having occurred at the earliest time at which a person with an interest in the property had knowledge of the material facts about the loss or damage.

10.9 Contracting Out

Section 7 of the Act prohibits excluding or restricting liability under the Act. The Act does not appear to exclude the transfer of liability from one person to another, as in Thompson v T Lohan (Plant Hire) Ltd [1987] 2 All ER 631 (contrast Phillips Products Ltd v Hyland and Hamstead Plant Hire Co Ltd [1987] 2 All ER 620). It should be pointed out that “notice” is defined in s.45(1) as meaning a “notice in writing” and it has been argued that the effect of this is that it is possible to contract out of the CPA by an oral notice.

10.10 Limitation

The limitation provisions are contained in a schedule to the Act. Basically, there is a three year limitation period which runs from the date of discoverability but that limitation period is subject to a ten year long-stop which runs from the date at which the product was first put into circulation.

10.11 Practical Advice to the Business Client

The phrase Product Liability is a fairly meaningless concept to the average UK manager. They may have heard about some of the goings on in the United States, relating to such inanities as “poodles in Micro-waves”. But as far as he is concerned it is not a problem that he has historically had to face. Such exposure as they may have had may involve occasional visits to Insurance Brokers, payments of premiums, a few rude letters and the very occasional visit to court, resulting in a small payout.

A company’s legal advisers will do their clients a grave disservice, if they were to suggest that historic patterns of legal exposure will be repeated in the future. Moreover legal exposure in itself is very much the tip of the iceberg of a problem should a product related crisis arise. The corollary of product liability is obviously product safety and in an increasingly safety conscious culture, environmental and safety issues are coming to the fore.

In one case where inadequate instructions led to a DIY enthusiast injuring himself in putting together a piece of garden furniture, there was £2,000 in the way of legal damages, but this was dwarfed into insignificance by the fact that the company lost many millions of pounds in that the large DIY chains refused to stock the product until the necessary changes were made. In another case involving a similar type of product, adverse remarks on the Esther Rantzen Show had a catastrophic effect on the product line concerned.

Lawyers should not pretend to be engineers, quality insurance inspectors, or the like, but the legal profession must look to protecting the client’s commercial position as well as its strict legal position. Advice to clients on these issues increases the client’s perception of a firm’s potential involvement in the business.

Solicitors can have a role in auditing from a legal and commercial point of view, the operations of client companies to maximise product safety and to limit any exposure to legal and commercial risks. This audit forms the basis of the rest of the presentation in terms of directing the client towards the area of its business that may require or benefit from your input in explaining to the Company how safety and liability may be affected.

10.11.1 A product safety audit

The purposes of the product safety and liability audit are to:

(i) assess the company’s exposure to product safety and liability risks, particularly under the developing EC legal regime; and

(ii) recommend action to be taken for limiting such exposure.

This involves interviews with the managers who are best able to provide accurate information about the company’s arrangements through which product liability risks can now arise. Since many of their arrangements were established before the legal changes, one would fully expect the audit to uncover many areas which need to be tightened up so that adjustments can be made to comply with the new requirements.

The product safety and liability audit is divided into 10 audit sections (i.e. 1-10). Each audit section is divided into a number of audit topics (e.g. 5.1. – 5.11).

Sections 1–4 cover general management and company administration responsibilities, such as may rest with the chief executive, company secretary, personnel director and insurance manager.

Sections 5–10 cover departmental management responsibilities, such as scientific, production, marketing, sales and distribution.

For the purposes of scheduling audit interviews following this seminar the company should identify, for each of the sections, the “responsible manager” (who is knowledgeable about most of the company’s arrangements covered by the topics under a particular section) and any other managers to whom particular section) and any other managers to whom particular topics may need to be referred.

As an example, the manager with responsibility for and knowledge of most of the topics under section 5 (R & D) will need to be interviewed. He or she is the “responsible manager” for section 5 and is asked to consider who else may be ore knowledgeable about any particular topic, or aspects of a topic, so that they can be available on the day of interview to deal with any questions referred to them.