A Court of Appeal judgment handed down this week provides useful assistance to product liability insurers and manufacturers in defending product liability claims. The case of Howmet Limited v Economy Devices Limited confirms that if someone continues to use a product despite knowing it is defective, it is done so at the user’s own risk and the manufacturer of the product cannot be found to be at fault in the event of damage caused by the defect.
The facts of the case
The claimant factory owner brought a claim against the manufacture of a “thermolevel” device which was supposed to detect when the level in heated tanks of liquid fell below a certain depth because in such circumstances there was a risk of fire. The claimant’s factory had been destroyed by fire when one of the thermolevels had failed. The claimant claimed damages in negligence and for breach of statutory duty under the Electrical Equipment (Safety) Regulations 1994.
At first instance the Judge found that although the thermolevel was flawed and unsafe, the claimant had prior knowledge of the malfunction because on two previous occasions the thermolevel had failed and had caused a fire (but in those instances the fire had been extinguished before any damage had occurred). Hence the Judge held that the claimant had failed to establish that the thermolevels caused the fire because they had not been relying on the thermolevels (since they knew they were faulty).
The claimant appealed on the basis that the judge had erred in attributing to it the knowledge of its employees and, in any event, in his analysis of the claims.
The Court of Appeal held that the employees who had knowledge of the defect were sufficiently senior enough (the facilities manager, who was a senior member of the team, the plant engineering manager, and the plant engineering technician) such that their collective knowledge could be attributed to the claimant.
On that basis, the Court of Appeal found that if an end user voluntarily continues to use a product after it has been alerted to its dangerous condition then it does so at its own risk. In such circumstances the effective cause of the fire is not the defect in the product, but rather the failure on the part of the end user to put in place a system to protect the tank once it knew of the malfunction.
The court also found that the manufacturer had no control over the product once it had been delivered to the end user and could not control the way in which it was used. As a result the claim failed because causation had not been established.
In addressing the breach of the safety regulations and hence the duty imposed by s.41 of the Consumer Protection Act, the court found that no liability arose under the statute because it was established law that there should be no difference in the principles of causation between a case in negligence and a case for breach of statutory duty under the Act.
What this means for you
This case may prove a useful tool in defending claims where a claimant has knowingly used a defective product and has suffered injury as a result. The decision supplements the case of Lambert v Lewis (1981) where the court held that liability arose not from the defective design of the product but from the claimant’s own negligence in continuing to use the product in a patently unsafe condition after discovery of the defects. In considering this point the court will need to be satisfied that the employee with knowledge of the defect is of sufficient seniority in the company to fix the company as a whole with knowledge.
This is a causation argument which could, potentially, defeat claims in negligence, contract and under the Consumer Protection Act 1987 – albeit I suspect that courts will be more reluctant to find that a ‘consumer’ (as opposed to a commercial entity) had full knowledge of the risks involved in continuing to use a defective product.
Interestingly, the Court of Appeal considered whether contributory negligence under the Law Reform (Contributory Negligence) Act 1945 applied in the circumstances (since the claimant had argued that there ought to be a reduction in damages rather than a dismissal of the claim). The Court of Appeal said that contributory negligence was not appropriate. It is worth noting in any event that a defendant cannot rely on arguments of contributory negligence in cases where it is alleged to have breached a strict contractual duty, e.g. by supplying a product that is not of satisfactory quality.