29/01/2015
If a consumer purchases a product which fails to do what the manufacturer states that it will, are the manufacturers of the product liable for losses suffered by the buyer if that product is found to be defective? Can a manufacturer’s representations be blindly followed, even after it becomes clear that they are false?
This issue was discussed in Howmet Ltd v Economy Devices Ltd & Ors late last year. The case involved a large company (the Claimant) with a £100 million turnover and a small manufacturing business with a turnover of around £50,000 per year. A customer brought a case against the manufacturer for breach of duty in the common law areas of tort, contract and for breaching their statutory duties under the Electrical Equipment (Safety) Regulations 1994.
Thermolevel probe failure - £20 million worth of fire damage
In February 2007 the customer suffered over £20 million worth of damages when a fire swept through their factory in Exeter. The Claimant alleged that the fire was caused by the failure of a probe on a thermolevel manufactured by the Defendant. The thermolevel was supposed to detect a loss of liquid in the hot water tank and deactivate the heater to the tank. On the day of the fire a combination of events led to the heater being switched on at a time when the tank was virtually empty of liquid. The probe, being out of the water, should have isolated the heating units in the tank. It failed to do so, the heaters overheated, set fire to the tank, and the fire quickly spread to the factory.
Prior to the devastating blaze which brought about the legal proceedings, there had been two other separate instances where the thermolevel failed to deactivate the heater. After the second instance the Claimant ordered another device (a float switch) for the tank to act as an additional safety measure. This had not arrived when the final fire occurred.
The Defendant argued that the losses sustained by the Claimant were not within the scope of any duty owed by the company, that the fire was caused by actions preformed by the Claimant which broke the chain of causation and that there was nothing wrong with what they stated was a simple and relatively low grade product. As an alternative defence, the Defendant stated that the Claimant contributed to the negligence which caused the blaze.
Did the Defendant Breach Their Duty of Care?
In the Technology and Construction Court Edwards-Stuart J held that the Defendant had breached their duty of care by failing to implement an adequate system for testing their thermolevels. The Court also stated that the product itself was clearly badly designed. Although the Defendant had breached their duty to the Claimant, the claim for damages failed for want of proof of causation. The Court applied the principle found in Nulty v Milton Keynes Borough Council where the Court of Appeal held that the civil ‘balance of probability’ test meant:
“no less and no more than that the court had to be satisfied on rational and objective grounds that the case for believing that the suggested means of causation occurred was stronger than the case not so believing As the Court of Appeal explained in that (Nulty) case, it is not enough for the court to choose between, say, three causes - each of which taken by itself is an unlikely cause - and then, as a matter of logic, to conclude that the least unlikely must be the probable cause of the loss”.
The Claimant was unable to show why the thermolevel had failed or why the hot water tank’s heater overheated, therefore causation could not be established on the balance of probabilities.
The Court also rejected the claim under the Electrical Equipment (Safety) Regulations 1994. It was not satisfied that the Claimant was entitled to or in fact relied on the thermolevel as a low level cut-out due to the acknowledgement of the two separate instances in which the thermolevel failed prior to the major fire, and the fact that the Claimant had ordered the float switch as an additional safety measure following the second failure of the Defendant’s device.
Can a Customer Rely on a Manufacturer’s Product Claims?
Through technical specifications and instructions, the Defendant represented the following about the thermolevel:
- it was a safety device designed to switch off the heater when the liquid fell below a particular level
- it would therefore prevent heater burn-outs or fires caused by evaporation, leaks or withdrawing the probe
- the thermolevel left the factory preset for operation in water, and
- if the thermolevel was not immersed in liquid it would turn off the heater and make the display flash.
Nothing in the technical specifications and instructions warned that:
- the thermolevel should not be used as the only safety device or that it was not a failsafe (meaning the system would remain safe even if the device failed)
- if the sensitivity control was turned too far in one direction it would fail to deactivate a heater regardless of the water level (and it was inadequate to explain how to set the sensitivity control), or
- over time the accuracy of the sensor would reduce (referred to as ‘voltage drift’)
On the other hand, no-where was it stated that the device was failsafe or that it complied with any particular legislation. There was no CE mark (indicating compliance with EU safety laws) on the product.
Even though the Claimant had greater resources when compared with the Defendant, Edwards-Stuart J commented that they could still rely on the Defendant’s representations found in their literature, instructions and testing procedures. However, he also concluded that after the device started to show it was not deactivating the heaters to the tank in the way the manufacturer’s representations stated it was supposed to, then the Claimants should have ceased relying on the device as a safety measure and tested the product’s reliability themselves.
The issue of manufacturers’ warranties was also discussed in the case of Stacey (t/a the New Gailey Caravan/Motorhomes Centre) v Autosleeper Group Ltd. Although the facts of the case are different, the decision highlighted that the Courts will not be overly sympathetic to sellers who try to blame customers for relying on their warranties. Often customers are dependent on the expertise of the trader; therefore, in the interests of smooth commerce, if a seller states something to be so regarding their own product, it is right that the customer can rely on this, up to a point. If it becomes clear, as in the case of Howmet Ltd v Economy Devices Ltd & Ors that the product is not performing in the way it should they must conduct their own investigations or be seen by the Courts as contributing to their loss.
Although the best way for a consumer to protect themselves against losses caused by a defective product is to independently test the manufacture’s warranties themselves, this is not commercially practical in many cases. The Courts seem to conclude that a consumer can rely on a manufacturer’s representation, in so far as it is not contradicted or challenged.
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Fisher Scoggins Waters is a leading construction, engineering and manufacturing litigation firm, specialising in disputes and disasters. For further information on this article or any of our litigation services, please contact us on +44 (0) 207 993 6960.