Product Liability Limitation

Guest authored post

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There are generally three routes to remedy where one is alleging a product has caused an injury. The traditional negligence claim; the Consumer Protection Act 1987(CPA) and where the claim is pursued against the supplier rather than the manufacturer, under the Consumer Rights Act 2015 (as a replacement to the Sales of Good Act 1979 and the Supply of Goods and Services Act 1982). In cases where some form of credit has been used to finance the purchase then one may add in a like for like claim against the funder under s75 Consumer Credit Act 1974.

Negligence of course involves the three year limitation period beginning with the date of supply or more usually the date of knowledge. The date of knowledge is defined in relation to personal injury claims as the time at which the claimant or should reasonably have become aware of the damage, the defect and the identity of the producer.

The other consumer contract legislation claims carry the same limitation.

There are two separate limitation periods applicable to claims under the Consumer Protection Act 1987 (CPA). On the basis that the claim is an action for personal injuries, then it is determined by s 11A of the Limitation Act 1980 that a claim must be commenced within three years from whichever is the later of:

(1)        the date on which the cause of action accrued; or

(2)        the date of knowledge of the injured person or, in the case of loss of or damage to property, the date of knowledge of the claimant or (if earlier) of any person in whom his cause of action was previously invested.

The second, and arguably more importantly limitation period (actually an extinguishing clause rather than a defence) is that described in Schedule 1, Part I, paragraph 1 to the CPA. It amends s 11 of the Limitation Act 1980 (actions in respect of personal injuries) and inserts a new s 11A:

‘‘ (1)      This section shall apply to an action for damages by virtue of any provision of Part I of the Consumer Protection Act 1987.

(2)        None of the time limits given in the preceding provisions of this Act shall apply to an action to which this section applies.

(3)        An action to which this section applies shall not be brought after the expiration of the period of ten years from the relevant time, within the meaning of section 4 of the said act of 1987; and this subsection shall operate to extinguish a right of action and shall do so whether or not that right of action had accrued, or time under the following provisions of this Act had begun to run, at the end of the said period of ten years.’’

There are three important features to note in relation to the 10-year period:

(1)        it is an extinguishing period;

(2)        date of supply; and

(3)        infants and patients.

Extinguishing Period

As with the limitation periods in the Montreal Convention 1999 in relation to claims arising out of air travel, this limitation period is not a defence, carrying with it a discretion on the part of the court to enforce it but it is an extinguishing clause. It removes the right to bring a claim. It therefore takes precedent over the issue of the consumer’s date of knowledge and reflects a situation in which in some cases an injury, particularly, for example, a cancer, may not appear for a long period of time after the original supply of the product.

While this may provide considerable comfort to manufacturers and suppliers of products and their liability insurers, it is of cold comfort to claimants who through no fault of their own find themselves outside of the 10-year limit and without a remedy under CPA 1987.

The EC is actively looking at the efficacy if the Directive and its relevance in the 21^st Century. Those representing the victims of products have all argued that the long stop period is unfair for minors, protected persons [1] and victims of pharmaceutical and medical devices where the injury may take many years to develop. This has been evident in recent medical device cases where prostheses were fitted and were later the subject of a recall by the manufacturer and the relevant licensing authority because of failure of the product. However because it was actually supplied, in that it left the factory, more than 10 years earlier, the claimants had lost the possibility of a remedy under the Act. It remains to be seen whether such a provision can be Article 6 compliant.

The High Court ruled in Wilson v Beko [2], it is not possible to circumvent the limitation periods of the Product Liability Directive and the 1987 Act 1987 by bringing a claim for breach of statutory duty of safety regulations made under Part II of the CPA.

In Wilson, the claimants who were all victims of washing machines catching fires in their homes, sought to argue that they could bring a strict liability claim for breach of statutory duty of the Electrical Equipment (Safety) Regulations 1994 under section 41(1) of the CPA, even though a claim under Part I of the CPA (enacting the Product Liability Directive) was not possible because of the 10 year longstop. Section 41(1) on its face makes breach of safety regulations made under Part II of the CPA actionable. The claimants argued that claims under section 41(1) were different in nature from those Product Liability Directive/ Part I of the CPA. The claim had very significant implications beyond electrical goods as a very wide range of products are subject to safety regulations under Part II of the CPA.

Knowles J ruled that Part I of the CPA and the Directive both provide for an exhaustive system of liability within their scope. He accordingly ruled that, in accordance with the Marleasing principle, safety regulations made under Part II of the CPA had to be read down so as to preclude a claim for breach of statutory duty insofar as the claim would otherwise fall within the scope of the Product Liability Directive. 

Date of supply

It is important to note that ‘date of supply’ which is at the heart of the longstop period is not necessarily the date that the consumer receives the product but is usually the date it is put into circulation. However, where a product which is said to be defective is the result of an assembling of various components at the time of surgery then this too may be ‘supply’. However in terms of circulation then in the case of a medical device, for example, it can be a matter of several weeks, months or in some cases years before the product is actually implanted into the consumer.

The CPA provides that the time when the product is put into circulation may vary according to who is being pursued. For a producer, an own brander or an importer into the EU then the time is when that producer supplied the product to another. For a supplier who has secondary liability, the time is when the product was last supplied by a producer, own brander or importer into the EU. In the modern world, manufacturers and suppliers are often part of a network of international companies made up of subsidiaries and parent companies which means that the question of when a product is put into circulation can be a vexed one. This was the main matter of concern in the case of O’Byrne v Sanofi [1] an alleged vaccine-damaged infant case.

Moreover, what if you later find that the defendant you sued is actually the wrong one and by the time you find the correct identity the limitation period has expired? This was a side effect of the vexed issue of ‘supply’ in O’Byrne and had been initially considered in Horne Roberts v SmithKline Beecham [2].

Here the claimant alleged injury as a result of the MMR vaccine and commenced proceedings in August 1999, claiming that the vaccine he received in June 1990 was defective. He sued Merck & Co Inc. However, in August 2000 it was discovered that the vaccine had in fact been manufactured by SmithKline Beecham plc.

In February 2001 the claimant applied to substitute the correct defendant. The Court of Appeal eventually ruled that although the 10 years had expired, it would grant the application. The claimant had argued that it had always intended to sue the producer of the vaccine. The court accepted that the Directive did not expressly deal with the situation of a mistake in the identity of the defendant, but noted in the preamble: ‘liability should expire after a reasonable length of time, without prejudice to claims pending at law’. Consequently although the correct defendant was unaware of the litigation before the application, the court relied on the same wording in Art 11 (concerning limitation) that the claimant’s rights would only be extinguished ‘without prejudice to claims pending at law’. As the proceedings themselves had been commenced in time it decided that there was no conflict with the scope of the Directive.

Parliament incorporated the 10-year limit as part of the complex and interrelated provisions of that Act, which included the plain provisions of s 35 of the Limitation Act 1980. It was not for the courts to exclude s 35 in such cases when Parliament had not decided to do so. The test was whether the intended party could be identified by reference to a description that was specific to the particular case. Protection was given to an unsuspecting defendant by the exercise of the court’s discretion under s 35 of the Limitation Act 1980. The claimant always intended to sue the manufacturer of the identified vaccine and that was sufficient to give the court the power to substitute the true manufacturer under s 35 of the 1980 Act and CPR, r 19.5.3 Moreover because the claimant was part of a group action, the judge at first instance had exercised his discretion because the new defendant was already facing a number of cases.

In O’Byrne the High Court, Queen’s Bench Division referred both this issue and that of the question of the wrong defendant for a preliminary ruling to the ECJ concerning the interpretation of Art 11 of the Directive.

The High Court wished to know at what time a product may be considered to have been put into circulation. The additional factor here being that the first transfer of the allegedly defective product took place between two companies in the same group of companies and the court was asked to determine whether a transfer within a group amounts to putting a product into circulation.

Article 11 of the Directive provides:

‘‘Member states shall provide in their legislation that the rights conferred upon the injured person pursuant to this Directive shall be extinguished upon the expiry of the period of 10 years from the date in which the producer put into circulation the actual product which caused the damage, unless the injured person has in the meantime instituted proceedings against the consumer.’’

The defendants were the producers of the vaccine while Merieux UK Limited, an English company, was a wholly owned subsidiary of Aventis Pasteur and acted as a distributor in the United Kingdom.

On 18 September 1992 the second defendant had sent a consignment of the vaccine to Merieux, received on 22 September. Some time before or after 7 October 1992 part of that consignment was sold by Merieux to the Department of Health and delivered by Merieux to a hospital at the request of the Department of Health, who in turn supplied it to the surgery in question, who in turn vaccinated the claimant in November 1992.

On 2 November 2000 the claimant brought proceedings for compensation against Merieux claiming that they were the producer of the product. On 7 October 2002 a second action was brought against Merieux on the basis that the claimant only became aware during the Summer of 2002 that the producer was in fact the second defendant and not Merieux. The second defendant argued that since it had placed the product on the market by consignment to Merieux on 18 September 1992 and who had received it on 22 September 1992 this second action brought on 7 October 2002 was outside of the extinguishing 10-year period. It was the claimant’s case, however, that the product was not put into circulation until it was supplied by to the hospital nominated by the Department of Health and that was after 7 October 1992 and therefore the case should remain active. The court was therefore asked to consider whether the product was put into circulation:

Subsidiary issues that the court had to examine were where, as is the case here, proceedings were instituted against one company in the mistaken belief that it was the producer of the product when in fact the producer was another company, was it permissible for a member state under its national laws to confer a discretionary power on its courts to treat such proceedings as ‘proceedings against the producer’ within the meaning of Art 11 of the Directive. Does Art 11 therefore permit a member state to confer a discretionary power on the court to allow the second defendant to be substituted for the original defendant in circumstances where the period of 10 years has expired, where the relevant proceedings were issued in the first place before the 10-year period and no proceedings were issued against the second defendant before the expiry of the 10-year period?

The opinion of the Advocate General, Geelhoed was delivered on 2 June 2005 in which he recommended to the court his interpretation of the date on which a product is put into circulation. He noted that putting a product into circulation, despite its importance, is not actually defined in the Directive. It was thought when the Directive was produced that this was self-explanatory ‘in the ordinary meaning of the words’. According to the European Commission’s Explanatory Memorandum to the Directive, normally a product has been put into circulation where it has been started off on the chain of distribution. The Advocate General in reaching his conclusion reminded himself that the purpose of the Directive was to create a balance between the interest of consumers and those of producers and therefore this balance should be taken into account in interpreting the phrase. The Advocate General recognised that the determination of the moment at which the period of strict liability starts should be as clear and objective as possible.

‘‘It cannot be too early (the manufacturing process may not be complete), or too late (the product may be somewhere in the chain of distribution). It will be contrary to the wording of the Directive for the relevant ten year period to start at the moment the retail supplier puts the product on sale, since Article 11 of the Directive refers clearly to the “producer”. It was argued by the Claimant, the Commission and the Italian Government that “as long as a product is within the group control over the product remains with the producer”.’’

In this case the defendant argued that the manufacturing process was complete and that the products left the second defendant’s sphere of control when it was sent to Merieux. After the product was sold and sent to Merieux the second defendant was no longer able to alter or modify it without calling the product back. However the Advocate General said:

‘‘consumers have an interest too, which is that a producer should not be able to manipulate the length of the liability period by way of its internal organisation. Therefore, I do not agree with the argument that a transaction within a group should be treated simply the same as a transaction with a third party.’’

He therefore reached the conclusion ‘thus, the period of strict liability should start at the moment at which the producer voluntarily relinquishes control over the product by transferring it for commercial reasons to someone unrelated to the group to which the producer belongs’ [4].

In relation to the second and third questions the Advocate General noted that of course a consumer may sue any supplier of the product when the producer cannot be identified and the supplier fails to inform the consumer within a reasonable time of the identity of the producer or of the person who supplied him with this product. ‘It is clear that if an injured person has mistaken commenced proceedings against a person who is not the producer … the ten-year period is not interrupted [5]. The Advocate General noted in this case the producer and the supplier belonged to the same group of companies but were separate legal entities.

‘‘if the supplier is erroneously sued as the producer, he should immediately inform the suing party as to the identity of the producer, particularly where the supplier is the subsidiary of the producer, as in the present case. If he were to fail to do so, by Article 3 (3) of the Directive he should/could be treated as the producer” [6].

“It would be unacceptable if the victim’s claim were to be rejected because the limitation period had expired, which might be the case if the supplier, erroneously sued as the producer, neglected to provide the information known by it as to the identity of the producer within a reasonable time” [7].

In those circumstances the Advocate General’s opinion was that it was permissible for a court to treat the proceedings as being proceedings against the producer when the supplier knew who the producer was and could have informed the claimant within sufficient time to protect the 10-year period. He therefore set out the answers that he recommended should be given to the High Court:

‘‘a product is put into circulation from the moment at which it is transferred by a person or a company over whom the producer exercises effective control to a person or company over whom the producer does not exercise such control.’’ [8].

and:

‘‘Where proceedings … are instituted against a supplier within the 10 year period … in the mistaken belief that the supplier was the producer of the product when in fact the producer was another company within the same group of companies to which both the supplier and the producer belong, the provisions (of their) Directive … permit the Court seised to treat such proceedings as proceedings against the producer within the meaning of Article 11 and the supplier knew the identity of the producer and was in a position to inform the Claimant thereof in a reasonable time and in any event before the expiry of that 10 year period.’’ [9].

However when the First Chamber of the Court of Justice of the European Communities gave its ruling on 9 February 2006 [10] it did not wholly adopt the Advocate General’s opinion. To begin with on the issue of substitution the court held that it is for the national court to determine the conditions in which substitution can take place, bearing in mind the definition of a producer under Art 3 of the Product Liability Directive. It considered that national courts need to undertake a case by case examination of the facts, looking in particular at the relationship between different entities to determine whether the transfer of a product between them amounts to putting a product into circulation.

There still remained a significant question mark because the House of Lords (now the Supreme Court) was unhappy with the judgment of the ECJ, and in June 2008 [11] the court adjourned the proceedings involving the substitution of one defendant for another pending receipt of a form of words for a reference to the ECJ seeking clarification of the meaning of its judgment [12].

The original reference was for a preliminary ruling on the words ‘instituted proceedings against the producer’ in Art 11 of the Directive. The House of Lords in the majority, were unhappy that the answer from the ECJ was not clear as to whether it was consistent with Art 11 for the domestic court to be able to say that proceedings started against someone described as the producer should count as having being started against the real producer, where in fact the person named as the defendant was a mistake and was not the producer.

The second defendant who was being now joined in the proceedings submitted that the ECJ’s answer was to be interpreted as meaning the same as the Advocate General’s proposed but discarded answer. Namely that no substitution was possible unless somebody deemed by Art 3 of the Directive to be the producer had been named as the defendant in the original proceedings. It was in the application of the second defendant that if there was doubt on the meaning of the ECJ judgment then the House of Lords should refer the matter back to Europe.

Lord Hoffmann took a fairly robust view and perhaps at first glance an obvious one that if the ECJ had intended to give the answer proposed by the Advocate General it would have said so. Lord Hoffmann took the view that the ECJ was disregarding that answer by saying that in some circumstances proceedings which were obviously intended to be proceedings against the producer but which used the wrong name could be treated by national procedural law as having being properly brought against the producer so long as the proceedings could plausibly be regarded as having actually been brought against the producer. However the majority view of the Lords was that the ECJ judgment was not so clear and obvious as to leave no scope for any reasonable doubt. There was no escaping a conclusion that a further reference to the ECJ was required.

The Grand Chamber delivered its judgment on 2 December 2009 [13]. The answer in response to the second reference did not follow either of the interpretations of its judgment on the first reference which had been advanced before the appellate committee. However, this time there was no ambiguity or uncertainty:

‘‘Article 11 of Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products must be interpreted as precluding national legislation, which allows the substitution of one defendant for another during proceedings, from being applied in a way which permits a “producer”, within the meaning of Article 3 of that directive, to be sued, after the expiry of the period prescribed by that article, as defendant in proceedings brought within that period against another person.’’

It was now clear that once the 10-year period since the product was put into circulation (supplied), the right to sue that producer has been extinguished. In view of this the respondent accepted that he could not use s 35 of the Limitation Act as a basis for substituting one company for another as the defendant in these proceedings.

The Supreme Court held that the ECJ was concerned to show how the principle which it had just laid down would apply in relation to the substitution. To judge by the Advocate General’s analysis the only way in which that principle could be maintained and yet the substitution take place would be if, by suing the first defendant, the claimant had, in effect, sued the second. So they concluded that the ECJ must have been pointing them to the way in which they should approach that issue. They concluded that the ECJ’s reference to the corporate structure with a wholly owned subsidiary was only consistent with it directing attention to factors which might point to a close connection between the two companies.

So, the court focused on the time when the product was supplied to the Department of Health, since, if the first defendant was, in effect, tied into the manufacturing process of the second defendant, the product would only be put into circulation when it was supplied by the first defendant. They concluded that in para 52 the ECJ must have been referring to the product being put into circulation by the supplier at the behest of its parent.

It decided that a domestic court must look at the circumstances to see whether, despite appearances, the reality was that the manufacturing parent company which had determined that the product should be put into circulation. They held that there was nothing in the judgment of the ECJ on either reference to suggest that the fact that the second defendant was a wholly owned subsidiary of the first could somehow, of itself, be a reason for allowing the second defendant to be substituted after the expiry of the 10-year period. Indeed, they pointed out that would have been inconsistent with the two companies being distinct entities. Rather, the fact that the first defendant was a wholly owned subsidiary was simply one of the factors to be taken into account by the domestic court when assessing how closely the subsidiary was involved with its parent’s business as an Art 3(1) producer. As a result the Supreme Court allowed the appeal and set aside paragraph 1 of the order of Teare J dated 20 October 2006 substituting the second defendant for the first in the action. And so after 10 years the claimant found he had no remedy.

While the Act defines liability attaching to the ‘producer’ and this in turn is defined as:

(1)     the person who manufactured (the product);

(2)     in the case of a substance which has not been manufactured but has been won or abstracted, the person who won or abstracted it;

(3)     in the case of a substance which has not been manufactured, won or abstracted but essential characteristics of which are attributable to an industrial or other process having been carried out (for example in relation to agricultural produce), the person who carried out that process.

Other producers may include those who trade mark or put their name on a product or otherwise hold themselves out as the producer as well as those who import a product into the EU [14] and generally on all those who supply the product but where they fail to identify a person higher up the chain of liability, usually the manufacturer. There is even a widely held view that a surgeon assembling a product by putting together different components may be said to be the producer of the product which itself is an assembly of various components manufactured elsewhere and by others. Hence, one can see how easy it may be to pursue the wrong party.

The basis for the ECJ view was first of all to achieve harmonisation across the Member States so that the 10-year period cannot be interrupted other than by instituting proceedings ‘against a producer’, and secondly to provide legal certainty to producers as to the period for which they can potentially be liable; the original reason offered for the insertion of the long stop limitation period unique to this legislation. Unfortunately therefore suing the wrong person by mistake is going to be fatal to the case.

However, the effect of the decision is that it may still be possible for the courts to permit substitution outside of the 10-year period in certain factual circumstances, such as in cases of parent companies and their subsidiaries. So, for example, if proceedings were instigated within the 10-year period against a wholly owned subsidiary of the ‘producer’, then in those circumstances the ‘producer’ may be able to be substituted after the expiration of the 10-year period. Secondly, it remains the case that a supplier who declines to disclose the identity of the producer promptly and of its own initiative will be treated as the producer.

So now where previously it was presumed that there was one 10-year period based on the date of supply, now one will have to consider even more carefully who is or who may be considered a producer. Then having done that one will then need to consider carefully with each proposed defendant where the 10-year period will finish based on when that particular producer put the product into circulation.

Turning then to the meaning of the concept to ‘put into circulation’ under the Directive and therefore the date of supply, the court ruled that a product is defined as being put into circulation once it is taken out of the production process operated by the producer and enters a marketing process. Then it must be in the form in which it can be made available to the public in order to be used. It did, however, steer clear of setting a formula which would be applied in all cases.

The courts will still be required to examine carefully the actual facts in the case and the exact form of the relationship between the respective companies. In addition the court concentrated on what the companies’ actual purpose was rather than their status as legal entities and hence the reference to processes above. It means that claimants will have to examine these situations very carefully, to ensure they have the correct defendant and particularly where, at first glance, it is thought that the 10-year period may have expired. It may just be that the transfer is not adjudged to be a ‘supply’.

In practice

However recent the event may seem to be such that the three year limitation period should not trouble the claimant lawyer, it is important that the date of supply is established. This information will never be in the claimant’s hand. Questions to identify the producer and the date of supply, by reference to the process by which the product has left the manufacture and got to the supplier should be put to the manufacturer if known and the supplier if not.

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1       Master Declan O’Byrne v Sanofi Pasteur SA formerly Aventis Pasteur SA and Sanofi Pasteur MSD Ltd, formerly Adventis Pasteur MSD Ltd (Case C-127/04) [2006] All ER (EC) 674, ECJ.

2        [2001] EWCA Civ 2006, [2002] 1 WLR 1662.

3        Civil Procedure Rules 1998, SI 1998/3132.

4        Paragraph 52.

5        Paragraph 58.

6        Paragraph 62.

7        Paragraph 64.

8        Paragraph 67.

9        Paragraph 67.

10       (Case 127/04) [2006] ECR I-1313, 2 June 2005.

11       O’Byrne v Aventis Pasteur MSD Ltd and Others [2008] UKHL 34, [2008] 4 All ER 881.

12       [2006] 1 WLR 1606.

13       Aventis Pasteur SA v OB (Case C-358/08) [2010] All ER (EC) 522.

14       Section 2(2)(c).