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No liability for manufacturer of faulty product

In Howmet Ltd v Economy Devices Ltd and others [2016] the Court of Appeal decided that a manufacturer of a defective product was not liable in negligence because the innocent party had chosen to continue to use the product, despite being aware of the defect. The case also confirmed that an innocent party cannot rely on the ignorance of senior managers, if employees fail to report a dangerous situation to their line managers. 

The case serves as a useful reminder to businesses that they must ensure that their internal safety reporting procedures are robust and they may not be able to rely on statutory recourse for defective products if defects are not reported within a business.  

Background

A factory owner, Howmet, had installed a number of devices (thermolevels) in heated tanks used in the aerospace industry. The thermolevels were meant to prevent the risk of fire by switching off the heaters in the tanks if they were empty or the liquid level fell below a certain level.

Howmet issued a negligence claim against the manufacturer of the device, EDL, as a result of a damage caused by a fire which occurred due to the thermolevel's failure to work properly. Prior to the fire that broke out on 12 February 2007, there had been two other incidents where the device failed to operate and a fire broke out but was extinguished. As a result, Howmet's employees implemented a system to reduce the risk of fire and purchased float switches to use as an alternative to switching off the heater. They had not, however, managed to install them by the time of the fire on 12 February 2007.  

The High Court dismissed Howmet's claim stating that it was not able to prove that the fire was caused by EDL's negligence as it had knowledge of the defective device and had not been relying on the safety features at the date of the fire.

Decision

The Court of Appeal unanimously upheld the High Court's decision that the manufacturer of the defective device was not liable for the fire as Howmet's employees were aware of the malfunction and had therefore put an alternative system in place, rather than rely on the faulty device.

Attribution of knowledge

The court considered the law on the doctrine of attribution, drawing on the principles in the cases of Donogue v Stevenson and Jetivia SA and another v Bilta (UK) Ltd. It determined that it was appropriate to attribute to Howmet the knowledge and the decisions of the staff to whom the directors of Howmet had entrusted the task of maintaining and operating the tank in a safe manner.

Negligence and breach of duty

The court confirmed the principle established in Donogue v Stevenson that a manufacturer owes to the end user of the product a duty to ensure that the product will not cause any damage due to its malfunction. However, the court went on saying that if the defect is discovered before the damage is caused, then the manufacturer is not generally liable. Howmet was aware of the fact that the device was unreliable, and had introduced a new procedure to avoid further risks of fire. The court therefore found that the cause of the fire was the failure of the system that Howmet had implemented.

Implications

The case acts as an important reminder that a negligent manufacturer may not be held liable for a faulty product where the innocent party becomes aware of the defect before the damage occurs, and continues to use the product nonetheless.  It also serves to underline the importance of making sure that any product defects presenting safety risks are internally reported.  There is the presumption that within an organisation senior managers and directors will have an awareness of any product defects so the organisations reporting policy and procedures should reflect that.

Contributor: Duncan Reed

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.


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