The Court of Appeal recently handed down judgment in Howmet Ltd v Economy Devices Ltd & Others (2016) in which it considered a manufacturer's continuing liability for defective products and how the knowledge of employees should be attributed to companies.

Factory owners claimed damages against the manufacturer of thermolevels that had been installed in heated industrial tanks used in the manufacture of aerospace products. The thermolevels were meant to protect against the risk of fire if the tanks were empty or the liquid level inside them was too low.

In December 2006, the thermolevel in one of the tanks failed and a small fire broke out which was extinguished by factory personnel. In mid-January 2007 there were a number of thermolevel malfunctions in other tanks. At the end of January 2007, there was another tank fire following a thermolevel malfunction which was again extinguished by factory personnel. Engineering and facilities managers at the factory, realising that there was a problem with the thermolevels, implemented a change in procedure to guard against the risk of future fires and purchased float switches. However before the float switches were installed, there was a third fire on 12 February 2007 when a heater was switched on in an empty tank . The thermolevel in the tank failed to operate and no factory personnel were around to extinguish the fire. The factory was destroyed.

The High Court found that the thermolevels were "unreliable, unpredictable in operation and unacceptable as a critical safety device" and that the factory personnel's knowledge of this should be attributed to Howmet (the factory owners). Since Howmet was no longer relying on the thermolevels to prevent tank fires, this broke the chain of causation. As a result Howmet's claim in negligence against the thermolevel manufacturer failed.

Howmet appealed against the High Court's findings (a) about the knowledge that had been attributed to the company and (b) that there had been a break in the chain of causation because of Howmet's non-reliance on the thermolevels. Howmet's appeal was dismissed on various grounds including the following:

  1. The Court of Appeal reviewed the law on the doctrine of attribution. The facilities manager, the production engineering manager, the production engineering technician and the relevant operators at the factory had been aware of the thermolevel malfunctions and the subsequent change in procedure. The Court of Appeal confirmed that this collective knowledge should be attributed to the factory owner who could not rely on the ignorance of its more senior managers.
     
  2. The Court of Appeal reviewed Donoghue v Stevenson (1932) and considered that "once an article has passed through the factory gate, the original manufacturer has no control over who will use it or how they will do so". If a hidden defect in a product causes damage then the product's manufacturer should be held liable for that damage. If however the defect is discovered before any damage is caused then the manufacturer is not generally liable.
     
  3. Once the end user is aware that a product is defective, if he decides to continue using it which results in injury or damage, he does so entirely at his own risk – i.e. the manufacturer of the defective product has no continuing duty to the end user. If however the end user has no alternative but to go on as before then the position may be different.

This decision highlights the responsibility of end users who continue to use goods which they know are defective and, depending on the facts, offers a shield for manufacturers facing subsequent negligence claims.