The recent Court of Appeal case of Webster v Liddington(1) is a useful reminder to all suppliers of the risks involved if they pass on product information provided by a third party to consumers without any form of disclaimer. A disclaimer must be used if the supplier is to avoid assuming a duty of care in relation to any misrepresentations that the information contains, especially if the supplier is also undertaking a further service utilising the product in question.
The claimants were persons who had undergone skin rejuvenation treatments. Isolagen Europe Ltd (IEL) had devised and manufactured a substance administered by various clinicians as part of the treatments. IEL also produced brochures explaining the process and included statements to the effect that the treatments would contain only that individual patient's cells and no extraneous material. The clinicians provided these brochures to prospective patients. After later discovering that the treatment may have contained traces of bovine product, some of the patients who had undergone treatment sought compensation from the clinicians for misrepresentation. By this time IEL had gone into administration.
The first-instance court, as a preliminary issue, found in favour of the claimants. It concluded that:
- the defendants were responsible for the statements in the brochures;
- the statements were intended for the claimants to rely on; and
- the claimants had reasonably relied on the statements.
The brochure's assertions were incorrect and constituted material misrepresentations.
The clinicians appealed.
The Court of Appeal held that there are four primary scenarios that apply when a person (X) passes information produced by another party (Y) to someone with whom X is hoping to contract (Z):
- X may be warranting to Z that the information is correct;
- X may be adopting the statement as his or her own;
- X may be representing, on the basis of reasonable grounds, that he or she believes the information provided by Y to be correct; and
- X may be simply passing on the information to Z as material from Y, about which X has no knowledge or belief.
The appropriate test to determine which scenario applied was set out in IFE Fund SA v Goldman Sachs International(2) as follows – what would a reasonable person in Z's position understand from X's words or infer from X's conduct and all circumstances?
No warranty was given by the clinicians to the patients, so the first scenario did not apply.
As to the second scenario, the following facts were important features of the case:
- The claimants were consumers and the appellants qualified clinicians, resulting in a "stark imbalance of knowledge between the parties";
- The appellants were offering to sell a product and a service, so the relationship was both as clinician and seller and as patient and consumer;
- The treatment was purely elective; and
- There was no disclaimer and no reservation about the accuracy of the information.
These facts led the Court of Appeal to the same finding as the first-instance court – namely, that a reasonable person in the position of any of the claimants would conclude that the clinician was adopting the contents of the brochure. Lord Justice Jackson, who gave the leading judgment, said that for the third scenario to apply, the clinicians would have needed to issue a disclaimer along the lines of:
"This is what the manufacturer says. They are a reputable company. Although I have no direct knowledge of these matters and cannot confirm the details, I believe that the brochure is accurate."
For the fourth scenario to apply, an even stronger disclaimer would be required. Giving a disclaimer in either of these terms may not have been in the commercial interests of the clinicians.
As to whether the statements amounted to material misrepresentations, expert evidence had shown that the bovine product comprised between 0% and 0.02% of the substance injected as part of the treatment. The appellants had argued that this was such a small trace that the statements were substantially true, and that for all material purposes the substance comprised the patient's own cells. However, the court found that as expert evidence showed that between 3% and 20% of the population has a propensity to suffer an allergic reaction to bovine products, there was evidence that entitled the court to conclude that the traces amounted to a material matter. The statement that the treatments would contain that patient's cells only and no extraneous material were therefore incorrect in a material respect. Equally, knowledge of the presence of other material may have affected the decision of some of the patients to go ahead with the procedure.
For further information on this topic please contact Andrew Austin at Freshfields Bruckhaus Deringer LLP by telephone (+44 20 7936 4000), fax (+44 20 7832 7001) or email (firstname.lastname@example.org). The Freshfields Bruckhaus Deringer website can be accessed at www.freshfields.com.