The Court of Appeal recently decided 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.
Howmet (factory owners) claimed damages against a thermolevel manufacturer. The device was installed in heated industrial tanks to detect if the liquid level was too low and a fire hazard. Two separate thermolevel failures occurred with small fires which were extinguished by factory personnel. Engineering and facilities managers were aware of the failures and implemented a change in procedure and purchased float switches. Before they were installed, there was a catastrophic fire when an empty tank's heater was switched on. The thermolevel failed and no one was around to extinguish the fire. The factory was destroyed.
The High Court found that the thermolevels were "unreliable, unpredictable ... and unacceptable as a critical safety device" and that the factory personnel's knowledge of this was attributable to Howmet. Howmet was not relying on the thermolevels to prevent fires, which broke the chain of causation. Howmet's claim in negligence against the manufacturer failed.
Howmet's subsequent appeal also failed. The Court of Appeal reviewed the law on the doctrine of attribution and confirmed that the collective knowledge of operators and mid-level managers should be attributed to Howmet who could not rely on the ignorance of its more senior managers.
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. Critically, if an end user is aware that a product is defective and continues using it, resulting 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 the end user has no alternative, then the position may be different.
This is of particular relevance within the construction industry where contractors are often responsible under the construction contract for the fitness of a particular product which falls within their work package or the main contract. As an aside it is always worth considering what is and is not a "product" in the context of building works. The Court of Appeal in Aspen Insurance UK Ltd v Adana Construction Ltd (2015) provided guidance on this when it was held that a concrete base as a whole was not a "product".
The Court of Appeal decision in Howmet highlights the responsibility of end users who continue to use goods which they know are defective and is of significance to contractors and insurers. Depending on the facts, it may offer a shield for contractors and installers of equipment in projects as well as for the manufacturers and their insurers facing subsequent claims.