Beware when dealing with product liability. A recent case has shown there are times when goods are not ‘goods’ and breach is not all it seems

Simon Tolson

It recently struck me that there is a lot of interest in what happens when a product, be it a roof tile, push-fit pipe, or a complex control apparatus, fails. Must a design and build contractor provide a product which is fit for purpose or simply use reasonable skill and care in its design? Since 1975 in Greaves & Co (Contractors) Ltd vs Baynham Meikle and Partners and IBA vs EMI and BICC Construction Limited, the routine answer is where the builder provides a product, it should be fit for purpose. However, recently in Trebor Bassett Holdings Limited and the Cadbury UK Partnership vs ADT Fire and Security plc, the Court of Appeal concluded otherwise.

In fact it was a bizarre result for most punters in much the same way as the recent case of 199 Knightsbridge vs WSP UK Limited, concerning allegations of negligence against M&E consultant engineers, raised questions in connection with risks unforeseen by an entire industry - to do with water and pressure surges.  

The designs failed to prevent catastrophic pressure surges (CPS) in the boosted water systems when those systems were restarted after a drain-down. In both cases CPS ultimately caused extensive flood damage. The risk of CPS was generally unknown to the industry at the time of the projects in 2005-2006. Yet the court found in 199 Knightsbridge that WSP owed the claimants a contractual duty of care in the design of the cold water system requiring it to “exercise a reasonable level of care and skill as [was to be] expected of a qualified consultant in the same profession, experienced and competent in carrying out work of similar size, scope and complexity to the project”.

ADT argued that previous fires in the factory and the actions of TB’s employees meant the chain of causation resulting in ADT’s liability had been broken

This duty equates to the standard of care and skill the law ordinarily imposes on professionals. Mr Justice Edwards-Stuart found that despite the absence of a responsible body of professional opinion at the time, the prevailing industry practice could not excuse WSP of its duty of care towards the claimant to design the cold water system so as to avert such damage. It should have foreseen the problem and was negligent. The issue then was that if WSP had foreseen the problem, could the damage have been prevented?

The judge was clear that even after the flooding, the claimant had still not installed surge arresters, despite being advised to do so. That was fatal to 199’s success.

I turn now to the kit side of building contracts. 

The starting point is reassuring under English law that if a contractor is to supply materials, it warrants that the materials will be:

  • reasonably fit for the purpose for which they will be used, and
  • of good quality, unless the express terms of the contract and any admissible surrounding circumstances show that the parties intended to exclude either or both warranties.

A Court of Appeal case considered them in the context of more esoteric goods.

In Trebor Bassett the dispute arose after a fire broke out causing £110m worth of damage to the employer’s confectionary factory. ADT was engaged by the employer for around £10,000 to provide the fire CO2 suppression system to the popcorn production lines.

Trebor sued in both tort and contract because the CO2 system was not of satisfactory quality or fit for purpose. Trebor was successful in its case that ADT’s design was negligent. However, at first instance, Mister Justice Coulson also found Trebor’s actions were contributorily negligent so damages were reduced by 75%.

The court concluded that the relevant standard of care for professionals of reasonable skill and care applied

Trebor appealed, claiming that ADT had been contracted to supply a system that was fit for purpose and in accordance with a specification, ADT counter-claimed and argued that previous fires in the factory and the actions of TB’s employees meant that the chain of causation resulting in ADT’s liability had been broken. Trebor said that the system was a supply of goods and was therefore subject to a statutory implied fitness for purpose requirement under the Sale of Goods and Services Act 1982 (SGSA). This distinction between “goods” and a “system” is important. It determines whether a supplier is obliged to provide something which is fit for purpose or to use reasonable skill and care in its production, which is less onerous.

The Court of Appeal disagreed with Trebor.

Trebor appealed against the contributory negligence finding, arguing that ADT’s contractual duty of care was higher than its tortious duty. Its main arguments were that:

  • ADT had to supply a system that was fit for purpose in that it met the specification (which it said was to prevent fire) (section 4 Supply of Goods and Services Act 1982); and
  • The specification guaranteed the system’s success, so failure to prevent a fire automatically constituted a breach.

Finding that the duties were co-extensive and confirming contributory negligence, the Court of Appeal rejected the arguments, saying: “The system was not an off-the-shelf ‘good(s)’, but a bespoke system made of component parts that had been selected for use and, therefore, ‘designed’.”

The Court of Appeal concluded that the relevant standard of care for professionals of reasonable skill and care applied.

In short: if you have to ponder to know how a product will perform, the law as it currently stands is more likely to say “system” than “goods”.But if like a bathtub, you know it basically should hold water, or like a lamp, emit light, they are goods, as much as a tile, nail or screw.

Simon Tolson is senior partner in Fenwick Elliott and chair of TeCSA