Product liability law plea for reform

By Julian Moti

SCRATCHING the surface of the very complex laws regulating product liability in the Pacific opens up a ‘pandora’s box’ perhaps even a ‘can of worms’!

Exploding kerosene stoves, benzene lanterns and other defective products’ have inflicted serious physical injury, claimed several lives and destroyed the homes and worldly posessions of many Pacific islanders.

Obtaining legal redress for losses caused by defective products rarely dawns upon the victim. Even if it does, the expense and uncertainty of litigation act as powerful deterrents.

Against whom should proceedings be commenced? In which jurisdiction? On what basis can an action be maintained? These questions, which are bound to agonise the plaintiffs lawyer, also highlight the limitations of current laws regulating product liability in the Pacific Islands. 1 here is no discrete body of law dealing with product liability in the Pacific. Traditionally English common law (which has been ‘inherited’ in many Pacific countries) has allowed recovery of damages for loss caused by defective products on two bases. The first ground, based on the law of contract, enables the purchaser of a defective product to sue the retailer (shopkeeper) for breach of contract. Both the common law and sale of goods legislation require that certain terms be implied in contracts for the sale of goods. For example, goods must be fit for their intended purpose and be of

merchantable quality.

A number of factors affect the plaintiffs ability to recover damages for breach of these implied conditions. First, the implied terms may have been expressly negatived in the written (or oral) contract of sale. Secondly, the right of action is only available to the purchaser. The doctrine of privity of contract prevents action by those who are not parties to the contract.

Hence, the injured consumer who received the defective product from the purchaser is effectively deprived of contractual remedies (although it is possible to argue that the purchaser bought the defective product as an agent of the consumer). Thirdly, the arcane doctrine of privity also bars any direct action against the manufacturer of the defective product.

The local shopkeeper with whom the purchaser has a contractual relationship might not have the financial capacity to satisfy a judgment in the purchaser’s favour. 1 here also is the prospect of multiple proceedings being instituted. If the purchaser succeeds in obtaining judgment against the retailer, the retailer will claim indemnity from the wholesaler, who will in turn seek indemnity from the manufacturer. This is a rather cumbersome, protracted and expensive way of bringing liability home to the manufacturer for marketing defective products. The process is likely to be frustrated when a party in the chain of distribution becomes insolvent or excludes its liability under an exemption clause in the contract.

The second avenue of redress is founded on the tort (civil wrong) of negligence. The manufacturer owes a ‘duty of care’ to those who it is ‘reasonably foreseeable’ may sufTer loss or injury caused by a defective product. Significantly, this principle allows the injured consumer direct recourse against the manufacturer. No spectacular problems should arise where the manufacturer is based locally.

Overseas manufacturers, on the other hand, may not be amenable to the jurisdiction of a number of Pacific courts.

Some courts will decline jurisdiction if the ‘substance of the tort’ did not occur within its territory. There is some uncertainty as to what constitutes the ‘substance of the tort’. Is the ‘substance of the tort’ constituted by the negligence in the manufacturing process? Or is the ‘substance of the tort’ the manufacturer’s

failure to warn of the possible hazards associated witht product? In the former case, the local court is deprived jurisdiction since the negligent act occurred at the place; manufacture. In the latter situation, the negligent act occv at the place of sale or consumption thus enabling the local cov to hear the case.

Apart from the obvious problems in locating the overso manufacturer, there is also the attendant expense, inconve:; ence and risk in suing the manufacturer in its home count:; The gist of the action in negligence is that the plaintiff bes the onus of proving that the defendant breached its duty of cs to him. The plaintiffs difficulty in establishing that 0 manufacturer was negligent is compounded by the fact that lacks knowledge about the defendant’s manufacturii processes. The manufacturer may be able to demonstrate tfi there was no shortcoming in the manufacturing process, tH its employees had not been careless, or that fault lay inr component part of the product, supplied by anotb manufacturer.

The problems generated by claims based in contract aj negligence are easily surmounted by the imposition of stn liability on manufacturers of defective products. This approai has been adopted in the USA and the EEC, and is likely be followed in Australia. The chief attraction of a strict liabil! regime is that it dispenses with the need for the plaintiff to pro fault on the manufacturer’s part. The manufacturer’s liabil I is determined solely by reference to the fact that it has marked a ‘defective’ product. Strict liability may be absolute qualified by statutory defences.

The threat of liability is usually an incentive to take positi steps to prevent the risk of loss. Faced with an order to pc compensation (irrespective of whether liability is based contract, negligence or strict liability), the prudent manufs turer will attempt to seek economically rational ways spreading the impact of loss. Pricing and insurance are commi mechanisms for loss distribution. The manufacturer w attempt to recoup the amount of damages paid out increasing the price of its product. Alternatively, it may arranr insurance cover. The cost of insurance premiums will reflected in higher prices. Ultimately, it is the consumer w' pays for the losses caused by defective products.

The concept of strict liability recognises that the manufs turer is in a belter position to distribute losses than the rando victim (who is unlikely to be insured). Liability without far also is an efficient vehicle for promoting accident preventio To minimise its exposure to liability, a manufacturer will nes to install a system of quality control. Design and manufacture! defects may be detected by testing procedures. The alarmii news for manufacturers is that there is no guarantee that} product’s trouble-free history will continue.

At the end of the day, the decision to adopt a strict liabiliJ regime is essentially a political one. Consumer organisatioc assert that the right to product safety is a basic consumer rigl; Manufacturers argue that strict liability will unduly incres production costs and stifle product innovation. Yet 100 manufacturers who export their products to the USA and EH arc already exposed to strict liability rules.

Product liability should occupy a pre-eminent place on tJ agenda for legislative reform in the Pacific. Statutory adopthi of any particular regime of product liability should, howevr be postponed until current laws are properly analyse Comprehensive studies could be undertaken by a regional la; reform body operating perhaps under the aegis of the Foruu Secretariat, without extra expense and multiplication of effoc The plight of victims of exploding kerosene stoves and othri defective products should be addressed in public debate, au

remedied by appropriate legislative action.

Julian Moti is an international lawyer based in Sydney.