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Is the CPA the final word on product liability?

14 April 2011 Donald Dinnie, Director, Deneys Reitz Inc.
Donald Dinnie

Donald Dinnie

Residual common law product liability claims

Our common law acknowledges that physical or financial harm to others by producing or distributing a defective product is actionable. Our law has no difficulty in providing a remedy to persons who are harmed physically in person or property by a defective product.

For that reason, Professor Boberg suggested that “Product liability in law has perhaps been puffed up a little beyond its true importance.” (PQR Boberg: The Law of Delict, Volume 1, Acquilian Liability (1984), page 194.)

Consumers will disagree. From the time when product liability claims were first allowed, requiring proof that the manufacturer was negligent in the manufacture of the product causing the harm, it often made it impossible for a complainant to succeed.

In Wagener v Pharmacare Limited, the Supreme Court of Appeal declined to develop the common law to impose strict liability saying that it was for the legislature to do so if it wished and that our common law was sufficient to protect the claimant’s right to bodily injury.

Five years later, the legislature took up that invitation with the inclusion in the Consumer Protection Act of section 61 providing a no-negligence regime for liability for damage caused by goods.

The no-negligence liability regime extends to injuries and damage caused as a consequence of:

§ Supplying unsafe goods.

§ A product failure, defect or hazard in any goods.

§ Inadequate instructions or warnings provided pertaining in respect of any hazard arising from or associated with the use of any goods.

That is irrespective whether the harm resulted from any negligence on the part of any or all of the producer, importer, distributer or retailer.

The limiting feature of the section is the definition of “harm” which is:

§ Death of or injury to a natural person.

§ Illness of any natural person.

§ Any loss of or physical damage to any property whether movable or immovable.

§ Economic loss resulting from any of those forms of harm.

Pure economic loss is a loss that does not arise directly from damage to property or person but in consequence of the conduct complained. Such as a loss of profit, being put to extra expenses or the diminution in the value of property (Telematrix (Pty) Limited t/a Matrix Vehicle Tracking v Advertising Standards Authority).

Because pure economic loss falls outside the ambit of the product liability provisions, a claimant who suffers pure economic loss without personal injury or damage to property because of a defective product, will have to consider whether the common law provides any remedy in the circumstances.

Where the claimant suffers pure economic loss but is in the position to avoid the loss contractually, there are no grounds to extend the remedy to another legal basis (more specifically in delict).

The situation is different where it is not possible in any practical sense for a consumer to protect itself against pure economic loss caused by the negligence of the manufacturer.

In Freddy Hirsch Group (Pty) Limited v Chickenland (Pty) Limited (March 2011), Nandos Chicken distributors suffered pure economic loss when products in which the spice packs containing Sudan One (a substance not fit for human consumption) were recalled.

Those distributors had no contract with the supplier of the spice packs and were not in the position to protect themselves by contract.

The question was whether our common law allowed the claim for pure economic loss in the circumstances.

Our courts are reticent to allow pure economic loss claims. The court requires policy factors to be in favour of imposing such a liability.

It takes into account factors such as whether there are a limited number of possible claimants, whether there will be a multiplicity of actions, and whether the damage suffered by the claimants was foreseeable by the manufacturer.

On the Chickenland facts, the Court found that the nature of the distributor relationships was that:

§ The spice manufacturer was aware of the role played by the distributors in their clients’ business.

§ The claims would not bring an unforeseeable multiplicity of actions.

§ The imposition of liability imposed no additional burden on the manufacturer than already imposed by law or good practice internationally.

§ The manufacturer’s client and the distributors were innocent victims of the manufacturer’s illegal conduct and had a duty to withdraw the contaminated product from the market to mitigate their losses.

On the Chickenland facts, the court determined that fault on the part of the manufacturer had been established.

So, in the case of a claim for pure economic loss arising from a defective product, the basis of the claim is recovery at common law because such claims fall outside the benefits afforded by section 61 of the Consumer Protection Act.

The Consumer Protection Act does not provide a one-stop remedy for all product liability claims. Common law remains the remedy for product liability claims for pure economic loss.

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