02 April 2007
Key Points:
Piper illustrates the important role quality control systems play in being able to prove that a product is defect-free when leaving a manufacturer's control.
The recent English Court of Appeal decision in Piper v JRI (Manufacturing) Limited [2006] EWCA Civ 1344 ("Piper") provides some helpful guidance with regard to what evidence an Australian court may require when assessing one of the defences in the strict liability provisions in Part VA of the Trade Practices Act 1974 (Cth) ("TPA")[1] - the absence of defect at the time of supply. The decision illustrates the important role quality control systems play in being able to prove that a product is defect-free when leaving a manufacturer's control.
Background
Mr Piper, the claimant, underwent a total hip replacement operation at the end of 1998. This involved the implantation of a prothesis supplied by the defendant, JRI (Manufacturing) Limited ("JRI") into Mr Piper's right hip. In June 2000, the prosthesis sheared in two beneath the femoral head. As a consequence, Mr Piper underwent a further hip replacement operation involving the removal of the fractured prosthesis and the insertion of another.
Later in June 2003, Mr Piper brought an action for damages alleging that JRI (as the producers[2] of the prosthesis) were strictly liable under the Consumer Protection Act 1987 ("the CPA") for the damage caused by a defect in the prosthesis[3]. Mr Piper argued that the defect was a point defect on the surface of the prosthesis which caused its premature failure.
It was common ground that the prothesis fractured as a result of "fatigue failure initiating from a defect in the titanium alloy from which it was made" (at [8]). Thus, JRI were liable unless they could establish (on a balance of probabilities) that the defect was not present when the prothesis was supplied to the treating hospital. To establish the existence of a defect under section 3 of the CPA a claimant must prove that "the safety of the product is not such as persons generally are entitled to expect". This is similar to the test for defect under section 75AC (1) of the TPA.
Given that a defect had been found to exist, JRI's defence was based on section 4(1)(d) of the CPA which allows a defence where "the defect did not exist in the product at the relevant time."
The trial judge held that JRI had established the defence. On appeal, Lord Justice Thomas confirmed that, "it was common ground that the time was the time at which the defendant's supplied the prosthesis to the hospital for subsequent implantation into the claimant" (at [8]). With this in mind, the Court of Appeal focused on the trial judge's analysis of both the expert and factual evidence, in particular the evidence relating to the manufacturing and inspection processes undertaken by JRI prior to supply of the prosthesis.
The evidence
The key issue for evidence was whether the defect causing the fracture occurred during the manufacturing process or after it had been supplied to the hospital. Scanning Electron Microscopy ("SEM") tests carried out prior to the initial trial by metallurgical experts established that a number of "gouge like defects or point defects on the surface were co-incident with the initiation of a fatigue crack" and the "defects were at least 200 microns in depth" (at [13]).
The size of the defects was significant in view of the manufacturing evidence given by JRI. This supported that their quality control processes could have picked up a defect down to 35 microns in depth.
The Court of Appeal rejected Mr Piper's submission that the surface point defect would not have been visible on inspection by JRI and held that:
"the system was capable of detecting the only type of surface point defects capable of initiating the fatigue failure, given the view taken of those operating the system, it could be inferred that any such defect would have been detected had it been present prior to delivery to the hospital and that in the case of the prosthesis implanted into the claimant that the inspection system had not failed" (at [29(viii)]).
The Court of Appeal commented that "those who carried out the inspection were found by the judge to be highly experienced and conscientious" so any defects would have been detected prior to supply (at [29(vii)]). Accordingly, the defence under section 4(d) was upheld. It was not necessary for the trial Judge or for the Court of Appeal to find how or when the surface point defect which initiated the fatigue failure arose.
What does Piper mean for an Australian manufacturer?
The decision provides some guidance as to the level of evidence that an Australian court might require when hearing a defence under section 75AK(1)(a) of Part VA TPA. Like the English legal position, the provision provides a defence to liability under Part VA of the TPA if it is established that "the defect in the action goods that is alleged to have caused the loss did not exist at the supply time" ("the defence").
There is limited case law in Australia examining the defence at this stage. In particular, the Federal Court decision in Carey-Hazell v Getz Bros & Co (Australia) Pty Limited [2004] FCA 853 ("Carey- Hazell") where the defence was successfully invoked by Getz Bros which had supplied the applicant with a mechanical mitral valve[4]. In Carey-Hazell, the applicant had undergone surgery to replace her mitral valve. After the operation, the applicant suffered a thromboembolism which she alleged was caused by the existence of a chip on the valve.
Justice Kiefel considered what was required for Getz Bros to establish the defence. In particular, it would be necessary to show that the "defence did not exist when the goods left the control of the actual manufacturer, St Jude Medical Inc" (at [191]). Justice Kiefel commented that the defence "does not require the manufacturer to establish that the defect occurred at a later time, although if this were possible it would obviously deny the earlier existence of the defect" (at [207]).
With regard to manufacturing evidence, the Court heard that at the point of assembly the valve was tested and checked by visual examination at 7x magnification. The valve then passed further tests after rework before supply. After the valve was explanted it was re tested during which microscopic examinations did not reveal any abnormalities or defects apart from a blood clot. Functional testing and dimensional analysis were also performed at that stage. However, four years later (after the claim had been made), an SEM test (under magnifications of 11x and 75x) reported the presence of a small chip on the valve.
In coming to a decision, Justice Kiefel commented that the "evidence of the examinations of the valve's component parts prior to assembly establishes the likelihood that any chip present would have been detected" (at [208]).
Consistent with the approach taken in Piper, the evidence concerning the quality control procedures in Carey-Hazell enabled Getz Bros to establish the defence. Both cases underscore the importance that quality control systems can play in defending litigation.
Future guidance for Australian courts?
Part VA of the TPA is based on the EC Product Liability Directive. When it was introduced in 1992, it was heralded at the time as representing "the emerging international standard" for manufacturers. The consistency in approach by the Australian court in Carey-Hazell and the English court in Piper suggests that we may be moving towards this stated objective. It remains to be seen.
It will be interesting to see to what extent Australian courts will look to UK and European product liability decisions for future guidance in this area.
[1] See section 75AK(1)(a) of Part VA TPA ("the defence").
[4] See also Effem Foods Ltd v Nicholls [2004] NSWCA 332 and Cheong bht The Protective Commissioner of NSW v Wong & Ors [2001] NSWSC 88 for further judicial comment on the defence.
For further information, please contact Colin Loveday.
