Case of the Week: Product liability

(1) Kingspan Environmental Ltd; (2) Tyrell Tanks Ltd; Rom Plastics Ltd; (3) Titan Environmental Ltd v (1) Borealis A/S; (2) Borealis UK Ltd.

Christopher Clarke J. QBD.

1 May 2012.

Claim dismissed

This largescale product liability claim raised issues including: fitness for purpose and breach of terms implied under the Sale of Goods Act 1979; misrepresentation; limitation of liability; choice of law; causation; and loss of future profits.

It was alleged by the claimants that static oil tanks manufactured by them failed in large numbers because of defects in the raw polyethylene from which they were made and which was supplied by the defendants.

The defendants countered that the raw polyethylene was of satisfactory quality and that the claimants’ tanks failed because of deficiencies in the claimants’ design and manufacturing processes. The nominal value of the claim was approximately £100m.

A further point of interest raised by the case is in the context of security for costs: the Commercial Court has held in two judgments that the conventional form of security is either payment into court or provision of a first-class bank guarantee, and that a defendant is not obliged to accept security in the alternative form of a parent company guarantee.

After a trial lasting around three months, Mr Justice Clarke found in favour of Borealis and dismissed the claims in their entirety.

In a long and detailed judgment Clarke J held that Kingspan had failed to establish any deficiency in the product, Borecene, which on the contrary was suitable for use in the production of external fuel storage tanks. He found that the failure of Kingspan’s fuel tanks in service was instead the result of poor design, deficient processing and inadequate quality control. Kingspan had, in effect, caused its own loss.

The judge further found that the contractual claim was governed by Danish law and subject to Borealis’ standard terms and conditions.

In the circumstances, even had Kingspan succeeded, its claim would have been limited to the value of the product purchased by it. In addition, he found that part of the claim was time-barred as a matter of Danish law. 

Regarding the misrepresentation claim, the judge found that this too was governed by Danish law (applying section 12 of the Private International Law (Miscellaneous Provisions) Act 1995, ruling that it was substantially more appropriate for the applicable law to be Danish law, since this was the law governing the parties’ contractual relationship). On this basis, the misrepresentation claim was bound to fail since Danish law does not recognise an independent cause of action in misrepresentation.

Clarke J nonetheless went on to consider the misrepresentation claim on the evidence and found that it failed on the facts in any event, as no misrepresentations had been made or there had been no inducement of the claimants.

Commentary: Anthony Greenwood

Clarke J held that Kingspan failed to establish a deficiency in Borecene, and that Kingspan had, in effect, caused its own loss. The judge found that the claim was governed by Danish law.

In the circumstances, even had Kingspan succeeded, its claim would have been limited to the value of the product purchased by it. In addition, he said that part of the claim was time-barred as a matter of Danish law.

As for the misrepresentation claim, the judge found that it was substantially more appropriate for the applicable law to be Danish law. On this basis, he found that

the misrepresentation claim was bound to fail.

However, Clarke J went on to discuss the misrepresentation claim on the evidence and found that it failed on the facts.

The judgment is of more general interest where it considers the appropriate tests for determining issues of satisfactory quality and fitness for purpose in product liability claims. It also considers the applicable law of a claim in misrepresentation and discusses the scope of the international supply contracts exception in section 26 of the Unfair Contract Terms Act 1977. 

A further point of interest raised by earlier decisions in the case is in the context of security for costs: the Commercial Court has held in two judgments that the conventional form of security is either payment into court or provision of a first-class bank guarantee, and that a defendant is not obliged to accept security in the alternative form of a parent company guarantee.

Anthony Greenwood, consultant, Kennedys

For the claimants (1) Kingspan Environmental; (2) Tyrell Tanks; Rom Plastics; (3) Titan Environmental

1. Justin Fenwick QC4 New Square
2. Ben Elkington4 New Square
3. Brendan McGurkMonckton Chambers
4. Katie Powell4 New Square
5. Catriona Gibson, partner, Arthur Cox

For the defendants (1) Borealis A/S; (2) Borealis UK

1. David Allen QC, 7KBW
2. Sushma Ananda, 7KBW 
3. James Brocklebank, 7KBW
4. Mark Harper, Kings Chambers
5. Elizabeth Lindesay 7KBW
6. Anthony Greenwoodconsultant, Kennedys
7. Leanna Mailer senior solicitor, Kennedys