UK: Extension Of Manufacturers’ Product Liability Exposure After 10-Year Cut-Off Period

Last Updated: 29 November 2007
Article by Sarah Hanson and Shuna Mason

Summary

In the recent Court of Appeal case of O’Byrne v Aventis Pasteur SA [2007] EWCA Civ 939, Aventis Pasteur SA (the proposed defendant) appealed against an order under s.35 Limitation Act 1980 that it be substituted for the original defendant, which was a secondary supplier. The Court confirmed that s.35 is capable of applying where the 10-year final cut-off period, for claimants to enforce their rights under the Product Liability Directive 85/374/EC, has expired. This decision therefore confirms an earlier Court of Appeal decision in 2001 that a substituted defendant’s ability to defend a product liability action commenced before the English Courts on grounds of limitation can be ineffective because of the Courts’ powers to retrospectively substitute one defendant for another defendant, mistakenly named originally by the claimant. This decision therefore erodes the legal certainty intended to be provided by the 10-year cut-off period under the Directive.

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Summary

In the recent Court of Appeal case of O’Byrne v Aventis Pasteur SA [2007] EWCA Civ 939, Aventis Pasteur SA (the proposed defendant) appealed against an order under s.35 Limitation Act 1980 that it be substituted for the original defendant, which was a secondary supplier. The Court confirmed that s.35 is capable of applying where the 10-year final cut-off period, for claimants to enforce their rights under the Product Liability Directive 85/374/EC, has expired. This decision therefore confirms an earlier Court of Appeal decision in 2001 that a substituted defendant’s ability to defend a product liability action commenced before the English Courts on grounds of limitation can be ineffective because of the Courts’ powers to retrospectively substitute one defendant for another defendant, mistakenly named originally by the claimant. This decision therefore erodes the legal certainty intended to be provided by the 10-year cut-off period under the Directive.

Facts

Mr O’Byrne suffered severe brain damage when he was one year old after he had been vaccinated with two doses of anti-haemophilius vaccine by 3 November 1992. In early November 2000, he brought an action under the Consumer Protection Act 1987 (CPA) against Aventis Pasteur MSD Limited (APMSD), in the belief that it was the manufacturer (producer) of the vaccine, alleging that his brain damage was caused by the vaccine. In August 2001 the claimant served particulars of his claim additionally alleging in the alternative that APMSD had caused him injury through its negligence, breach of statutory duty and/or negligent misstatement in connection with the marketing of the vaccine, amongst other matters.

In November 2001 APMSD served a defence which stated that it was the distributor of the vaccine, not the manufacturer. In other words, that it was not a producer but rather a secondary supplier of the vaccine within the scheme of the Product Liability Directive 85/374/EEC (the Directive), which is implemented under English law by the CPA. In April 2002 it also informed the claimant that the manufacturer was Aventis Pasteur SA (APSA). APMSD’s defence of the CPA claim was therefore based upon the argument that the claimant had been informed of the identity of the producer and that APMSD, as a secondary supplier, had not put the product into circulation. Under the scheme of the Directive secondary suppliers do not have liability in such circumstances.

After separate proceedings commenced by the claimant against APSA on 7 October 2002 had failed on the ground that they had been started more than 10 years after the product had been put into circulation by APSA (which was believed to be on or about 18 September 2002) and also after the claimant’s joinder of APSA as a co-defendant in the subject proceedings was set aside, the claimant was left with no alternative but to seek to rectify its mistake regarding the identity of the manufacturer by applying to substitute APSA for APMSD, since it was by then common ground that APSA was the producer for the purpose of the CPA claim.

The substitution application was made on 10 March 2003; after the 10-year limitation period specified in article 11 of the Directive had expired. The judge at first instance ordered that APSA be substituted for APMSD under section 35 of the Limitation Act 1980 (the Act). APSA subsequently appealed against this order raising two questions:

  1. Whether section 35 is applicable so as to permit substitution where the time limit which has expired is the 10 year cut-off period for enforcing rights under the Directive; and
  2. If so, whether on the proper construction of s.35, there is power to order substitution in factual circumstances where the claimant had discovered his mistake as to the true identity of the producer before the expiry of the 10-year period but had at that time elected to pursue its claims against APMSD.

Legal Framework

Section 35(5)(b) of the Act, permits the Court to exercise its discretion to add or substitute a new party after the expiry of a limitation period where the addition or substitution is "necessary" for the original claim to be determined. Under this provision the addition or substitution of a new party is only necessary if under s.35(6):

  1. the new party is substituted for a party whose name was given in any claim made in the original action in mistake for the new party’s name; or:
  2. b) any claim already made in the original action cannot be maintained by or against an existing party unless the new party is joined or substituted as plaintiff or defendant in that action.

Section 35 of the Act therefore permits the Court to allow a claimant to rectify a mistake as to its choice of defendant under the specified conditions. However, as well as satisfying the prescribed conditions a claimant must also persuade the Court to exercise its discretion in its favour, which the claimant succeeded in doing at first instance in O’Byrne. APSA did not appeal this exercise of the Court’s discretion.

Article 11 of the Directive requires member states to provide in their legislation that the rights conferred upon the injured person pursuant to the Directive shall be extinguished after 10 years from the date on which the producer put into circulation the actual product which caused the damage, unless the injured person has in the meantime instituted proceedings against the producer. Hence, article 11 does not merely time bar the claim after 10 years but actually extinguishes the injured person's rights. The distinction between a time barred right and an extinguished one is significant. APSA argued that this meant that the claimant’s rights are extinguished unless within the 10-year period s/he commences proceedings against someone who is a producer within the definition in the Directive. Broadly, this category comprises: the actual manufacturer of the product in question, any "own brander" or the "first importer" of the product into the European Economic Area.

Decision

The first appeal question

The Court of Appeal considered itself bound by, and decided to follow, its own previous 2001 decision in Horne-Roberts v SmithKline Beecham Plc [2001] EWCA Civ 2006. This case also examined the apparent conflict between the Directive and s.35 of the Act in relation to very similar facts arising in connection with another claim under the CPA where the first instance court permitted the claimant to substitute the true producer (Smithkline) for the original defendant (Merck) named in error, notwithstanding the expiry of the 10-year cut-off period.

In Horne-Roberts the defendants argued that the complete extinction of an injured person's rights after the 10-year period, which is envisaged by article 11 of the Directive, meant that s.35 of the Act would have to be interpreted to give effect to this cut-off and therefore should be construed so as to exclude any substitution from being made after the expiry of the 10-year long stop period. To fail to do so would be to fail to give effect to the Directive under English law.

In Horne-Roberts, the Court of Appeal rejected the defendants’ arguments and decided that Parliament must have made a conscious decision not to disapply s.35 of the Act to the 10-year period. In its 2001 decision the Court of Appeal specifically noted in support of this construction that neither article 11 nor recital 11 of the Directive are expressed in absolute terms but rather that they are each respectively qualified by reference to actions already commenced against the producer or which are "pending at law". It also noted that the Directive does not explicitly deal with the situation to which s.35 of the Act relates (i.e. mistake as to the identity of the producer) and concluded that there was therefore no conflict between s.35 and the Directive.

In O’Byrne APSA argued that the decision in Horne-Roberts should not be followed as this was not consistent with the 2006 ruling of the European Court of Justice (Case C-127/04) in response to certain questions which had been referred to the European Court of Justice (ECJ) in 2003 in the context of APSA’s appeal. APSA argued that the ECJ judgment emphasised the "personal scope" of the Directive in its judgment, i.e. the limited scope of persons potentially liable under the Directive as producers, and that national courts must ensure that due regard is paid to this personal scope of the Directive when they examine the conditions governing the substitution of one party for another. APSA argued on this basis that claimant’s rights are extinguished by article 11 unless they have already sued someone who falls within the defined category of producers. In APSA’s case, APMSD did not fall within this definition and APSA argued that article 11 should therefore prevent it being substituted for APMSD in these factual circumstances.

After considering the ECJ's judgment, the Court of Appeal in O’Byrne concluded that the ECJ’s reasoning did not support APSA’s arguments and that the ECJ has in fact decided that it is for national procedural law (and therefore national courts) to determine whether, and if so under what conditions and with what effect, one person can be substituted for another where a mistake has been made as in this case.

In considering what manner of mistake is covered by s. 35 of the Act the Court of Appeal referred to a recent decision (Adelson v Associated Newspapers Limited [2007] EWCA Civ 701) which confirmed that the test for a qualifying mistake for the purposes of s.35 of the Act is that the mistake must be as to the name (or nomenclature) of the party in question and not as to the identity of that party and that the claimant must also be able to show that, but for the mistake , the true defendant would have been named. The basic test under s.35(6) was whether the claimant intended to sue a defendant by reference to a particular description, such as in this case the manufacturer of the identified vaccine. Thus the Court of Appeal considered that if the claimant in O’Byrne had not made a mistake and if he had known that APSA was the manufacturer of the vaccine he would have sued APSA.

Because s.35 of the Act has retrospective effect the Court has the power to substitute the true producer for the person originally sued where a mistake of name has been made. Consequently "the person substituted for the original defendant is treated as having been sued at the date of the original action" and the 10-year cut-off period in article 11 cannot be invoked by the substituted defendant as the injured person is treated as having started proceedings against the true producer before the expiry of the 10 year period.

The second appeal question

The second appeal question was whether the first instance court had jurisdiction to order the substitution of APSA on the actual facts in this case (i.e. where the claimant knew APSA was the manufacturer before the expiry of the 10-year period). APSA did not challenge the exercise of the first instance court’s discretion. Instead, it challenged whether the first instance court had any powers under s.35 of the Act, where the effect of the claimant appreciating his earlier mistake as to the identity of the producer before the 10-year period expired was that the substitution was no longer "necessary" within the meaning of s.35(6) of the Act. The Court of Appeal followed the first instance judge’s reasoning that:

  • the wording of s.35(6) does not make any reference to the claimant’s knowledge or otherwise of his mistake as at the date of the expiry of the limitation period such that this is not relevant to the question of whether the powers under s.35 of the Act arise; and
  • where the new party is to be substituted for a party whose name has been given in a claim in the original action in mistake for the new party’s name, substitution is to be regarded as "necessary" for the determination of the original action.

The Court of Appeal considered that a proposed defendant is protected in such circumstances by the fact that, even if the claimant establishes the necessary criteria, the claimant does not have a right to have the new party added or substituted but must instead persuade the court to make the order in the exercise of its discretion and that, in so doing, the court will make what it regards as the just order.

Comment

This decision confirms that English procedural rules permit the 10-year long stop limitation period under the Directive to be overridden in circumstances of the claimant’s mistake as to the name of the true producer, even where claimants have entirely failed to follow any pre-action protocol prior to commencing proceedings against the wrong entity and were aware of the identity of the true producer before the expiry of the 10-year period. This therefore significantly erodes the legal certainty which article 11 of the Directive was originally expected to provide for producers and for claimants alike and could result in a defendant who has no notice of the claim being substituted after the 10-year cut-off period, though the Court of Appeal recognised some reluctance in permitting substitution of a defendant unconnected with the original defendant and unaware of the claim until after the 10-year period’s expiry.

As the national procedural rules across the 27 member states are unlikely to operate in the same way this is likely to be a further example of disparity in the practical application of certain aspects of the Directive.

As substitutions can be made years after the expiry of the 10-year period (up to 4 years later in the O’Byrne case) this lengthens potential exposure for both producers and their product liability insurers and producers in particular may wish to review their insurance cover and document retention policies in this regard.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 22/11/2007.

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