Product liability after the ECJ's 'faulty vaccine' ruling

For claims under the Consumer Protection Act 1987, the ten-year time limit begins to run from the moment the product is 'put into circulation' by the producer (Art 11 of Directive 85/374/EEC on Product Liability), and the claimant's rights under the Directive are 'extinguished' unless proceedings have been commenced within time. The court has no discretion to set aside the provisions '“ s 33 of the Limitation Act 1980 does not apply, and it is irrelevant that the claimant is a patient or a child.

Claimant practitioners are therefore in an invidious position. The product may have been in circulation for years before the damage occurred and there is therefore no immediate way of knowing whether the time limit is about to expire. The natural inclination is to issue a protective claim form '“ but against whom? The identity of the producer may be far from clear '“ especially in claims concerning medical products manufactured within large multinational groups.

The potential liability of the intermediate supplier might provide a safeguard, but these provisions are limited by the requirement to serve a valid statutory notice on the supplier within a reasonable period after the damage occurs. This is not always realistic by the time instructions are received, and, in any event, does not offer any immediate protection.

In practice, the information required to protect the claimant's position will be in the possession of the producer and/or other intermediaries in the chain of distribution. The claimant must ask the right questions about when the product was first put into circulation, and by whom. But what are the right questions, and what happens if the defendant gives the wrong answers?

When is a product put into circulation?

In C-127/04 O'Byrne v Aventis Pasteur [2006], the product (a vaccine) was produced by P, a French company, and supplied to S, its wholly-owned subsidiary and UK distributor, where it remained for a period of time before being supplied to the health authority who then administered it to the infant claimant. Soon afterwards, C suffered a severe brain injury.

The European Court of Justice (ECJ) was asked to consider the date when the product was 'put into circulation' for the purposes of the Directive. Was it the supply from P to S, or from S to health authority, or some other time?

In a carefully reasoned opinion, the Advocate-General considered that the critical moment is when the producer relinquishes control of the product (see www.curia.eu.int). In the case of a transfer between members of a corporate group, he suggested that it might be presumed in those circumstances that the producer retains effective control. He accepted the claimant's argument that, were this not the case, the producer would in effect be able to curtail the period of strict liability by delaying the moment at which the product is exposed to consumers. He concluded:

'The period of strict liability should start at the moment at which the producer voluntarily relinquishes control over the product by transferring it for commercial reasons to someone unrelated to the group to which the producer belongs.'

However, in its final judgment, the ECJ was reluctant to commit to a universal formula based on control. The court considered that the national court would need to examine the facts surrounding the relationship between P and S carefully, in order to determine whether that relationship is 'so close that the concept of producer'¦ also includes that latter entity'.

It is therefore permissible for the national court to find on the facts that a transfer from producer to a separate entity in the chain of distribution does not in law amount to putting the product into circulation if those entities are so intimately connected that they can be regarded in reality as the same entity.

By way of further guidance, the court focused on the activity carried out by the companies (rather than their status as distinct entities). They concluded that the product 'must be considered as having been put into circulation'¦ when it leaves the production process operated by the producer and enters a marketing process in the form in which it is offered to the public in order to be used or consumed'.

Does this mean that a transfer to an entity that is intimately connected with P, but carries out a purely marketing function would qualify? What if the transfer is to a wholly independent entity, but in a form that requires further processing before being offered to the public (eg, a vaccine that requires preparation before being administered)?

In departing from a universal formula based upon the concept of control (as C argued and as the Advocate-General appeared to endorse), the ECJ has not provided clear answers to these questions. The claimant practitioner's difficulties in seeking to protect his client's position are therefore likely to continue.

However, in practical terms, claimants should not surrender the possibility of a claim simply because it is ten or more years from the date of supply from producer to national distributor. If further enquiries reveal a connection between the two companies, there may still be time to issue and protective proceedings should be commenced.

What can the claimant do if a mistake is made?

The potential for getting it wrong is considerable and mistakes are not uncommon '“ either as to the expiry date of the liability period or as to the identity of the producer. Indeed, this may not even be attributable to the default or delay of the claimant, who might have been misled by the defendant, notwithstanding that all the right questions were asked within time to issue.

(1) Substitution

One potential remedy is substitution. In Horne-Roberts v SmithKline Beecham [2002] 1 WLR 1662, the Court of Appeal permitted the claimant to substitute the true producer (SmithKline) for the original defendant (Merck) named in error, notwithstanding that the ten-year liability period had expired. The tactical advantage of such a remedy is considerable. The defendant

is unable to plead a limitation defence

where one would otherwise be available because the substitution is retrospective for limitation purposes.

The permissibility of such a remedy was considered expressly by the ECJ in O'Byrne as a discreet issue. C had argued that by permitting substitution after the expiry of the ten-year period, the English court is in effect deeming the existing timely proceedings against the third party as proceedings against the producer. On that basis, it can therefore legitimately be held that proceedings against the producer have in fact been commenced within time and, therefore, there is no inconsistency with the Directive in permitting substitution at a later stage.

The ECJ agreed that this was essentially a matter of procedural law, and so a matter for the national court. Horne-Roberts should continue to be regarded as good authority, providing a valuable remedy for claimants who have issued proceedings in time, but against the wrong entity.

(2) Estoppel

Suppose the claimant has sued the correct entity, but has issued out of time in reliance upon false information from the defendant as to the date on which the product was put into circulation. Under the strict terms of the Directive, if proceedings have not been issued within time, the consumer's rights are extinguished after ten years, regardless of the reasons for the delay '“ even if the default is attributable to the fraud or concealment of the defendant. The usual postponement of limitation on these grounds is specifically excluded from the operation of the ten-year long-stop.

Nevertheless, there is surely a manifest injustice in the ability of the defendant to extinguish an otherwise valid cause of action by reason of his own fraud and concealment. One solution would be to raise an estoppel against a limitation defence in those circumstances. The defendant has made express representations of fact in the knowledge that the claimant will rely on their accuracy. In reliance on the representations, the claimant has acted to his detriment by delaying the issue of protective proceedings.

Some support for an equitable solution of this kind can be found in dicta from Lord Diplock. In Walkley v Precision Forgings [1979] 1 WLR 606 he suggested that where a claimant has been 'induced to discontinue by a misrepresentation or other improper conduct by the defendant', that might amount to exceptional circumstances such that the defendant would be unable to rely on a limitation defence in a second action commenced after the expiry of the limitation period. In Deerness v John R Keeble & Son (Brantham) Ltd [1983] 2 Lloyds Rep 260, he clarified his remarks by confirming that this would not be a matter of disapplying the limitation provisions under s 33, but would 'more accurately [be] described as an estoppel from relying on s 11 of the Act'.

Such an argument would not be without difficulty. Defendants would argue that it amounts to nothing less than an attempt to bypass the provisions of the Directive. Furthermore, the ten-year liability period is not in fact a limitation period at all. It does not merely provide the defendant with a procedural defence. It has the effect of extinguishing the statutory cause of action. If the cause of action is extinguished, upon what basis can judgment be given? It cannot, surely, derive from the estoppel itself, which ought to be regarded as a shield and not a sword.

However, there ought to be no objection in principle to a defendant being deprived as a matter of procedure from running a particular line of defence that would otherwise have provided a clear answer to the claim. The circumstances in which this might arise under the CPR are legion, ranging from a default judgment to a refusal of a late amendment to the defence. If it is permissible for the court to refuse to allow the producer to run a time-limit defence that has not been sufficiently pleaded, why should it not be permissible to strike out the same point on the basis of an estoppel?

In circumstances where no common law remedy is available to prevent a fraudulent defendant from defeating a valid claim in this way, the concept of an equitable estoppel has obvious attractions, but that is undoubtedly a novel point that has not yet been the subject of judicial scrutiny. In the meantime the effect of the ECJ decision in O'Byrne will be:

(a) to postpone the expiry of the ten-year long-stop in certain cases involving distribution within corporate groups; and

(b) to confirm the legitimacy of the Court of Appeal's decision in Horne-Roberts, permitting substitution out of time in cases of mistaken identity.

Hugh Preston is a barrister practising from 7 Bedford Row. He is instructed with Simeon Maskrey QC on behalf of the claimant (represented by Freeth Cartwright LLP) in O'Byrne v Aventis Pasteur