November 13, 2015

Product Liability - Iveco v Magna Electronics (High Court)

Jurisdiction in a product liability case: where does the harm occur?

Clyde & Co (Ian Plumley and Sian Purath) represented the claimants in this case.

An Italian company (A) supplied defective components to another Italian company (B), which incorporated them into vehicles which it manufactured. Those vehicles were then sold by B's distributor company in the UK (C). The vehicles caught fire in England. Claims brought by the vehicle owners were settled and B and C then sought a contribution from A. Of issue in this case is whether the English courts had jurisdiction over that claim.

Under the Recast Brussels I Regulation (Regulation 1215/2012), a defendant should be sued in the country of its domicile unless the special jurisdiction rules apply. These provide (inter alia) that "in matters relating to a contract" the defendant can be sued in the place of performance of the obligation in question (ie where the goods have been delivered) (Article 7(1)), or, in matters relating to tort, "where the harmful event occurred". Edwards-Stuart held as follows:

(1) It could not be said that there was a contractual relationship between A and C. Nor could it be argued that, since there was a contract between A and B, everything that followed from that was "related to a contract": "It seems to me, as a matter of construction, that the reference to "a contract" in Article 7(1)(a) must be to a contract between the claimant and the defendant, or a situation very close to it - for example, where one of the contracting parties is, or is effectively, acting as agent for one of the parties to the litigation".

(2)          It was common ground that the place "where the harmful event occurred" means both the place where the event giving rise to the damage occurred (it being accepted that in this case that was Italy) and also the place where the damage occurred. The judge rejected an argument that the damage had occurred in Italy when the defective components had been incorporated into the vehicles in Italy. Instead, he found that no one had suffered any damage prior to the occurrence of each of the fires: "It is true that, if (B) had discovered the defects in the relay systems before it sold the vehicles, it would have suffered a loss in that it would have had to replace the defective relay systems. But this never happened. Similarly, (C) suffered a potential loss in that it purchased vehicles which contained a serious defect, but since the vehicles were sold on at the agreed price in ignorance of the defect, it suffered no loss".

Accordingly, the English courts had jurisdiction to hear the claim brought by C (but the claim brought by B, which did relate to a contract, should be heard in Italy).