INTERNALISING THE COSTS OF DEFECTIVE PRODUCTS BY PUMZO MBANA

Friday, April 17, 2009
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During the second half of 2008 milk tainted with melamine, an industrial chemical used in plastics and which can make the protein content of milk and other products appear higher, was discovered in Chinese baby formula. When consumed, melamine can cause kidney failure. In China, traces of melamine in baby formula resulted in the deaths of several children and tens of thousands fell sick. Inspections by the Chinese government discovered that 22 of that country’s 109 milk powder producers used melamine to boost the protein content of their milk.
In South Africa, it is not clear how our law would decisively protect consumers from a product liability scandal of this nature. However, the Consumer Protection Bill of 2008 (“the Act”), which is expected to be signed into law during 2009, provides some comfort for victims of defective products. 
Product liability refers to a consumer’s delictual action for damages against a manufacturer, supplier or retailer of a defective product. The Act introduces a rights-based approach to product liability claims. It guarantees every consumer’s right to products that are of fair value, good quality and safe. In terms of this approach, product liability claims will no longer be dealt with under the common law negligence standard but under the strict liability regime.
At common law, our courts focus on whether the defendant failed to observe a degree of care which the law of delict requires. In other words, a court would find a defendant liable if there is a failure to take reasonable care to prevent foreseeable harm to others.
This common law negligence standard does not adequately protect consumers from persons who breach the duty of care towards consumers. This is partly because the consumer may only recover damages from the defendant if the defendant should have reasonably foreseen and acted to avoid injury to others. The further a person is from the manufacturing of the product, the more difficult it is to establish that they should have reasonably foreseen the harm caused by a defective product.
Under the strict liability regime, our courts will no longer focus on the foreseeability of harm. Section 61(2) of the Act states that the producer, importer, distributor or retailer (collectively referred to as “persons in the supply chain”) of any goods is liable for any harm caused wholly or partly by the goods, irrespective of whether the harm resulted from any negligence on the part of these parties. A consumer must show that a person in the supply chain supplied the defective product and that the product was the proximate cause of the plaintiff’s injuries. 
Strict liability ensures that the costs of injuries resulting from defective products are borne by the persons who bring the defective product to the market rather than by a powerless injured person. This internalises the costs of the defective products. 
In order to succeed in a product liability suit, a consumer may raise any of the three causes of action in section 61 of the Act. Firstly, liability may arise in situations where a consumer is supplied with an unsafe product. For example, unsafe products would include damaged, physically flawed, and incorrectly assembled products.
Secondly, liability may arise as a result of a product failure, defect or hazard in any product.
Thirdly, liability may arise due to information defects, namely, the failure to provide adequate instructions or warnings to the consumer pertaining to any hazard arising from or associated with the use of the product. These products are only hazardous if the consumer is not provided with adequate instructions or appropriate warnings. However, a consumer who has failed to follow the instructions or read the warnings cannot sustain a claim based on information defects.
Persons in the supply chain may raise several defences against a product liability claim. Firstly, they may argue that the defective characteristic of the product is wholly attributable to their compliance with a public regulation.
Secondly, they may argue that the defect did not exist in the product at the time it was supplied or the unsafe characteristic is wholly attributable to compliance by them with the instructions of the supplier.
Thirdly, a person in the supply chain may argue that it is unreasonable to expect them to have discovered the defect. In determining whether the defendant acted unreasonably, one needs to take into account the person’s role in marketing the goods and the state of scientific and technical knowledge at the time the goods were under the control of that person. If the state of scientific and technical knowledge at the time of sale of the product was such that the defect was not known or knowable, no liability would arise.
Fourthly, no liability will arise for a claim that is brought more than three years of the harm occurring. The Act however does not bar a consumer from bringing a claim because the product in question has been in circulation for more than three years.
The introduction of strict liability shifts the inquiry from the assessment of the conduct of the defendant to the determination of the causal connection between the defective product and the harm suffered. Under the strict liability regime, the focus will be on compensating consumers for damages suffered.
Persons in the supply chain should diligently monitor the quality of the products they bring to the market. In order to minimise the potentially devastating costs of a product liability claim on a company, companies would need product liability insurance.
Hopefully, the new product liability regime will protect consumers and spread the costs of defective products.
Pumzo Mbana is an associate in the Dispute Resolution Department at Bowman Gilfillan.