HL Deb 20 January 1987 vol 483 cc865-80

6.27 p.m.

House again in Committee on Clause 4.

Lord Morton of Shuna moved Amendment No. 40: Page 4, line 15, leave out from ("to") to ("instructions") in line 16.

The noble Lord said: Clause 4(1)(f)(ii) states: that the defect was wholly attributable to the design of the other product or to compliance by the producer of the product so comprised with instructions given by the producer of the other product". The amendment changes the wording of the subsection to state: that the defect was wholly attributable to the design of the other product or to instructions given by the producer of the other product".

To my mind—no doubt the noble and learned Lord, in reply, will say that I am wrong—that means exactly the same thing, and in fewer words. It also has the advantage of using the words of the directive. In my submission, there is something to be said for making the subsection shorter, clearer and more definite. I beg to move.

The Lord Advocate (Lord Cameron of Lochbroom)

I am always with the noble Lord in seeking to achieve clarity but as I think he will understand I have explained the reasons why I cannot suggest to the Committee that the amendment be accepted. It will indeed introduce an ambiguity that the words included in the Bill presently are intended to remove.

As the noble Lord has said, the subsection implements the provisions of Article 7(f) of the directive. That article provides that the producer shall not be liable if he can show, as a manufacturer of a component, that the defect in the product is attributable to the design of the product in which his component has been fitted or to the instructions given by the manufacturer of the product.

The case at which this article is clearly aimed—and I think it is clear from a general reading of the directive—is where component parts such as nuts and bolts, for instance, are made to the order of the finished product manufacturer, who then uses them for purposes for which they were not designed. That is to say that the component manufacturer is acting upon the instructions given by the manufacturer of the finished product.

The trouble about taking the words out, as the noble Lord has suggested, is that it might then be argued that the "instructions" referred to in the clause and in the article were instructions relied upon by the injured party. One might perhaps take the example of an electrical product which carries instructions for use prepared by the manufacturer of the finished product, and those instructions incorrectly specify adjustment to a component. Those instructions will not then usually be relevant to the component manufacturer's position since the component was supplied at an earlier stage. It was to correct this possible ambiguity that the subsection was carefully drafted to make it clear that there should be no ambiguity.

I think the noble Lord will understand, if he looks at the matter again in the light of what I have said, that it is important to obtain clarity and these words are then included to make it clear that they are instructions to the component manufacturer. This arises out of the point that he would not then be liable for a design for which he himself had not been effectively responsible.

Lord Morton of Shuna

I thank the noble and learned Lord for his answer, which I regret to say is wholly unconvincing. I agree it has to cover instructions to the manufacturer of the component but it is surely also designed to cover the situation where the manufacturer of the total article which has the component in it issues instructions to the consumer which involve a misuse of the component. That is what Article 7(f) says. If there is an ambiguity, it is one which exists in the directive, because it says there: The producer shall not be liable as a result of this Directive if he proves: … in the case of a manufacturer of a component, that the defect is attributable to the design of the product in which the component has been fitted or to the instructions given by the manufacturer of the product. It does not say "given by the manufacturer of the product to the manufacturer of the component": it just says "instructions given". One can quite foresee a situation where the instructions of the manufacturer of, say, a car to the consumer in the instruction book involve a misuse of a component manufactured by somebody else. Surely the manufacturer of the component should have the defence that the article says he should have. I regret to say that I find the noble and learned Lord's answer wholly unconvincing and I should be pleased to know whether he has any response to make to me on this point or not.

Lord Cameron of Lochbroom

It is not a question of response. I have given the Committee the advice that I have received—that that is the intention of Article 7 and that if one looks at it in the light of the whole directive the intention is to deal with design (a design which, however, may be one which has been the subject of instructions given to the manufacturer of the component by the manufacturer of the product). As I say, it is upon that advice that I have to advise your Lordships that this clause is framed as it is.

The noble Lord opposite takes issue with me on that matter, but I have to say that obviously we have very carefully considered the whole question of what the article means; and this part of the Bill is a synthesis of what the directive seeks to achieve. I am bound to say, acting on advice, that that is why this subsection appears in the clause as it does.

Lord Morton of Shuna

I will beg leave to withdraw the amendment in the hope that perhaps the Government may look at this again and perhaps the manufacturers of components may be able to persuade the Government in this respect if I have been unable to do so. I beg leave to withdraw the amendment.

Lord Kennet

On the Question that the Committee gives the noble Lord leave to withdraw his amendment, the noble and learned Lord has informed us that he has received advice that the intention—

Lord Cameron of Lochbroom

With respect, I think the amendment has already been withdrawn and the noble Lord is therefore out of order.

Lord Kennet

I believe the Committee has not yet given its leave for the amendment to be withdrawn and the Committee must give leave before the amendment can be withdrawn. It is at present still the property of the Committee—

The Deputy Chairman of Committees (Baroness Serota)

I rise to put the Question—

Lord Kennet

I believe I am correct in saying that the amendment has not yet been withdrawn. The noble and learned Lord has just informed us that he has received advice that the intention of the clause in question was such and such—for the purpose of my intervention it does not matter what the intention is—and I should like to ask two questions. First, who gave him the advice which he has passed on to us? Secondly, whose intention was it that the effect of the article should be such and such? There appears to me to be an unacceptable degree of anonymity in what the noble and learned Lord has just said to us.

Lord Cameron of Lochbroom

I have made it quite clear that the advice I have received was from those officials who advise in these matters. It is upon that basis which I have indicated to your Lordships that the article is translated as it is into the Bill.

Amendment, by leave, withdrawn.

On Question, Whether Clause 4 shall stand Part of the Bill?

Lord Williams of Elvel

Before we leave this clause, may I ask a question about Clause 4(2), which refers to "the relevant time" in relation to electricity? I find myself rather perplexed by this subsection and I shall be grateful for clarification. The generation of electricity, as I understand it, is a continuous process and I fail to understand how you can determine a time at which electricity is generated. I do not quite understand how, given the problems of storing electricity at high voltage, you can distinguish between the time at which electricity was generated and the time at which it was transmitted.

My last question is: given that Clause 1(2)(c) indicates that there is a further process, the performance of which can make the person doing the processing into a producer, does the transformation of electricity from high voltage to medium and low voltage constitute a production process under the terms of Clause 1? Is therefore the transformer the producer of the electricity which may come from a prior source? Further, if that is not the case, and if one cannot pin the responsibility for being a producer on to the transformer and hence the immediate supplier, how is it possible to tell what is the source of the electricity generated?

As we know, there are many arrangements between, for example, Electricité de France and the CEGB, and between the South of Scotland Electricity Board, the North of Scotland Hydro Board, the CEGB and others, for the transfer of electricity. How is it possible for anybody to determine who was the generator of electricity? I should be most grateful if the noble Lord could clarify my points.

Lord Lucas of Chilworth

I shall certainly try to answer the points which the noble Lord has raised. Clause 4(2) read with Clause 4(1)(d) gives effect in relation to electricity to an entry in the minutes of the council. These were adopted at the same time as the directive. It reads: The council notes that the inclusion of electricity in the definition of 'products' in Article 2 is intended solely to cover defects which are due to a failure in the process of production of this commodity and not defects which are due to external agents intervening after the electricity has been put into the network". In other words, liability in the United Kingdom will be confined to defects of generation, for which usually the Central Electricity Generating Board is responsible, and not defects arising subsequently in the supply, such as faults in the distribution line, for which the area boards are generally responsible. Electricity is treated as a product, so that if it is defective due to a fault in its generation—for example, it may be of too high a voltage or its frequency may be incorrect—damage caused by that defect will be covered by Part I of the Bill.

Lord Williams of Elvel

I am grateful to the noble Lord for his response. I think that this is a rather complicated question and I should perhaps like to take it up with him elsewhere.

Clause 4 agreed to.

Lord Airedale moved Amendment No. 41: After Clause 4, insert the following new clause:

("Identity of producer.

—(1) Every producer shall whenever practicable incorporate in his product his identity.

(2) Any person who fails to comply with subsection (1) above shall be guilty of an offence.")

The noble Lord said: This amendment seeks to introduce a new clause and I think the need for it can best be explained if I give the Committee an example of what I am thinking of. I confess to having given this example once before, but not for some time now.

A carpenter builds a splendid step-ladder, staunch and strong, and sells it to a customer. Nevertheless, when it is used it collapses and somebody has a bad fall, breaks his thigh and presents the poor carpenter with a large bill for damages. The carpenter is not at fault in any respect at all. The trouble is that one of the hinges that he fixed to the ladder had a crack in it. It could not be seen by any reasonable inspection because it had been painted over. It had not been painted over dishonestly—it had been painted over by the manufacturer as one of a consignment which were all painted over—and neither did the manufacturer spot the crack in the hinge.

The carpenter's only hope of passing the responsibility for this disaster back along the line of communication is, first, to identify the builders' merchant who supplied the hinge to him. His situation is that he has a good relationship of trust and friendship with several travellers who visit him from time to time from different builders' merchants. When he is busy he allows them to look through his stock of fittings, because they know as well as he does what fittings he regularly needs in the course of his business, and he relies upon them to keep replenished the stock that he needs of these fittings.

When this particular hinge is shown to be defective, the carpenter is under terrible difficulty even to be sure which builders' merchants supplied it. His chance of taking the matter back, as it ought to be taken back, to the manufacturer in the West Midlands—and there are many manufacturers in the West Midlands of fittings like this—is just about nil. This surely indicates the need for an amendment like this one to make the Bill work satisfactorily from the point of view of people who are injured. It is surely desirable to make it obligatory upon the producer to put his identity mark upon his product so that in cases like this he can be identified.

I do not suppose that the acceptance of this amendment would be met with any dismay by the industry, because it is already very common practice for fittings to be marked with the maker's identity mark. Indeed, on balance, it is probably advantageous to him to do this, because in that way he probably relies upon getting repeat orders for the products which he supplies.

I qualify the new clause slightly by saying "whenever practicable", because I realise that there are limits. It is probably not practicable that every screw or nail should be inscribed "GKN" or whatever it may be. But subject to that I should have thought a new clause of this kind was necessary if this Bill is to work satisfactorily from the point of view of people who will be injured. I beg to move.

6.45 p.m.

Lord Kilbracken

I must say that on this occasion I find the noble Lord's wording in his new clause slightly inappropriate and misleading. He talks about a producer having to, incorporate in his product his identity. I do not know why he does not say, "incorporate his identity in his product", which would be the usual order of words. To incorporate means to include something as part of something else, and I do not see how a producer can include his identity in a product. I suggest that he includes an indication of his identity. That is what we want to know. We want some indication of who he is. It is an indication of his identity, rather than his identity, which should be included.

Baroness Gardner of Parkes

I find this a slightly worrying suggestion, as those of us who have travelled overseas recently have discovered that anyone can get anything with a fake hallmark or a name of any sort on it. Indeed, if you go to Singapore you can buy any sort of fake watch, and watches are sold as being fake watches. But how then does someone later prove that a hinge which has a very small mark on it was genuinely made by someone and was not made by someone else who was faking it?

Lord Marshall of Leeds

I should also like to say that the words "whenever practicable" will be a matter of great contention if any person who fails to comply is thereby guilty of an offence. It makes me regret that I am a lawyer retired from private practice, because the amount of litigation that this might generate is a very attractive proposition so far as the law is concerned.

Lord Denning

I would just add that before creating any criminal offence it ought to be clear and distinct, so that you know exactly whether you are committing a criminal offence. These words "whenever practicable" have to be put in in case of argument, but the position is so uncertain that I am afraid it ought not to be made a criminal offence.

Lord Lucas of Chilworth

I greatly enjoyed hearing again the example of the noble Lord, Lord Airedale. He said that to alleviate to some extent his new clause he has added the words "whenever practicable". He then said that you cannot go on to name every component. He referred to the nail; but where is it not practicable and where do we draw the line? One would go to the producer of the step-ladder, if indeed that were defective.

Leaving that aside, I would sooner rest my suggestion of rejecting the noble Lord's amendment on rather firmer ground. The purpose of the amendment is that every producer of every product would have to incorporate his name on that product and if he did not do so he would be guilty of an offence. There are a number of problems here. First, the provision would place a quite intolerable burden on United Kingdom producers. Even if we were to accept the clause into the Bill it would have no effect whatsoever in other Community countries which are also implementing the directive. Indeed, it would have no effect anywhere else other than in the United Kingdom. For that reason alone, I suggest that the clause is misplaced.

However, to make it a criminal offence for a manufacturer not to put his identity into the product, as my noble friend Lord Marshall of Leeds and the noble and learned Lord, Lord Denning, suggest, is going too far. My noble friend Lady Gardner of Parkes had a point when she spoke about copied parts. I do not wish to engage this evening in a long debate—and I do not think my noble friend does either—on the great problem of counterfeiting, another problem into which the Community is looking.

Surely it must be for every producer to decide whether he wishes to attach his name to a product or whether his customer wishes his name to be attached to the product. We also have a problem in establishing what in this amendment the word "producer" means. Does the noble Lord, Lord Airedale, intend it to refer to the manufacturer of the product or to those persons who would be deemed to be producers by virtue of the provisions in Clause 2(2)? Both by putting their own trade mark or name on a product hold themselves out to be the producer of the product or a person who imports the product into the Community from a place outside. We can legislate only for United Kingdom manufacturers or importers. This would place them at a considerable competitive disadvantage within the Community.

Furthermore, the provision would make any producer who failed to incorporate his identity guilty of an offence. This part of the Bill does not deal with criminal offences. It is concerned solely with civil liability for damage caused by defects in products.

I feel quite sure that the noble Lord, Lord Airedale, will find those agruments sufficiently persuasive for him to withdraw his amendment.

Lord Airedale

As the amendment has been opposed strongly in every single quarter of the Committee, I think I should be unwise to press it to a Division. I am gratified that noble Lords have taken so much interest in this matter. Some of the criticisms have been slightly nit-picking. For instance, the noble Baroness, Lady Gardner, asks about the position with regard to a cheap imitation made in Singapore. If one took that to the firm in Birmingham it would say. "That's not our product. That's a cheap copy. If you take us to the court we shall have no difficulty in persuading the judge that it is a cheap copy of our product". I see no difficulty arising there in practice.

I shall not go on to deal with all the criticisms that have been levied. It is quite clear that the Committee is not prepared to accept the amendment, and I beg leave to withdraw it.

Amendment, by leave withdrawn.

Lord Airedale moved Amendment No. 42: After Clause 4, insert the following new clause;

("Insurance of producer or importer.

. Every person to whom section 2(2) above applies shall maintain in force such a policy of insurance as complies with the requirements of this Part of this Act; and if a person acts in contravention of this section he shall be guilty of an offence.").

The noble Lord said: This amendment is based upon the relevant section of the Road Traffic Act which makes compulsory insurance in respect of road traffic. I should have thought that the amendment is necessary if the Bill is to work. For a variety of reasons, unless they have to, people and firms will not take out insurance to cover themselves against this liability. Some of them will be too busy to remember to insure and others will deliberately take the risk upon themselves.

They will say that these terrible disasters are things which happen to other people and will not happen to them, so they will not insure; they will stand the risk themselves. Then some terrible disaster will occur and the small firm will be quite unable to meet the enormous claim that will be made. The small firm will be made to meet it up to the point of bankruptcy perhaps, and its work-people will be thrown out of employment. The injured person will not receive his full compensation and there will be tears all round. To avoid such situations it is necessary to have a provision to require producers compulsorily to ensure against liability under this part of the Bill.

There is another aspect which I do not mention in the amendment itself. There is the Motor Insurers' Bureau provision whereby, in the cases where a motor vehicle or its owner is not insured, nevertheless by agreement with the Government the insurance industry agrees to compensate the injured person just as though the person guilty of the offence was insured. That, I believe, is not a statutory provision but is an extra-statutory arrangement come to between the Government and the industry. I hope that a similar arrangement would become available if this amendment for compulsory insurance was enacted. I beg to move.

Lord Williams of Elvel

I hope that the noble Lord, Lord Airedale, feels that I have been reasonably sympathetic to some of his amendments and to some of his thoughts, but on this one I am bound to say that as an Opposition we oppose it fundamentally. It appears to introduce into the Bill a whole new series of concepts of a wholly impractical nature. I very much hope that the noble Lord opposite will turn it down straight away without further debate.

Lord Auckland

I begin by declaring an interest as president of the Institute of Insurance Consultants, although any views I express do not necessarily represent the views of that organisation. There are some intolerable difficulties here. In the first place, I think it is fair to say that most producers of any repute will already be insured.

There is also the question of enforceability. Who is going to enforce this? I know that under the Road Traffic Acts at least third party insurance is compulsory, but here we are talking about all kinds of producers—mainly people who are reasonable, but obviously there are some mavericks.

One cannot compel an insurance company to deal with those people. We must leave it to the bona fides of the producer to seek insurance. It is not always easy, but insurance can normally be obtained, even if sometimes at a high cost, through a reputable insurance company for a reputable producer. I think that in this instance one has to trust the bona fides of both sides.

7 p.m.

Lord Denning

May I add that if this insurance is compulsory it would be only in regard to the strict liability. If you are to have insurance it must cover negligence, breach of contract and goodness knows what. I am afraid the amendment will not work.

Lord Lucas of Chilworth

I suggest to the noble Lord, Lord Airedale, that he does not press his amendment, for a number of reasons which have already been given by members of the Committee.

I do not normally comment upon the drafting of an amendment but this proposed new clause refers to, such a policy of insurance as complies with the requirements of this Part of this Act when there are no such requirements in the Act. Secondly, it is not right—

Lord Airedale

I should have said that I deliberately did not spell out the requirements of "this Part of this Act" because I am dealing with a general principle and I did not want to clutter the Marshalled List with a lot of detailed matter which in any case probably would not have been right. I am dealing with the general principle.

Lord Lucas of Chilworth

Perhaps I can then deal with the one principle which I believe is wrong. There are practical arguments that one can portray and some have been portrayed. I refer to such matters as own insurance which the noble Lord, Lord Ezra, spoke about earlier. I should say that compulsory insurance is not a feature of the directive. In the interests of harmonisation and the agreement which was struck in Brussels it would be wrong for the United Kingdom unilaterally to put in such a provision as it would put a tremendous burden—an impossible burden to enforce—on our manufacturers or producers.

Lord Airedale

Again I am grateful to members of the Committee who have taken part in this discussion and who have shown an interest. This is another matter on which I am not going to win on a Division. The noble Lord, Lord Auckland, asked how the proposal would be enforced. Whenever one makes something a criminal offence the news gets around. If you do not do what is legally necessary you are committing an offence and can be heavily fined. You must comply with the law of England. That is the way such matters get enforced.

Having said that, since the Committee is not favourably inclined towards this idea, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 [Damages recoverable under Part I]:

Lord Morton of Shuna moved Amendment No. 43: Page 4, line 30, at end insert ("and including non-corporeal losses.").

The noble Lord said: This is in the nature of a probing amendment. Clause 5 deals with damages, what they consist of and what can be recovered. According to subsection (1): 'damage' means death or personal injury or any loss of or damage to any property (including land). That conveys the connotation that it is corporeal property and there is no definition that I can find anywhere in the Bill of what "property" is supposed to mean; so one assumes that it means what the court holds it to mean.

There are many cases that one could visualise where someone is injured or suffers in some way because of a defective product and therefore suffers a non-corporeal loss. For example, if someone who runs his own business is seriously injured in an accident the good will of his business will suffer and he will have had a severe loss of that nature.

I should like to know from the noble and learned Lord whether he is satisfied that the Bill covers that type of loss because it clearly covers a loss of earnings claim. Does it cover the other types of claim? I beg to move.

Lord Denning

This is an important point to decide and it is not clear in the Bill as it stands. I do not like the phrase "non-corporeal losses". That sort of phrase is used in Scotland, but I have never heard it in English law. We usually refer to it as "economic loss". There are many cases about economic loss or damage, and it has been the subject of much discussion in the courts and in the textbooks.

It is important to resolve this point because Article 9 of the directive tries to define "damage", although it is not clear on that point. It then states: This Article shall be without prejudice to national provisions relating to non-material damage. I expect that means the same as economic loss, but I do not know. Again, that is not an English phrase; it is a directive phrase but I assume that it does mean non-corporeal loss or economic damage, or whatever it is.

This is a matter which should be clarified in the Bill. I am a little uncertain about it. If you are imposing strict liability I am doubtful as to how far you should include economic loss. Certainly there has been much discussion on negligence and we include economic loss: loss of earnings, loss of profit in a business, and so on, are all included. I am not at all sure that they ought not to be included here. However, it should be made clear in the Bill whether or not they are covered. I do not know the Government's view, but I am inclined to think that the Bill should cover the same sort of damage as an ordinary action of tort should cover and that this is going to be considered as a matter of tort. It should be made clear.

Lord Cameron of Lochbroom

I recognise that this is an important point raised by the noble Lord. In regard to death or personal injury claims I think the noble and learned Lord, Lord Denning, extended this to the other kind of damage. I should say that the Bill is framed to make it clear that, as the directive intends, for property loss it will simply be the loss or damage to the property that is covered and no economic loss resulting therefrom.

As regards the case of personal injury or death, I have to assure the Committee that the intention is that damages recoverable under Part I will be the same as for other actions on personal injuries and will in particular include the normal incidents, apart from solatium, or pain and suffering as it is known more familiarly south of the Border. It includes what the noble Lord opposite would recognise as, in the Scottish term, patrimonial loss. I am bound to say that I stand alongside the noble and learned Lord, Lord Denning, in wondering what is an incorporeal loss. I can understand incorporeal property rights but not an incorporeal loss. I should have thought that it was a negation. However, I fully understand what it is that the noble Lord opposite is driving at.

I am bound to say, as a Scots lawyer, that I have expressed a certain concern about the way in which this particular part of the clause is framed to make it clear that both patrimonial loss and the other rights, which I might call in solatium, can be recovered. Perhaps I may say that our intention is perfectly clear. We think that it is within the sweep of the directive and indeed, as the noble and learned Lord has pointed out, the last words of Article 9, which say, This Article shall be without prejudice to national provisions relating to non-material damage.". That includes, of course, pain and suffering.

I should like to consider the matter further. I think that our objectives are the same. I am not yet fully satisfied that the Bill as drafted secures the objective that both noble Lords and I wish to achieve. Perhaps with that undertaking, the noble Lord opposite will feel able to withdraw his amendment.

Lord Denning

I should like to add one word. There have been many cases in the courts in which damage to property has led to loss of profits or benefits of other kinds. So, in a way, it is necessary for all these aspects to be considered.

Lord Cameron of Lochbroom

Let me come back to say that this is why I was very careful at the outset to make clear that what I am talking about in my undertaking relates only to that part of the clause which deals with death or personal injury. We read the directive as making it clear that so far as property damage is concerned it does not extend beyond damage to property to other economic loss.

Lord Morton of Shuna

As I said, this is a probing amendment and I certainly intend to ask leave to withdraw it. However, in looking at the personal injury side, perhaps I may suggest the inclusion of a clause stating that damages for personal injury shall be assessed according to the law of England or Scotland as appropriate. That would make it perfectly clear what is being dealt with. I ask leave to withdraw this amendment.

Amendment, by leave, withdrawn.

The Principal Deputy Chairman of Committees (Baroness Serota)

In calling the next amendment, Amendment No 44, I should mention to the Committee that if this amendment is agreed to, I cannot call Amendment No. 45.

Lord Airedale moved Amendment No. 44: Page 4, line 31, leave out subsection (2).

The noble Lord said: Subsection (2) provides that, A person shall not be liable … in respect of any defect in a product for the loss of or any damage to the product itself". Why should this be so? If I buy the very latest 21-inch colour television set costing many hundreds of pounds and find that it has an electrical fault so that the set catches fire and is destroyed, why should I not be able to claim under this part of this Bill without having to prove negligence just because we are talking about the product itself? I see no reason for this. May I please have an explanation? I beg to move.

Lord Morton of Shuna

On these Benches we have to oppose the amendment, not with any purpose of saying that the amendment or the idea behind it is bad in itself but because the purpose of Part I of the Bill is to comply with the directive. We shall be discussing on the next amendment what the product is. But the directive states specifically in Article 9 that "damage" means, damage to, or destruction of, any item of property other than the defective product itself". It seems to be perfectly clear. Therefore, something on the lines of subsection (2) has to be inserted.

Lord Beaverbrook

As the noble Lord, Lord Morton, has said, it is made clear in Article 9(b) of the directive that for the purposes of the directive "damage" means, damage to, or destruction of, any item of property other than the defective product itself". This subsection of Clause 5 reflects that intention in the directive. The purpose of Part I is only to implement the provisions of the directive. I apologise to the Committee if I am being repetitive but it is important to confirm that the purpose of the directive is to provide compensation to persons injured by defective products.

Liability in respect of the quality of a product, its fitness for a particular purpose, including its freedom from defects in the sense that it will not be damaged or lost in its entirety as a result of defects in part of it, is normally governed in the laws of all the member states by the law relating to the sale of goods.

In the United Kingdom, the main provisions are contained in the Sale of Goods Act 1979. This field of law is not affected by the directive. For these reasons and because it goes beyond the provisions of the directive, I ask the noble Lord to withdraw his amendment.

Lord Airedale

I appreciate that if the person who suffers the damage is the person who entered the contract to buy the set, there is a cause of action in contract. I appreciate also that if negligence can be proved against the producer, there is an action in negligence. However, if neither of those circumstances is present, is it not anomalous that just because one is talking about the product itself, this part of the Bill is not available to come to the rescue of the person who suffers the damage?

When our representatives discussed this directive in its formative stages with their opposite numbers in Europe, did they point out how anomalous this was going to be and did they urge that the directive should not make this rather extraordinary exception which would create this anomaly? It is no good crying over spilt milk. Noble Lords are quite right, and we have to follow the directive. If the directive directs something which is anomalous, we have to live with it, but it is unsatisfactory. I am glad that I raised the matter because it shows up an anomaly. Nothing can be done about it at this moment, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

7.15 p.m.

Lord Morton of Shuna moved Amendment No. 45: Page 4, line 33, leave out from ("itself") to end of line 35.

The noble Lord said: In my view this is an important amendment and it returns to a matter that I raised on Second Reading. For what it is worth, my opinion is that Clause 5(2) does not reflect the wording or the meaning of the directive and is contrary to it. Clause 5(2) says: A person shall not be liable under section 2 above in respect of any defect in a product for the loss of or any damage to the product itself'. So far I am quite happy. It is the following words that I seek to delete from the subsection; namely: or for the loss of or any damage to the whole or any part of any product which has been supplied with the product in question comprised in it". In my submission the second half of this subsection is entirely contrary to the content of that article. If one turns first to Article 9(b)—and I read it out during our discussion on the previous amendment—it says: damage to, or destruction of, any item of property other than the defective product itself, with a lower threshold of 500 ECU, provided that the item of property … is". Now we have to look at what is the item of property and what is being talked about by the directive. At Second Reading I gave the illustration of buying a car with a defective battery which went wrong and burned out the car. I said that clearly the intention of the directive was that one should be able to sue the producer of the battery for the damage to the car which was the loss. At col. 1061 of Hansard the noble Lord, Lord Lucas, said that I was wrong. We are now reverting to that argument. I shall refer to the preamble and the fourth "whereas", if I can identify it in that way. The directive states: Whereas protection of the consumer requires that all producers involved in the production process should be made liable, in so far as their finished product, component part or any raw material supplied by them was defective". That seems to mean that the protection of the consumer requires that we should be able to go against the supplier of the raw material, the component or the finished article in which the component and the raw material are comprised. One then goes to the articles which give the definition. Article 2 defines what a product is. It states: For the purpose of this Directive 'product' means all movables with the exception of primary agricultural products and game, even though incorporated into another movable or into an immovable.". In other words, a battery, when incorporated into a car, remains a battery.

Under Article 3 "producer" means: the manufacturer of a finished product,"— that is the car— the producer of any raw material or the manufacturer of a component part". That is the manufacturer of the battery in the example that I have given, or of a defective tyre or brake lining: and any person who, by putting his name, trade mark and so forth.

That is clear. The consumer is being given a choice. He can either sue the car manufacturer, in which case he cannot recover the damage to the car, or he can sue the battery manufacturer, in which case he can recover the damage to the car. That becomes clear if one looks at Article 7: The producer shall not be liable as a result of this Directive if he proves: … in the case of a manufacturer of a component, that the defect is attributable to the design of the product in which the component has been fitted or to the instructions given by the manufacturer of the product.". As I said, the point of the provision is to give a choice and a collection of producers. The manufacturer of a component or a raw material is clearly a producer. The directive says so time and again. He does not cease to be a producer merely because someone else puts his products into a car or any other component-assembled article.

The Government have not followed the directive. They have restricted the damages in a way that is clearly wrong. Subsection (2) would meet the directive completely if it said: a person shall not be liable under Section 2 in respect of any defect in the product for the loss of or any damage to the product itself and just left it there. I can find nothing in the directive to justify the next two lines, and for those reasons I beg to move.

Lord Denning

I support the amendment. I find it difficult to understand the two or three lines at the beginning. I should like to compare it to where an action in negligence or breach of contract still lies. I should have thought that one would be liable under that for the loss or damage to the component itself and to the other materials; in other words, I think the provision unduly restricts liability in damage. It is much better to keep it to those first two lines which correspond with the directive. I support the amendment.

Lord Cameron of Lochbroom

I invite the Committee not to accept the amendment. I do so for a number of reasons. The principal reason relates to the directive. I accept that if one goes through the directive one finds many places where it does not fully work out the consequences of the provision contained in Article 2 which provides that a product may include products incorporated into other products. This is one of those places. We take the view that the reference to the defective product in Article 9(b) is reasonably and rightly to be construed as including any product in which a defective component is comprised.

In that regard it may be helpful to quote paragraph 20 of the Commission's memorandum on the directive which I think makes the point abundantly clear: claims for compensation in respect of damage to or the destruction of the defective product itself are excluded. Product damage is damage which is inflicted upon the user or purchaser of a defective article in the form of personal injury or damaged property. The producer of the article is liable in respect of this type of damage. Liability in respect of the quality of a newly purchased article, its fitness for particular purposes, including"— this is the important part— its freedom from defects in the sense that it will not be damaged or destroyed in its entirety as a result of defects in part of it, is normally governed in the laws of all the Member States by the law relating to the Sale of Goods. This field is not affected by the Directive. There it is, including freedom from defects in the sense that a product will not be damaged or destroyed in its entirety as a result of defects in part of it. I should make it clear, as the noble Lord opposite will recognise, that if we have a defect in the component of a car that leads to the car which is what the person who is claiming damages would have received, being destroyed, and that happens without any injury to that person or damage to his property, then such damage raises different considerations.

A product which destroys itself, which would be what that is, is not of merchantable quality and accordingly would be treated by the law which deals with the quality of goods and not their safety. That is the point that the Commission makes in its memorandum. Accordingly, the directive and the first part of Clause 5(2) does not cover damage done by the product to itself.

Having explained why we have taken that view, I hope that the noble Lord, Lord Morton, will understand that there was good reason for our drafting this provision as we did. Sadly, his expensive motor car which blows itself up with its defective battery, will not be a subject for litigation under this Bill. The noble Lord will as usual no doubt find many ways of recovering by adopting other remedies available to him in law.

Lord Denning

May I ask about this memorandum? Where do we find it? I have only the directive. Is the memorandum separately issued by the European Commission?

Lord Cameron of Lochbroom

I understand that to be the case. I shall certainly be happy to try to obtain a copy for the noble and learned Lord.

Lord Denning

It is interesting that when interpreting this we first looked at the directive and from the directive to a memorandum. I understand that the Commission is saying "Leave it to the sale of goods provisions", and not those on strict liability.

Lord Morton of Shuna

At this time of night I certainly do not want to test the opinion of the Committee. Nor do I wish to go into the question as to whether, if one buys a car with a defective tyre, that car is of merchantable quality and whether one would be able to operate wholly under the Sale of Goods Act. There is the other problem about whether, if A buys a car and it causes damage to B, for whom, if anybody, there will be a right under this directive.

No doubt the noble and learned Lord can tell us the status of the memorandum. The directive is published by the European Community and the Community has adopted it. Is the memorandum advice to the Community? What is its status if it contradicts the directive?

Lord Cameron of Lochbroom

I would simply say that the memorandum is not contradicting the directive. It makes clear the Commission's view, and it will be the Commission at the end of the day which will be ensuring that the directive is implemented as to the effect of this article. Obviously all member countries will be taking that into account when they are drafting their legislation based upon this directive. That is the reason why I thought it was extremely pertinent to quote it in some length to the Committee to make it quite clear why it is that we have taken the view that we have done about the effect of this article.

Lord Morton of Shuna

Perhaps this is an appropriate time to ask leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Lord Beaverbrook

It may be for the convenience of the Committee if I suggest that we do not return to this subject until 8.30 p.m. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.