I move: "That the Bill be now read a Second Time."
I am very pleased to introduce this Bill, it is without question the most significant measure to emerge to date in the Community in the area of consumer protection. Equally, the changes in our national law will have important implications for the legal process as regards product liability. Thus the position of Irish consumers will be advanced in a very considerable way by providing additional legal redress to those already available under existing tort and contract law.
While the present measure is aimed primarily at improving the position of the consumer, it should not be construed as being either anti-enterprise or anti-business development. I would like to remind the House that the requirements of the directive already have to be met by Irish manufacturers in their principal EC markets. Deputies are aware that our manufacturing sector now sells about 70 per cent of its production in markets which are predominantly within the European Community. In 1990 our exports to other EC countries were valued at nearly £11 billion. Currently 2,500 manufacturing companies in Ireland — half the total — are now engaged in exporting.
The remaining 2,500 manufacturing companies continue to rely on the home market for the bulk of their business. Thus it will be in industry's interest that quality assurance and safety standards are maintained at the highest international levels. The message to industry is that quality production, a desirable end in itself, helps to guard against the risk of damage and liability, and consequently costly claims.
Any company operating to the highest quality standards in its management and production processes should have little to fear from the new legislation. The competitive challenges associated with the Single European Market make it imperative that Irish manufacturers employ strict quality control in the production of their goods. Furthermore, I believe that as many companies as possible should strive to achieve certification by the National Standards Authority of Ireland. The attainment of its quality standard is an invaluable tool in marketing Irish products overseas. At the end of February 1991, 182 Irish companies had been awarded ISO 9000 certificates. It is predicted that there will be 400 before the end of the year.
There has been widespread consultation with industry, as well as with consumer and trade interests, in the course of preparation of this legislation. Industry should now be very familiar with the aims and requirements of the EC Directive as a result of this and also through seminars arranged over an extended period. This Bill will give effect in Irish law to European Communities Directive 85/374/EEC on liability for defective products which was adopted on 25 July 1985. The directive is an integral part of the Community's policy of reducing distortions in trade between member states by the harmonisation of their laws in a wide range of areas.
The Bill will introduce into Irish law the remedy of damages, in respect of injury to a person or damage to his property, from faulty or defective products, based on the principle of strict or no-fault liability. This means that where damage is caused to a person or his property from the use of a defective product, the producer is liable irrespective of whether he is negligent in its manufacture or production.
The remedies available under this Bill are additional to those in existing tort and contract law. Liability in tort exists where, because of a defect in a product resulting from its faulty manufacture, damage is caused to a person or his property, but to succeed in such cases at present the plaintiff must prove negligence on the part of the manufacturer, supplier or dealer. For this reason many potential claims never get to court and the injured party does not even get a hearing.
The Sale of Goods and Supply of Services Act, 1980, incorporates two main implied conditions which are: (i) that the product or goods are of merchantable quality; and (ii) that they are reasonably fit for the purpose for which they are intended.
A consumer can take an action for damages against the supplier — generally the retailer — if the goods are not of the necessary quality and damage or loss ensues. Of course, if such an action is successful in recovering damages from the supplier, then that supplier can seek indemnity from the person who supplied him with the product or goods. Taken together, the expanded law of tort and contract law will offer the consumer a comprehensive and complementary set of measures providing wide ranging protection in the area of product liability.
The Bill follows quite closely the wording and the provisions of the directive. However in transposing the directive into national legislation member states are permitted to exercise a number of options. These are as follows: first, member states are allowed to include in the scope of implementing legislation primary agricultural products, including fish and game, which have not undergone initial processing; second, member states are allowed to exclude from the defences that are available to the producer the so-called "development risks" or "state of the art" defence and third, member states may put a limit on the total liability of a producer for damage resulting from a death or personal injury and caused by identical items with the same defect. In giving effect to the directive, the Government has decided not to avail of any of these options. I will explain the reasons for this approach presently.
The following is a description of the provisions of the Bill. The definitions of certain of the terms used in the Bill are contained in section 1. Many of the provisions of this section are self-explanatory but some warrant comment. Damage within the meaning of this Bill includes death or personal injury or loss of, damage to or destruction of property. Damage to the defective product itself and to property that is used other than for private consumption is excluded. An injured person is defined as one who has suffered the damage or his personal representative or dependants. Products covered by the Bill are all movables except primary agricultural products, which include fish products and game, except where these products have undergone processing of an industrial nature. Included are component parts of or raw material used in the manufacture of a finished product even though that final product may be an immovable. An example of this would be building materials used in the construction of a house, which is immovable.
Primary agricultural products have been excluded from the legislation because they can be particularly prone to hidden defects caused by environmental factors beyond the control of the producer. These products, however, will still be covered under fault-based tort and contract law. Where they are processed, the responsibility will reside with the processor, who will be considered as the producer under the terms of this Bill. It is his responsibility to detect defects and failure to eliminate them could expose him to risk. It is interesting to note that all member states, with the exception of Luxembourg, which have implemented this directive have excluded primary agricultural products from the scope of their implementing legislation; for us to do otherwise would be to unfairly disadvantage our own farm sector particularly with regard to insurance costs.
Section 2 contains the principal provision of the Bill, imposing liability for damages in tort on the producer for damage caused wholly or partly by a defect in his product. A producer is defined in considerable detail and may be (a) the manufacturer of a finished product, (b) the manufacturer of a component or of a raw material used in a finished product, (c) in the case of processed agricultural products, including fish and game, the processor thereof, (d) any person who, by using his name in connection with a product, represents himself as the producer of that product, (e) any person who imports a product into the European Community for business purposes, or (f) in the unlikely event that none of the above mentioned can be identified, any other person in the chain of supply.
I am confident that this section provides adequate scope for the identification of a liable producer where a defective product has caused damage. Where a defective product is imported into this country from outside the European Community, the importer will be held liable. A very important safeguard from the point of view of the consumer is that where he has difficulty in identifying the producer and where, simultaneously, the supplier of the defective product fails to identify the manufacturer or his supplier, then that supplier can be held liable. In my view this represents a powerful incentive to Irish importers, wholesalers and retailers to refrain from dealing in faulty goods, particularly those originating outside the EC.
In order to discourage the possibility of an excessive number of cases entailing very small claims, section 3, in accordance with the provisions of the directive, provides that damages not exceeding £350 claimed in respect of property are excluded from the provisions of the Bill, but this restriction relates only to damage to property. Where damages are awarded, only that amount in excess of £350 can be recovered. To enable this figure to be updated without the necessity for primary legislation, the Bill will empower me to vary this amount by making an order under this section. Such an order might be necessary, for example, if the EC Commission decided to revise this minimum amount or a significant movement of exchange rates over a period warranted an adjustment.
The directive allows members states to provide for a limit on the total liability of a producer resulting from a death or injury caused by identical items with the same defect. Where a member state decides to avail of this option, the limit cannot be less than 70 million ECUs — approximately £53 million. This Bill does not include such a limit. It is considered that the minimum financial limit is pitched at such a high level that there would be no material difference from that of a system of unlimited liability.
Section 4 concerns the burden of proof on the injured person. I indicated in my introduction that in actions under the existing law of tort, the injured person is required to prove negligence on the part of the producer; in actions brought under this legislation the injured person must prove only the damage suffered, the defect in the product and that the defect caused the damage.
Section 5 provides the criteria for determining the defectiveness of a product. Under this Bill, a product is defective if it does not provide the safety which a person is entitled to expect taking all circumstances into account. This criterion must, for example, take into account the way the product was used — some products are capable of being used for a purpose for which they are clearly not intended. In such cases a product may well not be considered to be defective. Additionally a product cannot be regarded as defective solely because a better product has subsequently been put into circulation.
I have already mentioned that the Bill makes available to producers a number of defences. These are contained in section 6. A producer will not be liable if he can prove any of the following: that he did not put the product into circulation, that the defect probably did not exist at the time the product was put into circulation by him or that the defect arose afterwards, that the product was not produced for an economic purpose or in the course of business, that the defect was as a direct result of compliance with any legal requirement of national or European Communities law, that in the case of a defect in the raw material or component part the defect was due to the design of the finished product or the instructions given by its manufacturer, or that when the product was put into circulation the state of scientific or technical knowledge was not such as to enable the existence of the defect to be discovered; this is commonly known as the "development risks" or "state of the art" defence.
As I have mentioned, the directive does provide for the exclusion of the "development risks" or "state of the art" defence. This option has not been exercised in the Bill. The Government are of the view that this defence should be allowed as the cost of insuring against this risk could be extremely high and the effect could well be to stifle innovation in some of our most progressive industries. When development risk is a factor in causing damage, however, a cause of action for liability based on fault may exist.
There are two very important time limits specified in section 7 of the Bill. First, it stipulates that an action for recovery of damages can be brought within three years of discovery of the damage rather than the date of sustaining such damage. Second, right of action will expire after a period of ten years from the date on which the actual product which caused the defect was put into circulation by the producer. If, however, judicial proceedings are pending at the end of this period, liability does not expire but runs until a final decision is made. If the damage is discovered during the ten-year limitation period but proceedings are not initiated before this period expires, an injured person will have no right of action subsequently. I am empowered to make an order under this section in respect of the application of the Statute of Limitations, 1957, to proceedings initiated under this Bill. The purpose of this is to ensure consistency with the limitation of actions provisions of the Bill amending the Statute of Limitations which is currently before the Seanad.
Section 8 provides that joint and several liability will apply where two or more persons are liable for the same damage. In such circumstances an action for damages may be brought against each and every liable person. This provision is in line with the Civil Liability Act, 1961. It enhances the prospect of the injured person securing full recompense.
It is reasonable that if the injured person is responsible to any degree for the damage the producer should not be liable for all the damages. Section 9 provides that where any damage is in part due to the fault of the injured person, or to the fault of any person for whom the injured person is responsible, the producer will be enabled to reduce his liability under the rules of contributory negligence as provided for in the Civil Liability Act, 1961. These rules, however, will not apply where the damage is as a result both of a defect in a product and the act or omission of a third party.
An important practical measure of protection for the consumer is provided for in section 10. This section prohibits the limitation or exclusion by the producer of his liability contractually or by any notice or by any other provision. If a producer does attempt by, for instance, the inclusion of a clause in a contract to limit or exclude his liability in this way, such clause will have no legal effect.
Section 11 provides that any existing rights of an injured person are not affected by these provisions. Rights under contract law or in tort, therefore, are unaffected. Indeed, there may be instances where an injured party would wish to avail of either of these avenues of redress rather than that being introduced by this Bill. These new provisions will, therefore, complement existing domestic law in the area of product liability.
Section 12 provides that section 1 of the Courts Act, 1988, which relates to the abolition of juries in certain actions in the High Court shall apply to an action for damages for personal injuries taken under this Bill.
Section 13 provides that this Bill shall not apply to any products put into circulation within the territory of any member state before the commencement of this Bill. Section 14 provides for the bringing into effect of this Bill. I intend to introduce these measures immediately this Bill is passed.
These are the provisions of this Bill. I am confident that it will improve considerably the position of persons injured by defective products. I also believe that whatever burden this imposes on producers is balanced to a reasonable degree by the defences available and by some other provisions of the Bill. I am sure that the Bill will, accordingly, be welcomed by Deputies on all sides.
I commend the Bill to the House.