§ 2.58 p.m.
§ Lord ALLEN of ABBEYDALE rose to call attention to the recommendations of the Royal Commission on Civil Liability and Compensation for Personal Injury (Cmnd. 7054) about products liability; and to move for Papers. The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. This Motion relates to one of a whole range of topics considered by the Royal Commission on Civil Liability and Compensation for Personal Injury, under the wise guidance of its illustrious chairman, the noble and learned Lord, Lord Pearson. I think that we must all of us be sorry that it is 406 impossible for the noble and learned Lord to be present today on this, the first occasion on which there has been a debate directly related to the findings of the Royal Commission.
§ The issues which the Motion raises are, it seems to me, of considerable significance both to producers and importers in this country and also to consumers. But it also seems to me that the state of public knowledge of what is involved is not all that great and I thought that it was high time that we had some public debate.
§ The very term "product liability" is an American invention. We have adopted it, although there are some other aspects of the American legal scene which I hope we shall not adopt, but we have not even decided whether we should refer to "products" in the plural or "product" in the singular. However, leaving that aside, the plain fact is that our present law of compensation for death or injury caused by defective products is open to serious criticism. It is equally clear that we cannot devise a solution in isolation and without regard to what is done by our trading competitors.
§ I am given to understand that there are those who believe that "consumerism" in this country in recent years has been overdone. But consumerism is not a localised phenomenon; nor is it really very surprising that pretty well worldwide the interests of the consumer should increasingly be a matter for public concern. Time was when many goods were produced by small, local businesses, often selling direct to the user. But now we have large-scale production, complex technology, a whole range of processes, producers and distributors involved in any one item, and a large-scale crossing of national boundaries both by components and by finished products. Therefore, the consumer—rampant or not—is dependent upon producers he does not know and processes he does not understand.
§ For a long time our law has certainly provided some measure of protection. I am no lawyer, but, as I understand it, if a wife buys a ladder which has a defective rung and she falls off and injures herself, she can claim damages against the seller for breach of contract. But if, as is perhaps rather more likely, 407 it is the husband who falls off the ladder, he can take no action against the seller because he has had no contract with him. He might possibly bring an action in tort against the manufacturer on the ground of negligence, but in practice he would find it far from easy to bring his claim home. To disgress for a moment, I should perhaps apologise to the Scottish lawyers for ignoring the complications of Scots law and, indeed, for referring to "tort" and not also to "delict".
§ These remedies in contract and in tort have been refined in various ways by a number of Acts of Parliament. Certain industries, for example, are now liable for damage for failure to measure up to prescribed standards. We hear quite a lot from industry, although perhaps not quite so much from the insurance companies, that these provisions are proving to be complicated and burdensome. But there is also a widely held view that the existing complex of common law and statute law is patchy and piecemeal and is simply inadequate in the world in which we live.
§ The whole problem was dramatically and tragically highlighted by thalidomide. That tragedy—and I would remind noble Lords that no United Kingdom court has ever ruled that there was any legal liability on the manufacturers—was one of the main reasons that the Royal Commission was set up in 1973, as the noble and learned Lord on the Woolsack will certainly remember. For good measure the Law Commission and the Scottish Law Commission had already been asked to review the law relating to loss or damage caused by defective products. They submitted a joint report in, I think, the summer of 1977, some months before the Royal Commission itself reported, so that the Royal Commission could take some account of the findings of the Law Commissions.
There were differences in the two remits. The Law Commissions saw themselves confined to considering changes within the framework of tort and contract law; whereas the Royal Commission was not so confined. But more important than any of those differences was the coincidence of the main conclusion. All three bodies came down in favour of a new tort whereby producers would he strictly liable for death or personal injury caused by
defective products. They did not suggest absolute liability and certain defences were to be permitted. But there would no longer be any requirement for a claimant to establish negligence on the part of the producer. Nor was this an occasion when these advisory bodies were:
beating in the void [their] luminous wings in vain",
and that is probably the first occasion on which words of Shelley have been applied to the Law Commissions.
§ By the time they reported there were already in existence two important European documents bearing directly on product liability. The first was a convention on the Council of Europe which was opened for signature in 1977 and which has been signed, but not yet ratified, by Austria, Belgium, France and Luxembourg. The second was a draft EEC Directive. This has very recently reemerged in a new version on which the Department of Trade has sought comments from interested bodies before, as I understand the position, the draft goes to a special working group of the Council of Ministers. The important thing is that both the Strasbourg Convention and the draft EEC Directive are based on the doctrine of putting strict liability on the producer, so, if in the end we accede to the convention or if we accept the draft Directive in anything like its present form and legislate accordingly, we shall be making a fundamental change in the negligence-based system of tort liability which has so long applied in this country.
§ The case for some international agreement is strong if the producers in one trading company are not to be put at a disadvantage with their competitors. This point is made quite specifically and at some length in the preamble to the draft EEC Directive. I know that my noble friend Lord Hayter will be comforted to realise that the preamble very comfortably exceeds the Gettysburg Address in length. I may be quite wrong about this point and, admittedly, I have had quite a number of representations from trade associations about this debate, but I wonder whether industry as a whole in this country has quite taken in what may be in store.
§ On the Royal Commission itself, I am bound to say that we found it rather 409 disquieting that the CBI failed to respond to an invitation to give substantive evidence to us; nor I believe did it give any evidence to the Law Commissions. It is perfectly true that in our list of witnesses in the Royal Commission's report, we list the CBI as submitting written evidence as well as giving oral evidence, but I remember the oral evidence only too well —it was merely to explain that the CBI was not yet ready with any observations, and it never was.
§ Be that as it may, the Strasbourg Convention and the draft EEC Directive between them raise a number of difficult issues on which the Royal Commission and the Law Commissions had something to say but on which, so far as I am aware, we do not have any Government view. Representatives at Strasbourg and at Brussels, though, must have been acting under some kind of instruction from the last Government. We do not know what those instructions were. We know even less whether the present Government are minded to alter them, whatever they were.
§ It would take a long time to go through all the difficult issues raised by these two documents, and I should like to pick out just three for special mention. The first is whether the producer should be allowed a special defence of development risks where the defect is a basic design defect common to a whole product type, as indeed happened with thalidomide. This will be something like the "state of the art" defence which is available under the present system of liability in negligence as I understand it.
§ The argument that there should be such a defence is obviously a pretty powerful one. If it were not available the manufacturer would be liable for damage caused by defects, the existence of which could not be ascertained by anyone at the time the product was put into circulation, given the state of knowledge and technology at that time. Why, it is argued, should the drug manufacturer, or the aeroplane constructor, be held liable if he did everything in his power, on the knowledge available, to make his product safe, and simply could not have known of the defect which, in the end, led to disaster? He would be incurring an unlimited liability for unknowable defects, and, for some products at any rate, would 410 simply be unable to get insurance cover for all possible risks.
§ But there are powerful arguments the other way. It is even more unjust, it is urged, for consumers who buy products in the expectation of reasonable safety to have to bear without compensation the consequences of injuries caused by those products if they prove to be defective. Why, it is asked, should the consumer be treated as a sort of guinea pig and be required to bear without any remedy the risk of defects being discovered during the use of a product? Returning yet again to thalidomide, to provide such a defence to the producer would leave a gap through which another similar tragedy could go.
§ Counter-arguments of this kind persuaded the Royal Commission and the Law Commissions that the special defence of development risks should not be permitted, and, perhaps more important, led to a similar conclusion in the Strasbourg Convention and the EEC Directive. The CBI, once they surfaced, were naturally unhappy about this, and I noticed that one of their officers wrote in an article last April that the Convervative Party had officially adopted the view that the "state of the art", as he chose to put it, was to be accepted as a good defence. I saw nothing in the consultative document, recently issued by the Department of Trade, to suggest that the Government had already made up their mind in advance that they were opposed to this provision in the draft EEC Directive ruling out any such defence, but no doubt the Minister will be able to tell us later the Government's attitude on this important point.
§ The second of my three difficult issues relates to components. The Law Commissions disagreed on this. The Scots thought that the responsibility of the component manufacturer should cease once a component was included in the finished product. The English Law Commission, the Royal Commission, the Strasbourg Convention, and the EEC Directive all plumped for the opposite conclusion: namely, that the component manufacturer remains liable throughout alongside the main manufacturer. So, if you happen to make the meat content of a pork pie which poisons those who consume it, an action will lie against you as well as the manufacturer. Similarly, the 411 manufacturer of the defective tyre which causes a road crash is liable as well as the maker of the car itself. To put the case at its extreme, if a manufacturer makes the component which proves to be defective and causes an aircraft to crash in the middle of a crowded city, the component manufacturers as well as the aircraft constructor can be faced with the bill of hundreds of millions of pounds. As I read the draft, I think the manufacturer can be sued if his component is included in a finished product which proves to be defective, even though the component itself is perfectly all right. The draft gives him a good defence, but he may be put to the trouble and expense of establishing it.
The last of my three difficult issues relates to natural products. The English Law Commission and the Royal Commission thought there should he no exemption from strict liability here. As the Law Commission rather charmingly put it:
A person who is made ill by eating poisonous fish should be able to look to the person who put the product into the stream of commerce".
But the Scottish Law Commission thought otherwise, and argued that defects in this context tended to arise from nature or from pollutants for which the farmer, or fisherman, was not responsible, and which he could not afford to cover by insurance.
§ This time the EEC Directive, in its latest version, agrees with the Scots and exempts primary agricultural produce. The Strasbourg Convention, too, would allow any signatory who wanted to exempt such produce to do so. It would be quite interesting to know on this point whether the Government go along with the latest version of the draft Directive, or whether they look on this as a Scottish stimulation of the Common Market's preoccupation with agricultural interests.
§ There are quite a number of other issues, but with my eye on the clock I realise that I have been going on for too long. I cannot sit down without saying one word about the basis on which compensation would be assessed if we came to legislate. It would presumably fall to be dealt with under the general law applying to compensation, and the Royal Commission felt in no doubt that the present law in this country is woefully inadequate and faces the judges with 412 problems which they are not given powers to solve. I know that had the noble and learned Lord, Lord Scarman, been able to be present today, as he had hoped, he would have had some eloquent words to say on that topic.
§ The Royal Commission made proposals for a new relationship between tort and social security payments and for new powers for the courts, including the power to make periodical payments in certain circumstances, which would make much more sense than lump sums in an inflationary world. I am hound to say that is a considerable disappointment to the members of the Royal Commission that there has, as yet, been so little serious public discussion of the issues involved. I, for one, certainly felt some sympathy for the opening paragraphs of the letter in The Times this morning from the noble and learned Lord, Lord Gardiner. I am not today arguing that the Royal Commission's proposals are right or wrong. They may well not be right, but neither, my Lords, is the present law, and there is a real problem here which ought to be faced.
§ To end, I go back to product liability. I very much hope that we can be given some indication of the Government's present attitude towards the draft EEC Directive, recognising, as I do, that they will want to take account of comments from interested bodies before they make up their minds on all the details. May I ask what they see as the likely course of proceeding, the possible timetable, as the draft finds its way through the Brussels labyrinth? What is the Government's attitude towards the Strasbourg Convention which is, as it were, on the table and all ready for signature? Have they formed any views on what should be done, possibly involving governmental intervention, in the event of a major catastrophe calling for compensation beyond the ability of any producer to cover by insurance? Do the Government see that there is a need to try to get a better public understanding of the issues involved and what may be in all this for manufacturers, importers, and consumers alike? Finally in my list of questions, greatly daring, may I ask if it would be right that the message to go out from this debate is not whether producers in this country are to be made subject to strict liability but, rather, when? My Lords, I beg to move for Papers.413
§ 3.21 p.m.
§ Lord AIREDALE
My Lords, we are indeed grateful to the noble Lord, Lord Allen of Abbeydale, for having introduced us to this interesting, difficult, technical and thorny subject, which I imagine will give rise to a very interesting debate. We are also grateful to him for the attractive manner in which he introduced the topic. I suppose that at first sight, at any rate, the concept of strict liability of the producer of a defective product is an attractive proposition. Probably the sort of picture one has in mind when this topic arises is, for example, an explosion of the gas main underneath the pavement as a result of which someone is injured, or a defective car manufactured by an international corporation which crashes and injures or kills the driver or passengers. The thought goes through one's mind, "These producers can afford to compensate those unfortunate victims without even noticing the financial burden on them of doing so". But how far down the scale does one go? At the other end of the scale, one may have the village smallholder who sells a Christmas turkey to the stockbroker who lives in the manor house; the smallholder has taken all reasonable precautions known to him, but unknown to him the turkey contains injurious bacteria and the stockbroker and his family suffer food poisoning in consequence. In that case it is less obviously just that the smallholder should be strictly liable to compensate the stockbroker and his family.
Fears have been expressed in some quarters that, if this concept of strict liability is introduced, it may stifle innovation and lessen the number of new products which are brought on to the market. I am not so sure about that. I believe that the spur to marketing new products—a very strong spur—is the prospect of good profits; and I should think that the introduction of the concept of strict liability would not so much affect the innovation of new products as emphasise greater need for research and development into those products before they are marketed. If that is the effect, and if the new products marketed will be safer in consequence when they are marketed, good will have been done all round.
However, there are all sorts of difficulties of detail in this subject matter and I 414 confess that, perhaps rather mischievously, I have sought out those details on which the two Law Commissions, the Royal Commission and the EEC Directive have differed from one another. It so happens—I do not know whether Lord Allen was approaching this part of the matter from the same angle—that we have both hit on two topics that for me come under this heading where the experts so far have tended to disagree.
The noble Lord mentioned natural products. Perhaps a good example of a natural product which can give rise to difficulty is the yellow staining mushroom. It looks and tastes very much like an ordinary mushroom and some people can eat it without any ill effects, but some people are made very ill by the yellow staining mushroom. A greengrocer sells a yellow staining mushroom to a customer who as a result suffers food poisoning. Is the greengrocer then allowed to pass responsibility back on to the producer, who in this case is the person who gathered the mushroom in the fields, and may be a pensioner or a young person? Is it not to be said that the greengrocer, who is perhaps more prosperous than the gatherer, should be equally well able to recognise a yellow staining mushroom when he sees one? This is one of the difficulties which arise.
I, too, came upon the topic of components, which the noble Lord mentioned. This aspect is bristling with difficulties; indeed, one need only ask oneself what a component is. Take a car radio. Is it a component of the car? If it is a standard fitting in an expensive motor-car, perhaps it is a component. If it is an optional extra on a cheaper motor-car, perhaps it is not a component. If it is screwed to the dashboard and is not intended to be removed, perhaps it is a component. If it is merely clipped to the dashboard and can be removed and used outside the car, perhaps it is not a component. If it catches fire and sets fire to the car and injures the person who tries to put out the fire, perhaps it is a component. But if it is being used on a picnic rug outside the car and it sets fire to the rug and injures the baby crawling about on the rug, I suppose it would be difficult to argue that it was then a component of the motor car. One does not have to go very far into the topic of components to find 415 oneself up against all sorts of difficulties of detail.
Next we come to the question of the manufacture of goods to somebody else's specification. The Royal Commission thought that a manufacturer who manufactures to the purchaser's specification should have no defence on that account if the product proved to be defective. But what about those other kinds of specification, such as the British Standards Institution specification (the BSS specification), which I think is fairly familiar to us, kite marks, the Good Housekeeping Seal of Approval, and so on? I should have thought that a manufacturer was entitled to say that, provided that the organisation which gives the specification is officially recognised and is acting in the public interest, he ought, if he makes his product faithfully to that specification, to be allowed to rely upon that as a defence even if the product turns out to be defective. He could surely argue that, if it was not for the official specification, he would probably have designed a slightly different product which might not have turned out to be defective, and that all he was doing was to act in what he supposed to be the public interest.
Allied to the specification is the official certification process: and this brings us to pharmaceutical products, to which the noble Lord also referred. I do not know whether this is right, but it seems to me that since the thalidomide disaster the pharmaceutical industry has come in for not so much a bad Press but possibly a worse Press than it really deserves. It seems to me that sometimes the pharmaceutical industry can be placed in the most terribly difficult position. Let us suppose that a new, supposed wonder-drug is being developed. The news gets out that this new drug has wonderful properties, and a clamour arises—Let this product be released to cure and alleviate the suffering of thousands of patients. On the other hand, the manufacturer has to say, "Well, I have to do more tests. I must make more certain that it is safe." This is not only a financial dilemma: it is really a dilemma of humanity. Ought not the manufacturer to be allowed to say, "This difficulty should be taken off my shoulders and put on to an officially recognised, impartial body of experts before whom I can place all the facts, 416 and it is for them to say when the moment has come when enough research has been undertaken and they are satisfied that the drug is safe to be marketed. If they impartially decide the moment of marketing and I go ahead, that surely should be for me a defence concerning any defects which may occur in the future, because by proceeding at the best moment according to the opinion of impartial experts I am only acting in the public interest."?
There is one small point which I think will give rise to considerable difficulty. The Royal Commission recommend a 10-year cut-off period after which no further action shall be taken, even in respect of strict liability. It seems to me that this will present great difficulties. Somewhere the Royal Commission mention defective screwdrivers. I suppose that the average handyman probably has about eight screwdrivers which he has bought at various times. He may even have the receipts for all the screwdrivers, but is he really to be expected to marry each screwdriver with its receipt and be able to assert with certainty whether a defective screwdriver is more or less than 10 years old? Must we all whenever we buy anything demand a receipt and keep it for 10 years in order to be able to establish that we are suing within the 10 years? This seems to me a small, but very practical, difficulty.
I shall be told that I have taken a very easy line here. I have picked out difficulties and mentioned them, and I have not produced many solutions. All I can say is that I have endeavoured to point out that we really have not yet got down in detail to this thorny subject sufficiently well to be in a position to legislate about it. There is much hard work upon detail to be done before we can confidently proceed.
§ 3.36 p.m.
§ Lord RAWLINSON of EWELL
My Lords, I have unstinted admiration for those who devote months and years of their lives to serving on Royal Commissions, and I share with the noble Lord, Lord Allen of Abbeydale, his comments about the letter—certainly the first part of it—from the noble and learned Lord, Lord Gardiner, in today's Times. I agree with him about the tribute that must be 417 paid to those who serve in the public interest on these lengthy commissions. I also think that it is impertinence for anybody to start to criticise commissioners and their report before having had even a chance of studying or reading the report. What the commissioners have been asked to do, and have done, is to study in depth a very complex subject, to hear and to read a mass of evidence, and then to make their recommendations. I must confess that I was disappointed when the noble Lord, Lord Goodman, after admittedly only a cursory study of the Royal Commission Report on the Legal Services, criticised in print the commissioners because they had not agreed with him.
Of course at the end of their report commissioners receive formal thanks. Then, usually, they receive criticism, and afterwards, usually, their report is put in the pigeonhole. Certainly it is a disservice to the public interest for persons to discourage others to serve on Royal Commissions by neglecting serious consideration of the reports, and it betrays an extent of prejudice.
I do not say that always we must accept what a Royal Commission proposes—that would of course be absurd—but if we are ever to get anyone else to serve on a Royal Commission, at least we must do the commissioners the justice of studying the report before criticising it. As is always said, I am sure that every Government have a list of the great and of the good, and I am sure, too, that the noble Lord, Lord Allen of Abbeydale, is very high on the list of the great and the good. He went from the Pearson Royal Commission to the Croom-Johnson present inquiry, and as a great public servant he has given considerable service in the work that he did on this particular report.
The quality of the report depends upon the calibre of the commissioners and of the chairman, in this case a greatly admired judge, Lord Pearson. They certainly faced a massive and complex task, as has already been pointed out. But this is a subject of very great importance. It is probably of greater importance than many matters which we debate in your Lordships' House. because it could affect does affect—hundreds of thousands of fellow citizens. Therefore there is public interest in this matter, complex as it is; and the detail of it certainly is complex 418 and difficult. Though few probably will have much interest in the words that are spoken in debate about it, there is nevertheless a very considerable public interest in getting the law right over this matter.
The part of this massive report with which we are at present concerned rejects any form of "no-fault" scheme for products liability, and that I wholeheartedly support. Apart from the almost insuperable difficulties of financing, which must render that totally impractical, there is, I believe, great importance in retaining the principle that a wrongdoer should make up to the injured party, so far as money can, the loss and injury he has sustained—restitutio in integrum; and, as in other parts of the Pearson Report, it is in my view essential to retain the action of tort.
Negligence, my Lords, speaking in current forensic speech, can be of three kinds: first, a state of mind in which it is opposed to intention; secondly, careless conduct; and, thirdly, the breach of the duty to take care imposed by statute or common law. All of those are applicable in different circumstances, but any one is not exclusive of the others. It is the third meaning which, in this context, is important, because the tort of negligence is the breach of the duty to take care imposed by statute or common law resulting in damage to a complainant, and to remove all consequences upon a person who has breached that duty is in my view an unhealthy social development. It is unhealthy and unwise, since it could seem to indicate acceptance by society, if not its approval, of irresponsibility for fault caused by one who damages another; and it could lead—imperceptibly at first, perhaps—to a slide in standards, to an indifference to duties which one citizen has to another, and then to recklessness as to the rights of another. That attitude, if it were to develop—that, however much one person has wronged or damaged another, the consequence will fall on some public fund or some other general fund—would in my view be an unhealthy development.
Of course, I accept that in these civil actions of tort the consequence usually falls upon the insurance company, but that in fact also means that protection has been sought and obtained by the citizen through the payment of premiums, 419 which means at some personal cost and therefore an acceptance of some personal responsibility. Therefore, I am strongly of the view that the principle must be maintained of the right of the wronged person to seek recompense from the wrongdoer. I welcome the fact that in this Pearson Report generally—elsewhere in it, particularly as to the road scheme—the Royal Commission, even when superimposing a general "no-fault" provision, have retained the action in tort. In the case of road accidents, of course, it is particularly essential. Road accidents are always difficult as to the establishment of liability, because they are usually instantaneous and people's memories are particularly fallible. I therefore think it important that the Royal Commission should have recommended, as they did, the introduction of a "no-fault" provision as well as the retention of the action in tort.
The products liability which your Lordships are discussing here this afternoon, is of very much greater complexity because it seems to me that the Royal Commission, having rejected the altering of the contract law by introducing a fictional implied warranty, having rejected the reversal of the burden of proof, and having rejected "no-fault" liability, have been almost inevitably led to recommend in favour of strict liability. But indeed there must be a note of caution.
With regard to the cost of products, it is said by the Royal Commission that the cost of product liability will be small in relation to costs even if that is offset by other recommendations of social security benefit. But, as has already been pointed out, the risk of a major catastrophe is not inconsiderable, especially in respect of aircraft operation; and, reading the Royal Commission's report I get the impression that they may have underplayed the level of the premiums which would be required and thus the very substantial element of cost which, as it has been said, could act as a real restraint on technical innovation. Nevertheless, on balance, as a lawyer I find persuasive the conclusion that producers should be strictly liable for death and personal injury caused by defective products, though I accept that the balance is nice. The development risk argument 420 is very powerful, and I should not think it right at the moment, however persuasive the Royal Commission's report is, to say that the decision is conclusive.
In the matter of defences I was impressed by the recitation of the view of Mr. Marshall in respect of, for instance, aircraft manufacturers, especially where an operator is deliberately careless, deliberately negligent, and fails to comply with the requirements and the recommendations of the manufacturer. Therefore, even if you reject that as a special defence, certainly you must take into account faulty maintenance. The relationshp between aircraft manufacturers and commercial operators is very close, and it is obviously only right to give to manufacturers the right to be indemnified by the user or the operator who wilfully and negligently ignores his instructions. Of course, if you omitted that recommendation it would present a potentially alarming situation for the ordinary traveller; that is, where the operator is secure in the knowledge that all consequence for catastrophe would fall only on the manufacturer, no matter how negligent was the operator himself.
Then we come—because the argument is nicely balanced, my Lordsto the limitation on liability and the problem of insurance, and that is indeed very difficult. The Royal Commission frankly acknowledge a continuing discrepancy between a limited insurance and an unlimited liability. The Royal Commission acknowledge that this must be very burdensome to producers, and must produce a less watertight scheme for consumers. But I appreciate that, in the circumstances, the Royal Commission could do no other than set financial limits and make no recommendation for compulsory liability. I do not know whether it is to be accepted, though, that the Government would necessarily intervene in the event of some under-insured catastrophe. It may not perhaps be as probable as the Royal Commission imply. Therefore, I have no doubt that, with the introduction of strict liability, there will inevitably be a great increase in the burden of cost upon consumers and producers—and how great it is very difficult to assess.
This report, as one would expect from the calibre of the commissioners and of their chairman, is indeed very clear and 421 cogent. That, as I have said, is as would be expected, and it reflects the quality of the membership; but there is, obviously, room for disagreement. I think they have started the argument: I do not believe they have concluded it. They took on themselves a massive task, they heard a great deal of evidence, and it would be brash for anybody to reject their basic recommendation after they had made such a lengthy and thorough examination. They have therefore performed, it seems to me, a very signal service in a very important branch of the law. Their recommendation bristles with complexities and it bristles with technical and legal complications, but I am sure it will form the basis of all future discussions of these problems. However, despite the persuasive advocacy of the noble Lord who opened this debate, I am not certain that it has definitely pointed the road, and, even more so, I do not believe that at this stage any Government would be very ready to march along such a road.
§ 3.49 p.m.
§ Lord SMITH
My Lords, I hope I may be forgiven for speaking on a single possibly narrow, aspect of the commission's report, but this is due to a feeling that it is perhaps better to stick to something of which you have personal knowledge than to stray into matters of which you do not.
If legislation accepting the whole of what the commissioners re commende should follow, it is quite clear that, in referring tothe risk of death or personal injury caused by defective products",medicinal products would be included. It would be necessary to see doctors prescribing medicinal products as producers in the sense that this word is used in the report. Paragraph 1273 makes it clear that the commission would not accept a suggestion that medicinal drugs might be excluded from their recommendations. At first sight, I think it might be supposed that this could be right; but I think that we ought to consider where it leads.
A "defective product" is defined as one which,does not provide for persons or property the safety which a person is entitled to expect".422 This is quite exceptionally difficult to apply to medicinal products. In practical terms there is in fact no such thing as a drug which has a single effect upon the human body; so that if something unexpected occurs it naturally follows that the thought is going to be there that it must be due to some defect in the drug. But all drugs have a very large range of effects: some of these effects will be useful and some will be adverse. Moreover, an adverse tissue reaction, whether it be a local one or a general one, may be inherent, it may be acquired, it may be due to a reaction with another drug that a patient is taking. Such an adverse reaction may vary enormously from the trivial to the dangerous. At its most dangerous level, it may be called an idiosyncracy to the drug itself, but this is merely a matter of terminology. A drug may provide for one patient in every sense "the safety which a person is entitled to expect" and yet may be dangerous to another patient. Or, worse still, it may be dangerous to him at one time but not at another, dangerous to him if he is taking a particular second drug, but not if he is not. Prescribing for a patient means therefore every time balancing probable useful effects against possible harmful effects; but the latter may be quite impossible to assess with total accuracy.
Then, again, the person for whom a medical product is prescribed is already suffering from some form of illness or he would not need a prescription. A paper prepared on this subject by the Royal College of Physicians of London comments:It may simply not be possible when a patient perceives an adverse change in his condition, to ascribe it confidently to a drug that he has taken, to a change in the illness itself or to one of the many possible interactions between the patient's constitution, his illness and what enters his system, whether this be food, a medicine or a substance such as tobacco or alcohol".Then, again, the adverse effects of a drug are often the same as a spontaneous disease. Some drugs may cause jaundice so difficult to distinguish from an infection of the liver by a virus that the position is still obscure even after sections of the liver have been examined under a microscope.
One drug may cancel out the effects of another. A patient on treatment with a drug prescribed by his doctor for high blood pressure may treat himself with a 423 common cold remedy which may neutralise it. One inevitable result, if the commission's recommendations were swallowed in toto, would be that you would find you had developed two categories of disease—one specially compensatable and the other not—into which it might be quite impossible reliably to allocate patients. Consider, as an example, a lady who is on the contraceptive pill and who smokes heavily, who develops a thrombosis—not an uncommon situation. But is this due to the pill, is it due to a defect in the pill, is it due to smoking, is it due to both or is it due to neither? You are really never going to be able to tell.
It may matter greatly to a patient into which category an illness is allocated and, human nature being what it is, it surely is inconceivable that there will not be some patients encouraged by some lawyers who will seek to have investigated in detail any illness that they may have, looking for some element that may be attributable to an unacceptable effect of a drug that is being used and may therefore he in part compensatable. One thing is certain. There will be endless scope for tribunals, court cases and appeals occupying a great number of people for a very long time and usually resulting in the end in failure to resolve what is unresolvable. Each case of this kind in which the patient may see his doctor as in some way his adversary erodes the confidence between doctor and patient upon which all good medicine is based.
In regard to the possible increase in claims, the Royal Commission, at paragraph 1324, says:We do not think that we need fear in this country a problem of American proportions, but we should not be complacent. The possibility of some escalation of claims cannot be ignored".I believe that many would feel that the commission is underestimating a very real danger of a massive escalation in the number of medical claims. The Royal College of Physicians would rate as highly probable another consequence—that is, a pronounced reduction in the development and marketing of new drugs and, to use their words:a resultant net increase in human suffering".That is possible. But perhaps the most serious consequence of all would be to introduce a new and additional factor that 424 might encourage some doctors to practise what has been called "defensive medicine". A doctor who feels so unreasonably threatened that he might think first of his own protection and only second of the best interests of his patient is a bad doctor; and we must do nothing to produce or encourage such a situation.
My Lords, there is, in my view, no doubt at all that legislation which surely is designed principally to protect the consumer from faulty industrial products would, if applied to medicinal products, have an extremely damaging effect upon the practice of medicine and, therefore, upon the interests of the patient. I hope very much that medicinal products may be excluded from any general legislation, possibly by introducing later separate and more appropriate legislation to cover these products after further consideration of what is really a highly complex issue.
§ 4 p.m.
§ Lord ORR-EWING
My Lords, I think we all owe a debt of gratitude to the noble Lord, Lord Allen of Abbeydale, for having raised this issue. He and I sat on another Royal Commission, the Royal Commission on the Standard of Conduct in Public Life. We spent endless hours, days and months considering this matter and I have felt very restless that absolutely nothing has ever been done as a result of it. Therefore, I am rather reluctant to suggest in this instance that we ought to think carefully before proceeding with legislation. My instinct, after the masterly speech by the noble Lord, Lord Allen of Abbeydale, is to say that we should get on on the lines that the Royal Commission, on which he sat, recommended. However, I am afraid that, after examining the case, I cannot agree with that viewpoint, whatever my emotional feelings on the subject.
We should also thank the noble Lord, Lord Smith, for the masterly speech he made. How lucky we are in this House to have an ex-President of the Royal College of Surgeons able to give a professional opinion on such an erudite subject and speak with such knowledge and experience! That is not something which will ever occur in the other place, and so we are especially fortunate in having a system which allows it to occur here.
425 I am arguing the case for not going ahead with legislation ahead of our OECD competitors, but perhaps more particularly of our EEC partners. I argue the case where it concerns high technology and aerospace in particular. I tend to think that British industry has already been loaded in recent years—British manufacturing industry in particular—with a whole host of measures which grow ever more extensive and expensive. I know that each one in its time and place is wholly acceptable; but every year fire precautions become more expensive; every year the building regulations seem to get more complicated; every year the planning regulations seem to take longer and longer to come to fruition. We have training regulations to carry out; we have clean air policies to follow; we have enormous costs building up now on the health and safety at work regulations—these are quite new. We have extra costs on employment protection. So we want to be careful before saddling industry with product liability which is too extensive and far reaching.
It might be said that the USA has extensive product liability in the aerospace field. It is true that big manufacturers like Boeing, McDonnell-Douglas and Lockheed have tremendous resources behind them. Currently I believe that each of these carries insurance worth 600 million dollars to cover their product liability. The premiums, of course, are a very considerable charge on all their products. I believe the Society of British Aerospace Companies in this country carries 300 million dollars' worth of insurance. We have to remember that that has to cover the aircraft insurance over a period of 20 years. It is not something which is here now and gone tomorrow; it is round their necks for a very long while.
As my noble and learned friend Lord Rawlinson said, I am very mindful of the caveat which Mr. Marshall put in the Royal Commission's report, and I commend page 267 to the attention of your Lordships who are studying this problem. He sets out there a dissenting view, that it is unfair that if an aircraft operator has not carried out the recommended modifications the liability should fall back on the manufacturer. Of course, in an aircraft life of 20 years different components are constantly being improved. 426 The fatigue factor of different components becomes more exactly known. There are a whole stream of modifications improving the aircraft during its operational life.
We also have to remember that such a high technology vehicle as a modern aircraft has some hundreds of contractors and sub-contractors backing it up. There are, for instance, sub-contractors for the undercarriage, and that weighs many, many tons. There are the sub-contractors for the nuts and bolts. It may be that in the investigation of the DC.10 crash sub-contractors of that ilk will be giving their experience and perhaps acting as witnesses. At the very small end there are the silicon chips and things as small and minute as that. It is not just the Boeings of this world, it is not just the big companies which are concerned, but a whole host of other companies all the way down the line.
There are those who argue that the USA has accepted this principle of product liability; but I do not know whether your Lordships know that they are currently thinking that they have gone far too far, and there is at present a plan to rectify that. It will have been noticed that in the USA there are now law cases in which claims are made, regarding what seem to be all sorts of relatively trivial matters, for six figure damages. I cannot help feeling that these claims may be influenced by their practice—which I hope never spreads here—whereby lawyers agree to share the proceeds with their clients. This is of course an added incentive for choosing to fight the case in an area such as California, which is by tradition very generous to plaintiffs. As a result, six figure claims are appearing in respect of a passenger in an aircraft crash. There is then the factor that there are 300 people in a wide bodied jet, and so one is faced almost immediately with a 300 million dollar claim. When one thinks in those terms, the present coverage of six hundred million dollars is not all that thorough.
If there were two or three air crashes within a short time of each other—and I am sad to see in my evening paper that a DC.10 from New Zealand appears to be lost—they would very quickly run that 600 million dollars down very substantially before extra insurance was taken to top up. So the USA is now preparing a new Congressional Bill which 427 I believe may be called the Air Travel Public Protection Bill. It comes under their public protection programme. The object is to make federal Government funds available when normal insurance runs out. If one large aircraft firm could find itself in trouble in the USA, how much more vulnerable we are in Europe and in other places? It is argued that world insurance would be behind the insurance policies. But although the sums are very large, the world insurance industry is not all that great in the aircraft market, and so one has to wonder whether one ought not to be careful in thinking that there is always enough money to cover the situation. At a time when the USA is back-tracking and coming more into line with us, it would seem a very unwise time for us to punch ahead on our own.
I should like to identify myself with the views put forward concerning innovation. I am absolutely certain that we must not take one step which would reduce the innovative programme, particularly the innovative programme in small firms. The present EEC Directive does not allow for a state of an art defence. That should be written in when the matter comes to be considered by our present Government.
I come back to the issue that if large firms can carry it for the present—and I believe the time factor will even militate against that—small firms will find it very, very hard and will be discouraged from producing new products. The House of Commons debated this matter on 17th November, 1978. They decided that the United Kingdom would be wrong to go it alone but should stay in line with their partners in the EEC. The first session of the working party of the Council of Ministers which will consider the latest draft of the EEC Directive takes place early in December. That being so, surely we ought to take account of all the representations and all the caveats which have been put forward in this debate today, and all those points put forward a year ago in the House of Commons. Having taken these and other representations into account, I hope the Government will seek to amend the EEC Directive accordingly.
§ 4.10 p.m.
§ Lord HAYTER
My Lords, I know 428 very well that, as a layman, I should be ill-advised to enter into any of the legal interpretations of the subject we are discussing today. I was comforted, though, by many of the wise words of the noble and learned Lord, Lord Rawlinson, on that issue. I want to speak as a businessman and to emphasise the implications, some of which are obvious, of this proposed EEC Directive, and to refer to a particular point which has not yet been mentioned: that among the damages contemplated are—…damages to or destruction of any item of property other than the defective article itself where the item of property is of a type…".So I am talking in the main about damage to property. I cannot help feeling there is a certain bias implied in the Pearson Report and indeed in some of the European Common Market thoughts. May I instance the phrasethat the producer can be held liable for a defective product even if the product could not be regarded as defective in the light of scientific and technical knowledge at the time when it was put into circulation".That to me sounds arrant nonsense, but perhaps somebody could explain it from a different angle. I also pause at the recommendation in the Pearson Report:It should not be a defence for the producer merely to prove that he had withdrawn, or attempted to withdraw, his product".In our heart of hearts, we all know that we make mistakes from time to time, But what else can the poor chap do? I should be interested in any observations on that subject.
But let me get back to the business which I know best, the British security industry. I can tell your Lordships that for a company of some size, manufacturing many varied products such as locks and safes, fire extinguishers and so on, there is a greater potential for product and public liability than there is for most other businesses. It would therefore be thought well for companies—indeed some companies do—to cover themselves for £10 million for this liability. Indeed, that is not the end of the story, because if you try to get a contract, which is successful, in relation to the British Airways Authority you have to take out £15 million cover. The House might be interested to know that the approximate premium for £10 million cover would be in the region of £200,000 a year. This makes nonsense, to my mind, of the estimate in the Pearson 429 Report, where it is said that the current value of tort payments is £1.6 million a year—though that is in relation to death and injury and does not include property, about which in the main I am talking.
Obviously, the insurance companies who are prepared to under-write this cover—and incidentally there are few very of them in this country—will have to build up adequate reserves at an early stage in order to cover catastrophe insurance; and so the cost of insurance may become very high indeed, as it is in the U.S.A., as has been pointed out. Curiously enough, in our industry insurance companies will not sometimes insure you unless you have a safe or an alarm or fire precautions. So it would not be unfair to say that they get it both ways. They insist on that, and then, once the products are supplied, they have this insurance on product liability as well. There are special considerations, though, in connection with the security industry. For example, Article 1 of the EEC Directive says:The producer of an article should be liable for damage caused by a defect in the article whether or not he knew or could have known of the defect".In connection with safes, I remember a time not so very long ago, and only after a safe was attacked successfully by an oxyacetylene blowpipe, that I discovered the safe had been made two years before the oxy-acetylene blowpipe was invented!
It may well be imagined that in relation to this product liability there are other factors involved since, in the eyes of the public, safes and strong rooms are not considered to go out of date, and indeed can be used for many years. It is estimated that the majority of safes and strong rooms in this country are about 50 years old. I am not talking about banks. Indeed, in that passage of time the product itself may have changed ownership and the purpose for which it was originally sold, and the caveat which was issued by the manufacturer at the time of the sale, may have been forgotten or not passed on to the new owner. I think I have told your Lordships on a previous occasion that there is no such thing as a burglar-proof safe, and therefore when you are selling one to a customer you have to take into account the value of the contents, the form of attack which may be made against it and the time for that attack. But is 430 there any conceivable claim in contract between the ultimate owner and the producer? I should be interested to hear the legal argument on that side.
Article 4 of this Directive arises from the phrase:A product is defective when, being used for the purpose for which it is apparently intended, it does not provide for persons or property the safety which a person is entitled to expect, taking into account all the circumstances, including its presentation and the time at which it was put into circulation".I sincerely hope that this new proposal will be adopted; otherwise one could imagine that one would have to plaster the product with all sorts of warnings. The mind boggles in relation to a safe. Do you have to warn the purchaser, for example, not to allow his children to use it as a Wendy house? If that sounds rather ridiculous, I can remember very well at the time of Munich selling a safe to a man and his wife, who wanted to be able to sit inside it in case of an air raid. That was indeed the precursor of the Anderson shelter.
I find Article 5 vague in a major particular when it talks about the conditions which are named in this article—I am not certain whether it is an "and" or an "or". But I think the three circumstances, in regard to any one of which the purchaser cannot be liable, seem to be a defence in that context.
Then we come to another new proposal which is interesting. It says:If the victim has contributed to the damage, the compensation may be reduced or not awarded".I attach much importance to that. This seems to be a vital point because one can incorporate into a safe or an alarm a variety of security measures which have to be properly used by the owner; otherwise they are of no avail. And so we get back to this defence of contributory negligence.
At the risk of introducing rather "Monty Python" incidents to your Lordships, I can give two examples. One is the case where a fire extinguisher was incorrectly fastened to the wall on a hook rather than remaining, as it should have done, on the floor. Through a failure of the hook the extinguisher fell off the wall, bounded down a flight of stairs and thence through a window, striking a passer-by walking in Sloane Square. But the re- 431 sponsibility was that of the wall-fixing person and not ours; it was that of the customer. The second instance is where a purchaser of a fire extinguisher got so excited when the fish-fryer at his restaurant caught fire that he threw the whole extinguisher into the fire without its being discharged. There was an appalling explosion, but I am glad to say that no serious damage was occasioned to him. It is Article 6 which is of consequence to manufacturers as well, since, as I read it,damage to or destruction of any item or property other than the defective article itselfcould be taken to mean the contents of the safe or the strongroom, which of course can be enormous. In my business it is well known throughout the world, and particularly in the U.S.A., that if a safe deposit, where of course the contents are not known to the safe deposit owners, is successfully attacked the claims can be astronomical, since the only restraint on the claim is that of the watchful eye of the income tax inspector!
This brings me naturally to Article 7 where, as I understand it, liability in respect of damage of property should be limited to the figure of about £34,000. To get back to the case of the safe deposit, which we may assume has been successfully attacked, is that the limit for the whole of the safe deposit or for each of perhaps 1,000 lockers involved in that safe deposit? That shows some of the complications of the industry.
The time factor for the liability of the producer has been suggested to be 10 years; but in an age of increasing speed of technological development I agree with the CBI, who advocate that the time factor should be five years. There are certain standards—we have had that phrase raised earlier in this debate—applying to the products of this industry. It may well be argued that if they are made to those standards, that is that, or should be so in law and common sense. For instance, in the field of alarm manufacturers, you can be admitted to the Roll of Approved Installers only if you undertake to manufacture to certain standards which are laid down, and are willing to be inspected at any time by the the National Supervisory Council for Intruder Alarms. To my mind, that is a very sensible provision, and 432 one could quote the phrase: "Prevention is better than cure".
As has been said by other speakers, the cost of insurance could escalate enormously if the manufacturer or the importer were to be made responsible, regardless of whether there was any fault in the product itself. In addition, I would mention the possible ratification by Parliament of the United Kingdom/USA Reciprocal Judgments Convention which, as I understand it, would expose British insurers to the high awards made by American courts, often requiring payments exceeding the limits of the policy underwritten.
So that, reading the Directive as it stands, it can be argued that it puts a brake on innovation—a point that has already been made in this debate—since in our industry one cannot guess what might be the possible dangers over the course of years. It also has the effect of penalising the small people who may be coming into the industry, and who would be terrified about the consequences of this Directive, as it is envisaged at the moment. The extension of strict liability would encourage frivolous and unjustified claims and, Heavens knows!, we have had plenty of those in our industry. So I agree with the CBI that it is essential to establish satisfactory definitions of "defect", and to impose much more realistic limits on the time for which the producer should be liable.
It is true that the Department of Trade is, very properly, consulting the British Security Industry Association in relation to some of these difficulties that I have outlined. Of course, it should not be taken that I am speaking for the industry at this moment; I am merely indicating some of the worries that we have. I shall be happy enough with the assurances, which are really necessary, that the Department of Trade will be listening to the Association's views. But I thought it might be helpful to indicate what some of these problems may be, because they perhaps have a more universal application.
However, I was interested in paragraph 1272 of the Pearson Report which stated:It remains to consider whether any particular classes of product should be excluded from the strict liability proposed, or have some form of special treatment".So I join my colleague on these Benches, the noble Lord, Lord Smith, in being yet 433 another industry which would like to opt out, if it were at all possible, of the implications that we have been talking about today.
§ 4.22 p.m.
§ The Earl of SHANNON
My Lords, like other noble Lords who have spoken, I, too, should like to express my gratitude to the noble Lord, Lord Allen of Abbey-dale, for raising this subject in this House this afternoon. As we can see merely by the size of the report, this is a very wide subject, and, like the noble Lord, Lord Hayter, I find myself struggling in very difficult waters, not being one of those learned in the law. I believe we all think that revision of the law is not something that we can say is not overdue, but need we, or should we, really go overboard on consumerism? Consumerism, laudable though it is in itself, is not sensible when it is in direct contradiction to the manufacturing facts of life. That was very well brought out by the noble and learned Lord, Lord Rawlinson, and the noble Lord, Lord Hayter, when they cited examples of whether industry knows what it is in for, and what all this is going to cost.
We tend to colour our opinions with very emotional examples, and quite rightly so. Nobody wants these great disasters and tragedies that happen. The noble and learned Lord, Lord Rawlinson, said that we do not wish to have reckless manufacturers and producers. But do we really want to leave the way wide open for reckless consumers and operators? I cannot compete with the noble Lord, Lord Hayter, in his amusing anecdotes, but one is made to remember the story of the gentleman in the United States who purchased an electric hedge-clipper. He then, having cut his ear extremely badly, sued the manufacturer of the hedge-clipper on the following basis: that there was not a label firmly fixed to the hedge-clipper telling him that he should not use it for cutting his hair.
Many noble Lords have referred to the EEC draft Directive on this subject, and even that is very wide. Therefore, I should like to confine myself, as other noble Lords have done, to pointing out some of the possible anomalies which bristle in one or two even very minor 434 fields of the Directive. The one to which I should most like to refer is the difference between moveable and immoveable products. Moveable products are included, according to the commission's report, and immoveables are excluded.
I should like to refer to the Law Commission's Working Paper No. 64, paragraph 65, where questions were posed to the commission on this very subject. To show how difficult it is, may I quote just one sentence which states:Moreover, a product such as a brick may start off as a moveable, become immoveable when used in a building and become moveable again when the building is demolished".Apparently, the commission considered this and, with the exception of their Scottish brethren, came down very firmly on the side of a brick being always a brick, and the fact that it has been put into a building not necessarily making it an immoveable, however immoveable the building may be. This raises a lot of other points. We have thought of the brick. What about the cement?
Let us just have a look at building failures. If I may quote from a report of the BRE Advisory Division on a survey of building failures, the report states:In the reports of our investigations, we do not attempt to allocate responsibility or attribute blame. It is rare for a defect to be due to a single cause. in many cases, failure results from a combination of two or more faults any one of which acting alone might not have caused any trouble. Nevertheless, one can generally identify a prime responsibility".It goes on to say:We made this judgment in relation to the cases analysed and the results are shown in the diagram which is attached. This diagram shows that more than 60 per cent. of the faults in building were basically due to design errors, choice of the wrong material, faulty detailing or failure to incorporate a vital feature like a damp proof membrane. A further third arose from construction faults in either method or workmanship and relatively few were due to faulty manufactured products".If one is going to adopt this principle of strict liability in this one field of building materials, and refuse to acknowledge that a moveable, once incorporated in a building, becomes an immoveable, treating it as still subject to the principle of strict liability, it will affect many things. I know that the principle was discussed in the report—I am afraid that I cannot give the paragraph—in relation to the use of cement.
435 We have also heard about natural products such as sand ballast. It does not seem to me that the principle of strict liability can possibly be made to apply in all these cases. If the materials fail, the cause, as I have tried to explain, is usually bad design or bad workmanship. A plaintiff would therefore first have to identify the material and then bring an action under the proposed legislation. In most cases, the producer of the material would be able to show that the cause of failure was not an inherently faulty product, and further actions would presumably have to be brought under the existing legislation. Therefore it appears to me, though not as one learned in law, that we are treading on very dangerous ground if we accept the principle of strict liability in the way proposed.
The noble and learned Lord, Lord Rawlinson, referred to the cost. He thought that the commission had underestimated it. That is a point which I also wish to make. Industry cannot possibly cope with this sort of legislation—nor, in fact, do we really want it to have to do so. I am sure that your Lordships' House, with its great wealth of knowledge in every direction, will give any proposed legislation from the EEC based on such a principle the very closest and most careful scrutiny.
§ 4.32 p.m.
§ Lord MOTTISTONE
My Lords, I should like to begin by joining other noble Lords in thanking very much the noble Lord, Lord Allen of Abbeydale, for introducing this important subject at a timely moment. I should also like to join the noble and learned Lord, Lord Rawlinson, in saying how much I support the principle that commissioners, who spend hours and days on these sorts of tasks, need to receive every consideration and to be spared false comment from people who have not had time to read their reports.
I must start by declaring an interest as a director of the Cake and Biscuit Alliance, a trade association which looks after the interests of the manufacturers of packaged cakes and biscuits. It is of importance to do so because, with your Lordships' permission, I shall concentrate on seeking to persuade your Lordships, and, indeed, 436 my noble friend on the Front Bench, that foodstuffs need to be considered differently from other consumer goods in relation to this problem of strict liability.
Perhaps noble Lords will allow me to remind them of the very long chain of activity which takes place from the farm to the ultimate consumer. I shall use as an example flour which is an ingredient of both the products made by my colleagues. Wheat, from which flour is derived, is grown on the farm. Having been treated with chemicals, it is reaped with machinery. It then goes through the primary process of being turned into flour. After that it is processed for the second time so that the flour can form part of the manufacture of a biscuit. Up to that moment, during the whole of this process, it has been subject to the very stringent food laws which we have in this country and which, indeed, all other countries in the European Community also have.
It then leaves the second processer and goes to the retailer, who will store it and who will in due course sell it to the purchaser, who both stores it and possibly, at a later stage, prepares it. Finally, it is consumed by the consumer. Those last three or four stages are vital, because it is all too possible that if any damage is done to the product it is likely to be done at the stage when the product is out of the control of those subject to the stringent food laws and is in the control or custody of the retailer and the purchaser. It is probable, rather than anything else, that if anything goes wrong with the food—and on the whole it does not, but on rare occasions it does—it is due to bad storage, storage for too long and sometimes faulty preparation while being cooked.
Your Lordships may think that I have spent rather a long time talking about this process but one needs to remember that about 75 per cent. of the food consumed in this country is processed food. Therefore it is important that we should get this into the right perspective.
The question of how food products should be treated, if treated differently from other consumer goods, is the point at issue. It is perhaps relevant that in the Consumer Safety Act 1978, which I had the privilege of introducing into your Lordships' House, food products of the sort I have described were specifically 437 excluded from the terms of the Act. It was clearly understood that food products were wholly catered for, in terms of safety, by the very stringent food laws to which I have referred.
I turn now to the question of what sort of products we need to consider. Both the EEC Commission in its latest Directive and the Scottish Law Commission, as the noble Lord, Lord Allen of Abbeydale, earlier reminded your Lordships, accepted that there should be different treatment for what are called primary agricultural products. The EEC go on to describe these as, "those agricultural products which are not industrially produced". They do not define them further, and that is definitely a weakness. However, it is significant that, as a result of pressure from the European Parliament, the commission saw fit to make special provision to exclude what they now call "primary agricultural products". Therefore they recognise that there is some substance in the argument that at least some food needs to be treated separately from the strict liability provisions contained in the Directive.
I should now like to direct your Lordships' attention to a report from another Royal Commission, and I trust that I shall not be accused of inciting one Royal Commission to attack another. It so happens that recently we received the Seventh Report of the Royal Commission on Environmental Pollution, Cmnd. 7644, relating to agricultural products. In passing, may I reiterate that food on the farm receives not very dissimilar treatment from manufactured foods, in that it is treated with chemicals and processed by machinery before it is despatched from the farm. That is so in many cases, although obviously not in all.
The report makes the point which I am trying to persuade your Lordships to adopt; namely, that there is not very much difference between foods and that the distinction made by the EEC concerning "industrially produced food to be excluded" is not one which stands up very readily. Indeed, paragraph 3.86 of the report of the Royal Commission on Environmental Pollution, chaired by Sir Hans Kornberg, which I shall call the Kornberg Report, makes the point that in some ways the food legislation that we have in this country is too stringent rather than not stringent enough.
438 Also in that paragraph—by way of light relief—it recounts an amusing comment made by the noble and learned Lord who primarily sits on the Woolsack (and I am sorry that he is not with us) regarding a caterpillar in a tin of peas. With your Lordships' permission, to save you getting this vast book, perhaps I may read what it says:We note that the courts accepted that the caterpillar was entirely harmless. Lord Hailsham expressed the view that the purchaser could have consumed the caterpillar, perhaps with benefit".It is serious, though, my Lords, in its application to my argument. Another point—and I quote again:The producers were able to show that 3½ million tins of peas were produced in that year with only four complaints of extraneous material".I think we can accept that the Pearson Commission seem to take for granted in Chapter 22 that food producers should be strictly liable. Apart from the fact that they quote some food examples in their paragraphs they do not include processed foods in the possible exclusion section of that chapter. On the other hand, I should have thought that the Kornberg Report—and your Lordships probably have not had the opportunity of reading it, as I have—gives encouragement to the thought that the attitude of Pearson regarding strict liability in relation to processed foods is perhaps not entirely correct.
I turn now to the point which was made by the noble Lord, Lord Allen of Abbey-dale, about the apparent lack of interest shown by manufacturers generally—not just food manufacturers—in the Royal Commission of which he was a distinguished member. As he himself said, the non-attendance of the CBI which is mentioned in paragraph 1214 of the report is at variance with what is said in Annexe 3; but as he has explained, the CBI comment was somewhat inadequate. It is also said in paragraph 1214 that agricultural interests did not give evidence; but Annexe 3 says that the National Farmers' Union gave evidence, and also that at least three or four, if not more, obviously agricultural trade associations, gave evidence. So I think perhaps paragraph 1214 was overstating its case. It is true, however, that food processors did not give evidence. I hold no particular brief for that; it might indeed have helped to clarify the mind of the com- 439 mission if they had. I know that my own trade association in the summer of 1977 were extremely anxious about this, mainly because of the first condition of the Directive which was just reaching our consciousness, and also the terrifying stories from the United States of America which various noble Lords have recounted to us. We took great trouble to send a special delegation to the Ministry of Agriculture, Fisheries and Food, which is the trade association-sponsoring Ministry, and they assured us that everything possible would be done to see that the Government and the commission would realise that food at all stages should be treated separately from other consumer goods. For that reason no other action was taken at the time when the Royal Commission was sitting.
Coming towards my conclusion, one particular point I should like to make is that there is no suggestion on the part of the food industry or those associated with it that there should be no liability for injury due to negligence. That of course will continue to apply as it has done to date, and of which there are examples in both reports of Royal Commissions from which I have quoted. The only point at issue is that strict liability in the terms proposed by the revised EEC Directive is not strictly relevant to application at a specific point in the food chain which I outlined to your Lordships at the beginning of my speech. It is too difficult to identify a specific point at which the liability is most likely to be relevant. Indeed, if one were going to do so, one would tend to look more to the purchaser than to the manufacturer.
Accordingly, I hope very much that your Lordships would accept this argument and that my noble friend on the Front Bench would agree that the Government should perhaps examine this situation afresh and invite the European Commission also to do so. I would suggest that the aim must surely be to give the consumer maximum choice, minimum price and assured protection from injury. Protection from injury in the case of food products comes from stringent laws; very much more stringent than most other laws relating to any form of consumer product. Maximum choice and minimum price would be adversely affected if safeguards against strict liability were to lead to 440 tighter quality control, which could lead possibly to waste of food, waste of resources, special insurance which could lead to higher prices—and we have heard from other noble Lords what sort of costs this special insurance might lead to. There is a third factor, which is the possibility—indeed the probable likelihood—of vexatious claims, which in their turn also lead to unnecessary expense, which in the end must be borne by the consumer.
I trust that this approach to the problem will commend itself to your Lordships, and that you will see that food products at any rate are best left alone in the area of strict liability, as they have been in the area of consumer safety.
§ 4.48 p.m.
§ Lord PLOWDEN
My Lords, the noble Lord, Lord Allen of Abbeydale, to whom we are most grateful for introducing this debate, claimed that he was no lawyer. Neither am I; I am only an industrialist, and if in expressing the very real concern of industry about the proposals of the Royal Commission I sound critical of those proposals, this does not mean that industry is not very conscious of its need to accept its real responsibilities in this field. Neither am I being critical about members of Royal Commissions or Government committees of inquiry. Were I to do so, perhaps I would be condemning having wasted a good many years of my own life!
The noble Lord, Lord Allen, complained that industry in general, and the CBI in particular, had not given evidence to the Royal Commission. At the time the Royal Commission was taking evidence, in 1974–75, there were really only a very few people in industry who had considered the problems of product liability law in any depth, and it was not possible for the CBI to give a balanced assessment of the seriousness of these problems across the breadth and diversity of industry. I am sure that the noble Lord, who gave me and Sir John Partridge very much help in our committee of inquiry into the aims and organisation of the CBI, will sympathise with the difficulties which that highly democratic organisation had in expressing an authentic industrial view at that time.
Now industry has had the opportunity—no doubt in large part stimulated by the 441 report of the Royal Commission—to consider the implications of the proposed introduction of strict liability for defective products. It has made its views known—in part this afternoon in this House—and it will continue to do so. It is, of course, conscious that this particular part of the Royal Commission's recommendations is progressing somewhat faster than the other proposals. Perhaps there is a danger that the selective enactment of these perhaps more politically attractive proposals, one of a coherent set of proposals which only make sense if taken as a whole, may give rise to results which nobody intended or wants.
It is industry's view that a law on the lines proposed by the Royal Commission, which are similar to those in the draft Directive from Brussels, would reflect a lack of balance between the two parts of the Royal Commission's remit. The aspect of compensation for personal injury has been stressed to the point at which the concept of civil liability has been distorted. The quite understandable, the very real, desire to compensate the injured has, we believe, been allowed to sway the balance too far against the producer, and the likely result is that both the producer and the consumer will be the poorer in the end.
Industry's major objection is to the proposals on what is usually described by that most unsatisfactory phrase "development risk", or as the equally unsatisfactorily expressed "state of art" defence. The draft Directive puts this quite clearly. It says:The producer shall be liable even if the article could not have been regarded as defective in the light of the scientific and technological development at the time when he put the article into circulation".Retrospective liability, my Lords, to an unlimited extent if the recommendations of the Royal Commission are followed; "unlimited liability for unknowable defects", as Dr. Budworth of the CBI expressed it. The injustice—and I use the word deliberately—of this proposal will be apparent. Its shortcomings in achieving its avowed objective of compensating the unfortunate at the expense of the nearest convenient corporate body needs a little elaboration. First, as the Royal Commission itself pointed out, insurance cover for product liability is never unlimited. The resources of any 442 one company are also limited. It follows that complete compensation in the case of a major disaster will not be provided by the strict liability solution. The solution is not complete. Secondly, aware of this fact, companies will be very conscious of the financial consequences posed by liability for an unknowable design defect, affecting all the output of some mass-produced article, which might fall on them individually. This is quite different from paying compensation in the case of an odd defective example from a run of otherwise perfectly satisfactory products. The result, I suggest, of imposing such a liability would undoubtedly he to add even more uncertainty to the already risky process of innovation. It would add to costs since the cost of insurance, which can be very large, would be passed on. I believe that it would be likely to inhibit innovation and thereby to impoverish both consumer and producer.
This is a particular danger in industries scientifically or technologically advanced, such as drugs, aircraft, as we have already heard this afternoon. It might even lead to the withdrawal from the market of products which are on balance beneficial but which are commercially insignificant to the producer. Industry is most concerned that a strict liability regime will fall particularly heavily on small firms. Some argue that the financial impact of strict liability on industry as a whole would be small. But, in practice, the liabilites fall on individual companies, and this cannot fail to inhibit small companies from desirable innovation.
Industry claims that the only fair and sensible—and I emphasise sensible—procedure is that a product which was manufactured in accordance with the "state of the art" at the time of its production, and particularly if it complies with mandatory or approved safety standards, should not be regarded as defective solely on the grounds of subsequently discovered defectiveness. The noble Earl, Lord Shannon, said that we did not want to have reckless consumers.
I should like to illustrate that with an example of a case that happened to my own company. About five years ago in California two children fell off a bicycle manufactured by my company in Notting- 443 ham, and they sustained some injuries. About three years later a claim was made for 2 million dollars because of alleged defective design of the bicycle. Quite recently that case was settled out of court for 7,000 dollars—2,000,000 dollars claimed and 7,000 dollars accepted out of court. You can imagine the enormous effort on the part of senior people in my own company, in America and here, the insurance company, in America and here, and lawyers galore in both countries. Of course, we would never in this country be likely to go as far as people have gone in America, but the danger is there. Once we allow the understandable desire to compensate the injured to overwhelm considerations of moral responsibility, blameworthiness, or however you like to express the concept, there is no knowing where we should end up.
My Lords, I should like to conclude by suggesting that we follow instead the example of the recent Model Uniform Product Liability Act which the United States Department of Commerce finally published on 31st October this year. It is firmly based on the premise that,…tort law is not a compensation system…".It also distinguishes between construction defects, design defects, defects of instructions or warnings, and defects in respect of conformity with express warranty, and it lays down how each shall be determined. It points out, most significantly, that no court has imposed true strict liability for design defects, not even in the USA.
These matters were perhaps too detailed—perhaps it was the fault of industry—for the Royal Commission to consider in depth, but considered in depth they must be before we legislate in this country and in this House. As the United States model law says:Many product liability proposals that appear sound when stated in a broad and general manner break down when one focuses on the practicality of their implementation".The work of the noble Lord, Lord Allen, and his colleagues gives us a magnificent foundation, but there is much more to do before we take the next steps.
§ 5 p.m.
§ Lord MISHCON
My Lords, your Lordships' House has often had occasion to pay tribute to the noble Lord, Lord 444 Allen of Abbeydale, for the effective contributions that he always makes to our deliberations. It is a great pleasure for me, from this Dispatch Box, to be able to join in yet another tribute to him tonight. I should also like to pay a very humble tribute to the members of the Royal Commission upon whose efforts we are deliberating tonight. It was a Herculean task with which they were confronted and it dealt with many aspects of our law relating to personal injury. It is with only one small chapter of that law that we are dealing tonight and it is, as I have said, work involving great public sacrifice—and again I refer to the letter of the noble and learned Lord, Lord Gardiner, in The Times this morning—that members of such commissions and departmental committees undertake. I am sure that Members of this House wish to join in expressions of gratitude to them.
I refuse to believe, as a lawyer, that it is impossible to persuade, with language that is perfectly simple other noble Lords who do not have the benefit of belonging to the legal profession of the worthiness of a legal argument. I therefore propose, in what I hope will be in thoroughly acceptable and intelligible terms, to explain why it is that the Law Commission of England, the Law Commission of Scotland and the Royal Commission whose report we are considering, have found the state of the law as it exists at present to be quite unacceptable; why they have recommended revisions of that law; and why it would be insufferable, if I may say so, that something should not be done about it by the Government.
I put the matter in the following way: our law at present says to the purchaser of an article—the noble Lord, Lord Allen, took the example of a ladder—"if you purchase that article and it is not of merchantable quality" (which means that it is not fit for the purpose for which you intended it and the purpose for which it was supplied) "then you have a right, under breach of contract, against the person from whom you purchased it". It is a strict liability. If one purchases something and tells the seller the precise purpose for which one requires it and it does not fulfil that purpose, the answer is that one has a claim, in law, and it is strict liability. The defect in that law of contract governed by the Sale of Goods Act, and an amending Act—it is an old Sale of 445 Goods Act dating back to 1893—is that only you, the purchaser, as the noble Lord, Lord Allen pointed out, can have that remedy of strict liability against the seller.
Many noble Lords present have most likely heard of a ginger beer bottle case which was a tragic one for the person who purchased the ginger beer bottle, because it contained a snail. That is not something that one normally expects to find when one purchases ginger beer. That case was one of the leading cases which dealt with the question of who can sue who, because obviously it was the ultimate consumer who was faced with the sight of the snail in the ginger beer bottle.
The alternative remedy is, therefore, one in tort where anybody—and that is, of course, the width of the area covered by the tort—in the long line from the original manufacturer—the original producer—to the ultimate consumer, may have certain rights if he can prove negligence. It is that which has caused so much difficulty in cases such as we have been examining tonight, because quite obviously the onus of proof of negligence, certainly in the international sphere of manufacture today, is extremely difficult. One can imagine that, too, when one looks at mass production. However, that is not the only problem that lawyers face.
The next problem is that, bearing in mind that a component part may be manufactured in one country; that the finished product may be manufactured in another; that it may be sold in a third; then bought in a fourth; but that the damage may have occurred in a fifth, lawyers do not know for certain in which country the action ought to take place and more particularly which law is applicable. The better opinion is—and this is about the only learned phrase that I shall use—that it is the lex loci delicti, that is, the law in which the injury takes place.
But, because again of the uncertainty, there was a Hague Convention. The Hague Convention succeeded in trying to tidy up the situation regarding which law was applicable. There were certain signatories to the Hague Convention but this country was not a signatory and so we too remain, as it were, in the wilderness.
446 One might have gathered from the debate tonight that we were the only country that had considered strict liability. As I have said, we have it under the Sale of Goods Act, but with privity of contract. So far as I know, the only countries in Europe which do not have a concept of strict liability are the Netherlands and, I believe I am right in saying, the Federal Republic of Germany. So, this again is not a concept which is a new one for various countries of Europe, and we have already heard that the United States has it.
The problem is as follows. We have had a Law Commission sitting in regard to these matters. We have had the report of the Law Commission. We have had the Royal Commission, whose report we are discussing tonight, deliberating upon it; and that Royal Commission, as your Lordships have been reminded, started its deliberations and had its remit arising out of a disastrous matter which has gone down in our history books as a most dreadful example not only of what damage can he done, but of the ineffectual nature of legal remedies at that time.
Who would imagine, when we had a Royal Commission that was created in 1973 to deal with that matter which was in our minds so much at that time as being a very unsatisfactory situation if I may use an under-statement, that, tonight, some six and a half years later, we would be deliberating whether we had yet considered the problem sufficiently. Here I come back to what I believe was the complaint of the noble Lord, Lord Allen. What is the point of setting up Royal Commissions and departmental committees to go in depth into matters that are of concern to the nation, when all that appears to happen is that either people discuss the report before they read it or, if they discuss it after they have read it, say that obviously this matter and the recommendations will have to be put somewhere in a drawer and looked at perhaps in the future?
This matter has become even more immediate from our point of view, because reference has been made not only to the Strasbourg Convention, but also to the immediate matter of the EEC Directive. The matter of the EEC Directive is of grave urgency. The noble Lord, Lord Allen of Abbeydale, referred to the length of the preamble. I promise your Lordships that I shall quote only 447 one paragraph from it. It reads:Whereas, lastly, approximation is necessary because the consumer is protected against damage caused to his health and property by a defective product either in differing degrees or in most cases not at all, according to the conditions which govern the liability of the producer under the individual laws of Member States; whereas to this extent therefore a common market for consumers does not as yet exist".It is to fill that vacuum that the EEC Directive has gone forward. It has been considered by the appropriate committee of the EEC. It has been amended; submissions have been made leading to those amendments. It is now an urgent matter for the Government to consider in order that our view may be put to those who will have to finalise this Directive. Either we become members and sign the Strasbourg Convention, or this Directive is made. In either event this matter will become a part of our law.
Therefore, first, I say to the Government that we on this side of the House are certainly, in general terms, in favour of the recommendation of the Royal Commission that there should be strict products liability. We ask the Government to say that this will be given urgent consideration and that all the matters that have been debated in your Lordships' House tonight will be considered in the appropriate stages of a Bill, so that this matter can be properly dealt with.
In the time available to me I wish that I could have dealt with all the very worthy contributions that have been made tonight; but time and your Lordships' patience would not permit of that. Perhaps your Lordships will allow me to deal with just a couple of matters which have arisen in this debate, which I think are of importance and which show that quite obviously much consideration must be given while any such Bill is either before this House or comes before another place.
We were all impressed—as we always are—by the contribution of the noble Lord, Lord Smith. A very fitting compliment was paid to the noble Lord and to your Lordships' House for having the noble Lord and other Members with great specialist knowledge among us. This ensures that our debates are worthy debates and that, with the guidance of those who have specialist skills, we are able to go into various matters in depth. 448 In particular, the noble Lord, Lord Smith, dealt with the difficulty relating to medicinal products and the burdens that would be placed upon doctors and drug manufacturers. There is not the slightest doubt that this aspect cannot be lightly dealt with. If someone of the eminence of the noble Lord, Lord Smith, and if those who represent doctors in this country have apprehensions about matters relating to health, your Lordships' House will obviously want to pay the utmost attention to what they have to say.
But I cannot help feeling that this matter may have been taken a little out of context. It is a fact that at present drugs are issued throughout the world in great quantities and in great multiplicity. Guided by medical and scientific opinion, many of us feel that in the main new drugs with new remedies are not being manufactured, but that there is the manufacture for profit of drugs which achieve precisely the same object. Many of us believe that we have developed almost into a drug-addict society—I do not mean this offensively to the medical profession—because sometimes one feels that drugs are of no great advantage to the patient. Is it so wrong that a drug manufacturer should have to go through the careful task of warning about the effects a particular drug may have? Is it so very wrong that, when prescribing, a doctor should do so with the utmost care?—bearing in mind the warnings that may have been given by the drug manufacturer. Is it so wrong that if the drug manufacturer fails in his duty to warn of a possible risk, he should be held liable when a consumer, having taken that drug, in fact, suffers injury?
I know that the noble Lord, Lord Smith, would always want to be completely accurate and fair, but, if I may say so, he did not complete the definition which is contained in the commission's report as to what is a defect. I am sure that it was only because he wanted to save your Lordships one minute more time. However, I am afraid that I must complete the definition of "defect". It reads:A product has a "defect" when it does not provide the safety which a person is entitled to expect".That was the quotation which the noble Lord gave, but he finished there. However, the definition in the report, which follows the Strasbourg Convention 449 definition of "defect", goes on to say:having regard to all the circumstances including the presentation of the product".Therefore, there would be no liability if, in all the circumstances and having regard to the presentation of the product, proper warnings were given.
As to the great fear that somebody might bring an action under the rule of full and absolute liability, without being able to prove that the drug was the cause of the injury, I can only say that in its recommendations the Pearson Commission made it a requirement that any claimant should, in fact, prove causation. Reference was also made—and this is the last item with which I shall weary your Lordships—to certain difficulties in the aircraft industry. I have no doubt that this is a matter which has to be given considerable thought before the doctrine of strict liability is applied to aircraft manufacturers where they have sent out a recall, or where they have sent out a modification; but this has not in fact been effected by a recall, or there has been no modification as a result of the negligence of the operator.
Mr. Marshall, as has been said in the course of this debate, makes an effective contribution in the report as to why he thinks that certain exemptions should be made. I listened to the noble and learned Lord, Lord Rawlinson of Ewell, with the care that all of us do. When he pleaded for the right of indemnification so far as the manufacturer was concerned against the operator, I am sure that he was aware—but it may be that noble Lords would not have been aware from his speech—that of course this very right of indemnification was advocated by the Pearson Report.
I end with this note. The tidiness of our own law, the tidiness of European law, the tidiness of international law, are of great importance in regard to product liability, not only in the interests of the consumer but because our own manufacturers ought to be competing fairly with other manufacturers in other countries. Therefore, a tidiness of the law is essential. I repeat that the Strasbourg Convention, the draft Directive of the EEC, the Law Commission, the Royal Commission's report which we are considering, all advocate in general terms the doctrine of strict liability in order to have a tidiness of that law.
450 My plea in this House tonight is the same as Lord Allen's plea, if I may be allowed to be a partner with him in this. It is that we do not further delay; that we get our thinking right in regard to the draft Directive, the effect of which will be upon us very soon; that we consider carefully, not only in general terms, whether or not we require legislation, but that we have legislation before us as soon as possible in order that we may carry out some of the fine contributions in today's debate, so that any Bill becomes an effective Act.
§ 5.23 p.m.
§ The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard)
My Lords, as many noble Lords have already said, this debate has shown this House at its best. I would echo the Government's thanks to the noble Lord, Lord Allen of Abbeydale, for introducing it at this stage, which is also timely. I would also add not only the Government's thanks but their real appreciation of the existence of this Royal Commission report and of the Law Commissioner's report, and of the value that the Government attach to those documents in the task that my right honourable friend has in front of her at the moment in reviewing the many learned contributions to this great problem.
I should also like to assure the House that we understand the urgency that is attached to a situation where things can be said not to be right: where victims of some product or other may not get compensation. We understand and sympathise with the desirability of trying to meet that as soon as we possibly can. We understand the need to ensure that the victim does not have to depend upon negligence, and does not have to be the purchaser. We need to ensure that the person whose property is badly damaged through a defective product is also taken account of. Having said all of that, we have to review, in an area where there is considerably more than one opinion, what is the best way of doing it—and I shall come to it later—and what is the timing of doing it in relation to other countries. We have to balance, as the noble Lord, Lord Plowden, so rightly said, all the important points which he made in his speech, and which he made on a wide 451 industrial base. I shall turn in a moment to those problems in particular industries.
We have to take into account the best estimates that can be made of the effect on industry; of the effect on the costs of industry; on the insurability of the risks, including unknown risks, as has been mentioned. We need to try to estimate the effect on innovation, which various noble Lords have today stressed with such a degree of expertise in their own fields. As the noble Lord, Lord Allen, pointed out, the days when it could be said that industry had perhaps—and, as an industrialist, I can say it—not fully woken up to this important problem are over. At least, I hope they are.
I should like to encourage my industrialist friends to rationalise in theory what their experience in practice tells them; to consult with insurance companies, and to make forecasts on the basis of the various proposals before us in Europe of what they really feel will be the effect. But I beg them to take account of the tremendous groundswell, which has been well stated, across the world and certainly within Europe to look to the victims. The Government know that the majority of industry accept the need to look to the problems of the victim who needs compensation.
I believe that industry today, as has been stressed in this debate, is asking for what it sees as adequate safeguards in order to be able to continue to serve the public generally, not only as well as, but hopefully better than, certainly UK industry has been able to do in recent years. It is a particularly sensitive time for costs. It is a particularly sensitive time for the need for innovation, which has been too little, rather than too much, for too long in this country. If I may summarise the safeguards that have been asked for, and which I can assure noble Lords will be considered, they are the whole and difficult question of the state of the art, as it is called, or the development risk. It is not Conservative Party policy—I think the noble Lord, Lord Allen, produced a quotation from some source about this—that we shall accept the state of the art defence. We are reviewing the matter and trying to answer all the problems and produce a solution 452 nearer perfection than we believe has yet been produced.
We are aware and take note—and my right honourable friend will study this debate in great detail—of the problems of definition of what is defective. Enough has been said in this debate for me to give no further examples. I think industry has stated that the compensation amounts could be crippling, to big firms in some instances, as we have heard today, but several speakers have underlined the possible adverse effects on smaller firms and I assure them that their arguments and views and those from trade and industry—which can still be put to the Department of Trade—will be looked at with the greatest care. The points that have been made about the whole problem of who is responsible—this covers the question of components and that of handling through the life of a product—will be looked at and studied.
We had some magnificent contributions, as we always do, from thoroughly knowledgeable people in each specialist area and it would be impertinent for me to add anything or question anything produced in the contribution of the noble Lord, Lord Smith, on the known problems of the pharmaceutical industry. I would only add to what he said that we also know the size of the research and development budgets that that industry has, the amount of effort that goes into innovation. They often range from between 10 and 20 per cent., as I know from experience, and some are even possibly above that. An enormous weight of money is going into trying to solve unsolved problems for the benefit of consumers, the public at large, and we must study very closely their fears, which Lord Smith echoed today, that we shall harm that situation. I took note also of the remarks he made in relation to tobacco and alcohol and I particularly took note of the phrase when he said that no drug has a single effect. Those are real problems.
We take note of all the points that have been made on the food industry, and here I have past interests so I must not speak for any length of time. One example given happened to be in an area in which I spent a good deal of time 20 years ago, that of whether a supplier of a filling for a meat pie would be responsible if the filling was deficient. The noble Lord, 453 Lord Mottistone, referred to where the raw materials started for much of the industry in respect of which he declared an interest; namely in grains of wheat on the farm.
If we go back to the meat pie and the filling problem, in those days 20 years ago I remember one had to deal with the accidents of contamination to an animal either on the farm in respect of various forms of bacteria—salmonella for instance —or where it was physically and totally impossible to look for salmonella on every animal coming into a large slaughterhouse. I stress that because this problem, which has been well highlighted today, of who in a chain is responsible and whether it is ever possible to say who in a whole chain is responsible, applies to the food industry as well as to the other industries which have been mentioned, and we shall have to look at that. The points on standards and on the Directives that already exist, horizontal and vertical, which control to a quite high degree how certain products, including the food industry, are made, and the position of those standards if you comply with them yet produce a defective product, will have to be examined.
The noble Lord, Lord Hayter, made a major contribution on the property element because of his great industrial experience in that area. He stressed the size, if I understood him correctly, of existing insurance costs or insurance costs that would exist under the present system. I would say to him and to other industrialists that I hope they will talk to insurance brokers and try to give information to the Department of Trade, perhaps with their insurance firms, on what the situation might be under the various proposals we are considering. That would be extremely helpful, and I say that to industry in general and to the CBI.
The Government's view is that action should be on the widest international basis practicable, and in the immediate future we see that as the EEC. We hope that will not in any way be taken as a slight on the importance of the Royal Commission, the Law Commission's report or the Strasbourg Convention. The Directive would seem to us to be the moment for international action and I hope that some other parts of the world will 454 also consider, particularly if laws apply to imports, that that might be the appropriate moment for them to move too.
We had excellent and interesting contributions, which will be studied in detail, from my noble friend Lord Orr-Ewing on aircraft and from the noble Earl, Lord Shannon, on building and the problems of objects which are movable at one moment and immovable the next. That again is merely an illustration of the enormous number of problems of definition which this kind of legislation in the end will require to meet. We noted with interest the point the noble Lord, Lord Plowden, raised; that the United States, with its new proposals, after experience—I think one can say this without fear of contradiction—having definitely got it wrong in the early stages, deserves to have these new proposals closely studied. I take that point because I think we have not given too much attention to America except in the terms that they have got it wrong. If as a result of experience—and they certainly have a lot of experience—they are now balancing these various points of view with effect, then we will certainly look at their new proposals very closely.
The noble Lord, Lord Allen of Abbey-dale, asked what our attitude was not only to the Royal Commission Report but to Strasbourg—what brief we had given—and asked if I could say what the timing of the Directive would be. I have already indicated that we regard the Directive as the time for action. It is hard to anticipate accurately the timing of that Directive. The noble Lord, Lord Mishcon, suggested that Europe was already a long way down that road. I understand, though I am not an expert in this area, that there are many differences of important detail, of exclusion as well, and that they themselves have very different opinions one from another. I may be wrong; and I have noted very carefully what the noble Lord said today.
The situation regarding the work on the Directive may be of interest to noble Lords, and it is as follows. We are at the point of second draft, and your Lordships probably know better than I that this already takes account of the comments of the Economic and Social Committee and of the European Assembly. The draft Directive is next examined by a specially 455 constituted working party in the Council. They go through two main sections, a first reading and a second reading, with a great deal of consultation and argument in both cases. At the end of the second reading—this is the normal procedure; it may not be exactly followed—there are generally alternative texts which may be supported by several member States for certain of the articles, and a number of points on which individual States have reserved their position. It is at this stage that the presidency, the Commission, and the Council secretariat seek to promote overall compromises. The working party then reports to Coreper—the Council group on which Member States are represented by their ambassadors—and I understand, judging from the past, that this leads to more compromises, more negotiations. Coreper then either submits the draft Directive to the Council, or asks the working party to resolve minor outstanding points in the light of the decisions taken on the issue and then submits it to the Council.
I have cut that a little short, but think I have said enough. It is not going to be an immediate process. I think that it is bound to take years—and by that I do not mean masses of years, but it is bound to be more than one year. This process is bound to take years. I say that as an estimate with all the likelihood that it may be wrong, but since various noble Lords have expressed interest in it, I felt that I should do my best to respond.
§ Lord MISHCON
My Lords, would the noble Viscount forgive me if I were to intervene for a moment? Am I right in thinking that in fact the EEC has itself set a target date for getting the Directive through, and is my period of 18 months completely out of proportion with the information that he has been given?
§ Viscount TRENCHARD
My Lords, I shall have to give the noble Lord the answer to that question later. I deliberately asked for information on this point, and the information that I have been given does not give that time limit. But if I am wrong, I will not only let the noble Lord know, but take steps to try to inform other noble Lords who are interested, particularly the noble Lord, Lord Allen—
§ Lord DRUMALBYN
My Lords, will my noble friend forgive me for intervening? In order to complete the picture, will he confirm that at the point when the Commission is about to submit the draft Directive to the Council, or even before that, the draft Directive comes to the Select Committee of this House which deals with these documents? It would then report, and in a case like this I should think that most certainly that report would be followed by a debate in this House.
§ Viscount TRENCHARD
My Lords, with regard to the question of my noble friend Lord Drumalbyn, I am sure that that is correct—that the Select Committee will scrutinise the draft Directive and that there will be opportunities for debate. My "Box" has just sent me a note. I think that I am correct. There is no period of 18 months from now. What the noble Lord, Lord Mishcon, may have in mind is that a Directive such as this comes into force 18 months after agreement, and most of what I have described to him are the stages coming up to agreement. Perhaps that makes the position as clear as one can in dealing with a difficult estimation.
The noble Lord, Lord Allen, asked me whether it was part of our policy to try to educate the public on the situation. The answer is, not specifically as such, but I believe that the matter is bound to be aired in both Houses of Parliament as a result of all that is going on, and I think that the public debate will mirror the debate in the House. I have no answer to the question about what the situation would be if a catastrophe were to occur tomorrow. As I think the noble Lord, Lord Plowden, pointed out, even if one introduced various forms of strict product liability, or even absolute product liability, a catastrophe can be caused that is far beyond the means of an individual company to compensate. So catastrophes will be a continuing problem, and I believe that we must get the situation right rather than rush it in order to try to get through to meet what I hope is an eventuality which will not occur in the meantime.
I should like to end by saying two things. First, this is one of many areas in a human world where the present situation can be described as undesirable, even unacceptable. 457 I believe that there is experience in this human world that suggests that major problems can be made worse as well as better, and to those who have urged us to push forward quickly I would say that we must balance all the many sided problems that have been aired in the debate and try to get a solution which is very nearly right.
I agreed so much with what my noble and learned friend Lord Rawlinson of Ewell said. After having paid great tribute to the Royal Commission Report, my noble friend said, I think, that he believed that it had started the discussions, but not concluded them. I believe that the debate has aired many of the contradictory problems. It is now the task of this Government, and other Governments, to try to find a way through those contradictory problems.
§ 5.48 p.m.
§ Lord ALLEN of ABBEYDALE
My Lords, I am sure that we are all extremely grateful to the Minister for being so forthcoming and for giving us so much information. In particular, I noted with great interest what he said about encouraging industry to start thinking about these problems perhaps even more deeply than hitherto, as well as what he said about the Government's present attitude to the defence of development risks. We were all glad to know what was the likely programme at Brussels, and I noted with great interest what I understood the Minister to say: that any question of signing the Strasbourg Convention is put off sine die and that the EEC draft Directive takes priority.
I do not want to delay your Lordships, but I wish to say that there were two points which struck me about the debate, at any rate until we got to the last two speeches. The first point was that it is perhaps not terribly surprising that in this forum we should hear quite a lot about the difficulty of producers and manufacturers and not very much about the problems of consumers. Many of the arguments advanced this evening had an extremely familiar ring to those members of the Royal Commission who had sat through months and months of taking evidence. Perhaps the most remarkable feature of the Royal Commission was that, although it was composed of people with such a wide variety of interests, including 458 doctors and lawyers, nevertheless we came to a unanimous conclusion on this particular issue. For that matter so did the Law Commissions, whose members are not exactly revolutionary and starry-eyed individuals. Anyway, the advisory bodies have made their propositions. Frankly, I am not sure that I have heard very much today which would make me change our conclusions, but it is out of our hands and is now with Her Majesty's Government.
The second point is the one which the noble Lord, Lord Mishcon, made: that, listening to some of the debate, one rather got the impression that we were dealing with this in total isolation, as though the rest of the world, and the rest of Europe in particular, did not exist. But the point was faithfully dealt with by the noble Lord, Lord Mishcon, and by the Minister in his speech, and I will not pursue it further. I am tempted to comment on the speeches, but I will limit myself to three very brief comments. The first is on the very notable contribution made by the noble Lord. Lord Smith. To some extent, what he was talking about related not so much to products liability as to medical injury, which is the subject of a separate chapter in the Royal Commission's report—and I think it is no secret that we probably found this the most difficult chapter of all to draft. In the end, we did not come to any very firm, long-term conclusions. We made our recommendations; but we did envisage, particularly in the light of experience in other parts of the world, whether in this area one ought not to end up with a "no-fault" system.
Then, my Lords, I am not used to taking issue with the noble and learned Lord, Lord Rawlinson of Ewell, but it seemed to me that perhaps he was blurring just a little too much the importance of tort or delict in the modern world, given the impact of insurance. On the Royal Commission we toyed for a time with the idea of in fact making the insurance company the nominal defendant in these cases, rather than the individual; and I think we all of us felt that the traditional argument about tort—bringing the wrong home to the wrongdoer—is not quite as clear-cut as perhaps once it was. But this is really taking it into the wider territory covered by the Royal Commission, and it is a matter of considerable 459 regret to me that we here have not yet had any debate on these wider issues. It so happens that products liability can usefully be considered by itself, although, as I said in my opening speech, when one comes to the problem of assessing damages then our general recommendations come very much in point. My third comment, which is a very short one, is merely to remind my noble friend Lord Hayter that the Royal Commission's terms of reference did not extend to damage to property. We made no wise or unwise recommendations on that issue.
The debate has at any rate, I think, brought out the fact that this is not only a very important topic but is also a very complicated one, and I think we shall all look forward to reading at leisure the various extremely interesting contributions which have been made. But perhaps I may say that the Royal Commission said almost in terms in the last chapter that they never thought they were working out a blueprint which Governments would accept without question. We wanted it to provide a basis for debate. Our concern has been that the debate has been so slow in starting; but, at any rate, we have begun this aspect now. At the end of the day, my Lords, I still cannot get out of my mind those thalidomide children. I beg leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.