21 September 2017

Self-damage is (still) not considered damage caused by a defective product according to product liability law

On 13 September 2017, the Supreme Court dismissed a claim for compensation against a manufacturer of marine engines for a shipping company’s loss as a consequence of wear damage to the marine engines.

The Supreme Court thereby rules (once again) that damage to the actual defective product (self-damage) is not damage caused by a defective product within the meaning of product liability law. In the judgment, the Supreme Court has specified the more detailed framework for the principle on self-damage within product liability law.

WHEN IS A DAMAGE COVERED BY THE RULES ON PRODUCT LIABILITY?

Application of the rules on product liability is conditional on damage to something else than the actual defective product. It is therefore not possible to obtain compensation for loss as a consequence of damage to the actual defective product (the so-called self-damage situation) under the product liability rules. This limitation appears from section 2 (2) last sentence of the Product Liability Act, and the same principle applies according to the product liability rules developed under case law.

In a self-damage situation, it is a clear principle that the injured end-buyer may therefore only raise a contractual claim against its contracting party. However, this main principle was challenged during the above action.

THE DISPUTE

J. Lauritzen A/S and J. Lauritzen Singapore Prte. Ltd (“Lauritzen”) concluded an agreement with a shipyard concerning purchase of gas carriers. In connection with the purchase, the shipyard concluded an agreement with the marine engine manufacturer MAN Diesel & Turbo (“MAN”) concerning delivery and installation of marine engines in the new ships. The engines were equipped with a special cylinder oil system, the Alpha Lube system. The agreement involved a new model of the Alpha Lube system which - as opposed to the original system - could be used in small marine engines. The new model of the Alpha Lube system was manufactured, marketed and delivered by MAN.

Lauritzen noted an unusual wear of the engines which resulted in several components having to be replaced sooner than expected. The wear damage was apparently caused by a defect in the Alpha Lube system.

Material limitations of liability were included in Lauritzen’s contract with the shipyard. Consequently, Lauritzen raised a claim for compensation against Man for loss as a consequence of the wear damage to the marine engines. There was no contractual relationship between Lauritzen and MAN, and Lauritzen could therefore not raise a contractual claim against MAN. It was decisive whether MAN was liable to pay compensation to Lauritzen for the loss as a consequence of the wear damage to the marine engines according to the product liability rules developed under case law or the principles concerning direct claims.

The primary dispute in relation to the product liability rules was whether the Alpha Lube system was to be considered an independent product or a part of the product sold, the marine engines. This consideration was decisive as to whether damage had been caused to something else than the defective product or whether this was a self-damage situation.

THE MARITIME AND COMMERCIAL HIGH COURT GAVE DECISIVE WEIGHT TO THE MARKETING OF THE ALPHA LUBE SYSTEM AS AN INDEPENDENT PRODUCT

The Maritime and Commercial High Court found that the Alpha Lube system could be considered an independent product and gave weight to the circumstances at the time when the engines were subject to negotiation. In that period, MAN had actively marketed the new Alpha Lube system for small engines in separate campaigns and as an independent product which could be selected when purchasing new engines and be purchased separately for installation in used engines.

On this basis, the Maritime and Commercial High Court concluded that MAN was liable to pay compensation for the loss as a consequence of the wear damage to the engines under the product liability rules developed under case law as the system had caused damage to something else than the system itself, i.e. the engines. MAN lodged an appeal against the judgment with the Supreme Court.

THE SUPREME COURT GAVE DECISIVE WEIGHT TO THE FACT THAT THE PRODUCTS HAVE BEEN SOLd AS ONE UNIT

The Supreme Court found that, when assessing whether damage had been caused to something else than the defective product, it should be taken into account whether the defective product is part of a product which was sold as one unit. Further to this, the Supreme Court referred to the grounds of the Masnedø judgment (UfR 2010.1360) where the Supreme Court found that, when assessing whether it involved a self-damage situation, it should be taken into account which product the end-buyer has purchased from its contracting party.

In the marine engine case, MAN had not made an allegation that the product purchased by Lauritzen should be taken into account as in the Masnedø judgment. On the contrary, MAN claimed that damage had not been caused to anything else than the product sold by MAN to the shipyard, i.e. an aggregate engine, including the Alpha Lube system. The Supreme Court then made a specific assessment as to whether the product sold by MAN constituted an aggregate unit/product, and the Supreme Court concluded that this was the case. Consequently, the Supreme Court found that damage had not been caused to anything other than the sold product, and that the wear damage to the engines did therefore not constitute damage caused by a defective product within the meaning of product liability law.

Further, the Supreme Court found that Lauritzen has not proved that MAN had acted in a manner giving rise to liability according to the principle on direct claims. The Supreme Court therefore ruled in favour of MAN.

COMMENTS

In the judgment of 13 September 2017, the Supreme Court determines, referring to the Masnedø judgment, that the assessment as to whether damage has been caused to something else than the defective product must be based on how the situation appears from the point of view of the end-buyer. The principal rule providing that the assessment should be based on the end-buyer’s purchase is also in accordance with the judgment of the Maritime and Commercial High Court in the Opel case (H-57-04). For more information, see the article in UfR 2013B.417 “Product liability - Components and self-damage”.

related news

Compliance: E-leaning in competition law

20 September 2017

Horten now offers e-learning in competition law tailored to each company.

Denmark accedes to the convention on jurisdiction

14 September 2017

On 30 May 2017, the Danish parliament adopted a bill stating that Denmark accedes to the Hague convention on jurisdiction of 30 June 2005 (the Convention on jurisdiction). The bill came into force on 1 July 2017.

Supplier of components wins long-term arbitration case

23 August 2017

Horten has conducted and won a comprehensive international arbitration case on behalf of Bollfilter Nordic ApS. Bollfilter Nordic ApS is part of the German group BOLL & KIRCH Filterbau GmbH, which is one of the world’s leading suppliers of filtration solutions, including to the maritime industry.

New rules on expert opinions

10 July 2017

On 1 July 2017, new rules on expert opinions in legal action came into force. Read more about the most significant changes brought about by the new rules.

Horten advances in new Chambers and Legal 500 rankings

19 April 2017

In 2017, the leading international ranking agencies, Legal 500 and Chambers, are once again ranking Horten among the best law firms in Denmark.

Four new specialised attorneys at Horten

7 March 2017

Horten has appointed four new specialised attorneys having in-depth professional and commercial expertise within personal data law, environmental and planning law, energy and supply law and tax law.

Global Leaders in Law appoints Horten as exclusive partner for Denmark

10 January 2017

Global Leaders in Law, the leading global general counsel forum based in London, and Horten has announced partnership. Appointed as a global bronze partner, Horten will sponsor the activities of Global Leaders in Law in 2017.

New partners

4 January 2017

With effect from 1 January 2017, Horten appointed Lars Lüneborg and Julie Arnth Jørgensen as partners.

Competition law - Adoption of new rules on claims for damages

1 December 2016

The directive concerning damages to customers (and others) suffering a loss due to violation of the competition rules came into force in December 2014 (Directive 2014/104/EU). The directive is now being implemented into Danish law.

New partner

15 August 2016

Horten strengthens the partner group and the expertise within environmental and public law with the admission of partner Anne Sophie K. Vilsbøll.

New ratings from the international reference book Legal 500

4 May 2016

There are several good news for Horten in the new rankings, among these to new Tier 1-ratings in Media & entertainment and Telecoms.

Municipalities cannot take out insurance covering volunteers - yet

2 May 2016

The Ministry of Social Affairs and the Interior has put a - temporary - stop to the question whether municipalities can take out collective accident and liability insurance covering volunteers.

International women lawyers discuss the future of the legal profession

6 April 2016

Horten participates when 150 lawyers from all over the world meet in Berlin on 7-8 April under the headline "Law in a changing world – how women can contribute to innovation of the legal profession".

Horten Corporate Day 2016 - Danish companies at the forefront

18 March 2016

At Horten's Corporate Day 2016 on 16 March, Danish and foreign executives and experts gave their views on the trends and opportunities of the Danish business sector. Horten will repeat the success next year with Horten Corporate Day 2017.

The Eastern High Court: Pressalit infringed Tivoli's trademark and breached the licence agreement

2 March 2016

In January 2016, the Eastern High Court ruled in the appeal proceedings between Tivoli A/S and Pressalit Group A/S.

Insurance broker avoided claim for compensation of more than DKK 1.7 million despite insufficient advice

18 February 2016

In a recent ruling, the Eastern High Court stated that insurance advice which is not in accordance with the Executive Order on the good practices of insurance brokers may form the basis of a claim for compensation.

The Supreme Court did not set aside an arbitration award

10 February 2016

A new Supreme Court ruling concerning compensation for breach of a distributor agreement emphasises the binding character of awards.

The Eastern High Court: Label infringes design right

9 February 2016

Horten represented the manufacturer of a diaper pail, Sangenic, and the High Court ruled that the use of a picture of the design-protected pail constituted an infringement of the design right.