In D.I.P.T and others v Sanglier Limited, DAC Beachcroft successfully acted for the Claimants in obtaining judgment for recovering settlement sums paid following the supply of a defective industrial spray adhesive. The decision by His Honour Judge Pelling KC showcases a welcome practical approach by the Technology and Construction Court in respect of both the evidence supporting the recovery action and the handling of the original settlements.
Background
The Claimants procured the Defendant to formulate a new adhesive product for its customers. The Defendant engaged Apollo Chemicals Ltd to manufacture the adhesive. The Defendant added propellant to the adhesive and packaged it into canisters. The product was then supplied by the Defendant to the Claimants, who in turn sold it to end user customers who used it in the manufacture of furniture and fittings in shops, offices and exhibition stands.
Within months there were widespread complaints by end users of the adhesive failing prematurely, leaving a powdery residue. Claims were made against the Claimants for a range of low value sums which were settled by the Claimants’ insurers. The insurers then sought recovery of their outlay from the Defendant on the basis that the adhesive was not of satisfactory quality nor fit for purpose, in breach of the implied terms under the Sale of Goods Act 1979.
The Defendant denied liability and argued that the failures were caused primarily by misapplication of the adhesive by the end users. It also challenged the reasonableness of the settlements paid to the end users, which totalled circa £2.1m.
Prompt settlement
The Claimants, their insurers and legal team worked closely together and, at an early stage in the claim, acted quickly in settling numerous claims from over 30 end users, some of whom used the adhesive at hundreds of sites across the UK and Europe. The Defendant refused to engage in the settlements. Given the number of claims, the court directed that the claim should proceed by way of a test case of 6 end user claims, with the outcome of the test case to be applied in resolving the other end user claims.
Witness and documentary evidence
One key aspect of the trial was witness evidence. Factual witnesses were required to recall events that occurred over 8 years ago, which had an inevitable impact on the reliability of some of their recollections. The court therefore tested the witness evidence against contemporaneous documents. However, the Judge was also realistic about the types of documentary evidence which would be available in low tech, low cost applications such as furniture joinery. He rejected the Defendant’s artificial points that end users had not kept records of batch numbers of adhesive which were used, saying that this approach would be unrealistic where there was no legal obligation to maintain such records.
The court also considered expert evidence presented, which involved highly complex chemistry issues in respect of the nature of the defect in the adhesive, upon which there was significant disagreement. The judge took a step back from this evidence, and accepted the Claimants’ submission that it would be:
“staggeringly unlikely…”… that “…suddenly when taking up [the adhesive], and only when using [the adhesive], many if not all of the joiners and fabricators employed by the [end users] forgot en masse how to use sprayable PSAs in a proper and workmanlike manner.”
The court held that there was no meaningful misapplication or want of care and skill that was causative of the problems that arose, and the sheer number of experienced end users suffering delaminations within the same time period, was strongly indicative of a chemical issue within the adhesive.
Reasonableness of Settlements
The court also provided a useful summary of the principles involved in the reasonable settlement of claims. It confirmed that the Claimants were required to establish that the settlements reached with its end users were, in all the circumstances, within the range that reasonable people in the position of the Claimants might have made.
The Judge considered various factors in reaching his conclusion that the settlements were reasonable, noting that technical expert evidence had been sought and the settlements had been entered into upon legal advice. He also placed a fair amount of weight on the fact that the settlements had been paid by the Claimants’ insurers, who had an interest in keeping payments as low as possible.
Of particular interest to product liability claims, His Honour Judge Pelling KC also considered that the quantity of relatively modest value claims which the Claimants faced (as a result of the Defendant’s breach) justified a generous approach. It ought to have been in the reasonable contemplation of the Defendant that the adhesive would be used by a number of end users in various projects, resulting in modest claims made by many individual claimants which were not economic to dispute.
Finally, whilst the Defendant asserted that the settlements fell outside the range of reasonableness, it failed to adduce any evidence from either a loss adjuster or other suitably qualified expert to that effect, and thus the court rejected these arguments.
Ultimately, the Claimants were successful on all points and entitled to recover the amounts paid out to the test case end users.
Practical takeaways
This litigation highlights the importance of insurers, insureds and the legal team working closely together to enable the prompt settlement of claims. Such an approach can have a huge reputational impact.
Further, settlement cannot be divorced from the cost of disputing claims, especially in circumstances such as these where litigation would almost certainly be disproportionate. The benefits of settlement in such cases are both obvious and compelling.
The court’s approach also serves as a reminder of the importance of collating contemporaneous documents at an early stage in any claim in order to corroborate factual witness evidence, while being mindful of the realities of the trade in question.
Olu Dansu (Partner) and Jennifer Pateman (Senior Associate) of DAC Beachcroft acted for the successful Claimants.
