Questioning the Social Desirability of Product Liability Claims Submitted by Trevor Jonathan Fox to the University of Exeter as a thesis for the degree of Doctor of Philosophy in Legal Practice In July 2015 This thesis is available for Library use on the understanding that it is copyright material and that no quotation from the thesis may be published without proper acknowledgement. I certify that all material in this thesis which is not my own work has been identified and that no material has been previously submitted and approved for the award of a degree by this or any other University. Signature………………………………………………………………………………… 1 | P a g e ABSTRACT Questioning the Social Desirability of Product Liability Claims This thesis seeks to answer the primary question as to whether Product Liability Claims are socially desirable by reference to three Product Liability case studies and a survey of 132 archived Product Liability claims. These constitute a representative random sample of Product Liability cases handled by the Author’s Legal Practice. This practice has provided a window through which serious failings are identified in (i) the strict liability based Product Liability Directive; (ii) tort itself as a mechanism for compensating injured persons; and (iii) the procedural infrastructure in which claims are made, as recently reformed in accordance with Lord Justice Jackson’s recommendations. This thesis tests Product Liability claims against the objectives of tort: deterrence; corrective justice; retribution and vindication; distributive justice and compensation. It is found that Product Liability claims fail to meet the defined standard of social desirability. There is nothing special about products to necessitate or justify a bespoke system of liability. Product Liability claims for damages represent in microcosm the broader picture of personal injury claims as a whole. This thesis highlights the failings of a system which relies heavily on gambling upon outcomes; perpetuates a ‘have a go’ culture; rewards the lucky few; builds in an unacceptable element of moral hazard and tolerates and generates the costs of a high volume of claims which serve no practical or legal purpose. It is concluded that 1. The Product Liability Directive was introduced as an emotive response to the Thalidomide tragedy but it would fail to provide a remedy in a similar disaster. Instead it treats sufferers of minor mishaps as victims and contributes to a litigation industry that inculcates in society a false and unnecessary sense of entitlement. 2 | P a g e 2. The Product Liability Directive should be repealed as a flawed and misconceived piece of legislation that fails to achieve its key goal of protecting consumers and harmonising the law. 3. Support is found in this practical research for much of what Atiyah advocated in his seminal work The Damages Lottery. The possibility of an all-embracing no- fault liability system should be reconsidered subject to strict controls, including thresholds, to ensure that it compensates and rehabilitates only those with genuine needs. 4. A first party insurance market would have to develop to fill the gaps. 3 | P a g e CONTENTS ABSTRACT ................................................................................................................................... 2 INTRODUCTION ........................................................................................................................... 9 1.1 THE CENTRAL QUESTIONS AND THEIR IMPORTANCE ................................................................. 9 1.2 STARTING POINT .................................................................................................................. 12 1.3 COMPARATIVE LAW ELEMENTS .............................................................................................. 14 1.4 PRODUCT LIABILITY .............................................................................................................. 15 1.4.1 The Strasbourg Convention holds the key to European thinking on PL..................................... 16 1.4.2 The EEC Draft PL Directive ........................................................................................................ 19 1.4.3 Principles underlying PL ............................................................................................................ 20 1.5 EXISTING RESEARCH AND THE IMPORTANCE OF THE SUBJECT ................................................ 21 METHODOLOGY ........................................................................................................................ 30 1.6 DEFINING SOCIAL DESIRABILITY ............................................................................................ 30 1.7 CASE STUDIES ..................................................................................................................... 32 1.8 PL CLAIMS SURVEY ............................................................................................................. 33 ORGANISATION OF CHAPTERS.............................................................................................. 35 CHAPTER TWO - THE SOCIALLY DESIRABLE GOALS OF TORT EXPLAINED ................. 37 2.1 DETERRENCE AND SAFETY ENHANCEMENT ............................................................................ 37 2.2 CORRECTIVE JUSTICE .......................................................................................................... 39 2.3 VINDICATION ........................................................................................................................ 41 2.4 RETRIBUTION ....................................................................................................................... 42 2.5 DISTRIBUTIVE JUSTICE ......................................................................................................... 44 2.5.1 Social Welfare ........................................................................................................................... 47 2.5.2 First Party Insurance ................................................................................................................. 49 2.5.3 Third Party Insurance and Tort ................................................................................................. 51 2.6 COMPENSATION ................................................................................................................... 53 CASE STUDY 1: DETERRENCE ............................................................................................... 57 MARTIN V KUDO (GB) MOTOR COMPANY .................................................................................... 57 CHAPTER THREE – PL FAILS TO DETER .............................................................................. 62 3.1 CONSUMER PROTECTION MEANS DETERRENCE. .................................................................... 62 SCALE OF AWARDS ................................................................................................................. 63 3.2 BY COMPARISON WITH US AWARDS, UK DAMAGES AWARDS ARE TOO SMALL TO DETER ........... 63 3.2.1 Punitive damages may be available in the US but not in the UK .............................................. 64 3.2.2 The arbitrariness of punitive damages awards enhances their deterrent effect ...................... 65 3.2.3 There is no equivalent to US punitive damages in the UK ........................................................ 65 3.2.4. US class actions may generate huge awards which cannot fail to deter ................................. 66 3.2.5 By contrast, Group Actions in the UK have been unsuccessful and unpopular ......................... 67 3.2.6 The adoption of elements of US litigation could affect the deterrent quality of PL .................. 69 STRICT LIABILITY FAILS TO DETER....................................................................................... 72 3.3 STRICT LIABILITY IS A LESS EFFECTIVE DETERRENT THAN FAULT BASED LIABILITY .................. 72 3.3.1 Punitive awards are based on fault .......................................................................................... 72 3.3.2 Direct deterrence is based on fault ........................................................................................... 73 3.3.3 So-called strict liability for defective products in the US is not really strict .............................. 74 3.3.4 UK Strict Liability based on the PL Directive is strict ................................................................. 76 3.3.5 The defendant’s conduct and avoidability of defect irrelevant ................................................ 77 3.3.6 Warnings ................................................................................................................................... 80 DOES PL REGULATE SAFETY? .............................................................................................. 81 3.4 PL IN THE UK IS TOO UNSTRUCTURED AND UNFOCUSED TO AFFECT PRODUCT SAFETY ............ 81 3.4.1 The safety debate in the US is inapplicable to the UK ............................................................... 81 3.4.2 As a deterrent, PL is inapt to regulate ...................................................................................... 82 3.4.3 PL is unstructured in deterring carelessness ............................................................................. 84 4 | P a g e 3.4.4 Economic deterrence ...............................................................................................................