Diametric Metal Fabrications Ltd v Reilor Ltd

A claimant assembling manufactured components is not liable for alleged product failures unless the defendant proves both the probable mechanism of failure and a breach of contract or duty causing it. Wear in the defendant’s tooling does not, without evidence of responsibility, establish breach. A contractual obligation to maintain supplied tooling may be qualified throughout by an exception for fair wear and tear. Where the defendant controls the design, tooling and testing arrangements, the claimant’s compliance with instructions and reasonable reliance on authorised stop-gap measures may be relevant. Separate corporate defendants must be treated as separate legal persons when analysing liability, accounting and any set-off.

The claimant assembled hydraulic door-closer units for the defendants under contracts initially made with the first defendant and later novated to the second defendant. The defendants withheld payment, alleging that numerous closers were defective because end caps had been inadequately crimped, and counterclaimed for credits and loss of profits.

The claimant sought payment for supplied goods, payment for completed units, and compensation for stock remaining after termination. The central issues were the extent and cause of product failures, whether the claimant was contractually responsible, whether the defendants had proved their losses, and whether either defendant could set off a counterclaim.

1. Liability for defective closers. The defendants failed to prove the number of defective units, the probable mechanism of failure, or that any failure resulted from breach by the claimant. Evidence of some failures did not establish that they were caused by detached end caps or inadequate crimping. The defendants’ counterclaims and proposed set-off therefore failed.
2. Tooling and assembly obligations. The claimant followed the defendants’ instructions and carried out the available visual and rig testing. The evidence did not establish that it failed to maintain the tooling or test rig, or that it should have detected the relevant wear. The claimant was entitled to rely on the authorisation by the defendants’ personnel of the washer as a temporary measure. The tooling clause’s fair-wear-and-tear exception qualified the obligations in the clause generally, not merely the obligation to make good damage.
3. Loss of profits. The first defendant failed independently to prove the amount and causation of its alleged loss. Its figures were inconsistent and unsupported by sufficient documentary evidence.
4. Separate defendants and sums due. The defendants were separate legal persons, so any liability and set-off would have required separate accounting. The claimant was entitled to judgment for £23,055.24 against the first defendant and £34,646.30 against the second defendant. The second defendant was also liable for unused stock and completed units following termination. Interest was left for agreement or further submissions.