OB (by his mother and litigation friend) (FC) v Aventis Pasteur SA

Under Article 11 of the product liability Directive, a producer’s liability is extinguished ten years after the product was put into circulation unless proceedings were instituted against that producer within the period. National substitution rules cannot circumvent that limitation, even where the claimant mistakenly sued another company.

A manufacturing parent may nevertheless replace its subsidiary where the subsidiary was so integrated into the manufacturing process and controlled by the parent that proceedings against it were, in substance, proceedings against the parent. Wholly owned status is relevant but not decisive. The court must examine all the circumstances, including whether the parent determined when the subsidiary put the product into circulation.

The claimant alleged that a defective vaccine had caused brain damage. He initially sued the United Kingdom distributor, Aventis Pasteur MSD Ltd, under section 2 of the Consumer Protection Act 1987. After learning that the vaccine had been manufactured by its French parent, Aventis Pasteur SA, he sought to substitute the parent after the ten-year period prescribed by Article 11 of the product liability Directive had expired.

Teare J permitted substitution in O’Byrne v Aventis Pasteur MSD Ltd [2006] EWHC 2562 (QB), and the Court of Appeal dismissed the parent’s appeal in [2007] EWCA Civ 966. Following a second preliminary reference, the Court of Justice ruled that substitution ordinarily could not expose a producer to proceedings after expiry of the ten-year period. It identified a possible qualification where a manufacturing parent had in fact determined the putting into circulation of the product by its wholly owned subsidiary.

The issue was whether that qualification applied merely because the parent transferred the product to its subsidiary, or only where the subsidiary was sufficiently controlled and integrated into the parent’s manufacturing process.

1. Appeal allowed. Lord Rodger, delivering the judgment of the Court, held that paragraph 1 of Teare J’s order substituting Aventis Pasteur SA for Aventis Pasteur MSD Ltd had to be set aside.

2. Article 11 of the product liability Directive establishes a uniform ten-year period running from the date on which the producer puts the product into circulation. The producer is released from liability when that period expires unless proceedings have meanwhile been instituted against that producer. A national rule permitting substitution cannot be applied so as to sue a producer after expiry in proceedings begun against another person. The claimant’s mistake or genuine intention to proceed against the manufacturer cannot alter that result.

3. The qualification identified by the Court of Justice had to be read consistently with that core rule. Substitution is possible only where proceedings against the subsidiary were, in substance, already proceedings against the parent producer. This may occur where the subsidiary is so closely involved in the manufacturing process that parent and subsidiary are functionally one producer for Article 3(1).

4. The relevant inquiry is whether the manufacturing parent controlled the subsidiary and determined when the subsidiary put the product into circulation. The court must examine all the circumstances under domestic rules of proof. The subsidiary’s status as wholly owned is relevant but is not decisive. Distinct corporate personality neither determines nor prevents functional classification as one producer.

5. A product is put into circulation when it leaves the producer’s manufacturing process and enters the marketing process in the form offered for public use or consumption. If the distributor remains integrated into the parent’s manufacturing process, the transfer from parent to distributor does not put the product into circulation. Circulation occurs when the integrated distributor supplies it into the market.

6. The claimant’s proposed interpretation—that the qualification was satisfied simply because the parent decided to transfer the vaccine to its wholly owned subsidiary—was inconsistent with this functional analysis. Counsel accepted that, on the Court’s interpretation and the known facts, the appeal should be allowed.

1. United Kingdom Supreme Court: Allowed the appeal and set aside the order substituting Aventis Pasteur SA as defendant: [2010] UKSC 23.
2. House of Lords: Following the grant of permission to appeal, made a second preliminary reference to the Court of Justice because the appellate committee was not unanimous about the effect of the first preliminary ruling: [2008] 4 All ER 881.
3. Court of Appeal: Dismissed Aventis Pasteur SA’s appeal from the substitution order: [2007] EWCA Civ 966; [2008] 1 WLR 1188.
4. High Court: Teare J allowed substitution under section 35 of the Limitation Act 1980 and rule 19.5(3)(a) of the Civil Procedure Rules 1998: [2006] EWHC 2562 (QB); [2007] 1 WLR 757.