Electric Mania Limited v Avron Trading Limited

Products labelled as effective against particular bacteria are not necessarily medicinal products. The relevant question is whether they are presented as preventing or treating disease, applying the definitions in the Human Medicines Regulations 2012.

Providing product literature and labels does not, without clear words or conduct and a proper basis for reasonable reliance, imply a representation that the products may lawfully be sold. Where a regulatory restriction prevents the seller and buyer from dealing with the goods, the seller may breach the implied term as to the right to sell under the Sale of Goods Act 1979. However, regulatory illegality does not necessarily make goods of unsatisfactory quality or unfit for purpose.

The claimant purchased quantities of hand sanitiser from the defendant during the COVID-19 pandemic. The products were labelled or described as effective against bacteria including MRSA and E coli. After the claimant had made limited sales, the MHRA warned that the Lonstin product was a medicinal product and required cessation of sales unless authorised. The claimant withdrew both products and claimed rescission, damages for misrepresentation and damages for breach of implied terms under the Sale of Goods Act 1979.

The principal issues were whether the products were medicinal products under the Human Medicines Regulations 2012, whether the defendant had made an actionable representation as to legality, and whether the statutory implied terms concerning title, quality and fitness for purpose had been breached.

1. Issue 1. The products were not medicinal products within the meaning of regulation 2 of the Human Medicines Regulations 2012. A claim to eliminate or kill specified bacteria was not, without more, a claim that the products prevented or treated disease. The presence of such bacteria was not itself shown to constitute an ailment or adverse condition. The MHRA letter under regulation 165 did not determine the matter under the Part 9 procedure.
2. Issue 2. The defendant’s provision of product sheets and images did not amount to an express or implied representation that the products could lawfully be marketed as labelled. Clear words or conduct were required. The circumstances did not justify inferring that the defendant had assumed responsibility for advising on the regulatory framework. In any event, the alleged representation was not shown to be false. The claimant did rely on the product references to MRSA and E coli in deciding to purchase.
3. Issues 3 and 4. If an actionable misrepresentation had been established, rescission would have been inequitable because the market collapse was unrelated to the alleged misrepresentation and rescission would have conferred a windfall. Damages in lieu under section 2(2) of the Misrepresentation Act 1967 would have been assessed by reference to the difference between the contract price and the actual value attributable to the misrepresentation, disregarding the general market collapse. The hypothetical award would have been £95,970.50.
4. Issues 5 to 8. If the products had been medicinal products, the defendant would have breached section 12(1) of the Sale of Goods Act 1979, since the regulatory prohibition would have prevented it from selling the goods and impaired the claimant’s ability to deal with them. The products were nevertheless not of unsatisfactory quality under section 14(2), nor unfit for the known purpose of resale under section 14(3). Hypothetical contractual damages were assessed at £5,518.23.
5. Issue 9. The claimant had not failed to mitigate. Rejecting the relabelling offer was reasonable because relabelling might have produced a materially different and less marketable product.
6. The claim therefore failed on the central issue and judgment was given for the defendant. The claimant’s application for permission to appeal was to be determined separately.