Product Liability 2009 - Arnold & Porter LLP

Chapter 23
Hong Kong
Lovells
1 Liability Systems
1.1 What systems of product liability are available (i.e. liability
in respect of damage to persons or property resulting from
the supply of products found to be defective or faulty)? Is
liability fault based, or strict, or both? Does contractual
liability play any role? Can liability be imposed for breach
of statutory obligations e.g. consumer fraud statutes?
For historical reasons, Hong Kong’s legal system is based upon
English law, with its laws (including those relating to product
liability) based on the common law, rules of equity and local
legislation (known as “Ordinances”). Similar to the position under
English law, product liability can arise in contract, tort and/or
breach of statutory duty. There is no strict liability regime in Hong
Kong similar to that in the PRC.
Contractual Liability
A contractual relationship is formed between the buyer and
immediate supplier upon the sale and purchase of a product.
Liability is strict if the consumer can prove that the terms of the
contract have been breached. The extent of the liability will depend
upon the contractual terms, which can be express or implied.
Express terms may be written, or made orally, as is the case with
most consumer sales, or they can be inferred from the conduct of
the parties. Terms may be implied either by legislation, mainly the
Sale of Goods Ordinance (“SOGO”), or if it is necessary to do so to
give “business efficacy” to the contract or according to trade
custom. Pursuant to the SOGO, there are implied contractual terms
that goods sold in the course of business should have good title, be
of merchantable quality, correspond to any description or sample,
and be reasonably fit for their purpose.
Fault-based Tort Liability
A buyer may bring a tortious claim against the manufacturer or
supplier for negligence where the conduct of the manufacturer or
supplier falls below the standard of care expected at law. Liability is
fault-based and is extended not only to the buyer but to those other
end-users who come into contact with the purchased product. The
manufacturer must take reasonable steps to ensure that the product is
not defective. This includes taking reasonable steps to monitor safety
issues at all stages of the production process, from the research and
design to the manufacturing and the safety instructions on the
labelling. The supplier (such as the distributor or the retailer) must
take reasonable steps to ensure that the product is safe to be sold and
that adequate instructions and warnings are given where necessary.
Statutory Duty
A manufacturer, retailer or supplier can be found criminally liable
ICLG TO: PRODUCT LIABILITY 2009
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Allan Leung
by committing offences relating to product safety and standards
under various Ordinances. Many of these offences impose strict
liability although defences may be available.
A claimant may have a cause of action under one or more of these
heads.
1.2 Does the state operate any schemes of compensation for
particular products?
No, the state does not operate any such schemes.
1.3 Who bears responsibility for the fault/defect? The
manufacturer, the importer, the distributor, the “retail”
supplier or all of these?
The retailer, being the immediate supplier of the defective product,
will in nearly all cases be the party liable to the buyer in contract.
The retailer can also be liable in negligence if fault is established.
The manufacturer, importer and distributor will usually only be
found liable to the buyer in negligence as it is unlikely that there
will be a direct contractual relationship between the buyer and these
parties.
Liability may be excluded or limited by an appropriately worded
exclusion clause in the contract or by giving notice to persons to
whom a duty of care is owed. However, the Control of Exemption
Clauses Ordinance requires that any attempt by the manufacturer or
supplier to limit their liability must be reasonable in order to be
effective and there is an outright prohibition on any attempt to limit
liability for negligence in so far as it causes death or personal injury.
Furthermore, where the purchaser is a consumer, any contractual
term attempting to restrict or exclude the implied terms under the
SOGO as to title, fitness for purpose, conformity with sample or
merchantability will be void.
1.4 In what circumstances is there an obligation to recall
products, and in what way may a claim for failure to recall
be brought?
Under the Consumer Goods Safety Ordinance and the Toys and
Children’s Products Safety Ordinance, the Commissioner of
Customs and Excise may exercise his power to serve a recall notice
requiring the immediate withdrawal of any consumer goods, toys or
children’s products which he believes to be unsafe and may cause
serious injury. Certain goods such as pesticides, electrical products,
food and water and tobacco products are specifically excluded from
the definition of consumer goods under the Consumer Goods Safety
Ordinance.
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