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NZ exporters and product liability: many exporters don't think about the possibility of their product causing injury in foreign markets and what they would do if sued by an off shore plaintiff. Murray Hill offers some advice.

In 1974 New Zealand adopted the Accident Compensation system which had been researched and recommended by Justice Owen Woodhouse. Since that time New Zealand has developed the 'no fault' system for accidents and the state compensation system for injury caused by accidents.


The rest of the world has not followed New Zealand's lead in this area and has continued to develop the personal injury by accident common law system which we have largely forgotten. It is that lack of awareness of how the rest of the world copes with injury by accident that New Zealand exporters need to be aware of. Perhaps one of the most graphic illustrations of what can happen to a manufacturer whose product is involved in a personal injury claim as a result of a defective product is a recent case in America.

A pump manufacturing company was awarded damages against it of $US104.4 million because its pump sucked a teenager into a pipe at the bottom of a swimming pool. The teenager had managed to put his hand into the pipe because the opening to the pipe had become unprotected (the normal cover was not screwed down properly and had come loose). Once in, his arm became trapped by the suction of the pool pump. It took rescue workers 12 minutes to free the young man and the result was that he is severely and permanently brain damaged and now lives in a vegetative state suffering from seizures and convulsions. The plaintiffs argued that the pool company should have installed a safety switch which automatically turned off the pump when something blocked the inlet pipe. The manufacturer of the safety cover was unable to be identified and escaped liability even though its cover was also faulty and contributed to the accident.

It is highly foreseeable that a New Zealand manufacturer could get itself in the same sort of position with the same sort of consequences. Many New Zealand exporters do not think about the possibility of their product causing injury and what they would do if they were sued for a large sum by an offshore plaintiff.

This is understandable because for the last 30 years New Zealand manufacturers have not had to worry about such matters provided that they sold their product locally.

Overseas, claims for damages as a result of an accident caused by a defective product are normally brought in the appropriate court nearest where the accident occurred. The cause of action is the equivalent of our negligence action which is a claim in tort. That is not a contractual claim but is based on the law of wrongs which is a traditional common law remedy developed over the centuries by the Courts.

It is possible for a New Zealand manufacturer to protect itself from contractual claims from the people and businesses with whom it deals, but it is very difficult to protect from tortuous claims. The standard protection method against such claims is to obtain and maintain adequate insurance against such possibilities.

Talk to your insurer

Insurance in this area is a specialist business and belongs to large, wealthy, international insurance groups which have the time and resources to provide effective insurance cover to combat personal injury claims which arise and are prosecuted off shore. Exporters should talk to an appropriate insurer and spend some time effecting insurance should their product have any possibility of causing personal injury.

If a personal injury claim is successful off shore and a judgment is entered against a manufacturer of a product, the next question is how can that affect a New Zealand based manufacturer and exporter? New Zealand has enacted, along with many other countries, particularly in the Commonwealth, an Act called the Reciprocal Enforcement of Judgments Act. A judgment of a foreign Court registered under that Act in New Zealand gives the High Court the same control over the enforcement of the foreign judgment as if the judgment had originally been given by the High Court in New Zealand on the date of registration here in New Zealand. There are limited grounds upon which a defendant New Zealand exporter can contest the judgment and once those grounds are exhausted then, provided the judgment could be enforced in the country in which it was obtained, the New Zealand High Court procedure for enforcement of judgment is available to the plaintiff.

The danger to New Zealand exporters in relation to foreign judgment is that they are often significantly more substantial than would be the case had a similar case been taken in New Zealand.

Accordingly, New Zealand manufacturers and exporters need to be mindful that large amounts awarded against them for personal injuries caused by their products can be enforced against their asset bases in New Zealand through the legal system.

New Zealand manufacturers are not used to factoring in the price of insurance when pricing their goods and they need to be particularly vigilant and ensure that they do so when they export goods. Good advice at that time may save the complete ruin of a manufacturing business which has taken years to establish.

Murray Hill is with Sharp Tudhope Lawlink in Tauranga--email Lawlink is an Export NZ National Sponsor.
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Title Annotation:export focus
Author:Hill, Murray
Publication:NZ Business
Date:May 1, 2005
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