Case C-613/14, James Elliott Construction – EU standards and contract construction [judgment 2016, ECLI:EU:C:2016:821]

If a standard has been adopted in the EU, then is legal liability to be determined by this question: ‘Did the product comply with the standard, as assessed by the approved tests, at the time of supply?’

Background
In 2005, James Elliott Construction erected a building in Ireland but when doing so it used under-floor materials which were so poor that the building cracked. The repairs cost the company €1.6 million.

In turn, the builder sued Irish Asphalt, the company that had quarried and supplied the under-floor product. The builders claimed that the product was known to expand with moisture.

The legal issue is: who is liable for the repair costs? Is it James Elliot Construction, who bought the product; or the supplier, Irish Asphalt?

The answer is clear under Irish law; the supplier is liable. The product supplied did not meet the contractually specified standard (Clause 804); consequently, the supplier breached an express term of the contract. Furthermore, the product also breached an implied term of the contract as to ‘merchantability’.

However, the supplier claims that the answer is not clear under EU law, and it may be different to that under Irish law. The supplier makes a number of points.

First, Clause 804 is a building aggregate for which a European Standard exists (EN13242:2002). It is a standard that involves an interpretation about sulphur contents and testing protocols. The legal status of those protocols is unclear.

Second, when the Irish High Court talked of ‘merchantability’, what it did was to introduce new standards of ‘inertness’, ‘durability’ and ‘strength’. The High Court should not have done this because those standards had not been notified under the EU’s information procedure in the Technical Standards Directive 98/34/EC. Admittedly, ignoring those standards would have meant the court giving only limited indirect horizontal effect to the Directive but that was the effect of the CJEU’s case law (Case C-194/94, CIA Security International ECLI:EU:C:1996:172 [1996] E.C.R. I-2201 and Case C-443/98 Unilever Italia ECLI:EU:C:2000:496 [2000] E.C.R. I-7535). There was also support for such an interpretation in Professor Weatherill’s “Breach of Directives and Breach of Contract” [2001] 26(2) European Law Review, pp. 177-186.

The Irish Supreme Court decided to make a reference to the CJEU. However, it observed that Professor Weatherill’s thoughts were really directed to the CJEU’s judgment in Unilever, and that the suppliers were placing a great emphasis on what appeared to be a comment made in passing. Equally, the Supreme Court felt that neither of the CJEU’s judgments really addressed the issue here which was whether the High Court’s interpretation of the Sale of Goods and Supply of Services Act constituted the adoption of standard or technical regulation in contravention of the provisions of the Technical Standards Directive.

That said, there was a profound legal point at stake. The traditional approach taken by the law was that if a product was defective and dangerous, then it was no defence to show that the product had been manufactured either with care or in accordance with best practice. Liability in contract for a defective product could arise independently of fault.

What the supplier was suggesting was that that tradition had been swept away. According to the supplier, EU law now meant that if a standard had been adopted, then a product made in compliance with that standard was presumed to be fit for purpose. For all legal claims (be they contractual, tortious or statutory in nature), the relevant legal question had become: ‘Did the product comply with the standard, as assessed by the approved tests, at the time of supply?’

The answer to that question would then depend on the testing protocol which existed at the point of supply (when the product was in the hands of the supplier). That would make irrelevant the point in time at which an alleged defect actually arose (when the product was in the hands of the purchaser or consumer).

The Irish Supreme Court could find no hint of such a radical, revolutionary approach to liability having been contemplated in either the Technical Standards Directive or the Construction Products Directive. Nevertheless, it decided to make a reference to the CJEU.

Update – 7 March 2015
According to the Curia website, the Irish Supreme Court has asked:

1(a) Where the terms of a private contract oblige a party to supply a product produced in accordance with a national standard, itself adopted in implementation of a European standard made pursuant to a mandate issued by the European Commission under the provisions of the Construction Products Directive (89/106/EEC)[…], is the interpretation of the said Standard a matter upon which a preliminary ruling may be sought from the Court of Justice of the European Union pursuant to Article 267 TFEU?

(b) If the answer to question 1(a) is yes, does EN13242:2002 require that compliance, or breach of the said Standard, be established only by evidence of testing in accordance with the (unmandated) standards adopted by CEN (Le Comité Européen de Normalisation) and referred to in EN13242:2002, and where such tests are carried out at the time of production and/or supply; or may breach of the Standard (and accordingly breach of contract), be established by evidence of tests conducted later, if the results of such tests are logically probative of breach of the Standard?

2 When hearing a private-law claim for breach of contract in respect of a product manufactured pursuant to a European standard issued pursuant to a mandate from the European Commission under the Construction Products Directive, is a national court obliged to disapply the provisions of national law implying terms as to merchantability and fitness for purpose or quality, on the grounds that either the statutory terms, or their application, create standards or impose technical specifications or requirements which have not been notified in accordance with the provisions of the Technical Standards Directive (98/34/EC)[…]?

3 Is a national court hearing a claim for breach of a private contract alleged to arise from a breach of a term as to merchantability or fitness for use (implied by statute in a contract between the parties and not modified or disapplied by them) in respect of a product produced in accordance with EN13242:2002, obliged to presume that the product is of merchantable quality and fit for its purpose, and if so, may such a presumption only be rebutted by proof of non-compliance with EN13242:2002 by tests carried out in accordance with the tests and protocols referred to in EN13242:2002 and carried out at the time of supply of the product?

4 If the answers to questions 1(a) and 3 are both yes, is a limit for total sulphur content of aggregates prescribed by, or under, EN13242:2002 so that compliance with such a limit was required, inter alia, to give rise to any presumption of merchantability or fitness for use?

5 If the answers to 1(a) and 3 are both yes, is proof that the product bore the ‘CE’ marking necessary in order to rely on the presumption created by Annex ZA to EN13242:2002 and/or Article 4 of the Construction Products Directive (89/106/EEC)?