Although the size and incidence of awards from defective goods claims have traditionally been relatively low in Thailand, this may be about to change. On 21 February 2009, the Unsafe Product Liability Act, B.E. 2551 (the Product Liability Act) came into force. The Product Liability Act is short, containing only 16 sections and about three to four pages of text, but it introduces significant changes to Thai law. One of its most interesting aspects is the manner in which it shifts evidentiary burdens in product liability claims. The Product Liability Act becomes effective on the heels of the Consumer Case Procedures Act, B.E. 2551 (the CCPA), which has been in force since August 2008. While the CCPA has attracted less attention than the Product Liability Act since it is primarily a procedural law, it introduces some concepts novel to Thai law and we can already see changes it is bringing to litigation tactics in Thailand. In this Briefing Update, we look first at the Product Liability Act, then the CCPA, and finally at how these two laws together may significantly change some aspects of litigation – particularly product liability litigation – in Thailand.
Product Liability Act
Who is Liable?
The Product Liability Act provides for joint and several liability for “business operators”, a term that covers: (a) manufacturers and outsourcers; (b) importers; (c) a seller (where the seller cannot identify the manufacturer, outsourcer or importer of the product in the marketplace); and (d) any party who uses the trade name, trademark or places a statement on the product that causes the public to understand that such party was the manufacturer, outsourcer or importer of the product in the marketplace. A component manufacturer would likely not be liable, provided that the unsafe nature of the product was caused by the hirer’s design, assembly or instructions for use of the finished product, and the component manufacturer did not reasonably expect that the product would be unsafe.
Who Carries the Burden of Proof?
Although the strict liability provisions of product liability laws in many other jurisdictions relieve plaintiffs from the burden of having to prove negligence, the plaintiff still carries the burden of proving that the product was, in fact, defective. This lies at the heart of laws that impose strict liability when a consumer is harmed by a defective product, and various “tests” (e.g., the reasonable consumer test, the risk-utility test, etc.) are employed to determine if the product was, in fact, defective.
Significantly, the Thai Product Liability Act takes a very different approach. The Product Liability Act provides that the plaintiff only carries the burden of proving that the damage was caused by a product in “ordinary use or storage”, and explicitly states that the plaintiff does not have to prove that the damage is due to an act of the business operator. There is no requirement that the plaintiff prove that the product forming the subject of the claim is an “unsafe product”. But a business operator is not liable if it can prove that the “product is not unsafe”, meaning that the business operator in effect carries the burden of proving that its product is safe.
The CCPA meanwhile contains a provision on evidentiary burden which may reinforce these provisions of the Product Liability Act. Section 29 of the CCPA provides that if the Court believes that facts relating to “production, assembly, design or mixtures of the goods, the provision of services or other undertakings” are exclusively known by a business operator, the business operator will carry the burden to prove such matters. In most disputes, manufacturers will have better information about such matters than consumers. We will need to see how Thai Courts handle these provisions in practice, but these provisions of the Product Liability Act and CCPA represent a substantial departure from product liability doctrine in many other jurisdictions where the plaintiff still carries the burden of proving a product is defective even when proof of negligence is not required.
What is an Unsafe Product?
An “Unsafe Product” is defined under the Product Liability Act as any product manufactured or imported for sale (unless exempted under regulation) that causes or may cause injury as a result of defective manufacturing or design or because of insufficient or incorrect directions for use, taking into consideration the nature of the product and its ordinary usage and storage.
Similar to product liability doctrine in many other jurisdictions, the Product Liability Act makes a distinction between three different categories of unsafe or defective goods: (1) goods that are unsafe because of a defect in production; (2) goods that are unsafe because of a defect in design; and (3) goods that are unsafe because of insufficient warnings of danger or instructions for safe use. Although these three categories often overlap with each other, they differ in terms of the decisions they require courts to make and the risks they create.
The first category typically arises when there is an unintended irregularity in an otherwise safe manufacturing process. This sort of claim is usually relatively straightforward since it turns on a single or limited number of allegedly flawed products rather than an entire line of products.
The second category is often much more contentious and controversial because it can potentially condemn an entire line of products and because of the type of decisions it requires courts to make. Design defect claims require a court to determine if there were hazards lurking in a product’s engineering or scientific conception and, if so, whether such hazards rise to the level of a “defect” that would render the product “unsafe” under the Product Liability Act. Defect claims typically also require highly technical evidence. Because there are hazards in any human activity, they also require judgment calls about what can reasonably be expected from a design, and those judgment calls are sometimes very controversial and difficult to make.
The third category turns on information provided about the product. This category has two separate obligations: first, a duty to warn; and second, a duty to provide proper instructions. It is also an area where business operators can reduce their exposure.
What Defenses are Available to Business Operators?
There are three express defenses to a claim under the Product Liability Act:
- the product is not unsafe,
- the plaintiff knew the product was unsafe, or
- the injury occurred because the plaintiff did not follow the usage or storage instructions included with the product
Business Operators are jointly and severally liable under the Product Liability Act, but a manufacturer of a custom-made product is not liable if it can establish: (a) that the product is unsafe because it complied with the hirer’s design or order; and (b) the manufacturer did not know, or could not reasonably be expected to know, that the product would be unsafe.
Defendants in Thailand should also look outside the express defenses set forth in the Product Liability Act to defenses that have been successfully employed to defend product liability claims in jurisdictions with decades of experience handling such claims. The “state of the art defense”, for example, provides that if a product complies with state of the art safety standards when it is sold, it does not necessarily become “unsafe” when subsequent advances in technology raise safety standards. As one court in the U.S. put it: “A consumer would not expect a Model T to have the same safety features which are incorporated [into] automobiles made today.” We do not yet know how Thai Courts will treat these and other defenses from other jurisdictions, but potential defendants should be aware of and be prepared to raise these potential defenses when available.
What Sort of Damages can be Awarded?
The Product Liability Act and the CCPA significantly expand the type of damages that are available under the Civil and Commercial Code. An injured party can recover emotional distress damages, such as from pain, suffering, fear, anxiety, depression or humiliation. If an injured party dies, certain relatives and heirs of the injured person can also recover damages for emotional distress resulting from the death.
Punitive damages can also be awarded if the business operator knew the products were unsafe, failed to discover the products were unsafe because of gross negligence, or failed to take proper action to prevent damage after learning that the products were unsafe. Punitive damages are limited to twice the actual amount of damages under the Product Liability Act, but the CCPA has a separate double the actual punitive damages provision, and some commentators believe the CCPA’s separate provision means the actual cap is four times the actual damages. Prior to the enactment of the Product Liability Act and the CCPA, there was no express provision for the award of damages for emotional distress and punitive damages in Thailand.
The prescription period for product liability claims is the earlier of (i) three years from the date the injured consumer knew of the injury and could identify the relevant business operator and (ii), subject to details regarding discovery of injury, ten years from the sale of the goods. Because discovery of an injury can occur many years after a consumer is exposed to a product, business operators face potential liability many years after the product reaches the marketplace. The CCPA provides for suspension of the prescription period when there are negotiations over settlement of a product liability claim.
Consumer Case Procedures Act
The CCPA not only applies to claims brought under the Product Liability Act, but can and has been used to pursue other claims that do not involve defective products, including claims involving services. In brief, however, the CCPA changes the legal terrain for companies operating in Thailand in at least the following respects:
Commencing Cases: The CCPA makes it easier to commence and adjudicate product liability and other forms of consumer actions in Thailand. The CCPA provides for the creation of “competent case officials”, and the CCPA and the stipulations under the CCPA provide that such officials will, among other things, assist plaintiffs in drafting their claims and conduct discovery-like activities. The CCPA also allows associations registered with the Thai Consumer Production Board (NGOs) to commence lawsuits on behalf of groups of injured parties, although individual parties retain their right to bring individual claims. Consumers and registered NGOs are not required to pay court fees and may bring claims either orally or in writing.
- Mandatory Recalls & Announcements: The CCPA permits Thai Courts to issue orders requiring business operators to make announcements about and recall unsafe products if it is in the interest of the public. These are essentially mandatory injunctions, and because it is generally difficult to procure injunctions of any kind in Thailand, it is unclear how the courts will exercise this specific grant of power in practice.
- Binding Factual Determinations: The CCPA permits a factual finding against a defendant about the defective nature of a product to be used in other cases against that same defendant. As explained below, this could have significant consequences in design defect claims.
- Ability to Increase Judgment Amount: Where there is a physical injury, and it is impossible to know the exact amount of actual damages when the judgment is issued, the Court may provide in its judgment that the judgment can may be amended within a specified time period (which may not exceed ten years) to cover any additional damages that become apparent during the specified time period.
- Piercing the Corporate Veil: The CCPA permits plaintiffs to claim against other parties, such as shareholders of a company defendant, when a company’s assets are insufficient to satisfy a claim and if a company was “dishonestly incorporated” or assets were siphoned off to defeat the interests of claimants. It is unclear how this provision of the CCPA will be implemented in practice.
Despite the plaintiff-friendly provisions of this new legislation, there are some measures which business operators and their insurers can adopt to minimize their exposure. A seller of goods can avoid liability under the Product Liability Act provided it identifies the manufacturers or importers of the goods it sells and does not otherwise contribute to the injury.
Design defects are often not self-evident. If alternative designs are not practical or available, persuasive arguments can and have often been made in other jurisdictions that the design was not actually defective. The use of internationally recognized quality control measures and documented compliance with international safety standards can often be employed to buttress arguments about the absence of any design defect.
Proper labeling also helps minimize risks. Warnings should be clear, specific and have the appropriate level of intensity. For example, a warning that covers both the lethal and trivial dangers of a product in equal intensity has not been considered an effective label in other jurisdictions because it suffers from what is often called “warning pollution.”
Manufacturers and importers may agree by contract on how liability under the new laws will be shared, although such provisions will need careful consideration as some disclaimers from liability may be deemed unenforceable. Other measures should also be considered.
Summing It Up
Are we about to see an “explosion” of product liability claims in Thailand? No one can really predict what will occur, but we can make a few observations based on developments since the CCPA was enacted and the experience of other countries that have adopted product liability laws:
- Since the CCPA came into force, it has been embraced and employed by a large number of claimants in some surprising ways. An airline passenger used the CCPA to recover damages when an airline failed to use a metal detector to screen airline passengers. At the other end of the spectrum, some financial institutions have employed the CCPA to expedite debt collection proceedings.
- Many, but not, all jurisdictions adopting product liability laws have witnessed an increase in product liability litigation and consumer claims generally. It would be a mistake to conclude that such laws inevitably lead to an “explosion” in litigation, but it should not come as a surprise that when laws are introduced to provide incentives to pursue product liability claims, that there is an increase in such claims.
- Because a factual determination that a design is defective can be used in other cases, such a determination can condemn an entire product line and expose a defendant to claims by other parties. Defendants in design defect claims therefore need to be particularly vigilant when defending the design of a product.