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DEFECTIVE EQUIPMENT (^45)
DEFECTIVE EQUIPMENT* The Facts C was the operator in respect of the drilling and completion of a well. The well was spudded and drilled to a certain depth and completed as a dual producer of oil. General supervision of the drilling, testing and completion of the well was the responsibility of C. An order was placed to supplier X for a tubing head for the well. The order contained a general description giving the manufacturer's tradename, the size of the tubing strings and casing in the well, and in- dicating the working and test pressures of 2000 and 4000 pounds re- spectively, the same to be used for dual completion using 2 and 3/8 out- side diameter tubing strings in a 7 inch casing. No catalogue or other material from the manufacturer or supplier was available and none was used in placing the order. A tubing head, answering the description, was delivered to the well site, and following a visual inspection of it by C, it was determined that the tubing head was apparently complete and undamaged. The .tubing head was installed on .the well's spool assembly by an employee of the servicing company. Oil was produced from the well, the highest working pressure ob- served being 950 pounds per square inch. A few days after commence- ment of production, the pumper employed by C made an inspection of the well, at which time he discovered oil flowing from the tubing head which was ruptured.
Qualified personnel arrived at the scene as soon as possible and var- ious techniques were. attempted to bring the well under control, but without success. Experts were brought in and various methods were tried, but without success until some eight days later when the flow of oil was brought under control. The well had to be plugged and aban- doned as a result of the failure of the tubing head. The following items of damage resulted: (a) payments made to adjoining surface landowners for damages to their land, crops and buildings; (b) costs and expenses of labour, services and materials used in bringing the well under control: ( c) loss of material and equipment in the well; (d) the cost of drilling, testing, completing and abandoning the well.
The Problems Consider the liability of (1) the manufacturer, and, (2) the supplier to C with respect to these heads of damage if: (a) the tubing head was bought and sold as second hand equipment and the failure was owing to previous wear and tear; (b) the tubing head failed owing to defective manufacture; (c) the tubing head of this trade name and description was not rated for this job. Also consider the above questions where (1) the contract is entirely by parol; and, (2) the contract has been made by a purchase order, con-
- This paper was prepared through the combined efforts of B. V. Reed, MacPherson, Leslie & Tyerman, Regina; R. B. Laschuk, Balfour, MacLeod, McDonald, Laschuk & Kyle, Regina; John Stein, MacPherson, Leslie & Tyerman, Regina; K. R. MacLeod, Balfour, MacLeod, McDonald, Laschuk & Kyle, Regina: W. G. Loewen, Francana Oil & Gas Ltd., Regina; and C.R. Wimmer, Moss & Wimmer, Regina.
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firmation and invoice in the usual way in which the purchase of equip- ment is documented. For convenience, these problems will be dealt with under separate headings. Liability of the Manufacturer if the tubing head was bought and sold as secondhand equipment and the failure was the result of previous wear and tear Under this heading the failure of the tubing head is taken to have resulted solely from previous wear and tear on secondhand equipment. It is important to bear in mind that no defect in the design or manufacture of the tubing head is involved. No catalogue or other material from the manufacturer was used, and indeed the manufacturer was in no way involved in the sale. Under all of these circumstances, there is no way the manufacturer could be found liable in tort or in contract, and there appears to be nothing in the statutes which would affect this result.
Liability of the Manufacturer where the tubing head failed as a result of defective manufacture The fact of defective manufacture invites the test laid down in Donoghue v. Stevenson. 1 The general rule in Donoghue v. Stevenson is summed up in the following quotation from the judgment of Lord Atkin: A manufacturer of products which he sells in such form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumers' life or property, owes a duty to the consumer to take reasonable care. 2 The rule in Donoghue v. Stevenson is considered in Salmond on Torts, citing cases where the words "a manufacturer" have been extended to include repairers, assemblers and erecters, and other cases holding that "products" are not limited to articles of food and drink, but include, for example, underwear, tombstones, motor cars, elevator lifts, hair dye and ships' telegraphs. It is also indicated that "ultimate consumer" has been extended to include the "ultimate user" of the articles as in Grant v. Australian Knitting Mills.•
In setting the standard of care imposed on manufacturers, the Cana- dian courts have followed the English cases, and in some instances the general rule of liability has been enlarged. For example, in Shandloff v. City Dairy/' a decision of the Ontario Court of Appeal, Middleton, J. A. stated: The lack of care essential to the establishment of such a claim increases ac- cording to the danger to the ultimate consumer, and where the thing is in it- self dangerous, the care necessary approximates to and almost becomes an absolute liability, 0 Similarly, the inference of negligence even where there is no direct evidence of defect has been held sufficient to impose liability; Martin v. T.W. Hand Fireworks Company/ In the Martin case a spectator at a fireworks display was injured by the erratic functioning of a roman
1 J1932) A.C. 562. 2 d., at 599. a 1961, 13th ed., at 566.
, II 119351 1936 A.C. 4 D.L.R. 85. 712.
e 'i (^) (1963),d., at 719.37 D.L.R. (2d) 455,
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Court of Canada and that reasonable foreseeability is now the test in dealing with remoteness of damages. On this basis, it is submitted that none of the four items of damage referred to in the statement of facts in this case would be excluded. The damage under each of these four headings appears to be a natural con- sequence of the failure of the tubing head, and all of the damage which occurred must be regarded as reasonably foreseeable. In conclusion, applying the principles stated in Donoghue v. Stevenson and in the Wagon Mound, the manufacturer would be liable to C with respect to all four heads of damage. Before leaving the question of the manufacturer's liability under this heading, mention should be made of the possibility of the manufacturer's pleading a fool-proof process of manufacture which was carried out under constant supervision. This defence prevailed in Daniels v. White^11 where the manufacturer of a bottle of lemon-aid was held not liable for damages for injuries to a purchaser and his wife who purchased a bottle of lemon-aid containing 38 grains of carbolic acid. On the other hand are cases which follow the approach taken in Grant v. A u.stralian Knitting Mills where over five million garments had been placed on the market and not one other complaint had been made against the manufacturer. The judgment contains the following statement: However well designed, the manufacturer's proved system may be (to remove deleterious substances), it may not invariably work according to plan. Some employee may blunder.1^2 It is submitted that the manner in which the tubing head was ordered from the supplier would not be material to the action against the manu- facturer because this is a matter of contract between the supplier X and his customer C. Putting it another way, contractual arrangements be- tween X and C cannot affect the manufacturer whose liability, if any, is in tort on the basis of the rule in Donoghue v. Stevenson.
Liability of the manufacturer if the tubing head of this tradename and description were not 1"atedfM this ;ob
Under this heading we take the facts to be that the tubing supplied was exactly as ordered by C but a better grade should have been specified for this job.
Again it is important to bear in mind that no defect in design or manu- facture or other fault on the part of the manufacturer is involved. For the reasons indicated above, under these circumstances there is no liabi- lity on the manufacturer. For the reasons stated above, it is also immaterial whether the con- tract was entirely by parol or by purchase order, confirmation and in- voice.
Liability of the supplie1" to C if: (a) the tubing head was bought and sold as second hand equipment and the failu1"ewas a 1"esult of p,"evious
wea1" and tear, and (b) the tubing head failed because of defective
m,a.nufactu1"e The liability of the supplier to C where failure was owing to previous wear and tear on second hand equipment and where the tubing failed
11 (1938J , All E.R. 258. 12 Ante, n. 4, at 96.
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because of defective manufacture is considered under one heading be- cause, it is submitted, the result is the same in either case. In considering the liability of the supplier to C, reference must be had to the provisions of the Sale of Goods Act of Saskatchewan 13 and of Alberta. 14 The relevant section of the Saskatchewan Act reads as follows:
- Subject to the provisions of this Act and of any Act in that behalf there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale except as follows:
- Where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are :required so as to show that the buyer relies on the seller's skill or judgment and the goods are of a description that it is in the course of the seller's business to supply, whether he be the manu- facturer or not, there is an implied condition that the goods shall be reasonably fit for that purpose;
- Where goods are bought by description from a seller who deals in goods of that description, whether he is the manufacturer or not, there is an implied condition that the goods shall be of merchantable quality: Provided that if the buyer has examined the goods there shall be no implied condition with regard to defects which such examination ought to have re- vealed;
- An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade;
- An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.
The relevant section of the Alberta Act reads as follows:
- (1) Subject to this Act and any Act in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as provided in this section. (2) Where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller's skill or judgment and the goods are of a description that it is in the course of the seller's business to supply, whether he is the manu- facturer or not, there is an implied condition that the goods are reasonably fit for such purposes. (3) Notwithstanding subsection (2), in the case of a contract for the sale of a Sl)ecified article under its patent or other trade name, there is no implied con- dition as to its fitness for any particular purpose. · ( 4) Where goods are bought by description from a seller who deals in goods of that description, whether he is the manufacturer or not, there is an implied con- dition that the goods are of a merchantable quality. (5) Notwithstanding subsection ( 4), if the buyer has examined the goods there is no implied condition as regards defects that the examination ought to have revealed. (6) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. (7) An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.
The first question which arises is whether or not the implied con- ditions as expressed in the Acts are applicable to the contract between the supplier and C. In Manchester Liners Ltd. v. Rey Ltd. 15 the House of Lords held that if goods are ordered for a special purpose and that purpose is disclosed to the vendor so that in accepting the contract the vendor undertakes to supply the goods, the resulting contract is sufficient to establish that the buyer has shown that he relies on the seller's skill and judgment. The House of Lords was considering there the provisions of the Eng-
u R.S.S. 1965 c. 388. 14 R.S.A. 1955 c. 295. 111 [1922) A.C. '14.
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Liability of the supplier to C if the tubing of this tradename and descrip- tion was not rated for this ;ob Again we take the facts to be that the tubing supplied was exactly as ordered by C but a better grade should have been specified for this job. The question is, on the information given him should the supplier have been aware of this? On this point, it seems fair to state as a general principle that in the absence of special circumstances any skill and judg- ment of the seller relied on by the purchaser must surely be premised on the operating conditions indicated to the seller by his customer. It is noted that the highest working pressure observed was 950 pounds per square inch which is well below the 2,000 pounds indicated in the order. However this does not of itself lead to the conclusion that the goods were not as ordered, and having regard to all of the facts as stated, it is difficult to find that the supplier should have been led to in- quiry beyond the information given him by his customer. On this basis no implied condition or warranty would arise. For the reasons indicated above, if there is any liability on the seller under this heading, such liability would extend to all four heads of damage stated in the facts. For the reasons indicated above, writings constituting the agreement of the parties would have no bearing on the question of liability of the seller unless they contain provisions negativing liability.
