LMS International Ltd v Styrene Packaging and Insulation Ltd [2005] EWHC 2065 (TCC)

A factory was destroyed by fire after polystyrene blocks, supplied by the defendant, were ignited by a hot wire cutter. The defendant failed to provide adequate fire risk warnings. The court found the supplier liable but reduced damages for the claimant's contributory negligence.

Facts

The claimant, LMS International Ltd (LMS), operated a factory manufacturing products from expanded polystyrene (EPS). They purchased large blocks of EPS from the defendant, Styrene Packaging and Insulation Ltd (SPIL). LMS used a hot wire cutting machine to shape the EPS blocks, a process that generated significant amounts of flammable dust and fluff. On 11 February 2002, a fire started at the hot wire cutting machine which spread rapidly, destroying the factory. The fire was caused by the ignition of accumulated EPS material. SPIL had not provided any specific warning about the fire risks associated with the hot wire cutting of EPS, beyond what might be generally known in the trade. The material supplied at the time was a fracture-toughened (FT) grade of EPS, which was denser and produced more fine dust than grades previously used by LMS.

Issues

The court had to determine several key legal issues:

1. Did SPIL have a duty of care to warn LMS of the specific fire risks associated with the use of hot wire cutters on their EPS product?
2. If such a duty existed and was breached, did that breach cause the fire and the subsequent losses suffered by LMS?
3. Was LMS contributorily negligent by failing to maintain adequate housekeeping and safety procedures, given its own knowledge of the flammable nature of EPS?
4. Did an exclusion clause in SPIL’s standard terms and conditions operate to exclude or limit any liability for negligence?

Judgment

The judgment was delivered by His Honour Judge Richard Havery QC.

Duty to Warn

The court found that SPIL, as a specialist supplier, had a common law duty to warn its customers of the specific and serious risk of fire posed by using hot wire cutters on EPS. The judge determined that the risk was not obvious and went beyond a general understanding that the material was flammable. The supplier was aware, or ought to have been aware, of the particular dangers from its own testing and industry knowledge.

I find that, as a matter of common law, SPIL ought to have passed on to their customers a warning of the risk of fire from the use of hot wire cutting on their EPS product.

The judge concluded that a clear, succinct warning was required, stating:

The message should have been to the effect that the use of hot wire cutters on EPS creates a serious risk of fire. That would have conveyed the correct message succinctly.

Causation

On the issue of causation, the court held that SPIL’s failure to provide an adequate warning was a direct cause of the fire. The judge reasoned that had a proper warning been given, LMS would have heeded it and implemented safer working practices, such as improved dust extraction, better housekeeping, or ceasing cutting operations periodically to clear waste. These measures would, on the balance of probabilities, have prevented the fire.

On the balance of probabilities, I find that a proper warning would have been heeded by LMS, and that steps would have been taken in the light of it, and that those steps would have been effective to prevent the fire. I find that SPIL’s breach of duty was a cause of the fire.

Contributory Negligence

The court also found that LMS was contributorily negligent. LMS knew that EPS was flammable and that the cutting process was a source of ignition. The company’s housekeeping was found to be poor, allowing for a dangerous accumulation of flammable dust and fluff around the cutting machine. This failure to maintain a safe system of work constituted a significant contribution to the cause of the fire. The judge assessed LMS’s share of responsibility as equal to the defendant’s.

Doing the best I can, and taking into account all the circumstances, I assess the claimant’s share in the responsibility for the damage at 50 per cent.

Exclusion Clause and UCTA 1977

SPIL sought to rely on clause 9.3 of its conditions of sale, which stated that the customer was responsible for the safe handling and use of the goods. The judge analysed this clause under the Unfair Contract Terms Act 1977 (UCTA). He determined that it was an exclusion clause subject to the reasonableness test. Applying the guidelines in Schedule 2 of UCTA, the judge found the clause to be unreasonable, as it attempted to transfer the entire risk of a disaster, which the supplier had a duty to warn about, onto the customer.

It seeks to pass on to the customer the entire risk of a disaster which the supplier ought to have warned him about, but has not. In my judgment, it is not a fair or reasonable term to be included in the contract. I hold that clause 9.3 is unreasonable.

Implications

The decision in LMS v SPIL is significant for the law of negligence and product liability. It reinforces the principle that a manufacturer or supplier has a specific duty to warn customers of non-obvious risks associated with the use of their products, even in a business-to-business context where the customer may have some expertise. The case also provides a clear example of the courts’ application of the reasonableness test under UCTA 1977, demonstrating a reluctance to enforce broad exclusion clauses that seek to negate liability for a failure to warn of serious safety risks. Finally, the finding of 50% contributory negligence underscores that product users retain a significant responsibility to manage risks and implement safe systems of work, and cannot wholly absolve themselves of that duty even where a supplier has been negligent.

Verdict: The claimant is entitled to judgment for its damages to be assessed, subject to a reduction of 50 per cent for contributory negligence.

Source: LMS International Ltd v Styrene Packaging and Insulation Ltd [2005] EWHC 2065 (TCC)