Grant v Australian Knitting Mills [1935] UKPC 2 (21 October 1935)

Dr Grant suffered severe dermatitis from a chemical irritant in woollen underpants, a latent manufacturing defect. He successfully sued the retailer in contract and the manufacturer in negligence, significantly widening the 'neighbour principle' from Donoghue v Stevenson to include general consumer products.

Facts

The appellant, Dr Grant, purchased two pairs of woollen underpants manufactured by the first respondent, Australian Knitting Mills Ltd (AKM), from a retailer, the second respondent, John Martin & Co Ltd. After wearing the underpants for a week without washing them first, he developed an acute and severe case of dermatitis. Medical evidence established that the dermatitis was caused by an excess of free sulphite present in the garment. This chemical was a hidden and latent defect, left in the underpants due to negligence in the manufacturing process and was not detectable by any reasonable examination prior to use.

Issues

The case presented two primary legal issues for the Judicial Committee of the Privy Council to determine:

1. Was the retailer, John Martin & Co Ltd, liable for breach of contract under the South Australia Sale of Goods Act 1895, specifically for breaching the implied conditions as to fitness for purpose and merchantable quality?
2. Was the manufacturer, Australian Knitting Mills Ltd, liable in tort for negligence to the ultimate consumer, Dr Grant, with whom they had no contractual relationship?

Judgment

The Privy Council, in a judgment delivered by Lord Wright, allowed the appeal, finding both the retailer and the manufacturer liable.

Liability of the Retailer (Contract)

The Court held that the retailer was liable for breach of the implied condition of ‘merchantable quality’ under the Sale of Goods Act. The underpants, containing a hidden defect that rendered them harmful to wear, were not of merchantable quality. Lord Wright clarified the meaning of the term:

‘Merchantable quality’ … means that the article sold, if only meant for one particular use in ordinary course, is fit for that use; it is not merchantable in that event if it has defects unfitting it for its only proper use but not affecting its fitness for some other use.

The Court found that even though Dr Grant had not explicitly stated the purpose for which he was buying the underpants, there was an implied reliance on the retailer’s skill and judgement that they were fit for their obvious purpose of being worn. The presence of the chemical irritant was a fundamental breach of this condition.

Liability of the Manufacturer (Negligence)

The Court’s decision on the manufacturer’s liability was highly significant as it affirmed and extended the ‘neighbour principle’ established in Donoghue v Stevenson. The Court held that a manufacturer owes a duty of care to the ultimate consumer to ensure that articles are free from any defect likely to cause injury. This duty was not confined to foodstuffs but applied to other products, such as clothing, where the defect is latent and the product is intended to reach the consumer in the same state it left the manufacturer, with no reasonable expectation of intermediate examination.

Lord Wright explained the application of the principle to these facts:

The principle of Donoghue’s case can only be applied where the defect is hidden and unknown to the consumer, otherwise the directness of cause and effect is absent… According to the evidence, the method of manufacture was correct: the danger of excess sulphites being left was recognised and was guarded against: the process was intended to be fool proof. If excess sulphites were left in the garment, that could only be because someone was at fault. The appellant is not required to lay his finger on the exact person in all the chain who was responsible, or to specify what he did wrong. Negligence is found as a matter of inference from the existence of the defects taken in connection with all the known circumstances…

The Court found that AKM was negligent in its manufacturing process, which allowed the dangerous chemical to remain in the final product, directly causing Dr Grant’s injury. The manufacturer’s duty of care was established because the latent nature of the defect meant it was not discoverable by the retailer or the consumer.

Implications

The decision in Grant v Australian Knitting Mills was a landmark ruling in the development of consumer protection and the tort of negligence. It decisively confirmed that the duty of care owed by a manufacturer to the end consumer, as laid down in Donoghue v Stevenson, was a general principle of law and not restricted to specific items like food and drink. It solidified the legal foundation for product liability, holding manufacturers responsible for latent defects in their products that cause harm. Furthermore, the case provided an important clarification on the scope of implied conditions of merchantable quality and fitness for purpose within the law of contract, reinforcing the rights of a purchaser against a retailer.

Verdict: The appeal was allowed. The judgment of the High Court of Australia was reversed and the original trial judgment in favour of Dr Grant was restored.

Source: Grant v Australian Knitting Mills [1935] UKPC 2 (21 October 1935)