The manufacturers of an innovative electronic device used to de-scale oil pipelines are facing a multi-million-pound damages claim after the High Court refused to accept that the product matched up to industry safety standards.
The device was seen as a useful alternative to flushing pipelines with chemicals and hundreds of them were sold under an exclusive licence agreement with a company which provided services to the oil industry around the world.
However, the parties fell out after concerns emerged that the device had a tendency to cause sparking on adjacent pipework. The company ceased buying the product and many of those installed had since been withdrawn and replaced. However, the manufacturers insisted that there was nothing unsafe about the device and that suggestions that it posed a fire hazard were spurious.
In upholding the company’s claim, the Court found that the product did not comply with contractual warranties that it was fit for purpose and could be safely used in potentially explosive atmospheres. There had been incidents of sparking and the energy created was dangerously above recommended maximums.
Although there was no complaint about the quality of the product’s manufacture, or that its components were inadequate or of non-merchantable quality, the sparking issue meant that the manufacturers were not entitled to a declaration that the device had been properly certified as meeting industry safety requirements.
The ruling opened the way for the company to seek substantial damages for breach of contract and an indemnity in respect of the cost of withdrawing the device and other expenses. Issues relating to the value of the company’s claim were left over for argument at a later date.