Adelaide-based air-conditioning company Seeley International has been awarded more than $13 million in damages after a supplier negligently provided a potentially dangerous component that was installed in thousands of ducted gas heaters.
Key points:
- The faulty component caused more than 23,000 ducted gas heaters to malfunction
- The SA Supreme Court found that despite repeated assurances, the problem was not resolved for more than two years
- It found the component's manufacturer knew "or should have known" of the potentially fatal risk
Seeley launched legal action against now-defunct manufacturer Millennium Electronics over design flaws in an electrical component known as a "flame sense circuit".
The component "caused repeated malfunctioning" of the company's TQ Series ducted gas heaters by failing to detect the presence of a gas flame.
Seeley claimed the defects led to significant financial losses due to the cost of fixing the fault, as well as a decline in business because of damage to its brand and reputation.
In a judgement handed down in South Australia's Supreme Court last week, Justice Mark Livesey noted that the faulty component caused more than 23,000 gas heaters to malfunction over a two-year period, and that Millennium should have known of the potential "risk of injury, death or property damage".
The heater was commercially released in 2015, but was "almost immediately" met with criticisms.
In his judgement, Justice Livesey wrote that Millennium's "negligent breach of duty was ongoing throughout the period of supply" until the defects were identified.
"Seeley started receiving reports from dealers that many of the TQ Series heaters were experiencing unexplained shutdowns or failures to start," he wrote.
"The difficulty was that although a flame was usually present, it was not being detected by the flame sense circuit.
"As a flame was present, but not detected, the unit shut down."
Justice Livesey noted the potential for gas heater faults to expose residents to "potentially toxic and flammable gas" as well as the risk of house fires.
"Millennium knew, or should have known, that in the event of defective design and malfunctioning integrated control system units, the occupants of residences would be exposed to the risk of injury, death or property damage," Justice Livesey wrote.
Despite repeated attempts to fix the problem — and assurances that it had been fixed — it was not until more than two years later that Millennium "finally resolved the flame sense issues" with a ninth revision of the technology.
Seeley has manufacturing plants in Lonsdale in Adelaide's south and in Albury-Wodonga, and its products are predominantly sold in Victoria, New South Wales, the ACT, South Australia and New Zealand.
One major dealer in Victoria said that while its predecessor was "bulletproof", the TQ Series — which was sold under various brand names, including "Braemar" — was "rubbish".
Seeley previously sought an order to freeze Millennium's assets, the same day as Millennium appointed a liquidator.
Justice Livesey determined that Millennium had negligently breached its duty by "failure to conform" to accepted design standards, and ruled the company "liable to Seeley in damages for breach of contract", and calculated the amount at $13,277,000.
That figure includes the cost of ongoing replacement of the gas heaters, estimated at $925,000.
Editor's note (June 8, 2021): An earlier version of this story incorrectly stated that Justice Livesey's comment that a "negligent breach of duty was ongoing throughout the period of supply" was in reference to Seeley, not Millennium.