Professional Documents
Culture Documents
(1988) - Q B - 758
(1988) - Q B - 758
[1988]
[COURT OF APPEAL]
Feb. 2, 3; 17
F
NegligenceDuty of care to whom?BuilderMain contractor subcontracting installation of glass units in buildingMain contract
specifying supplier of glass unitsSub-contractor buying glass
units from specified supplierMain contractor suffering economic
loss by reason of alleged defects in glass unitsWhether supplier
liable to main contractor
The plaintiffs were the main contractors for a building in
Abu Dhabi. The main contract specified for incorporation into
the curtain walling double-glazed units of green glass which
were manufactured by the defendants. The plaintiffs subcontracted the erection of the curtain walling to a company
which was not a party to the action. The sub-contractors duly
purchased the double-glazed units from the defendants. When
the units had been installed the architect rejected the units as
being defective by reason of discrepancies in the colouring. The
plaintiffs brought a claim in negligence against the defendants,
alleging that by reason of the defects in the glass units they had
suffered economic loss in that money which they would otherwise
759
1 Q.B.
^
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964]
A.C. 465, H.L.(E.) and Junior Books Ltd. v. Veitchi Co. Ltd.
[1983] 1 A.C. 520, H.L.(E.) distinguished.
Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K.
Lines Ltd. [1986] A.C. 1, P . C ; Leigh and Sillavan Ltd. v.
Aliakmon Shipping Co. Ltd. [1986] A.C. 785, H.L.(E.);
Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B. 507,
C.A. and Yuen Kun Yeu v. Attorney-General of Hong Kong
[1988] A.C. 175, P.C. applied.
Decision of Judge John Newey Q . C , sitting on official
referee's business, reversed.
The following cases are referred to in the judgments:
Anns v. Merton London Borough Council [1978] A.C. 728; [1977] 2 W.L.R.
1024; [1977] 2 All E.R. 492, H.L.(E.)
Batty v. Metropolitan Property Realisations Ltd. [1978] Q.B. 554; [1978] 2
W.L.R. 500; [1978] 2 All E.R. 445, C.A.
Caltex Oil (Australia) Pty. Ltd. v. Dredge "Willemstad" (1976) 136 C.L.R.
529
Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd. [1986]
A.C. 1; [1985] 3 W.L.R. 381; [1985] 2 All E.R. 935, P.C.
Cattle v. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453
Curran v. Northern Ireland Co-ownership Housing Association Ltd. [1987]
A.C. 718; [1987] 2 W.L.R. 1043; [1987] 2 All E.R. 13, H.L.(N.L)
Donoghue v. Stevenson [1932] A.C. 562, H.L.(Sc)
Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004; [1970] 2 W.L.R.
1140; [1970] 2 All E.R. 294, H.L.(E.)
Dutton v. Bognor Regis Urban District Council [1972] 1 Q.B. 373; [1972] 2
W.L.R. 299; [1972] 1 All E.R. 462, C.A.
760
Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)
[1988]
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465; [1963] A
3 W.L.R. 101; [1963] 2 All E.R. 575, H.L.(E.)
Hill v. Chief Constable of West Yorkshire [1988] Q.B. 60; [1987] 2 W.L.R.
1126; [1987] 1 All E.R. 1173, C.A.
Junior Books Ltd. v. Veitchi Co. Ltd., 1982 S.L.T. 333; [1983] 1 A.C. 520;
[1982] 3 W.L.R. 477; [1982] 3 All E.R. 201, Ct. of Sess. and H.L.(Sc)
Ketteman v. Hansel Properties Ltd. [1987] A.C. 189; [1987] 2 W.L.R. 312;
[1988] 1 All E.R. 38, H.L.(E.)
B
Leigh and Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. [1986] A.C. 785;
[1986] 2 W.L.R. 902; [1986] 2 All E.R. 145, H.L.(E.)
London Congregational Union Inc. v. Harriss & Harriss [1988] 1 All E.R.
15, C.A.
McLoughlin v. O'Brian [1983] 1 A.C. 410; [1982] 2 W.L.R. 982; [1982] 2
All E.R. 298, H.L.(E.)
Morrison Steamship Co. Ltd. v. Greystoke Castle (Cargo Owners) [1947]
C
A.C. 265; [1946] 2 All E.R. 696, H.L.(E.)
Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B. 507; [1985] 3
W.L.R. 993; [1985] 3 All E.R. 705, C.A.
Peabody Donation Fund (Governors of) v. Sir Lindsay Parkinson & Co.
Ltd. [1985] A.C. 210; [1984] 3 W.L.R. 953; [1984] 3 All E.R. 529,
H.L.(E.)
Pirelli General Cable Works Ltd. v. Oscar Faber & Partners [1983] 2 A.C.
1; [1983] 2 W.L.R. 6; [1983] 1 All E.R. 65, H.L.(E.)
D
Ross v. Counters [1980] Ch. 297; [1979] 3 W.L.R. 605; [1979] 3 All E.R.
580
Simpson & Co. v. Thomson (1877) 3 App. Cas. 279, H.L.(Sc)
Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd. [1973] Q.B.
27; [1972] 3 W.L.R. 502; [1972] 3 All E.R. 557, C.A.
Tate & Lyle Food and Distribution Ltd. v. Greater London Council [1983] 2
A.C. 509; [1983] 2 W.L.R. 649; [1983] 1 All E.R. 1159, H.L.(E.)
E
Young & Marten Ltd. v. McManus Childs Ltd. [1969] 1 A.C. 454; [1968] 3
W.L.R. 630; [1968] 2 All E.R. 1169, H.L.(E.)
Yuen Kun Yeu v. Attorney-General of Hong Kong [1988] A.C. 175; [1987] 3
W.L.R. 776; [1987] 2 All E.R. 705, P.C.
The following additional cases were cited in argument:
D. & F. Estates Ltd. v. Church Commissioners for England (1985) 7 Const. F
L.R. 40
Department of the Environmental v. Thomas Bates & Son (Basildon
Development Corporation Third Party) (unreported), 26 January 1984,
Judge Smout Q.C.
Lexmead (Basingstoke) Ltd. v. Lewis [1982] A.C. 225; [1981] 2 W.L.R.
713; [1981] 1 All E.R. 1185, H.L.(E.)
Tozer Kemsley & Millbourn (Holdings) Ltd. v. J. Jarvis & Sons Ltd. (1983) G
4 Const. L.R. 24
INTERLOCUTORY APPEAL from Judge Newey Q.C. sitting on official
referee's business.
The plaintiffs, Simaan General Contracting Co., main contractors for
the erection of a building in Abu Dhabi, brought a claim in negligence
against the defendants, Pilkington Glass Ltd., the specified suppliers of
glass units to sub-contractors of the plaintiffs for incorporation into the
curtain walling of the building. The plaintiffs alleged that the glass units
were damaged, as a result of which they suffered loss and damage, in
"
761
1 Q.B.
T-)
762
Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)
[1988]
"
"
763
1 Q.B.
"
764
Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)
11988]
damage: see Pirelli General Cable Works Ltd. v. Oscar Faber & Partners
[1983] 2 A.C. 1, 16, 18, per Lord Fraser of Tullybelton, with whom the
other Law Lords agreed. The House of Lords implicitly rejected an
argument, advanced by the defendants on the basis of Junior Books
that, as economic loss occurred when the building was handed over with
a sub-standard chimney, the cause of action accrued at that time. A
similar argument was rejected by the Court of Appeal in London
Congregational Union Inc. v. Harriss & Harriss [1988] 1 All E.R. 15 and
by the House of Lords in Ketteman v. Hansel Properties Ltd. [1987]
A.C. 189. Although these cases involved latent defects subsequently
causing physical damage, the rejection of the economic loss argument,
together with the formulation of the basic principle in the Pirelli case
[1983] 2 A.C. 1, necessarily show that the principle covers also patent
defects.
If (save for the "doomed from the start" cases) the limitation period
only begins to run when physical damage occurs, it must follow that
physical damage is a constituent element of liability and the duty is to
avoid defects in the subject property resulting in physical damage with
consequential economic loss. Accordingly, the Junior Books principle
does not extend to defects in workmanship or materials which render
the property less valuable, e.g. because of an unaesthetic appearance.
The insistence that the economic loss must arise out of physical damage
necessitating expenditure on repair has the object of limiting liability to
cases where direct liability in tort is proper; in other cases, a plaintiff, if
he wishes to protect himself, must do so in contract. There is no
previous decision at appellate level in which liability has been imposed
in this context where the economic loss is not consequent upon physical
damage.
In the Junior Books case [1983] 1 A.C. 520 the pursuers owned and
occupied the factory at the time significant damage first occurred. In
Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd.
[1986] A.C. 1 and Leigh and Sillavan Ltd. v. Aliakmon Shipping Co.
Ltd. [1986] A.C. 785 it was held that only a person holding a proprietory
or possessory interest in the damaged property can maintain an action in
negligence for economic loss resulting from the damage. In the
Candlewood case [1986] A.C. 1, the Privy Council advised that the
principle in Cattle v. Stockton Waterworks Co., L.R. 10 Q.B. 453 which
had been applied so as to prevent a time charterer from recovering
damages for pecuniary loss caused by damage to the chartered vessel
was unaffected by Junior Books.
In Leigh and Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. [1986]
A.C. 520 the House of Lords held that a potential purchaser of goods,
who has the risk of but no proprietory or possessory interest in the
goods, cannot maintain an action in negligence for compensation for
damage to the goods. Lord Brandon of Oakbrook, delivering the leading
speech, said that a long line of authority established the principle that,
in order to claim in negligence for loss caused by reason of loss of or
damage to property, the plaintiff must have had either the legal
ownership of or a possessory title to the property not enough to have
had only contractual rights in relation to such property which have been
"
765
1 Q.B.
j-)
766
Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)
[1988]
767
1 Q.B.
"
In the Junior Books case [1983] 1 A.C. 520, the defenders were
nominated by the pursuers as sub-contractors. Accordingly, all technical
discussions and negotiations took place between the pursuers by their
agents, the architects, and the defenders: see 1982 S.L.T. 333. In
addition, the pursuers determined the form of the sub-contract. The
Law Lords clearly regarded the nomination of the defenders as an
important factor giving rise to a duty of care. In such a case it is not
difficult to infer a voluntary assumption of responsibility by the subcontractor. In the present case, however, the defendants were not
nominated suppliers in the sense that there was no technical discussion
of any significance between the defendants and the plaintiff and the
plaintiffs did not determine the form of the contract for the supply of
the units. The plaintiff's reliance on the defendants was akin to the
general reliance of a consumer on a manufacturer and was insufficient to
found liability. In the absence of nomination, the relative situation of
the parties was not sufficiently proximate to give rise to a duty of care,
and there was no express or implied assumption of responsibility.
Romie Tager for the plaintiffs. It must be borne in mind that the
product in question was unique. The glass was manufactured to specific
sizes and specifications which would have rendered it useless to the
defendants if it had been rejected by Feal. Essentially the defendants
were manufacturing glass for the building, not for a particular person.
To have substituted a different glass would have involved changing
completely the air-conditioning system.
Part of the ratio decidendi in Junior Books Ltd. v. Veitchi Co. Ltd.
[1983] 1 A.C. 520 is clearly referable to the development of the law of
tort in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C.
465. In none of the cases is there as part of the factual background any
conscious consideration of the question whether any duty is owed by
one to another. The neighbourhood principle of Donoghue v. Stevenson
[1932] A.C. 562 was limited to property of the plaintiff. All the cases
are consistent with the chain of authorities, and relate to negligence
resulting in damage to the property of the plaintiff. The Hedley Byrne
case [1964] A.C. 465 was a radical departure because it allowed a claim
for pure economic loss. There have been attempts to bring within its
principles claims against bankers etc. Often the claims result from
"negligent mis-statement." The professional negligence cases, e.g. Ross
v. Counters [1980] Ch. 297, carry the development further.
The Junior Books case [1983] 1 A.C. 520 was another development.
The negligent acts of the defenders which gave rise to pure economic
loss were relied on as giving a cause of action. It was not a case where
the factory was damaged, or even where the floor was damaged. It was
defective. The limitation imposed by the House of Lords was the
"special relationship" test derived from Hedley Byrne & Co. Ltd. v.
Heller & Partners Ltd. [1964] A.C. 465. For an illustration of the
application of the principle see Muirhead v. Industrial Tank Specialities
Ltd. [1986] Q.B. 507. There was nothing inherently wrong with the
motors in that case. They would have been perfectly adequate if used in
France, or even if used in England for another purpose. When the
motors were supplied the supplier set in train events which resulted in
768
Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)
[1988]
damage to the plaintiff. But at the time of the supply there was no cause
of action.
The allegations in the pleadings in the Junior Books case, 1982
S.L.T. 333, 334 are equivalent to incorrect spraying of the various
coatings on the glass in the present case. Whether or not the plaintiffs
had an interest in the glass units is an irrelevant consideration provided
otherwise they are within the Hedley Byrne principle.
Alternatively, if it is necessary to show that the plaintiffs have
suffered damage to property belonging to them, they suffered damage
when the glass units were rejected, and at that moment property in the
units was transferred to the plaintiffs from the building owner. The
owner might have been able to recover damages on the authority of
Junior Books if he had suffered damage. Different persons will suffer
different sorts of economic loss, but there is no practical possibility of
the same loss being claimed twice.
In some cases in England a sub-contractor is required to enter into a
direct contract with the building owner and collateral contracts, so that
it is possible to sue direct in contract. The fact that such a direct
contract had been requested and refused would be the best evidence of
a special relationship such as would found an action in tort.
The analysis of Donoghue v. Stevenson [1932] A.C. 562 in the
Hedley Byrne case [1964] A.C. 465 in the speech of Lord Keith of
Kinkel in the Junior Books case [1983] 1 A.C. 520, 534-535 is adopted,
particularly his remarks about proximity and reasonable anticipation of
physical injury not being a sine qua non for the existence of a duty of
care. The dissenting speech of Lord Brandon of Oakbrook is also relied
on as showing that the House of Lords was advancing the frontiers of
law in that case. In Lord Roskill's speech, at p. 546, property in the
goods does not appear as a feature of the list of facts of crucial
importance in establishing the requisite degree of proximity. That is
because Lord Roskill was extending the scope of the law, and not
confining it to a Donoghue v. Stevenson [1932] A.C. 562 situation.
Attempts to take Junior Books further than that have failed: see
Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd.
[1986] A.C. 1 and Leigh and Sillavan Ltd. v. Aliakmon Shipping Co.
Ltd. [1986] A.C. 785. Donoghue v. Stevenson [1932] A.C. 562 still
applies to negligent conduct resulting in damage to property.
In support of the analysis of Junior Books [1983] 1 A.C. 520 put
forward, see also Yuen Kun Yeu v. Attorney-General of Hong Kong
[1988] A.C. 175, 196, and Muirhead v. Industrial Tank Specialities Ltd.
[1986] Q.B. 507, 526, 527.
The main challenge to the judge's finding that there was a special
relationship between the plaintiffs and the defendants was by way of
contrasting the position of nominated sub-contractors with that of
nominated suppliers. It is said that the technical discussions which would
point to a special reliance would be a feature of a sub-contract. There is
the closest analogy here between the defendants and the position of the
defenders in the Junior Books case [1983] 1 A.C. 520. The defendants
name here was a sufficient warranty of their expertise. No distinction
can be drawn in the factual background.
"
"
769
1 Q.B.
Harris in reply.
Cur. adv. vult.
17 February. The following judgments were handed down.
The assumed loss is the withholding of money which the plaintiffs would
otherwise have been entitled to receive from the building owner, and
loss of interest. The alleged defects in the glass (also to be assumed for
purposes of the issue) relate not to their durability, serviceability or
present or future performance characteristics, but simply to their colour.
They should have been a uniform shade of green. They are (it is said) in
variable shades of green, and in places red. This colour discrepancy is
not acceptable to the building owner, being (it is said) unpleasant in
appearance, contrary to specification and not in accordance with a
sample supplied. Green is the colour of peace in Islam, so the
discrepancy is regarded as one of some moment.
The judge resolved the issue in favour of the plaintiffs, holding that
in all the circumstances the defendants did owe them a duty of care. In
reaching this conclusion he made a wide-ranging survey of the law of
negligence since 1932, but he relied in particular on the House of Lords'
much-discussed decision in Junior Books Ltd. v. Veitchi Co. Ltd. [1983]
1 A.C. 520. Factually, the situation in the Junior Books case was
different from that here. The pursuers were the building owner, not (as
here) the main contractor. The plaintiff had received a floor which was
unfit for use as such, not (as here) a wall which was serviceable as such
but unacceptable visually. The defenders were sub-contractors nominated
by the plaintiff, not (as here) a supplier of goods. The judge's decision
accordingly involves the application of the Junior Books case to a new
factual situation. That is not in itself an objection to his decision. It is
how the law develops. The question for us is whether the Junior Books
770
Bingham L.J.
[1988]
case (or any other case) lays down a principle which can and ought to A
lead us on the present facts to answer the question as the judge did.
I do not think that any very detailed account of the facts is called
for. From an early stage in the planning of this building project the
Sheikh's architect favoured the use of the defendants' Suncool 24/22
green double-glazed units in the curtain wall of the proposed building.
The architect and the defendants discussed the technical properties of
the material in detail and a sample was supplied to the architect. On 6 "
July 1982 the main contract for the building was made between the
Sheikh and the plaintiffs. It incorporated the Conditions of Contract
(International) for works of Civil Engineering Construction (FIDIC)
dated March 1977, Part 1, subject to variations and amendments. Under
the contract the plaintiffs were entitled to sub-contract parts of the work
with approval, but not so as to relieve themselves of liability to the Q
building owner. There was no clause governing the transfer of title to
goods delivered to site for purposes of the building or incorporated in it.
There was an arbitration clause. The contract was to be governed by the
law of Abu Dhabi; no evidence of Abu Dhabi law has been adduced, so
English law principles are assumed to apply. The contract incorporated a
specification which contained this provision:
"Glass Types (All glass to be approved by the engineer)
1. Curtain wall:
Pilkington [Suncool] Ref 24/22 (Green) sealed double glazing
units or other approved with similar characteristics
Shading coefficient
0.25
'U' value
1.80 W/m2 deg C/hr
E
Visible light transmission
0.24
reflectance
0.19
Solar radiant heat reflectance
0.21
absorption
0.64
Total transmission
0.22
Sound insulation
29 dBA."
F
Failure to meet these technical requirements could have had far-reaching
effects, for example, on the air-conditioning of the building. But no such
failure is alleged. It is only the colour which gives rise to complaint. No
other manufacturer produced glass having these characteristics.
On 31 July 1983 the plaintiffs sub-contracted to Feal the works:
"for the installation complete of curtain walling and all aluminium G
components and metalwork including . . . the exclusive use of glass
supplied by Messrs. Pilkington Bros, of St. Helens, Lancashire,
England."
The sub-contract terms broadly followed those of the main contract,
although the arbitration clause was different. Both before and after the
placing of the sub-contract Feal did their best to induce the architect to
use glass other than the defendants' but without success. So Feal at the
end of 1983 ordered the units from the defendants, the contract
apparently containing no exemption clauses.
771
1 Q.B.
Bingham L.J.
772
Bingham L.J.
[1988]
Ltd. [1964] A.C. 465. Lord Roskill referred to the statement of principle
by Lord Reid in Dorset Yacht Co. Ltd. v. Home Office [1970] A.C.
1004, 1026, and to the two-stage test proposed by Lord Wilberforce in
Anns v. Merton London Borough Council [1978] A.C. 728, 751. He
drew attention to Dutton v. Bognor Regis Urban District Council [1972]
1 Q.B. 373; Anns v. Merton London Borough Council [1978] A.C. 728
and Batty v. Metropolitan Property Realisations Ltd. [1978] Q.B. 554 as
cases in which claims for economic loss had succeeded when allied to
claims for physical damage. He then applied Lord Wilberforce's twostage test. He found that on the facts alleged there was sufficient
proximity, the parties' relationship being almost as close as if contractual.
He attached importance to the defenders' role as nominated subcontractors and to the pursuers' reliance on their skill and experience.
He held that the concept of proximity must always involve, at least in
most cases, some degree of reliance. He did not consider the pursuers'
title to sue because he did not regard the case as one of physical damage
and the pursuers' ownership of the defective floor was obvious anyway.
At the second stage of Lord Wilberforce's test he saw no reason to
restrict the defenders' duty of care. There was on the facts no relevant
exclusion clause, but had there been it might (he thought) have limited
the duty of care like the disclaimer of reponsibility in the Hedley Byrne
case. Lord Roskill regarded the point at issue as new and as one "of
fundamental importance" in the development of the law of delict and
negligence. He held that where Lord Wilberforce's two-stage test was
met, there was no reason to disallow a claim for pure economic loss.
Lord Fraser of Tullybelton expressed full agreement with Lord
Roskill's conclusion and reasons. He regarded the appeal as raising an
important question not precisely covered by authority. He addressed
himself specifically to two suggested problems. The first was the risk
that allowing the relevancy of the pursuers' claim might open the
floodgates to a mass of claims. He discounted that risk in reliance on the
very close proximity of these parties, the pursuers having nominated and
relied on the skill and knowledge of the defenders. In Lord Fraser's
opinion the case fell within limits already recognised in principle, and he
decided the appeal strictly on its own facts, foremost among these being
the proximity of the parties. The second problem was to ascertain the
standard of duty to be owed in a situation where the contract between
builder and purchaser stipulated a standard of which a subsequent
purchaser might wish to complain. That was not a difficulty which arose
on the appeal because the pursuers had full knowledge of the defenders'
contractual duties.
Lord Russell of Killowen agreed with Lord Fraser and Lord Roskill.
Lord Keith of Kinkel agreed in the result but on a narrower ground.
He concluded that the defenders owed the pursuers a duty to take
reasonable care to see that their workmanship was not faulty, and were
liable for the foreseeable consequences, sounding in economic loss, of
their failure to do so. Such loss could include reduced profitability and
the cost of relaying the floor. But Lord Keith did not hold the pursuers
entitled to succeed on the ground that the floor, being defective from
the start, was, without being harmful in any way, useless or worthless or
"
"
773
1 Q.B.
"
Bingham L.J.
defective in quality so that the pursuers had wasted the money spent on
it. To impose a general duty in such a situation on manufacturers
towards ultimate consumers would, he held, be disruptive of commercial
practice. It was also unnecessary since a right of action in contract
existed anyway.
Lord Brandon of Oakbrook dissented. He had no doubt that an
action in delict or negligence could lie to recover economic loss alone.
He was satisfied that the defenders owed the pursuers a duty to exercise
reasonable care to lay the floor so that it did not, when completed and
in use, constitute a danger of physical damage to persons or their
property, other than the flooring itself. He agreed that there was
sufficient proximity to give rise to a duty of care, but held that there
were two considerations which should limit the scope of the defenders'
duty. The first was the absence of danger of physical damage to persons
or property (other than the property the defective condition of which
gave rise to the danger), although in and since Donoghue v. Stevenson
[1932] A.C. 562 this had been regarded as an essential ingredient. The
second was the difficulty and undesirability of creating between parties
not in a contractual relationship obligations only appropriate between
parties who were.
Plainly this decision contained within it the seeds of a major
development of the law of negligence. According to Professors J. C.
Smith and Peter Burns, "The implications of this case for the law of
contracts and products liability are staggering to say the least": (1983) 46
M.L.R. 147, 153. It remained to be seen whether those seeds would be
encouraged or permitted to germinate. The clear trend of authority since
the Junior Books case has indicated that, for the time being at least,
they will not.
Lord Wilberforce's two-stage test in Anns was treated with some
reservation in a series of House of Lords decisions (see Yuen Kun Yeu
v. Attorney-General of Hong Kong [1988] A.C. 175, 190) culminating in
the conclusion, at p. 194:
"In view of the direction in which the law has since been developing,
their Lordships consider that for the future it should be recognised
that the two-stage test in Anns v. Merton London Borough Council
[1978] A.C. 728, 751-752, is not to be regarded as in all
circumstances a suitable guide to the existence of a duty of care."
Increasingly, emphasis is placed on the observation of Lord Keith
of Kinkel in Governors of the Peabody Donation Fund v. Sir Lindsay
Parkinson & Co. Ltd. [1985] A.C. 210, 241:
"So in determining whether or not a duty of care of particular scope
was incumbent upon a defendant it is material to take into
consideration whether it is just and reasonable that it should be so."
See, for example, Curran v. Northern Ireland Co-ownership Housing
Association Ltd. [1987] A.C. 718, 729 and Hill v. Chief Constable of
West Yorkshire [1988] Q.B. 60, 68.
In Tate & Lyle Food and Distribution Ltd. v. Greater London
Council [1983] 2 A.C. 509, 530, Lord Templeman said:
774
Bingham L.J.
[1988]
The claim in negligence failed because Tate & Lyle were held to have
no right to any particular depth of water at their jetties. Both Lord
Keith and Lord Roskill agreed with Lord Templeman's speech.
In Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B. 507 the
plaintiff owned a storage tank for live lobsters and the third defendants
manufactured electric motors which had been incorporated in pumps
used to circulate and oxygenate the water in the tank, as was necessary
for the survival of the lobsters. The motors, manufactured in France,
were to some extent incompatible with the electricity supply system in
this country. The result was that they cut out, the lobsters died and the
plaintiff suffered loss associated with the death of the lobsters and
additional economical loss. The judge held the third defendants liable to
the plaintiff in tort for all the loss suffered and the third defendants
appealed.
In his judgment in the Court of Appeal Robert Goff L.J. carefully
analysed the speeches of the House of Lords in the Junior Books case.
Then, turning to the case before him, he said, at pp. 526-528:
"In order to decide whether the judge was right to approach the
case before him on the basis of the principle in the Junior Books
case, it is necessary first of all to seek to identify the principle. Both
Lord Fraser of Tullybelton and Lord Roskill appear to have been
influenced in particular by what Lord Fraser of Tullybelton
described, at p. 533, as 'the very close proximity between the
parties.' In seeking to understand what they had in mind it is
perhaps important to bear in mind what is usually meant by the
word 'proximity' when used in this context. It does not bear its
normal meaning in ordinary speech; as is plain from Lord Atkin's
speech in Donoghue v. Stevenson [1932] A.C. 562, 581, it is used as
a convenient label to describe a relationship between the parties by
virtue of which the defendant can reasonably foresee that his act or
omission is liable to cause damage to the plaintiff of the relevant
type. In this context, the word 'relationship' refers to no more than
the relative situations of the parties, as a consequence of which such
foreseeability of damage may exist. As I see it, Lord Fraser of
Tullybelton cannot have been referring to proximity in the sense I
have described; and Lord Roskill, when he spoke of the very close
'relationship' between the parties must, I think, have had in mind
the dealings between the parties which led to the pursuers
nominating the defenders, who were specialists in flooring, as subcontractors to lay the flooring in their factory.
"A particular problem arises, however, with reference to reliance.
Lord Roskill, in the passage which I have quoted from his speech,
[1983] 1 A.C. 520, 546-547, appears to have regarded reliance by
"
775
1 Q.B.
"
Bingham L.J.
776
Bingham L.J.
[1988]
777
1 Q.B.
"
Bingham L.J.
778
Bingham L.J.
[1988]
"
779
1 Q.B.
p.
Bingham L.J.
780
Bingham L.J.
[1988]
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781
1 Q.B.
"
"
Bingham L.J.
plaintiffs had had no interest in them at the time of the damage; (9) that
there was no express or implied assumption of responsibility by the
defendants towards the plaintiffs; (10) that reasons of policy should deny
the plaintiffs a right of recovery against the defendants on the facts
assumed here.
In a very carefully thought out and well presented argument for the
plaintiffs, Mr. Tager sought to counter these arguments and to escape
the toils of authority by relying on the Hedley Byrne case [1964] A.C.
465 and the principles there laid down and adopted in the Junior Books
case [1983] 1 A.C. 520. Mr. Tager put forward his claim as one not
dependent on physical damage and suggested that the Junior Books case
also rested on a much wider basis. But if the plaintiffs had to show
damage to goods in which they had an interest he contended that they
could do so on the ground that the panels, on rejection by the architect,
reverted or passed into the plaintiffs' ownership.
I can, I think, state my conclusions fairly shortly.
(1) I accept without reservation that a claim may lie in negligence for
recovery of economic loss alone. Were that not so the Hedley Byrne
case [1964] A.C. 465 could not have been decided as it was.
(2) I am quite sure that the defendants owed the plaintiffs a
conventional Donoghue v. Stevenson [1932] A.C. 562 duty of care to
avoid physical injury or damage to person or property. Suppose (however
improbably) that the defendants manufactured the units so carelessly
that they were liable to explode on exposure to strong sunlight and that
one of the units did so explode, blinding an employee of the plaintiffs
working in the building. I cannot conceive that such employee would fail
in a personal injury action against the defendants for failure to prove a
duty of care.
(3) There is no meaningful sense in which the plaintiffs can be said
to have relied on the defendants. No doubt the plaintiffs hoped and
expected that the defendants would supply good quality goods conforming
with the contract specification. But the plaintiffs required Feal to buy
these units from the defendants for one reason only, namely, that they
were contractually obliged to do so and had no choice in the matter.
There was no technical discussion of the product between the plaintiffs
and the defendants.
(4) Where a specialist sub-contractor is vetted, selected and nominated
by a building owner it may be possible to conclude (as in the Junior
Books case [1983] 1 A.C. 520) that the nominated sub-contractor has
assumed a direct responsibility to the building owner. On that reasoning
it might be said that the defendants owed a duty to the Sheikh in tort as
well as to Feal in contract. I do not, however, see any basis on which
the defendants could be said to have assumed a direct responsibility for
the quality of the goods to the plaintiffs: such a responsibility is, I think,
inconsistent with the structure of the contract the parties have chosen to
make.
(5) The Junior Books case has been interpreted as a case arising
from physical damage. I doubt if that interpretation accords with Lord
Roskill's intention, but it is binding upon us. There is in my view no
physical damage in this case. The units are as good as ever they were
782
Bingham L.J.
[1988]
"
783
1 Q.B.
"
Bingham L.J.
conditions. Even as it is, the defendants' sale may well have been
subject to terms and conditions imported by the Sale of Goods Act
1979. Some of those are beneficial to the seller. If such terms are to
circumscribe a duty which would be otherwise owed to a party not a
party to the contract and unaware of its terms, then that could be unfair
to him. But if the duty is unaffected by the conditions on which the
seller supplied the goods, it is in my view unfair to him and makes a
mockery of contractual negotiation.
I would accordingly allow the appeal and answer the question posed
by the preliminary issue in the negative.
I end with a sincere tribute to the summary of argument submitted
by Mr. Harris for the defendants. This was not a skeleton, not even a
cadaver. But it deployed the defendants' argument with admirable
clarity, proceeding by logical steps from proposition to proposition and
giving precise and accurate references to the many authorities referred
to. I have no doubt it saved hours of argument. It certainly saved reams
of note-taking. Had it only appeared in legible form a little bit earlier
my gratitude would have been total.
DILLON L.J. In giving the leading speech, with which all other
members of the House agreed, in Leigh and Sillavan Ltd. v. Aliakmon
Shipping Co. Ltd. [1986] A.C. 785 Lord Brandon of Oakbrook stated,
at p. 809:
"there is a long line of authority for a principle of law that, in order
to enable a person to claim in negligence for loss caused to him by
reason of loss of or damage to property, he must have had either
the legal ownership of or a possessory title to the property concerned
at the time when the loss or damage occurred, and it is not enough
for him to have only had contractual rights in relation to such
property which have been adversely affected by the loss or damage
to it."
784
Dillon L.J.
[1988]
with the samples supplied by the defendants, not in accordance with the
expectations of the parties and not in accordance with the requirements
of the contracts between the Sheikh and the plaintiffs, between the
plaintiffs and the subcontractors Feal, and between Feal and the
defendants. It is in those circumstances submitted that the plaintiffs have
a direct claim in tort against the defendants for consequent economic
loss, although there was admittedly never any contract between the
plaintiffs and the defendants.
Mr. Tager founds that submission on the undoubted fact that there
have been cases, following the principles outlined in Hedley Byrne &
Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465, where a duty of
care has been held to exist and damages have been awarded for
economic loss resulting from breach of that duty of care, although there
has been no loss of, or damage to, the property or person of the
plaintiff. Mr. Tager seeks to align the present case with Hedley Bryne
principles.
There has consequently been a good deal of discussion in argument
about the controversial decision in Junior Books Ltd. v. Veitchi Co. Ltd.
[1983] 1 A.C. 520. My own view of the Junior Books case is that the
speeches of their Lordships have been the subject of so much analysis
and discussion with differing explanations of the basis of the case that
the case cannot now be regarded as a useful pointer to any development
of the law, whatever Lord Roskill may have had in mind when he
delivered his speech. Indeed I find it difficult to see that future citation
from the Junior Books case can ever serve any useful purpose.
In my judgment there are at least two reasonsthere may well be
morewhy Mr. Tager's submissions cannot be accepted and the
plaintiffs' direct claim for economic loss against the defendants must fail.
(1) It is clear, as Lord Keith pointed out in Yuen Kun Yeu v.
Attorney-General of Hong Kong [1988] A.C. 175, 191 by reference to
the speech of Lord Wilberforce in McLoughlin v. O'Brian [1983] 1 A.C.
410, 420, that foreseeability of harm or loss does not of itself and
automatically lead to a duty of care. Foreseeability of harm is a
necessary ingredient of a relationship in which a duty of care will arise,
but not the only ingredient. Foreseeability of harm does not become
enough to make the harm recoverable by the plaintiff just because what
was foreseeable was harm to the plaintiff as an individual rather than as
a member of a general and unascertained class; otherwise Lord Fraser
could not in the Candlewood case [1986] A.C. 1 have rejected the views
which he cited, at p. 22, from the judgments of Gibbs and Mason JJ. in
Caltex Oil (Australia) Pty. Ltd. v. Dredge "Willemstad" (1976) 136
C.L.R. 529.
If, however, foreseeability does not automatically lead to a duty of
care, the duty in a Hedley Byrne type of case must depend on the
voluntary assumption of responsibility towards a particular party giving
rise to a special relationship, as Lord Keith held in Yuen Kun Yeu v.
Attorney-General of Hong Kong [1988] A.C. 175, 196 (and see also his
statement at p. 784 that the Hedley Byrne case [1964] A.C. 465 was
concerned with the assumption of responsibility) and as Robert Goff
L.J. had earlier held in Muirhead v. Industrial Tank Specialities Ltd.
785
1 Q.B.
"
Dillon L.J.
[1986] Q.B. 507, 528 in a passage which would have been before Lord
Keith in the Yuen Kun Yeu case.
But in the present case I can see nothing whatever to justify a finding
that the defendants had voluntarily assumed a direct responsibility to the
plaintiffs for the colour and quality of the glass panels. On the contrary,
all the indications are the other way and show that a chain of contractual
relationships was deliberately arranged the way it was without any direct
relationship between the plaintiffs and the defendants.
(2) The approach of the law to awarding damages for economic loss
on the grounds of negligence where there has been no injury to the
person or property has throughout been greatly affected by pragmatic
considerations. See, for example, the opinion of Lord Fraser in the
Candlewood case [1986] A.C. 1, 16, in relation to the judgment in Cattle
v. Stockton Waterworks Co., L.R. 10 Q.B. 453, his comments [1986]
A.C. 1, 21, on a passage in Lord Wilberforce's speech in Anns v.
Merton London Borough Council [1978] A.C. 728 as "a useful reminder
of the part played by policy in decisions as to how far the liability of a
wrongdoer should extend" and his statement [1986] A.C. 1, 25, that
some limit or control mechanism has to be imposed upon the liability of
a wrongdoer towards those who have suffered economic damage in
consequence of his negligence.
It might at first glance seem reasonable that, if the plaintiffs have a
right of action in contract against Feal and Feal has in respect of the
same general factual matters a claim in contractalbeit a different
contractagainst the defendants, the plaintiffs should be allowed a
direct claim against the defendants. But in truth to allow the plaintiffs a
direct claim against the defendants where there is no contract between
them would give rise to formidable difficulties.
If the plaintiffs have a direct claim against the defendants so equally
or a fortiori has the Sheikh. Feal has its claim in contract also. All three
claims should be raised in separate proceedings, whether by way of
arbitration or litigation, and possibly in separate jurisdictions. The
difficulties of awarding damages to any one claimant would be formidable,
in view of the differing amounts of retentions by the Sheikh against the
plaintiffs and by the plaintiffs against Feal and other possibilities of set
off, and in view, even more, of the fact that none of the parties has yet
actually incurred the major cost of replacing the defendants' (assumedly)
defective glass panels with new panels of the correct colour. It would
not be practicable, in my view, for the court to award damages against
the defendants in a global sum for all possible claimants and for the
court subsequently to apportion that fund between all claimants and
administer it accordingly.
Moreover, if in principle it were to be established in this case that a
main contractor or an owner has a direct claim in tort against the
nominated supplier to a sub-contractor for economic loss occasioned by
defects in the quality of the goods supplied, the formidable question
would arise, in future cases if not in this case, as to how far exempting
clauses in the contract between the nominated supplier and the subcontractor were to be imported into the supposed duty in tort owed by
the supplier to those higher up the chain. Such difficulties were dismissed
786
Dillon L.J.
[1988]
"
R. C. W.