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| NEGLIGENCE - DUTY OF CARE |
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EXISTENCE OF A DUTY
Donoghue v Stevenson [1932] AC 562, HL By Scots and English law alike the manufacturer of an article of food,
medicine or the like, sold by him to a distributor in circumstances which
prevent the distributor or the ultimate purchaser or consumer from discovering
by inspection any defect, is under a legal duty to the ultimate purchaser or
consumer to take reasonable care that the article is free from defect likely to
cause injury to health:- Caparo Industries v Dickman [1990] 1 All ER 568, HL See below. Foreseeability and proximity
Bourhill v Young [1942] 2 All ER 396, HL The appellant, on Oct. 11, 1938, was a passenger on a tramcar. She alighted from the tramcar some 50ft. from the junction of the road along which the car was travelling and a cross road. After alighting from the car she passed along its near side, round the front, and then to the entrance to the (driver's platform on the off-side. Here, with the help of the driver, she placed her heavy creel upon her back. At the same time a motor cyclist passed between the near side of the tramcar and the footway and, not having seen a motor car turning into the cross road by reason of his view being obscured by the tramcar, he collided with the car, was thrown off his motorcycle, fell on his head and was killed. The appellant saw nothing of the accident but merely heard the noise of the impact of the two vehicles. After the body of the motor cyclist had been removed, she approached the spot and saw blood on the roadway. The injuries alleged to have been sustained by the appellant were that she wrenched and injured her back by being startled by the noise of the collision and that she was thrown into a state of terror and sustained a severe shock to her nervous system, though there was no reasonable fear of immediate bodily injury to her. She was about 8 months pregnant at the time and gave birth to a still-born child on Nov. 18, 1938. The driver of the motor-cycle was admittedly negligent as against the driver of the motor car, but the question was whether he owed any duty to the appellant in that he ought, as a reasonable man, to have contemplated the likelihood of injury to her in the circumtances.:- HELD : the question to be decided was one of liability and not one of
remoteness of damage. In the circumstances of this case the motor cyclist owed
no duty to the appellant since he could not be held to have reasonably foreseen
the likelihood that the appellant, placed as she was, could be affected by his
negligent act. The role of policy See handout on Public Policy.
ACTS AND OMISSIONS Smith v Littlewoods Organisation Ltd [1987] 1 All ER 710, HL The respondents purchased a cinema with a view to demolishing it and replacing it wit a supermarket. They took possession on 31 May 1976, closed the cinema and employed contractors to make site investigations and do some preliminary work on foundations, but from about the end of the third week in June the cinema remained empty and unattended by the respondents or any of their employees. By the beginning of July the main building of the cinema was no longer lockfast and was being regularly entered by unauthorised persons. Debris began to accumulate outside the cinema and on two occasions attempts to start fires inside and adjacent to the cinema had been observed by a passer-by but neither the respondents nor the police were informed. On 5 July a fire was started in the cinema which seriously damaged two adjoining properties, one of which had to be demolished. The appellants, the owners of the affected properties, claimed damages against the respondents on the ground that the damage to their properties had been caused by the respondents' negligence. The judge found the claims established and awarded the appellants damages. An appeal by the respondents was allowed by the Court of Session. The appellants appealed to the House of Lords, contending that it was reasonably foreseeable that if the cinema was left unsecured children would be attracted to the building, would gain entry and would cause damage which, it was reasonably foreseeable, would include damage by fire which, it was reasonably foreseeable, would in turn spread to and damage adjoining properties. Held - The appeal would be dismissed for the following reasons- (2) (Per Lord Goff, Lord Keith concurring) There was no general duty at
common law to prevent persons from harming others by their deliberate
wrongdoing, however foreseeable such harm might be if a defendant did not take
steps to prevent it. Accordingly, liability in negligence for such harm caused
by third parties could only be made out in special circumstances, namely (a)
where a special relationship existed between the plaintiff and the defendant,
(b) where a source of danger was negligently created by the defendant and it was
reasonably foreseeable that third parties might interfere and cause damage by
sparking off the danger and (c) where the defendant had knowledge or means of
knowledge that a third party had created or was creating a risk of danger on his
property and he failed to take reasonable steps to abate it. On the facts, no
such special circumstances were present, and accordingly the respondents owed no
duty of care to the appellants; Stansbie v Troman [1948] 1 All ER 599, Haynes v
G Harwood & Son [1934] All ER Rep 103, Goldman v Hargrave [1966] 2 All ER
989 and Thomas Graham & Co Ltd v Church of Scotland General Trustees 1982
SLT (Sh Ct) 26 considered; Squires v Perth and Kinross DC 1986 SLT 30
disapproved. Undertaking
Barrett v Ministry of Defence [1995] 3 All ER 87, CA The plaintiff was the widow and executrix of the deceased, a naval airman who died after becoming so drunk one night at the naval base where he was serving that he passed out into a coma and became asphyxiated on his own vomit. Following the deceased's death, his commanding officer was charged with, and pleaded guilty to, a breach of art 1810 of the Queen's Regulations for the Royal Navy 1967, under which it was the 'particular duty of all officers ... actively to discourage drunkenness ... by naval personnel' and in the event of alcohol abuse, to take appropriate action to prevent any likely breaches of discipline, possible injury or fatality, including medical assistance if ... available'. The plaintiff sued the Ministry of Defence claiming damages for herself and the deceased's estate in respect of his death, alleging that the defendant as his employer owed him while he was under its control a duty of care to prevent him becoming so drunk that he caused himself injury or death, and that it was in breach of that duty. At the hearing of the widow's action evidence was adduced of widespread laxity regard to alcohol consumption at the base, if not its actual encouragement, and the failure to take disciplinary action to prevent it. The judge found that the deceased had been a heavy drinker, that this was widely known, that it was therefore foreseeable that in the particular environment of the naval base with it lax attitude to drinking he would succumb to heavy intoxication, and that in the exceptional circumstances of the case it was just and reasonable to impose on the defendant a duty of care to protect a person of full age and capacity, such as the deceased, from his own weakness. He further held, comparing the Queen's Regulations and naval standing orders to the Highway Code and safety codes relating to factories, that the defendant was in breach of that duty because it had failed to enforce the standards it set itself in matters of discipline. He further held that the defendant had taken inadequate steps to care for the deceased after he had passed out in that no medical officer had been informed and the supervision of the deceased having been wholly inadequate by the defendant's own standards. However, the judge found that the deceased was guilty of contributory negligence and reduced the damages by 25%. The defendant appealed contending, inter alia, that the judge was wrong to fix it with a duty of care in the circumstances and that he was wrong to treat the Queen's Regulations and standing orders as setting the standard by which the defendant's fulfilment of that duty of care should be judged. Held - (1) The judge had wrongly equated the Queen's Regulations and standing
orders with the Highway Code and safety codes in factories, because the purpose
of the regulations and standing orders was to preserve good order and discipline
in the navy and to ensure that personnel remained fit for duty and while on duty
obeyed commands and when off duty did not misbehave bringing the service into
disrepute, and were in no sense intended to lay down standards or to give advice
in the exercise of reasonable care for the safety of the men when off duty g in
the bars on the base. The regulations and standing orders could not therefore be
directly invoked in determining whether a duty of care was owed to the deceased,
and if so whether the defendant was in breach of it. Relationship between claimant and defendant
Smoldon v Whitworth & Nolan [1997] PIQR P133, CA The plaintiff, who was aged 17 at the time, suffered very serious personal
injuries when playing hooker in a colts rugby match, when a serum collapsed, and
his neck was broken. He claimed damages against the first defendant, a member of
the opposing team, and against the second defendant, the referee. The claim
against the first defendant was dismissed, and there was no appeal against that
decision. Held, dismissing the appeal, that the judge had adopted the correct
formulation of the second defendant's duty. It was not necessary to show a high
level of probability that if the scrum collapsed serious injury of the kind
which occurred was a highly probable consequence; serious spinal injury was a
foreseeable consequence of a collapse of the scrum and of failure to prevent
collapse of the scrum, and that was sufficient. The plaintiff was not volens to
the risk of injury; he had consented to the ordinary incidents of a game of
rugby, not to a breach of duty by the official whose duty it was to apply the
rules and ensure, so far as possible, that they were observed. Control over third parties
Home Office v Dorset Yacht Co [1970] 2 All ER 294, HL Ten borstal trainees were working on an island in a harbour in the custody and under the control of three officers. During the night seven of them escaped. It was claimed that at the time of the escape the officers had retired to bed, leaving the trainees to their own devices. The seven got on board a yacht moored off the island and set it in motion. They collided with another yacht, the property of the respondents, and damaged it. The respondents sued the Home office for the amount of the damage. A preliminary issue was ordered to be tried whether on the facts pleaded in the statement of claim the Horne Office, its servants or agents owed any duty of care to the respondents capable of giving rise to a liability in damages with respect to the detention of persons undergoing sentences of borstal training, or with respect to the manner in which such persons were treated, employed, disciplined, controlled or supervised whilst undergoing such sentences. It was admitted that the Home Office would be vicariously liable if an action would lie against any of the borstal officers. On appeal against the decision of the preliminary point in favour of the respondents, Held - (Viscount Dilhorne dissenting) the appeal would be dismissed because- Control of land or dangerous things
Dominion Natural Gas v Collins and Perkins [1909] AC 640, PC In actions for damages in respect of an accident against the appellant gas company it appeared that the appellants were not occupiers of the premises on which the accident had occurred and had no contractual relations with the plaintiffs, but that they had installed a machine on the said premises, and the jury found that the accident was caused by an explosion resulting from gas emitted, owing to the appellants' negligence, through its safety valve direct into the closed premises instead of into the open air:- Held, that the initial negligence having been found against the appellants in
respect of an easy and reasonable precaution which they were bound to have
taken, they were liable unless they could shew that the true cause of the
accident was the act of a subsequent conscious volition, e.g., the tampering
with the machine by third parties. TYPES OF CLAIMANT
Pitts v Hunt [1990] 3 All ER 344, CA The plaintiff, who was aged 18, and a friend, who was aged 16, spent the evening drinking at a disco before setting off home on the friend's motor cycle with the plaintiff riding as a pillion passenger. The plaintiff was aware that the motor cyclist was neither licensed to ride a motor cycle nor insured. On the journey home the motor cyclist, encouraged by the plaintiff, rode the motor cycle in a fast, reckless and hazardous manner deliberately intending to frighten members of the public. The motor cycle collided with an oncoming car and the plaintiff was severely injured. The motor cyclist, whose blood alcohol level was more than twice the legal limit for driving a motor vehicle, was killed. The plaintiff claimed damages in negligence against the personal representative of the motor cyclist and against the driver of the oncoming car. The judge found that there had been no negligence on the part of the driver of the car and held that the plaintiff could not recover damages against the motor cyclist's estate because the two were engaged on a joint illegal enterprise and the claim was barred by the maxim ex turpi causa non oritur actio and public policy. The judge further held that the claim would have been defeated by the defence of volenti non fit injuria but for the fact that s 148(3) of the Road Traffic Act 1972, by providing that any 'agreement or understanding' between the driver and a passenger of a motor vehicle had no effect so far as it purported to negative or restrict the driver's liability to the passenger, precluded the defendants from relying on that defence in the context of a motor accident, and that in the event the plintiff was 100% contributorily negligent. The plaintiff appealed against the dismissal of his claim against the motor cyclist's estate. Held - Where one person was injured as the result of the actions of another
while they were engaged in a joint illegal enterprise the issue whether the
injured party was entitled to claim against the other person or whether his
claim was barred by the maxim ex turpi causa non oritur actio was to be
determined not according to whether there was any moral turpitude involved in
the joint illegal enterprise but whether the conduct of the person seeking to
base his claim on the unlawful act and the character of the enterprise and the
hazards necessarily inherent in its execution were such that it was impossible
to determine the appropriate standard of care because the joint illegal purpose
had displaced the ordinary standard of care. Since the plaintiff had played a
full and active part in encouraging the motor cyclist to commit offences which,
had an innocent third party been killed, would have amounted to manslaughter by
the commission of a dangerous act, the plaintiff ought not to be permitted to
recover for the injuries which he sustained arising out of that unlawful
conduct, on the grounds of the application of the maxim ex turpi causa non
oritur actio, public policy and the fact that the circumstances precluded the
court from finding that the driver owed any duty of care to the plaintiff. The
appeal would therefore be dismissed; dictum of Mason J Jackson v Harrison (1978)
138 CLR 438 at 455-456 applied; Thackwell v Barclays Bank plc [1986] 1 All ER
676 and Saunders v Edwards [1987] 2 All ER 651 not followed. Clunis v Camden [1998] 3 All ER 180, CA On 24 September 1992 the plaintiff, who had a history of mental disorder and of seriously violent behaviour, was discharged from the hospital where he had been detained as the result of an order under s 3 of the Mental Health Act 1983, and moved into the area covered by the defendant health authority. Under s 117 of the 1983 Act the health authority was under a duty to provide after-care services for the plaintiff, and a psychiatrist employed by it was designated as the plaintiff's responsible medical officer. However, the plaintiff failed to attend appointments arranged for him by the medical officer, and his condition deteriorated. On 17 December, in a sudden and unprovoked attack, the plaintiff stabbed a man to death at a tube station. He was charged with murder, but at his trial pleaded guilty to manslaughter on the grounds of diminished responsibility and was ordered to be detained in a secure hospital. Subsequently, the plaintiff brought an action for damages against the health authority alleging that it had negligently failed to treat him with reasonable professional care and skill in that, inter alia, the responsible medical officer had failed to ensure that he was assessed before 17 December, and that if he had been he would either have been detained or consented to become a patient and would not have committed manslaughter. The health authority applied to strike out the plaintiff's claim as disclosing no cause of action on the grounds (i) that it was based on his own illegal act which amounted to the crime of manslaughter, and (ii) that it arose out of the health authority's statutory obligations under s 117 of the 1983 Act and those obligations did not give rise to a common law duty of care. The deputy judge dismissed the application and the defendant appealed. Held - (1) The rule of public policy that the court would not lend its aid to
a plaintiff who relied on his own criminal or immoral act was not confined to
particular causes of action, but only applied if the plaintiff was implicated in
the illegality and was presumed to have known that he was doing an unlawful act.
In the instant case, the plaintiff's plea of diminished responsibility accepted
that his mental responsibility was substantially impaired but did not remove
liability for his criminal act, and therefore he had to be taken to have known
what he was doing and that it was wrong. It followed that the health authority
had made out its plea that the plaintiff's claim was based on his crime of
manslaughter; dictum of Best CJ in Adamson v Jarvis (1827) 4 Bing 66 at 72-73
and Burrows v Rhodes [1899] 1 QB 816 applied; Meah v McCreamer [1985] 1 All ER
367 doubted. Revill v Newbery [1996] 1 All ER 291, CA The 76-year-old defendant was sleeping in a brick shed on his allotment in order to protect valuable items stored in it when he was awoken in the middle of the night by the sound of the plaintiff attempting to break in. He took his shotgun, loaded it and, without being able to see whether there was anybody directly in front of the door, fired a shot through a small hole in the door, wounding the plaintiff in the arm and chest. The plaintiff was subsequently prosecuted for the various offences which he had committed that night and pleaded guilty; the defendant was also prosecuted on charges of wounding but was acquitted. Thereafter the plaintiff brought proceedings against the defendant, claiming damages for breach of the duty of care under s 1 of the Occupiers' Liability Act 1984 and for negligence. The judge found that although the defendant had not intended to hit the plaintiff he could reasonably have anticipated that he might do so and was thus negligent by reference to the standard of care to be expected from the reasonable man placed in the defendant's situation. The judge further found that the defendant had used greater violence than was justified in lawful self-defence and rejected the defendant's submission that he was relieved of all liability on the basis of the maxim ex turpi causa non oritur actio since the plaintiff had been involved in a criminal enterprise at the time of injury. On the question of contributory negligence the judge found the plaintiff two-thirds to blame. The defendant appealed. Held - A plaintiff in a personal injury claim for damages for negligence was
not debarred from making any recovery by the fact that he was a trespasser and
engaged in criminal activities at the time the injury was suffered. The duty of
care owed to a trespasser by an occupier under s 1 of the Occupiers' Liability
Act 1984 and by persons other than occupiers at common law, namely to take such
care as was reasonable in all the circumstances of the case to see that the
trespasser did not suffer injury on the premises, applied even where the
trespasser was engaged in a criminal enterprise. On the facts, the judge had
been justified in finding that the plaintiff was a person to whom the defendant
owed some duty of care and that the defendant, who had used greater violence
than was justified in lawful self-defence, was in breach of that duty, and in
finding substantial contributory negligence on the part of the plaintiff. The
appeal would accordingly be dismissed. British Railways Board v Herrington
[1972] 1 All ER749 and Pitts v Hunt [1990] 3 All ER 344 considered. Haynes v Harwood [1935] 1 KB 146, CA The plaintiff, a police constable, was on duty inside a police station in a
street in which, at the material time, were a large number of people, including
children. Seeing the defendants' runaway horses with a van attached coming down
the street he rushed out and eventually stopped them, sustaining injuries in
consequence, in respect of which he claimed damages:- A company, which carried on business as builders and contractors, undertook work on a well which involved clearing it of water. The well was some fifty feet deep and about six feet in diameter. H, a director of the company, and W and another workman employed by the company, erected a platform twenty-nine feet down the well and some nine feet above the water and lowered on to it a petrol-driven pump. After the engine of this pump had worked for about one and a half hours it stopped and a haze of fumes was visible in the well. The working of the petrol engine created also a dangerous concentration of carbon monoxide, a colourless gas. H returned to the well after working hours that evening and observed the haze and noticed a smell of fumes. On the following morning at about 7.30 a.m. H instructed the two workmen to go to the well, but said to W "Don't go down that bloody well until I come". The workmen arrived at the well at about 8.15 a.m., and, before H had arrived, one of the workmen went down the well and a few minutes later the other workman also went down it. Both were overcome by fumes. A doctor, who was called to the well, went down the well with a rope tied to his body in order to see if he could rescue the men, though be had been warned not to go. He also was overcome by fumes. Endeavour was made to haul him to the surface by the rope, but the rope caught in a down pipe in the well and he could not be brought to the surface until help arrived some time later. He died shortly afterwards. The court found that H had acted in good faith but that he lacked experience and did not appreciate the great danger that would be created in the well and did not seek expert advice on the proper method of emptying the well. In actions for damages for negligence resulting in the death of W and the doctor damages were awarded, but those awarded in the case of W were apportioned, one-tenth of the responsibility being attributed to W. On appeal, Held: (i) the defendant company were liable for negligence causing the death
of W because the method adopted to empty the well had created a situation of
great danger to anyone descending the well on the morning in question, and the
defendant company were negligent in that no clear warning of the deadly danger
was given to W on that morning, H's order not to go down the well until he came
being insufficient to discharge the defendant company's legal duty to take
reasonable care not to expose W to unnecessary risk, though the apportionment of
one-tenth of the responsibility to W would not be disturbed. Chadwick v BRB [1967] 2 All ER 945, QBD In December, 1957, C. was about forty-four years old and since 1945 had been successfully engaged in a window-cleaning business and taking an interest in social and charitable activities in his community. In 1941 when he was twenty-eight years old, he had suffered some psycho-neurotic symptoms, but he had not suffered from them for sixteen years thereafter and he was not (so the court found) someone who would be likely to relapse under the ordinary stresses of life. On Dec. 4, 1957, immediately following a collision between two railway trains on a line a short distance from his home, C. voluntarily took an active part throughout the night in rescue operations at the scene of the accident, in which ninety persons had been killed and many others were trapped and injured. As a result of the horror of his experience at the scene of the accident C. suffered a prolonged and disabling anxiety neurosis necessitating hospital treatment. In an action brought by C. and continued after his death by his widow as his personal representative it was conceded by the defendants that the accident was caused by negligence for which they were legally responsible, but liability to C. in damages was denied. Held: the defendants were in breach of duty to C. and his illness was
suffered as a result of that breach, with the consequence that his personal
representative was entitled to recover damages, for the following reasons- ECONOMIC LOSS
CARELESS ACTS
(a) As a consequence of physical damage to a third party's property Cattle v Stockton Waterworks (1875) LR 10 QB 453 Defendants, a waterworks company, under their Act laid down one of their mains along and under a turnpike-road, made under an Act which declared the soil to be in the owners of the adjoining land, subject only to the right to use and maintain the road. K. was owner of land on both sides, at a spot where the road was carried across a valley on an embankment, and wanting to connect his land on either side, K. employed Plaintiff at an agreed sum, to make a tunnel under the road. In doing the work, it was discovered that there was a leak in the Defendants' main higher up the road, and on the Plaintiff digging out the earth, the water from the leak flowed down upon the work and delayed it, so as to cause pecuniary damage to the Plaintiff, for which he brought an action against Defendants: -Held, that assuming K. could have maintained an action against Defendants
for injury to his property (as to which the Court gave no opinion), the damage
sustained by Plaintiff by reason of his contract with K. becoming less
profitable, or a losing contract, in consequence of the injury to K.'s property,
gave Plaintiff no right of action against Defendants. -The tunnel was formed by
digging through half the width of the road, forming the tunnel, and then
completing the other half in the same way. Before commencing the work K.
obtained the consent of the road surveyor and the trustees: -Held, assuming K.
could, under the circumstances, have been indicted for the nuisance to the high
road, the partial obstruction to the highway did not render the whole proceeding
so illegal as to prevent Plaintiff who was engaged in it from recovering damages
for a wrong. Weller v Foot and Mouth Disease Research Institute [1966] 1 QB 569, QBD The principle of the common law that a duty of care which arises from a risk of direct injury to person or property is owed only to those whose persons or property may foreseeably be injured by a failure to take care is not affected by the decision in Hedley Byrne & Co., Ltd. v. Heller & Partners, Ltd. ([1963] 2 All E.R. 575); in order to have a right of action for negligence a plaintiff must show that he was within the defendant's duty to take care, and he may then recover by way of damages for the direct and consequential loss reasonably foreseeable, but, though proof of direct loss is not an essential part of the claim, he must establish that he was within the scope of the defendant's duty of care (see p: 570, letter D, post). In consequence, as was assumed, of the escape of a virus imported by the defendants and used by them for experimental work on foot and mouth disease at land and premises owned and occupied by them, cattle in the vicinity of the premises became infected with the disease. Because of the disease an order was made under statutory powers closing cattle markets in the district, with the result that the plaintiffs, who were auctioneers, were temporarily unable to carry on their business at those markets and suffered loss. The court was required to assume that the loss to the plaintiffs was foreseeable and that there was neglect on the part of the defendants which caused the escape of the virus. On the question whether in law an action for damages would lie for the loss, Held: (i) an ability to foresee indirect or economic loss to another person
as the result of a defendant's conduct did not automatically impose on the
defendant a duty to take care to avoid that loss; in the present case the
defendants were not liable in negligence, because their duty to take care to
avoid the escape of the virus was due to the foreseeable fact that the virus
might infect cattle in the neighbourhood and thus was owed to owners of cattle,
but, as the plaintiffs were not owners of cattle, no such duty was owed to them
by the defendants. Hedley Byrne & Co., Ltd. v. Heller & Partners, Ltd.
([1963] 2 All E.R. 575) distinguished. Donoghue (or McAlister) v. Stevenson
([1932] All E.R. Rep. 1) and Morrison Steamship Co., Ltd. v. S.S. Greystoke
Castle (Owners of Cargo) ([1946] 2 All E.R. 696) considered and applied. Spartan Steel & Alloys v Martin [1972] 3 All ER 557, CA The plaintiffs manufactured stainless steel alloys at a factory which was directly supplied with electricity by a cable from a power station. The factory worked 24 hours a day. Continuous power was required to maintain the temperature in a furnace in which metal was melted. The defendants' employees, who were working on a near-by road, damaged the cable whilst using an excavating shovel. The electricity board shut off the power supply to the factory for 14 ½ hours until the cable was mended. There was a danger that a 'melt' in the furnace might solidify and damage the furnace's lining, so the plaintiffs poured oxygen on to the 'melt' and removed it, thus reducing its value by £368. If the supply had not been cut off, they would have made a profit of £400 on the 'melt', and £1,767 on another four 'melts', which would have been put into the furnace. They claimed damages from the defendants in respect of all three sums. The defendants admitted that their employees had been negligent, but disputed the amount of their liability. Held - (i) The defendants were liable in respect of the physical damage to
the 'melt' and for the loss of profit on it, for that loss was consequential on
the physical damage; SCM (United Kingdom) Ltd v WJ Whittall & Son Ltd [1970]
3 All ER 245 followed. Per Lord Denning MR. At bottom the question of recovering economic loss is
one of policy. Whenever the courts draw a line to mark out the bounds of duty,
they do it as a matter of policy so as to limit the responsibility of the
defendant. Whenever the courts set bounds to the damages recoverable -saying
that they are or are not, too remote - they do it as a matter of policy so as to
limit the liability of the defendants. The time has come to discard the tests
which have been propounded in the reported cases and which have proved so
elusive. It is better to consider the particular relationship in hand, and see
whether or not, as a matter of policy, economic loss should be recoverable. Candlewood Navigation v Mitsui [1985] 2 All ER 935, PC A vessel which was time chartered to the plaintiff time charterers was involved in a collision with the appellants' vessel while both vessels were waiting to berth at a New South Wales port. The collision was caused by the negligence of the crew of the appellants' vessel and resulted in the chartered vessel being damaged and put out of operation while repairs were carried out. The vessel underwent temporary repairs in Australia but those repairs were delayed for a period of some 32 days because the vessel was blacked by a trade union when the owners decided that permanent repairs should be carried out elsewhere. The charterers brought an action against the appellants in the New South Wales Supreme Court claiming damages for economic loss made up of hire they had had to pay while the vessel was repaired and loss of profits for the same period. The trial judge upheld the charterers' claim and also refused to discount the 32 days in assessing damages. The appellants appealed to the Privy Council, contending that recovery of economic loss suffered as a result of damage caused to a chattel by a wrongdoer should not be tied to the ownership of the chattel but by whether it was a direct result of the negligence and was foreseeable. Held - (1) Applying the principle that a person who was not the owner of a
chattel was not entitled to sue a person who damaged the chattel to recover
economic loss which resulted from not being able to use the chattel, the
charterers were not entitled to recover damages from the appellants for economic
loss. To that extent the appeal would be allowed; Cattle v Stockton Waterworks
Co [1874-80] All ER Rep 220 and Simpson & Co v Thomson (1877) 3 App Cas 279
applied; dictum of Scrutton LJ in Elliott Steam Tug Co Ltd v Shipping Controller
[1922] 1 KB at 139 approved; Cattex Oil (Australia) Pty Ltd v Dredge Willemstad
(1976) 136 CLR 529 considered. Leigh v Aliakmon Shipping [1986] 2 All ER 145, HL The buyers agreed to buy from the sellers a quantity of steel coils which were to be shipped c & f from Korea to the United Kingdom. The steel was badly stowed on board the shipowners' vessel and suffered damage during the voyage from Korea to the United Kingdom. In the course of that voyage, and after the damage had occurred but before it was discovered, the sellers tendered the bill of lading to the buyers for payment but the buyers were unable to make payment. The parties then agreed to vary their contract so as to provide that the sellers would deliver the bill of lading to the buyers to enable them to take delivery of the steel, that the buyers would not, however, become the holders of the bill of lading but would merely take delivery as agents for the sellers and that after delivery the steel would be stored to the sole order of the sellers. When the damage to the steel was discovered the buyers brought an action against the shipowners claiming damages for breach of contract and negligence. The judge found for the buyers in contract and on appeal by the shipowners the question arose whether, assuming the buyers did not have title to the steel, they were nevertheless entitled to sue the shipowners in negligence. The Court of Appeal allowed the appeal, holding that there was no contract between the buyers and the shipowners on the terms of the bill of lading and that, because the buyers did not have title to the steel, they were not entitled to sue the shipowners in tort. The buyers appealed. Held - The appeal would be dismissed for the following reasons- (b) As a consequence of acquiring a defective item of property Dutton v Bognor Regis UDC [1972] 1 QB 373, CA By s 1 of the Public Health Act 1936 it was the duty of a local authority to carry the Act into execution. Pursuant to that duty, and under the statutory authority contained in s 61 of the Act to make building byelaws, the Bognor Regis Urban District Council ('the council') made byelaws regulating (inter alia) the construction of buildings in their area. The Act provided the council with powers to enforce the byelaws. The byelaws were in standard form and could not be relaxed except with the Minister's consent. The byelaws governed every stage of building work; in particular byelaw 18 provided that the foundations of a building should be properly constructed to sustain the loads of the building and to prevent any settlement that might impair its stability. The byelaws also provided for the appointment of surveyors and inspectors to visit building work to see whether the byelaws were being complied with. Offences against the byelaws were punishable by a fine. In 1958 a builder, H, bought land in Bognor Regis for the purpose of developing it as a housing estate. He laid out the land in plots. One of the plots was on the site of an old rubbish tip, the tip having been filled in and the ground made up to look like the surrounding land. In October 1958 the builder submitted plans of this plot to the council for byelaw and planning approval. The plans showed that the house to be built on the plot had normal foundations for the type of soil in the area. In October 1958 the council gave byelaw approval to the plans, under the 1936 Act, on the printed form for that purpose. The form contained a note that all foundations and drains must be examined by the council's surveyor before being covered up, and that no new premises were to be occupied before being certified by the council's surveyor. A batch of notice forms was sent to the builder, with the form of approval for him to notify the council of the progress of the work. Planning permission for development of the plot was then granted. Having got the necessary approvals, the builder started work on the plot in 1959. While digging the trenches for the foundations he came on the remains of the rubbish tip; so he made the outer trench deeper than usual and reinforced the concrete floor with a steel mesh, but he did not bother about the inner walls. He duly notified the council that the foundations were ready for inspection. The council sent their building inspector to inspect them. The inspector approved the foundations for the purpose of the building byelaws. In doing so the inspector failed to carry out his task properly for had he made a competent inspection of the foundations he could easily have detected that the house was being built on a rubbish tip and that, in breach of the byelaws, the foundations laid by the builder were not properly constructed having regard to the nature of the land since they were not strong enough to take the load of the house. Having obtained approval for the foundations, the builder went ahead in building up the house to damp-proof course level, and the work at that stage too was passed by the council's surveyor. The house was finished at the end of 1959, and early in 196o the builder sold it to C. In December 1960 C sold the house to the plaintiff. As the house was new the plaintiff did not herself employ a surveyor but it was common ground that if a surveyor had been employed he could not have found out about the hidden defect in the foundations. The surveyor of the plaintiff's building society passed the house. Soon after the plaintiff had moved into the house in January 1961, the walls and ceiling cracked, the staircase slipped and the doors and windows would not close. This was due to subsidence of an internal wall caused by the inadequate foundations. The condition of the house got worse and in 1963 a surveyor instructed by the plaintiff's solicitor found out that the house had been built on a rubbish tip. In 1964 the plaintiff issued a writ against the builder and against the council for negligence claiming damages of £2,740 (being £2,240 for the cost of repairing the house and £500 for diminution in its value). The plaintiff's claim against the builder was settled for £625 because it was accepted that on the authorities (ie, Bottomley v Bannister [1932] KB 458 and Otto v Bolton & Norris [1936] 1 All ER 960) he was exempt from liability for negligence. Held - (1) The council, through their building inspector, owed a duty of care
to the plaintiff to ensure that the inspection of the foundations of the house
was properly carried out and that the foundations were adequate, for the
following reasons- (2) The council were liable to the plaintiff for the damage caused by the breach of duty by their building inspector in failing to carry out a proper inspection of the foundations; the plaintiff was not precluded from recovering damages on the ground that her loss was solely economic because (per Lord Denning MR and Sachs LJ) the damage to the house was physical damage and the plaintiff was entitled to recover the cost of repairs: (per Sachs and Stamp LJJ) as an action in negligence lay for economic or physical loss, the correct test in ascertaining whether any particular damage was recoverable was not whether it was physical or economic damage, but what range of damage was the proper exercise of the power designed to prevent or what was the character of the duty owed; applying that test there was nothing, in the nature of the loss sustained by the plaintiff to preclude a claim being maintained for that loss; accordingly the plaintiff was entitled to recover the damages claimed against the council as representing the cost of repairing the house although (per Sachs LJ) it was doubtful whether damages could be awarded for any reduction in market value. Dictum of Salmon LJ in Ministry of Housing and Local Government v Sharp [1970] 1 All ER at 1027 applied. Dictum of Lord Denning MR in SCM (United Kingdom) Ltd v W J Whittall & Son Ltd [1970] 3 All ER at 250 considered. Decision of Cusack J sub nom Dutton v Bognor Regis Urban District Council
[1971] 2 All ER 1003 affirmed. Anns v Merton LBC [1977] 2 All ER 492, HL The Public Health Act 1936 imposed and conferred a wide range of duties and powers on local authorities for the purpose of safeguarding and promoting the health of the public at large. In particular local authorities were enabled through building byelaws made under s 61 of the 1936 Act to supervise and control the construction of buildings in their area and in particular the foundations of buildings. Building byelaws were duly made under these powers by a local authority ('the council') in 1953. The byelaws contained provision for the deposit of plans and the inspection of work. Byelaw 18(1)(b) provided that the foundation of every building should be taken down to such depth or be so designed and constructed as to safeguard the building against damage by swelling and shrinking of the subsoil. In February 1962 the council approved building plans for the erection of a two storey block of maisonettes which were deposited under the byelaws. The approved plans showed, inter alia, the base wall and concrete foundations of the block '3 feet or deeper to the approval of local authority'. The written notice of approval drew attention to the requirement of the byelaws that notice should be given to the council surveyor both at the commencement of the work and when the foundations were ready to be covered. When the foundations were ready the council had the power to inspect and to insist on any corrections necessary to bring the work into conformity with the byelaws but were not under any obligation to inspect the foundations. On completion of the block in 1962 the builder, who was also the owner of the block, granted a long lease of each of the maisonettes, the last conveyance being made on 5th November 1965. In February 1970 structural movements began to occur resulting in cracks in the walls, sloping of floors and other defects. On 21st February 1972 the plaintiffs, who were the lessees of the maisonettes, issued writs against the builder and the council claiming damages. Two of the plaintiffs were the original lessees of their maisonettes and the other plaintiffs had acquired their leases by assignment in 1967 and 1968. The plaintiffs claimed that the damage to the maisonettes was attributable to the fact that the block had been built on inadequate foundations, there being a depth of two feet six inches only instead of three feet or deeper as shown on the deposited plans. As against the council the plaintiffs claimed damages for negligence by their servants or agents in approving the foundations on which the block had been erected and/or in failing to inspect the foundations. A preliminary issue was tried on the question whether the plaintiffs' claims were barred under s 2(1)(a) of the Limitation Act 1939. The official referee held that the plaintiffs' cause of action had accrued on the date of the first conveyance of each of the maisonettes, i e more than six years before the issue of the writs, and that accordingly the claims were barred under s 2(1)(a). The Court of Appeal, however, allowed appeals by the plaintiffs, holding that a cause of action did not accrue before a person capable of suing discovered, or ought to have discovered, the damage. The council appealed to the House of Lords and obtained leave to argue the question whether it was under a duty of care to the plaintiffs at all. Held - The appeal would be dismissed for the following reasons- Per Curiam. (i) A builder who is also the owner of a house is not immune from
liability in negligence for defects in the building to a person who subsequently
acquires it. Alternatively, since it is the duty of the builder, whether owner
or not, to comply with the byelaws, an action may be brought against him for
breach of statutory duty by any person for whose benefit or protection the
byelaw was made; Gallagher v N McDowell Ltd [1961] NI 26 and dictum of Lord
Denning MR in Dutton v Bognor Regis United Building Co Ltd [1972] 1 All ER at
471, 472 applied; Bottomley v Bannister [1931] All ER Rep 99 disapproved. Murphy v Brentwood DC [1990] 2 All ER 908, HL In 1970 the plaintiff purchased from a construction company one of a pair of semi-detached houses newly constructed on an in-filled site on a concrete raft foundation to prevent damage from settlement. The plans and calculations for the raft foundation were submitted to the local council for building regulation approval prior to the construction of the houses. The council referred the plans and calculations to consulting engineers for checking and on their recommendation approved the design under the building regulations and byelaws. In 1981 the plaintiff noticed serious cracks in his house and discovered that the raft foundation was defective and that differential settlement beneath it had caused it to distort. The plaintiff was unable to carry out the necessary repairs to the foundation, which would have cost £45,000, and in 1986 the plaintiff sold the house subject to the defects for £35,000 less than its market value in sound condition. He brought an action against the council claiming that it was liable for the consulting engineers' negligence in recommending approval of the plans and alleging that he and his family had suffered an imminent risk to health and safety because gas and soil pipes had broken and there was a risk of further breaks. The judge, who found as a fact that the plaintiff had been exposed to an imminent risk to health and safety, held the council liable for the consulting engineers' negligence and awarded the plaintiff damages of £38,777, being the loss on the sale of the house and expenses. The council appealed to the Court of Appeal, which held, following existing House of Lords authority, that the council owed a duty of care to the plaintiff to see that the house was properly built so that injury to the safety or health of those who lived in it was avoided and that it was in breach of that duty when it approved plans for a defective raft foundation. The court accordingly dismissed the appeal. The council appealed to the House of Lords. Held - When carrying out its statutory functions of exercising control over building operations a local authority was not liable in negligence to a building owner or occupier for the cost of remedying a dangerous defect in the building which resulted from the negligent failure of the authority to ensure that the building was designed or erected in conformity with the applicable standards prescribed by the building regulations or byelaws but which became apparent before the defect caused physical injury, because the damage suffered by the building owner or occupier in such circumstances was not material or physical damage but the purely economic loss of the expenditure incurred either in remedying the structural defect to avert the danger or of abandoning the property as unfit for habitation, and, since a dangerous defect once known became merely a defect in quality, to permit the building owner or occupier to recover his economic loss would logically lead to an unacceptably wide category of claims in respect of buildings or chattels which were defective in quality, and would in effect introduce product liability and transmissable warranties of quality into the law of tort by means of judicial legislation. The council accordingly had owed no duty of care to the plaintiff when it approved the plans for a defective raft foundation for the plaintiff's house. The appeal would therefore be allowed. Sutherland Shire Council v Heyman (1985) 60 ALR 1 followed. Dutton v Bognor Regis United Building Co Ltd [1972] 1 All ER 462 and Anns v Merton London Borough Council [1977] 2 All 492 overruled. Per curiam. It is unrealistic to regard a building or chattel which has been wholly erected or manufactured and equipped by the same contractor as a complex structure in which one part of the structure or chattel is regarded as having caused damage to other property when it causes damage to another part of the same structure or chattel, since the reality is that the structural elements in a building or chattel form a single indivisible unit of which the different parts are essentially interdependent and to the extent that there is a defect in one part of the structure or chattel it must to a greater or lesser degree necessarily affect all other parts of the structure. However, defects in ancillary equipment, manufactured by different contractors, such as central heating boilers or electrical installations may give rise to liability under ordinary principles of negligence. Decision of the Court of Appeal [1990] 2 All ER 269 reversed. Junior Books v Veitchi [1982] 3 All ER 201, HL The respondents (the owners) engaged a building company to build a factory for them. In the course of construction the owners' architects nominated the appellants (the sub-contractors) as specialist sub-contractors to lay a concrete floor with a special surface in the main production area of the factory, and the sub-contractors duly entered into a contract with the main contractors to carry out the flooring work. There was, however, no contractual relationship between the sub-contractors and the owners. Two years after the floor had been laid it developed cracks in the surface and the owners were faced with the prospect of continual maintenance costs to keep the floor usable. The owners brought an action against the sub-contractors alleging that the floor was defective because of the sub-contractors' negligence in laying it, and claiming that the sub-contractors were liable for the cost of replacing the floor and for consequential economic loss arising out of the moving of machinery, the closing of the factory, the payment of wages and overheads, and the loss of profits during the period of replacement. The owners further alleged that it would be cheaper to lay a new floor than to carry out continuous maintenance on the existing floor. The sub-contractors in reply claimed that, in the absence of any contractual relationship between the parties or a plea by the owners that the defective floor was a danger to the health or safety of any person or constituted a risk of damage to any other property of the owners, the owners' pleading did not disclose a good cause of action. The Lord Ordinary and, on appeal, the Court of Session rejected the sub-contractors' contention and held that the owners were entitled to proceed with their action. The subcontractors appealed, contending, inter alia, (i) that to impose liability on the subcontractors in the absence of any danger to the person or loss or damage to other property would in effect require sub-contractors and other manufacturers or suppliers of goods or work to give to an indeterminate class of potential litigants the same warranty regarding the fitness of the goods or work as they would be required to do when in a contractual relationship, and (ii) that a duty not to produce a defective article could not have a universally ascertainable standard of care, since whether an article was to be judged defective depended on whether it measured up to the contract under which it was constructed and the terms of that contract would not necessarily be known to the user of the article. Held (Lord Brandon dissenting) - The appeal would be dismissed for the
following reasons- (2) (Per Lord Keith) The sub-contractors were in breach of a duty owed to the
owners to take reasonable care to avoid acts or omissions, including laying a
defective floor, which they ought to have known would be likely to cause the
owners economic loss, including loss of profits caused by the high cost of
maintaining a defective floor, and in so far as the owners were required to
mitigate the loss by replacing the floor itself the cost of replacement was the
appropriate measure of the sub-contractors' liability. Muirhead v Industrial Tank Specialities [1985] 3 All ER 705, CA The plaintiff was a wholesale fish merchant. He wished to expand his lobster trade and decided to purchase lobsters during the summer, store them in a large tank, and then resell them on the Christmas market when prices were higher. The plaintiff intended to use a system by which seawater was collected, filtered, pumped into the tank, and then recirculated in order to oxygenate it. The pumps were assembled in England by the manufacturers using electric motors manufactured in France by the manufacturers' parent company. The manufacturers then sold the pumps to a pump supplier, who in turn supplied them to the company responsible for the installation of the tank and pumps on the plaintiff's premises. The pumps were required to run for 24 hours a day, but within a few days of installation they started to cut out and continued to do so until they were replaced by pumps of a different make. On one occasion the recirculation of the water was affected and the plaintiff lost his entire stock of lobsters. Both before the installation of the pumps and when they began to cut out the plaintiff relied heavily on the advice of the company which installed the tank and pumps but at no stage was he aware of the existence of, nor did he have any contact with, the manufacturers. The plaintiff brought an action against, inter alios, the manufacturers claiming damages for, inter alia, the loss of the lobsters and economic loss, including loss of profit on intended sales. The judge found that the cause of the cutting out of the motors was their unsuitability for the English voltage system and he held that there had been sufficient reliance by the plaintiff on the manufacturers for the manufacturers to owe him a duty of care, on the basis that the plaintiff, as an ultimate user, was entitled to expect the manufacturers to have tested the electric motors to ensure that they were suitable for use in the United Kingdom. The judge further held that, although the actual physical damage to the plaintiff's lobsters could not have been foreseen, the economic loss suffered by the plaintiff was reasonably foreseeable by the manufacturers because the manufacturers were aware that pumps incorporating their motors were being sold for use at fish farms and should have realised that the pumps would be used for recirculation and oxygenation of water in ranks where fish were kept. The manufacturers appealed. At the hearing of the appeal the plaintiff contended that the actual physical damage suffered by him, namely the loss of his stock of lobsters, was reasonably foreseeable by the manufacturers. Held - (1) A manufacturer of defective goods could be liable in negligence
for economic loss suffered by an ultimate purchaser if there was a very close
proximity or relationship between the parties and the ultimate purchaser had
placed real reliance on the manufacturer rather than on the vendor. However, on
the facts there was no such proximity and reliance by the plaintiff on the
manufacturers and in the absence of such proximity and reliance there was
nothing to distinguish the plaintiff's situation from that of an ordinary
purchaser of goods who, having suffered financial loss as a result of a defect
in those manufactured goods, could only look to the vendor and not to the
ultimate manufacturer to recover damages for purely economic loss. The
manufacturers' appeal on the issue of liability for economic loss would
therefore be allowed; Junior Books Ltd v Veitchi Co Ltd [1982] 3 All ER 201
explained. Per curiam. Where a supplier of goods incorporates the products of another
manufacturer into his goods and the contract for the supply of those products to
the supplier includes a term excluding liability for damage consequent on
defects in those products, the manufacturer is entitled to rely on that
exclusion clause in an action for negligence arising out of such a defect
brought directly against him by a purchaser from the supplier. Simaan General Contracting v Pilkington Glass (No 2) [1988] 1 All ER 791, CA The plaintiffs were the main contractors for a building to be erected in Abu Dhabi. The plans and specifications required double glazed units of green glass to be incorporated in the curtain walling of the building and specified that a particular type of glass manufactured by the defendants be used. The supply and erection of the curtain walling was sub-contracted by the plaintiffs to another company which, as required by the specifications and the sub-contract, ordered the glass panels from the defendants. The glass supplied was not of a uniform colour when installed and the building owner withheld payment from the plaintiffs until the panels were replaced. The plaintiffs sued the defendants for the economic loss caused by the withholding of payment. On the trial of a preliminary issue whether the defendants owed the plaintiffs a duty to take reasonable care to avoid defects in the units the judge held that the defendants did owe such a duty. The defendants appealed to the Court of Appeal. Held - Foreseeability of harm did not automatically lead to a duty of care,
and accordingly there was no general rule that proof of foreseeable economic
loss caused by a defendant would automatically establish a successful claim in
negligence. In the circumstances, the plaintiffs could not, in the absence of a
contract between the parties or of any damage to property owned by the
plaintiffs, bring a direct claim against the defendants for economic loss alone,
because the defendants had not voluntarily assumed direct responsibility to the
plaintiffs for the quality of the glass and the plaintiffs had not relied on the
defendants. Furthermore, it would not be just and reasonable to impose on the
defendants a duty of care not to make the plaintiffs' contract less profitable,
because the plaintiffs had a remedy against the sub-contractor who in turn could
claim against the defendants, and at each stage liability could be determined in
the light of the exemption clauses, if any, applying to each particular
contract. Accordingly, the defendant's appeal would be allowed. Junior Books Ltd
v Veitchi Co Ltd [1982] 3 All ER 201 considered. Greater Nottingham Co-op Society v Cementation Piling & Foundations [1988] 2 All ER 971, CA The plaintiff building owner entered into a contract with a contractor for the extension and alteration of the plaintiff's office premises. The defendants were engaged as subcontractors to provide piles for the extension. As well as entering into the sub-contract with the contractor, the defendants entered into a collateral contract with the plaintiff which required the defendants to exercise reasonable care and skill in the design of the works and the selection of materials. However, the contract was silent as to the manner in which the piling works were to be executed. As a result of negligent operation of the piling equipment by one of the defendants' employees damage was caused to an adjoining building and work was suspended while a revised piling scheme was worked out. The defendants agreed that they were liable for the damage to the adjoining building but the plaintiff also claimed damages for (i) £68,606 paid by the plaintiff to the main contractor under the main contract as the result of executing the revised piling scheme, (ii) £79,235 paid by the plaintiff to the main contractor as the result of delay in putting in piles, and (iii) £282,697 economic loss caused to the plaintiff by the delayed completion of the building. The defendants denied liability for those sums and the plaintiff issued a writ. The judge hearing official referee's business gave judgment for the plaintiff on its claim. The defendants appealed. Held - As a matter of policy the circumstances in which economic loss was
recoverable in tort in the absence of physical damage was restricted to special
cases or exceptional circumstances. Furthermore, if there was a contract between
the parties it was to be assumed that the parties had defined in the contract
whether and in what circumstances one party was to be liable to the other for
economic loss. On the facts, the defendant subcontractors were not liable to the
plaintiff building owner for economic loss resulting from the defendants'
negligent execution of the piling work, notwithstanding the close proximity of
the parties and the foreseeability of the loss, because it was to be assumed
that the parties had defined their relationship exhaustively in the collateral
contract, which did not provide for the defendants to be liable for the manner
in which they executed the piling work or for them to be directly responsible to
the plaintiff for economic loss. Having regard to the existence of the contract,
the defendants had not assumed any responsibility beyond that expressly
undertaken in the contract. The defendants' appeal would therefore be allowed. STATEMENTS
Hedley Byrne v Heller [1963] 2 All ER 575, HL If in the ordinary course of business or professional affairs, a person seeks information or advice from another, who is not under contractual or fiduciary obligation to give the information or advice, in circumstances in which a reasonable man so asked would know that he was being trusted, or that his skill or judgment was being relied on, and the person asked chooses to give the information, or advice without clearly so qualifying his answer as to show that he does not accept responsibility, then the person replying accepts a legal duty to exercise such care as the circumstances require in making his reply; and for a failure to exercise that care an action for negligence will lie if damage results. Cann v. Willson ((1888), 39 Ch.D. 39), Fish v. Kelly ((1864), 17 C.B.N.S.
194), approved. Nocton v. Lord Ashburton ([1914-15] All E.R. Rep. 45), Robinson
v. National Bank of Scotland (1916 S.C. (H.L.) 154) and view of Denning, L.J.,
dissenting in Candler v. Crane, Christmas & Co. ([1951] 1 All E.R., see,
e.g., at p. 432, letter A) applied. A bank inquired by telephone of the respondent merchant bankers concerning the financial position of a customer for whom the respondents were bankers. The bank said that they wanted to know in confidence and without responsibility on the part of the respondents, the respectability and standing of E. Ltd., and whether E. Ltd. would be good for an advertising contract for £8,000 to £9,000. Some months later the bank wrote to the respondents asking in confidence the respondents' opinion of the respectability and standing of E. Ltd. by stating whether the respondents considered E. Ltd. trustworthy, in the way of business, to the extent of £100,000 per annum. The respondents' replies to the effect that E. Ltd. was respectably constituted and considered good for its normal business engagements were communicated to the bank's customers, the appellants. Relying on these replies the appellants, who were, advertising agents, placed orders for advertising time and space for E. Ltd., on which orders the appellants assumed personal responsibility for payment to the television and newspaper companies concerned. E. Ltd. went into liquidation and the appellants lost over £17,000 on the advertising contracts. The appellants sued the respondents for the amount of the loss, alleging that the respondents' replies to the bank's inquiries were given negligently, in the sense of misjudgment, by making a statement which gave a false impression as to E. Ltd.'s credit. Negligence was found at the trial and contested on appeal; the appeal was determined, however, on the assumption that there had been negligence, but without deciding whether there had or had not been negligence. Held: although in the present case, but for the respondents' disclaimer, the
circumstances might have given rise to a duty of care on their part, yet their
disclaimer of responsibility for their replies on the occasion of the first
inquiry was adequate to exclude the assumption by them of a legal duty of care,
with the consequence that they were not liable in negligence. Robinson v.
National Bank of Scotland (1916 S.C. (H.L.) 154) applied. Decision of the Court of Appeal ([1961] 3 All E.R. 891) affirmed, but not on
the same ground. Smith v Eric Bush [1989] 2 All ER 514, HL In two cases the question arose whether a surveyor instructed by a mortgagee to value a house owed the prospective purchaser a duty in tort to carry out the valuation with reasonable skill and care and whether a disclaimer of liability by or behalf of the surveyor for negligence was effective. In the first case the respondent applied to a building society for a mortgage to enable her to purchase a house. The building society, which was under a statutory duty to obtain a written valuation report on the house, instructed the appellants, a firm of surveyors, to inspect the house and carry out the valuation. The respondent paid the society an inspection fee of £38-89 and signed an application form which stated that the society would provide her with a copy of the report and mortgage valuation obtained by it. The form contained a disclaimer to the effect that neither the society nor its surveyor warranted that the report and valuation would be accurate and that the report and valuation would be supplied without any acceptance of responsibility. In due course the respondent received a copy of the report, which container a disclaimer in terms similar to those on the application form. The report, which valued the house at £16,500, stated that no essential repairs were required. In reliance on the report and without obtaining an independent survey the respondent purchased the house for £18,000, having accepted an advance of £3,500 from the society. In their inspection of the house the appellants had observed that the first floor chimney breasts had been removed but they had not checked to see whether the chimneys above were adequately supported. Eighteen months after the respondent purchased the house, bricks front the chimney collapsed and fell through the roof causing considerable damage. The respondent brought an action against the appellants claiming damages for negligence. The judge held that the appellants were liable and awarded the respondent damages. The Court of Appeal affirmed his decision, holding that the disclaimer was not fair and reasonable and was ineffective under the Unfair Contract Terms Act I977. The appellants appealed to the House of Lords. In the second case the appellants applied to the local authority for a mortgage to enable them to purchase a house. The local authority, which was under a statutory duty to obtain a valuation before advancing any money, decided to carry out the valuation themselves and for that purpose instructed their valuation surveyor. The appellants signed an application form which stated that the valuation was confidential and was intended solely for the information of the local authority and that no responsibility whatsoever was implied or accepted by the local authority for the value or condition of the property by reason of the inspection and report. After receiving the surveyor's valuation of the house at the asking price of £9,450, the local authority offered to advance the appellants 90% of that sum subject to certain minor repairs being done to the house. The appellants, assuming that the house was worth at least the amount of the valuation and that the surveyor had found no serious defects, purchased the property for £9,000 without obtaining all independent survey. Three years later they discovered that the house was subject to settlement, was virtually unsaleable and could only be repaired, if at all, at a cost of more than the purchase price. The appellants brought in action against the local authority and their survevor claiming damages for negligence. The juice upheld their claim but the Court of Appeal reversed his decision on the ground that the notice had effectively excluded liability. The appellants appealed to the House of Lords. Held - (1) A valuer who valued a house for a building society or local authority for the purposes of a mortgage application for a typical house purchase, knowing that the mortgagee would probably, and the mortgagor would certainly, rely on the valuation, and knowing that the mortgagor was an intending purchaser of the house and had paid for the valuation, owed a duty of care to both parties to carry out his valuation with reasonable skill and care. It made no difference whether the valuer was employed by the mortgagee or acted on his own particular account or was employed by a firm of independent valuers since he was discharging the duties of a professional man on whose skill and judgment he knew the purchaser would be relying. Furthermore, the fact that the local authority or building society was under a statutory duty to value the house did not prevent the valuer coming under a contractual or tortuous duty to the purchaser. The extent of liability was, however, limited to the purchaser of the house and did not extend to subsequent purchasers; dictum of Denning LJ in Candler v Crane Christmas & Co [1951] 1 All ER at 433-434 applied; Yianni v Edwin Evans & Sons (a firm) [1981] 3 All ER 592 approved. (2) However, the valuer could disclaim liability to exercise reasonable skill and care by an express exclusion clause but such a disclaimer made by or on behalf of the valuer constituted a notice which was subject to the 1977 Act and therefore had to satisfy the requirement in s 2(2) of that Act of reasonableness to be effective. In considering whether a disclaimer might be relied on, the general pattern of house purchases and the extent of the work and liability accepted by the valuer had to be borne in mind. Having regard to the high costs of houses and the high interest rates charged to borrowers, it would not be fair and reasonable for mortgagees and valuers to impose on purchasers the risk of loss arising as a result of the incompetence or carelessness on the part of valuers. It followed therefore the disclaimers were not effective to exclude liability for the negligence of the valuers, and accordingly the first appeal would be dismissed and the second appeal would be allowed. Per curiam. Where a surveyor is asked to survey industrial property, large blocks of flats or very expensive houses for mortgage purposes, where prudence would seem to demand that the purchaser obtain his own survey to guide him in his purchase it may be reasonable for him to limit his liability to the purchaser or exclude it altogether. Decision of the Court of Appeal in Smith v Eric S Bush (a firm) [1987] 3 All
ER 179 affirmed. Decision of the Court of Appeal in Harris v Wyre Forest DC
[1988] 1 All ER 691 reversed. Caparo Industries v Dickman [1990] 1 All ER 568, HL The respondents owned shares in a public company, F plc, whose accounts for the year ended 31 March 1984 showed profits far short of the predicted figure which resulted in a dramatic drop in the quoted share price. After receipt of the audited accounts for the year ended 31 March 1984 the respondents purchased more shares in F plc and later that year made a successful take-over bid for the company. Following the take-over, the respondents brought an action against the auditors of the company, alleging that the accounts of F plc were inaccurate and misleading in that they showed a pre-tax profit of some £1.2m for the year ended 31 March 1984 when in fact there had been a loss of over £400,000, that the auditors had been negligent in auditing the accounts, that the respondents had purchased further shares and made their take-over bid in reliance on the audited accounts, and that the auditors owed them a duty of care either as potential bidders for F plc because they ought to have foreseen that the 1984 results made F plc vulnerable to a take-over bid or as an existing shareholder of F plc interested in buying more shares. On the trial of a preliminary issue whether the auditors owed a duty of care to the respondents, the judge held that the auditors did not. The respondents appeared to the Court of Appeal, which allowed their appeal in part on the ground that the auditors owed the respondents a duty of care as shareholders but not as potential investors. The auditors appealed to the House of Lords and the respondents cross-appealed against the Court of Appeal's decision that they could not claim as potential investors. Held - (1) The three criteria for the imposition of a duty of care were
foreseeability of damage, proximity of relationship and the reasonableness or
otherwise of imposing a duty. In determining whether there was a relationship of
proximity between the parties the court, guided by situations in which the
existence, scope and limits of a duty of care had previously been held to exist
rather than by a single general principle, would determine whether the
particular damage suffered was the kind of damage which the defendant was under
a duty to prevent and whether there were circumstances from which the court
could pragmatically conclude that a duty of care existed; dictum of Brennan J in
Sutherland Shire Council v Heyman (1985) 60 ALR 1 at 43-44 adopted. Decision of the Court of Appeal [1989] 1 All ER 798 reversed. Spring v Guardian Assurance [1994] 3 All ER 129, HL The plaintiff was employed a sales director and office manager by the second defendants, C Ltd, who were agents for the sale of life assurance policies. In April 1989 C Ltd was taken over by the first defendant, G plc, and in July the plaintiff was dismissed. He attempted to set up a business in the same locality selling the assurance policies of another company but that company was obliged by the code of conduct of the insurance industry's self-regulatory body (Lautro) to obtain a reference from the plaintiffs previous employer, which was in turn required by r 3.5(2) of the Lautro rules to give a reference which made 'full and frank disclosure of all relevant matters which are believed to be true'. The plaintiff's prospective employer received such a bad reference from G plc that it refused to have anything to do with him. The reference stated that he kept the best business for himself, that he was a man of little or no integrity and could not be regarded as honest and that he had mis-sold a policy with the aim of generating a very substantial commission for himself at the client's expense. The plaintiff endeavoured to obtain employment with two other life assurance companies which were members of Lautro but was rejected. He brought an action against the defendants alleging, inter alia, breach of an implied contractual term that the defendants would prepare any reference in regard to him using reasonable care and would provide a reference which was full, frank and truthful, and negligence in providing an unsatisfactory reference. He claimed damages for the loss caused to him by the reference. The judge held that there was no contract between the plaintiff and G plc and no implied term in the plaintiff's contract with C Ltd that any reference would be full, frank and truthful and prepared with reasonable care but he further held that the defendants owed a duty of care to the plaintiff in regard to the reference, that they had been negligent in preparing the reference and he gave judgment for the plaintiff for damages to be assessed. The defendants appealed. The plaintiff cross-appealed against the dismissal of his claim for breach of contract. The Court of Appeal allowed the appeal, holding that the giver of a reference owed no duty of care in negligence to the person who was the subject of the reference either in giving or compiling the reference or in obtaining the information on which it was based and that his only remedy lay in defamation, and a term could not be implied in the plaintiff's contract with the defendants that any reference would be full, frank and truthful and prepared with reasonable care since such a term was not a necessary incident of the contract. The plaintiff appealed to the House of Lords. The defendants contended (i) that any duty to exercise due skill and care in preparing a reference should be negatived because, if the plaintiff were instead to bring an action for damage to his reputation, he could be met by the defence of qualified privilege which could only be defeated by proof of malice and (ii) that it would be against public policy to impose such a duty of care since it would inhibit frankness in the giving of references. Held - (Lord Keith dissenting) The appeal would be allowed for the following
reasons- (2) (per Lord Lowry, Lord Slynn and Lord Woolf) In the employer/ employee relationship, where economic loss in the form of failure to obtain employment was clearly foreseeable if a careless reference was given and there was an obvious proximity of relationship, it was fair, just and reasonable that the law should impose a duty of care on the employer not to act unreasonably and carelessly in providing a reference about his employee or ex-employee. The duty was to avoid making untrue statements negligently or expressing unfounded opinions even if honestly believed to be true or honestly held. (3) Since liability based on negligent misstatement could exist only in a restricted class of situations if (per Lord Goff) there was an assumption of responsibility or (per Lord Lowry, Lord Slynn and Lord Woolf) foreseeable damage was caused and there was proximity imposing a duty of care, the principle of liability was different and distinguishable from any general duty in regard to reputation not to defame any other person or to publish an injurious falsehood. Defamation and injurious falsehood on the one hand and negligence on the other were different torts and in particular, the torts protecting reputation did not involve the concept of a duty of care. Accordingly, the fact that the plaintiff could have brought an action for damage to his reputation did not prevent the recognition of a duty of care where, but for the existence of the other two torts, it would be fair, just and reasonable to recognise it in a situation where the giver of a reference had said or written what was untrue and where he had acted unreasonably and carelessly in doing so. Furthermore, public policy was in favour of not depriving an employee of a remedy to recover the damages to which he would otherwise be entitled as a result of being the victim of a negligent reference and even if the number of references given was reduced it was in the public interest that the quality and value would be greater; Bell-Booth Group Ltd v A-G [1989] 3 NZLR 148, Balfour v A-G [1991] 1 NZLR 519 and South Pacific Manufacturing Co Ltd v New Zealand Security Consultants and Investigations Ltd, Mortensen v Laing [1992] 2 NZLR 282 considered. (4) (per Lord Goff, Lord Slynn and Lord Woolf) An employer's duty to take reasonable care in preparing a reference in respect of an employee could in appropriate circumstances be expressed as arising from an implied term of the contract of employment, ie that if a reference was supplied by the employer in respect of the employee, due care and skill would be exercised in its preparation. However, the duty arising under such an implied term did not add anything to the duty of care arising in negligence. (5) Accordingly, the defendants owed a duty of care to the plaintiff in respect of the preparation of the reference and were prima facie liable for the negligence in its preparation and (Lord Lowry dissenting) the case would be remitted to the Court of Appeal to consider the issue of the extent to which the damage suffered by the plaintiff was caused by the breach of duty of the defendants. Per Lord Goff. Quaere whether an employer providing a reference owes a duty of care to the recipient of the reference. Per Lord Slynn. Those giving references can make it clear what are the parameters within which the reference is given, such as stating their limited acquaintance with the individual either as to time or as to situation, and it may be that employers can make it clear to the subject of the reference that they will only give one if he accepts that there will be a disclaimer of liability to him and to the recipient of the reference. Per Lord Woolf. (1) There can be no action for negligence if the statement is true. (2) The circumstances in which a term will be implied in a contract of employment requiring the employer to take reasonable care in preparing a reference in respect of an employee are : (i) the existence of the contract of employment or services; (ii) the fact that the contract relates to an engagement of a class where it is the normal practice to require a reference from a previous employer before employment is offered; (iii) the fact that the employee cannot be expected to enter into that class of employment except on the basis that his employer will, on the request of another prospective employer made not later than a reasonable time after the termination of a former employment, provide a full and frank reference as to the employee. Decision of the Court of Appeal [1993] 2 All ER 273 reversed. Ross v Caunters [1979] 3 All ER 580, Ch D The testator instructed solicitors to draw up his will to include gifts of chattels and a share of his residuary estate to the plaintiff, who was his sister-in-law. The solicitors drew up the will accordingly, naming the plaintiff and giving her address in the will. The testator requested the solicitors to send the will to him at the plaintiff's home, where he was staying, to be signed and attested. The solicitors sent the will to the testator with a covering letter giving instructions on executing it but failed to warn him that under s 15 of the Wills Act 1837 attestation of the will by a beneficiary's spouse would invalidate a gift to the beneficiary. The plaintiff's husband attested the will which was then returned to the solicitors who failed to notice that he had attested it. The testator died two years later, and nine months after that the solicitors informed the plaintiff that the gifts to her under the will were void because her husband had attested the will. The plaintiff brought an action against the solicitors claiming damages in negligence for the loss of the gifts under the will, and for her legal expenses in investigating her claim up to the date of issue of the writ. The plaintiff alleged that the solicitors were negligent in failing (i) to warn the testator about the consequences of s 15, (ii) on the return of the will, to check that it had been executed in conformity with the 1837 Act, (iii) to observe that the plaintiff's husband was an attesting witness, and (iv) to draw that fact to the testator's attention so that he could re-execute the will or make a new and valid will. The solicitors admitted negligence but denied that they were liable to the plaintiff, contending (i) that a solicitor was liable only to his client and then only in contract and not in tort, and could not, therefore, be liable in tort to a third party, (ii) that for reasons of policy a solicitor ought not to be liable in negligence to anyone except his client, and (iii) that in any event the plaintiff had no cause of action in negligence because the damage suffered was purely financial. The solicitors further contended that if damages were recoverable they ought not to include any sum in respect of the plaintiff's legal expenses prior to the issue of the writ, although they might be recoverable as costs in the action. Held - The solicitors were liable to the plaintiff for the following reasons- White v Jones [1995] 1 All ER 691, HL On 4 March 1986 the testator, who had quarrelled with the plaintiffs, his two daughters, executed a will cutting them out of his estate. In June the testator was reconciled with the plaintiffs and sent a letter to his solicitors giving instructions that a new will should be prepared to include gifts of £9,000 each to the plaintiffs. The solicitors received the letter on 17 July but nothing was done |