Junior Books Ltd v Veitchi Company Ltd

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Fraser of Tullybelton,Lord Russell of Killowen,Lord Keith of Kinkel,Lord Roskill,Lord Brandon of Oakbrook
Judgment Date15 July 1982
Judgment citation (vLex)[1982] UKHL J0715-2
Docket NumberNo. 9.
Date15 July 1982

[1982] UKHL J0715-2

House of Lords

Lord Fraser of Tullybelton

Lord Russell of Killowen

Lord Keith of Kinkel

Lord Roskill

Lord Brandon of Oakbrook

Junior Books Limited
(Respondents)
and
Veitchi Company Limited
(Appellants) (Scotland)
Lord Fraser of Tullybelton

My Lords,

1

I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Roskill, and I am in full agreement with his conclusion and with the reasons on which he bases it. I also gratefully adopt his summary of the facts. It is enough for me to say that the appellants (defenders) are specialist sub-contractors who laid composition flooring in a factory that was built for the respondents (pursuers) at Grangemouth between September 1969 and May 1970. The respondents aver that the floor is defective, owing to failure by the appellants to take reasonable care in laying it, and that it will have to be replaced. There was no contractual relationship between the appellants and the respondents, and for some reason that has not been explained the respondents have not taken legal proceedings against the main contractors with whom they did have a contractual relationship. The respondents have raised this action against the appellants, claiming damages which consist mainly of the direct and indirect cost of replacing the floor, the action being founded on averments that the appellants were negligent in laying the floor. At the present stage of relevancy these averments must be taken as true. The appeal raises an important question on the law of delict or, strictly speaking, quasi delict, which is not precisely covered by authority. The question is whether the appellants having (as must at this stage be assumed) negligently laid a floor which is defective, but which has not caused danger to the health or safety of any person nor risk of damage to any other property belonging to the owner of the floor, may in the circumstances averred by the respondents be liable for the economic loss caused to them by having to replace the floor.

2

The Lord Ordinary (Lord Grieve) and the Second Division answered that question in the affirmative, and they have allowed to the respondents a proof before answer. The appellants maintain that the question should be answered in the negative and that the action should be dismissed as irrelevant. As I agree with my noble and learned friend, Lord Roskill, that the appeal fails I only add to his speech in order to deal in my own words with two important matters that arise.

3

The first is the concern which has been repeatedly expressed by judges in the United Kingdom and elsewhere, that the effect of relaxing strict limitations upon the area of liability for delict (tort) would be, in the words of Cardozo J. to introduce "liability in an indeterminate amount for an indeterminate time to an indeterminate class". This is the flood-gates argument, if I may use the expression as a convenient description, and not in any dismissive or question-begging sense. The argument appears to me unattractive, especially if it leads, as I think it would in this case, to drawing an arbitrary and illogical line just because a line has to be drawn somewhere. But it has to be considered, because it has had a significant influence in leading judges to reject claims for economic loss which were not consequent upon physical danger to persons or other property of the pursuer/plaintiff. It was the main reason for rejecting the claim in the Scottish case of Dynamco Ltd. v. Holland & Hannen & Cubitts (Scotland) Ltd. 1971 S.C. 257, which has recently been followed with some apparent reluctance by the Lord Ordinary (Lord Maxwell) in Wimpey Construction (U.K.) Ltd. v. Martin Black & Co. 1982 S.L.T. 239. The floodgates argument was much discussed by the High Court of Australia in Caltex Oil (Australia) Pty. Ltd v. The Dredge "Willemstad" (1976) 136 C.L.R. 529, where the majority of the court held that there was sufficient proximity between the parties to justify a claim for economic loss because the defendant knew (in the words of the headnote) "that a particular person, not merely as a member of an unascertained class, [would] be likely to suffer economic loss as a consequence of his negligence". Whether the defenders' knowledge of the identity of the person likely to suffer from his negligence is relevant for the present purpose may with respect be doubted and it seems to be contrary to the views expressed in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 by Lord Reid at 482 and by Lord Morris of Borth-y-Gest at 494. But it is not necessary to decide the question in this appeal because the appellants certainly knew, or had the means of knowing, the identity of the respondents for whom the factory was being built. So if knowledge of the respondents' identity is a relevant test, it is one that the appellants can satisfy. They can also satisfy most, if not all, of the other tests that have been suggested as safeguards against opening the floodgates. The proximity between the parties is extremely close, falling only just short of a direct contractual relationship. The injury to the respondents was a direct and foreseeable result of negligence by the appellants. The respondents, or their architects, nominated the appellants as specialist sub-contractors and they must therefore have relied upon their skill and knowledge. It would surely be wrong to exclude from probation a claim which is so strongly based, merely because of anxiety about the possible effect of the decision upon other cases where the proximity may be less strong. If and when such other cases arise they will have to be decided by applying sound principles to their particular facts. The present case seems to me to fall well within limits already recognised in principle for this type of claim, and I would decide this appeal strictly on its own facts. I rely particularly on the very close proximity between the parties which in my view distinguishes this case from the case of producers of goods to be offered for sale to the public.

4

The second matter which might be thought to justify rejecting the respondents' claim as irrelevant is the difficulty of ascertaining the standard of duty owed by the appellants to the respondents. A manufacturer's duty to take care not to make a product that is dangerous sets a standard which is, in principle, easy to ascertain. The duty is owed to all who are his "neighbours". It is imposed upon him by the general law and is in addition to his contractual duties to other parties to the contract. It cannot be discharged or escaped by pleading that it conflicts with his contractual duty. But a duty not to produce a defective article sets a standard which is less easily ascertained, because it has to be judged largely by reference to the contract. As Windeyer J. said in Voli v. Inglewood Shire Council (1963) 110 C.L.R. 74, 85 if an architect undertakes "to design a stage to bear only some specified weight, he would not be liable for the consequences of someone thereafter negligently permitting a greater weight to be put upon it." Similarly a building constructed in fulfilment of a contract for a price of £100,000 might justly be regarded as defective, although the same building constructed in fulfilment of a contract for a price of £50,000 might not. Where a building is erected under a contract with a purchaser, then provided the building, or part of it, is not dangerous to persons or to other property and subject to the law against misrepresentation, I see no reason why the builder should not be free to make with the purchaser whatever contractual arrangements about the quality of the product the purchaser wishes. However jerry-built the product, the purchaser would not be entitled to damages from the builder if it came up to the contractual standard. I do not think a subsequent owner could be in any better position, but in most cases he would not know the details of the contractual arrangements and, without such knowledge, he might well be unable to judge whether the product was defective or not. But in this case the respondents, although not a party to the contract with the appellants, had full knowledge of the appellants' contractual duties, and this difficulty does not arise. What the position might have been if the action had been brought by a subsequent owner is a matter which does not have to be decided now.

5

For the reasons given by my noble and learned friend, Lord Roskill, and for the additional reasons which I have stated, I would dismiss this appeal.

Lord Russell of Killowen

My Lords,

6

I have had the advantage of reading in draft the speeches prepared by my noble and learned friends, Lords Fraser of Tullybelton and Roskill. I agree with them and with their conclusion that this appeal fails. In my respectful opinion the view of my noble and learned friend, Lord Brandon of Oakbrook, unnecessarily confines the relevant principles of delict to exclude cases of such immediate proximity as the present.

Lord Keith of Kinkel

My Lords,

7

The respondents own and occupy a factory in Grangemouth. This factory was constructed for them over a period in 1969 and 1970, under a contract between them and a company called Ogilvie (Builders) Ltd, which I shall call "the main contractors". The respondents' architects nominated the appellants as specialist sub-contractors for the purpose of laying a floor in the main production area of the factory. The appellants entered into a contract with the main contractors for the carrying out of this work.

8

According to the respondents' averments the appellants' workmanship was seriously defective in a number of respects, with the result that after two years the floor began to develop cracks over the whole of its surface. They say that it requires replacement in order to avoid the necessity for continual maintenance, which...

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