S.C.M. (United Kingdom) Ltd v W. J. Whittall & Son Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE WINN,LORD JUSTICE BUCKLEY |
| Judgment Date | 17 July 1970 |
| Judgment citation (vLex) | [1970] EWCA Civ J0717-2 |
| Date | 17 July 1970 |
| Court | Court of Appeal (Civil Division) |
[1970] EWCA Civ J0717-2
The Master of The Rolls (Lord Denning)
Lord Justice Winn and
Lord Justice Buckley
In The Supreme Court of Judicature
Court of Appeal
Royal Courts of Justice
Mr R. KIDWELL, Q.C. and Mr J. GORMAN (instructed by Messrs Berrymans, Agents for Messrs T. Haines, Duffell & Son, Birmingham) appeared on behalf of the Appellants (Defendants).
Mr CONRAD DEHN. Q.C. and Mr C. BATHURST (instructed by Messrs Nabarro, Nathanson & Co.) appeared on behalf of the Respondents (Plaintiffs).
This is a preliminary question of law. We have to assume these to be the facts:-
On 20th November, 1967, a firm of building contractors were working in a road in West Bromwich, called Birmingham Road. There were several factories in the road. The task of the contractors was to rebuild the boundary wall of one of the factories next the road. They dug a trench and one of their men was hammering a metal tube into the bottom of the trench. He hit a brick but did not stop his hammering. He went on and cut into an electric cable which was running alongside the road. It was an 11,000-volt cable owned by the Electricity Board and supplying electric current to many factories in the road. The workman damaged it so badly that there was a power failure. The current was cut off for about seven hours and seventeen minutes. Some of the factories were put out of action. One of them was a factory in Birmingham Road at which a company called S.C.M. Ltd. manufactured typewriters and copying machines. They suffered particularly because they had molten materials in their machines. These materials solidified owing to lack of electric heat. The company was put to much trouble in getting the machines clear. They had to strip them down, and chip avray the solidified material, and reassemble the machines. It took them much of the time while the current was cut off. In addition, some parts of the machines were damaged beyond recovery. The company lost the value of those items and also the profit from one full day's production. They claim damages from the contractors for all that loss.
It must be accepted that the contractors were negligent in damaging the cable and that they ought reasonably to have foreseen that, if they damaged the cable, the supply of current to factories would be likely to be interfered with and that the occupiers, such as the Plaintiffs, would be likely to suffer loss and damage, including injury to their property.
During the course of the argument a question arose whether the loss of production was due to the shutting down of the works (thus causing economic loss only), or whether it was due to the physical damage to the machines which had to be repaired. Mr Dehn, for the factory, made enquiries of his clients and assured the Court that he confined the claim to the material damage done to the machines, plus the loss of production consequent on that damage.
This was an important assurance. It is well settled that when a Defendant by his negligence causes physical damage to the person or property of the Plaintiff, in such circumstances that the Plaintiff is entitled to compensation for the physical damage, then he can claim, in addition, for economic loss consequent on it. Thus a Plaintiff who suffers personal injuries recovers his loss of earnings: and a shipowner, whose ship is sunk or damaged, recovers for his loss of freight. If and in so far as Mr Dehn is entitled to claim for the material damage, then he can claim for the loss of production which was truly consequential on the material damage. But, if the loss of production was really due to the cutting-off of the electricity for 7 hours and 17 minutes - and the Plaintiff took the opportunity during that time of remedying the physical damage - then the claim for loss of production would depend on whether, in this type of case, economic loss is recoverable.
Mr Dehn did not wish to discuss whether economic loss is recoverable. That was good strategy on his part. He did not want to fight on that battlefield. But I do not think his strategy should divert us from doing so. Damage was done to many factories by the cutting off of the electricity supply. Those who had a stand-by system would not suffer loss. But all others would suffer loss of production and loss of profit. This could be reasonably foreseen. Some of the factories may have suffered material damage as well. But that should not give them a special claim. Either all who suffered loss of profit should get damagesfor it, or none of them should. It should' not depend on the chance whether material damage was done as well.
The principle at stake is an important one. The factory owners rely on the law of negligence as enunciated in modern times. First, they were neighbours' within the principle stated by Lord Atkin in Donaghue v. Stevenson. 1932 Appeal Cases at page 580, because they were so closely and directly affected by the work that the contractors ought reasonably to have had them in contemplation. Second, the damage done to them was reasonably foreseeable and is, therefore, recoverable within the principles stated in The Wagon Mound. 1961 Appeal Cases, page 388. Third, there is no difference in principle between economic loss and material damage. If the Defendants could reasonably foresee that their negligence might cause economic loss, it is recoverable, just as material damage is recoverable. They rely on what Lord Devlin said in Hedley Byrne & Co. v. Heller & Partners. 1964 Appeal Cases at page 517.
Mr Kidwell for the contractors sought to answer those contentions by saying that, in order to make a defendant liable for negligence, you must first find that he owed a duty of care: and he submitted that the contractors here owed no duty of care to the factory owners.
To support his proposition that the contractors owed no duty, Mr Kidwell relied very much on the judgment of Mr Justice Widgery in Weller & Co. v. Foot-and-Mouth Disease Research Institute. 1966 1 Queen's Bench, page 569. He gleaned from it the proposition that a duty of care only extends to those whose person or property is liable to be directly injured and then only when such injury can reasonably be foreseen. Reasonable foresight, he said, is a necessary condition in order to impose liability, but it is not sufficient unless it is foresight of direct injury to the person or property of another. To use the words of Mr Justice Widgery himself (at page 588): "Where an absence of reasonable care may foreseeably cause direct injury to the person or property of another, a duty to take such care exists".
Applying this proposition, Mr Kidwell said that the contractors here owed a duty of care to the Electricity Board which owned the cable, because their cable was liable to be directly injured and the contractors ought reasonably to have foreseen it. But the contractors, he said, owed no duty to the factory owners because their factory was not liable to be directly injured, but only indirectly (by having the current cut off). He admitted that the injury to them might reasonably be foreseen, but nevertheless said that the contractors were under no duty to avoid it.
Mr Kidwell carried this proposition to its logical conclusion. He said that the case of British Celanese v. Hunt. 1969 1 Weekly Law Reports, page 959, was wrongly decided. In that case the defendants collected on their premises long strips of metal foil. They negligently failed to keep them safe, and they were carried by the wind on to an electricity sub-station owned by the Electricity Board, thus causing a power failure over a wide area. The defendants ought reasonably to have foreseen this, because it had happened before and they had been warned about it. The plaintiffs were the owners of a nearby factory who suffered physical damage to their materials by the cutting off of the current. They were injured indirectly and not directly. This indirect injury could reasonably be foreseen. Mr Justice Lawton held that the defendants were under a duty of care to the factory owners and were liable for the material damage and the loss of profit consequent thereon. I think that Mr Justice Lawton was right. I cannot accept Mr Kidwell's proposition. The distinction between 'direct' and 'indirect' has been attempted before, but it has proved illusory. It was decisively rejected in a parallel field in The Wagon Mound. 1961 Appeal Cases, page 388, and should not be revived here. The cases, too, do not warrant the distinction. A man may owe a duty of care to those whom heforesees may be indirectly injured, as well as to those whom he foresees may be directly affected. A good example is wilful damage done by an escaping Borstal boy. Such damage is as indirect as can be, but, being reasonably foreseeable, a duty of care is owed to those in the neighbourhood who may be injured by it: see Dorset Yacht Co. Ltd. v. The Home Office. 1970 2 Weekly Law Reports, page 1140. Another example is the injury caused by a negligent reference given by a banker. The man who acts upon it suffers damage which is quite indirect: but, being foreseeable, a duty of care is owed to him, see Hedley Byrne & Co. v, Heller & Partners. 1964 Appeal Cases at page 465.
I put on one side, therefore, the distinction between direct and indirect, and ask myself simply: Did the contractors owe a duty of care to the factory-owners? I think it plain that they did. They were working near an electric cable which they knew supplied current to all the factory-owners in the neighbourhood. They knew that, if they damaged the cable, the current would be cut off and damage would be suffered by the factory-owners. Those simple facts put them under a duty to take care not to injure the cable: and this was a duty which they owed to all the factory-owners in the...
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