CARDINAL V.
A.-G. ALTA.
553
other footing. A plaintiff injured by another's negligence is
required to act reasonably. to mitigate his damages. If his
damages are economic damages only, mitigation may involve
him in repairing the defect which brought them about. It may
not be open to him to do that because the tortfeasor is in control of the matter that invites repair or correction, as in the
Cragg and Spartan Steel cases already cited. But where the
defective product which threatened injury has been in use by
the plaintiff, it may be reasonable for him, upon learning of
the threat of likely injury from its continued use, to expend
money for its repair to make it fit for service. Such an expenditure then becomes part of the economic loss for which Washington must respond. No question was raised in this case
about the reasonableness of the appellant's conduct in suspending use of the crane nor about the reasonableness of having it repaired nor of the reasonableness of the cost of repair.
I would, accordingly, allow the appeal, set aside the judgment of the British Columbia Court of Appeal and restore the
judgment of Ruttan, J., but would vary it to add the cost of
repair of the crane to the amount of economic loss for which he
found Washington liable. I agree with the disposition as to
costs made by my brother Ritchie.
I
II
Appeal allowed; trial judgment 1·estoTed.
I
'F
CARDINAL v. ATTORNEY·GENERAL OF ALBERTA
SlLpreme Court of Canada, Fautct,x, C.J.C., Abbott, Martland, Judson,
Ritchie, Hall, Spence, Pigeon and Laskin, JJ.
June 29,1973.
Indians - Application of provincial law - .Application to Indian on
resen·e of provincial law prohibiting trafficking in big game - Alberta
Natural Resources Agreement (1929), paras. 10, 12, assuring Indians of
hunting rights and providing for application of provincial game laws 'Vhether applicable to Indians on Indian reserve lands - Wildlife Act
(Alta.), s. 37.
Constitutional law- Validity of legislation- Provincial game law prohibiting trafficking in big game - Whether provincial law applicable to
Indians on reserve - Effect of Alberta Natural Resources Agreement
(1929), para. 12, providing for application of provincial game laws 'Yhether applicable to Indians on reserve lands - British North America
Act, 1930 -British North America Act, 186i, s. 91(24) -Wildlife Act
(Alta.), s. 37.
The appellant, an Indian, while on an Indian reserve, sold a piece o:f
moose meat and was charged with but acquitted of an offence under s. 37
of the Wildlife Act, R.S.A. 1970, c. 391, namely, trafficking in any big
g-ame (except as permitted), on the ground that s. 7 was ultra. v-ires in
000155
fi::·,;~~ En.pand L~ Reports 8 October 1982
f: ~-<·~!
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,::H::L_ _ _ _ _ _J_u_n~io_r_B_o_o_k_s_L_t_d_v_V_e_i_tc_h_i_C_o_L_t_d_ _ _ _ _ _2_0_1
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Junior Books Ltd v Veitchi Co Ltd
•..
ii
J-iOUSE OF LORDS
:~
LORD FRASER OF TUl.LYBEtTOf\1, LORD RUSSELL OF Kll.LOWEN, LORD KEITH OF KINKEL, LORD
1
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ROST.JLL Af\ID LORD BRANDOf\1 OF OAKBROOK
21,
22,
29
APRil., I 5 JULY
1982
b N~sligma- Duty ro take care- DefecCJve
. work ar product- Dray to avoid producing defective
work ur product- Proximity- Defendants laying defecth•e floor in plainti}fs'jaccory- Defective
floor not causing damage to the person or to plaintiffs' vther property-No contractual relationship
ber~e:t plaintiffs and drfendants- Wherher defendants liable to plaint!ffs in negligence for cost
C~j replacing defective floor- Whether parties in s~fficient proximity for duty of care co arise.
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The respondents (the owners) engaged a building company ro bujld a facmry for rhem.
In rhe course of consrrucrion .rhe owners' archirects nominated the appellants (the sub.
concracrors) as specialist sub-comractors co lay a concrete floor wirh a special surface in
che main production area of rhe factory, and the sub-comracmrs duly entered into a
concracr wirh rhe main conrracrors ro carry our rhe flooring work. There was, however,
d no concr<Krual relationship bee ween rhe sub-conrld.ctors and rhe owners. Two years after
the flO!?T had been laid ic developed cracks in the surface and the owners were faced wirh
rhe prospect of concinual maintenance costs m keep rhe floor usable. The owners brought
an acrion against rhe sub-cont~acrors alleging rhac the floor was defecdve bee<:~ use of the
sub-contractors' negligence in laying it, and claiming .char the sub-concraccors were liable
for rhe case of replacing the floor and for consequential economic loss arising out of rhe
e moving of machinery, rhe closing of the factory. the payment of wages and overheads,
and the loss of profits during the period of replacemenr. The owners further alleged char
it would be cheaper ro lay a new floor rhan co carry out continuous maintenance on che
e:ciscing floor. The sub-contractors in reply claimed chat, in the absence of any contractual
relationship between the parties or a plea by rhe owners char the defective floor was a
f danger co rh.t! healch or safety of any person or consdmred a risk of damage many ocher
property of che owners, rhe owners· pleading did nor disclose a good cause of action. The
Lord Ordinary and. on appeal, rhe Court of Session rejected che sub-contractors'
contention and held chat the owm:rs were emided to proceed with cheir action. The suJr.
contractors appealed, contending, inter alia, (i) char ro impose liability on the subcontn:!ctors in the absence of any danger ro rhe person or loss or damage co ocher pro perry
would in effect require sub-contractors and ocher manufacturers or suppliers of goods or
g work ro give co an indeterminate class of potenriallicigams the same warranty regarding
rhe fitness of the goods or work as they would be required ro do when in a conrraccual
relationship, and (ii) that a duty nor co produce a defective article could nor have a
universally ascertainable srandard of care, since whether an article was co be judged
defective depended en whether ir measured up ro rhe contract under which ir was
h constructed and rhe terms of chat contract would•.10C necessarily be known to che user of
rhe article.
. "1
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Held (Lord Brandon dissenting) - The appeal would be dismissed for the following
reasons...
( 1) (Per Lord Fraser, Lo;d Russell and Lord Roskill) Where rhe proximiry bee ween a
person who produced faulry work or a faulty article and rhe user was sufficiencly close,
rhe dury of are owed by the producer co·che user extended beyond a duty merelY ro
prevent harm being done by che faulty work or article and included a dury to avoid faulrs
being present in the work or article itself. so char che producer was liable for rhe case of
remedying defects in the work or an:ide or for replacing ic and for any cons~quenrial
economic or financial loss, notwithstanding rhat rhere was no conrractual relationship
berween rhe parties. Since (a) the owners or [heir archiceccs had nominated the sub-
,.
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All England law Repons 8 Ot:::ober 1992
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All England Law Reports
[1982) 3 Ali ER
•,,r
>
comracrors as specialise sub-conrr<~crors and rhe relationship berween rhe parries was
50
close as to fall only just shorr of a conrracmal relarionship, (b) rhe sub-contractors muse
a
have known rh.:;r rhe owners relied on rhe sub-conlracrors' skill and experience ro lay a
"
proper floor, and {c) the damage caused co the owners was a direct and foreseeable result
of rhe sub-comracwrs' negligence in laying a defecrive floor, ic followed rhar the
proximiry berween rhe parries was suffi.demly dose for rhe sub-contractors to owe a dury
)
of care ro rhe owners nor ro lay a defecrive floor which would cause rhe owners financial
Joss (seep 203 e, p 204 d ro h, p 205 b to d, p 213jto p 214fandj ro p 215 a, pose}; dicra b l•
of Lord Reid in Home Office v Dorset Yac.:ht Co Ltd [1970] 2 All ER ac 297 and of Lord
Wilberforce in Anns v Merron London Borot1gh [1977] 2 AllER ar 498 applied; dicrum of
Scamp LJ in Dt1tton v Bognar Regis United Building Co Ltd [1972] I A11 ER a[ 489-490 ,
Rivtcw.· Marine Ltd v Washir1gton Iron Works [ 1974] SCR 1 189, Caltex Oil (Au.stralia)PtyLrd
v Dredge Willemstad ( 1976) I 36 CLR 529 and Bowen v Paramount Bailders (Hamilton) Ltd
[I977] 1 NZLR 394 considered.
c ~
(2) (Per Lord Keirh) The sub-conrracrors were in breach of a dury owed co rhe owners
to rake reasonable care ro avoid acts or omissions, including laying a defective floor,
which rhey ought ro have known would be likely to cause the: owners economic Joss,
including loss of profics caused by rhe high cosc of maintaining a defective floor, and in
I
so far as the owners were re:guired ro mitigare rhe loss by replacing rhe floor irself rhe
!
cosr of replacemenc was rhe appropriate measure of rhe sub-conrr.acrors' liability (see d '
\
p 206 c w j and p 207 f, pose).
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Notes
For CilSes in which dury of care arises and for claims in negligence: for economic loss, see
34 Halsbury's Laws (4ch edn) paras 5-6 and for cases on the subjecr, see 36(1} Digesr
(Reissue) I7-39. 34-I2].
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Cases referred to in opinions.
Anns v Merton London Borough [I977] 2 AllER 492, [I97S] AC 728, [I977] 2 WLR Io24,
HL Digest (Cone Vol E) 449, 99b.
Batty v Metropolitan Property Realizations Ltd [1978] 2 AllER 445, [ 1978]QB 554, [1978]
2 WLR 500, CA. 7 Digest (Reissue) 327, :z 219.
R:
I
Bowen v Paramount Builders (Hamilton) Ltd [1977) 1 NZLR 394. NZ CA.
'? I
Calux Oil (Australia) Pty Ltd v Dredge Wilkmstad (I976) t 36 CLR 529, Aust HC, Digest
(Com Vol E) 457. •zJija.
-···'
Donaghue (or Mc'Ailirer) v Stevenson [ I932] AC 562, [ I9 32] All ER Rep I, HL, 36(I) Digest
(Reissue) 144,562.
·
Dutton v Bognar Regis United Building Co Ltd [I972]1 AllER 462, [1972] I QB 373, [I97>] g
g
2 WLR 299, CA. 36(I) Digest (Reissue) 30, 98.
Dynamco Ltd v Hofland & Hannen & Cubicts (S(otland} Ltd 1971 SC 257, Digesr (Com Vol
0)717, *254la.
i
Heaven v Pender (t 883) II QBD 50 3, [I88 I-5] AllER Rep 35. CA, 36(1) Digesr (Reissue)
7. 11.
Hedley Byrne & Co Ltd v Helr<r & Parners Ltd [1963] 2 AllER 575, [I964] AC 465, [I963] h
h
3 WLR Io 1, HL, 36(t) Digesr (Reissue) 24, 84.
Home Office v ilorS<t Yacht Co Ltd [I97o] 2 AllER 294, [t97o] AC Ioo4, [I97c] 2 WLR
J r4o, HL. 36{!) Digest(Reissue) 27, 93·
~
Morrison Sceam.ship Co Ltd v Greystoke Castle (cargo owners) [1946] 2. All ER 696, [J 947] AC
;>.65, HL, 4I B"lgesr(Repl) 5I4, 2887.
·
Mount Albert Borough Council vjohnson [1979} :z. NZLR 234, NZ CA.
j
Rivtow Marine Ltd v Washington. Iro11 Works [1974] SCR n89, Can SC. 36(r) Digest
(Reissue) 337, *2779.
Sparham-Souter v Tuwn and Counrry Developments (Essex) Ltd [ t976] 2 All ER 65, [1976]
QB 858, [1976] 2 WLR 493. C.~. 32 Digest (Reissue) 507, J86J.
Spartan Steel c.nd Alloys Ltd v Martin & Co (Contractors) Ltd [1972] 3 AllER 557, (1973]
QB 27, [ 1972] 3 WLR 502, CA, 17 Digest (Reissue) 149, 403.
f
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0001:>7
· -;;ilJrEnglandL<JW Reports 8 October 19a2
HL
Junior Books Ltd v Veitchi Co Ltd (lord Fraser)
203
, U!tramaresCorpvTouchd1931)2.55 NY 170.
v,1i v Inglnvood Shire Council ( 1963) I I 0 CLR 74. 7 Digesr (Reissue) 451' • '6 59·
: l Wimpey ConstruL·tion (UK) Ltd v Marcin Blar_k & Co 1982. SLT 2.39' ia11ng & Marr<n Ltd v McManus Childs Ltd [ 1968]2 All ER 1169, [ 1969]1 AC 454, [ 1968]
3 WLR 63o, HL, 7 Digest (Reissue) 436, 157'·
i'
Appeal
; J The defenders, Veirchi Co Lrd, appealed againsr an inrerlocuror of rhe Second Division of
·
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rhe Coun of Session in Scorland {che Lord Jusrice-Cierk (Lord Wheatle_v), Lord Kissen and
Lord Robertson) dared I September 198o wirh leaveofrhar courr granred on 3 I Ocrobi:r
1980 refusing the appellants' reclaiming motion againsr an interlocuror of che Lord
Ordinary (Grieve) dared 22 November 1979 allowing the pursuers,Junior Books- Ltd {the
respondt!ms), a proof before answer of cheir averments in an action in which rhe:
C respondents claimed damages against rhe appellants for loss and damage which rhey
claimed to have susrained_as a resulr of the appe!Ianrs' negligence in laying a floor at rhe
respondents' factory. The facts are sec out in the opinion of Lord Roskill.
~
'
W D Cullen QC and A F Rodg<r (both of the Sco1rish Bar) for the appellanrs .
. , d j MurrayQC andj E Dru.mnwnd Yormg(boch of rhe Scoccish Bar) for the respondents.
J
Their Lordships took time for consideration.
. :J
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15 July. The following opinions were delivered.
;
e LORD
_.:_:_
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FRASER OF TULLYBELTON. My Lords, I have had the advanrage of
reading in draft the speech of my noble and learned friend Lord Roskill, and I am in full
agreemenr with his conclusion and whh rhe reasons on which he bases it. I 2lso gratefully
adopt his summary of the faces. Jr is enough for me co say chat the appellants (defenders)
are specialist sub-conrracrors who laid com posicion flooring in a factory chat was built for
the respondents (pursuers) at Grangemomh between September I969 and May I970f The respondents aver rhar che floor is defective, owing to failure by the appe11ams to rake
reasonable care in laying ir, and that it will have co be replaced. There was no conrroctual
rdarionship berween _the appellams and the respondents, and for some reason that has
nor been explained d-ie respondents have not caken legal proceedings against the main
conrracmrs with whom they did have a concraccual relationship. The respondents have
raised this acrion against rhe appei!ancs, claiming damages which consist mainly of che
g direct and indirect cost of replacing rhe floor, rhe action being founded on averments
rhar the appellants were negligent in laying the floor. Ar the presem stage of relevancy
rhese averments must be caken as rrue. The appeal raises an imporranr question on the
law of delict or. srricrly speaking, quasi delict, which is not precisely covered by aurhoricy.
The question is whether the appellanrs having (as must ac this stage be assumed)
negligemly laid a floor which is defective, bur which has not caused danger ro rhe health
h or safecy of any person or risk of damage co any ocher properry belonging to the owner
O~ the floor, may in the circumstances averred by che respondents be liable for the
economic loss caused to rhem by having m replace the floor.
The Lord Ordinary.:f'Grieve} and rh:: Se\:ond Div.ision answered chat question in rhe
affirmative, and they have allowed to the respondents a proof before answer. The
ap~ellams maintain chat rhe question_ should be answerc:q in the negative and char the
i acnon should be dismissed as irrelevant. As I agree wirh my noble and le<~rned friend
Lord Roskill chat rhe appeal fails, I only add m his speech in order ro deal in my own
words wich rwo imporranc rnatrer:s char arise.
The firsr is the concern, which has. been repeatedly expressed by judges in the United
Kingdom and elsewhere, thac rhe effect of relaxing strict limitacions on che area of
liability for delict (torr) would be:, in rhe words of Cardozo Cj in Ultramares Carp v Touche
( 1931) ~55 NY 170 ar 17_9. to imroduce 'liability in ~n inde:cerminare amount for an
000158
AU England law Fle:;Jorts
204
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All England Law Repor1s
[1982] 3 All E
indererminare rime roan indeterminate class'. This is the floodg;:ue.s argurne.nr, if I rn ·
~se r?e expression as a convenient description, and n_or in any_ dis~is.sive or qllesrio;.
beggmg sense. The argurne:-~r appears w me unarrrucuve, especially 1fir leads, as I rhi 1
ir would in rhis case, ro drawing an arbitrary and illogical line jllsc because a line hasn~
be drawn somewhere. Bur ir has ro be considered, because ir has had a signific;;~~
_influence in leading judges ro rejecr claims for economic loss which were nor conseguem
on physical danger ro persons or other property of rhe pursuer/plain riff. Ir was rhe matn
reason for rejecting rhe claim in rhe Scorrish case of Dynamco Ltd\" Holland & Hannen &
Cubirts (&orland) Ltd J 971 SC 257, which ha.s recendy been followed wirh .some apparenr
relucrance by rhe Lord Ordinary (M;:uweli) in Wimpey Comtr11ctiot1 (UK) Ltd v Murr{J1
Black & Co 1982 SLT 239- The fioodgares argument wz.s much discussed by the High
Court of Ausrralia in Caltex Oil (rluitra/ia) Pry Lrd t' Dredge Willrm:;tad (I976) r36 CLR
529, where the majoriry of rhe courc held char rhere was sufficienr proximity berwe=n
rhe parries ro justify a claim for economic loss because rhe defendanr knew (in rhe words
of rhe headnote) 'rhat a particular person, nor merely as a member of an unascertained
class, [would] be likely ro suffer economic loss as a consequence of his negligence'.
\Vherher rhe defender's knowledge of rhe idenricy of rhe person likely ro suffer from his
negligence is relevunr for rhe pre.senr purpose may wirh respect be doubted and ir seems
robe conrrary co rhe views expressed in Hedley Byrne C CtJ Ltd v Heller & Pannrrs Lrd
[1963]2 AllER 575 or 580, sS8,[t964] AC 465ar 482,494 by Lord Reid and by Lord d
Morris. Bur iris nor necessary ro decide the quesrion in this appeal because the appeJI;:;ms
cenainly knew, or had rhe means of knowing, rhe idenriry of rhe respondents for whom
rhe factory was being builr. So, if knowledge of rhe respondents' identity is a relevant
resr, ir is one rhar the appell:mcs can satisfy. They can also sarisfy mosr, if nor· all, of rh~
other resrs that have been suggested ;;s safeguards ag:::~inst opening the floodgates. The
proximity berween the parries is extremely- close, faJJing only jusr short of a direcr e
contractual relarionship. The injury to rhe respondenrs was a direcr and foreseeable result
of negligence by the appellants. The respondenrs, or rheir architecrs, nominated the
appellan rs as specialise sub-conrra..:rors and they musr rherefon: ha._.e relied on their skiii
and knowledge. Jr would surely be wrong ro exclude from probation a claim which is so
srrongly based, merelv because of anxiety about rhe possible effecr of the decision on
or her cases where the ~proximity may be less strong. If and when such·Orher cases aris~ I
rhey will have to be decided by applying sound principles ro rheir particular facts. The
present case seems rome ro fall we !I within lim irs already recognised in principle forth is
rype of dairn, and I would decide chis appeal srriccly on irs own facrs. I re!y parricularly
. on rhe very dose proximity berween the pardes which in my view disringliishes this case
from the case of producers of goods co be offered for sale ro rhe public.
The second maner which mighr be rhoughr ro jusrify rejecting rhe respondents' claim g
as irrelevant is the difficulty of ascenaining the standard of duty owed by rhe appellants
ro the respondents. A manufacturer's dury ro cake care nor ro make a product that is
dangerous sers a srandard which is, in prindple, easy [0 ascerrain. The dury is owed wall
who are his 'neighbours'. Jr is imposed on him by rhe generai law and is in addition ro
his conrracrual duties ro other parries ro the con trace. J[ cannot be discharged or escaped
by pleilding rhar ir conflicts wirh his comracrual dU[y. Bur a dmy nor ro produce a h
defective article sets a srandard which is less easily ascerrained, because it has to be judged
·largely by reference ro the comr.~cr. As Windeyer J said in VoU v Inglewood Shire Ccuncil
( 196 3) 1 I o CLR 74 ac 8 5, if an architect undertakes 'ro design a srage ro bear only some
specified wc:ighr, he would.nor be liable for rhe consequences of someone thereafter
negligencly permitting a greater weight ro be puc upon ic'. Similarly a buiJdi,ng .
constructed irtiullilmenr of a conrracr for a price of [t oo,ooo might justly be regJraed I
as defective, although rhe same building consrrucred in fulfilmenr of a comr;;cr !or a
price of [5o,ooo mighr nor.- Where a building is erew:d under a conrracr w1rh a
purchaser, rhen, provided rhe building, or pare of it, is nor dangl!rous ro persons or _<O
ocher properry and subjecr to che law against misrepresenrarion, I see no reason why me
builder should not be free ro make wirh rhe purchaser whatever conrra:crual arrangemc:nrs
000159
HL
Junior Books ltd v Veitchi Co Ltd (Lord Fraser)
205
abom rhe gualiry of rhe: pr~ucr the purchaser wishes. However jerry·built rhe product.
a che purchaser would nor be encided ro damages from rhe builder if ir came up m
ch~
conrraccual srandard. 1 do nm think a subsequent owner could be in any berrer posicion,
bur in most cases he would nor know rhe derails ofrhe concracrual arrangements and
wirhour such knowledge, he mighr well be unable co judge wherher rhe... produce wa;
defecrive or noL Bur in chis case rhe re.spondenrs, alrhough nor a parry ro rhe conrracr
wirh che appellants, had full knowledge of rhe appellanrs' comr;;crual duties, and chis
b difficulty does nor <:trise. Whar rhe position mighr have been if rhe action had been
brought by a subsequenr owner is a marrer which does not ha ... e co be decided now.
For rhe reasons given by my noble and learned friend Lord Roskill, and for rhe
additional reasons which J have stared,! ,.,.·auld dismiss chis appeal.
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LORD RUSSELL. OF K1LLOWEN. MyLords,lhavehadcheadYancageofreading
my noble and learned friends Lord Fraser and Lord
Roski!L 1 agree wirh chem and wirh their conclusion rhar rhis appeal fails. In my
respectful opinion che view of my noble and ]earned friend Lord Brandon unnecessarily
confines rhe relevant princi pies of delicr co exclude cases of such immediate proximity as
rhe presem.
C in draft rhe speeches prepared by
d LORD KEITH OF KINKEL. My Lords, che respondents own and occupy a facrory .
l
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in Grangemourh. This tactory was consrrucred fore hem over a period ir. 1969 and 19-70
under a Conrracr between rhem and a company called Ogilvie (Builders) Ltd, which I
sh2ll cal!'rhe main concracrors'. The respond ems' archirecrs nominated rhe appellants as
specialist sub·conrracc~rs fC?r the 'purpose of layirig a floor in rhe main produciion area of
rhe f<1crory. The appellants entered imo a conrracr wirh rhe main conrracrors for the
e carrying our of this work.
According to rheTespondents:' avermenrs rhe appellants' workmanship was seriously
defective in a number of respects, wich che result char af£er two years the floor began to
develop cracks over rhe whole of irs surface. They say char ic requires repfacemem in
order ro avoid che necessity for continual maintenance, which would be more expensive
in rhe long run. They claim against rhe appdlanrs·for the case of such replacemenc,
f rogerher with certain consequenriaJ.Joss which they SJY chey will suffer while·rhe w.ork
of replacement is being carried our. The claim is founded· in Cfelicr, rhe respondents
. pleading char they have suffered loss through the appe!Janrs' negligence and are en ride?
ro reparation therefor.
The appellants plead char the respondents' averments are irrelevant. The Lord Ordinary
(Grieve) after debate, refused ro susrain rhis plea and allo"'·ed a proof before answer. "!":he
g.:· Second Division (rhe Lord Jusrice·Clerk (Lord Wheadey), Lord Kissen and Lord
Robertson) refused a reclaiming motion against the Lord Ordinary's ·incerlocuror. The
a:ppellams now appeal ro your Lordships' House.
It is a norable feacur.e of rhe respondenrs' pleadings char they coma in no averrnenr rhat
rhe defective nJture of flooring has led or is Hkely ro lead co any danger of physical injury
lo work people or of damage ro properry, movable or immovable, orher rhan the floor
b' surface itself, or even of economic loss rhrough incerruprion ofproduaion processes. The
. only type of pecuniary consequencialloss claimed for is rhac arising our of rhe need ro
';::,;}~~:;J:~~;:;;;F;~::::.- ·/ZF ',~;: . ,;.:::;>c•.v.•• ~ro;~~;~:e,~;;';~:~~,~~~~~~~;. ~~n:~u~~~'::~~~~~ ~~[.;J;c~~~~~~h;:;,~~~ ~~~~~~,~~~
exisred berween rhe appdbnrs and rhe respondents such proximiry·of relationship •
.. within rhe weli·known principle of Dcmoghu' v Sc<Venson [1932] AC 562, [1932] AllER
! }": Rep I, as ro give rise t-O dury .of care owed by rhe former co the larrer. As formulated in
; ·. Ponoghue v Suvenson, the -dury .extended co the avoidance of acrs or omissioris which
.might reasonably have be~:1 anticipated as likely co cause physical injury co persons or
pro~rry. The scope of rhe dmy has, however, been developed so as ro cover rhe siruacjon
where pure economic loss is to be foreseen as likely robe: suffered by one sranding in the
requisirc degree of proximity (see Hedley Bjrne & Co Ltd v Heller~ Partners Ltd [ r963] 2
000160
•.
-! ·
AltEnglandLawRepor:s
206
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8Qclober 1982
All England Law Reports
[1932]3 All F-
AllER 575, [1964] AC 465). Thar case was concerned wirh a negligent statemem mad
in response to an inquiry about the financial standing of a particular company, in relianc~
on the accuracy of which the plaintiffs had acred to their detriment. So the case is not in
point here excepr in so far as it established rhat reasonable anticipation of physical injury
ro person or property is not a sine qua non for rhe exjsLence of a duty of care. 1t has aha
been esra blished thar where a dury of care exists through the presence of such reasonable
amiciparion, and it is breached, rhen, even though no such injury has actually be.en
caused because rhe person ro whom rhe duty is owed has incurred ex.pendirure in
averting the danger, rhar person is entided ro damBges measured by the amoum of tb~r
expenditure (see Anns \' l'vkrron London BoroJtglt [ 1977] 2 All ER 492 at 50s. ( 1977] P·.C
728 at 7 59 per Lord Wilberforce). That is rhe principle which in my view underlies
Dutton v Bognor Regis Uniud BLlilding Co Lrd [1972] t .-'\II ER 462, (1972] t QB 37j and
Barry v Merropo/itan Property Realizations Lrd [1978] 2 AllER 445, [1978] QB 554- So in
rhe presenr case I am of opinion rhat rhe appellants in the laying ofrhe floor owed ro the:
respondents a duty to rake reasonable care ro avoid acts or omissions which they ought 10
have known would be likely ro cause the: responclenrs not only physical damage. ro person
or propeny bur also pure economic loss. Economic loss would be caused to the
respondenrs if rhe condition of the floor, in the course of irs normal life, came to be such
as ro prevenr rhe respondems from carrying our ordinary production processes on it, or,
shan of th<H, to c2use the production process robe more cosrly than it would otherwise
have been. In that siruJ.tion the respondents would have been enrirled to recover from
the appellants expenditure incurred in relaying the floor so as to avert or mitigate their
loss. The real·quesrion in rhl!' appeal, as I see it, is whether che respondents' averments
reve<~l such a st~He of affairs as, under the principles 1 have outlined, gives them a complm
righr of action. I am of opinion that they have relevandy averred a duty of care owed rc
chem by the appellams, though 1 think rheir averments in this respect might have be~n
more precise and better related to the true legal posicion. It is rhea verments of loss which
cause me some trouble. On the face of it, their avermenrs might be read 3s meaning nc
more than that the respondents have gar a bad floor instead of a good one. and rhat ·
loss is represented by the cost of re-placir;g the floor. But they do also aver that the co-...
maintaining the noor which they have got is heavy, and that ir would be cheaper to rakl
up the floor surface and lay a new one. If the cost of mainra_ining the defective noor i:
substantially greater than ic would have been in respect of a sound one, it must necessari!;
follow char their manufacturing operations are being carried on at a less profirable Jere
than would otherwise have been rhe case, and rhat they are then::for~_suffering economi·
loss. That is the sort of loss which the appelb.nts, standing in dil!"relationship m th
respondents which they did, ought reasonably to have anricipared as likely to occur i
their workmanship was faulty. They must have been aware of the nature of rh
respondents' business, rhe purpose for which the floor was required and the parr it was I
play in their operations. The appellants accordingly owed the respondents a dmy to cak
reasonable care to see that their workmanship was not faulty, and are liable for rh 1
foresee::~ble consequences, sounding in economic loss, of their failure to do so. The!
consequences may properly be held to include less profitable operation due ro rhe heav
cost of mainrenance. In so f~::; as the respondents, in order to avert or mitigate such los
incur expenditure on relaying rhe floor surface:, that expendirure becomes the me:~su1
of the app_ellants' liability. On that analysis of the situation, I am of opinion th:lt rt
respondenrs have srared a proper case for inquiry into the facts, and rh2t rhe Lot
Ordi~~!Y and the Second Divi~ion were therefore right to allow a proof before answer.
would accordingly dismiss the appeal.
Having thus reached a conclusion in favour of the respondents on the somewh
narrow ground which. I have indic<~ted, l do nor consider this to be an appropriate co;
for seeking to advance the frontiers of the law of negligence on the lines favoured I
cenain of your Lordships. There are a" number of reasons why such an extension woul
in my view, be wrong in principle. In the first place. I am unable ro regard t
deterioration of the flooring which is alleged in this case as being damage co r
000161
; ..
HL
·"··.
-
. _:'::~
. ::~-~.
. ··y-~ ./"!::. ___ :-:··_; .. .
Junior Books Ltd v Veitchi Co Ltd (lord Keith)
20.
responde:nrs' properry such as ro give rise ro a li::~.biliry falling direct! y wirhin rhe principle
a· of [)clnoghue . .- Ste\'c;>nSC'II. The flooring had an inherenr defe:cr in ic from che srarr. The:
appelbnrs did nor, in any sense consisrenr wirh rhe ord~nary use of language or
comemplared by rhe majority in Donoghue v Stevenson, damage rhe: responde:nrs' pro perry.
They supplied rhem wirh a defecrive floor. Such 30 acr can, in accordance wirh rhe views
1have: expressed above, give rise ro liability in negligence in cerrain circumstances. Bur ir
does nor do so merely because rhe flooring is defe-.:rive or valt!eless or useless and requires
b ~ 0 be: replaced. So ro hold would raise very difficult and delicare issues of principle having
a wide porenrial applicarion. l chink ic would necessarily follow rhar any manufacturer
of produces would become liable ro the ulrimare purchaser if che producr, owing to
negligence in manufacrure. was, wirhour being harmful in any way, useless or worrhless
or defecrive: in qualiry so char rhe purchaser wasred rhe money he spenr on it. One
instance mentioned in argumen£ and adverred ro by Scamp LJ in Dutton v Bognor Regis
c U11ited Building Co Ltd [ 1972] 1 All ER 462 ar 489, [ J 972) t QB 37 3 ac •P 4 was a product
purchased as ginger beer which rumed our robe only warer, and many or hers may be
·_:;·_:-.-:··.;
figured. To incroduce a generalliabiliry covering such siruarions would be disruptive of
·.·.· .··:· f commercial pracrice, under which manufacturers of products commonly provide the
ulrirnare purchaser wirh limited guarantees, usually undertaking only ro replace pares
e:chibiring defecrive workmanship and excluding any conseguenrial loss. There being no
d conrracruJI relationship bcrween manufacturer and ulrimare consumer, no room would
e:cisr, if rhe suggesred principle were accepred, for lim icing rhe manufacturer's liability.
The policy considerations which would be involved in introducing such a stare of affairs
appear rome robe such as a courr of law can nor properly assess, and rhe guest ion whether
or nor ir would be in rhe inreresrs of commerce and rhe public gener.~.lly is, in my view.
much bener lefr for rhe legislarure. The purchaser of a defecrive producr normally can
~ e proceed for brt:ach of conrracr againsr che selfer who can bring his own supplier imo rhe
proceedings by rhird parry procedure, so ir canner be said rhar rhe presenr scare ofrhe law
is unsa.risf<.crory from rhe poinr of view of available remedies. 1 refer ro Young C..,... Martin
L!dv McManus Childs Ltd [1966] 2 AllER tt69, [1969] 1 AC 454· In rhe second place, I
can foresee rhar very considerable difficulrie.s mighr arise in assessing che srandards of
quafiry by which rhe allegedly defecrive produce is co be judged. This a.specr is more fully
; I developed in rhe speech robe ddivered by my noble and learned friend Lord Br.~.ndon,
wirh whose views on rhe marrer 1 re.specrfully agree.
My Lords, for rhe reasons which I have given I would concur in rhe dismissal of--<he .·
appeal.
·- ·.
· ..
LORD ROSKlLL. My Lords, rhis appeal againsr an incerlocuror of rhe Second Division
: !! of rhe Courc of Session {rhe Lord jusrice-Cierk (Lord \Vhearlq}, Lord Kissen and Lord
.··-
Roberrson) dared r Sepcember 1980 refusing a reclaiming marion againsr an inre:rlocucor
of rhe Lord Ordinary (Grieve) dared 22 November 1979 rais.:s a quesrion of fundamenral
importance in rhe law of delict. Since ir was accepred in rhe courrs below and in argumem
before your Lordships' House char there was no relevant difference berween the Scars law
of defier and rhe English law of negligence, ir follows char chis appt:al equally raises a
h quescion offundamenral jmporrance in rhe de::velopmenr ofche larrer law. The defenders,
che appellanrs before your Lordships' House, cabled a general plea co rhe: relevance of rhe
punuer's averments and it was char plea which was de bared in bach courrs below. The
~ppdlanrs contended char chere was no averment in rhe pursuers' pleadings relevanr to
found an acrion againsr the defenders in delicr and thar therefore the acrion should be
dismissed as irrelevant. Ti!'ii re"Spondems, on rhe or her hand, conrended rhac proof before
answer should be allowed. Borh courts beiow allowed proof before answer. The Lord
Ordinary scarred his opinion by staring rhar rhere was no Scorrish auchoriry direcrly in
poinr and, while in argumenc before your Lordships' House much Scocrish, Eng !ish and
mdeed Commonwealrh aurhoriry was deed, ir remains rhe facr thar no decision in any
courr rhar was dted ro your Lordships conclusively shows rhe correct roure robe raken,
[hough many may be said greacly ro ilJuminace rhar roure.
000162
All England law Aecorcs S October 1982
208
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My Lords, since rhe appell comes before your Lordships' House in rhe manner 1h ,
jusr stared, ic follows that the respondents'avennems, alleged not co scare a relevanr ,;s~
must be assumed for presem purposes to be correct. Those avermenrs are fully set our i
the record and in the opinion of che Lord Ordinary and w avoid repetion, I gratefull~
borrow his sratemenr of them. I need only summarise rhe bare essentials. The appelbni
are specialist contiactors in the laying of flooring. They were nominated su b-conuacror
under a main building contract concluded between rhe respondents and some mail
conrracrors. There was no privity of conrracr becween rhe appellants and the re.sponde;;u
The appellanrs laid flooring in the production area of a factory which was being built ro
the respondents ac Grangemouth as long ago as 1969 and 1970. In I 972. ic is averred rha
char flooring showed defects allegedly due either co bad workmanship or bad material
or both. Ar rhe time che: pleadings were prepared no repair work had been carried ou
but ir was averred char che cost of repairs would be some [so,ooo to which were adde1
cen<Jin figures which, as rhe Lord Ordinary said, m ighr reasonably be described as item
of economic or financial loss. The total sum claimed by rhe respondenrs was ave
.,i
--·-.:·.-.
All England Law Reports
.,
"'··
'
My Lords, your Lordships are rhus invited ro deal with evems which happened Jon·
ago. It is difficuh ro believe rhar in rhe intervening period some work has nor been don.
to this flooring. bur no informorion was vouchsafed as ro rhe course of subsequent event:
The main building conrracr wJs not exhibited in rhe courrs below. Your Lord.~hips wer
not told whether rhar contract included as between rhe main contractors and rh
respondents any releva_nc e:t:ce?tions clause, nor .whether if there were such an e.xceprioTl
clause it mighr be available for the benefit of rhe appellants. Nor were your Lofdshir
cold why the respondents had chosen to proceed in delict against the .appellants ra1h!
than against the main conrracrors in comracr, nor indeed why 1he main conrracrors ha
not been joined as parties to rhese proceedings. This economy of fact is in stark conrra:
to the wealth of citation of authority of which your Lordships have had rhe benefic. -·
the bare poinr oflaw has to be decided on an assumption of lhe rrurh ofrhe facts pit
Bur J cannot but suspect rhar 1he truth regarding rhe supposed deficiencies of rhis floorin
at Grangemourh has long since been eirher established or disproved. Ofihose marw
however your Lordships know and have been cold norhing. H2lf a cenrury ago yol
Lordships' t-Jouse decided 0011og_hut: vSte-,~son [1932.] AC 562, (1932) AllER Rep 1 on
similar plea of irrelevancy. In that case however some 3-! ye:;~rs only had elapsed berwee
rhe purchase of rhe: allegedly offending borde of ginger beer and. the decision of yol
Lordships' House.
My Lords, rhere was much discussion before your Lordships' House as ro rhe. efft"ct l
the: pleadings. I see no need to discuss them in derail. They seem co me clearly to t:onrai
no allegation rhar che flooring was in a dangerous srate or rhar irs condition was such;
to cause danger ro lire or limb or ro or her properry of other persons or rhar repairs we1
urgenrly or irnminendy required co avoid any such danger, or thar any economic 1
financial loss had been, or would be, suffered save as would be consequemial on rf
ulrimate replacement of rhe flooring. rhe necessiry of which was averred i
condescendence Vll. The essenrial feature of rhe respondents pleading was 1har
advanced a claim for the case of remedying rhe alleged defects in rhe flooring iiselft
replacement roger her with resulting or economic or financial loss consequemial on rh
replacement.
·
M...'!.Lords, it was because of rha_t scope of the respondents' pleading and because th
pleading was limired in this wav chat the appelianrs were able ro moum rheir main arta!
on those pleadings and ro cont~nd rhat rhey were, at least in rhe absence of amendmer
for which no leave ·has been sought at any stage. irrelevant since the la.w neither
Scocland nor of England made the appellants liable in delict or in negligence for the cc
of replacing this flooring or for the economic or financial loss consequent en rh
replacemenr. Ir was strenuous! y argued for rhe appellanrs rhat for your Lordship~· Hou
now m hold that in those circumstances which I have jusr our lined the appellan_1s we
liable to rhe respondents would be ro extend rhe ducy of care owed by a manut:J.ctur
0001G3
~;'~· AU England Law AePOtts
1. -~,
HL
B October 1982
Junior Books Ltd v Veitchi Co Ltd (Lord Roskill)
2G
and ochers, co whom the principles first enunciated in Donoghue v St~venson have sine~
q been extended during the last half cemury, far beyond the limits ro which che cOurts
have hitherto extended them. The familiar'floodgares' argument was once again brought
fully inca play. My Lords, ahhough it cannot be denied char policy considerations have
from rime ro rime been allowed co play rheir pare in che lase century and the presem
eirher in limiting or in e:uending the scope of rhe rorr of negligence since ·ic first
developed as it were in irs own right in the course ofrhe lase century, yer today l chink irs
_b scope is besr derermjned by considerations of principle rarher chan of policy. ·The
'floodgates' argument is very familiar. lc srill may on occasion have irs proper place bur,
if principle suggesr.s char the law should develop along a pan:icular roun: and if rhe
i
adoption of char particular route will accord a remedy where that remedy has hitherm
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My Lords, I think there is no doubc that Donoghue v Stevrnscit by irs insistence on
proximity, in the sense in which Lord Arkin used char word, as the foundation of the
dury of care which was there enunciated marked a gre~H development in the law of delicr
and of negligence alike. In passing it should be noted that Lord Atkin emphasised that
the laws of Scorland and of England were in thar case, as is agreed in the present, idenrical
{see [I9,3l] AC 562 ac 579, [1932] AllER Rep I ar 10). Bur, rhar advance having been
thus made in I 932, the doctrine then enunciated was ac first confined by judicial decision
wirhin re!arively narrow limits. The gradual development of rhe law will be found
discussed by the editor of Salmond and Heuston on Torts (lBrh edn, J 98 I) pp 289ff. Though
initially rhere is no doubt rhat, because of Lord Arkin's phraseology in Donoghue v
Stevenson [I932] AC 562 at 599, [1932] AllER Rep tat 2.0, 'Injury to che consumer's life
or pro perry', ir was rhoughr char the dury of care did nor ex rend beyond avoiding physiGal
injury or physical damage co che pen:on or rhe property of the person ro whom rhe dury
of care was owed, char limitation has long since ceased as Professor Heuscon poims our in
rhe passage ro which I have jusr referred.
My Lords, in discussion on rhe Iacer developments of rhe law rhe decision of your
Lordships' House (albeit by a majority) in Morrison Steamship Co v Greystcke C,~stle (cargo
Olvners) [I946] 2. AllER 696, [1947) AC 2.65 is sometimes overlooked. The· facts were
e~emially simple. Two ships collided. For .simplicity I will call rhem A and B. Bach ships
were ro blame. albeir in uneCjual proportions. The owners of rhe cargo on ship A became
liable to concriburion in generdJ aver.~ge co the owners of ship A. The cargo owners rhen
sued ship B m recover rhe relevant proportion of char liabiliry for general average
comriburion. They succeeded in char claim. My Lords, I .shall not quare e.nensively from
rhe speeches of eicher rhe majoriry or rhe minoriry.Suffice ir co say that here che recovery
of economic loss was allowed and J do nor think char rhe decision is ro be explained
simply on some supposed esoreric mysrery appertaining co rhe law regarding general
average comribucion. J[ is rrue rhar rhere seems co be lirtle discussion in rhe speeches
regarding rhe exrenr of rhe duty of care, but rhe very rejection by rhe majoriEy of rhe
views expressed by Lord Simonds in his dissenting speech rhar 'norhing would jusrify
me in holding char rhe cargo owner can recover damages from the wrong-doing ship,
not because his cargo has suffered damage. ~uc because he has been placed under an
obligarion tO make a general average contribution' (see [ 1946] 2 All ER 696 ar 7 I 6, [I 947]
AC 2.65 ar 307) shows rhar Lord Simonds ~c lease was appreciating the consequences of
1he seep forward which rhe majority wc:r~''[hen caking. The decision is indeed far from
the previously lim ired application of che doctrine en uncia red in Donoghue v Sreveruon.
Fifteen years later, in Hedlq Byrn' & Co Ltd v Heller &-Parrners Ud [1963] 2 All ER
~75, [1964] AC 465, your Lordships' House made plain rhar the dury of care was nor
hmired in rhe manner for which the respondents in rhdt appeal had conrended. i'our
lordships' House held wirhour doubr tbar economic loss was recoverable wirhour
physical damage having been suffered provided rhar rhe relevant duty of care had exisred
and char rhar ducy existed when rhe party ro whom rhe allegedly negligent advice w:os
OOOHLi
All Engl:mdli!w Reports B Octobet-1982
210
All England Law Reports
[1982]3 AllER
given relied on the 'judgment' or 'skill' (I take rhose two words from the speech of Lord
Morris [1963]2 AllER 575 at 594, [ 1964] AC 465 at 503) of him who gave 1he advice. 1
draw arremion without cicarion to a passage of Lord Hodson [ 1963] 1. All ER 57 5 at 558
[1964] AC 465 at 509) where he refers to the Greystoke Cu.stk case:. Two passages in th~
speech of Lord Devlin however demand quotation in fulL ~he noble and learned Lc;ci
said ([ 1963]2 All ER 5 75 at 61 o-Q1 1, [ 1964] AC 465 at 529):
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'l have had the advanrage of reading all the opinions prepared by your lord~ hi:;~~
and of studying the terms which your lordships have framed by way of dcfiniti~r
of rhe sorr of relationship which gives rise ro a responsibility towards those who ac 1
on informacion or advice and so creates a duty of care towards them. I do nc1
understand any of your lordships ro hold char il is a responsibility imposed by lav.
on cerrain types of persons or in certain sons of situations. lr is a responsibi!i1y ch;;:
is voluntarily accepted or undertaken either generally when: a general relationship
such as that of solicitor and client or banker and customer, is cn:ared, or specific;; II•
i_n relation to a particular transaction.'
'
Later Lord Devlin said (( 1963 ]2 All ER 57 5 at 61 1, [ 1964] AC 465 at 5 Jo):
•1 shall therefore cement myself with the proposition that wherever there is:
relationship equivalent co contract there is a duty of care. Such a relationship rna·
be either general or pardctJlar ... 1 regard this proposition as an application ofth;
general concepcion of proximity. Cases may arise in che future in which a new an 1
wider proposition, quite independenr of any norian of comract, will be mede:d
There may, for example, be: cases in which a statement is nor supplied for the usc 0
any particular person, any more than in Donoghtu! v. St~·enson the ginger beer wa
supplied for consumption by any particular person; and it will then be necessa.·
rerum to the general concepcion of proximity and to see whether there ca1.
evolved from ir, as was done in Donoglme v. Srtven.son, a specific proposition ro fit th
case.'
·My Lords, it was, I think, chis deve:lopmenr of the law which led Lord Reid in Hl11t
O_ffke v Donee Yacht Co Ltd [1970) 2 AllER 2.94 ac 297, [1970] AC I.o04 at Io2.6-Jo271
S<ly:
.~:
.: .
'ln later years there has been a sready ~rend cowards regarding rhe law c
negligence as depending on principle so thar, when a new paine emerges, one shoul
ask nor whether it is covered by aurhoriry but whether recognised principles appl
to it. Donoghue v Stevenson may be regarded as a milestone, and rhe well-know
passage in Lord Atkin's speech ([1932] AC 562 at sSo, [1932] AllER Rep 1" 1 ,
should 1 rhink. be regarded as a sraremenr of principle. It is nor ro be created as if
were a staturory definition. It will require: qualification in new circumstances. Bu:
think that rhe time has come when we. can and should say thar it ought to app
unless there is some justification or vital explanation for irs exclusion ... Bur ,,,.he l
negligence is involved the tendency has been to apply principles analogous EO rho
scared by Lord Arkin :': .'
I
Simil:er•ly, in Annn-' Merton London. Borough [ 1977) 2 AllER 492 at 498, (1978] AC 718
75 I-7s:z. Lord Wilberforce, approving rhe earlier decisions of the Court of :\ppcJI
Dutton,_. Bognar'" Regis United Buildir1g Co Ltd [1972] J AllER 462, [197:!] 1 QB 373 al
Sparham-So1aer v Towli and Countr~ Del'f'lopmenc.s (E.s.sE.:t:) Lrd [1976] 2 AllER 65, (197
QB ass. said of the trilogy of cases. Donoghue\' St!"\'e11SOM, Hedley Byrne and Dorset ra.:ht:
'- .. the position has now been reached that in order ro establish that a duc:: of~
arises in a particular siruarion, it is nor necessary to bring the facts of rhar SJruall:
within those of previous situations in which a dury of care hils been held. ro exl
Rather the question has robe approached in two stages. First one hds mask wheth
as be:nveen rhe alleged wrongdoer and rhe person who has suffered damage chert
0001{)!)
,All England Law R~O<tS 8 Octobe119a2
HL
a
JUnior Books Ltd v Veitchi Co Ltd (Lord Roskill)
211 .
a sufficient relationship of proximity or neighbourhood such char, in rhe reasonable
conremplacion of the former, carelessness on his parr may be likely co cause damage
to rhe latrer, in wh_ich case a prima facie dury of care arises. Secondly, if che first
question is answered affirmatively. iris necessary co consider whether there an: any
consideracions which oughr to negarive, or w reduce or limit che scope of the ducy
or the class of person co whom it is owed or the damages to which a breach ofic may
give rise .. :
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Applying r~ose staremems of general principle as your Lordships have been enjoined
to do bath by Lord Reid and by Lord Wilb!!rforce rather than co ask whether che
particular siruation which has arisen does or does nor resemble some earlier and different
situation where a dury of care has been held or has nor been held m exisr, I look for the
reasons why, it being Conceded rhat rhe appellants owed a dury of care to or hers nm to
consrruct the flooring so rhac those ochers were in peril of suffering loss or damage to
C their persons or their property, that duty of care should not be equally owed ro the
respondents, who, rhough noc in direct conrraccual relationship wirh the appellants, were
as nominated sub-contractors in almost as close a commercial relationship wirh the
appdlanrs as ir is possible co envisage short of privity of comracr, so as nor co expose the
respondents ro a possible liability to financi.:d Joss for repairing the flooring should it
d prove rhar the flooring had been negligenrly constructed. Ic i~ conceded char if the
flooring had been so badly constructed that co avoid imminent danger the respondems
had co expend money on renewing it the respondents could have recoverd the cost of so.
doing. h seems curious that jf rhe appel!anrs' work h:id been so bad that co avoid
immenent danger expenditure had been incurred the respondems could recover char
expenditure bur char if che \Vork was less badly done so that remedial work could be
posrpon.ed they cannot do so. Yet chis is seemingly the result of the appellants'
e conrenrions.
My Lords, I have already said char rhere is no decided case which clearly points the
way. Bur it is, I think, of assistance ro see how far rhe various decisions have gone. l shall
resrricr my citation ro the more imponanr decisions both in chis councry and overseas.
In Dutron, which, as already stared, your Lordships' House expressly approved in Anns,
I the Court of Appeal held char the plaintiff, who bought che house in question long..Olfcer~:
ic had been built and irs foundations inadequarely inspected by the de:fendams' staff, was
enrided co recover from the defendants, inter alia, rhe estimated cost of repairing the
house as well as other items ofloss including diminution in value. There was in rhar case
physical damage to the house. Ic was argued char the defendants were not liable for t.he
case of repairs or diminution in value. This argument was expressly rejected by Lord
g Denning MR and by S.chs LJ (see [ 1972]1 Ali ER 46221 47 4, 480-481, [ 197 2]1 QB 373
ar 396, 403-4C4j. Scamp Lj was however more sympathetic tO rhis argumenr. He said
[1972]1 AllER 46201 489-490, [1972]1 QB 373 at 414-415):
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'It is pointed out chat in the past a distinction has been drawn bee ween constructing
a dangerous article and consrrucring one which is defective or of inferior quality. I
may be liable to one who purchases in rhe market a bocde of ginger beer which I
have carelessly manufacrured and which is dangerous and causes injury co person or
prope:-ry; bur it ~,.,or the law thac I am liable ro him for the loss he suffers because
whar is found inside rhe borde and for which he has paid money is nor ginger beer
bur water. I do not warrant, except co an immediate purch~er and then by contract
and not in tort, rhar rhe rhing I manufacture is reasonably fir for its purpose. The
submission is I think a formidable one and in my view raises the most difficulr
point for decision in chis case. Nor can J see any valid distinction between the cas<!
of a builder who carelessly builds a house which, although nor a source of danger to
person or property, nevertheless owing to a concealed defect in its foundations scans
tO settle and crack and becomes valueless. and the case of a manufacturer who
carelessly manufactures an article which. though not a source of danger co a
subsequent owner or to his mher property. nevertheless owing to a hidden defect
00013§
All England law Reports
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quickly disintegrates. To hold rhar eirher rhe builder or rhe manufacturer was !iab!
ex cepe in comracr, would be ro open up a new field of liability, rhe exrenr of whic~
could nor I chink be logically conrrolled, and since it is nor in my judgrul!n
necessary to do so for the purposes of rhis case, 1 do nor, more particularly because c
rhe absence of rhe builder, express m opinion whether the builder has a higher r;
lower ducy chan rhe manufacturer. Bur the distinction between rhe case: of
manufacturer of a dangerous riling which causes damage and rhac of a rhing whic!
turns our robe defective and valueless lies I r.hink nor in rhe nature of rhe injury bu
in the character of the dury. I have a dury not carelessly to pur our a dangerous ;hinwhich may cause damage ro one who may purchase ir, bu( rhe duty does nor exren:
ro purring our carelessly a defective or useless or valueless rhing. So again one gee
back ro consider what was the characrer of rhe duty, if any, owed to rhe plainciR
and one finds on authority rhar rhe injury which is one of rhe: essemial elements 0
the torr of negligence is noc confined ro physical damage co personal property bu
may embrace economic damage which rhe plaintiff suffers through buying
wonhless ching, as is shown by rhe Hedley Byrne: case.'
·.··-.
·:. :-·
B October 1982
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Thus it was on rhc character of rhe dury rhar Sramp LJ founded and was able ro agre
wirh rhe ocher members of rhe Court of Appeal in char case.
My ~ords, a similar question arose some years larer in Batty v Merropdiran Propar:
Realiza.cions Ltd (1978) 2 AllER 445, [1978] QB 554. By the dare of this decision ch 1
Couit of Appeal had the benefit of the decision in your Lordships' House in Anns. Mega'!'
LJ (see [1978]2 AllER 445 at 456, [197B]QB 554 at 570) regarded the doubts raised b1
Stamp Lj as resolved by Lord Wilberforce's speech in Anns. Once again the argumen.
based on absence of physical damage was advanced, .as ic had.bee:n in Dutton. Once agair
it was rejected, bur on rhe basis rhar rhere was in chis case as in Dutton the requisire degr!f
of physical damage. Bridge t.j [1978] 2 AllER 445 at 459, (1978] QB 554 a1
however see:ms m me co use somewhat wider language ar.d indeed ·he refers ro t•n
sentences ac rhe end of Lord Wilberforce's Speech in Ann.s-[1977] 2. Ali ER 492. at 505
[ 1978] AC 728 ar 759 where Lord Wilberforce said: 'Subject always ro adequate proof 01
causation, these damages may include damages for personal injury and damage-~rc
properry. In my opinion they may also include damage to rhe dwelling-house itself .. .'
My Lords, I am inclined co think rhar char lase sentence was djJ:e;cted ro the facts ir
Antts where there was, as in the mher cases ro· which I have referred, the e!emem o
physical damage presenr due ro crouble wirh rhe foundations, rather chan directed tQ thf
full breadth of the proposition for which the respondents in the present appeal contended
None the less the three decisions, Durron, Anns and Batty. seem to me co demonstrate ho~
far the law has developed in the relevant respect in recent years•
My Lords, I rum next co the three main Commonwealth decisions. They are Rivto-J
Marine Ltd v Washington Iron Works[1974] SCR r 189, a decision of the Supreme Court o
Canada, Caltex Oil (Austraiia) Pty Ltd v Dredge Willemstad (1 976) 136 CLR 529, a decisi01
of the High Court of Australia, and Bowen·v Paramount Builders (Hamilton) Ltd [1977)
NZLR 394, a decision of rhe Court of Appeal of New Zealand. All three of these C""..!e
were decided before Anns reached your Lordships' House.
My Lords, in the firsrOr rhis rrilogy rhe Supreme Coun by a majority held rhac th•
manuf~_cturer of a dangerously defective arricle is not liable in rorr to an ulrim::r·
consuffi"er or user of char article for rhe· cost of repairing damage arising in rhe arric!
irself or for such economic loss as would have- been sustained in any event as a result o
the need to effect repairs. Bur rhere was, if I may respectfully say so, a powerful dissenr~n;
judgmem by Laskin] with which Hall J concurred. The judge posed as rh.: first questiOI
(see [1974] .SCR 1 I 89 at 1217) wherher rhe defendants' liability for negligence shoul•
embrace economic loss where ·there h-as been no physical harm· in facr. He gav~ ~ 1
affirmative answer. After poinring out (ar 12.21) that rhe judicial limirarion oc liab1hr
was founded on what I have called 'rhe floodgares' argument rnrher than on principle. h
adopted the view that economic loss resulting from threatened physical loss frorn
00016'7
AU El"lglandlaw Aeporu 8 OCtober 1982
HL
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Junior Books ltd v Veitchi Co ltd (Lord Roskil\)
213
negligently designed or manufactured product was recoverable. lr was this judgment
which Lord Wilberforce described in his speech in .'\nns [1977] -z. All ER 492. ar 505,
[1978] ..~.c 728 ar 759-760 as of srrong persuasive force. In the Cultex case the High Court
of Australia elaborately reviewed all the relevant English aurhoriries and indeed or hers as
well. My Lords, I hope I shall not be thought lacking in respect for those elaborate
judgmencs or failing to acknowledge the help which I have derived from rhem if J do
nor cite from them, for to some e:m:nr certain of the difficulties there discussed have
been subsequently resolved by the decision of this House in Anns. In BO'\'.·en, ro which
Lord Wilberforce also referred in A11ns as having <1 fforded him much assistance, the Court
of Appeal in New Zealand followed rhe Court of Appeal decision in Dutto-n. Cookej took
rhe view that it was enough for rhe purpose of the case in question to say char the damage
was basically physical. Bur, as the report shows, he would have been prepared in
agreement with the judgments of Lord Denning MR and of Sachs Lj in Duttort to go
NZLR394.c 423)My Lords, to my mind in rhe insranr case: rhere is no physical damage to the flooring
in the sense in which thar phrase was used in Dutton, Batty and Bower! and some of the
orher cases. As my noble and learned friend Lord Russell said during rhe argument. rhe
question which your Lordships' House now has ro decide is whe:r.her rhe relevant Scars
and English ·law today ex rends rhe duty of care beyond a dury to pr.C'(ent harm being
done by faulty work co a dmy ro avoid such faulcs b~ing present in rhe work irself. Ir was
powerfully urged o.n behalf of the appellants char were your Lordships so ro ex rend rhe
law a pursuer in rhe posirion of rhe pursuer in Donoghue v Stevenson could in addidon to
recovering for any personal injury suffered have also recovered for the diminished value
ofrhe offending borde of ginger beer. Any remedy of rhar kind ir was argued must lie in
conrracr and nor in delia: or tore. My Lords, 1 seem to detect in rhar able argumem
reflections of the previous judicial approach to comparable problems before Dcmoghue v
Stevenson was decided. That approach usually resulted in rhe conclusion that in principle
the proper remedy lay in comract and not outside it. Bur rhar approach and its
concomiranr philosophy ended in 1932 and for my part I should be reluctant ro
countenance its re--emergence. some fifry years Iacer in the instant case. I thin~. roday the
proper comrol lies nor in asking whether rhe proper remedy should lie in.COmract or
insread in delict or torr, nor in somewhat capricious judicial determinacion whether a
particubr case fa11s on one side of the line or the or her. nor in somewhat artificial
distinctions between physical and economic or financial loss when the two sometimes go
[Ogether and sometimes do nor (it is some.rimes overlooked that virtually all damage
including physical damage is in one sense financial or economic for it is compensated by
an award of damages) bur in the first instance in establishing rhe relevant principles and
then in deciding whether the particular case falls within or wirhour chose principles. To
scare rhis is to do no more rhan co res tare what Lord Rt:id said in rhe Dorset Yacht case and
furcher(see[I977)I
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the dury or the c;Jass of person
to
whom it is owed or che damages co which a breach of
h the dury may give rise. My Lords, it is I chink in the <~pplicacion of rhose rwo principles
r~at the ability to comrol che extent ofli<~bilicy in delict or in negligence lies. The history
ot the developmem of the Ia'-'{. in the las"i' fifty years shows char fears aroused by rhe
'floodgates' argumem have been unfounded. Cooke J in Bowe-n [t977] 1 t'JZLR 394 at
472 described rhe: 'floodgates' argument as specious and rhe argument against allowing a
cause of action such as was allowed in Durton, .4rms ;md Bo-wt.'Jt as 'in terrorem or
j doctrinaire'.
Turning back ro rhe present appeal I therefore ask first whether there was the requisite
degree of proximity so as to give rise co the rde..-anc duty of care relied on by the
respondems. I regard the following faCts as of cruci-al importance in requiring an
affirmative answer to char quesrion: {1) the appdlants were nomim:.ced sub.comracrors;
0001G8
AU England law Repor.:s 8 Oc!ober 1982
214
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(.1) rhe appdbnrs were specialisrs in flooring; (3) I he appdlanrs knew what produc1.s w;:
;equired by the appdlanrs and their m;~in comracwrs ~:md specialised in the producric
of rhose products; (4) the appellants alone were responsible for the composition ;;r
construction of rhe flooring; (5) rhe respondents relied on rhe appe.llams' skill 2 r
experience; (6) rhe appellanrs as nominated sub-contractors musr have known rh;:;.c!}
respondents relied on !heir skill and experience; (7) rhe relationship berween rhe panj
was as dose as ic could be. short of acru<~l priviry of conrracr; (8) rhe appellcms must 1
raken to have known char if rhey did rhe work negligently (as ir must be assumed th
rhey did) rhe resulting defects would :Jt some rime require remedying by the responden
expending money on rhe remedial measures as a consequence of which the responde.n
would suffer financial or economic loss.
My Lords, revening ro Lord Devlin's speech in Hedley Byrne, it seems to me char all d
conditions existed which give rise co rhe relevanr dury of care owed by rhe appellams 1
the respondents.
I rhen rurn [a Lord Wilberforce's second proposirion. On rhe facrs I have: jusr srattd,
see nothing whatever to resrricr the duty of care arising from the proximity of which
have spoken. During rhe argument it was asked what.the position would be in a ca
where there was a relevant exclusion clause in rhe main contract. My Lords, rhac quesric
does nor arise for decision in the ins ram appeal. bur in principle I would venrure the vie
rhar such a clause according to the manner in which it WClS worded mighr in sor;circumsrances limit rhe dury of care jusr as in rhe Hedley Byrne case the plaintiffs we1
ultima rely defenred by the defendanrs' disdaimer of responsibility. Bur in rhe p·
case the only suggested reason for limiring rhe damage (ex hypothesi econom. .
financial only) recoverable for the breach of rhe duty of care just enunci:ned is rh;
hirherco rhe law has nor allowed such recovery and therefore ought not in the furore 1
do so. My Lords, wirh ::~11 respecr ro those who find this a sufficient answer I do not
think this is rhe next logical step forward in the developmem of rhis branch of rhe law.
see no reason why whar was called during rhe argument 'datnage to che pock.;
simplicirer should be disallowed when 'damage co the pocket' cdtlpled with phjsic
damage has hitherto always been allowed. l do nor think th<H this developmenc;
developmenr ir be, will lead ro untoward consequences. The concept of proximity mu
always involve, at leasr in mosc cases, some degree of reliance; I have already mentiom
the words 'skill' and 'judgmenc' in rhe speech of Lord Morris in Hedley Byrne. The:
words seem to me robe an echo, be ir conscious or unconscious, of rhe language of s 14(
of the Sale of Goods Act 189 3- fv1y Lords. rhough rhe analogy is not exacc, I do nor lind
unhelpful fori rhink the concepr of proximity of which I have spoken and rhe reasonir
of Lord Devlin in the Hedlq Byrne case involve factual considerations nor unlike 1ho:
involved in a claim under s 14(1); and as between an ultimate purchaser and
manufacturer would nor easily be found to exist in rhe ordinary everyday rransacrion 1
purchasing charre.ls when ic is obvious rhar in truth rhe re.:J.l reliance was on rhe immedia
vendor and not on the manufacrurer.
MyJ•. iJrds, I have nor rhoughr it necessary ro review all the cases cired in argument.
my conclusion be correcr, certain of chem can no longer be regarded as good l3w ;;;r
others may have robe Considered afresh hereafter, for ex::~mple whether the decisior, 1
rhe majority of rhe Court of Appeal jn Spa.rran Sud and Allays Ltd v Martin C:- (
(Contractors) Ltd [1972] 3 All ER 557, [1 973] QB 27 is correct or whether the re3son!r
of Edmund-Davies LJ in his dissenting judgment is to be. preferred, and wherher ~~
decision of the First Division of the Inner House of rhe Court of Session in Dynamco LrJ
Holland & Hannen & Cubirts (Scotland) Ud 197 J SC 257, a decision given after the DorJ
Yacht case bur before Anns, bur seemingly wichour reference to the Dorset Yacht ca.~e.
correct.
My Lords. for all these reasons I would dismjss this appeal and allow rhis action
proceed to proof before answer.
My Lords, I would add rwo further observations.. Firsc, slnce: preparing rhis spet:ln
•.
000169
•
•',• .All England Law ReportS
HL
have had rhe
a October 1982
Junior Books Ltd v Veitchi Co Ltd (Lord Roskill)
advan~age of reading
in drafr rhe speech of Lord F.raser, with which 1\
a Second.
my anencion has been drawn to the decision of che Courr of Appeal in',. .-..
Zt:aland in Mount .4.lbert Borough Council v Joltnson [1979] 2. NZLR 234. The judgmen ,f ..
Cooke and Somers JJ in whlch the decision in Bowen\' Paramount Bu.iCd~rs (Hamilton)\ ' ·
(1977] 1 NZLR 394 is stared ro reflect the present law in New Zealand (see [ 1 97 9)
NZLR 234 ac :!.J8-lJ9) is consonam wirh rhe views I have expressed in chis speech.
·
b LORD BRANDON OF OAKBROOK. My
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Lords, this appeal arises in •n action in
which junior Books Ltd are the purs1.1e.rs and Veirchi Co Led are rhe defenders. In that'.
action. which purports ro be founded in delict, the pursuers seek reparation from the
def~nders for loss and damage which they daim to have suffered by reason of the want
:-~<\
of care of the defenders in laying flooring ac the pursuers' factory in Grangemourh.
·.··.· :.:.: .. - : ~
The defenders made a general challenge ro rhe relev:J.ncy of the averments contained
·: -~ in the pursuers' condescendence ac procedure roll. The question of law raised b)' that
·- -~
challenge came first before the Lord Ordinary (Grieve). He decided the quesrion in
·!
favour of the pursuers, and by an interlocutor of 22 November f979 allowed chem a
proof before answer of all cheir averments. The defenders reclaimed to the Inner House
and by an interlocucor of 1 September 1980 the Second Division, consisting of rhe Lord
jusrice-Cierk (Lord \Vhearley), Lord Kissen and Lord Robertson, refused the reclaiming
q medon and affirmed the inrerlocmor of the Lord Ordinary. The defenders now appeal
from thar decision ro your Lordships' House.
Avoiding all matters of derail, the averinems conrained in the condescendence can be
summarised as follows. ( 1) In 1969-70 rhe pursuers had built for rhem by main
conrractors a factory in Grangemouth. (2) Earlier, in july 1968, the pursuers' architects
h2d nominated rhe defenders as sub-comracmrs ro lay flooring. consisting of a magnesium
.e_ oxychloride composition, in rhe production area of the factory. (3) The pursuers'
- architects, in so nominating the defen·ders, had relied on the fact thac the defenders were
specialises in the laying of flooring. (4) The defenders had accepted the nomination and,
afrer entering inro a contract with rhe main contractors, laid flooring of the specified
composition in the specified area~ .(5) It was the ducy of the defenders to mix and lay the
flooring wirh reasonable care. (6) The defenders were in breach Ofrhac ducy in that they.·.
·: J~ failed, in a number of respects, to mix and lay rhe flooring with reasonable care. (7) In
·
consequence of chat breach of duty by rhe defenders the flooring began ro dev~lop cracks
in 197:!. and had gone on cracking more and more ever since. {8) As a result of the
mcking of rhe flooring the pursuers suffered the following items of damage or loss:
necess.o.ry relaying or replacement of the flooring [so,ooo; smrage of books during the
.
, ~ carrying our of the work {t,ooo; removal of machinery to enable the work ro be done,
~-.g~ [l,ooo: loss of profits due to disturbance of business [4s,ooo; wages of employees
:..•·· : ;:·-~-~ thrown away [9o,ooo; overheads rhrown away £t6,ooo; investigation of necessary
~-: ·. treatment of flooring [J,ooo. The roral of these items was pleaded as £2.o6,ooo; iris in
· ··
-~ .·;. faaF, alrhhough the poim is nor material, [2.o],ooo.
fc
1-,
or t e purpose of considering the relevancy of the pursuers' averments o tact, it is
..
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to the pursuers in
with the laying of the flooring; the existence of SOme
-~.
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duty arising froc;! rhe proximity of the pardc;s is, rightly in my view, admitted by rhe
defenders. The dispute is rather concerned wirh che scope of chat admitted dmy of care.
For the defenders, on the one hand, it waS contended that the dury was limited m a
~ . _.. duty ro exercise reasonable care so to mix and lay the flooring as ro ensun: char it was not
/·.':.a t~anger to persons or property, excluding for rhis purpose che property brought inro
--~,, be:mg by the work and labour done, that is to say rhe flooring itself. For rhe pursuers, on
· . the o_rher hand, it was c.omended that the dury \vas a dury co exercise: reasonable care so
:·_ ..' 10 m1x and lay the flooring as ro ensure: rhar it was free of any defects, whether dangerous
;.-. ,.to persons or propeny or no£; ahe:rnarively. if rhe duty was in principle rhar put forward
! -:
000170
Ail EngJanCLaw Repor.s
216
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All England Law Reports
[1982]3 All
by the defenders, the re!ev:mr property, damage ro which che defenders were unQ
ducy co exercise reasonable care to avoid, included rhe. properry brought inro beinl
che work and labour done, rbar is ro say the flooring irself.
In reladon co char dispute it is common ground rhar. so far as rhe presenr C;i!
concerned, there are no material differences between the Scorrish law of delicr and
English law of negligence, so char authorities rehring ro rhe Iauer are properly rc
raken in co accounc in relarion ro rhe former. Iris further common ground rhac aurhori
in Commonwealth countries, the laws of which, in so far as they are not srarurory,
derived from rhe English common law, may usefully be considered, although rheir v::
is necessarily persuasive only.
My Lords, ir appears to me dear beyond doubt char, there being no conrracr
relationship between the pur:suer:s and rhe defenders in rhe present case, rhe foundari
and rhe only foundarion, for the e:cisrence of a dury of care owed by rhe defenders ro
pursuers, is rhe principle laid down in rhe decision of your lordships' House in Dcno11
v Stet•enson [I 932] AC 56:!, [1932] All ER Rep z. The acrual decision in char cc.se rei~,
only w rhe dury owed by a manufacturer of goods ro rheir ulrimare user or consum
and can be summarised in thi.s way: a per:son who manufacrl!res goods which he inter.
robe used or consumed by ochers is under a dury ro exercise such reasonable care in rh 1
maOufacture as co ensure char rhey can be used or consumed in rhe manner inrend
wichour causing physical damage co persons or rheirpropeny.
While char was che acrual decision in Donoghue V Stevel"..son, ir was based on a mu.
wider principle embodied in passages in rhe speech of Lord Atkin. which ha;•e. 1.~.
quoced so often rhar I do nor find ic necessary ro quote chem again here. Pur .shorrl.
wider principle is char, when a person can or ought co appreciate rhar a careless act,
omission on his parr may resulr in physical injury co or her persons or their property, t
owes a dury ro al1 .such persons ro exercise re-asonable care to avoid such careless ;;cr c
omission.
Iris, however, of fundamental imporrance ro observe th;;~r rhe 9ury of care laid dow
in Dcmoglnu v Stevenson wa.s based on che existence of a danger __.9.f physical injury t
persons or rheir property. Thar rhis is so is clear from the observations made_by Lor
Arkin [1932] AC 562 ac sBr-;82, [1932.] AllER Rep 1 at I z-r2) with regard to rh
sracemems of Jaw of Brecr MR in Heaven v Pender (I 883) J l QBD 503 at 509, [ 1881-!
Ail ER Rep 35 ar 39· fr has further, until rhe present Case, never been doubred,so far as
know, that che relevant properCy for rhe purpose of rhe wider principle on which rh
decision in Donoghue v Stevenson was based was property ocher than the very proper(
which gave rise ro rhe danger of physical damage concerned.
My Lords, J have already indicated my opinion char the wider principle on which rh1
decision in Donoghue v St~enson was based applies ro che presenr case. The effecr of ir.
application is rhar rhe &:fenders owed a dury to the pursuers ro exercise reasonable can
so ro mi;c and lay rhe flooring as ro ensure that it did nor, when completed and pur ro it:
comemplared use, consrirme a danger of physical damage ro persons or their properry
ocher than rhe fiooring itself.
The _averments comained in rhe cqndescendence in rhe present case do nor include any
averment that the defects in che flooring complained of by the pursuers either consti!ut~
presently, or migflr reasonably be expecred co consrirute in rhc: furure, a danger of
physical damage to persOns or rheir property. other chan che flooring itself. In rhe absence
of any avermem of rhar kind, I am of opinion rhar the averments concained in rbe
condescendence di.sclo.se no cause of acrion in delicr and are accordingly irrelevenr. .
My lords, a good deal ofrhe argument presented ro your Lordships during the hean_ng
of rhe appeal was directed co rhe question whether a person can recover, in an acr~on
founded on delicr alone. purely pecuniary Joss which is independent of any phys:Lal
damage ro persons or chei:i- property. Jf rhac were che question co be decided _in ch~
presem case, 1 should have no hesirarion in holding char, in principle and dependm~
rhe faces of a panicular case, purely pecuniary Joss may be recoverable in an ac.
000171
HL
Junior Books l_td v Veitchi Co Ltd (Lord Brandon)
2.
founded on delict alone. Two examples can be given of such cases. First, there is the type
•
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has a cause of action based on Donoghue v Scevensan, reasonably incurs pecuniary loss in
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of case where a person suffers purdy pecuniary loss as a result of relying on another
person's negligent misstatements: see Hedley Byrne & C~ Ltd v Heller & Parrner.s Ltd [I 963]
1 All ER 575, [ 1964] AC 465. Second. rhere may be a rype of case where a persort, who
order ro prevent or mitigate imminem danger of damage to the persons or property
exposed ro char danger: see the dissemingjudgmem ofLaskinj in the Canadian Supreme
Court case of Rh·tow Marine Ltd v Washington Iron Works [1974] SCR I 189, referred to
with ~pproval in the speech of Lord Wilberforce in Anns v lV1ertor. London Borough [19 77 ]
1 AllER 491 ar 505, (1978] AC 728 at 760.
l do nor, however, consider char rhe question oflaw for decision in this case is whether
a person can, in an action founded in delict alone, recover for purely pecuniary loss. On
rhe comrary, I adhere to rhe nature of the question of law to be decided which I
formulated earlier, namely what is the scope of rhe dury of care owed by the defenders
co rhe pursuers on rhe assumed facts of rhe present case?
My Lords, in supporr of their _concenrions rhe pursuers plactd reliance on rhe broad
m.[ements relaring ro liability in negligence comalne:d in rhe speech of Lord Wilberforce
in.-tnn.s v Merton London Borough [1977] 2 AllER 492 ar 498, [1978] .A.C 728 at 751-752.:
'Through the trilogy of c.:iSes in chis House, Donoghue v Stevenson [1932] AC 56 2 ,
(1932] Ail ER Rep I, Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963]2 AllER
575, ( 1964] AC 465 and Harne Office v Dors" Yacht Co Lrd[1970]2 AllER 294, [197o]
AC 1004, the posicion has now been reached char in order to establish char a duty of
care arises in a particular situation, ir is not necessary to bring the facts of tha(
siruarion within those of previous siruarions in which a ducy of care has been held
to exisr. Rae her the question has robe: approached in two srages. First on.e has to ask
whether, as between rhe alleged wrongdoer and rhe person who has suffered damage
there is a sufficiem relationship of proximity or neighbourhood such that, in the
reasonable comemplation of the former, carelessness on his pan may be likely to
cause damage co the latter, in which case a prima facie duty of care arises. Secondly,
if the first question is answered affirmarively, it is necessary ro consider whether
there are any considerations which ought to negative, or co reduce or limit the scope
of the duty or the class of person co whom it is owed or rhe damages to which a
breach of it may give rise ... '
d.
.••.
····::.· ·
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Applying rhac general srareme:nr of principle to the present case, ic is, as I indicated
earlier, common ground that the first que'stion which Lord Wilberforce said one should
·;.:::, ask onesdf, namely whether there is sufficienr proximity between the parties to give rise
·:-. ·f#. to the existence of a ducy of care owed by the one ro rhe or her, falls m be answered in the
affir~arive. Indeed, ir is difficult to imagine a greater degree of proximity, in the absence
:
a d1re:cr conrracrual relationship, chan char which, under the modern type of building
or
':.~::i~:;:J,i:l~;:;i:~t;:.'· {.•. '<::;·;::;':.t•::;,\;L, ::.•·: ··' <::.~ :~;;:~;:.;,exists between a building owner and a sub·contractor nominated by him or his
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· ;·- · -:.:·:···. ·:::\··,~· .:.·_·l-'.:::\: ..~· Tha~ first quesrion having been answered in the affirmative, however, it is necesS<Iry,
accordmg ro r~.e views expressed by Lord Wilberforce: in the passage from his speech in
· If
.""~ ·A"-11S v Merwn· Landon B:.:rough quoted above, to ask oneself a second question, namely
·::-whether there are any considerations which ought, inter aHa, ro limir the scope of the
dury which e."tists.
(__· .. ~0 that second question I ~~ould answer that there are two important considerations
f-~~~ ~hJch ought co limit the scope of theduryof care which iris common ground was owed
·_ ~/ :1 Ythe defenders to the pursuers on the assumed facrs of the present case.
·
.-The first consideration is that, in Donoghue v Suvenson itself and in all the numerous
;·. ·, ~se:s !n ~hie~ the_ principle: of char decision has been applied ro differenr bur analogous
_ .Ctl.J..,_I S!~uar10ns. H h;:;.s always been eirher srared e:tpressly, or raken for granred, that an
:essem 1almgre:dienr in the cause of action rdied on was che existence of danger, or the
000172
All Englandl;rw Reports B October 1982
218
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threar of danger, of physical damage to persons or their property, excluding for t~
purpose rhe very piec~ of prop~rry from _rhe defective :o~dicion_ of which such dangt
or rhr~t of danger, anses. To dispense wHh lhar essen[Ja] mgred1ent in a cause of acri
of the kind concerned in rhe presenr case would, in my view, involve a radical de pan~
from long-established amhoriry.
The second consideration is rhar there is no sound policy reason for substituting r1
wider scope of rhe dury of care put forward for rhe pursuers for rhe more. restricted scol
of such duty pm forward by rhe defenders. The effect of accepting the pursue:
contemion with regard m the scope of the dury of care involved would be, in subsram
ro create, as between two persons who are noc in any concraaual relationship wich e:o1
ocher, obligations of one of those two persons ro rhe ocher which are only real
appropriate as between persons who do hJve such a relationship between them.
In rhe case of a manufacrurer or distributor of goods, the posicion would be thJr 1
warranred ro rhe uldmare user or consumer of such goods char they were as well desigr.e:
as merchamable and as fir for rheir contemplated purpose as rhe exercise of reasonab
care could make them.
In the case of sub-comractors such as those concerned in rhe present case, rhe posiric
would be char they warranred ro rhe building owner thar the flooring, when laid, wou
be as we!i designed, as free from defects of any kind and as fit for irs comemplart
purpose as rhe exercise of reasonable care could make it.
In my view, the imposition of warranties of this kind on one person in favour 1
another, when there is no contractual reladomhip between· them, is contrary ro ar
sound policy requirement.
It is, I rhink, just wonh while to consider rhe difficulties which would arise if ri'
wider scope of the duty of care puc forward by rhe pursuers were accepted. In any ca:
where complaint was made by an ultimate consumer char a product made by ~ ·
persons wirh whom he himself had no conrract was defective. by whac sranda
standards of quality would rhe question of defectiveness fall to be decided? In the .case: c
goods bought from a retailer, it could hardly be che standard prescribed by the COnrra1
between the retailer and rhe wholesaler, or between the wholesaler and the discriburo
or between the distribmor and rhe manufacturer, for the terms of such com races waul
noc even be known co rhe ulrimare buyer. In the case of sub-contractors such as ch
defenders in che present case, ir could hardly be the standard presc.r:ibed by rhe comm
between the sub-conrracrors and the main contractors, for, although rhe building owm
would probably be aware of chose terms, he could DOt. since he was not a party co sue
comracr. rely on any standard or standards prescribed in it. Ir follows char the quescio
by what standard or standards alleged defects in a producr complained of by irs uhimat
user or consumer are co be judged remains enrirely at large and cannot be given any ju~
or satisfactory answer.. ·
.
·
If, contrary ro the views expressed above, the relevant contract or comracrs can b
regarded in order to establish the standard or standards of quality by which the quesdm
of defectiveness fallss:JO be judged. and if SlJCh contract or comracts happen to inch!~
provisions excluding or limiting liability for defective products or defective work. or ro
negligence generally, ir seems char the parry sued in delict should in justice be enrirled !•
rely on such provisions. This illusrrares with especial force the inherent difficulry u
seekine:_ to impose what are really conrracrual obligations by unprecedented and, ~
rhink:-'~vholly undeshable extensions of the existing law of delict.
By conrrasr, if rhe scope of the duty of care co mended for by rhe defenders is acceprcc
the standard of defectiveness presents no problem a_r all. The sole question is wherher th·
product is so defective char, when used or consumed in rhe way in whiCh it was inrende,
to be, it gives rise to a danger of physical damage to persons or their property, otherth.<J
che produce concerned itself.
.
My Lords, for the reasons which I have given, I would decide the question of rdevanc.
in favour of the defenders and allow rhe appeal accordingly.
000173
,~;~ ,AJIEn~landLawReporn 8 October 1962
·t··',
'·
Junior Books Ltd v Veitchi Co Ltd
HL
219
Appeal dismissed.
a
Solicirors: Mucfarlanes, agents for McClure, Naismith, Brodie & Co, Edinburgh (for the
appdlams); Beaumont &- San, agems for Rttssel & Aitkt'n WS, Edinburgh (for the
respondents).
Mary Rose Plummer
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Wilson & Garden Ltd v Inland Revenue
Commissioners
t- c
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HOUSE OF LORDS
J
1'
I
LORD FRASER OF TULLYBELTON, LORD RUSSELL OF KILLOWEN, LORD LOWRY, LORD ROSKJLL AND
LORD BRANDON OF OAKBROOK
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26,27 APRIL, 8 JULY I932
Income la..."C- Close company- Apportionment of income- Reievanr income-- Maintenance and
devdopmt'nt of business- Business- Taxpayer company ~·arrying on business as manufi1crurers
of ,nalJWoards- Decline in demand for chalkboards - Taxpa-ya company planning co ~cqu.ire
r.totor dealership Co improve irs trading position - .4.cquisiticn of d~a.lership within taxpaya
company's objects - Whether acquisition of dealership a 'development' of ca.:rpayer company's
business- Whether planned ~xpendiltlre on acquisition of dealership a 'requirement' oftaxpu:yer
cvmpany's business- Finance Ace 19 71~ SLh J 6, para 8(1).
:·· '': The taxpayer company. which carried on business as a rna"nufacrurc:rof chalkboards, was
~:-. -_.:~.close company. In rhe period from r July 1 9Tl to 30 June 1977 there was a sready fall
f~ ff. __
in the number of chalkboards sold by rhe raxpaye.r company. and in 1976 che directo~~
~ Of_rhe company, seeking ro finO ocher means ofcreacing profits to mainrain rhe company's
..
--~- rrilding position, decided ro acquire a major motor dealership at a rmal cosr of nor more
. than [ 11 o,ooo. The acquisirion of the dealership was intra vires the company's
: '!IC:morandum of association. The company's only previous connection wirh rhe moror
~·_>j-!r.ade had been its ownership of a number of vehicles for use in connection wirh ics
. -: .J :_91<~Esiness as a manufacwrc::r of chalkboards. In the accounting period ro 30 june 197 s. rhe
· __- { ·<~:.~counrs for which were approved by rhe taxpayer company on 8 October 1976 (the
\ · relevam dare), rhe raxpayer company disrribuced dividends roca!ling £6.614 our of a
j ··:·:_profir of [68,573- The question arose whether, for rhe purposes apportioning the
--;. ,L_- ..raxpayer company's relevanr income in the accounting period ro 30 June I975 in
,_;,~··:,,i:_;~·/}::<::·'',:~:;.,:~·~:*' ?'}::~'::~~~,·,:: ,:;_;,,;,/,~' '? {}b,}:~~~~~n'~ '~~'~e:~~~:;':~ a";~:q1~;:;,!~~ [~hi~~r:.~j n~c~!!~~:~da~~f,~~f:~~~e'~~
,:~ -~_rmunrenance: and devd.'Jpmem of[rhe raxpa yer corripany's) business' within para 8(2)b of
;:_-,;<,.;r.hat schedule. The Crown Co mended char the words 'such or her requirements as may be
i'-X/:necessary or advisable for rhe maince:nance and developme.nr of char business' in para
;._-:·/~{l.~a). referred only ro rhe mainrenaOce.and development of the particular business
::~•,:_, -p!rnea on ar rhe rime when the relevant income was calculated, and rhar accordingly rhe
~:'f~. ~C!i}ui.sirion of the dealership was not a business rhe requitemems of which could be raken
....--- .
•11.
b
Ilaf";!gr<~ph t, :o far 01s m.ateri:ll. is set our at p 222.: to f. posr
Pilngr;oph 8(2) is Sl!r out ar p 2:!2 j. post
000174