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271 Q.B. D.D.S.A. v. Times Newspapers (GA.) Lord Denning M.R.

For instance, in this particular case there is a reference to a " London-based operation." If the plaintiffs say that it means the plaintiffs, theyshould say so. They should insert " (meaning thereby the plaintiffs)."There is a reference to " the largest single network operating from a London suburb." Do they say that means the plaintiffs? If they do, they

should put in " (meaning thereby the plaintiffs)."Such an exercise will be a great advantage to the plaintiffs themselves.It will make them clear their minds: and it will help the defendants too.

For these reasons I think it is quite improper to plead in the way it hasbeen done here. I find myself entirely in agreement with Master BickfordSmith on both points. I would strike out the pleading as embarrassing anddefective. I would, therefore, allow the application and restore the master'sorder.

PHILLIMORE L.J. I agree.

CAIRNS LJ. I also agree.

Appeal allowed with costs in Court of Appeal and below.

Statement of claim struck out.

Solicitors: Theodore Goddard & Co.; Tringhams.

M. M. H.

[COURT OF APPEAL]

F

SPARTAN STEEL & ALLOYS LTD. v. MARTIN & CO.(CONTRACTORS) LTD.

[1970 S. No. 3104]

1972 April 9, 25, 26, 27; Lord Denning M.R., Edmund Davies andG June 22 Lawton L.JJ.

Damages— Remoteness— Economic loss—Contractors negligentlydamaging cable supplying electricity to factory—Physicaldamage to metal in factory's furnace as result of power cut —

Loss of profit from melt and from melts which would havetaken place if no power cut —Whether economic loss recover-„ able—Whether economic loss attaching to physical loss re-

"• coverable— Doctrine of parasitic damages

The defendants' employees were digging up a road whenthey negligently damaged an electric cable, which the defendants

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Spartan Steel v. Martin & Co. (C.A.) [1973]

knew was the direct supply from the electricity board's powerstation to the plaintiffs' factory. The plaintiffs were without Aelectricity until the board was able to repair the cable and,immediately the power supply failed, they had to pourmolten metal out of their furnace to prevent the metal solidifying and damaging the furnace. As the plaintiffs could notkeep the metal at the correct temperature and complete the"melt," the metal depreciated in value by £368 and they losta profit from the sale of the metal from that melt of £400.They could also have completed four further melts during the "power cut and their loss of profit from those melts was £1,767.

In an action for negligence against the defendants, theplaintiffs claimed all three sums as damages, a total of £2,535.The defendants admitted negligence and liability for thephysical damage of £368 but denied liability for the plaintiffs'economic loss. The plaintiffs contended that the defendantswere liable for their economic loss and that mere was a doctrine ,-,in English law of " parasitic damages " by which damages not ^

recoverable in themselves could be recovered if they could beattached to a claim for physical damages and were foreseeable.Faulks J. found the defendants liable for all three sums andawarded the plaintiffs £2,535 damages.

On appeal by the defendants: — Held, allowing the appeal, (1) (Edmund Davies L.J. dis

senting) that the plaintiffs were entitled to recover the £400 as j_)damages as the loss of profit from the melt was a foreseeablefinancial damage immediately consequential on the foreseeablephysical damage to the metal but they were not entitled torecover the loss of profit from the four melts due to thenegligent interruption of the electricity supply.

Cattle v. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453and S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B. 337, C.A. applied. E

Per Lord Denning M.R. The tests hitherto applied(namely, whether there was a duty and whether the damage wastoo remote) are too elusive. They should be discarded.Instead the courts should consider the particular relationshipsof those concerned in the particular circumstances and seewhether, as a matter of policy, economic loss should berecovered. In the present case those concerned are theelectricity board (who are under a statutory duty to maintain Fsupplies of electricity in their district), the inhabitants, includingthe plaintiffs (who are entitled by statute to a continuous supplyof electricity) and the defendant contractors (who dig up theroad). In the result, as a matter of policy the plaintiffs shouldrecover the £400 but not the loss of profit from the four melts(post, pp. 37D-H, 39D-E).

Per Edmund Davies LJ. dissenting. Where a defendantwho owes a duty of care to a plaintiff breaches that duty and, Gas both a direct and a reasonably foreseeable result of thatinjury, the plaintiff suffers only economic loss, he is entitled torecover that loss as damages and, since the plaintiffs' financialloss was both the direct and foreseeable consequence of the

defendants' negligence, they were rightly awarded damages fortheir financial loss (post, pp. 45A-B, 46C-D).

(2) That, if there was a doctrine of parasitic damages inEnglish law (per Lord Denning M.R. that there was no such "doctrine), it did not apply to an action in negligence or to thefacts of the present case (post, pp. 35E-F, 46F-G, 49C-H).

Decision of Faulks J. reversed.

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291 Q.B. Spartan Steel v. Martin & Co. (C.A.)

The following cases are referred to in the judgments:

Atkinson v. Newcastle & Gateshead Waterworks Co. (1877) 2 Ex.D. 441,C.A.

Baker v. Crow Carrying Co. Ltd., February 1, 1960, C.A.; Bar LibraryTranscript No. 45.

Best v. Samuel Fox & Co. Ltd. [1952] A.C. 716; [1952] 2 All E.R. 394,H.L.(E.). British Celanese Ltd. v. A. H. Hunt {Capacitors) Ltd. [1969] 1 W.L.R. 959;

" [1969] 2 All E.R. 1252.Candler v. Crane, Christmas & Co. [1951] 2 K.B. 164; [1951] 1 All E.R.

426, CA.Cattle v. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453.Clegg, Parkinson & Co. v. Earby Gas Co. [1896] 1 Q.B. 592, D.C. Dutton v. Bognor Regis Urban District Council l[1972] 1 Q.B. 372; [1972]

2 W.L.R. 299; [1972] 1 All E.R. 462, C.A.c Electrochrome Ltd. v. Welsh Plastics Ltd. [1968] 2 All E.R. 205.

Elliott Steam Tug Co. Ltd. v. Shipping Controller [1922] 1 K.B. 127, C.A.Furniss V. Fitchett [1958] N.Z.L.R. 396.Geddis V. Proprietors of Bann Reservoir (1878) 3 App.Cas. 430, H.L.(I.).Griffith v. Richard Clay & Sons Ltd. [1912] 2 Ch. 291, C.A.

Hartley v. Mayoh & Co. [1954] 1 Q.B. 383; [1954] 1 W.L.R. 355; [1954]1 All E.R. 375, C.A.

D Heard v. Brymbo Steel Co. Ltd. [1947] K.B. 692, C.A. Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465; [1963]

3 W.L.R. 101; [1963] 2 All E.R. 575, H.L.(E.). Horton v. Colwyn Bay and Colwyn Urban District Council [1908] 1 K.B.

327, C.A. Inland Revenue Commissioners v. Hambrook [1956] 2 Q.B. 641; [1956] 3

W.L.R. 643; [1956] 3 All E.R. 338, C.A.E Jackson v. Watson & Sons [1909] 2 K.B. 193, C.A.

King v. Phillips [1953] 1 Q.B. 429; [1953] 2 W.L.R. 526; [1953] 1 All E.R.617, C.A.

Kirkham v. Boughey [1958] 2 Q.B. 338; [1957] 3 W.L.R. 626; [1957] 3 AllE.R. 153.

Lampert v. Eastern National Omnibus Co. Ltd. [1954] 1 W.L.R. 1047;[1954] 2 All E.R. 719.

F Leeds Industrial Co-operative Society Ltd. v. Slack [1924] A.C. 851,H.L.(E.).

London, Tilbury & Southend Railway Co. and Trustees of Gower's WalkSchools, In re (1889) 24 Q.B.D. 326, C.A.

Margarine Union G.m.b.H. v. Cambay Prince Steamship Co. Ltd. [1969]1 Q.B. 219; [1967] 3 W.L.R. 1569; [1967] 3 All E.R. 775.

Midwood & Co. Ltd. v. Manchester Corporation [1905] 2 K.B. 597, C.A.G Milnes v. Huddersfkld Corporation (1886) 11 App.Cas. 511, H.L.(E.).

Ministry of Housing and Local Government v. Sharp [1970] 2 Q.B. 223;[1970] 2 W.L.R. 802; [1970] 1 All E.R. 1009, C.A.

Morrison Steamship Co. Ltd. v. Greystoke Castle {Cargo Owners) [1947]

A.C. 265; [1946] 2 All E.R. 696, H.L.(E.).S.CM. {United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B.

337; [1970] 3 W.L.R. 694; [1970] 3 All E.R. 245, C.A.H Seaway Hotels Ltd. v. Gragg {Canada) Ltd. and Consumer Gas Co. (1960)

21 D.L.R. (2d) 264.Simpson & Co. v. Thomson (1877) 3 App.Cas. 279, H.L.(Sc).Societe" Anonyme de Remorquage a H&lice v. Bennetts [1911] 1 K.B. 243.

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30Spartan Steel v. Martin & Co. (C.A.) [1973]

Stevens v. Aldershot Gas, Water & District Lighting Co. Ltd. (1932) 31L.G.R.48; 102L.JX.B. 12. A

Thurston v . Charles (1905) 21 T.L.R. 659.Wagon Mound, The [1961] A.C. 388; [1961] 2 W.L.R. 126; [1961] 1 All

E.R. 404, P.C.Welter & Co. v. Foot and Mouth Disease Research Institute [1966] 1 Q.B.

569; [1965] 3 W.L.R. 1082; [1965] 3 All E.R. 560.

The following additional cases were cited in argument: "

Bourhill v. Young [1943] A.C. 92; [1942] 2 All E.R. 396, H.L.(Sc).Campbell v. Paddington Corporation [1911] 1 K.B. 869, D.C.Clayton v. Woodman & Son (Builders) Ltd. [1962] 2 Q.B. 533; [1961]

3 W.L.R. 987; [1961] 3 All E.R. 249; [1962] 1 W.L.R. 585; [1962]2 All E.R. 33, Salmon J. and C.A.

Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004; [1970] 2 W.L.R.1140; [1970] 2 All E.R. 294, H.L.(E.). C

Liesbosch, Dredger V. Eddison S.S. [1933] A.C. 449, H.L.(E.).Pratt v. British Medical Association [1919] 1 K.B. 244.Quinn v. Leathern [1901] A.C. 495, H.L.(L).

APPEAL from Faulks J.

On June 12, 1969, while digging up a road with a power-driven pjexcavating shovel, men employed by the defendants, Martin & Co. (Contractors) Ltd., damaged a cable, which the defendants knew suppliedelectricity from the Mechalls Power Station of the Midland ElectricityBoard direct to the Spartan Works, Birmingham. The plaintiffs, Spartan

Steel & Alloys Ltd., were the owners of the factory and they manufacturedstainless steel alloys.

The plaintiffs claimed that, due to the defendants' negligence, their arc Efurnace, which worked on a 24-hour basis, was rendered inoperative fromabout 7.40 p.m. on June 12 until the electricity supply was restored at10 a.m. on June 13, 1969, that material in the furnace was damaged anddepreciated in value and that their loss and damage totalled £2,535. Thatsum was made up of £368 for loss of value of the metal in the furnace at thetime the electricity supply failed, £400 for loss of profit on that metal and p£1,767 for loss of profit on four further melts which could have beencarried out during the period that there was no electricity supply. Thedefendants, by their defence, formally denied negligence and pleaded thatthe damage was too remote. At the hearing before Faulks J. at BirminghamAssizes, the defendants admitted negligence and liability for damages of£368 but denied liability for the £400 and £1,767 damages. On December14, 1971, Faulks J. awarded the plaintiffs £2,535 damages with interest at G6 per cent, from the date of the accident.

The defendants appealed on the grounds that Faulks J. was wrong inlaw and misdirected himself in holding that (1) the plaintiffs were entitled to

recover any sum in excess of £368, or any sum in respect of damage otherthan physical damage to their plant and materials; (2) alternatively, in holding that the plaintiffs were entitled to recover any sum in excess of £768, or J Jany sum in respect of damage not directly arising out of the physicaldamage to their materials and plant; (3) by applying the doctrine ofparasitic damages and by holding that the plaintiffs were entitled to recover

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damages in respect of loss of profit not directly arising out of and attribut-"• able to physical damage to materials and plant and (4).Faulks J, failed to>

direct himself and to hold that the plaintiffs' economic loss unrelated tophysical damage was irrecoverable. At the hearing of the appeal, theplaintiffs gave notice of additional grounds for contending that the judgmentof Faulks J. should be affirmed, namely, (1) that as the defendants owedthe plaintiffs a duty to take reasonable care to avoid acts liable to sever

B or damage the electric power cable transmitting electricity to the plaintiffs'factory, economic loss caused by the negligent breach of duty was recoverable whether or not the plaintiffs had in fact suffered physical damage totheir plant or materials and (2) that the defendants owed the plaintiffs aduty to take reasonable care to avoid acts liable to cause economic loss tothe plaintiffs and such economic loss was recoverable for breach of thatduty.

The facts are stated in the judgment of Lord Denning M.R.

Richard Tucker Q.C. and Piers Ashworth for the defendants. Thedefendants admit liability for the direct physical damage to the metalin the furnace on the basis of S.C.M. (United Kingdom) Ltd. v. W. J.Whittall & Son Ltd, [1971] 1 Q.B. 337. Common sense dictates that,

0 where a defendant negligently cuts an electric cable, he should be liableto pay compensation but it equally dictates that there must be a limit onthe amount payable. The defendants were lucky not to have cut thepower supply to a trading estate as happened in British Celanese Ltd. v. A. H. Hunt (Capacitors) Ltd. [1969] 1 W.L.R. 959 and they were not in a

position to mitigate the damage because they had to rely on the electricityboard for a quick repair of the cable. By statute, the plaintiffs could notE have sued the board for any damages the board might do to the cable.

All the previous relevant authorities were brought within the decision ofS.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B.337. Following the ratio decidendi and not the obiter dicta of that case,the defendants were liable for the direct physical damage but for nothingelse and, as there was no damage to the furnace and the direct cause of

p the loss from the five melts was not due to physical damage but to thecontinuation of the power failure, the defendants are only liable for the

damage to the metal in the furnace.There is no English case, except those in which the principle of

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465applied, where a plaintiff recovered economic loss when there was nophysical damage: see Electrochrome Ltd. v. Welsh Plastics Ltd. [1968]

G 2 All E.R. 205; British Celanese Ltd. v. A. H. Hunt (Capacitors) Ltd.[1969] 1 W.L.R. 959 and Weller & Co. v. Foot and Mouth Disease

Research Institute [1966] 1 Q.B. 569. The dubious doctrine of parasiticdamages has never been applied in previous cases and has only appearedin textbooks. Horton v. Colwyn Bay and Colwyn Urban District Council

[1908] 1 K.B. 327, referred to in Clerk & Undsell on Torts, 13th ed. (1969),g p. 349, para. 350, is not authority for the doctrine. The doctrine is also

referred to in Mayne & McGregor on Damages, 12th ed. (1961), paras.110-114 but the editor is not enamoured of it.

The question of recovery of damages where the power is negligently

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cut off is a matter of common sense and commercial expediency. The linebetween recovery or not must be drawn and must be defined. The line is A

physical damage and physical damage only but, if economic loss is to someextent recoverable, then it must be economic loss flowing directly from thephysical damage.

Christopher Bathurst for the plaintiffs. The three heads of damageare the physical damage to the metal which it is conceded to be recoverable, the consequential economic loss of profit from that damage and ]$the pure economic loss due to there being no electricity to carry out thefurther melts. The consequential economic loss is recoverable and cannotbe separated from the physical damage and, in any event, S.C.M. {UnitedKingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B. 337 is abinding authority for that proposition.

Whether or not there is a rule that a plaintiff cannot recover pureeconomic loss in an action for negligence there is good and binding C

authority that, where a plaintiff has a cause of action against a defendantfor recoverable damages, he may also recover damages caused by the sameact or default which would not by themselves be recoverable. Thus, if theplaintiffs cannot sue to recover damages for the four melts alone they canbe recovered as parasitic damages with the damages recoverable on thefirst melt. Parasitic damages to be recoverable must be foreseeable and j->the chain of causation must not be broken: see In re London, Tilbury &Southend Railway Co. and Trustees of Gower's Walk Schools (1889) 24Q.B.D. 326; Horton v. Colwyn Bay and Colwyn Urban District Council[1908] 1 K.B. 327; Campbell v. Paddington Corporation [1911] 1 K.B. 869

and Griffith V. Richard Clay & Sons Ltd. [1912] 2 Ch. 291. Another caseof parasitic damages was Jackson v. Watson & Sons [1909] 2 K.B. 193,for damages for the death of a human being were not recoverable at Ecommon law but, because there was a breach of contract, the plaintiffwas also entitled to recover damages arising from the death of his wife.The cases cover many fields of the law and the following cases exemplifythe principle: Lampert v. Eastern National Omnibus Co. Ltd. [1954]1 W.L.R. 1047; Seaway Hotels Ltd. v. Gragg (Canada} Ltd. and ConsumerGas Co. (1960) 21 D.L.R. (2d) 264, in which the principle was clearly F

applied to an action in negligence; Quinn v. Leathern [1901] A.C. 495,

where there was a pecuniary loss and a cause of action had to be foundbefore the plaintiff could recover damages; Pratt v. British Medical Association [1919] 1 K.B. 244 and Thurston v. Charles (1905) 21 T.L.R. 659.

The term " parasitic damages " seems to have been used first by theAmerican Professor Street in Foundations of Legal Liability (New York,1906), vol. 1, pp. 461 et seq. and the doctrine of parasitic damages has Gbeen recognised in the textbooks: see Mayne & McGregor on Damages,12th ed. (1961), paras. 110-114; Clerk & Undsell on Torts, 13th ed. (1969),p. 349, para. 350; Salmond on Torts, 15th ed. (1969), p. 719, para. 198and Professor Harry Street, The Law of Torts, 4th ed. (1968), pp. 145-146.

The plaintiffs are not seeking by the application of the doctrine of parasitic damages entirely separate heads of damages, as in Thurston v. Charles, JJ21 T.L.R. 659, but the recovery of loss of profit from five instead of onemelt. Although there are only two authorities where the doctrine has beenapplied in an action for negligence, of which one is a Canadian case, there

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are no authorities which are contrary to the doctrine. It is only since x S.C.M. (United Kingdom) Ltd. v. W . / . Whittall & Son Ltd. [1971] 1 Q.B.

337 that there has been authority for the proposition that the plaintiffs canrecover economic loss arising from the first melt. It may be illogical thata factory where there is slight physical damage may recover economic

loss when a factory with no physical damage and large economic losscannot recover at all but the application of the principle is no less illogicalB than the application of the principle in Hedley Byrne & Co. Ltd. v. Heller

& Partners Ltd. [1964] A.C. 465 and it is a dear principle causing practitioners no great difficulty in applying it. Fears that the doctrine may havefar-reaching effect are seen not to be great when it is remembered that aplaintiff still has to prove that the resulting damage of the tortious actwas foreseeable and that the defendant owed a duty to the plaintiff. Thefact that an electricity board has statutory protection from liability does

^ not affect the principle or the application of the doctrine to contractors who

dig up a road. The material consequences of their action may be greatbut there is no reason why an innocent plaintiff should have to bear theloss caused by a contractor's negligence.

Where there is a breach of duty, pure economic loss is recoverableprovided that the economic loss is foreseeable. It is not the type of damage

0 which limits a defendant's liability for the consequences of his act but thelimitation is whether he owed the plaintiff a duty: see Morrison SteamshipCo. Ltd. v. Greystoke Castle (Cargo Owners) [1947] A. C. 265 and Hedley

Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465. The decisions,if not the dicta, in Candler v. Crane, Christmas & Co. [1951] 2 K.B. 164;

Dutton V. Bognor Regis Urban District Council [1972] 1 Q.B. 372; Claytonv. Woodman & Son (Builders) Ltd. [1962] 2 Q.B. 533; Dorset Yacht Co.

E Ltd. v. Home Office [1970] A.C. 1004 and Societe Anonyme de Remor-quage a Helice v. Bennetts [1911] 1 K.B. 243 support the proposition. Thetype of damage is a factor to be taken into account in deciding whethera defendant owed a duty to the plaintiff but, once the duty is established,the extent of the damage is immaterial. Each case must be decided on itsfacts to determine whether the defendant owed a duty to the plaintiff: see

p per Buckley L.J. in S.C.M. (United Kingdom) Ltd. v. W. J. Whittall &

Son Ltd. [1971] 1 Q.B. 337, 357 and C. F. King v. Phillips [1953] 1 Q.B.429 and Bourhill v. Young [1943] A.C. 92. Liesbosch, Dredger v. EddisonS.S. [1933] A.C. 449 and Cattle v. Stockton Waterworks Co. (1875) L.R. 10Q.B. 453 are persuasive authority for the plaintiffs' proposition whilstWeller and Co. v. Foot and Mouth Disease Research Institute [1966] 1Q.B. 569 and Electrochrome Ltd. v, Welsh Plastics Ltd. [1968] 2 All E.R.

J 205 were clearly decisions on the question whether or not the defendantsowed a duty to the plaintiffs. If the plaintiffs' propositions are applied inthis case and not the dicta of Lord Denning M.R. and Winn L.J. inS.C.M. (United Kingdom) Ltd. V. W. J. Whittall & Son Ltd. [1971] 1 Q.B.

337 that economic loss is not recoverable, then the decision will be in linewith the authorities and it will produce a fair and logical result.T Tucker Q.C. replied.

Cur. adv. vult.

June 22. The following judgments were read.1 Q.B. 1973—2

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LORD DENNING M.R. The plaintiffs have a factory in Birminghamwhere they manufacture stainless steel. The factory obtains its electricityby a direct cable from a power station of the Midlands Electricity Board.

In June 1969 the defendant contractors were doing work on a roadabout a quarter of a mile away. They were going to dig up the road

with a big power-driven excavating shovel. They made inquiries aboutthe place of the cables, mains, and so forth, under the road. They weregiven plans showing them. But unfortunately their men did not take Ereasonable care. The shovel damaged the cable which supplied electricityto the plaintiffs' works. The electricity board shut down the power whilstthey mended the cable.

The factory was at that time working continuously for 24 hours allround the clock. The electric power was shut off at 7.40 p.m. on June 12,1969, and was off for 14£ hours until it was restored at 10 a.m. on June13, 1969. This was all through the night and a couple of hours more.But, as this factory was doing night work, it suffered loss.

At the time when the power was shut off, there was an arc furnace inwhich metal was being melted in order to be converted into ingots.Electric power was needed throughout in order to maintain the temperatureand melt the metal. When the power failed, there was a danger that themetal might solidify in the furnace and do damage to the lining of the Efurnace. So the plaintiffs used oxygen to melt the material and poured itfrom a tap out of the furnace. But this meant that the melted materialwas of much less value. The physical damage was assessed at £368.

In addition, if that particular melt had been properly completed, theplaintiffs would have made a profit on it of £400.Furthermore, during those 14£ hours, when the power was cut off, the

plaintiffs would have been able to put four more melts through the *furnace: and, by being unable to do so, they lost a profit of £1,767.

The plaintiffs claim all those sums as damages against the contractorsfor negligence, No evidence was given at the trial: because the defendantsadmitted that they had been negligent. The contest was solely on theamount of damages. The defendants take their stand on the recent decisionin this court of S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son j

Ltd. [1971] 1 Q.B. 337. They admit that they are liable for the £368physical damages. They did not greatly dispute that they are also liablefor the £400 loss of profit on the first melt, because that was truly consequential on the physical damages and thus covered by S.C.M. (UnitedKingdom) Ltd. v. W. J. Whittall & Son Ltd. But they deny that they areliable for the £1,767 for the other four melts. They say that was economicloss for which they are not liable. Faulks J. rejected their contention and *•held them liable for all the loss. The defendants appeal to this court.

Mr. Christopher Bathurst, for the plaintiffs, raised a point which wasnot discussed in S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd.

He contended that there was a principle of English law relating to"parasitic damages." By this he meant that there are some heads ofdamage which, if they stood alone, would not be recoverable: but, j .nevertheless, if they can be annexed to some other legitimate claim fordamages, may yet be recoverable. They are said to be " parasitic"because, like a parasite, in biology, they cannot exist on their own, but

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351 Q.B. Spartan Steel v. Martin & Co. (C.A.) Lord Denning MJt.

depend on others for their life and nourishment. Applying this principleL he contended that, even if the economic loss (£1,767) on these four melts,

standing alone, would not be recoverable, nevertheless by being attached tothe other claim it can be added to it, and recovered as a " parasite " to it.

Mr. Bathurst sought to establish this principle by reference to thebooks. He cited a case where the owner of an old house was entitled toancient lights for some small old windows. He pulled down the old house

I and put up a new house with big new windows. The defendants afterwardsput up a building which obstructed the big new windows. The plaintiffwas held entitled to be compensated for the loss of light through the wholespace of the big new windows and not merely through the little space ofthe small old windows: see In re London, Tilbury & Southend Railway Co.and Trustees of Gower's Walk Schools (1889) 24 Q.B.D. 326. That decision

, was considered in Horton

v. Colwyn Bay and Colwyn Urban District

' Council [1908] 1 K.B. 327, and Buckley L.J. drew from it a generalproposition which he stated to be, at p. 341:

" . . . if an actionable wrong has been done to the claimant he isentitled to recover all the damage resulting from that wrong, and nonethe less because he would have had no right of action for some partof the damage if the wrong had not also created a damage which was

> actionable."In a similar case relating to ancient lights, a similar result was reached:see Griffith v. Richard Clay & Sons Ltd. [1912] 2 Ch. 291.

Mr. Bathurst drew our attention to a number of other cases in which,he said, the same principle was applied, although it was not expresslystated in them.

' I do not like this doctrine of " parasitic damages." I do not like thevery word " parasite." A " parasite " is one who is a useless hanger-onsucking the substance out of others. " Parasitic " is the adjective derivedfrom it. It is a term of abuse. It is an opprobrious epithet. The phrase" parasitic damages" conveys to my mind the idea of damages whichought not in justice to be awarded, but which somehow or other have been

7 allowed to get through by hanging on to others. If such be the concept

underlying the doctrine, then the sooner it is got rid of the better. It hasnever been used in any case up till now. It has only appeared hithertoin the textbooks. I hope it will disappear from them after this case,

I do not believe there is any such doctrine. The cases on ancientlights stand in a category by themselves and are to be explained in thisway: if a house has ancient lights which are threatened by a new building,

* the owner, if he moves promptly, may obtain an injunction to restrain theerection of the new building. The court, however, may refuse an injunctionand award him damages in lieu of an injunction: see Leeds Industrial Cooperative Society Ltd.

v. Slack

[1924] A.C. 851. These damages wouldbe, in effect, buying a right to put up the new building. If the owner,however, delays and allows the new building to go up without making any

j objection—so that he cannot seek an injunction—I do not think he shouldrecover damages for his big new windows (for which he has no right). Heought only to recover damages for the small old windows (for which hehas a right).

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36Lord Denning M.R. Spartan Steel v. Martin & Co. (C.A.) [1973]

None of the other cases gives any difficulty. In all of them there wassome good reason for adding on the extra damages—not because theywere improper, but because they flowed naturally and directly from thewrong done and could reasonably have been foreseen as a consequence of it.

I reject, therefore, Mr. Bathurst's argument based on "parasitic"

damages.Mr. Bathurst submitted in the alternative that the views expressed by

Winn LJ. and me in S.CM. (United Kingdom) Ltd. v. W. J. Whittall & BSon Ltd. [1971] 1 Q.B. 337 were wrong. He said that if there was anylimitation on the recovery of economic loss, it was to be found by restricting the sphere of duty, and not by limiting the type of damages recoverable.In this present case, he said, the defendants admittedly were under a dutyto the plaintiffs and had broken it. The damages by way of economicloss were foreseeable, and, therefore, they should be recoverable. He cited ,-

several statements from the books in support of his submissions, includingsome by myself.At bottom I think the question of recovering economic loss is one of

policy. Whenever the courts draw a line to mark out the bounds of duty,they do it as matter of policy so as to limit the responsibility of thedefendant. Whenever the courts set bounds to the damages recoverable—saying that they are, or are not, too remote—they do it as matter of policy Dso as to limit the liability of the defendant.

In many of the cases where economic loss has been held not to berecoverable, it has been put on the ground that the defendant was under

no duty to the plaintiff. Thus where a person is injured in a road accidentby the negligence of another, the negligent driver owes a duty to theinjured man himself, but he owes no duty to the servant of the injured jman—see Best v. Samuel Fox & Co. Ltd. [1952] A.C. 716, 731: nor tothe master of the injured man— Inland Revenue Commissioners v. Ham-brook [1956] 2 Q.B. 641, 660: nor to anyone else who suffers loss becausehe had a contract with the injured man—see Simpson & Co. v, Thomson(1877) 3 App.Cas. 279, 289: nor indeed to anyone who only sufferseconomic loss on account of the accident: see Kirkham V. Boughey [1958]

2 Q.B. 338, 341. Likewise, when property is damaged by the negligence Fof another, the negligent tortfeasor owes a duty to the owner or possessorof the chattel, but not to one who suffers loss only because he had acontract entitling him to use the chattel or giving him a right to receiveit at some later date: see Elliott Steam Tug Co. Ltd. v. ShippingController [1922] 1 K.B. 127, 139 and Margarine Union G.m.b.H. v.Cambay Prince Steamship Co. Ltd. [1969] 1 Q.B. 219, 251-252. G

In other cases, however, the defendant seems clearly to have beenunder a duty to the plaintiff, but the economic loss has not been recoveredbecause it is too remote. Take the illustration given by Blackburn J.

in Cattle V. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453, 457, whenwater escapes from a reservoir and floods a coal mine where many men areworking. Those who had their tools or clothes destroyed could recover: j ,but those who only lost their wages could not. Similarly, when the defendants' ship negligently sank a ship which was being towed by a tug, theowner of the tug lost his remuneration, but he could not recover it from

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371 Q.B. Spartan Steel v. Martin & Co. (C.A.) Lord Denning M.R.

the negligent ship: though the same duty (of navigation with reason-able care) was owed to both tug and tow: see Societe Anonyme de Remorquage a Helice v. Bennetts [1911] 1 K.B. 243, 248. In such casesif the plaintiff or his property had been physically injured, he would haverecovered: but, as he only suffered economic loss, he is held not entitled to

recover. This is, I should think, because the loss is regarded by the lawas too remote: see King v. Phillips [1953] 1 Q.B. 429, 439-440.

B On the other hand, in the cases where economic loss by itself has beenheld to be recoverable, it is plain that there was a duty to the plaintiff andthe loss was not too remote. Such as when one ship negligently runsdown another ship, and damages it, with the result that the cargo has to bedischarged and reloaded. The negligent ship was already under a duty tothe cargo owners: and they can recover the cost of discharging andreloading it, as it is not too remote: see Morrison Steamship Co. Ltd. v.

^ Greystoke Castle (Cargo Owners) [1947] A.C. 265. Likewise, when abanker negligently gives a reference to one who acts on it, the duty is plainand the damage is not too remote: see Hedley Byrne & Co. Ltd. v. Heller& Partners Ltd. [1964] A.C. 465.

The more I think about these cases, the more difficult I find it to puteach into its proper pigeon-hole. Sometimes I say: " There was no duty."

D In others I say: " The damage was too remote." So much so that I thinkthe time has come to discard those tests which have proved so elusive.It seems to me better to consider the particular relationship in hand, andsee whether or not, as a matter of policy, economic loss should be recover

able, or not. Thus in Wetter & Co. v. Foot and Mouth Disease Research Institute [1966] 1 Q.B. 569 it was plain that the loss suffered by theauctioneers was not recoverable, no matter whether it is put on the groundthat there was no duty or that the damage was too remote. Again in

Electrochrome Ltd. v. Welsh Plastics Ltd. [1968] 2 All E.R. 205, it isplain that the economic loss suffered by the plaintiffs' factory (due to thedamage to the fire hydrant) was not recoverable, whether because therewas no duty or that it was too remote.

So I turn to the relationship in the present case. It is of commonp occurrence. The parties concerned are: the electricity board who are under

a statutory duty to maintain supplies of electricity in their district; theinhabitants of the district, including this factory, who are entitled bystatute to a continuous supply of electricity for their use; and the contractors who dig up the road. Similar relationships occur with otherstatutory bodies, such as gas and water undertakings. The cable may bedamaged by the negligence of the statutory undertaker, or by the negligence

J of the contractor, or by accident without any negligence by anyone: and thepower may have to be cut off whilst the cable is repaired. Or the powermay be cut off owing to a short-circuit in the power house: and so forth.If the cutting off of the supply causes economic loss to the consumers,should it as matter of policy be recoverable? And against whom?

The first consideration is the position of the statutory undertakers. If[.[ the board do not keep up the voltage or pressure of electricity, gas or

water—or, likewise, if they shut it off for repairs—and thereby causeeconomic loss to their consumers, they are not liable in damages, noteven if the cause of it is due to their own negligence. The only remedy

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38Lord Denning M.R. Spartan Steel v. Martin & Co. (C.A.) [1973]

(which is hardly ever pursued) is to prosecute the board before themagistrates. Such is the result of many cases, starting with a water board— "• Atkinson v. Newcastle & Gateshead Waterworks Co. (1877) 2 Ex.D. 441;going on to a gas board—Clegg, Parkinson & Co. v. Earby Gas Co. [1896]1 Q.B. 592; and then to an electricity company—Stevens v. Aldershot

Gas, Water & District Lighting Co. Ltd. best reported in (1932) 31 L.G.R.48; also in 102 L.J.K.B. 12. In those cases the courts, looking at thelegislative enactments, held that Parliament did not intend to expose the JJboard to liability for damages to the inhabitants en masse: see what LordCairns L.C. said in Atkinson v. Newcastle & Gateshead Waterworks Co., 2Ex.D. 441, 445 and Wills J. in Clegg, Parkinson & Co. v. Earby Gas Co.[1896] 1 Q.B. 592, 595. In those cases there was indirect damage to theplaintiffs, but it was not recoverable. There is another group of cases whichgo to show that, if the board, by their negligence in the conduct of theirsupply, cause direct physical damage or injury to person or property, they C

are liable: see Milnes v. Huddersfield Corporation (1886) 11 App.Cas. 511,530 by Lord Blackburn; Midwood & Co. Ltd. v. Manchester Corporation[1905] 2 K.B. 597; Heard v. Brymbo Steel Co. Ltd. [1947] K.B. 692 and

Hartley V. Mayoh & Co. [1954] 1 Q.B. 383. But one thing is clear: thestatutory undertakers have never been held liable for economic loss only.If such be the policy of the legislature in regard to electricity boards, it Qwould seem right for the common law to adopt a similar policy in regardto contractors. If the electricity boards are not liable for economic loss dueto negligence which results in the cutting off the supply, nor should acontractor be liable.

The second consideration is the nature of the hazard, namely, thecutting of the supply of electricity. This is a hazard which we all run. Itmay be due to a short circuit, to a flash of lightning, to a tree falling onthe wires, to an accidental cutting of the cable, or even to the negligenceof someone or other. And when it does happen, it affects a multitude ofpersons: not as a rule by way of physical damage to them or their property,but by putting them to inconvenience, and sometimes to economic loss.The supply is usually restored in a few hours, so the economic loss is notvery large. Such a hazard is regarded by most people as a thing they

must put up with—without seeking compensation from anyone. Somethere are who instal a stand-by system. Others seek refuge by takingout an insurance policy against breakdown in the supply. But mostpeople are content to take the risk on themselves. When the supply iscut off, they do not go running round to their solicitor. They donot try to find out whether it was anyone's fault. They just put up with Git. They try to make up the economic loss by doing more work nextday. This is a healthy attitude which the law should encourage.

The third consideration is this: if claims for economic loss were

permitted for this particular hazard, there would be no end of claims. Somemight be genuine, but many might be inflated, or even false. A machinemight not have been in use anyway, but it would be easy to put it down ^\to the cut in supply. It would be well-nigh impossible to check the claims.If there was economic loss on one day, did the claimant do his best tomitigate it by working harder next day? And so forth. Rather than

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391 Q.B. Spartan Steel v. Martin & Co. (C.A.) Lord Denning M.R.

expose claimants to such temptation and defendants to such hard labour—"• on comparatively small claims—it is better to disallow economic loss

altogether, at any rate when it stands alone, independent of any physicaldamage.

The fourth consideration is that, in such a hazard as this, the risk of

economic loss should be suffered by the whole community who suffer thelosses—usually many but comparatively small losses—rather than on theB one pair of shoulders, that is, on the contractor on whom the total of

them, all added together, might be very heavy.The fifth consideration is that the law provides for deserving cases.

If the defendant is guilty of negligence which cuts off the electricity supplyand causes actual physical damage to person or property, that physicaldamage can be recovered: see Baker v. Crow Carrying Co. Ltd. (unreported) February 1, 1960; Bar Library Transcript No. 45, referred to by

c Buckley L.J. in S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son

Ltd. [1971] 1 Q.B. 337, 356; and also any economic loss truly consequentialon the material damage: see British Celanese Ltd. V. A. H. Hunt(Capacitors) Ud. [1969] 1 W.L.R. 959 and S.C.M. (United Kingdom) Ltd.v. W. J. Whittall & Son Ltd. [1971] 1 Q.B. 337. Such cases will becomparatively few. They will be readily capable of proof and will be

D easily checked. They should be and are admitted.These considerations lead me to the conclusion that the plaintiffs

should recover for the physical damage to the one melt (£368), and theloss of profit on that melt consequent thereon (£400): but not for the lossof profit on the four melts (£1,767), because that was economic loss independent of the physical damage. I would, therefore, allow the appealand reduce the damages to £768.

E

EDMUND DAVIES L.J. The facts giving rise to this appeal have alreadybeen set out by Lord Denning M.R. Their very simplicity serves to highlight a problem regarding which differing judicial and academic viewshave been expressed and which it is high time should be finally solved.The problem may be thus stated: Where a defendant who owes a duty

p of care to the plaintiff breaches that duty and, as both a direct and a

reasonably foreseeable result of that injury, the plaintiff suffers onlyeconomic loss, is he entitled to recover damages for that loss?In expressing in this way the question which now arises for determina

tion, I have sought to strip away those accretions which would otherwiseobscure the basic issue involved. Let me explain. We are not here concerned to inquire whether the defendants owed a duty of care to the plain-

® tiffs or whether they breached it, for these matters are admitted. Norneed we delay to consider whether as a direct and reasonably foreseeableresult of the defendants' negligence any harm was sustained by the plaintiffs, for a " melt" valued at £368 was admittedly ruined and the defen

dants concede their liability to make that loss good. But what is inissue is whether the defendants must make good (a) the £400 loss of profitpj resulting from that material being spoilt and (b) the £1,767 further loss of

profit caused by the inability to put four more "melts" through thefurnace before power was restored. As to (a), the defendants, whilemaking no unqualified admission, virtually accept their liability, on the

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40Edmund Davies LJ. Spartan Steel v. Martin & Co. (C.A.) [1973]

ground that the £400 loss was a direct consequence of the physical damagecaused to the material in the furnace. But they reject liability in respectof (b), not because it was any the less a direct and reasonably foreseeableconsequence of the defendants' negligence than was the £400, but on theground that it was unrelated to any physical damage and that economic loss

not anchored to and resulting from physical harm to person or property isnot recoverable under our law as damages for negligence.In my respectful judgment, however it may formerly have been B

regarded, the law is today otherwise. I am conscious of the boldnessinvolved in expressing this view, particularly after studying such learneddissertations as that of Professor Atiyah on Negligence and Economic

Loss (1967) 83 L.Q.R. 248, where the relevant cases are cited. Irecognise that proof of the necessary linkage between negligent acts andpurely economic consequences may be hard to forge. I accept, too, that ^~if economic loss of itself confers a right of action this may spell disaster

for the negligent party. But this may equally be the outcome where physicaldamage alone is sustained, or where physical damage leads directly toeconomic loss. Nevertheless, when this occurs it was accepted in S.C.M.{United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B. 337that compensation is recoverable for both types of damage. It follows thatthis must be regardless of whether the injury (physical or economic, or a Dmixture of both) is immense or puny, diffused over a wide area or narrowlylocalised, provided only that the requirements as to foreseeability anddirectness are fulfilled. I therefore find myself unable to accept as factorsdeterminant of legal principle those considerations of policy canvassed inthe concluding passages of the judgment just delivered by Lord DenningM.R. E

In particular, I have to say that I derive no assistance by consideringthe position of statutory undertakers. To take the very first case citedby Lord Denning M.R.— Atkinson v. Newcastle & Gateshead WaterworksCo. (1877) 2 Ex.D. 441—Lord Cairns L.C. there stressed, at p. 448, thatliability " must, to a great extent, depend on the purview of the legislaturein the particular statute, and the language which they have there employed." pAs the Waterworks Causes Act 1847 provided for the imposition of amonetary penalty for neglect of the undertakers' duty, inter alia, to keeptheir pipes charged with water at a sufficient pressure and to allow allpersons to use it for extinguishing fires, the court held that the inferencewas that no right of action was conferred. Wright J. adopted the sameapproach in Clegg, Parkinson & Co. v. Earby Gas Co. [1896] 1 Q.B.592, though Wills J. based his decision on the wider ground that, at p, 594: ^

". . . where there is an obligation created by statute to do somethingfor the benefit of the public generally or of such a large body ofpersons that they can only be dealt with practically, en masse, as itwere, and where the failure to comply with the statutory obligationis liable to affect all such persons in the like manner, though not „necessarily in the same degree; there is no separate right of actionto every person injured, by breach of the obligation, in no othermanner than the rest of the public."

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411 Q.B. Spartan Steel v. Martin & Co. (C.A.) Edmund Davies LJ.

In Stevens v. Aldershot Gas, Water and District Lighting Co. Ltd. (1932) 31^ L.G.R. 48, Macnaghten J. simply held, at p. 51:

" Where a statutory duty is imposed and where, in consequence, anindividual has suffered loss and a question arises whether he can claim

damages at common law or must proceed under the statute, thedecision must be that his remedy lies under the statute."

B He accordingly held that the recovery of the penalty provided by therelevant statute was the only remedy. But the refusal of compensation inthese cases in no way turned on the nature of the injury sustained by thecomplaining party. Atkinson's house was destroyed by fire, so therewas physical damage in plenty; Clegg " sustained damage to the amountof £50 by reason of the supply of gas having been insufficient and impure,"

P the nature of the damage being unstated, but the action was one brought

not in tort but for alleged breach of contract to supply gas continuouslyas required by the plaintiffs and in accordance with a local gas order;while in Stevens' case the plaintiff hairdresser alleged that, as a resultof an electric transformer not working properly, the apparatus in hersalon was thrown out of action, her assistants were unable to work, herbusiness takings were reduced, and she claimed damages both under

D statute and in negligence for loss of earnings. The observations of LordCairns L.C. in Atkinson V. Newcastle & Gateshead Waterworks Co. (1877)2 Ex.D. 441, 445 to which Lord Denning M.R. has drawn specialattention, had reference to the non-performance of a statutory duty by a

water undertaking as a consequence of which " any number of householders might happen to have their houses burnt down." But there is

F ample authority for the proposition that negligence in the performance ofstatutory duties can create a cause of action (Geddis V. Proprietors of Bann

Reservoir (1878) 3 App.Cas. 430, per Lord Blackburn at p. 455) and as inthe remaining cases referred to by Lord Denning M.R. only physical damageto person or property was sustained, the legal position had the damagebeen economic only simply did not arise for consideration.

For my part, I cannot see why the £400 loss of profit here sustainedF should be recoverable and not the £1,767. It is common ground that both

types of loss were equally foreseeable and equally direct consequences ofthe defendants' admitted negligence, and the only distinction drawn is thatthe former figure represents the profit lost as a result of the physicaldamage done to the material in the furnace at the time when power wascut off. But what has that purely fortuitous fact to do with legal prin-

P ciple? In my judgment, nothing, and I would seek no stronger supportfor my answer than the following passage from the judgment of LordDenning M.R. himself in S.C.M. (United Kingdom) Ltd. V. W. J. Whittall& Son Ltd. [19.71] 1 Q.B. 337, 342:

"Damage was done to many factories by the cutting off of theelectricity supply. Those who had a stand-by system would not suffer

TT 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 aspecial claim. Either all who suffered loss of profit, should get

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damages for it, or none of them should. It should not depend on thechance whether material damage was done as well." "•

Nevertheless, Lord Denning M.R. went on to point out, at p. 344:

" In actions of negligence, when the plaintiff has suffered no damage

to his person or property, but has only sustained economic loss, thelaw does not usually permit him to recover that loss. The reason liesin public policy." g

It should, however, be stressed that, as in that case physical damage wassustained, observations regarding the position where the damage is economic only, while clearly commanding the greatest respect, are to be regardedas strictly obiter.

Professor R. F. V. Heuston has observed in Salmond on Torts, 15th ed.(1969), p. 262: " the reluctance to grant a remedy for the careless invasion _

of financial or pecuniary interests is longstanding, deep-rooted and not unreasonable," an observation cited with approval by Barrowclough C.J. inFurniss V. Fitchett [1958] N.Z.L.R. 396, 401. The starting point usuallytaken is the judgment of Blackburn J. in Cattle v. Stockton WaterworksCo. (1875) L.R. 10 Q.B. 453 where the defendants had laid a defectivewater pipe under a turnpike road. The resulting leakage of water hampered the contractor's work of tunnelling under the road and greatly Dreduced his profit on a contract with the road owners. Holding that thisloss gave him no cause of action, Blackburn J. said, at p. 457:

". . . the objection is technical and against the merits, and we should

be glad to avoid giving it effect. But if we did so, we should establish an authority for saying that, in such a case as that of Fletcher v.

Rylands (1866) L.R. 3 H.L. 330 the defendant would be liable, not E

only to an action by the owner of the drowned mine, and by such ofhis workmen as had their tools or clothes destroyed, but also to anaction by every workman and person employed in the mine, who inconsequence of its stoppage made less wages than he would otherwisehave done. And many similar cases to which this would apply mightbe suggested. It may be said that it is just that all such persons shouldhave compensation for such a loss, and that, if the law does not give Fthem redress, it is imperfect. Perhaps it may be so."

Was Blackburn J. there saying that damages could not be recovered ifonly pecuniary loss flowed from a negligent act? Or was he saying thatthe pecuniary loss sustained by the plaintiff in that case, and such pecuniaryloss as would arise in the hypothetical cases he gave, was not recoverablebecause it was too remote? I believe that Blackburn J. was saying no Gmore than the latter, and that this is demonstrated by the fact that hecontinued his judgment in this way:

" But, as was pointed out by Coleridge J., in Lumley v. Gye (1853)

2 E. & B. 216, 252, courts of justice should not ' allow themselves, inthe pursuit of perfectly complete remedies for all wrongful acts, totransgress the bounds, which our law, in a wise consciousness as I pconceive of its limited powers, has imposed on itself, of redressingonly the proximate and direct consequences of wrongful acts' In thiswe quite agree."

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Despite the frequency with which Cattle v, Stockton Waterworks Co.is cited as authority for the proposition that pecuniary loss, without more,can never sustain an action for negligence, I respectfully venture to thinkthat Blackburn J. was there laying down no such rule. Had he intendedto do so when, two years later as Lord Blackburn, he was a party to die

decision in Simpson & Co. v. Thomson (1877) 3 App.Cas. 279, this factwould surely have emerged when he concurred, at pp. 292 et seq., in the

B dismissal of underwriters' claim for recoupment of the sum they had paidfor a total loss.

To revert to S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B. 337, Lord Denning M.R. said, at p. 345:

" I must not be taken, however, as saying that economic loss isalways too remote. There are some exceptional cases when it is the

C immediate consequence of the negligence and is recoverable accord-

ingly."

Lord Denning M.R. went on to give examples of such " exceptionalcases." But before turning to them, reference should be made toSociete Anonyme de Remorquage a Helice v. Bennetts [1911] 1 K.B. 243.There a steam tug belonging to the plaintiffs was engaged under a towage

D contract in towing a ship. That ship was struck by a steamship belongingto the defendant owing to the negligence of his servants, but no damagewas caused to the tug. The plaintiffs sued to recover as damages thetowage remuneration they would have earned if they had completed the

towage contract. Founding himself upon Cattle v. Stockton WaterworksCo., L.R. 10 Q.B. 453, Hamilton J. held that the plaintiffs had failed toshow that they had sustained " damage recognised by law." That caseneeds to be contrasted with Morrison Steamship Co. Ltd. v. GreystokeCastle (Cargo Owners) [1947] A.C. 265, where cargo owners sustainedpurely financial loss as the result of a collision between the vessel carryingtheir cargo and another, and were held entitled to recover from the ownersof the colliding ship the general average contribution which they hadbecome liable to pay. Lord Roche there said, at p. 279:

"There remains for consideration the contention on behalf of theappellants that the respondents had no direct right of suit because itwas said that: (a) their cargo sustained no material or physical damageand an expense occasioned to them after the collision in connectionwith a contract was not actionable; . . . As to the first branch of thiscontention, I would observe that in my judgment if the expense is

G occasioned by the collision and if it is the expense in whole or inpart of the cargo owners—. . . then no authority was cited to supportthe proposition that whether by land or by sea physical or materialdamage is necessary to support a cause of action in a case like this.

I do not regard the case of Societe Anonyme de Remorquage a Helice v. Bennetts [1911] 1 K.B. 243 which was cited as any such

TT authority. If it was correctly decided, on which I express no opinion,I think it must depend on a view that one vessel (A) does not owe tothe tug which is towing vessel (B) any duty not negligently to collidewith(B)."

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44Edmund Davies L.J. Spartan Steel v. Martin & Co. (C.A.) [1973]

Lord Roche's observation that "no authority was cited," etc. issignificant as indicating that he did not regard Cattle v. Stockton Waterworks Co. as supporting the proposition he was rejecting; there is noquestion of that great commercial judge having momentarily overlookedthat decision, for it was the foundation of Hamilton J.'s judgment in

Societe Anonyme de Remorquage a Helice v. Bennetts [1911] 1 K.B. 243and had clearly been cited to their Lordships: see per Lord Simonds, atp. 306. Lord Roche went on to give an illustration which is worthy of Bbeing recalled, at p. 280:

". . . if two lorries A and B are meeting one another on the road, Icannot bring myself to doubt that the driver of lorry A owes a dutyto both the owner of lorry B and to the owner of goods then carriedin lorry B. Those owners are engaged in a common adventure withor by means of lorry B and if lorry A is negligently driven and damages Qlorry B so severely that whilst no damage is done to the goods in itthe goods have to be unloaded for the repair of the lorry and thenreloaded or carried forward in some other way and the consequentexpense is by reason of his contract or otherwise the expense of thegoods owner, then in my judgment the goods owner has a direct causeof action to recover such expense."

IDIn S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1Q.B. 337, 346 Lord Denning M.R. said of this illustration that the goodsowner's economic loss " i s analogous to physical damage: because the

goods themselves had to be unloaded," but I have to say that in myrespectful judgment this will not do, that the suggested analogy is misleading, and that Lord Roche was illustrating the proposition he favouredthat purely economic loss can be per se sufficient in negligence. ^

In Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C.465, one of those "exceptional cases" referred to by Lord DenningM.R. in S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. anda landmark in the branch of the law with which we are here concerned, LordDevlin, referring to Morrison Steamship Co. Ltd. v. Greystoke Castle(Cargo Owners), said, at p. 518: F

" Their Lordships did not in that case lay down any general principleabout liability for financial loss in the absence of physical damage;but the case itself makes it impossible to argue that there is any generalrule showing that such loss is of its nature irrecoverable."

This is increasingly recognised as being the legal position, and ampleillustrations of this are available. Thus in Ministry of Housing v. Sharp *

J

[1970} 2 Q.B. 238, Salmon L J . said, at p. 278:

"So far, however, as the law of negligence relating to civil actionsis concerned, the existence of a duty to take reasonable care no longerdepends upon whether it is physical injury or financial loss which canreasonably be foreseen as a result of a failure to take such care."

HAnd in Button V. Bognor Regis Urban District Council [1972] 1 Q.B.372, 404 Sachs L J . said that ". . . to pose the question: ' I s it physicaldamage or economic damage? ' is to adopt a fallacious approach."

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Having considered the intrinsic nature of the problem presented in thisappeal, and having consulted the relevant authorities, my conclusion, asalready indicated, is that an action lies in negligence for damages inrespect of purely economic loss, provided that it was a reasonably foreseeable and direct consequence of failure in a duty of care. The application

of such a rule can undoubtedly give rise to difficulties in certain sets ofcircumstances, but so can the suggested rule that economic loss may beB recovered provided it is directly consequential upon physical damage.

Many alarming situations were conjured up in the course of counsel'sarguments before us. In their way, they were reminiscent of those formerlyadvanced against awarding damages for nervous shock; for example, therisk of fictitious claims and expensive litigation, the difficulty of disprovingthe alleged cause and effect, and the impossibility of expressing such aclaim in financial terms. But I suspect that they (like the illustrations

^ furnished by Lord Penzance in Simpson & Co. v. Thomson (1877) 3

App.Cas. 279, 289 et seq.) would for the most part be resolved either onthe ground that no duty of care was owed to the injured party or that thedamages sued for were irrecoverable not because they were simplyfinancial but because they were too remote.

The much misunderstood decision in Electrochrome Ltd. v. WelshD Plastics Ltd. [1968] 2 All E.R. 205 affords a modern illustration of this

point. B's servant negligently damaged a fire hydrant belonging to C.A alleged that, as a result, the water supply to his factory was thereby interrupted, thereby causing him to suspend work and, in consequence, to suffer

considerable financial loss. But, after being exhaustively scrutinised, thealleged loss of productivity was simply never established. The court had nodifficulty in detecting the element of considerable exaggeration. At the end

E of the day, the claim was reduced to a mere £29 10s. representing the valueof the diminished water supply to A's factory (which C had contracted toprovide) until the damage was repaired: see p. 206. This Geoffrey Lane J.dismissed on the ground that B's duty of care was owed only to C, the ownerof the hydrant and not to A. However unconsciously, he was therebyechoing Denning LJ. who, in Candler V. Crane, Christmas & Co. [1951]

p 2 K.B. 164, blazing the trail which was to lead to Hedley Byrne & Co.

Ltd. v. Heller & Partners Ltd. [1964] A.C. 465, said, at p. 179:" I can understand that in some cases of financial loss there may notbe a sufficiently proximate relationship to give rise to a duty of care;but, if once the duty exists, I cannot think that liability depends on thenature of the damage."

G That approach to the clear facts of the present case has, if I may sayso, the virtues of good sense and of fairness. Here too the line has to bedrawn where " in the particular case the good sense of the judge decides."In this connection I respectfully adopt the observations of Professor

Goodhart, (1971) 87 L.Q.R. 10:". . . the fact that the judge has good sense does not explain the

JJ grounds on which he has based his decision. It is submitted that thefirst of these grounds is that the court must decide whether a reasonableperson in the position of the defendant ought to have foreseen thatan accident could arise if he failed to take care. The second is, could

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a reasonable person foresee that damage of the nature which theplaintiff suffered might arise from his act? The third is, would areasonable person in these circumstances have taken reasonable careto avoid the harmful consequences? In Liesbossh, Dredger v. EdisonS.S. [1933] A.C. 449 ought the defendant to have foreseen that if the

dredger was sunk this might lead to the plaintiff's failure to performhis contract as he did not have sufficient resources to hire anotherdredger? Both these consequences were foreseeable, but it would Bnot have been reasonable to expect the defendants to guard againstthe loss caused by the impecunious condition of the plaintiffs by insuring against such a consequence."

Such good sense as I possess guides me to the conclusion that it would bewrong to draw in the present case any distinction between the first, spoilt" melt" and the four " melts " which, but for the defendants' negligence, C

would admittedly have followed it. That is simply another way of sayingthat I consider the plaintiffs are entitled to recover the entirety of thefinancial loss they sustained.

I should perhaps again stress that we are here dealing with economicloss which was both reasonably foreseeable and a direct consequence ofthe defendants' negligent act. What the position should or would be were £>the latter feature lacking (as in Weller & Co. v. Foot and Mouth Disease

Research Institute [1966] 1 Q.B. 569) is not our present concern. Bystressing this point one is not reviving the distinction between direct and

indirect consequences which is generally thought to have been laid at restby The Wagon Mound [1961] A.C. 388, for, in the words of ProfessorAtiyah, Negligence and Economic Loss, 83 L.Q.R. 263, that case

E, " was solely concerned with the question whether the directness of

the damage is a sufficient test of liability, . . . In other words, TheWagon Mound merely decides that a plaintiff cannot recover forunforeseeable consequences even if they are direct; it does not decidethat a plaintiff can always recover for foreseeable consequences evenif they are indirect."

FBoth directness and foreseeability being here established, it follows that Iregard Faulks J. as having rightly awarded the sum of £2,535.

Having regard to the route which has led me to this conclusion, it isnot necessary for me to express any concluded view regarding the topicof " parasitic damages." I content myself with saying that, whateverbe the scope of such a concept in other and wholly different branches ofthe law, I am at present not satisfied that it can be invoked in cases of the Gtype now under consideration.

I would be for dismissing the appeal.LAWTON LJ. This appeal raises neatly a question which has beenasked from time to time since Blackburn J. delivered his well known

judgment in Cattle V. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453 H

and more frequently since the decision in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465, namely, whether a plaintiff canrecover from a defendant, proved or admitted to have been negligent,

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471 Q.B. Spartan Steel v. Martin & Co. (C.A.) Lawton LJ.

foreseeable financial damage which is not consequential upon foreseeable"• physical injury or damage to property. Any doubts there may have been

about the recovery of such consequential financial damage were settled bythis court in S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd.[1971] 1 Q.B. 337. In my judgment the answer to this question is that

such financial damage cannot be recovered save when it is the immediateconsequence of a breach of duty to safeguard the plaintiff from that kind

B of loss.This is not the first time a negligent workman has cut an electric

supply cable nor the first claim for damages arising out of such anincident. When in practice at the Bar I myself advised in a number ofsuch cases. Most practitioners acting for insurers under the so-called" public liability" types of policy will have had similar professionalexperiences; if not with electrical supply, with gas and water mains.

^ Negligent interference with such services is one of the facts of life and cancause a lot of damage, both physical and financial. Water conduits havebeen with us for centuries; gas mains for nearly a century and a half;electricity supply cables for about three-quarters of a century; but there.isnot a single case in the English law reports which is an authority for theproposition that mere financial loss resulting from negligent interruption

D of such services is recoverable. Why?Many lawyers would be likely to answer that ever since. Cattle v.

Stockton Waterworks Co., L.R. 10 Q.B.. 453, such damages have beenirrecoverable. Edmund Davies LJ. has just stated that he doubts-whether

Blackburn J. laid down any such rule. Knowing that he had these doubts,I have re-read Cattle v. Stockton Waterworks Co. The claim was innegligence. The declaration was as follows:

" that defendants, being a water company, so negligently laid downunder a certain turnpike road their pipes for supplying water to adistrict, and so negligently kept and maintained the pipes in suchinsufficient repair, and in such imperfect and leaky condition, that,while plaintiff was lawfully constructing for reward to the plaintiff atunnel across the turnpike road, and was lawfully using the road for

F such purpose, the pipes leaked, and large quantities of water flowed

into the road, and upon the plaintiff's workings, and flooded them,and plaintiff was hindered and delayed in the work, and sufferedgreat loss."

The declaration raised precisely the problem which has to be solved inthis case; Blackburn J.'s answer was in these words, at p. 458:

" In the present case there is no pretence for saying that the defendantswere malicious or had any intention to injure anyone. They were, atmost, guilty of a neglect of duty, which occasioned injury to the

property of Knight, but which did not injure any property of theplaintiff. The plaintiff's claim is to recover the damage which he hassustained by his contract with Knight becoming less profitable, or, it

H may be, a losing contract, in consequence of this injury to Knight'sproperty. We think this does not give him any right of action."

Earlier in his judgment he had said, at p. 457: " No authority in

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48Lawton LJ. Spartan Steel v. Martin & Co. (C.A.) [1973]

favour of the plaintiff's right to sue was cited, and, as far as our knowledge goes, there was none that could have been cited." There is still "•no authority directly in point today. Blackburn J.'s judgment has beencited with approval and followed many times: the judgment of HamiltonJ. in Soci&e Anonyme de Remorquage a Helice v. Bennetts [1911] 1

K.B. 243, 248 and of Widgery J. in Weller & Co. v. Foot and Mouth Disease Research Institute [1966] 1 Q.B. 569, 588 are instances. Fornearly a 100 years now contractors and insurers have negotiated policies Band premiums have been calculated on the assumption that the judgmentof Blackburn J. is a correct statement of the law; and those affectedfinancially by the acts of negligent contractors have been advised timeand time again that mere financial loss is irrecoverable.

It was argued that the law has developed since 1875, albeit thedevelopment was unnoticed by Hamilton J. and Widgery J. Has it?

Mr. Bathurst based his argument about the law developing beyond the ^limits delineated by Blackburn J. upon three planks: first, what LordEsher M.R. had said in In re London, Tilbury & Southend Railway Co. andTrustees of Gower's Walk Schools (1889) 24 Q.B.D. 326; secondly,what Buckley LJ. had said in Horton v. Colwyn Bay and Colwyn Urban

District Council [1908] 1 K.B. 327, 341 and, thirdly, what the House ofLords had decided in Morrison Steamship Co. Ltd. v. Greystoke Castle D(Cargo Owners) [1947] A.C. 265. Both Lord Esher M.R. and BuckleyLJ. made general statements about what kinds of damage can be recovered; and if those statements are to be followed without any qualifica

tion, mere financial loss is recoverable in an action for negligence. It ispertinent to note, however, that both cases were concerned with the assessment of compensation under statute and in each case the court had todecide how to construe and apply the statute. Clearly both statements ^were obiter and, in my judgment, over-simplifications. If, in the GreystokeCastle case, the House of Lords overruled Cattle v. Stockton WaterworksCo., L.R. 10 Q.B. 453, it did so by an unobserved flanking movement, notby a direct assault. The two leading counsel, Sir William McNair K.C.and Sir Robert Aske K.C, do not seem to have appreciated that a bastionof the common law was in danger of falling, as neither seems to have p

cited Cattle v. Stockton Waterworks Co. The only one of the Law Lordswho did was Lord Simonds, who clearly did so with respect andapproval: his speech, however, was a dissenting one. Lord Roche commented upon the judgment of Hamilton J. in Societe Anonyme de Remorquage a Helice v. Bennetts [1911] 1 K.B. 243, He sought to explain it on the ground that the unsuccessful plaintiff had not proved abreach of duty. Had he intended to disapprove a long-standing judgment Qof such an eminent common lawyer as Blackburn J., I would have expected him to have done so in terms. The House did, however, by amajority, adjudge that the cargo owners had a direct claim against the

owners of the colliding ship for a proportion of the general average contribution. The case was argued and speeches delivered on the basis thatthe House was considering a problem of maritime law. I would not have JJthe temerity to express any opinion as to the extent to which maritimelaw and the common law differ as to the kinds of damage which arerecoverable; but having regard to their differing historical developments,

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491 Q.B. Spartan Steel v. Martin & Co. (C.A.) Lawton LJ.

it would not surprise me if there were divergences. The policies governingtheir developments may well have been different. What I am satisfiedabout is that the House of Lords in the Greystoke Castle case [1947] A.C.265 cannot be said to have overruled Cattle V. Stockton Waterworks Co.,L.R. 10 Q.B. 453.

The differences which undoubtedly exist between what damage canbe recovered in one type of case and what in another cannot be reconciled

B on any logical basis. I agree with Lord Denning M.R. that such differenceshave arisen because of the policy of the law. Maybe there should be onepolicy for all cases; the enunciation of such a policy is not, in my judgment,a task for this court.

Mr. Bathurst appreciated that his broad submission about recoveringfinancial loss might fall at the hurdle presented by Cattle v. Stockton Water-

Q works Co., L.R. 10 Q.B. 453. As an alternative submission he sought

to rely upon the so-called concept of parasitic damages. Those whosupport this concept argue that once physical injury or damage toproperty has been proved, all foreseeable financial loss consequent uponthe wrong-doing is recoverable: in some way it becomes hitched on to, orattached to, the physical injury or damage to property. The cases hecited in support were, with two exceptions, far removed from actions for

D negligence. The two exceptions were Lampert v. Eastern National Omnibus Co. [1954] 1 W.L.R. 1047 and Seaway Hotels Ltd. v. Gragg (Canada)

Ltd. and Consumer Gas Co. (1960) 21 D.L.R. (2d) 264. In the first,Hilbery J. adjudged that the facts relied upon as the basis of the claim

for financial loss had not been proved so that the case cannot be anauthority for this concept. In the second, doubts were expressed in

E S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B.337 by both Lord Denning M.R. and Buckley L.J. as to whether the merefinancial loss would have been recoverable under an English judgment.Thurston v. Charles (1905) 21 T.L.R. 659 was a claim for damages forthe detention and conversion of a letter. In Jackson v. Watson & Sons[1909] 2 K.B. 193 the successful claim was for damages for a breach of

P warranty on the sale of a tin of salmon which had poisoned the purchaser's

wife whereby he had lost the benefit of her services through her death.In Griffith v. Richard Clay & Sons Ltd. [1912] 2 Ch. 291, the plaintiffclaimed an injunction and damages for the obstruction by the defendantsof his ancient lights. He was awarded damages but refused an injunction,a fact which may explain why the basis for the award of damages was asbroad as it was. I do not find it necessary to make a detailed examination

*•* of these cases because, in my judgment, the comment which was made bythe editor of Mayne & MacGregor on Damages, 12th ed. (1961), p. I l l ,correctly and neatly sums up the position. After referring to Buckley LJ.'sdictum in Horton v. Colwyn Bay and Colwyn Urban District Council [1908]1 K.B. 327 upon which I have already commented, he wrote:

„ . "This is an over-simplification and there is no necessity in principleto adopt such a sweeping statement. Each tort is different and, sincethe matter is one of policy, each can be decided in a different wayfrom the next one."

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50Lawton LJ. Spartan Steel v. Martin & Co. (C.A.) [1973]

In my judgment the rule enunciated in 1875 by Blackburn J. is the correctone to apply in negligence cases.

When this principle is applied to the facts of this case it produces theresult referred to by Lord Denning M.R, in his judgment. I too wouldallow the appeal and reduce the damages to £768.

Appeal allowed with costs in Court of Appeal. B

Damages reduced to £768.

Solicitors: Allan Jay & Co. for William F. Hatton & Co., Dudley; Herbert Oppenheimer, Nathan & Vandyk.

H. J.

C

D

[COURT OF APPEAL]

GENERAL ACCIDENT FIRE AND LIFE ASSURANCE

CORPORATION LTD. v. FOSTER

[1970 G. No. 1341] E

1972 July 7 Lord Denning M.R., Sachs and Buckley L.JJ.

Legal Aid —Costs— Act of 1964—Unassisted party successful — Plaintiff insurance company claiming costs out of legal aid fund —Whether "proceedings . . . finally decided" in plaintiff's favour—Whether "just and equitable"—Whether means p of applicant bar to successful application— Merits of unsuccessful appeal—Legal Aid Act 1964 (c. 30), s. 1

The plaintiff insurance company claimed £866 against thedefendant in respect of moneys had and received by him astheir agent. The registrar gave them judgment under R.S.C.,Ord. 14. The defendant got legal aid and appealed. KilnerBrown J. varied the registrar's order by giving the plaintiffs Q

judgment for £650 with leave to defend as to the balance.The defendant appealed with legal aid. The Court of Appealgave judgment for £450 absolutely with leave to defend as to£341-50 on condition that the latter sum was brought intocourt. The plaintiffs were given an order for costs which wasnot to be enforced without further application to the court,the defendant to have no present liability.

The defendant's solicitors declined to act further for him, „his legal aid certificate was discharged and the plaintiffs "obtained judgment in the county court for the £341-50 withoutappearance by him.

On the plaintiffs' application under section 1 of the Legal

[1973] q.b. 27.pdf

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