Spartan Steel & Alloys Ltd v Martin & Co (Contractors) PDF

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Date and Time: Sunday, 18 April, 2021 5:00:00 PM MYT Job Number: 141713482

Document (1) 1. Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1972] 3 All ER 557 Client/Matter: -NoneSearch Terms: spartan steels & alloys ltd Search Type: Terms and Connectors Narrowed by: Content Type MY Cases

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Spartan Steel and Alloys Ltd v Martin & Co (Contractors) Ltd Overview

| [1973] QB 27,

| [1972] 3 All ER 557,

| [1972] 3 WLR 502,

| 14 KIR 75, 116 Sol Jo 648

Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1972] 3 All ER 557 COURT OF APPEAL, CIVIL DIVISION LORD DENNING MR, EDMUND DAVIES AND LAWTON LJJ 25, 26, 27 APRIL, 22 JUNE 1972 Damages — Remoteness of damage — Negligence — Foreseeability — Economic loss not consequent on physical damage — Electric cable severed causing power failure in plaintiffs' factory — Molten metal in furnace damaged and profit lost — Melting of other metal impossible during interruption and further profit lost — Whether damages recoverable for loss of profit in respect of melting which could not be undertaken. The plaintiffs manufactured stainless steel alloys at a factory which was directly supplied with electricity by a cable from a power station. The factory worked 24 hours a day. Continuous power was required to maintain the temperature in a furnace in which metal was melted. The defendants' employees, who were working on a near-by road, damaged the cable whilst using an excavating shovel. The electricity board shut off the power supply to the factory for 14 1/2 hours until the cable was mended. There was a danger that a 'melt' in the furnace might solidify and damage the furnace's lining, so the plaintiffs poured oxygen on to the 'melt' and removed it, thus reducing its value by £368. If the supply had not been cut off, they would have made a profit of £400 on the 'melt', and £1,767 on another four 'melts', which would have been put into the furnace. They claimed damages from the defendants in respect of all three sums. The defendants admitted that their employees had been negligent, but disputed the amount of their liability. Held – (i) The defendants were liable in respect of the physical damage to the 'melt' and for the loss of profit on it, for that loss was consequential on the physical damage (see p 564 f, p 565 b and p 574 a, post); SCM (United Kingdom) Ltd v W J Whittall & Son Ltd [1970] 3 All ER 245 followed. (ii) (Edmund Davies LJ dissenting) the defendants were not liable for the loss of profit on the other four 'melts' because— (a) no remedy was available in respect of economic loss unconnected with physical damage (see p 564 g and p 573 h to p 574 a, post); Cattle v Stockton Waterworks Co [1874–80] All ER Rep 220 followed; (b) there was no principle of 'parasitic' damages in English law to the effect that there were some heads of damage which, if they stood alone, would not be recoverable, but would be if they could be annexed to some other claim for damages, ie that the economic loss in respect of the four 'melts' was recoverable as a 'parasite' by being attached to the claim in respect of the first 'melt' (see p 561 c d and g and p 573 h, post); Re London, Tilbury and Southend Railway Co & Gower's Walk Schools Trustees (1889) 24 QBD 326, Horton v Colwyn Bay and Colwyn Urban Council [1908] 1 KB 327 and Griffith v Richard Clay & Sons Ltd [1912] 2 Ch 291 explained. Per Lord Denning MR. At bottom the question of recovering economic loss is one of policy. Whenever the courts draw a line to mark out the bounds of duty, they do it as a matter of policy so as to limit the responsibility of the defendant. Whenever the courts set bounds to the damages recoverable—saying that they are or are not, too remote—they do it as a matter of policy so as to limit the liability of the defendants. The time has come to discard

Page 2 of 8 Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1972] 3 All ER 557 the tests which have been propounded in the reported cases and which have proved so elusive. It is better to consider the particular relationship in hand, and see whether or not, as a matter of policy, economic loss should be recoverable (see p 561 j and p 562 g, post). Per Lawton LJ. The differences which undoubtedly exist between what damage can be recovered in one type of case and what in another cannot be reconciled on any logical basis. Such differences have arisen because of the policy of the law and it may be that there should be one policy for all cases; but the enunciation of such a policy is not a task for the court (see p 573 b, post). Notes For remoteness of damages in tort, see 11 Halsbury's Laws (3rd Edn) 277, 278, paras 458, 459, and for cases on the subject, see 17 Digest (Repl) 121–125, 325–355. Cases referred to in judgments Atkinson v Newcastle & Gateshead Waterworks Co (1877) 2 Ex D 441, [1874–80] All ER Rep 757, 46 LJEx 775, 36 LT 761, CA, 33 Digest (Repl) 28, 134. Baker v Crow Carrying Co Ltd (1 February 1960) unreported, CA. Best v Samuel Fox & Co Ltd [1952] 2 All ER 394, [1952] AC 716, HL, Digest (Cont Vol A) 680, 683. British Celanese Ltd v A H Hunt (Capacitors) Ltd [1969] 2 All ER 1252, [1969] 1 WLR 959, Digest (Cont Vol C) 727, 77h. Candler v Crane, Christmas & Co [1951] 1 All ER 426, [1951] 2 KB 164, CA 36 Digest (Repl) 17, 75. Cattle v Stockton Waterworks Co (1875) LR 10 QB 453, [1874–80] All ER Rep 220, 44 LJQB 139, 33 LT 475, 39 JP 791, 1 Digest (Repl) 37, 277. Clegg, Parkinson & Co v Earby Gas Co [1896] 1 QB 592, 65 LJQB 339, DC, 38 Digest (Repl) 49, 250. Dutton v Bognor Regis Urban District Council [1972] 1 All ER 462, [1972] 1 QB 373, [1972] 2 WLR 299, [1972] 1 Lloyd's Rep 227, CA. Electrochrome Ltd v Welsh Plastics Ltd [1968] 2 All ER 205, Digest (Cont Vol C) 2, 300b. Elliott Steam Tug Co v Shipping Controller [1922] 1 KB 127, 91 LJKB 294, 126 LT 158, 15 Asp MLC 406, CA, 17 Digest (Repl) 109, 230. Furniss v Fitchett [1958] NZLR 396, 33 Digest (Repl) 529, *96. Geddis v Bann Reservoir Proprietors (1878) 3 App Cas 430, HL, 38 Digest (Repl) 16, 64. Griffith v Richard Clay & Sons Ltd [1912] 2 Ch 291, 81 LJCh 809, 106 LT 963, CA, 19 Digest (Repl) 212, 1546. Hartley v Mayoh & Co [1954] 1 All ER 375, [1954] 1 QB 383, [1954] 1 WLR 355, 118 JP 178, CA, Digest (Cont Vol A) 1140, 77a. Heard v Brymbo Steel Co Ltd [1947] KB 692, [1948] LJR 372, 177 LT 251, 80 Lloyd LR 424, CA, 20 Digest (Repl) 233, 141.

Page 3 of 8 Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1972] 3 All ER 557

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465, [1963] 3 WLR 101, [1963] 1 Lloyd's Rep 485, HL, Digest (Cont Vol A) 51, 1117a. Horton v Colwyn Bay and Colwyn Urban Council [1908] 1 KB 327, 77 LJKB 215, 98 LT 547, 72 JP 57, CA, 11 Digest (Repl) 144, 238. Inland Revenue Comrs v Hambrook [1956] 3 All ER 338, [1956] 2 QB 656, [1956] 3 WLR 643, CA, 34 Digest (Repl) 225, 1632. Jackson v Watson & Sons [1909] 2 KB 193, 78 LJBK 587, 100 LT 799, CA, 17 Digest (Repl) 118, 296. King v Phillips [1953] 1 All ER 617, [1953] 1 QB 429, [1953] 2 WLR 526, CA, Digest (Cont Vol A) 1189, 1039. Kirkham v Boughey [1957] 3 All ER 153, [1958] 2 QB 338, [1957] 3 WLR 626, Digest (Cont Vol A) 1195, 1068b. Lampert v Eastern National Omnibus Co Ltd [1954] 2 All ER 719, [1954] 1 WLR 1047, Digest (Cont Vol A) 680, 683a. Leeds Industrial Co-op Society Ltd v Slack [1924] AC 851, [1924] All ER Rep 259, 93 LJCh 436, 131 LT 710, HL, 19 Digest (Repl) 206, 1468. Liesbosch Dredger (Owners) v Steamship Edison (Owners) [1933] AC 449, 102 LJP 73, 18 Asp MLC 380; sub nom The Edison [1933] All ER Rep 144, 149 LT 49, HL, 17 Digest (Repl) 93, 103. London, Tilbury and Southend Railway Co & Gower's Walk Schools Trustees, Re (1889) 24 QBD 326, 62 LT 306; sub nom Re Gower's Walk Schools Trustees & London, Tilbury & Southend Railway Co, 59 LJQB 162, CA, 19 Digest (Repl) 212, 1545. Lumley v Gye (1853) 2 E & B 216, [1843–60] All ER Rep 20822 LJQB 463, 118 ER 749, 17 Digest (Repl) 116, 285. Margarine Union GmbH v Cambay Prince Steamship Co Ltd [1967] 3 All ER 775, [1969] 1 QB 219, [1967] 2 WLR 1569, Digest (Cont Vol C) 883, 1806c. Midwood & Co Ltd v Manchester Corpn [1905] 2 KB 597, 74 LJKB 884, 93 LT 525, 69 JP 348, CA, 38 Digest (Repl) 43, 219. Milnes v Huddersfield Corpn (1886) 11 App Cas 511, [1886–90] All ER Rep 350, 56 LJQB 1, 55 LT 617, 50 JP 676, HL, 47 Digest (Repl) 599, 143. Ministry of Housing and Local Government v Sharp [1970] 1 All ER 1009, [1970] 2 QB 238, [1970] 2 WLR 802, 134 JP 358, CA, Digest (Cont Vol C) 830, 926f. Morrison Steamship Co Ltd v Steamship Greystoke Castle (Owners of Cargo lately laden on) [1946] 2 All ER 696, [1947] AC 265, [1947] LJR 297, 176 LT 66, HL, 41 Digest (Repl) 514, 2887. Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) (No 1) [1961] 1 All ER 404, [1961] AC 388, [1961] 2 WLR 126,[1961] 1 Lloyd's Rep 1, PC, Digest (Cont Vol A) 1148, 185a. Rylands v Fletcher (1868) LR 3 HL 330, [1861–73] All ER Rep 1, 37 LJEx 161, 19 LT 220, 33 JP 70, HL, 36 Digest (Repl) 282, 334.

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SCM (United Kingdom) Ltd v W J Whittall & Son Ltd [1970] 3 All ER 245, [1971] 1 QB 337, [1970] 3 WLR 694, CA, Digest (Cont Vol C) 728, 77k. Seaway Hotels Ltd v Cragg (Canada) Ltd and Consumers' Gas Co (1959) 21 DLR (2d) 264, [1959] OR 581, [1959] OWN 359, 25 Digest (Repl) 538, *64. Simpson & Co v Thompson (1877) 3 App Cas 279, 58 LT 1, 3 Asp MLC 567, HL, 1 Digest (Repl) 61, 452. Société Anonyme de Remorquage à Héliece v Bennetts [1911] 1 KB 243, 80 LJKB 228, 16 Com cas 24, 1 Digest (Repl) 33, 250. Stevens v Aldershot Gas, Water and District Lighting Co (1932) 102 LJKB 12, 31 LGR 48, 20 Digest (Repl) 214, 60. Thurston v Charles (1905) 21 TLR 659, 32 Digest (Repl) 133, 1529. Weller & Co v Foot and Mouth Disease Research Institute [1965] 3 All ER 560, [1966] 1 QB 569, [1965] 3 WLR 1082, [1965] 2 Lloyd's Rep 414, Digest (Cont Vol B) 554, 109c. Appeal This was an appeal by the defendants, Martin & Co (Contractors) Ltd, against the judgment of Faulks J on 14 December 1971 at Birmingham Assizes, in favour of the plaintiffs, Spartan Steel & Alloys Ltd, who had claimed damages for negligence in that the defendants' employees had damaged an electricity cable supplying power to the plaintiffs' alloy factory with the result that (a) a 'melt' in a furnace was damaged and a loss of profit on it was incurred; and (b) the plaintiffs had suffered a further loss in respect of four other 'melts' which could not be put into the furnace whilst the supply was interrupted. Faulks awarded the plaintiffs £2,535 damages. The facts are set out in the judgment of Lord Denning MR. R H Tucker QC and Piers Ashworth for the defendants.Christopher Bathurst for the plaintiffs. Cur adv vult LORD DENNING MR. The plaintiffs, Spartan Steel & Alloys Ltd, have a factory in Birmingham where they manufacture stainless steel. The factory obtains its electricity by a direct cable for a power station of the Midlands Electricity Board. In June 1969 contractors called Martin & Co (Contractors) Ltd, the defendants, were doing work on a road about a quarter of a mile away. They were going to dig up the road with a big power-driven excavating shovel. They made enquiries about the place of the cables, mains and so forth, under the road. They were given plans showing them. But unfortunately their men did not take reasonable care. The shovel damaged the cable which supplied electricity to the plaintiffs' works. The electricity board shut down the power whilst they mended the cable. The factory was at that time working continuously for 24 hours all round the clock. The electric power was shut off at 7.40 pm on 12 June 1969, and was off for 14 1/2 hours until it was restored at 10.00 am on 13 June 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 in which metal was being melted in order to be converted into ingots. Electric power was needed throughout in order to maintain the temperature and melt the metal. When the power failed, there was a danger that the metal might solidify in the furnace and do damage to the lining of the furnace. So the plaintiffs used oxygen to melt the material and poured it from a tap out of the furnace. But this meant that the melted material was of much less value. The physical damage was assessed at £368. In

Page 5 of 8 Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1972] 3 All ER 557 addition, if that particular melt had been properly completed, the plaintiffs would have made a profit on it of £400. Furthermore, during those 14 1/2 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 defendants for negligence. No evidence was given at the trial, because the defendants admitted that they had been negligent. The contest was solely on the amount of damages. The defendants take their stand on the recent decision in this court of SCM (United Kingdom) Ltd v W J Whittall & Son Ltd. They admit that they are liable for the £368 physical damages. They did not greatly dispute that they are also liable for the £400 loss of profit on the first melt, because that was truly consequential on the physical damages and thus covered by SCM v Whittall. But they deny that they are liable for the £1,767 for the other four melts. They say that was economic loss for which they are not liable. The judge rejected their contention and held them liable for all the loss. The defendants appeal to this court. Counsel for the plaintiffs raised a point which was not discussed in SCM v Whittall. He contended that there was a principle of English law relating to 'parasitic damages'. By this he meant that there are some heads of damage which, if they stood alone, would not be recoverable; but, nevertheless, if they could be annexed to some other legitimate claim for damages, might yet be recoverable. They are said to be 'parasitic' because, like a parasite, in biology, they cannot exist on their own, but depend on others for their life and nourishment. Applying this principle he contended that, even if the economic loss (£1,767) on these four melts, standing alone, would not be recoverable, nevertheless by being attached to the other claim it can be added to it, and recovered as a 'parasite' to it. Counsel sought to establish this principle by reference to the books. He cited a case where the owner of an old house was entitled to ancient lights for some small old windows. He pulled down the old house and put up a new house with big new windows. The defendants afterwards put up a building which obstructed the big new windows. The plaintiff was held entitled to be compensated for the loss of light through the whole space of the big new windows and not merely through the little space of the small old windows: see Re London, Tilbury and Southend Railway Co & Gower's Walk Schools Trustees. That decision was considered in Horton v Colwyn Bay and Colwyn Urban Council, and Buckley LJ drew from it a general proposition which he stated to be this ([1908] 1 KB at 341): '… if an actionable wrong has been done to the claimant he is entitled to recover all the damage resulting from that wrong, and none the less because he would have had no right of action for some part of 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. Counsel for the plaintiffs drew our attention to a number of other cases in which, he said the same principle was applied, although it was not expressly stated in them. I do not like this doctrine of 'parasitic damages'. I do not like the very word 'parasite'. A 'parasite' is one who is a useless hanger-on sucking the substance out of others. 'Parasitic' is the adjective derived from it. It is a term of abuse. It is an opprobrious epithet. The phrase 'parasitic damages' conveys to my mind the idea of damages which ought not in justice to be awarded, but which somehow or other have been 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 has never been used in any case up until now. It has only appeared hitherto in the textbooks. I hope it will disappear from them after this case. I do not believe there is any such doctrine. The cases on ancient lights stand in a category by themselves and are to be explained in this way. 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 the erection of the new building. The court, however, may refuse an injunction and award him damages in lieu of an injunction: see Leeds Industrial Co-op Society Ltd v

Page 6 of 8 Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1972] 3 All ER 557 Slack. These damages would be, 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 objection—so that he cannot seek an injunction—I do not think he should recover damages for his big new windows (for which he has no right). He ought only to recover damages for the small old windows (for which he has a right). None of the other cases gives any difficulty. In all of them there was some good reason for adding on the extra damages—not because they were improper, but because they flowed naturally and directly from the wrong done and could reasonably have been foreseen as a consequence of it. I reject, therefore, counsel's argument based on 'parasitic' damages. Counsel for the plaintiffs submitted in the alternative that the views expressed by Winn LJ and me in SCM v Whittall were wrong. He said that if there was any limitation 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 duty to the plaintiffs and had broken it. The damages by way of economic loss were foreseeable, and, therefore, they should be recoverable. He cited several statements from the books in support of his submissions, including some 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 a matter of policy so as to limit the responsibility of the defendant. Whenever the courts set bounds to the damages recoverable—saying that they are, or are not, too remote—they do it as matter of policy so as to limit the liability of the defendant. In many of the cases where economic loss has been held not to be recoverable, 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 accident by the negligence of another, the negligent driver owes a duty to the injured man himself, but he owes no duty to the servant of the injured man: see Best v Samuel Fox & Co Ltd ([1952] 2 All ER 394 at 398, [1952] AC 716 at 731); nor to the master of the injured man: Inland Revenue Comrs v Hambrook ([1956] 3 All ER 338 at 339, 340, [1956] 2 QB 656 at 660); nor to anyone else who suffers loss because he had a contract with the injured man: see Simpson & Co v Thomson ((1877) 3 App Cas 279 at 289); nor indeed to anyone who only suffers economic loss on account of the accident: see Kirkham v Boughey ([1957] 3 All ER 153 at 155, [1958] 2 QB 338 at 341). Likewise, when property is damaged by the negligence of another, the negligent tortfeasor owes a duty to the owner or possessor of the chattel, but not to one who suffers loss only because he had a contract entitling him to use the chattel or giving him a right to receive it at some later date: see E...