(1988) - Q B - 758

758
Sir Edward Eveleigh
Smith v. Eric S. Bush (C.A.)
[1988]
considering whether or not it would be fair and reasonable to allow A

reliance on the notice, having regard to all the circumstances obtaining
when the liability arose.
A relevant part of the circumstances obtaining when liability arose
was the fact that the report stated that the house was readily saleable for
the purpose of owner occupation and was likely to remain so. There was
no warning that this assertion was unreliable. It would have been
perfectly simple to discover the dangerous state of the premises. No "
structural survey was needed for that. The least attention to the task
that the plaintiff was entitled to expect from the defendants would have
revealed the fault. The defendants' fault can hardly be regarded as a
mere accidental error or omission.
I therefore am of the opinion that it would not be fair and reasonable
to allow reliance on a disclaimer which might, I know not, be effective Q
in other circumstances.
Appeal dismissed with costs.
Leave to appeal refused.
Solicitors: Barlow Lyde & Gilbert; Hood Vores & Allwood, East
Dereham.
[Reported by CLIVE SCOWEN, ESQ., Barrister-at-Law]
[COURT OF APPEAL]
SIMAAN GENERAL CONTRACTING CO. v. PILKINGTON

GLASS LTD. (NO. 2)
1988
Feb. 2, 3; 17
Lord Donaldson of Lymington M.R.,

Dillon and Bingham L.JJ.
F
NegligenceDuty of care to whom?BuilderMain contractor subcontracting installation of glass units in buildingMain contract
specifying supplier of glass unitsSub-contractor buying glass
units from specified supplierMain contractor suffering economic
loss by reason of alleged defects in glass unitsWhether supplier
liable to main contractor
The plaintiffs were the main contractors for a building in
Abu Dhabi. The main contract specified for incorporation into
the curtain walling double-glazed units of green glass which
were manufactured by the defendants. The plaintiffs subcontracted the erection of the curtain walling to a company
which was not a party to the action. The sub-contractors duly
purchased the double-glazed units from the defendants. When
the units had been installed the architect rejected the units as
being defective by reason of discrepancies in the colouring. The
plaintiffs brought a claim in negligence against the defendants,
alleging that by reason of the defects in the glass units they had
suffered economic loss in that money which they would otherwise
759
1 Q.B.
^
Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)
have received had been withheld. Judge Newey Q.C. tried as a

preliminary issue the question whether the defendants, as
specified suppliers of the units, owed the plaintiffs a duty of
care to avoid defects in the units which had caused the plaintiffs
economic loss. He found in favour of the plaintiffs.
On appeal by the defendants:
Held, allowing the appeal, that a claim for pure economic
loss, unaccompanied by physical damage to property of which
the plaintiff was the owner or to which he could show a
possessory title, lay only where he could show a special
relationship between himself and the defendant which amounted
to reliance by the plaintiff on the defendant; that in so far as
the glass units could be said to have been damaged the plaintiffs
had failed to show any proprietary interest in them at the time
when the damage occurred; that since the plaintiffs had required
the sub-contractors to buy the glass units from the defendants
only because they had been contractually obliged to do so they
could not be said to have relied on the defendants, nor had the
defendants assumed a direct responsibility to the plaintiffs for
the quality of the units; and that, accordingly, there was no
reason to depart from the normal contractual chain of liability
(post, pp. 781c782H, 7 8 4 D 7 8 5 D , 7 8 6 A - D ) .
Per curiam. If a main contractor has a direct claim in tort

against the nominated supplier to a sub-contractor for economic
loss occasioned by defects in the quality of the goods supplied,
the difficulty arises of how far exemption clauses or other
conditions of the contract of sale affect the duty owed in tort by
the supplier (post, pp. 7 8 2 H 7 8 3 B , 7 8 5 G 7 8 6 A ) .
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964]
A.C. 465, H.L.(E.) and Junior Books Ltd. v. Veitchi Co. Ltd.
[1983] 1 A.C. 520, H.L.(E.) distinguished.
Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K.
Lines Ltd. [1986] A.C. 1, P . C ; Leigh and Sillavan Ltd. v.
Aliakmon Shipping Co. Ltd. [1986] A.C. 785, H.L.(E.);
Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B. 507,
C.A. and Yuen Kun Yeu v. Attorney-General of Hong Kong
[1988] A.C. 175, P.C. applied.
Decision of Judge John Newey Q . C , sitting on official
referee's business, reversed.
The following cases are referred to in the judgments:
Anns v. Merton London Borough Council [1978] A.C. 728; [1977] 2 W.L.R.
1024; [1977] 2 All E.R. 492, H.L.(E.)
Batty v. Metropolitan Property Realisations Ltd. [1978] Q.B. 554; [1978] 2
W.L.R. 500; [1978] 2 All E.R. 445, C.A.
Caltex Oil (Australia) Pty. Ltd. v. Dredge "Willemstad" (1976) 136 C.L.R.
529
Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd. [1986]
A.C. 1; [1985] 3 W.L.R. 381; [1985] 2 All E.R. 935, P.C.
Cattle v. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453
Curran v. Northern Ireland Co-ownership Housing Association Ltd. [1987]
A.C. 718; [1987] 2 W.L.R. 1043; [1987] 2 All E.R. 13, H.L.(N.L)
Donoghue v. Stevenson [1932] A.C. 562, H.L.(Sc)
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.)
Dutton v. Bognor Regis Urban District Council [1972] 1 Q.B. 373; [1972] 2
W.L.R. 299; [1972] 1 All E.R. 462, C.A.
760
[1988]
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465; [1963] A
3 W.L.R. 101; [1963] 2 All E.R. 575, H.L.(E.)
Hill v. Chief Constable of West Yorkshire [1988] Q.B. 60; [1987] 2 W.L.R.
1126; [1987] 1 All E.R. 1173, C.A.
Junior Books Ltd. v. Veitchi Co. Ltd., 1982 S.L.T. 333; [1983] 1 A.C. 520;
[1982] 3 W.L.R. 477; [1982] 3 All E.R. 201, Ct. of Sess. and H.L.(Sc)
Ketteman v. Hansel Properties Ltd. [1987] A.C. 189; [1987] 2 W.L.R. 312;
[1988] 1 All E.R. 38, H.L.(E.)
B
Leigh and Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. [1986] A.C. 785;
[1986] 2 W.L.R. 902; [1986] 2 All E.R. 145, H.L.(E.)
London Congregational Union Inc. v. Harriss & Harriss [1988] 1 All E.R.
15, C.A.
McLoughlin v. O'Brian [1983] 1 A.C. 410; [1982] 2 W.L.R. 982; [1982] 2
All E.R. 298, H.L.(E.)
Morrison Steamship Co. Ltd. v. Greystoke Castle (Cargo Owners) [1947]
C
A.C. 265; [1946] 2 All E.R. 696, H.L.(E.)
Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B. 507; [1985] 3
W.L.R. 993; [1985] 3 All E.R. 705, C.A.
Peabody Donation Fund (Governors of) v. Sir Lindsay Parkinson & Co.
Ltd. [1985] A.C. 210; [1984] 3 W.L.R. 953; [1984] 3 All E.R. 529,
H.L.(E.)
Pirelli General Cable Works Ltd. v. Oscar Faber & Partners [1983] 2 A.C.
1; [1983] 2 W.L.R. 6; [1983] 1 All E.R. 65, H.L.(E.)
D
Ross v. Counters [1980] Ch. 297; [1979] 3 W.L.R. 605; [1979] 3 All E.R.
580
Simpson & Co. v. Thomson (1877) 3 App. Cas. 279, H.L.(Sc)
Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd. [1973] Q.B.
27; [1972] 3 W.L.R. 502; [1972] 3 All E.R. 557, C.A.
Tate & Lyle Food and Distribution Ltd. v. Greater London Council [1983] 2
A.C. 509; [1983] 2 W.L.R. 649; [1983] 1 All E.R. 1159, H.L.(E.)
E
Young & Marten Ltd. v. McManus Childs Ltd. [1969] 1 A.C. 454; [1968] 3
W.L.R. 630; [1968] 2 All E.R. 1169, H.L.(E.)
Yuen Kun Yeu v. Attorney-General of Hong Kong [1988] A.C. 175; [1987] 3
W.L.R. 776; [1987] 2 All E.R. 705, P.C.
The following additional cases were cited in argument:
D. & F. Estates Ltd. v. Church Commissioners for England (1985) 7 Const. F
L.R. 40
Department of the Environmental v. Thomas Bates & Son (Basildon
Development Corporation Third Party) (unreported), 26 January 1984,
Judge Smout Q.C.
Lexmead (Basingstoke) Ltd. v. Lewis [1982] A.C. 225; [1981] 2 W.L.R.
713; [1981] 1 All E.R. 1185, H.L.(E.)
Tozer Kemsley & Millbourn (Holdings) Ltd. v. J. Jarvis & Sons Ltd. (1983) G
4 Const. L.R. 24
INTERLOCUTORY APPEAL from Judge Newey Q.C. sitting on official
referee's business.
The plaintiffs, Simaan General Contracting Co., main contractors for
the erection of a building in Abu Dhabi, brought a claim in negligence
against the defendants, Pilkington Glass Ltd., the specified suppliers of
glass units to sub-contractors of the plaintiffs for incorporation into the
curtain walling of the building. The plaintiffs alleged that the glass units
were damaged, as a result of which they suffered loss and damage, in
"
761
1 Q.B.
T-)
that the building owner withheld payments to them in respect of the

work done. Judge Newey Q.C., sitting on official referee's business tried
as a preliminary issue the following question: "In manufacturing the
double-glazed units to be incorporated into the curtain wall of the AIOteiba Building, did [the defendants] owe to [the plaintiffs], as the main
contractors, a duty to take reasonable care to avoid defects in the units
which (it is assumed for the purpose of this preliminary issue) have
caused [the plaintiffs] economic loss as alleged in paragraphs 14 and 15
of the statement of claim?" On 16 July 1987 Judge Newey decided the
question in favour of the plaintiffs.
The defendants appealed with leave of the judge on the grounds,
inter alia, that (1) the judge ought to have held as a matter of law that
as (on the assumed facts) the economic loss suffered by the plaintiffs
had not resulted from any physical damage to the double-glazed units
supplied by the defendants, but had resulted instead from a defect or
defects in the design or manufacture of the units, the plaintiffs did not
have any cause of action against the defendants in respect of such loss
and the defendants did not owe a duty of care to the plaintiffs to avoid
causing the plaintiffs such loss and were not liable in respect of it; (2)
the judge ought to have held as a matter of law that (i) if the units had
suffered damage the plaintiffs had not had a proprietary interest in them
at the time when such damage first occurred; (ii) any damage to the
units had first occurred at the latest on delivery of the first consignment
to the plaintiffs' sub-contractors, before the plaintiffs could have acquired
a proprietary or possessory interest in the consignment or, alternatively,
after the first consignment had been glazed into the building, after the
termination of any proprietary or possessory interest which the plaintiffs
might have had; (iii) in the premises the plaintiffs had no cause of action
against the defendants in respect of the economic loss which the plaintiffs
had suffered as a result of such damage; (3) the judge misdirected
himself in law in concluding that although ordinarily anything physically
attached to the land vested in the landowner, the head contract between
the landowner and the plaintiffs seemed to have altered the usual
position, and possibly the glazing units incorporated in the building
remained the property of the plaintiffs until they had been paid for; and
if the judge had been correct so to hold, the terms of the plaintiffs' subcontract prevented property passing from the subcontractors until
payment, so that the plaintiffs had not acquired any proprietary or
possessory interest in the units at the time damage first occurred; (4) the
judge had erred in law in failing to consider whether the defendants
had voluntarily assumed responsibility towards the plaintiffs to supply
units which were suitable for installation in the building; alternatively he
ought to have held that the defendants had not assumed such
responsibility so as to give rise to a sufficient special relationship
between the parties as to found the alleged duty of care; and (5) the
judge had erred in law in concluding that the plaintiffs had relied on
the defendants to supply units which were suitable for installation in the
building.
The facts are stated in the judgment of Bingham L.J.
762
[1988]
David M. Harris for the defendants. The case involves a further

consideration of the parameters of the duty of care in negligence to
avoid causing economic loss and the application of the principles to a
common factual situation to which they have not previously been applied
at appellate level.
The law has been reluctant to allow a comprehensive remedy in tort
for negligent interference with economic interests for fear of giving rise
to indiscriminate liability and because it is considered that such interests
are best protected through the law of contract. Accordingly, it has
developed piecemeal and not consistently and the parameters of liability
in one situation may differ from those thought appropriate in another:
see Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd.
[1973] Q.B. 27, 49B per Lawton L.J.
Prior to Junior Books Ltd. v. Veitchi Co. Ltd. [1983] 1 A.C. 520 it
was well-established that there was no general duty to take reasonable
care to avoid causing economic loss e.g. rendering a contract less
profitable: see the Spartan Steel case [1973] Q.B. 27, especially at p. 50A
per Lawton L.J., approving the decision of Blackburn J. in Cattle v.
Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453. As a result of the
general approach to economic loss claims, it was not considered prior to
the Junior Books case [1983] 1 A.C. 520 that a sub-contractor owed the
main contractor or employer a duty of care to avoid causing economic
loss by sub-standard work: Young & Marten Ltd. v. McManus Childs
Ltd. [1969] 1 A.C. 454, 469E-^170B, per Lord Pearce, and at p. 475B-D,
per Lord Upjohn. If the employer or main contractor wished to impose
responsibility on the sub-contractor, he had to do so by means of a
contract. Prior to Junior Books A owed no duty of care to B to avoid
causing him economic loss by rendering him liable to pay damages to C:
Lexmead (Basingstoke) Ltd v. Lewis [1982] A.C. 225. See the comments
of Lord Diplock at pp. 277-278 in relation to an indemnity against
damages for personal injuries. Had this claim been litigated prior to
Junior Books [1983] 1 A.C. 520, it would have failed. The questions for
this court, therefore, are what principles were laid down by or can be
properly extrapolated from Junior Books and whether the plaintiffs
come within such principles.
In subsequent cases, the Junior Books case [1983] 1 A.C. 520 has
been increasingly treated as a decision on its own facts: Muirhead v.
Industrial Tank Specialities Ltd [1986] Q.B. 507, 528. It is important,
therefore, to identify the facts averred by the pursuers on which the
decision was based. The assumed facts included the following: the
financial loss alleged by the pursuers resulted from very substantial
damage to the subject property; (see articles 3 and 7 of the pursuers'
averments, 1982 S.L.T. 333, 334); at the time damage occurred (and
accordingly at the time the cause of action accrued), the pursuers owned
and occupied the factory; and the defenders were nominated subcontractors on whose skill and judgment in the construction of the floor,
the pursuers relied. There was a very close proximity between the
parties, not in the sense in which that term is used in Donoghue v.
Stevenson [1932] A.C. 562, but in the sense of a course of dealing
leading to nomination.
"
"
763
1 Q.B.
"
The Lord Ordinary allowed the pursuers a proof before answer as

the financial loss claimed arose out of alleged "damage, actual and
threatened, to property belonging to the pursuers." The Second Division
went further and held that on the assumed facts, the defenders owed the
pursuers a duty of care to avoid causing them foreseeable economic loss.
Lord Wheatley held in the alternative that the financial loss was
consequent on "damage both actual and threatened to the pursuers'
property" and accordingly was capable of supporting a claim in
negligence.
In the House of Lords [1983] 1 A.C. 520, Lord Fraser of Tullybelton
decided the appeal "strictly on its own facts": see p. 533D. Those facts
included physical damage to the subject property, the pursuers'
proprietory interest in the property at the time the damage first occurred,
and the consequential character of the financial loss alleged. Lord
Russell agreed with Lord Fraser and Lord Roskill. Lord Keith of Kinkel
held that the defenders' duty of care to the pursuers extended to
economic loss resulting from physical damage to the floor which impaired
the pursuers' business, but emphasised that he was not prepared to lay
down any general principle of law that a plaintiff can recover damages
for economic loss suffered because the object he received is less valuable
than contemplated: see pp. 535-537.
Lord Roskill defined the claim as being purely "for the cost of
remedying the alleged defects in the flooring itself by replacement
together with resulting or economic or financial loss consequential upon
that replacement": see p. 539. The alleged defects were physical damage.
In Tate & Lyle Food and Distribution Ltd. v. Greater London
Council [1983] 2 A.C. 509, 530 Lord Templeman, with whom Lords
Keith, Roskill and Bridge agreed, held that in the authorities from
Donoghue v. Stevenson [1932] A.C. 562 to the Junior Books case [1983]
1 A.C. 520 the plaintiff suffered personal injury or damage to his
property. In Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B.
507, 526, Robert Goff L.J. observed that in the Tate & Lyle case Lord
Templeman had treated Junior Books as one of the cases where the
plaintiff had suffered personal injury or damage to his property. The
claim in the Muirhead case probably arose out of damage to property in
that the cutting out of the motors must have resulted in some damage.
Accordingly the Court of Appeal did not have to consider this element
of liability further. However, the statement by Lord Templeman
constitutes the ratio decidendi in relation to a claim based on Junior
Books and as such is binding on the Court of Appeal. In London
Congregational Union Inc. v. Harriss & Harriss [1988] 1 All E.R. 15, 25
Ralph Gibson L.J., also held that liability in Junior Books was based on
physical damage to the premises. He recognised that, as a matter of
policy, the law should not impose liability in tort for negligent design
which does not result in physical damage.
In the building limitation cases, the House of Lords has held that a
cause of action in tort for negligence in the design or workmanship of a
building accrues when physical damage occurs, and not when the
building is handed over with a defect which may, or even is
overwhelmingly likely to, result within a relatively short time in physical
764
11988]
damage: see Pirelli General Cable Works Ltd. v. Oscar Faber & Partners
[1983] 2 A.C. 1, 16, 18, per Lord Fraser of Tullybelton, with whom the
other Law Lords agreed. The House of Lords implicitly rejected an
argument, advanced by the defendants on the basis of Junior Books
that, as economic loss occurred when the building was handed over with
a sub-standard chimney, the cause of action accrued at that time. A
similar argument was rejected by the Court of Appeal in London
Congregational Union Inc. v. Harriss & Harriss [1988] 1 All E.R. 15 and
by the House of Lords in Ketteman v. Hansel Properties Ltd. [1987]
A.C. 189. Although these cases involved latent defects subsequently
causing physical damage, the rejection of the economic loss argument,
together with the formulation of the basic principle in the Pirelli case
[1983] 2 A.C. 1, necessarily show that the principle covers also patent
defects.
If (save for the "doomed from the start" cases) the limitation period
only begins to run when physical damage occurs, it must follow that
physical damage is a constituent element of liability and the duty is to
avoid defects in the subject property resulting in physical damage with
consequential economic loss. Accordingly, the Junior Books principle
does not extend to defects in workmanship or materials which render
the property less valuable, e.g. because of an unaesthetic appearance.
The insistence that the economic loss must arise out of physical damage
necessitating expenditure on repair has the object of limiting liability to
cases where direct liability in tort is proper; in other cases, a plaintiff, if
he wishes to protect himself, must do so in contract. There is no
previous decision at appellate level in which liability has been imposed
in this context where the economic loss is not consequent upon physical
damage.
In the Junior Books case [1983] 1 A.C. 520 the pursuers owned and
occupied the factory at the time significant damage first occurred. In
Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd.
[1986] A.C. 1 and Leigh and Sillavan Ltd. v. Aliakmon Shipping Co.
Ltd. [1986] A.C. 785 it was held that only a person holding a proprietory
or possessory interest in the damaged property can maintain an action in
negligence for economic loss resulting from the damage. In the
Candlewood case [1986] A.C. 1, the Privy Council advised that the
principle in Cattle v. Stockton Waterworks Co., L.R. 10 Q.B. 453 which
had been applied so as to prevent a time charterer from recovering
damages for pecuniary loss caused by damage to the chartered vessel
was unaffected by Junior Books.
In Leigh and Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. [1986]
A.C. 520 the House of Lords held that a potential purchaser of goods,
who has the risk of but no proprietory or possessory interest in the
goods, cannot maintain an action in negligence for compensation for
damage to the goods. Lord Brandon of Oakbrook, delivering the leading
speech, said that a long line of authority established the principle that,
in order to claim in negligence for loss caused by reason of loss of or
damage to property, the plaintiff must have had either the legal
ownership of or a possessory title to the property not enough to have
had only contractual rights in relation to such property which have been
"
765
1 Q.B.
j-)
adversely affected by the loss or damage to it: see p. 809. He rejected

the argument that the case in question would only create a strictly
limited exception to the general rule (see pp. 816-817), and regarded
the Junior Books case [1983] 1 A.C. 520 as being of no direct help to
the plaintiffs.
In D. & F. Estates Ltd. v. Church Commissioners for England (1985)
7 Const. L.R. 40 the first plaintiffs were the lessees of a luxury flat, part
of a block of flats constructed by the third defendants. The flat was
occupied under a licence from the first plaintiff by the second and third
plaintiffs who in fact held controlling interests in the first plaintiff. Due
to the negligence of the third defendants, plaster had to be renewed by
the first plaintiffs, causing financial loss. The first plaintiffs' claim in
negligence was rejected by the Court of Appeal.
The two-stage test of liability formulated by Lord Wilberforce in
Anns v. Merton London Borough Council [1978] A.C. 728 on which
Lord Roskill in particular heavily relied in the Junior Books case [1983]
1 A.C. 520, has been substantially qualified: see Yuen Kun Yeu v.
Attorney-General of Hong Kong [1988] A.C. 175, 192-194. In particular,
proximity involves more than mere foreseeability of harm, but is a
"composite" expression "importing the whole concept of necessary
relationship" between the parties: see p. 191. The Junior Books case
was analysed as turning on the voluntary assumption of responsibility
towards a particular party, giving rise to a special relationship: see
p. 196. One important factor impelling the conclusion that there had
been such an assumption of responsibility was that the defenders were
nominated subcontractors.
In Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B. 507 the
Court of Appeal carefully analysed the Junior Books case [1983] 1 A.C.
520 and concluded that it should be treated as a case in which on its
particular facts, there was considered to be such a very close relationship
between the parties that the defenders could, if the facts as pleaded
were proved, be held liable to the pursuers. The basis of the latter
decision was that the majority of the House of Lords held that the
nominated sub-contractors had assumed a direct responsibility to the
building owners in circumstances equivalent to contract. The Court of
Appeal held that in Muirhead there was insufficient proximity or specific
reliance in to give rise to a Junior Books type of duty of care, and both
Nourse and O'Connor L.JJ. held that the extension to the law made by
Junior Books was "very limited" (per O'Connor L.J. at p. 535), and
that, unless the factors of very close proximity and specific reliance are
present, the law is as set out in Spartan Steel & Alloys Ltd. v. Martin &
Co. (Contractors) Ltd. [1973] Q.B. 27.
The plaintiffs' allegations about the units are that because of undue
thickness of the coating layers, insufficiency of chrome in the coatings,
and lack of uniformity in the coating layers, the units display "extensive
variation in the colour shade," and do not manifest an even-coloured
uniform light green facade.
The alleged insufficiencies in the units cannot constitute damage for
the purpose of the principle in Junior Books as subsequently interpreted.
766
[1988]
Damage for that purpose involves physical deterioration, degradation or

other adverse change.
Tozer Kemsley v. Millbourn (Holdings) Ltd. v. J. Jarvis & Sons Ltd.
(1983) 4 Const. L.R. 24, a decision of Judge Stabb Q.C. that a defect in
the construction of the building, whether a result of a faulty design or
construction of part of that building or its services, meant that a building
in that defective state was a damaged building, is wrong.
Judge Newey Q.C. concluded that, once foresight of injury and a
relationship as close as it could be short of actual privity of contract
were established, a Junior Books type of duty would arise, sufficient to
encompass the alleged loss. But the defendants' duty was merely to take
reasonable care to avoid supplying units which by reason of defects were
liable to suffer physical damage causing foreseeable economic loss.
If the plaintiffs are to succeed, they must show that they had either
the legal ownership of or a possessory title to the "damaged" units at
the time the "damage" occurred.
The judge approached this issue as falling within the second stage of
the test formulated by Lord Wilberforce in Anns v. Merton London
Borough Council [1978] A.C. 728. In the light of Yuen Kun Yeu v.
Attorney-General of Hong Kong [1988] A.C. 175, it is submitted that the
judge's approach is incorrect. The plaintiffs' interest is either a separate
prerequisite to liability or possibly a factor in determining proximity.
Furthermore, the judge considered that this requirement was satisfied if
the plaintiffs could show that they presently own or are in possession of
the units. This approach is incorrect. In Leigh and Sillavan Ltd. v.
Aliakmon Shipping Co. Ltd. [1986] A.C. 785 the buyers acquired legal
ownership in the goods after the damage to them had occurred, but the
House of Lords held that this did not give them sufficient title to sue in
respect of their economic loss. The real nature of the plaintiffs' case is
that their contract has been rendered unprofitable or less profitable than
it should have been. The claim is untenable, and the judge has attempted
to avoid this difficulty by engaging in a highly artificial attempt to
construe a sufficient proprietory or possessory interest to give rise to a
duty of care.
In any event, the plaintiffs did not have a sufficient interest in the
units at any material time.
If the alleged defects in the units are capable of constituting damage,
the units were damaged before delivery by the defendants to Feal.
Alternatively, they were delivered to site in a damaged condition. On
delivery, each consignment became the property of Feal. On either
basis, the plaintiffs did not have any proprietory or possessory interest in
the units at the time they suffered damage. Once the architect certified
payment for any particular units, such units as between the employer
and the plaintiffs became the property of the employer. Prior to
certification or payment, they became as between the plaintiffs and the
employer the property of the employer. On glazing, property passed
directly from Feal to the employer. Again, the plaintiffs did not
momentarily acquire property. Even if the plaintiffs did momentarily
acquire property in the units, it was after the units were damaged.
767
1 Q.B.
"
In the Junior Books case [1983] 1 A.C. 520, the defenders were
nominated by the pursuers as sub-contractors. Accordingly, all technical
discussions and negotiations took place between the pursuers by their
agents, the architects, and the defenders: see 1982 S.L.T. 333. In
addition, the pursuers determined the form of the sub-contract. The
Law Lords clearly regarded the nomination of the defenders as an
important factor giving rise to a duty of care. In such a case it is not
difficult to infer a voluntary assumption of responsibility by the subcontractor. In the present case, however, the defendants were not
nominated suppliers in the sense that there was no technical discussion
of any significance between the defendants and the plaintiff and the
plaintiffs did not determine the form of the contract for the supply of
the units. The plaintiff's reliance on the defendants was akin to the
general reliance of a consumer on a manufacturer and was insufficient to
found liability. In the absence of nomination, the relative situation of
the parties was not sufficiently proximate to give rise to a duty of care,
and there was no express or implied assumption of responsibility.
Romie Tager for the plaintiffs. It must be borne in mind that the
product in question was unique. The glass was manufactured to specific
sizes and specifications which would have rendered it useless to the
defendants if it had been rejected by Feal. Essentially the defendants
were manufacturing glass for the building, not for a particular person.
To have substituted a different glass would have involved changing
completely the air-conditioning system.
Part of the ratio decidendi in Junior Books Ltd. v. Veitchi Co. Ltd.
[1983] 1 A.C. 520 is clearly referable to the development of the law of
tort in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C.
465. In none of the cases is there as part of the factual background any
conscious consideration of the question whether any duty is owed by
one to another. The neighbourhood principle of Donoghue v. Stevenson
[1932] A.C. 562 was limited to property of the plaintiff. All the cases
are consistent with the chain of authorities, and relate to negligence
resulting in damage to the property of the plaintiff. The Hedley Byrne
case [1964] A.C. 465 was a radical departure because it allowed a claim
for pure economic loss. There have been attempts to bring within its
principles claims against bankers etc. Often the claims result from
"negligent mis-statement." The professional negligence cases, e.g. Ross
v. Counters [1980] Ch. 297, carry the development further.
The Junior Books case [1983] 1 A.C. 520 was another development.
The negligent acts of the defenders which gave rise to pure economic
loss were relied on as giving a cause of action. It was not a case where
the factory was damaged, or even where the floor was damaged. It was
defective. The limitation imposed by the House of Lords was the
"special relationship" test derived from Hedley Byrne & Co. Ltd. v.
Heller & Partners Ltd. [1964] A.C. 465. For an illustration of the
application of the principle see Muirhead v. Industrial Tank Specialities
Ltd. [1986] Q.B. 507. There was nothing inherently wrong with the
motors in that case. They would have been perfectly adequate if used in
France, or even if used in England for another purpose. When the
motors were supplied the supplier set in train events which resulted in
768
[1988]
damage to the plaintiff. But at the time of the supply there was no cause
of action.
The allegations in the pleadings in the Junior Books case, 1982
S.L.T. 333, 334 are equivalent to incorrect spraying of the various
coatings on the glass in the present case. Whether or not the plaintiffs
had an interest in the glass units is an irrelevant consideration provided
otherwise they are within the Hedley Byrne principle.
Alternatively, if it is necessary to show that the plaintiffs have
suffered damage to property belonging to them, they suffered damage
when the glass units were rejected, and at that moment property in the
units was transferred to the plaintiffs from the building owner. The
owner might have been able to recover damages on the authority of
Junior Books if he had suffered damage. Different persons will suffer
different sorts of economic loss, but there is no practical possibility of
the same loss being claimed twice.
In some cases in England a sub-contractor is required to enter into a
direct contract with the building owner and collateral contracts, so that
it is possible to sue direct in contract. The fact that such a direct
contract had been requested and refused would be the best evidence of
a special relationship such as would found an action in tort.
The analysis of Donoghue v. Stevenson [1932] A.C. 562 in the
Hedley Byrne case [1964] A.C. 465 in the speech of Lord Keith of
Kinkel in the Junior Books case [1983] 1 A.C. 520, 534-535 is adopted,
particularly his remarks about proximity and reasonable anticipation of
physical injury not being a sine qua non for the existence of a duty of
care. The dissenting speech of Lord Brandon of Oakbrook is also relied
on as showing that the House of Lords was advancing the frontiers of
law in that case. In Lord Roskill's speech, at p. 546, property in the
goods does not appear as a feature of the list of facts of crucial
importance in establishing the requisite degree of proximity. That is
because Lord Roskill was extending the scope of the law, and not
confining it to a Donoghue v. Stevenson [1932] A.C. 562 situation.
Attempts to take Junior Books further than that have failed: see
Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd.
Ltd. [1986] A.C. 785. Donoghue v. Stevenson [1932] A.C. 562 still
applies to negligent conduct resulting in damage to property.
In support of the analysis of Junior Books [1983] 1 A.C. 520 put
forward, see also Yuen Kun Yeu v. Attorney-General of Hong Kong
[1988] A.C. 175, 196, and Muirhead v. Industrial Tank Specialities Ltd.
[1986] Q.B. 507, 526, 527.
The main challenge to the judge's finding that there was a special
relationship between the plaintiffs and the defendants was by way of
contrasting the position of nominated sub-contractors with that of
nominated suppliers. It is said that the technical discussions which would
point to a special reliance would be a feature of a sub-contract. There is
the closest analogy here between the defendants and the position of the
defenders in the Junior Books case [1983] 1 A.C. 520. The defendants
name here was a sufficient warranty of their expertise. No distinction
can be drawn in the factual background.
"
"
769
1 Q.B.
Harris in reply.
Cur. adv. vult.
17 February. The following judgments were handed down.
BINGHAM L.J. This appeal concerns a new building in Abu Dhabi.

It is owned by Sheikh Al-Oteiba, who is not a party to the action. The
main contractors under the building contract for the building are the
plaintiffs in this action and the respondents to this appeal. The supply
and erection of curtain walling for the building were sub-contracted to
Industria Componenti per l'Architettura Feal SpA ("Feal"), who are not
parties to the action. Glass units for incorporation in the curtain walling
were supplied by the appellant defendants to Feal.
The defendants appeal against a decision of Judge Newey Q.C.,
sitting as an official referee, on a preliminary issue argued before him.
The issue was:
"In manufacturing the double-glazed units to be incorporated into
the curtain wall of the Al-Oteiba Building, did [the defendants] as
the specified suppliers] of the units, owe to [the plaintiffs], as the
main contractors, a duty to take reasonable care to avoid defects in
the units which (it is assumed for the purpose of this preliminary
issue) have caused [the plaintiffs] economic loss as alleged in
paragraphs 14 and 15 of the statement of claim?"
The assumed loss is the withholding of money which the plaintiffs would
otherwise have been entitled to receive from the building owner, and
loss of interest. The alleged defects in the glass (also to be assumed for
purposes of the issue) relate not to their durability, serviceability or
present or future performance characteristics, but simply to their colour.
They should have been a uniform shade of green. They are (it is said) in
variable shades of green, and in places red. This colour discrepancy is
not acceptable to the building owner, being (it is said) unpleasant in
appearance, contrary to specification and not in accordance with a
sample supplied. Green is the colour of peace in Islam, so the
discrepancy is regarded as one of some moment.
The judge resolved the issue in favour of the plaintiffs, holding that
in all the circumstances the defendants did owe them a duty of care. In
reaching this conclusion he made a wide-ranging survey of the law of
negligence since 1932, but he relied in particular on the House of Lords'
much-discussed decision in Junior Books Ltd. v. Veitchi Co. Ltd. [1983]
1 A.C. 520. Factually, the situation in the Junior Books case was
different from that here. The pursuers were the building owner, not (as
here) the main contractor. The plaintiff had received a floor which was
unfit for use as such, not (as here) a wall which was serviceable as such
but unacceptable visually. The defenders were sub-contractors nominated
by the plaintiff, not (as here) a supplier of goods. The judge's decision
accordingly involves the application of the Junior Books case to a new
factual situation. That is not in itself an objection to his decision. It is
how the law develops. The question for us is whether the Junior Books
770
Bingham L.J.
[1988]
case (or any other case) lays down a principle which can and ought to A
lead us on the present facts to answer the question as the judge did.
I do not think that any very detailed account of the facts is called
for. From an early stage in the planning of this building project the
Sheikh's architect favoured the use of the defendants' Suncool 24/22
green double-glazed units in the curtain wall of the proposed building.
The architect and the defendants discussed the technical properties of
the material in detail and a sample was supplied to the architect. On 6 "
July 1982 the main contract for the building was made between the
Sheikh and the plaintiffs. It incorporated the Conditions of Contract
(International) for works of Civil Engineering Construction (FIDIC)
dated March 1977, Part 1, subject to variations and amendments. Under
the contract the plaintiffs were entitled to sub-contract parts of the work
with approval, but not so as to relieve themselves of liability to the Q
building owner. There was no clause governing the transfer of title to
goods delivered to site for purposes of the building or incorporated in it.
There was an arbitration clause. The contract was to be governed by the
law of Abu Dhabi; no evidence of Abu Dhabi law has been adduced, so
English law principles are assumed to apply. The contract incorporated a
specification which contained this provision:
"Glass Types (All glass to be approved by the engineer)
1. Curtain wall:
Pilkington [Suncool] Ref 24/22 (Green) sealed double glazing
units or other approved with similar characteristics
Shading coefficient
0.25
'U' value
1.80 W/m2 deg C/hr
E
Visible light transmission
0.24
reflectance
0.19
Solar radiant heat reflectance
0.21
absorption
0.64
Total transmission
0.22
Sound insulation
29 dBA."
F
Failure to meet these technical requirements could have had far-reaching
effects, for example, on the air-conditioning of the building. But no such
failure is alleged. It is only the colour which gives rise to complaint. No
other manufacturer produced glass having these characteristics.
On 31 July 1983 the plaintiffs sub-contracted to Feal the works:
"for the installation complete of curtain walling and all aluminium G
components and metalwork including . . . the exclusive use of glass
supplied by Messrs. Pilkington Bros, of St. Helens, Lancashire,
England."
The sub-contract terms broadly followed those of the main contract,
although the arbitration clause was different. Both before and after the
placing of the sub-contract Feal did their best to induce the architect to
use glass other than the defendants' but without success. So Feal at the
end of 1983 ordered the units from the defendants, the contract
apparently containing no exemption clauses.
771
1 Q.B.
Bingham L.J.
The defendants proceeded to fabricate units to the dimensions

specified for the building. It seems that the mineral coatings may have
been incorrectly applied to the inner side of the outer layer of glass of
the units, with the result that a uniform green colouring was not
achieved, but no one appreciated this at the time.
The units were shipped to Abu Dhabi and the defendants were paid.
Feal incorporated the units in the curtain walling which they erected,
but the architect objected to the "variation and inconsistency in the
colour/shading of the glass between the various panels and within each
panel," and after unsuccessful attempts to find a solution the plaintiffs
rejected the units and instructed Feal to replace the units with glass
panels to be approved by the architect and the building owner. To date,
no replacement has taken place. The building owner has not paid the
plaintiffs, nor have the plaintiffs paid Feal, the price attributable to the
supply of the panels.
In this situation one might expect a claim by the building owner
against the plaintiffs (to be arbitrated if disputed), by the plaintiffs
against Feal (also to be arbitrated if disputed), and by Feal against the
defendants. This procedure would, in the absence of agreement on an
alternative procedure to save time and expense, be cumbersome, but it
would reflect the contractual obligations which the parties had respectively
undertaken. The problem arises here because the plaintiffs have chosen
to sue the defendants in tort rather than Feal in contract.
In the Junior Books case the defenders were specialists in the laying
of floors, nominated by the pursuers' architect as sub-contractors to lay
the floor at the pursuers' new factory. In laying the composition floor
the defenders used too wet a mixture and applied too thin a top coat
and failed to cure the material properly. As a result cracks began to
appear in the floor and it started to break up. The floor required
replacement and the pursuers contended that while this replacement
work was carried out they would lose business and incur irrecoverable
overheads. The issue was determined on the defenders' plea to the
relevancy of the pursuers' averments, so that (as here) the facts alleged
by the pursuers had to be assumed to be true. The full averments are
reported, 1982 S.L.T. 333.
Since Lord Roskill's speech in the Junior Books case represents the
high water mark both of that decision and of the plaintiffs' argument, I
begin my analysis of the case by considering it. Lord Roskill saw the
pursuers' claim as one based on pure economic loss, not physical
damage to the floor. There was no danger to life or limb or any other
property. The question was whether English law extended the duty of
care beyond a duty to prevent harm being done by faulty work to a duty
to avoid such fault being present in the work itself. The answer should,
he said, be founded on considerations of principle rather than policy.
Lord Roskill acknowledged that Donoghue v. Stevenson [1932] A.C. 562
had at first been understood as limited to cases of physical injury or
damage to the plaintiff's person or property, but pointed out that claims
for pure economic loss had succeeded (narrowly) in Morrison Steamship
Co. Ltd. v. Greystoke Castle (Cargo Owners) [1947] A.C. 265 and
decisively (in principle) in Hedley Byrne & Co. Ltd. v. Heller & Partners
772
Bingham L.J.
[1988]
Ltd. [1964] A.C. 465. Lord Roskill referred to the statement of principle
by Lord Reid in Dorset Yacht Co. Ltd. v. Home Office [1970] A.C.
1004, 1026, and to the two-stage test proposed by Lord Wilberforce in
Anns v. Merton London Borough Council [1978] A.C. 728, 751. He
drew attention to Dutton v. Bognor Regis Urban District Council [1972]
1 Q.B. 373; Anns v. Merton London Borough Council [1978] A.C. 728
and Batty v. Metropolitan Property Realisations Ltd. [1978] Q.B. 554 as
cases in which claims for economic loss had succeeded when allied to
claims for physical damage. He then applied Lord Wilberforce's twostage test. He found that on the facts alleged there was sufficient
proximity, the parties' relationship being almost as close as if contractual.
He attached importance to the defenders' role as nominated subcontractors and to the pursuers' reliance on their skill and experience.
He held that the concept of proximity must always involve, at least in
most cases, some degree of reliance. He did not consider the pursuers'
title to sue because he did not regard the case as one of physical damage
and the pursuers' ownership of the defective floor was obvious anyway.
At the second stage of Lord Wilberforce's test he saw no reason to
restrict the defenders' duty of care. There was on the facts no relevant
exclusion clause, but had there been it might (he thought) have limited
the duty of care like the disclaimer of reponsibility in the Hedley Byrne
case. Lord Roskill regarded the point at issue as new and as one "of
fundamental importance" in the development of the law of delict and
negligence. He held that where Lord Wilberforce's two-stage test was
met, there was no reason to disallow a claim for pure economic loss.
Lord Fraser of Tullybelton expressed full agreement with Lord
Roskill's conclusion and reasons. He regarded the appeal as raising an
important question not precisely covered by authority. He addressed
himself specifically to two suggested problems. The first was the risk
that allowing the relevancy of the pursuers' claim might open the
floodgates to a mass of claims. He discounted that risk in reliance on the
very close proximity of these parties, the pursuers having nominated and
relied on the skill and knowledge of the defenders. In Lord Fraser's
opinion the case fell within limits already recognised in principle, and he
decided the appeal strictly on its own facts, foremost among these being
the proximity of the parties. The second problem was to ascertain the
standard of duty to be owed in a situation where the contract between
builder and purchaser stipulated a standard of which a subsequent
purchaser might wish to complain. That was not a difficulty which arose
on the appeal because the pursuers had full knowledge of the defenders'
contractual duties.
Lord Russell of Killowen agreed with Lord Fraser and Lord Roskill.
Lord Keith of Kinkel agreed in the result but on a narrower ground.
He concluded that the defenders owed the pursuers a duty to take
reasonable care to see that their workmanship was not faulty, and were
liable for the foreseeable consequences, sounding in economic loss, of
their failure to do so. Such loss could include reduced profitability and
the cost of relaying the floor. But Lord Keith did not hold the pursuers
entitled to succeed on the ground that the floor, being defective from
the start, was, without being harmful in any way, useless or worthless or
"
"
773
1 Q.B.
"
Bingham L.J.
defective in quality so that the pursuers had wasted the money spent on
it. To impose a general duty in such a situation on manufacturers
towards ultimate consumers would, he held, be disruptive of commercial
practice. It was also unnecessary since a right of action in contract
existed anyway.
Lord Brandon of Oakbrook dissented. He had no doubt that an
action in delict or negligence could lie to recover economic loss alone.
He was satisfied that the defenders owed the pursuers a duty to exercise
reasonable care to lay the floor so that it did not, when completed and
in use, constitute a danger of physical damage to persons or their
property, other than the flooring itself. He agreed that there was
sufficient proximity to give rise to a duty of care, but held that there
were two considerations which should limit the scope of the defenders'
duty. The first was the absence of danger of physical damage to persons
or property (other than the property the defective condition of which
gave rise to the danger), although in and since Donoghue v. Stevenson
[1932] A.C. 562 this had been regarded as an essential ingredient. The
second was the difficulty and undesirability of creating between parties
not in a contractual relationship obligations only appropriate between
parties who were.
Plainly this decision contained within it the seeds of a major
development of the law of negligence. According to Professors J. C.
Smith and Peter Burns, "The implications of this case for the law of
contracts and products liability are staggering to say the least": (1983) 46
M.L.R. 147, 153. It remained to be seen whether those seeds would be
encouraged or permitted to germinate. The clear trend of authority since
the Junior Books case has indicated that, for the time being at least,
they will not.
Lord Wilberforce's two-stage test in Anns was treated with some
reservation in a series of House of Lords decisions (see Yuen Kun Yeu
v. Attorney-General of Hong Kong [1988] A.C. 175, 190) culminating in
the conclusion, at p. 194:
"In view of the direction in which the law has since been developing,
their Lordships consider that for the future it should be recognised
that the two-stage test in Anns v. Merton London Borough Council
[1978] A.C. 728, 751-752, is not to be regarded as in all
circumstances a suitable guide to the existence of a duty of care."
Increasingly, emphasis is placed on the observation of Lord Keith
of Kinkel in Governors of the Peabody Donation Fund v. Sir Lindsay
Parkinson & Co. Ltd. [1985] A.C. 210, 241:
"So in determining whether or not a duty of care of particular scope
was incumbent upon a defendant it is material to take into
consideration whether it is just and reasonable that it should be so."
See, for example, Curran v. Northern Ireland Co-ownership Housing
Association Ltd. [1987] A.C. 718, 729 and Hill v. Chief Constable of
West Yorkshire [1988] Q.B. 60, 68.
In Tate & Lyle Food and Distribution Ltd. v. Greater London
Council [1983] 2 A.C. 509, 530, Lord Templeman said:
774
Bingham L.J.
[1988]
"My Lords, in the cited relevant cases from Donoghue v. Stevenson

to Junior Books the plaintiff suffered personal injury or damage to
his property. In the present case Tate & Lyle assert that they have
suffered damage to their property caused by interference with their
right to use their jetties for the benefit of their sugar refining
business."
The claim in negligence failed because Tate & Lyle were held to have
no right to any particular depth of water at their jetties. Both Lord
Keith and Lord Roskill agreed with Lord Templeman's speech.
In Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B. 507 the
plaintiff owned a storage tank for live lobsters and the third defendants
manufactured electric motors which had been incorporated in pumps
used to circulate and oxygenate the water in the tank, as was necessary
for the survival of the lobsters. The motors, manufactured in France,
were to some extent incompatible with the electricity supply system in
this country. The result was that they cut out, the lobsters died and the
plaintiff suffered loss associated with the death of the lobsters and
additional economical loss. The judge held the third defendants liable to
the plaintiff in tort for all the loss suffered and the third defendants
appealed.
In his judgment in the Court of Appeal Robert Goff L.J. carefully
analysed the speeches of the House of Lords in the Junior Books case.
Then, turning to the case before him, he said, at pp. 526-528:
"In order to decide whether the judge was right to approach the
case before him on the basis of the principle in the Junior Books
case, it is necessary first of all to seek to identify the principle. Both
Lord Fraser of Tullybelton and Lord Roskill appear to have been
influenced in particular by what Lord Fraser of Tullybelton
described, at p. 533, as 'the very close proximity between the
parties.' In seeking to understand what they had in mind it is
perhaps important to bear in mind what is usually meant by the
word 'proximity' when used in this context. It does not bear its
normal meaning in ordinary speech; as is plain from Lord Atkin's
speech in Donoghue v. Stevenson [1932] A.C. 562, 581, it is used as
a convenient label to describe a relationship between the parties by
virtue of which the defendant can reasonably foresee that his act or
omission is liable to cause damage to the plaintiff of the relevant
type. In this context, the word 'relationship' refers to no more than
the relative situations of the parties, as a consequence of which such
foreseeability of damage may exist. As I see it, Lord Fraser of
Tullybelton cannot have been referring to proximity in the sense I
have described; and Lord Roskill, when he spoke of the very close
'relationship' between the parties must, I think, have had in mind
the dealings between the parties which led to the pursuers
nominating the defenders, who were specialists in flooring, as subcontractors to lay the flooring in their factory.
"A particular problem arises, however, with reference to reliance.
Lord Roskill, in the passage which I have quoted from his speech,
[1983] 1 A.C. 520, 546-547, appears to have regarded reliance by
"
775
1 Q.B.
"
Bingham L.J.
the plaintiff on the defendants as significant, as does Lord Fraser of

Tullybelton, at p. 533. But neither explains why he regarded such
reliance as important. Lord Roskill referred to Hedley Byrne & Co.
Ltd. v. Heller & Partners Ltd. [1964] A.C. 456, in which reliance by
the plaintiff was relevant because, without it, the defendant's
negligent misstatement would have caused the plaintiff no damage:
he also referred to section 14(1) of the Sale of Goods Act 1893,
which was concerned with a manifestation of reliance by the plaintiff
on the defendant's skill and judgment which supports the implication
of a term in a contract of sale (cf. now section 14(3) of the Sale of
Goods Act 1979). Junior Books Ltd. v. Veitchi Co. Ltd. [1983] 1
A.C. 520 was concerned with neither such case, but with reliance by
the pursuers on the defenders to install a floor which was not
defective. It is not, however, clear why reliance should distinguish a
case such as Junior Books Ltd. v. Veitchi Co. Ltd. from other cases
in which a defendant may not be held liable. There is, of course, a
sense in which it can be said that every successful plaintiff in an
action of negligence has relied on the defendant not to be negligent,
as every motorist relies on every other motorist in the vicinity to
drive carefully; but presumably neither Lord Fraser of Tullybelton
nor Lord Roskill had that kind of reliance in mind. There is also a
sense in which a purchaser of goods relies on the manufacturer to
have manufactured goods which are not defective, and so decides to
order goods, made by the particular manufacturer, from his
immediate supplier. Lord Fraser of Tullybelton and Lord Roskill
were, however, at pains to distinguish such a case from the case
before them. But they did not identify the ground of distinction;
and we can see the difficulty which the judge in the present case
faced in grappling with the notion of reliance on the facts of the
case before him.
"Yet another problem arises from the fact that Lord Fraser of
Tullybelton considered, at p. 534, that the building owner in the
Junior Books case, who had full knowledge of the sub-contractors'
contractual duties to the main contractor, could be in no better
position than the main contractor; and that Lord Roskill, although
expressing no concluded opinion, appears to have inclined to the
same view, at p. 546. But the question then arises: on what principle
are contractual terms, not arising under a contract between the
parties, to be relevant to a claim in negligence? For only if that
principle is identified can we discern in what cases they are to be
held applicable in future.
"Having studied the speeches of Lord Fraser of Tullybelton and
Lord Roskill in the Junior Books case the only principle I feel able
to formulate which is consistent with (1) the relevance of 'the very
close proximity between the parties;' (2) the relevance of reliance
by the plaintiff on the defendant; and (3) the fact that the defendant
may be able to rely on contractual terms with a third party in order
to defeat the plaintiff's claim against him, is that, on the facts in the
Junior Books case, it was considered by the majority of the House
of Lords that the nominated sub-contractor had assumed a direct
776
Bingham L.J.
[1988]
responsibility to the building owner. Voluntary assumption of A

responsibility, in circumstances akin to contract, was the basis of
liability in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.
[1964] A.C. 465, which Lord Roskill regarded as relevant in Junior
Books Ltd. v. Veitchi Co. Ltd. [1983] 1 A.C. 520, both to the
invocation by the defendant of contractual terms with a third party,
and to reliance. However, I feel very diffident in so analysing the
Junior Books case, because that analysis appears to me to be
difficult to reconcile with the factual situation in that case, in which
the parties had deliberately structured their contractual relationship
in order to achieve the result that (apart from any special
arrangements) there should be no direct liability inter se.
"Faced with these difficulties it is, I think, safest for this court to
treat Junior Books as a case in which, on its particular facts, there Q
was considered to be such a very close relationship between the
parties that the defenders could, if the facts as pleaded were
proved, be held liable to the pursuers. I feel fortified in adopting
that approach by three matters. First, Lord Fraser of Tullybelton
stressed, at p. 533, that he was deciding the appeal before him
'strictly on its own facts.' Second, in the advice of the Privy Council
in Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines D
Ltd. [1986] A.C. 1, Lord Fraser of Tullybelton, who delivered the
advice, appears to have treated Junior Books Ltd. v. Veitchi Co.
Ltd. [1983] 1 A.C. 520 as a decision of limited application. Third,
both Lord Fraser of Tullybelton and Lord Roskill in the Junior
Books case gave examples which assist us in approaching the
present case on a pragmatic basis. For Lord Fraser of Tullybelton, g
at p. 533, considered that the very close proximity between the
parties in his view distinguished the case before him from 'the case
of producers of goods to be offered for sale to the public;' and Lord
Roskill, at p. 547, contrasted cases in which (as in Hedley Byrne &
Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 and section
14(1) of the Sale of Goods Act 1893) there was reliance by the
plaintiff on the defendant, with cases of claims by ultimate F
purchasers against manufacturers in respect of goods purchased
under ordinary everyday transactions where 'it is obvious that in
truth the real reliance was upon the immediate vendor and not
upon the manufacturer.'"
Nourse L.J. agreed. He said, at pp. 533-534:
G
"In his analysis of Junior Books Ltd. v. Veitchi Co. Ltd. [1983] 1
A.C. 520 Robert Goff L.J. has identified the three features of that
case on which the decision that the nominated sub-contractor had
voluntarily assumed a direct responsibility to the building owner was
founded. The first two of these were very close proximity between
the sub-contractor and the building owner and reliance by the
building owner on the sub-contractor. Having been so decided, that "
case cannot, in my respectful opinion, be taken to be authority for
the proposition that where those features are absent a defendant is
liable in tort in respect of economic loss which is not consequent
777
1 Q.B.
"
Bingham L.J.
upon physical damage to the person or property of the plaintiff.

Where those features are absent, I agree with O'Connor L.J. that
we remain bound by the decision of this court in Spartan Steel &
Alloys Ltd. v. Martin & Co. (Contractors) Ltd. [1973] Q.B. 27. I
too regard the recent observations of the Privy Council in
Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines
Ltd. [1986] A.C. 1 as being significant in this respect.
"In the present case there was no very close proximity between
the third defendant and the plaintiff. Contractually they were
several stages removed from each other. More important, there was
no reliance by the plaintiff on the third defendant in the sense in
which that concept was applied in Junior Books Ltd. v. Veitchi Co.
Ltd. [1983] 1 A.C. 520. The people on whom the plaintiff relied to
install the system and to get the right equipment, including pumps
with electric motors which worked, were ITS. They were the people
who stood in the same factual relationship with the plaintiff as the
sub-contractor did with the building owner in the Junior Books
case. The two features of very close proximity and reliance having
been absent, it is unnecessary to look further in the present case.
The plaintiff's claim in respect of pure economic loss must fail. I
therefore agree that the appeal should be allowed to that extent."
O'Connor L.J. agreed, relying in particular on the decision of the Court
of Appeal in Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors)
Ltd. [1973] Q.B. 27 and the observations of Lord Fraser in Candlewood
Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd. [1986] A.C. 1,
to which I now turn.
In the Candlewood case a time charterer sued to recover economic
loss which he had suffered because of damage caused by a third party to
the chartered vessel. The Privy Council held that he could not succeed
because a strong line of authority dating back to Cattle v. Stockton
Waterworks Co. (1875) L.R. 10 Q.B. 453 and Simpson & Co. v.
Thomson (1877) 3 App. Cas. 279 established that a claimant must, to
succeed, have a proprietary or possessory interest in the damaged
property. A mere right to its use was not enough. The cases, it was held
[1986] A.C. 1, 17:
"show, in their Lordships' opinion, that the justification for denying
the right of action to a person who has suffered economic damage
through injury to the property of another is that for reasons of
practical policy it is considered to be inexpedient to admit his
claim."
Giving the advice of the Board, Lord Fraser referred to, but shortly
dismissed, the decision in the Junior Books case, pp. 24-25:
"Finally their Lordships must refer to the recent decision of the
House of Lords in an appeal from Scotland: Junior Books Ltd. v.
Veitchi Co. Ltd. [1983] 1 A.C. 520. That case may be regarded as
having extended the scope of duty somewhat, but any extension was
not in the direction of recognising a title to sue in a party who
suffered economic loss because his contract with the victim of the
778
Bingham L.J.
[1988]
wrong was rendered less profitable or unprofitable. It is therefore

not in point here."
A similar point arose in Leigh and Sillavan Ltd. v. Aliakmon
Shipping Co. Ltd. [1986] A.C. 785, where a buyer with no legal or
possessory interest in goods claimed damages against a shipowner for
causing damage to them. The buyer placed reliance on the Junior Books
case. The claim failed for want of title to sue. Lord Brandon, in a
speech in which the other members of the House concurred, said, at
p. 817:
"Mr. Clarke sought to rely also on Junior Books Ltd. v. Veitchi Co.
Ltd. [1983] 1 A.C. 520. That was a case in which it was held by a
majority of your Lordships' House that, when a nominated subcontractor was employed by a head contractor under the standard
form of R.I.B.A. building contract, the sub-contractor was not only
under a contractual obligation to the head contractor, under the
sub-contract between them, not to lay a defective factory floor, but
also owed a duty of care in tort to the building owner not to do so
and thereby cause him economic loss. The decision is of no direct
help to the buyers in the present case, for the plaintiffs who were
held to have a good cause of action in negligence in respect of a
defective floor were the legal owners of it. But Mr. Clarke relied on
certain observations in the speech of Lord Roskill as supporting the
proposition that a duty of care in tort might, as he submitted it
should be in the present case, be qualified by reference to the terms
of a contract to which the defendant was not a party. In this
connection Lord Roskill said, at p. 546: 'During the argument it
was asked what the position would be in a case when there was a
relevant exclusion clause in the main contract. My Lords, that
question does not arise for decision in the instant appeal, but in
principle I would venture the view that such a claim according to
the manner in which it was worded might in some circumstances
limit the duty of care just as in the Hedley Byrne case the
plaintiffs were ultimately defeated by the defendants' disclaimer of
responsibility.' As is apparent this observation was no more than an
obiter dictum. Moreover, with great respect to Lord Roskill there is
no analogy between the disclaimer in Hedley Byrne & Co. Ltd. v.
Heller & Partners Ltd. [1964] A.C. 465, which operated directly
between the plaintiffs and the defendants, and an exclusion of
liability clause in a contract to which the plaintiff is a party but the
defendant is not. I do not therefore find in the observation of Lord
Roskill relied on any convincing legal basis for qualifying a duty of
care owed by A to B by reference to a contract to which A is, but
B is not, a party."
In London Congregational Union Inc. v. Harriss & Harriss [1988] 1
All E.R. 15, 25, Ralph Gibson L.J. followed authority by treating the
Junior Books case as a case in which the pursuers had suffered damage
to their property. The case is also of significance in holding that a
building owner's cause of action is complete, not when he acquires a
defective building (although he suffers economic loss at that time), but
"
779
1 Q.B.
p.
Bingham L.J.
when damage occurs. In so holding, the Court of Appeal followed the

House of Lords' decision in Pirelli General Cable Works Ltd. v. Oscar
Faber & Partners [1983] 2 A.C. 1, where an argument (based on the
Junior Books case) that the building owner's cause of action was
complete once economic loss was sustained was implicitly rejected: see
pp. 7, 16, 18. It was accordingly argued for the defendants here that if
physical damage (in addition to economic loss) was necessary to perfect
a cause of action, it followed that a cause of action could not arise in
this context on proof of economic loss alone. This submission was
fortified by reference to Ketteman v. Hansel Properties Ltd. [1987] A.C.
189. In that case Lord Keith said, at p. 205:
"(4) The 'doomed from the start' argument
"The appellants' presentation of this argument involved two
aspects. In the first place it was maintained that the houseowners'
respective causes of action accrued, not when the physical damage
to their houses occurred, but when they became the owners of
houses with defective foundations. It was argued that they then
suffered economic loss because the houses were less valuable than
they would have been if the foundations had been sound. The
proposition that a cause of action in tort accrued out of negligence
resulting in pure economic loss was sought to be vouched by
reference to Junior Books Ltd. v. Veitchi Co. Ltd. [1983] 1 A.C.
520. That case was also cited in Pirelli General Cable Works Ltd. v.
Oscar Faber & Partners [1983] 2 A.C. 1, in support of the argument
that, since in that case there was economic loss when the chimney
was built, the cause of action arose then. The argument was clearly
rejected in the speech of Lord Fraser of Tullybelton concurred in by
all the others of their Lordships who participated in the decision. At
p. 16, he expressed the opinion that a latent defect in a building
does not give rise to a cause of action until damage occurs. In the
present case there can be no doubt that the defects in the houses
were latent. No one knew of their existence until damage occurred
in the summer of 1976. This branch of the argument for the
architects is, in my opinion, inconsistent with the decision in the
Pirelli case, and must be rejected."
Lord Brandon agreed. He said, at p. 208:
"The accrual issue
"The Court of Appeal, applying the ground of decision in the
Pirelli case, held that the plaintiffs' causes of action against the third
defendants accrued at the various times when the structural damage
to their houses, consequential on their originally defective
foundations, first came into existence. The court rejected the
contention put forward for the third defendants that the houses
were 'doomed from the start,' and that, on the basis of the
observations of Lord Fraser of Tullybelton in the Pirelli case to
which I referred earlier, the plaintiffs' causes of action accrued
when the houses were built. This contention was renewed by the
third defendants before your Lordships' House. The argument of
counsel, as I understand it, proceeded as follows. Where a house
780
Bingham L.J.
[1988]
was built on defective foundations, a buyer of it might suffer two

kinds of damage. The first kind of damage was physical, in the form
of consequential structural failure or damage. The second kind of
damage was economic loss, in the form of diminution in market
value. In the case of the first kind of damage, the buyer's cause of
action against any party for negligence in respect of the defective
foundations accrued when the consequential structural failure or
damage occurred. But, in the case of the second kind of damage,
the diminution of market value was present from the time of the
original construction, and it was at that earlier time that the buyer's
cause of action in respect of such diminution accrued. The plaintiffs
in the present case had sued for the second kind of damage,
namely, diminution of market value. Their causes of action had,
therefore, accrued at the date when the houses were built.
"In my opinion this contention cannot be supported. I do not
know what special cases Lord Fraser of Tullybelton had in mind
when he referred in his speech in the Pirelli case to buildings
'doomed from the start.' It may be that he was only keeping open
the possibility of the existence of such special cases out of major
caution. Be that as it may, however, I am quite sure that he was
not seeking to differentiate between causes of action in respect of
making good defects or damage on the one hand, and causes of
action in respect of diminution in market value on the other. In any
case, on the facts of the present case it seems that the plaintiffs, in
re-selling their houses at a loss, were acting reasonably in mitigation
of their damage, so that the distinction between the two kinds of
damage relied on is one of form rather than substance.
"In my view there is nothing in the facts of the present case
which would take it out of the general principle laid down in the
Pirelli case and put it into some special class of case, if there be
one, of buildings 'doomed from the start.'
"It follows that I would answer the first question by saying that
the plaintiffs' causes of action against the third defendants accrued
at the dates on which the consequential structural damage to their
houses first came into existence."
It was submitted for the defendants (in brief summary): (1) that the
plaintiffs could not have succeeded against the defendants before the
Junior Books case; (2) that the Junior Books case should be regarded as
a decision on its own facts; (3) that the assumed facts of the Junior
Books case included crucial facts not present here, including in particular
substantial damage to the subject property, ownership and occupation of
the subject property by the pursuers, and close proximity based, inter
alia, on nomination of the defenders as sub-contractors by the pursuers
and reliance on the defenders' skill and judgment; (4) that the plaintiffs
could not show physical damage to property; (5) that the plaintiffs could
not show physical damage to any property in which they had any legal
or possessory interest; (6) that the plaintiffs could not perfect their cause
of action on proof of economic loss alone; (7) that the glass units had
not suffered damage; (8) that if the glass units had suffered damage the
"
781
1 Q.B.
"
"
Bingham L.J.
plaintiffs had had no interest in them at the time of the damage; (9) that
there was no express or implied assumption of responsibility by the
defendants towards the plaintiffs; (10) that reasons of policy should deny
the plaintiffs a right of recovery against the defendants on the facts
assumed here.
In a very carefully thought out and well presented argument for the
plaintiffs, Mr. Tager sought to counter these arguments and to escape
the toils of authority by relying on the Hedley Byrne case [1964] A.C.
465 and the principles there laid down and adopted in the Junior Books
case [1983] 1 A.C. 520. Mr. Tager put forward his claim as one not
dependent on physical damage and suggested that the Junior Books case
also rested on a much wider basis. But if the plaintiffs had to show
damage to goods in which they had an interest he contended that they
could do so on the ground that the panels, on rejection by the architect,
reverted or passed into the plaintiffs' ownership.
I can, I think, state my conclusions fairly shortly.
(1) I accept without reservation that a claim may lie in negligence for
recovery of economic loss alone. Were that not so the Hedley Byrne
case [1964] A.C. 465 could not have been decided as it was.
(2) I am quite sure that the defendants owed the plaintiffs a
conventional Donoghue v. Stevenson [1932] A.C. 562 duty of care to
avoid physical injury or damage to person or property. Suppose (however
improbably) that the defendants manufactured the units so carelessly
that they were liable to explode on exposure to strong sunlight and that
one of the units did so explode, blinding an employee of the plaintiffs
working in the building. I cannot conceive that such employee would fail
in a personal injury action against the defendants for failure to prove a
duty of care.
(3) There is no meaningful sense in which the plaintiffs can be said
to have relied on the defendants. No doubt the plaintiffs hoped and
expected that the defendants would supply good quality goods conforming
with the contract specification. But the plaintiffs required Feal to buy
these units from the defendants for one reason only, namely, that they
were contractually obliged to do so and had no choice in the matter.
There was no technical discussion of the product between the plaintiffs
and the defendants.
(4) Where a specialist sub-contractor is vetted, selected and nominated
by a building owner it may be possible to conclude (as in the Junior
Books case [1983] 1 A.C. 520) that the nominated sub-contractor has
assumed a direct responsibility to the building owner. On that reasoning
it might be said that the defendants owed a duty to the Sheikh in tort as
well as to Feal in contract. I do not, however, see any basis on which
the defendants could be said to have assumed a direct responsibility for
the quality of the goods to the plaintiffs: such a responsibility is, I think,
inconsistent with the structure of the contract the parties have chosen to
make.
(5) The Junior Books case has been interpreted as a case arising
from physical damage. I doubt if that interpretation accords with Lord
Roskill's intention, but it is binding upon us. There is in my view no
physical damage in this case. The units are as good as ever they were
782
Bingham L.J.
[1988]
and will not deteriorate. I bridle somewhat at the assumption of defects

which we are asked to make because what we have here are not, in my
view, defects but failures to comply with Sale of Goods Act conditions
of correspondence with description or sample, merchantability or
(perhaps) fitness for purpose. It would, I think, be an abuse of language
to describe these units as damaged. The contrast with the floor in the
Junior Books case is obvious.
(6) I do not accept that the Hedley Byrne case [1964] A.C. 465,
and such authorities as Ross v. Counters [1980] Ch. 297, establish a
general rule that claims in negligence may succeed on proof of
foreseeable economic loss caused by the defendant even where no
damage to property and no proprietary or possessory interest are shown.
If there were such a general rule, the plaintiffs in the Candlewood case
Ltd. [1986] A.C. 785 would not have failed on the ground they did and
the causes of action in the Pirelli case [1983] 2 A.C. 1 and London
Congregational Union Inc. v. Harriss & Harriss [1988] 1 All E.R. 15
would have been complete at an earlier date. However attractive it may
theoretically be to postulate a single principle capable of embracing
every kind of case, that is not how the law has developed. It would of
course be unsatisfactory if (say) doctors and dentists owed their patients
a different duty of care. I do not, however, think it unsatisfactory or
surprising if, as I think, a banker's duty towards the recipient of a credit
reference and an industrial glass manufacturer's duty towards a main
contractor, in the absence of any contract between them, differ. Here,
the plaintiffs' real (and understandable) complaint is that the defendants'
failure to supply goods in conformity with the specification has rendered
their main contract less profitable. This is a type of claim against which,
if laid in tort, the law has consistently set its face.
(7) If, contrary to my view, these units can be regarded as damaged
at all, the damage (or the defects) occurred at the time of manufacture
when they were the defendants' property. I therefore think that the
plaintiffs fail to show any interest in the goods at the time when damage
occurred. I very much doubt if there was any time on site, whether in
course of erection or after rejection, when the plaintiffs had a proprietary
or possessory interest in the units, but I do not think it useful to pursue
this, since neither was the time at which, if at all, physical damage
occurred.
(8) I do not think it just and reasonable to impose on the defendants
a duty of care towards the plaintiffs of the scope contended for. (a) Just
as equity remedied the inadequacies of the common law, so has the law
of torts filled gaps left by other causes of action where the interests of
justice so required. I see no such gap here, because there is no reason
why claims beginning with the Sheikh should not be pursued down the
contractual chain, subject to any short-cut which may be agreed upon,
ending up with a contractual claim against the defendants. That is the
usual procedure. It must be what the parties contemplated when they
made their contracts. I see no reason for departing from it. (b) Although
the defendants did not sell subject to exempting conditions, I fully share
the difficulty which others have envisaged where there were such
"
783
1 Q.B.
"
Bingham L.J.
conditions. Even as it is, the defendants' sale may well have been
subject to terms and conditions imported by the Sale of Goods Act
1979. Some of those are beneficial to the seller. If such terms are to
circumscribe a duty which would be otherwise owed to a party not a
party to the contract and unaware of its terms, then that could be unfair
to him. But if the duty is unaffected by the conditions on which the
seller supplied the goods, it is in my view unfair to him and makes a
mockery of contractual negotiation.
I would accordingly allow the appeal and answer the question posed
by the preliminary issue in the negative.
I end with a sincere tribute to the summary of argument submitted
by Mr. Harris for the defendants. This was not a skeleton, not even a
cadaver. But it deployed the defendants' argument with admirable
clarity, proceeding by logical steps from proposition to proposition and
giving precise and accurate references to the many authorities referred
to. I have no doubt it saved hours of argument. It certainly saved reams
of note-taking. Had it only appeared in legible form a little bit earlier
my gratitude would have been total.
DILLON L.J. In giving the leading speech, with which all other
members of the House agreed, in Leigh and Sillavan Ltd. v. Aliakmon
Shipping Co. Ltd. [1986] A.C. 785 Lord Brandon of Oakbrook stated,
at p. 809:
"there is a long line of authority for a principle of law that, in order
to enable a person to claim in negligence for loss caused to him by
reason of loss of or damage to property, he must have had either
the legal ownership of or a possessory title to the property concerned
at the time when the loss or damage occurred, and it is not enough
for him to have only had contractual rights in relation to such
property which have been adversely affected by the loss or damage
to it."
In the course of his immensely helpful opening of the present appeal,

Mr. Harris took us through some of the more important of the cases in
this long line, viz.: Cattle v. Stockton Waterworks Co., L.R. 10 Q.B.
453; the decision of the Privy Council in Candlewood Navigation
Corporation Ltd. v. Mitsui O.S.K. Lines Ltd. [1986] A.C. 1; the decision
of the House of Lords in Tate & Lyle Food and Distribution Ltd. v.
Greater London Council [1983] 2 A.C. 509; and the decision of this
court in Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B. 507.
Mr. Tager, for the respondent plaintiffs, of course accepts these
authorities and the principle stated by Lord Brandon, and he does not
seek to bring the present case within that principle, since it is common
ground that in the present case there has been no damage to property at
all, let alone damage to property of which the plaintiffs had the legal
ownership or to which the plaintiffs had a possessory title. The complaint
against the defendants is not of damage to property, but that the glass
panels supplied by the defendants specially for the Al-Oteiba building
failed, allegedly through faults by the defendants in their manufacture,
to give the correct colour effect; the colour effect was not in accordance
784
Dillon L.J.
[1988]
with the samples supplied by the defendants, not in accordance with the
expectations of the parties and not in accordance with the requirements
of the contracts between the Sheikh and the plaintiffs, between the
plaintiffs and the subcontractors Feal, and between Feal and the
defendants. It is in those circumstances submitted that the plaintiffs have
a direct claim in tort against the defendants for consequent economic
loss, although there was admittedly never any contract between the
plaintiffs and the defendants.
Mr. Tager founds that submission on the undoubted fact that there
have been cases, following the principles outlined in Hedley Byrne &
Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465, where a duty of
care has been held to exist and damages have been awarded for
economic loss resulting from breach of that duty of care, although there
has been no loss of, or damage to, the property or person of the
plaintiff. Mr. Tager seeks to align the present case with Hedley Bryne
principles.
There has consequently been a good deal of discussion in argument
about the controversial decision in Junior Books Ltd. v. Veitchi Co. Ltd.
[1983] 1 A.C. 520. My own view of the Junior Books case is that the
speeches of their Lordships have been the subject of so much analysis
and discussion with differing explanations of the basis of the case that
the case cannot now be regarded as a useful pointer to any development
of the law, whatever Lord Roskill may have had in mind when he
delivered his speech. Indeed I find it difficult to see that future citation
from the Junior Books case can ever serve any useful purpose.
In my judgment there are at least two reasonsthere may well be
morewhy Mr. Tager's submissions cannot be accepted and the
plaintiffs' direct claim for economic loss against the defendants must fail.
(1) It is clear, as Lord Keith pointed out in Yuen Kun Yeu v.
Attorney-General of Hong Kong [1988] A.C. 175, 191 by reference to
the speech of Lord Wilberforce in McLoughlin v. O'Brian [1983] 1 A.C.
410, 420, that foreseeability of harm or loss does not of itself and
automatically lead to a duty of care. Foreseeability of harm is a
necessary ingredient of a relationship in which a duty of care will arise,
but not the only ingredient. Foreseeability of harm does not become
enough to make the harm recoverable by the plaintiff just because what
was foreseeable was harm to the plaintiff as an individual rather than as
a member of a general and unascertained class; otherwise Lord Fraser
could not in the Candlewood case [1986] A.C. 1 have rejected the views
which he cited, at p. 22, from the judgments of Gibbs and Mason JJ. in
Caltex Oil (Australia) Pty. Ltd. v. Dredge "Willemstad" (1976) 136
C.L.R. 529.
If, however, foreseeability does not automatically lead to a duty of
care, the duty in a Hedley Byrne type of case must depend on the
voluntary assumption of responsibility towards a particular party giving
rise to a special relationship, as Lord Keith held in Yuen Kun Yeu v.
Attorney-General of Hong Kong [1988] A.C. 175, 196 (and see also his
statement at p. 784 that the Hedley Byrne case [1964] A.C. 465 was
concerned with the assumption of responsibility) and as Robert Goff
L.J. had earlier held in Muirhead v. Industrial Tank Specialities Ltd.
785
1 Q.B.
"
Dillon L.J.
[1986] Q.B. 507, 528 in a passage which would have been before Lord
Keith in the Yuen Kun Yeu case.
But in the present case I can see nothing whatever to justify a finding
that the defendants had voluntarily assumed a direct responsibility to the
plaintiffs for the colour and quality of the glass panels. On the contrary,
all the indications are the other way and show that a chain of contractual
relationships was deliberately arranged the way it was without any direct
relationship between the plaintiffs and the defendants.
(2) The approach of the law to awarding damages for economic loss
on the grounds of negligence where there has been no injury to the
person or property has throughout been greatly affected by pragmatic
considerations. See, for example, the opinion of Lord Fraser in the
Candlewood case [1986] A.C. 1, 16, in relation to the judgment in Cattle
v. Stockton Waterworks Co., L.R. 10 Q.B. 453, his comments [1986]
A.C. 1, 21, on a passage in Lord Wilberforce's speech in Anns v.
Merton London Borough Council [1978] A.C. 728 as "a useful reminder
of the part played by policy in decisions as to how far the liability of a
wrongdoer should extend" and his statement [1986] A.C. 1, 25, that
some limit or control mechanism has to be imposed upon the liability of
a wrongdoer towards those who have suffered economic damage in
consequence of his negligence.
It might at first glance seem reasonable that, if the plaintiffs have a
right of action in contract against Feal and Feal has in respect of the
same general factual matters a claim in contractalbeit a different
contractagainst the defendants, the plaintiffs should be allowed a
direct claim against the defendants. But in truth to allow the plaintiffs a
direct claim against the defendants where there is no contract between
them would give rise to formidable difficulties.
If the plaintiffs have a direct claim against the defendants so equally
or a fortiori has the Sheikh. Feal has its claim in contract also. All three
claims should be raised in separate proceedings, whether by way of
arbitration or litigation, and possibly in separate jurisdictions. The
difficulties of awarding damages to any one claimant would be formidable,
in view of the differing amounts of retentions by the Sheikh against the
plaintiffs and by the plaintiffs against Feal and other possibilities of set
off, and in view, even more, of the fact that none of the parties has yet
actually incurred the major cost of replacing the defendants' (assumedly)
defective glass panels with new panels of the correct colour. It would
not be practicable, in my view, for the court to award damages against
the defendants in a global sum for all possible claimants and for the
court subsequently to apportion that fund between all claimants and
administer it accordingly.
Moreover, if in principle it were to be established in this case that a
main contractor or an owner has a direct claim in tort against the
nominated supplier to a sub-contractor for economic loss occasioned by
defects in the quality of the goods supplied, the formidable question
would arise, in future cases if not in this case, as to how far exempting
clauses in the contract between the nominated supplier and the subcontractor were to be imported into the supposed duty in tort owed by
the supplier to those higher up the chain. Such difficulties were dismissed
786
Dillon L.J.
[1988]
by Lord Brandon in Leigh and Sillavan Ltd. v. Aliakmon Shipping Co.

Ltd. [1986] A.C. 785, 817-819, and provided, as I read his speech, part
of his reasoning for maintaining the established principle which I have
set out at the beginning of his judgment.
If, by contrast, the court does not extendand in my judgment it
would be an extensionthe principle of the Hedley Byrne case [1964]
A.C. 465 to cover a direct claim by the plaintiffs against the defendants,
no party will be left without a remedy, by English law at any rate, which
is the only system of law we have been asked to consider. There will be
the "normal chain of liability," as Lord Pearce called it in Young &
Marten Ltd. v. McManus Childs Ltd. [1969] 1 A.C. 454, 470, in that the
Sheikh can sue the plaintiffs on the main building contract, the plaintiffs
can sue Feal on the sub-contract and Feal can sue the defendants. Each
liability would be determined in the light of such exemptions as applied
contractually at that stage. There is thus no warrant for extending the
law of negligence to impose direct liability on the defendants in favour
of the plaintiffs.
Accordingly for the foregoing reasons I agree that this appeal should
be allowed.
LORD DONALDSON OF LYMINGTON M.R. I have had the advantage of
reading in draft the judgments delivered by Bingham and Dillon L.JJ.,
with which I am in complete agreement. I should like, in particular, to
pay tribute to the assistance which I derived from the arguments of both
counsel, without in any way derogating from my total agreement with
the special tribute paid by Bingham L.J. to the summary of argument
submitted by Mr. Harris, who, appearing for the appellant defendants,
had to bear the initial burden of seeking to produce order out of a
measure of authoritative chaos.
"
Appeal allowed with costs.

Leave to appeal refused.
Solicitors: C. R. Bayley, Pilkington Bros. Pic. Legal Department;
Michael Conn & Co.
R. C. W.

(1988) - Q B - 758

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758

Sir Edward Eveleigh

Smith v. Eric S. Bush (C.A.)

considering whether or not it would be fair and reasonable to allow A

[Reported by CLIVE SCOWEN, ESQ., Barrister-at-Law]

SIMAAN GENERAL CONTRACTING CO. v. PILKINGTON

Lord Donaldson of Lymington M.R.,

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

have received had been withheld. Judge Newey Q.C. tried as a

Per curiam. If a main contractor has a direct claim in tort

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

that the building owner withheld payments to them in respect of the

David M. Harris for the defendants. The case involves a further

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

The Lord Ordinary allowed the pursuers a proof before answer as

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

adversely affected by the loss or damage to it: see p. 809. He rejected

Damage for that purpose involves physical deterioration, degradation or

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

BINGHAM L.J. This appeal concerns a new building in Abu Dhabi.

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

The defendants proceeded to fabricate units to the dimensions

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

"My Lords, in the cited relevant cases from Donoghue v. Stevenson

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

the plaintiff on the defendants as significant, as does Lord Fraser of

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

responsibility to the building owner. Voluntary assumption of A

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

upon physical damage to the person or property of the plaintiff.

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

wrong was rendered less profitable or unprofitable. It is therefore

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

when damage occurs. In so holding, the Court of Appeal followed the

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

was built on defective foundations, a buyer of it might suffer two

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

and will not deteriorate. I bridle somewhat at the assumption of defects

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

In the course of his immensely helpful opening of the present appeal,

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

Simaan Contracting Co. v. Pilkington Ltd. (No. 2) (C.A.)

by Lord Brandon in Leigh and Sillavan Ltd. v. Aliakmon Shipping Co.

Appeal allowed with costs.

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