Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27
Citation:Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27
Rule of thumb 1:Do you owe an economic duty of care to third parties in society? Yes, but, if a person is not aware of the third parties & the third party has not been named then no duty of care is owed to them.
Rule of thumb 2:If you accidentally cut off an energy cable & electricity is cut off to neighbours or businesses are damages, such as loss of profits owed? No, there is not a sufficiently strong link between the person who did this and the third parties for the duty of care to arise.
Judgment:
The basic facts were that a company doing construction severed an energy pipe. This caused energy to be cut off to a nearby factory which caused them a loss of profits. The Court held that there is an economic duty of care to third parties people are not in contracts with, however, the third party has to be known to the person in order for damages to apply. This was deemed to be too remote a third party in order for them to be liable for damages.
Ratio-decidendi:
‘In many of the cases where economic loss has been held not to be recoverable, it has been put on the ground that the defendant was under no duty to the plaintiff. Thus where a person is injured in a road accident by the negligence of another, the negligent driver owes a duty to the injured man himself, but he owes no duty to the servant of the injured man - see Best v Samuel Fox & Co Ltd [1952] AC 716, 731: nor to the master of the injured man - Inland Revenue Commissioners v Hambrook [1956] 2 QB 641 , 660: nor to anyone else who suffers loss because he had a contract with the injured man - see Simpson & Co v Thomson (1877) 3 App Cas 279, 289: nor indeed to anyone who only suffers economic loss on account of the accident: see Kirkham v Boughey [1958] 2 Q.B. 338 , 341. Likewise, when property is damaged by the negligence of another, the negligent tortfeasor owes a duty to the owner or possessor of the chattel, but not to one who suffers loss only because he had a contract entitling him to use the chattel or giving him a right to receive it at some later date: see Elliott Steam Tug Co Ltd v Shipping Controller [1922] 1 KB 127, 139 and Margarine Union GmbH v Cambay Prince Steamship Co Ltd [1969] 1 QB 219, 251-252. In other cases, however, the defendant seems clearly to have been under a duty to the plaintiff, but the economic loss has not been recovered because it is too remote. Take the illustration given by Blackburn J in Cattle v Stockton Waterworks Co(1875) LR 10 QB 453, 457, when water escapes from a reservoir and floods a coal mine where many men are working. Those who had their tools or clothes destroyed could recover: but those who only lost their wages could not. Similarly, when the defendants' ship negligently sank a ship which was being towed by a tug, the owner of the tug lost his remuneration, but he could not recover it from the negligent ship: though the same duty (of navigation with reasonable care) was owed to both tug and tow: see Société Anonyme de Remorquage à Hélice v Bennetts [1911] 1 KB 243, 248. In such cases if the plaintiff or his property had been physically injured, he would have recovered: but, as he only suffered economic loss, he is held not entitled to recover. This is, I should think, because the loss is regarded by the law as too remote: seeKing v Phillips [1953] 1 Q.B. 429 , 439-440. On the other hand, in the cases where economic loss by itself has been held to be recoverable, it is plain that there was a duty to the plaintiff and the loss was not too remote. Such as when one ship negligently runs down another ship, and damages it, with the result that the cargo has to be discharged and reloaded. The negligent ship was already under a duty to the cargo owners: and they can recover the cost of discharging and reloading it, as it is not too remote: see Morrison Steamship Co Ltd v Greystoke Castle (Cargo Owners) [1947] AC 265. Likewise, when a banker negligently gives a reference to one who acts on it, the duty is plain and the damage is not too remote: see Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465. The more I think about these cases, the more difficult I find it to put each into its proper pigeon-hole. Sometimes I say: "There was no duty." In others I say: "The damage was too remote." So much so that I think the time has come to discard those tests which have proved so elusive. It seems to me better to consider the particular relationship in hand, and see whether or not, as a matter of policy, economic loss should be recoverable, or not’, Lord Denning
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.