Editorial Committee of the Cambridge Law Journal

What Price the Privity of Contract Fallacy? Contract Damages in Tort ActionsAuthor(s): David FlemingSource: The Cambridge Law Journal, Vol. 37, No. 2 (Nov., 1978), pp. 226-229Published by: Cambridge University Press on behalf of Editorial Committee of the Cambridge LawJournalStable URL: http://www.jstor.org/stable/4506092 .

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The Cambridge Law Journal The Cambridge Law Journal

for pain damages and a limit but no threshold for grief damages, and odder still to decide that damages for pain should transmit to the estate of the claimant but that damages for grief should not. When we learn that in Scotland damages for grief are to remain unlimited and damages for pain untransmissible, we are entitled to wonder on what principle this bizarre farrago of proposals can be founded. If it is true that the new award is really for loss of society, one must ask why it is triggered only by death: surely the family of Mrs. Shephard lost her society when she was rendered un- conscious, not when she subsequently and mercifully died?

As to proposal (12), it is right that the tortfeasor should make good to a family the loss which accrues when the mother gives up a job in order to look after an injured child, but the Commission should have put the claim on a sounder basis than the reasoning of Megaw L.J. in Donnelly v. Joyce [1974] Q.B. 454. To say that the tortfeasor must pay the value of the medical attention which he has made the victim need and that " the way in which the need is met is indeed irrelevant " is to prove too much, for on such reasoning the defendant should be liable for the value of necessary medical ser- vices which are provided free by the national health service or, indeed, which are not provided at all.

Criticism of specific proposals is easy enough. The difficulty in

appraising the Report as a whole is that it really isn't a whole at all-it is a congeries of those ideas which managed to collect a

majority of voices in a Commission whose members displayed very diverse attitudes, ranging from intuitive humanity to dogmatic sophistication. The result is extremely English, but the two volumes of supporting data will be very useful.

TONY WEIR.

WHAT PRICE THE PRIVITY OF CONTRACT FALLACY?-CONTRACT

DAMAGES IN TORT ACTIONS

CONSIDER the following:

(a) "It ought to be obvious that the consumer cannot get damages from the manufacturer just because the product is not as good as it should have been. What claim had Mrs.

Donoghue against anyone that the ginger-beer be delicious? What loss had she suffered from not getting a drinkable

ginger-beer to which she was not entitled?" (Weir, A Case- book on Tort, 3rd ed., p. 22; see also Dutton v. Bognor Regis U.D.C. [1972] 1 Q.B. 373, 415, per Stamp L.J.)..

for pain damages and a limit but no threshold for grief damages, and odder still to decide that damages for pain should transmit to the estate of the claimant but that damages for grief should not. When we learn that in Scotland damages for grief are to remain unlimited and damages for pain untransmissible, we are entitled to wonder on what principle this bizarre farrago of proposals can be founded. If it is true that the new award is really for loss of society, one must ask why it is triggered only by death: surely the family of Mrs. Shephard lost her society when she was rendered un- conscious, not when she subsequently and mercifully died?

As to proposal (12), it is right that the tortfeasor should make good to a family the loss which accrues when the mother gives up a job in order to look after an injured child, but the Commission should have put the claim on a sounder basis than the reasoning of Megaw L.J. in Donnelly v. Joyce [1974] Q.B. 454. To say that the tortfeasor must pay the value of the medical attention which he has made the victim need and that " the way in which the need is met is indeed irrelevant " is to prove too much, for on such reasoning the defendant should be liable for the value of necessary medical ser- vices which are provided free by the national health service or, indeed, which are not provided at all.

Criticism of specific proposals is easy enough. The difficulty in

appraising the Report as a whole is that it really isn't a whole at all-it is a congeries of those ideas which managed to collect a

majority of voices in a Commission whose members displayed very diverse attitudes, ranging from intuitive humanity to dogmatic sophistication. The result is extremely English, but the two volumes of supporting data will be very useful.

TONY WEIR.

WHAT PRICE THE PRIVITY OF CONTRACT FALLACY?-CONTRACT

DAMAGES IN TORT ACTIONS

CONSIDER the following:

(a) "It ought to be obvious that the consumer cannot get damages from the manufacturer just because the product is not as good as it should have been. What claim had Mrs.

Donoghue against anyone that the ginger-beer be delicious? What loss had she suffered from not getting a drinkable

ginger-beer to which she was not entitled?" (Weir, A Case- book on Tort, 3rd ed., p. 22; see also Dutton v. Bognor Regis U.D.C. [1972] 1 Q.B. 373, 415, per Stamp L.J.)..

226 226 [1978] [1978]

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Case and Comment

(b) "In my judgment, the law of this country is and always has been that an action for negligence in respect of loss or damage to goods cannot succeed unless the plaintiff is at the time of the tort complained of the owner of the goods or the person entitled to possession of them" (Margarine Union GmbH v. Cambay Prince Steamship Co. Ltd. [1969] 1 Q.B. 219, 250, per Roskill J.).

Now, apply these statements to the following facts, those of Batty v. Metropolitan Property Realisations Ltd. [1978] 2 W.L.R. 500 (C.A.): the third defendants, a local authority, sold land to the second defendant, a builder who resold it to the first defendant, a development company. The first and second defendants inspected the land to see whether it was suitable for building and came to the hopelessly incorrect conclusion that it was so fit; houses were built. The first defendant granted a 999-year lease of one of the houses to the plaintiffs in 1971 and sold the reversion to the second defend- ant. The house was built on a plateau and the garden was on the side of a one in three slope; in 1974 there was a severe slip of the strata of the hillside which damaged the plaintiffs' garden; neither the house nor its foundations were damaged. The plaintiffs failed in their action against the third defendants but succeeded against the second defendant in tort and against the first defendant in contract. The house being, in the words of the trial judge, "doomed from the outset," the plaintiffs recovered £13,000 for loss of value. The first and second defendants lost their appeals; the plaintiffs succeeded in their cross-appeal against the refusal of the trial judge to enter judgment in tort against the first defendant on the ground that it was procedurally impossible for him to do so given the success of the plaintiffs' contract action.

First, the success of the contract action was a matter of the construction of a warranty given by the first defendants that the house would be " fit for human habitation."

Secondly, the decision that the success of the action in contract did not, ipso facto, preclude the possibility of judgment in tort is scarcely surprising in the light of the decision of the Court of Appeal in Esso Petroleum Co. Ltd. v. Mardon [1976] Q.B. 801 and is indication of the fact that the contrary view of Diplock L.J., sitting as judge of first instance in Bagot v. Stevens Scanlon & Co. Ltd. [1966] 1 Q.B. 197, has fallen from grace. On the one hand, one might have considerable sympathy for the view that one should determine " a defendant's liability with reference to the transaction under which he was operating" ([1977] C.L.J. 27); on the other hand, there seems no reason to deny the plaintiff an election of

C.L.J. 227

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228 The Cambridge Law Journal [1978]

remedy, provided that no absurdity results. It may well be that the view of Diplock L.J. was foredoomed anyway by the line of cases

beginning with Hedley Byrne & Co. v. Heller & Partners Ltd. [1964] A.C. 465; if that and subsequent decisions mean that one can

recover for purely financial loss in situations characterised by a "

special relationship" (le., less "

special" than contractual or

fiduciary relationships) then one cannot be surprised by an incli- nation to the opinion that the greater includes the lesser: if liability can exist in tort absent a contract, liability will also be found to exist in tort where there is a contract. Not to be surprised is not

necessarily to welcome! This begins to look like the acceptance of the proposition that breach of contract is a tort; it is, surely, an

example of the use of the overly elastic concepts of the tort of

negligence to break down distinctions between classes of situations once thought to be radically different. It may be attractive to be able to cover a large number of situations with one rule, but it remains true that a rule which tends to be all-inclusive will tend also to be so general and abstract as to be vacuous.

Though in the present case the fact of damage to the garden was sufficient to ground an action, Megaw L.J. first quoted from the speech of Lord Wilberforce in Anns v. Merton Lx>ndon Borough Council [1977] 2 W.L.R. 1024 (H.L.): [1977] C.LJ. 245 to the effect that a cause of action arises " when the state of the building is such that there is present or imminent danger to the health or safety of

persons occupying it," stated that this was such a case (Mrs. Batty recovered damages for "

the consequences to her health and peace of mind of the foreseen disaster ") and concluded

The law, in my judgment, is not so foolish as to say that a cause of action against the builder does not arise in those circumstances because there is no imminent danger. I would reject that submission.

In the case where the property is " doomed from the outset" it

would seem to be the case, then, that a cause of action arises when the plaintiff realises or when he ought to realise that he has made a bad bargain; Mr. Duncan Wallace Q.C. has suggested a test in terms of

" reasonable foreseeability

" and points out that physical damage

would be irrelevant ((1978) 94 L.Q.R. 331, 333), but the matter remains anything but satisfactory; when should a cause of action

entitling the plaintiff to contractual damages against one with whom he does not have a contractual relationship arise? The only sensible answer is "

never."

It has already been suggested that it is not necessarily sensible to say that because one has a tort action absent a contract, one has

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Case and Comment Case and Comment

one when there is a contract; the further variation which this deci- sion and Anns present is one which requires very close attention (would that the Court of Appeal had reserved judgment!). We are now told that, where A has a contract action against B and a tort action against B on the same facts, a tort action may lie against C whose carelessness has meant that B is in breach of contract-and for contractual damages.

And, on the present state of the authorities, Roskill J. was wrong in the Margarine Union case: now, seemingly, if A commits a " tort" reducing the value of goods which subsequently become the property of C as the result of a contract between C and B, the fact of that contract gives C an action in tort against A and the quantum of damages is measured by, and can only be measured by, C's loss on his contract with B. What price, indeed, the "privity of contract fallacy "?

DAVID FLEMING.

CONTRACT-DAMAGES FOR MISREPRESENTATION

IN its first ten years of operation, the Misrepresentation Act 1967 has generated very little case-law, despite its complex drafting, and most is obscurely reported. Howard Marine & Dredging Co. Ltd. v. A. Ogden & Sons (Excavations) Ltd. [1978] 2 W.L.R. 515 is there- fore something of a landmark, even though the decision itself does little to resolve any of the difficulties raised by the Act-the sole issue before the court was that of liability. What the case does illu- strate is the range of remedies now available to a plaintiff in the shadowy area where warranty, misrepresentation and negligent mis- statement overlap, and the variance in judicial opinion which is pos- sible on the one set of facts.

Ogdens, an experienced firm of earth-moving contractors, ten- dered to do work for the Northumbrian Water Authority at a cost approaching £2 million. They were required to dump large quantities of soil out at sea, and for this purpose needed to hire two seagoing barges. Howards were invited to quote for the supply of two such vessels. In the course of negotiations, Mr. O'Loughlin, Howards' maritime manager, stated that the usable deadweight capacity of each barge was about 1,600 tonnes-a figure which he based on his recollection of the entry in Lloyd's Register. The entry was (excep- tionally for Lloyd's) erroneous. The correct payload was about 1,050 tonnes, as was ascertainable from the ships' documents held among the files at Howards' London office. These papers, which were in German, had been seen at some time by O'Loughlin, but he had not

one when there is a contract; the further variation which this deci- sion and Anns present is one which requires very close attention (would that the Court of Appeal had reserved judgment!). We are now told that, where A has a contract action against B and a tort action against B on the same facts, a tort action may lie against C whose carelessness has meant that B is in breach of contract-and for contractual damages.

And, on the present state of the authorities, Roskill J. was wrong in the Margarine Union case: now, seemingly, if A commits a " tort" reducing the value of goods which subsequently become the property of C as the result of a contract between C and B, the fact of that contract gives C an action in tort against A and the quantum of damages is measured by, and can only be measured by, C's loss on his contract with B. What price, indeed, the "privity of contract fallacy "?

DAVID FLEMING.

CONTRACT-DAMAGES FOR MISREPRESENTATION

IN its first ten years of operation, the Misrepresentation Act 1967 has generated very little case-law, despite its complex drafting, and most is obscurely reported. Howard Marine & Dredging Co. Ltd. v. A. Ogden & Sons (Excavations) Ltd. [1978] 2 W.L.R. 515 is there- fore something of a landmark, even though the decision itself does little to resolve any of the difficulties raised by the Act-the sole issue before the court was that of liability. What the case does illu- strate is the range of remedies now available to a plaintiff in the shadowy area where warranty, misrepresentation and negligent mis- statement overlap, and the variance in judicial opinion which is pos- sible on the one set of facts.

Ogdens, an experienced firm of earth-moving contractors, ten- dered to do work for the Northumbrian Water Authority at a cost approaching £2 million. They were required to dump large quantities of soil out at sea, and for this purpose needed to hire two seagoing barges. Howards were invited to quote for the supply of two such vessels. In the course of negotiations, Mr. O'Loughlin, Howards' maritime manager, stated that the usable deadweight capacity of each barge was about 1,600 tonnes-a figure which he based on his recollection of the entry in Lloyd's Register. The entry was (excep- tionally for Lloyd's) erroneous. The correct payload was about 1,050 tonnes, as was ascertainable from the ships' documents held among the files at Howards' London office. These papers, which were in German, had been seen at some time by O'Loughlin, but he had not

C.L.J. C.L.J. 229 229

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