#6616 - H Parsons V. Uttley Ingham - Commercial Remedies BCL

H. Parsons v. Uttley Ingham

Facts

The plaintiffs, H. Parsons (Livestock) Ltd., have a fine herd of nearly 700 pigs at their farm in Derbyshire. They feed the pigs on special pignuts. They use about 10 tons a month of these pignuts. In order to store and handle the pignuts, the plaintiffs bought in 1968 a big hopper called a bulk feed storage hopper. They bought it from the makers, the defendants, Uttley Ingham & Co. Ltd., who are sheet-metal workers. The plaintiffs paid 270 for it. It was a huge round metal bin 28 feet high and 8 feet 6 inches in diameter.

It was exactly the same as the first, but when the delivery man erected it in position he forgot to adjust the ventilator. He left it closed. It was fastened with a piece of tape which had been put on so as to stop it rattling on the journey. No one noticed the mistake, because the ventilator was at the top of the hopper 28 feet above the ground. The delivery man went off. The plaintiffs used the hopper. They put pignuts into it just as they did with the first hopper. On August 12, 1971, they filled it with 9 tons of pignuts; on September 10, 8 tons; on October 1, 8 tons.

At first all was well. But on September 28 a small number of the nuts appeared to be mouldy. The plaintiffs did not think this would harm the pigs. So they went on feeding them. Early in October more nuts turned mouldy. But still the plaintiffs were not unduly concerned. As a rule, mouldy nuts do not harm pigs. On Saturday, October 9, there was a bigger proportion of mouldy nuts; and some of the pigs were showing signs of illness.

It was indeed the trouble. After much evidence by experts, the judge found that the closed ventilator was the cause. But the effects remained so as to affect the herd greatly. A large number of the pigs suffered an attack of E. coli, which is very bad for pigs.

Holding

Lord Denning (minority)

Rejecting the distinction between tort and contract in Heron II

I find it difficult to apply those principles universally to all cases of contract or to all cases of tort: and to draw a distinction between what a man "contemplates" and what he "foresees." I soon begin to get out of my depth. I cannot swim in this sea of semantic exercises - to say nothing of the different degrees of probability - especially when the cause of action can be laid either in contract or in tort.

Distinction between economic loss and physical damage

I go back with relief to the distinction drawn in legal theory by Professors Hart and Honoré in their book Causation in the Law (1959), at pp. 281-287. They distinguish between those cases in contract in which a man has suffered no damage to person or property, but only economic loss, such as, loss of profit or loss of opportunities for gain in some future transaction: and those in which he claims damages for an injury actually done to his person or damage actually done to his property (including his livestock) or for ensuing expense (damnum emergens) to which he has actually been put. In the law of tort, there is emerging a distinction between economic loss and physical damage.

Remoteness tests for economic loss and physical damage

I would suggest as a solution that in the former class of case - loss of profit cases - the defaulting party is only liable for the consequences if they are such as, at the time of the contract, he ought reasonably to have contemplated as a serious possibility or real danger. You must assume that, at the time of the contract, he had the very kind of breach in mind - such a breach as afterwards happened, as for instance, delay in transit - and then you must ask: ought he reasonably to have contemplated that there was a serious possibility that such a breach would involve the plaintiff in loss of profit?

In the second class of case - the physical injury or expense case - the defaulting party is liable for any loss or expense which he ought reasonably to have foreseen at the time of the breach as a possible consequence, even if it was only a slight possibility. You must assume that he was aware of his breach, and then you must ask: ought he reasonably to have foreseen, at the time of the breach, that something of this kind might happen in consequence of it? This is the test which has been applied in cases of tort ever since The Wagon Mound cases [1961] A.C. 388 and [1967] 1 A.C. 617. But there is a long line of cases which support a like test in cases of contract.

Application to the facts

The present case falls within the class of case where the breach of contract causes physical damage. The test of remoteness in such cases is similar to that in tort. The contractor is liable for all such loss or expense as could reasonably have been foreseen, at the time of the breach, as a possible consequence of it. Applied to this case, it means that the makers of the hopper are liable for the death of the pigs. They ought reasonably to have foreseen that, if the mouldy pignuts were fed to the pigs, there was a possibility that they might become ill. Not a serious possibility. Nor a real danger. But still a slight possibility.

Lord Scarman (majority)

Rejecting the Economic loss and physical damage distinction – also affirming the “assimilation thesis”

I agree with him in thinking it absurd that the test for remoteness of damage should, in principle, differ according to the legal classification of the cause of action, though one must recognise that parties to a contract have the right to agree on a measure of damages which may be greater, or less, than the law would offer in the absence of agreement. I also agree with him in thinking that, notwithstanding the interpretation put on some dicta in C. Czarnikow Ltd. v. Koufos [1969] A.C. 350, the law is not so absurd as to differentiate between contract and tort save in situations where the agreement, or the factual relationship, of the parties with each other requires it in the interests of justice. I differ from him only to this extent: the cases do not, in my judgment, support a distinction in law between loss of profit and physical damage.

Test of Remoteness is the same for both contract and tort

As to the first problem, I agree with Lord Denning M.R. in thinking that the law must be such that, in a factual situation...