27

1 Q.B. D.D.S.A. v. Times Newspapers (GA.) Lord Denning M.R.

For instance, in this particular case there is a reference to a " London-
based operation." If the plaintiffs say that it means the plaintiffs, they
should say so. They should insert " (meaning thereby the plaintiffs)."
There is a reference to " the largest single network operating from a Lon-
don suburb." Do they say that means the plaintiffs? If they do, they
should put in " (meaning thereby the plaintiffs)."
Such an exercise will be a great advantage to the plaintiffs themselves.
It will make them clear their minds: and it will help the defendants too.
For these reasons I think it is quite improper to plead in the way it has
been done here. I find myself entirely in agreement with Master Bickford
Smith on both points. I would strike out the pleading as embarrassing and
defective. I would, therefore, allow the application and restore the master's
order.

PHILLIMORE L.J. I agree.

CAIRNS LJ. I also agree.

Appeal allowed with costs in Court of

Appeal and below.
Statement of claim struck out.

Solicitors: Theodore Goddard & Co.; Tringhams.

M. M. H.

[COURT OF APPEAL]
F
SPARTAN STEEL & ALLOYS LTD. v. MARTIN & CO.
(CONTRACTORS) LTD.

[1970 S. No. 3104]

1972 April 9, 25, 26, 27; Lord Denning M.R., Edmund Davies and
G June 22 Lawton L.JJ.
Damages—Remoteness—Economic loss—Contractors negligently
damaging cable supplying electricity to factory—Physical
damage to metal in factory's furnace as result of power cut—
Loss of profit from melt and from melts which would have
taken place if no power cut—Whether economic loss recover-
„ able—Whether economic loss attaching to physical loss re-
"• coverable—Doctrine of parasitic damages
The defendants' employees were digging up a road when
they negligently damaged an electric cable, which the defendants
 Spartan Steel v. Martin & Co. (C.A.) [1973]
knew was the direct supply from the electricity board's power
station to the plaintiffs' factory. The plaintiffs were without A
electricity until the board was able to repair the cable and,
immediately the power supply failed, they had to pour
molten metal out of their furnace to prevent the metal solidi-
fying and damaging the furnace. As the plaintiffs could not
keep the metal at the correct temperature and complete the
"melt," the metal depreciated in value by £368 and they lost
a profit from the sale of the metal from that melt of £400.
They could also have completed four further melts during the "
power cut and their loss of profit from those melts was £1,767.
In an action for negligence against the defendants, the
plaintiffs claimed all three sums as damages, a total of £2,535.
The defendants admitted negligence and liability for the
physical damage of £368 but denied liability for the plaintiffs'
economic loss. The plaintiffs contended that the defendants
were liable for their economic loss and that mere was a doctrine ,-,
in English law of " parasitic damages " by which damages not ^
recoverable in themselves could be recovered if they could be
attached to a claim for physical damages and were foreseeable.
Faulks J. found the defendants liable for all three sums and
awarded the plaintiffs £2,535 damages.
On appeal by the defendants: —
Held, allowing the appeal, (1) (Edmund Davies L.J. dis-
senting) that the plaintiffs were entitled to recover the £400 as j_)
damages as the loss of profit from the melt was a foreseeable
financial damage immediately consequential on the foreseeable
physical damage to the metal but they were not entitled to
recover the loss of profit from the four melts due to the
negligent interruption of the electricity supply.
Cattle v. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453
and S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son
Ltd. [1971] 1 Q.B. 337, C.A. applied. E
Per Lord Denning M.R. The tests hitherto applied
(namely, whether there was a duty and whether the damage was
too remote) are too elusive. They should be discarded.
Instead the courts should consider the particular relationships
of those concerned in the particular circumstances and see
whether, as a matter of policy, economic loss should be
recovered. In the present case those concerned are the
electricity board (who are under a statutory duty to maintain F
supplies of electricity in their district), the inhabitants, including
the plaintiffs (who are entitled by statute to a continuous supply
of electricity) and the defendant contractors (who dig up the
road). In the result, as a matter of policy the plaintiffs should
recover the £400 but not the loss of profit from the four melts
(post, pp. 37D-H, 39D-E).
Per Edmund Davies LJ. dissenting. Where a defendant
who owes a duty of care to a plaintiff breaches that duty and, G
as both a direct and a reasonably foreseeable result of that
injury, the plaintiff suffers only economic loss, he is entitled to
recover that loss as damages and, since the plaintiffs' financial
loss was both the direct and foreseeable consequence of the
defendants' negligence, they were rightly awarded damages for
their financial loss (post, pp. 45A-B, 46C-D).
(2) That, if there was a doctrine of parasitic damages in
English law (per Lord Denning M.R. that there was no such "
doctrine), it did not apply to an action in negligence or to the
facts of the present case (post, pp. 35E-F, 46F-G, 49C-H).
Decision of Faulks J. reversed.
 29
1 Q.B. Spartan Steel v. Martin & Co. (C.A.)
The following cases are referred to in the judgments:
Atkinson v. Newcastle & Gateshead Waterworks Co. (1877) 2 Ex.D. 441,
C.A.
Baker v. Crow Carrying Co. Ltd., February 1, 1960, C.A.; Bar Library
Transcript No. 45.
Best v. Samuel Fox & Co. Ltd. [1952] A.C. 716; [1952] 2 All E.R. 394,
H.L.(E.).
British Celanese Ltd. v. A. H. Hunt {Capacitors) Ltd. [1969] 1 W.L.R. 959;
" [1969] 2 All E.R. 1252.
Candler v. Crane, Christmas & Co. [1951] 2 K.B. 164; [1951] 1 All E.R.
426, CA.
Cattle v. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453.
Clegg, Parkinson & Co. v. Earby Gas Co. [1896] 1 Q.B. 592, D.C.
Dutton v. Bognor Regis Urban District Council l[1972] 1 Q.B. 372; [1972]
2 W.L.R. 299; [1972] 1 All E.R. 462, C.A.
c
Electrochrome Ltd. v. Welsh Plastics Ltd. [1968] 2 All E.R. 205.
Elliott Steam Tug Co. Ltd. v. Shipping Controller [1922] 1 K.B. 127, C.A.
Furniss V. Fitchett [1958] N.Z.L.R. 396.
Geddis V. Proprietors of Bann Reservoir (1878) 3 App.Cas. 430, H.L.(I.).
Griffith v. Richard Clay & Sons Ltd. [1912] 2 Ch. 291, C.A.
Hartley v. Mayoh & Co. [1954] 1 Q.B. 383; [1954] 1 W.L.R. 355; [1954]
1 All E.R. 375, C.A.
D Heard v. Brymbo Steel Co. Ltd. [1947] K.B. 692, C.A.
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465; [1963]
3 W.L.R. 101; [1963] 2 All E.R. 575, H.L.(E.).
Horton v. Colwyn Bay and Colwyn Urban District Council [1908] 1 K.B.
327, C.A.
Inland Revenue Commissioners v. Hambrook [1956] 2 Q.B. 641; [1956] 3
W.L.R. 643; [1956] 3 All E.R. 338, C.A.
E Jackson v. Watson & Sons [1909] 2 K.B. 193, C.A.
King v. Phillips [1953] 1 Q.B. 429; [1953] 2 W.L.R. 526; [1953] 1 All E.R.
617, C.A.
Kirkham v. Boughey [1958] 2 Q.B. 338; [1957] 3 W.L.R. 626; [1957] 3 All
E.R. 153.
Lampert v. Eastern National Omnibus Co. Ltd. [1954] 1 W.L.R. 1047;
[1954] 2 All E.R. 719.
F Leeds Industrial Co-operative Society Ltd. v. Slack [1924] A.C. 851,
H.L.(E.).
London, Tilbury & Southend Railway Co. and Trustees of Gower's Walk
Schools, In re (1889) 24 Q.B.D. 326, C.A.
Margarine Union G.m.b.H. v. Cambay Prince Steamship Co. Ltd. [1969]
1 Q.B. 219; [1967] 3 W.L.R. 1569; [1967] 3 All E.R. 775.
Midwood & Co. Ltd. v. Manchester Corporation [1905] 2 K.B. 597, C.A.
G Milnes v. Huddersfkld Corporation (1886) 11 App.Cas. 511, H.L.(E.).
Ministry of Housing and Local Government v. Sharp [1970] 2 Q.B. 223;
[1970] 2 W.L.R. 802; [1970] 1 All E.R. 1009, C.A.
Morrison Steamship Co. Ltd. v. Greystoke Castle {Cargo Owners) [1947]
A.C. 265; [1946] 2 All E.R. 696, H.L.(E.).
S.CM. {United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B.
337; [1970] 3 W.L.R. 694; [1970] 3 All E.R. 245, C.A.
H Seaway Hotels Ltd. v. Gragg {Canada) Ltd. and Consumer Gas Co. (1960)
21 D.L.R. (2d) 264.
Simpson & Co. v. Thomson (1877) 3 App.Cas. 279, H.L.(Sc).
Societe" Anonyme de Remorquage a H&lice v. Bennetts [1911] 1 K.B. 243.
30
Spartan Steel v. Martin & Co. (C.A.) [1973]
Stevens v. Aldershot Gas, Water & District Lighting Co. Ltd. (1932) 31
A
L.G.R.48; 102L.JX.B. 12.
Thurston v. Charles (1905) 21 T.L.R. 659.
Wagon Mound, The [1961] A.C. 388; [1961] 2 W.L.R. 126; [1961] 1 All
E.R. 404, P.C.
Welter & Co. v. Foot and Mouth Disease Research Institute [1966] 1 Q.B.
569; [1965] 3 W.L.R. 1082; [1965] 3 All E.R. 560.

The following additional cases were cited in argument: "

Bourhill v. Young [1943] A.C. 92; [1942] 2 All E.R. 396, H.L.(Sc).
Campbell v. Paddington Corporation [1911] 1 K.B. 869, D.C.
Clayton v. Woodman & Son (Builders) Ltd. [1962] 2 Q.B. 533; [1961]
3 W.L.R. 987; [1961] 3 All E.R. 249; [1962] 1 W.L.R. 585; [1962]
2 All E.R. 33, Salmon J. and C.A.
Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004; [1970] 2 W.L.R.
C
1140; [1970] 2 All E.R. 294, H.L.(E.).
Liesbosch, Dredger V. Eddison S.S. [1933] A.C. 449, H.L.(E.).
Pratt v. British Medical Association [1919] 1 K.B. 244.
Quinn v. Leathern [1901] A.C. 495, H.L.(L).

APPEAL from Faulks J.

On June 12, 1969, while digging up a road with a power-driven pj
excavating shovel, men employed by the defendants, Martin & Co. (Con-
tractors) Ltd., damaged a cable, which the defendants knew supplied
electricity from the Mechalls Power Station of the Midland Electricity
Board direct to the Spartan Works, Birmingham. The plaintiffs, Spartan
Steel & Alloys Ltd., were the owners of the factory and they manufactured
stainless steel alloys.
The plaintiffs claimed that, due to the defendants' negligence, their arc E
furnace, which worked on a 24-hour basis, was rendered inoperative from
about 7.40 p.m. on June 12 until the electricity supply was restored at
10 a.m. on June 13, 1969, that material in the furnace was damaged and
depreciated in value and that their loss and damage totalled £2,535. That
sum was made up of £368 for loss of value of the metal in the furnace at the
time the electricity supply failed, £400 for loss of profit on that metal and p
£1,767 for loss of profit on four further melts which could have been
carried out during the period that there was no electricity supply. The
defendants, by their defence, formally denied negligence and pleaded that
the damage was too remote. At the hearing before Faulks J. at Birmingham
Assizes, the defendants admitted negligence and liability for damages of
£368 but denied liability for the £400 and £1,767 damages. On December
14, 1971, Faulks J. awarded the plaintiffs £2,535 damages with interest at G
6 per cent, from the date of the accident.
The defendants appealed on the grounds that Faulks J. was wrong in
law and misdirected himself in holding that (1) the plaintiffs were entitled to
recover any sum in excess of £368, or any sum in respect of damage other
than physical damage to their plant and materials; (2) alternatively, in hold-
ing that the plaintiffs were entitled to recover any sum in excess of £768, or JJ
any sum in respect of damage not directly arising out of the physical
damage to their materials and plant; (3) by applying the doctrine of
parasitic damages and by holding that the plaintiffs were entitled to recover
 31
1 Q.B. Spartan Steel v. Martin & Co. (C.A.)
damages in respect of loss of profit not directly arising out of and attribut-
"• able to physical damage to materials and plant and (4).Faulks J, failed to>
direct himself and to hold that the plaintiffs' economic loss unrelated to
physical damage was irrecoverable. At the hearing of the appeal, the
plaintiffs gave notice of additional grounds for contending that the judgment
of Faulks J. should be affirmed, namely, (1) that as the defendants owed
the plaintiffs a duty to take reasonable care to avoid acts liable to sever
B or damage the electric power cable transmitting electricity to the plaintiffs'
factory, economic loss caused by the negligent breach of duty was recover-
able whether or not the plaintiffs had in fact suffered physical damage to
their plant or materials and (2) that the defendants owed the plaintiffs a
duty to take reasonable care to avoid acts liable to cause economic loss to
the plaintiffs and such economic loss was recoverable for breach of that
duty.
The facts are stated in the judgment of Lord Denning M.R.

Richard Tucker Q.C. and Piers Ashworth for the defendants. The
defendants admit liability for the direct physical damage to the metal
in the furnace on the basis of S.C.M. (United Kingdom) Ltd. v. W. J.
Whittall & Son Ltd, [1971] 1 Q.B. 337. Common sense dictates that,
0 where a defendant negligently cuts an electric cable, he should be liable
to pay compensation but it equally dictates that there must be a limit on
the amount payable. The defendants were lucky not to have cut the
power supply to a trading estate as happened in British Celanese Ltd. v.
A. H. Hunt (Capacitors) Ltd. [1969] 1 W.L.R. 959 and they were not in a
position to mitigate the damage because they had to rely on the electricity
board for a quick repair of the cable. By statute, the plaintiffs could not
E have sued the board for any damages the board might do to the cable.
All the previous relevant authorities were brought within the decision of
S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B.
337. Following the ratio decidendi and not the obiter dicta of that case,
the defendants were liable for the direct physical damage but for nothing
else and, as there was no damage to the furnace and the direct cause of
p the loss from the five melts was not due to physical damage but to the
continuation of the power failure, the defendants are only liable for the
damage to the metal in the furnace.
There is no English case, except those in which the principle of
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465
applied, where a plaintiff recovered economic loss when there was no
physical damage: see Electrochrome Ltd. v. Welsh Plastics Ltd. [1968]
G 2 All E.R. 205; British Celanese Ltd. v. A. H. Hunt (Capacitors) Ltd.
[1969] 1 W.L.R. 959 and Weller & Co. v. Foot and Mouth Disease
Research Institute [1966] 1 Q.B. 569. The dubious doctrine of parasitic
damages has never been applied in previous cases and has only appeared
in textbooks. Horton v. Colwyn Bay and Colwyn Urban District Council
[1908] 1 K.B. 327, referred to in Clerk & Undsell on Torts, 13th ed. (1969),
g p. 349, para. 350, is not authority for the doctrine. The doctrine is also
referred to in Mayne & McGregor on Damages, 12th ed. (1961), paras.
110-114 but the editor is not enamoured of it.
The question of recovery of damages where the power is negligently
32
Spartan Steel v. Martin & Co. (C.A.) [1973]
cut off is a matter of common sense and commercial expediency. The line
between recovery or not must be drawn and must be defined. The line is A
physical damage and physical damage only but, if economic loss is to some
extent recoverable, then it must be economic lossflowingdirectly from the
physical damage.
Christopher Bathurst for the plaintiffs. The three heads of damage
are the physical damage to the metal which it is conceded to be recover-
able, the consequential economic loss of profit from that damage and ]$
the pure economic loss due to there being no electricity to carry out the
further melts. The consequential economic loss is recoverable and cannot
be separated from the physical damage and, in any event, S.C.M. {United
Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B. 337 is a
binding authority for that proposition.
Whether or not there is a rule that a plaintiff cannot recover pure
economic loss in an action for negligence there is good and binding C
authority that, where a plaintiff has a cause of action against a defendant
for recoverable damages, he may also recover damages caused by the same
act or default which would not by themselves be recoverable. Thus, if the
plaintiffs cannot sue to recover damages for the four melts alone they can
be recovered as parasitic damages with the damages recoverable on the
first melt. Parasitic damages to be recoverable must be foreseeable and j->
the chain of causation must not be broken: see In re London, Tilbury &
Southend Railway Co. and Trustees of Gower's Walk Schools (1889) 24
Q.B.D. 326; Horton v. Colwyn Bay and Colwyn Urban District Council
[1908] 1 K.B. 327; Campbell v. Paddington Corporation [1911] 1 K.B. 869
and Griffith V. Richard Clay & Sons Ltd. [1912] 2 Ch. 291. Another case
of parasitic damages was Jackson v. Watson & Sons [1909] 2 K.B. 193,
for damages for the death of a human being were not recoverable at E
common law but, because there was a breach of contract, the plaintiff
was also entitled to recover damages arising from the death of his wife.
The cases cover many fields of the law and the following cases exemplify
the principle: Lampert v. Eastern National Omnibus Co. Ltd. [1954]
1 W.L.R. 1047; Seaway Hotels Ltd. v. Gragg (Canada} Ltd. and Consumer
Gas Co. (1960) 21 D.L.R. (2d) 264, in which the principle was clearly F
applied to an action in negligence; Quinn v. Leathern [1901] A.C. 495,
where there was a pecuniary loss and a cause of action had to be found
before the plaintiff could recover damages; Pratt v. British Medical Asso-
ciation [1919] 1 K.B. 244 and Thurston v. Charles (1905) 21 T.L.R. 659.
The term " parasitic damages " seems to have been used first by the
American Professor Street in Foundations of Legal Liability (New York,
1906), vol. 1, pp. 461 et seq. and the doctrine of parasitic damages has G
been recognised in the textbooks: see Mayne & McGregor on Damages,
12th ed. (1961), paras. 110-114; Clerk & Undsell on Torts, 13th ed. (1969),
p. 349, para. 350; Salmond on Torts, 15th ed. (1969), p. 719, para. 198
and Professor Harry Street, The Law of Torts, 4th ed. (1968), pp. 145-146.
The plaintiffs are not seeking by the application of the doctrine of para-
sitic damages entirely separate heads of damages, as in Thurston v. Charles, JJ
21 T.L.R. 659, but the recovery of loss of profit from five instead of one
melt. Although there are only two authorities where the doctrine has been
applied in an action for negligence, of which one is a Canadian case, there
 33
1 Q.B. Spartan Steel v. Martin & Co. (C.A.)
are no authorities which are contrary to the doctrine. It is only since
x
S.C.M. (United Kingdom) Ltd. v. W. /. Whittall & Son Ltd. [1971] 1 Q.B.
337 that there has been authority for the proposition that the plaintiffs can
recover economic loss arising from the first melt. It may be illogical that
a factory where there is slight physical damage may recover economic
loss when a factory with no physical damage and large economic loss
cannot recover at all but the application of the principle is no less illogical
B than the application of the principle in Hedley Byrne & Co. Ltd. v. Heller
& Partners Ltd. [1964] A.C. 465 and it is a dear principle causing prac-
titioners no great difficulty in applying it. Fears that the doctrine may have
far-reaching effect are seen not to be great when it is remembered that a
plaintiff still has to prove that the resulting damage of the tortious act
was foreseeable and that the defendant owed a duty to the plaintiff. The
fact that an electricity board has statutory protection from liability does
^ not affect the principle or the application of the doctrine to contractors who
dig up a road. The material consequences of their action may be great
but there is no reason why an innocent plaintiff should have to bear the
loss caused by a contractor's negligence.
Where there is a breach of duty, pure economic loss is recoverable
provided that the economic loss is foreseeable. It is not the type of damage
0 which limits a defendant's liability for the consequences of his act but the
limitation is whether he owed the plaintiff a duty: see Morrison Steamship
Co. Ltd. v. Greystoke Castle (Cargo Owners) [1947] A. C. 265 and Hedley
Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465. The decisions,
if not the dicta, in Candler v. Crane, Christmas & Co. [1951] 2 K.B. 164;
Dutton V. Bognor Regis Urban District Council [1972] 1 Q.B. 372; Clayton
v. Woodman & Son (Builders) Ltd. [1962] 2 Q.B. 533; Dorset Yacht Co.
E Ltd. v. Home Office [1970] A.C. 1004 and Societe Anonyme de Remor-
quage a Helice v. Bennetts [1911] 1 K.B. 243 support the proposition. The
type of damage is a factor to be taken into account in deciding whether
a defendant owed a duty to the plaintiff but, once the duty is established,
the extent of the damage is immaterial. Each case must be decided on its
facts to determine whether the defendant owed a duty to the plaintiff: see
p per Buckley L.J. in S.C.M. (United Kingdom) Ltd. v. W. J. Whittall &
Son Ltd. [1971] 1 Q.B. 337, 357 and C. F. King v. Phillips [1953] 1 Q.B.
429 and Bourhill v. Young [1943] A.C. 92. Liesbosch, Dredger v. Eddison
S.S. [1933] A.C. 449 and Cattle v. Stockton Waterworks Co. (1875) L.R. 10
Q.B. 453 are persuasive authority for the plaintiffs' proposition whilst
Weller and Co. v. Foot and Mouth Disease Research Institute [1966] 1
Q.B. 569 and Electrochrome Ltd. v, Welsh Plastics Ltd. [1968] 2 All E.R.
J 205 were clearly decisions on the question whether or not the defendants
owed a duty to the plaintiffs. If the plaintiffs' propositions are applied in
this case and not the dicta of Lord Denning M.R. and Winn L.J. in
S.C.M. (United Kingdom) Ltd. V. W. J. Whittall & Son Ltd. [1971] 1 Q.B.
337 that economic loss is not recoverable, then the decision will be in line
with the authorities and it will produce a fair and logical result.
T Tucker Q.C. replied.
Cur. adv. vult.
June 22. The following judgments were read.
1 Q.B. 1973—2
34
Spartan Steel v. Martin & Co. (C.A.) [1973]
LORD DENNING M.R. The plaintiffs have a factory in Birmingham
where they manufacture stainless steel. The factory obtains its electricity
by a direct cable from a power station of the Midlands Electricity Board.
In June 1969 the defendant contractors were doing work on a road
about a quarter of a mile away. They were going to dig up the road
with a big power-driven excavating shovel. They made inquiries about
the place of the cables, mains, and so forth, under the road. They were
given plans showing them. But unfortunately their men did not take E
reasonable care. The shovel damaged the cable which supplied electricity
to the plaintiffs' works. The electricity board shut down the power whilst
they mended the cable.
The factory was at that time working continuously for 24 hours all
round the clock. The electric power was shut off at 7.40 p.m. on June 12,
1969, and was off for 14£ hours until it was restored at 10 a.m. on June
13, 1969. This was all through the night and a couple of hours more.
But, as this factory was doing night work, it suffered loss.
At the time when the power was shut off, there was an arc furnace in
which metal was being melted in order to be converted into ingots.
Electric power was needed throughout in order to maintain the temperature
and melt the metal. When the power failed, there was a danger that the
metal might solidify in the furnace and do damage to the lining of the E
furnace. So the plaintiffs used oxygen to melt the material and poured it
from a tap out of the furnace. But this meant that the melted material
was of much less value. The physical damage was assessed at £368.
In addition, if that particular melt had been properly completed, the
plaintiffs would have made a profit on it of £400.
Furthermore, during those 14£ hours, when the power was cut off, the
plaintiffs would have been able to put four more melts through the *
furnace: and, by being unable to do so, they lost a profit of £1,767.
The plaintiffs claim all those sums as damages against the contractors
for negligence, No evidence was given at the trial: because the defendants
admitted that they had been negligent. The contest was solely on the
amount of damages. The defendants take their stand on the recent decision
in this court of S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son j
Ltd. [1971] 1 Q.B. 337. They admit that they are liable for the £368
physical damages. They did not greatly dispute that they are also liable
for the £400 loss of profit on the first melt, because that was truly conse-
quential on the physical damages and thus covered by S.C.M. (United
Kingdom) Ltd. v. W. J. Whittall & Son Ltd. But they deny that they are
liable for the £1,767 for the other four melts. They say that was economic
loss for which they are not liable. Faulks J. rejected their contention and *•
held them liable for all the loss. The defendants appeal to this court.
Mr. Christopher Bathurst, for the plaintiffs, raised a point which was
not discussed in S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd.
He contended that there was a principle of English law relating to
"parasitic damages." By this he meant that there are some heads of
damage which, if they stood alone, would not be recoverable: but, j .
nevertheless, if they can be annexed to some other legitimate claim for
damages, may yet be recoverable. They are said to be " parasitic"
because, like a parasite, in biology, they cannot exist on their own, but
 35
1 Q.B. Spartan Steel v. Martin & Co. (C.A.) Lord Denning MJt.
depend on others for their life and nourishment. Applying this principle
L
he contended that, even if the economic loss (£1,767) on these four melts,
standing alone, would not be recoverable, nevertheless by being attached to
the other claim it can be added to it, and recovered as a " parasite " to it.
Mr. Bathurst sought to establish this principle by reference to the
books. He cited a case where the owner of an old house was entitled to
ancient lights for some small old windows. He pulled down the old house
I and put up a new house with big new windows. The defendants afterwards
put up a building which obstructed the big new windows. The plaintiff
was held entitled to be compensated for the loss of light through the whole
space of the big new windows and not merely through the little space of
the small old windows: see In re London, Tilbury & Southend Railway Co.
and Trustees of Gower's Walk Schools (1889) 24 Q.B.D. 326. That decision
, was considered in Horton v. Colwyn Bay and Colwyn Urban District
' Council [1908] 1 K.B. 327, and Buckley L.J. drew from it a general
proposition which he stated to be, at p. 341:
" . . . if an actionable wrong has been done to the claimant he is
entitled to recover all the damage resulting from that wrong, and none
the less because he would have had no right of action for some part
of the damage if the wrong had not also created a damage which was
> actionable."
In a similar case relating to ancient lights, a similar result was reached:
see Griffith v. Richard Clay & Sons Ltd. [1912] 2 Ch. 291.
Mr. Bathurst drew our attention to a number of other cases in which,
he said, the same principle was applied, although it was not expressly
stated in them.
' I do not like this doctrine of " parasitic damages." I do not like the
very word " parasite." A " parasite " is one who is a useless hanger-on
sucking the substance out of others. " Parasitic " is the adjective derived
from it. It is a term of abuse. It is an opprobrious epithet. The phrase
" parasitic damages" conveys to my mind the idea of damages which
ought not in justice to be awarded, but which somehow or other have been
7 allowed to get through by hanging on to others. If such be the concept
underlying the doctrine, then the sooner it is got rid of the better. It has
never been used in any case up till now. It has only appeared hitherto
in the textbooks. I hope it will disappear from them after this case,
I do not believe there is any such doctrine. The cases on ancient
lights stand in a category by themselves and are to be explained in this
way: if a house has ancient lights which are threatened by a new building,
* the owner, if he moves promptly, may obtain an injunction to restrain the
erection of the new building. The court, however, may refuse an injunction
and award him damages in lieu of an injunction: see Leeds Industrial Co-
operative Society Ltd. v. Slack [1924] A.C. 851. These damages would
be, in effect, buying a right to put up the new building. If the owner,
however, delays and allows the new building to go up without making any
j objection—so that he cannot seek an injunction—I do not think he should
recover damages for his big new windows (for which he has no right). He
ought only to recover damages for the small old windows (for which he
has a right).
36
Lord Denning M.R. Spartan Steel v. Martin & Co. (C.A.) [1973]
None of the other cases gives any difficulty. In all of them there was
some good reason for adding on the extra damages—not because they
were improper, but because they flowed naturally and directly from the
wrong done and could reasonably have been foreseen as a consequence of it.
I reject, therefore, Mr. Bathurst's argument based on "parasitic"
damages.
Mr. Bathurst submitted in the alternative that the views expressed by
Winn LJ. and me in S.CM. (United Kingdom) Ltd. v. W. J. Whittall & B
Son Ltd. [1971] 1 Q.B. 337 were wrong. He said that if there was any
limitation on the recovery of economic loss, it was to be found by restrict-
ing the sphere of duty, and not by limiting the type of damages recoverable.
In this present case, he said, the defendants admittedly were under a duty
to the plaintiffs and had broken it. The damages by way of economic
loss were foreseeable, and, therefore, they should be recoverable. He cited ,-
several statements from the books in support of his submissions, including
some by myself.
At bottom I think the question of recovering economic loss is one of
policy. Whenever the courts draw a line to mark out the bounds of duty,
they do it as matter of policy so as to limit the responsibility of the
defendant. Whenever the courts set bounds to the damages recoverable—
saying that they are, or are not, too remote—they do it as matter of policy D
so as to limit the liability of the defendant.
In many of the cases where economic loss has been held not to be
recoverable, it has been put on the ground that the defendant was under
no duty to the plaintiff. Thus where a person is injured in a road accident
by the negligence of another, the negligent driver owes a duty to the
injured man himself, but he owes no duty to the servant of the injured j
man—see Best v. Samuel Fox & Co. Ltd. [1952] A.C. 716, 731: nor to
the master of the injured man—Inland Revenue Commissioners v. Ham-
brook [1956] 2 Q.B. 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 F
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 K.B. 127, 139 and Margarine Union G.m.b.H. v.
Cambay Prince Steamship Co. Ltd. [1969] 1 Q.B. 219, 251-252. G
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) L.R. 10 Q.B. 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: j ,
but those who only lost their wages could not. Similarly, when the defen-
dants' 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
 37
1 Q.B. Spartan Steel v. Martin & Co. (C.A.) Lord Denning M.R.
the negligent ship: though the same duty (of navigation with reason-
able care) was owed to both tug and tow: see Societe Anonyme de
Remorquage a Helice v. Bennetts [1911] 1 K.B. 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: see King v. Phillips [1953] 1 Q.B. 429, 439-440.
B 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] A.C. 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] A.C. 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."
D 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 recover-
able, or not. Thus in Wetter & Co. v. Foot and Mouth Disease Research
Institute [1966] 1 Q.B. 569 it was plain that the loss suffered by the
auctioneers was not recoverable, no matter whether it is put on the ground
that there was no duty or that the damage was too remote. Again in
Electrochrome Ltd. v. Welsh Plastics Ltd. [1968] 2 All E.R. 205, it is
plain that the economic loss suffered by the plaintiffs' factory (due to the
damage to the fire hydrant) was not recoverable, whether because there
was no duty or that it was too remote.
So I turn to the relationship in the present case. It is of common
p occurrence. The parties concerned are: the electricity board who are under
a statutory duty to maintain supplies of electricity in their district; the
inhabitants of the district, including this factory, who are entitled by
statute to a continuous supply of electricity for their use; and the con-
tractors who dig up the road. Similar relationships occur with other
statutory bodies, such as gas and water undertakings. The cable may be
damaged by the negligence of the statutory undertaker, or by the negligence
J
of the contractor, or by accident without any negligence by anyone: and the
power may have to be cut off whilst the cable is repaired. Or the power
may be cut off owing to a short-circuit in the power house: and so forth.
If the cutting off of the supply causes economic loss to the consumers,
should it as matter of policy be recoverable? And against whom?
The first consideration is the position of the statutory undertakers. If
[.[ the board do not keep up the voltage or pressure of electricity, gas or
water—or, likewise, if they shut it off for repairs—and thereby cause
economic loss to their consumers, they are not liable in damages, not
even if the cause of it is due to their own negligence. The only remedy
38
Lord Denning M.R. Spartan Steel v. Martin & Co. (C.A.) [1973]
(which is hardly ever pursued) is to prosecute the board before the
magistrates. Such is the result of many cases, starting with a water board— "•
Atkinson v. Newcastle & Gateshead Waterworks Co. (1877) 2 Ex.D. 441;
going on to a gas board—Clegg, Parkinson & Co. v. Earby Gas Co. [1896]
1 Q.B. 592; and then to an electricity company—Stevens v. Aldershot
Gas, Water & District Lighting Co. Ltd. best reported in (1932) 31 L.G.R.
48; also in 102 L.J.K.B. 12. In those cases the courts, looking at the
legislative enactments, held that Parliament did not intend to expose the JJ
board to liability for damages to the inhabitants en masse: see what Lord
Cairns L.C. said in Atkinson v. Newcastle & Gateshead Waterworks Co., 2
Ex.D. 441, 445 and Wills J. in Clegg, Parkinson & Co. v. Earby Gas Co.
[1896] 1 Q.B. 592, 595. In those cases there was indirect damage to the
plaintiffs, but it was not recoverable. There is another group of cases which
go to show that, if the board, by their negligence in the conduct of their
supply, cause direct physical damage or injury to person or property, they C
are liable: see Milnes v. Huddersfield Corporation (1886) 11 App.Cas. 511,
530 by Lord Blackburn; Midwood & Co. Ltd. v. Manchester Corporation
[1905] 2 K.B. 597; Heard v. Brymbo Steel Co. Ltd. [1947] K.B. 692 and
Hartley V. Mayoh & Co. [1954] 1 Q.B. 383. But one thing is clear: the
statutory undertakers have never been held liable for economic loss only.
If such be the policy of the legislature in regard to electricity boards, it Q
would seem right for the common law to adopt a similar policy in regard
to contractors. If the electricity boards are not liable for economic loss due
to negligence which results in the cutting off the supply, nor should a
contractor be liable.
The second consideration is the nature of the hazard, namely, the
cutting of the supply of electricity. This is a hazard which we all run. It
may be due to a short circuit, to a flash of lightning, to a tree falling on
the wires, to an accidental cutting of the cable, or even to the negligence
of someone or other. And when it does happen, it affects a multitude of
persons: not as a rule by way of physical damage to them or their property,
but by putting them to inconvenience, and sometimes to economic loss.
The supply is usually restored in a few hours, so the economic loss is not
very large. Such a hazard is regarded by most people as a thing they
must put up with—without seeking compensation from anyone. Some
there are who instal a stand-by system. Others seek refuge by taking
out an insurance policy against breakdown in the supply. But most
people are content to take the risk on themselves. When the supply is
cut off, they do not go running round to their solicitor. They do
not try to find out whether it was anyone's fault. They just put up with G
it. They try to make up the economic loss by doing more work next
day. This is a healthy attitude which the law should encourage.
The third consideration is this: if claims for economic loss were
permitted for this particular hazard, there would be no end of claims. Some
might be genuine, but many might be inflated, or even false. A machine
might not have been in use anyway, but it would be easy to put it down ^\
to the cut in supply. It would be well-nigh impossible to check the claims.
If there was economic loss on one day, did the claimant do his best to
mitigate it by working harder next day? And so forth. Rather than
 39
1 Q.B. Spartan Steel v. Martin & Co. (C.A.) Lord Denning M.R.
expose claimants to such temptation and defendants to such hard labour—
"• on comparatively small claims—it is better to disallow economic loss
altogether, at any rate when it stands alone, independent of any physical
damage.
The fourth consideration is that, in such a hazard as this, the risk of
economic loss should be suffered by the whole community who suffer the
losses—usually many but comparatively small losses—rather than on the
B one pair of shoulders, that is, on the contractor on whom the total of
them, all added together, might be very heavy.
The fifth consideration is that the law provides for deserving cases.
If the defendant is guilty of negligence which cuts off the electricity supply
and causes actual physical damage to person or property, that physical
damage can be recovered: see Baker v. Crow Carrying Co. Ltd. (un-
reported) February 1, 1960; Bar Library Transcript No. 45, referred to by
c
Buckley L.J. in S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son
Ltd. [1971] 1 Q.B. 337, 356; and also any economic loss truly consequential
on the material damage: see British Celanese Ltd. V. A. H. Hunt
(Capacitors) Ud. [1969] 1 W.L.R. 959 and S.C.M. (United Kingdom) Ltd.
v. W. J. Whittall & Son Ltd. [1971] 1 Q.B. 337. Such cases will be
comparatively few. They will be readily capable of proof and will be
D easily checked. They should be and are admitted.
These considerations lead me to the conclusion that the plaintiffs
should recover for the physical damage to the one melt (£368), and the
loss of profit on that melt consequent thereon (£400): but not for the loss
of profit on the four melts (£1,767), because that was economic loss in-
dependent of the physical damage. I would, therefore, allow the appeal
and reduce the damages to £768.
E
EDMUND DAVIES L.J. The facts giving rise to this appeal have already
been set out by Lord Denning M.R. Their very simplicity serves to high-
light a problem regarding which differing judicial and academic views
have been expressed and which it is high time should be finally solved.
The problem may be thus stated: Where a defendant who owes a duty
p of care to the plaintiff breaches that duty and, as both a direct and a
reasonably foreseeable result of that injury, the plaintiff suffers only
economic loss, is he entitled to recover damages for that loss?
In expressing in this way the question which now arises for determina-
tion, I have sought to strip away those accretions which would otherwise
obscure the basic issue involved. Let me explain. We are not here con-
cerned to inquire whether the defendants owed a duty of care to the plain-
® tiffs or whether they breached it, for these matters are admitted. Nor
need we delay to consider whether as a direct and reasonably foreseeable
result of the defendants' negligence any harm was sustained by the plain-
tiffs, for a " melt" valued at £368 was admittedly ruined and the defen-
dants concede their liability to make that loss good. But what is in
issue is whether the defendants must make good (a) the £400 loss of profit
pj resulting from that material being spoilt and (b) the £1,767 further loss of
profit caused by the inability to put four more "melts" through the
furnace before power was restored. As to (a), the defendants, while
making no unqualified admission, virtually accept their liability, on the
40
Edmund Davies LJ. Spartan Steel v. Martin & Co. (C.A.) [1973]
ground that the £400 loss was a direct consequence of the physical damage
caused to the material in the furnace. But they reject liability in respect
of (b), not because it was any the less a direct and reasonably foreseeable
consequence of the defendants' negligence than was the £400, but on the
ground that it was unrelated to any physical damage and that economic loss
not anchored to and resulting from physical harm to person or property is
not recoverable under our law as damages for negligence.
In my respectful judgment, however it may formerly have been B
regarded, the law is today otherwise. I am conscious of the boldness
involved in expressing this view, particularly after studying such learned
dissertations as that of Professor Atiyah on Negligence and Economic
Loss (1967) 83 L.Q.R. 248, where the relevant cases are cited. I
recognise that proof of the necessary linkage between negligent acts and
purely economic consequences may be hard to forge. I accept, too, that ^~
if economic loss of itself confers a right of action this may spell disaster
for the negligent party. But this may equally be the outcome where physical
damage alone is sustained, or where physical damage leads directly to
economic loss. Nevertheless, when this occurs it was accepted in S.C.M.
{United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B. 337
that compensation is recoverable for both types of damage. It follows that
this must be regardless of whether the injury (physical or economic, or a D
mixture of both) is immense or puny, diffused over a wide area or narrowly
localised, provided only that the requirements as to foreseeability and
directness are fulfilled. I therefore find myself unable to accept as factors
determinant of legal principle those considerations of policy canvassed in
the concluding passages of the judgment just delivered by Lord Denning
M.R. E

In particular, I have to say that I derive no assistance by considering

the position of statutory undertakers. To take the very first case cited
by Lord Denning M.R.—Atkinson v. Newcastle & Gateshead Waterworks
Co. (1877) 2 Ex.D. 441—Lord Cairns L.C. there stressed, at p. 448, that
liability " must, to a great extent, depend on the purview of the legislature
in the particular statute, and the language which they have there employed." p
As the Waterworks Causes Act 1847 provided for the imposition of a
monetary penalty for neglect of the undertakers' duty, inter alia, to keep
their pipes charged with water at a sufficient pressure and to allow all
persons to use it for extinguishing fires, the court held that the inference
was that no right of action was conferred. Wright J. adopted the same
approach in Clegg, Parkinson & Co. v. Earby Gas Co. [1896] 1 Q.B.
592, though Wills J. based his decision on the wider ground that, at p, 594: ^
". . . where there is an obligation created by statute to do something
for the benefit of the public generally or of such a large body of
persons that they can only be dealt with practically, en masse, as it
were, and where the failure to comply with the statutory obligation
is liable to affect all such persons in the like manner, though not „
necessarily in the same degree; there is no separate right of action
to every person injured, by breach of the obligation, in no other
manner than the rest of the public."
 41
1 Q.B. Spartan Steel v. Martin & Co. (C.A.) Edmund Davies LJ.
In Stevens v. Aldershot Gas, Water and District Lighting Co. Ltd. (1932) 31
^ L.G.R. 48, Macnaghten J. simply held, at p. 51:
" Where a statutory duty is imposed and where, in consequence, an
individual has suffered loss and a question arises whether he can claim
damages at common law or must proceed under the statute, the
decision must be that his remedy lies under the statute."

B He accordingly held that the recovery of the penalty provided by the

relevant statute was the only remedy. But the refusal of compensation in
these cases in no way turned on the nature of the injury sustained by the
complaining party. Atkinson's house was destroyed by fire, so there
was physical damage in plenty; Clegg " sustained damage to the amount
of £50 by reason of the supply of gas having been insufficient and impure,"
P the nature of the damage being unstated, but the action was one brought
not in tort but for alleged breach of contract to supply gas continuously
as required by the plaintiffs and in accordance with a local gas order;
while in Stevens' case the plaintiff hairdresser alleged that, as a result
of an electric transformer not working properly, the apparatus in her
salon was thrown out of action, her assistants were unable to work, her
business takings were reduced, and she claimed damages both under
D statute and in negligence for loss of earnings. The observations of Lord
Cairns L.C. in Atkinson V. Newcastle & Gateshead Waterworks Co. (1877)
2 Ex.D. 441, 445 to which Lord Denning M.R. has drawn special
attention, had reference to the non-performance of a statutory duty by a
water undertaking as a consequence of which " any number of house-
holders might happen to have their houses burnt down." But there is
F ample authority for the proposition that negligence in the performance of
statutory duties can create a cause of action (Geddis V. Proprietors of Bann
Reservoir (1878) 3 App.Cas. 430, per Lord Blackburn at p. 455) and as in
the remaining cases referred to by Lord Denning M.R. only physical damage
to person or property was sustained, the legal position had the damage
been economic only simply did not arise for consideration.
For my part, I cannot see why the £400 loss of profit here sustained
F should be recoverable and not the £1,767. It is common ground that both
types of loss were equally foreseeable and equally direct consequences of
the defendants' admitted negligence, and the only distinction drawn is that
the former figure represents the profit lost as a result of the physical
damage done to the material in the furnace at the time when power was
cut off. But what has that purely fortuitous fact to do with legal prin-
P ciple? In my judgment, nothing, and I would seek no stronger support
for my answer than the following passage from the judgment of Lord
Denning M.R. himself in S.C.M. (United Kingdom) Ltd. V. W. J. Whittall
& Son Ltd. [19.71] 1 Q.B. 337, 342:
"Damage was done to many factories by the cutting off of the
electricity supply. Those who had a stand-by system would not suffer
TT loss. But all others would suffer loss of production and loss of profit.
This could be reasonably foreseen. Some of the factories may have
: suffered material damage as well. But that should not give them a
special claim. Either all who suffered loss of profit, should get
42
Edmund Davies LJ. Spartan Steel v. Martin & Co. (C.A.) [1973]
damages for it, or none of them should. It should not depend on the
chance whether material damage was done as well." "•
Nevertheless, Lord Denning M.R. went on to point out, at p. 344:
" In actions of negligence, when the plaintiff has suffered no damage
to his person or property, but has only sustained economic loss, the
law does not usually permit him to recover that loss. The reason lies
in public policy." g
It should, however, be stressed that, as in that case physical damage was
sustained, observations regarding the position where the damage is econo-
mic only, while clearly commanding the greatest respect, are to be regarded
as strictly obiter.
Professor R. F. V. Heuston has observed in Salmond on Torts, 15th ed.
(1969), p. 262: " the reluctance to grant a remedy for the careless invasion _
of financial or pecuniary interests is longstanding, deep-rooted and not un-
reasonable," an observation cited with approval by Barrowclough C.J. in
Furniss V. Fitchett [1958] N.Z.L.R. 396, 401. The starting point usually
taken is the judgment of Blackburn J. in Cattle v. Stockton Waterworks
Co. (1875) L.R. 10 Q.B. 453 where the defendants had laid a defective
water pipe under a turnpike road. The resulting leakage of water ham-
pered the contractor's work of tunnelling under the road and greatly D
reduced his profit on a contract with the road owners. Holding that this
loss gave him no cause of action, Blackburn J. said, at p. 457:
". . . the objection is technical and against the merits, and we should
be glad to avoid giving it effect. But if we did so, we should estab-
lish an authority for saying that, in such a case as that of Fletcher v.
Rylands (1866) L.R. 3 H.L. 330 the defendant would be liable, not E
only to an action by the owner of the drowned mine, and by such of
his workmen as had their tools or clothes destroyed, but also to an
action by every workman and person employed in the mine, who in
consequence of its stoppage made less wages than he would otherwise
have done. And many similar cases to which this would apply might
be suggested. It may be said that it is just that all such persons should
have compensation for such a loss, and that, if the law does not give F
them redress, it is imperfect. Perhaps it may be so."
Was Blackburn J. there saying that damages could not be recovered if
only pecuniary loss flowed from a negligent act? Or was he saying that
the pecuniary loss sustained by the plaintiff in that case, and such pecuniary
loss as would arise in the hypothetical cases he gave, was not recoverable
because it was too remote? I believe that Blackburn J. was saying no G
more than the latter, and that this is demonstrated by the fact that he
continued his judgment in this way:
" But, as was pointed out by Coleridge J., in Lumley v. Gye (1853)
2 E. & B. 216, 252, courts of justice should not ' allow themselves, in
the pursuit of perfectly complete remedies for all wrongful acts, to
transgress the bounds, which our law, in a wise consciousness as I p
conceive of its limited powers, has imposed on itself, of redressing
only the proximate and direct consequences of wrongful acts' In this
we quite agree."
 43
1 Q.B. Spartan Steel v. Martin & Co. (C.A.) Edmund Davies LJ.
Despite the frequency with which Cattle v, Stockton Waterworks Co.
is cited as authority for the proposition that pecuniary loss, without more,
can never sustain an action for negligence, I respectfully venture to think
that Blackburn J. was there laying down no such rule. Had he intended
to do so when, two years later as Lord Blackburn, he was a party to die
decision in Simpson & Co. v. Thomson (1877) 3 App.Cas. 279, this fact
would surely have emerged when he concurred, at pp. 292 et seq., in the
B dismissal of underwriters' claim for recoupment of the sum they had paid
for a total loss.
To revert to S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son
Ltd. [1971] 1 Q.B. 337, Lord Denning M.R. said, at p. 345:
" I must not be taken, however, as saying that economic loss is
always too remote. There are some exceptional cases when it is the
C immediate consequence of the negligence and is recoverable accord-
ingly."
Lord Denning M.R. went on to give examples of such " exceptional
cases." But before turning to them, reference should be made to
Societe Anonyme de Remorquage a Helice v. Bennetts [1911] 1 K.B. 243.
There a steam tug belonging to the plaintiffs was engaged under a towage
D contract in towing a ship. That ship was struck by a steamship belonging
to the defendant owing to the negligence of his servants, but no damage
was caused to the tug. The plaintiffs sued to recover as damages the
towage remuneration they would have earned if they had completed the
towage contract. Founding himself upon Cattle v. Stockton Waterworks
Co., L.R. 10 Q.B. 453, Hamilton J. held that the plaintiffs had failed to
show that they had sustained " damage recognised by law." That case
needs to be contrasted with Morrison Steamship Co. Ltd. v. Greystoke
Castle (Cargo Owners) [1947] A.C. 265, where cargo owners sustained
purely financial loss as the result of a collision between the vessel carrying
their cargo and another, and were held entitled to recover from the owners
of the colliding ship the general average contribution which they had
become liable to pay. Lord Roche there said, at p. 279:
"There remains for consideration the contention on behalf of the
appellants that the respondents had no direct right of suit because it
was said that: (a) their cargo sustained no material or physical damage
and an expense occasioned to them after the collision in connection
with a contract was not actionable; . . . As to the first branch of this
contention, I would observe that in my judgment if the expense is
G occasioned by the collision and if it is the expense in whole or in
part of the cargo owners—. . . then no authority was cited to support
the proposition that whether by land or by sea physical or material
damage is necessary to support a cause of action in a case like this.
I do not regard the case of Societe Anonyme de Remorquage a
Helice v. Bennetts [1911] 1 K.B. 243 which was cited as any such
TT authority. If it was correctly decided, on which I express no opinion,
I think it must depend on a view that one vessel (A) does not owe to
the tug which is towing vessel (B) any duty not negligently to collide
with(B)."
44
Edmund Davies L.J. Spartan Steel v. Martin & Co. (C.A.) [1973]
Lord Roche's observation that " n o authority was cited," etc. is
significant as indicating that he did not regard Cattle v. Stockton Water-
works Co. as supporting the proposition he was rejecting; there is no
question of that great commercial judge having momentarily overlooked
that decision, for it was the foundation of Hamilton J.'s judgment in
Societe Anonyme de Remorquage a Helice v. Bennetts [1911] 1 K.B. 243
and had clearly been cited to their Lordships: see per Lord Simonds, at
p. 306. Lord Roche went on to give an illustration which is worthy of B
being recalled, at p. 280:
". . . if two lorries A and B are meeting one another on the road, I
cannot bring myself to doubt that the driver of lorry A owes a duty
to both the owner of lorry B and to the owner of goods then carried
in lorry B. Those owners are engaged in a common adventure with
or by means of lorry B and if lorry A is negligently driven and damages Q
lorry B so severely that whilst no damage is done to the goods in it
the goods have to be unloaded for the repair of the lorry and then
reloaded or carried forward in some other way and the consequent
expense is by reason of his contract or otherwise the expense of the
goods owner, then in my judgment the goods owner has a direct cause
of action to recover such expense."
ID
In S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1
Q.B. 337, 346 Lord Denning M.R. said of this illustration that the goods
owner's economic loss " i s analogous to physical damage: because the
goods themselves had to be unloaded," but I have to say that in my
respectful judgment this will not do, that the suggested analogy is mis-
leading, and that Lord Roche was illustrating the proposition he favoured
that purely economic loss can be per se sufficient in negligence. ^
In Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C.
465, one of those "exceptional cases" referred to by Lord Denning
M.R. in S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. and
a landmark in the branch of the law with which we are here concerned, Lord
Devlin, referring to Morrison Steamship Co. Ltd. v. Greystoke Castle
(Cargo Owners), said, at p. 518: F
" Their Lordships did not in that case lay down any general principle
about liability for financial loss in the absence of physical damage;
but the case itself makes it impossible to argue that there is any general
rule showing that such loss is of its nature irrecoverable."
This is increasingly recognised as being the legal position, and ample
illustrations of this are available. Thus in Ministry of Housing v. Sharp * J
[1970} 2 Q.B. 238, Salmon L J . said, at p. 278:
" S o far, however, as the law of negligence relating to civil actions
is concerned, the existence of a duty to take reasonable care no longer
depends upon whether it is physical injury or financial loss which can
reasonably be foreseen as a result of a failure to take such care."
H
And in Button V. Bognor Regis Urban District Council [1972] 1 Q.B.
372, 404 Sachs L J . said that ". . . to pose the question: ' I s it physical
damage or economic damage? ' is to adopt a fallacious approach."
 45
1 Q.B. Spartan Steel v. Martin & Co. (C.A.) Edmund Davies LJ.
Having considered the intrinsic nature of the problem presented in this
appeal, and having consulted the relevant authorities, my conclusion, as
already indicated, is that an action lies in negligence for damages in
respect of purely economic loss, provided that it was a reasonably foresee-
able and direct consequence of failure in a duty of care. The application
of such a rule can undoubtedly give rise to difficulties in certain sets of
circumstances, but so can the suggested rule that economic loss may be
B recovered provided it is directly consequential upon physical damage.
Many alarming situations were conjured up in the course of counsel's
arguments before us. In their way, they were reminiscent of those formerly
advanced against awarding damages for nervous shock; for example, the
risk of fictitious claims and expensive litigation, the difficulty of disproving
the alleged cause and effect, and the impossibility of expressing such a
claim in financial terms. But I suspect that they (like the illustrations
^ furnished by Lord Penzance in Simpson & Co. v. Thomson (1877) 3
App.Cas. 279, 289 et seq.) would for the most part be resolved either on
the ground that no duty of care was owed to the injured party or that the
damages sued for were irrecoverable not because they were simply
financial but because they were too remote.
The much misunderstood decision in Electrochrome Ltd. v. Welsh
D Plastics Ltd. [1968] 2 All E.R. 205 affords a modern illustration of this
point. B's servant negligently damaged a fire hydrant belonging to C.
A alleged that, as a result, the water supply to his factory was thereby inter-
rupted, thereby causing him to suspend work and, in consequence, to suffer
considerable financial loss. But, after being exhaustively scrutinised, the
alleged loss of productivity was simply never established. The court had no
difficulty in detecting the element of considerable exaggeration. At the end
E of the day, the claim was reduced to a mere £29 10s. representing the value
of the diminished water supply to A's factory (which C had contracted to
provide) until the damage was repaired: see p. 206. This Geoffrey Lane J.
dismissed on the ground that B's duty of care was owed only to C, the owner
of the hydrant and not to A. However unconsciously, he was thereby
echoing Denning LJ. who, in Candler V. Crane, Christmas & Co. [1951]
p 2 K.B. 164, blazing the trail which was to lead to Hedley Byrne & Co.
Ltd. v. Heller & Partners Ltd. [1964] A.C. 465, said, at p. 179:
" I can understand that in some cases of financial loss there may not
be a sufficiently proximate relationship to give rise to a duty of care;
but, if once the duty exists, I cannot think that liability depends on the
nature of the damage."
G That approach to the clear facts of the present case has, if I may say
so, the virtues of good sense and of fairness. Here too the line has to be
drawn where " in the particular case the good sense of the judge decides."
In this connection I respectfully adopt the observations of Professor
Goodhart, (1971) 87 L.Q.R. 10:
". . . the fact that the judge has good sense does not explain the
JJ grounds on which he has based his decision. It is submitted that the
first of these grounds is that the court must decide whether a reasonable
person in the position of the defendant ought to have foreseen that
an accident could arise if he failed to take care. The second is, could
46
Edmund Davies LJ. Spartan Steel v. Martin & Co. (C.A.) [1973]
a reasonable person foresee that damage of the nature which the
plaintiff suffered might arise from his act? The third is, would a
reasonable person in these circumstances have taken reasonable care
to avoid the harmful consequences? In Liesbossh, Dredger v. Edison
S.S. [1933] A.C. 449 ought the defendant to have foreseen that if the
dredger was sunk this might lead to the plaintiff's failure to perform
his contract as he did not have sufficient resources to hire another
dredger? Both these consequences were foreseeable, but it would B
not have been reasonable to expect the defendants to guard against
the loss caused by the impecunious condition of the plaintiffs by in-
suring against such a consequence."
Such good sense as I possess guides me to the conclusion that it would be
wrong to draw in the present case any distinction between the first, spoilt
" melt" and the four " melts " which, but for the defendants' negligence, C
would admittedly have followed it. That is simply another way of saying
that I consider the plaintiffs are entitled to recover the entirety of the
financial loss they sustained.
I should perhaps again stress that we are here dealing with economic
loss which was both reasonably foreseeable and a direct consequence of
the defendants' negligent act. What the position should or would be were £>
the latter feature lacking (as in Weller & Co. v. Foot and Mouth Disease
Research Institute [1966] 1 Q.B. 569) is not our present concern. By
stressing this point one is not reviving the distinction between direct and
indirect consequences which is generally thought to have been laid at rest
by The Wagon Mound [1961] A.C. 388, for, in the words of Professor
Atiyah, Negligence and Economic Loss, 83 L.Q.R. 263, that case
E
, " was solely concerned with the question whether the directness of
the damage is a sufficient test of liability, . . . In other words, The
Wagon Mound merely decides that a plaintiff cannot recover for
unforeseeable consequences even if they are direct; it does not decide
that a plaintiff can always recover for foreseeable consequences even
if they are indirect."
F
Both directness and foreseeability being here established, it follows that I
regard Faulks J. as having rightly awarded the sum of £2,535.
Having regard to the route which has led me to this conclusion, it is
not necessary for me to express any concluded view regarding the topic
of " parasitic damages." I content myself with saying that, whatever
be the scope of such a concept in other and wholly different branches of
the law, I am at present not satisfied that it can be invoked in cases of the G
type now under consideration.
I would be for dismissing the appeal.
LAWTON LJ. This appeal raises neatly a question which has been
asked from time to time since Blackburn J. delivered his well known
judgment in Cattle V. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453 H
and more frequently since the decision in Hedley Byrne & Co. Ltd. v.
Heller & Partners Ltd. [1964] A.C. 465, namely, whether a plaintiff can
recover from a defendant, proved or admitted to have been negligent,
 47
1 Q.B. Spartan Steel v. Martin & Co. (C.A.) Lawton LJ.
foreseeable financial damage which is not consequential upon foreseeable
"• physical injury or damage to property. Any doubts there may have been
about the recovery of such consequential financial damage were settled by
this court in S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd.
[1971] 1 Q.B. 337. In my judgment the answer to this question is that
such financial damage cannot be recovered save when it is the immediate
consequence of a breach of duty to safeguard the plaintiff from that kind
B of loss.
This is not the first time a negligent workman has cut an electric
supply cable nor the first claim for damages arising out of such an
incident. When in practice at the Bar I myself advised in a number of
such cases. Most practitioners acting for insurers under the so-called
" public liability" types of policy will have had similar professional
experiences; if not with electrical supply, with gas and water mains.
^ Negligent interference with such services is one of the facts of life and can
cause a lot of damage, both physical and financial. Water conduits have
been with us for centuries; gas mains for nearly a century and a half;
electricity supply cables for about three-quarters of a century; but there.is
not a single case in the English law reports which is an authority for the
proposition that mere financial loss resulting from negligent interruption
D of such services is recoverable. Why?
Many lawyers would be likely to answer that ever since. Cattle v.
Stockton Waterworks Co., L.R. 10 Q.B.. 453, such damages have been
irrecoverable. Edmund Davies LJ. has just stated that he doubts-whether
Blackburn J. laid down any such rule. Knowing that he had these doubts,
I have re-read Cattle v. Stockton Waterworks Co. The claim was in
negligence. The declaration was as follows:
" that defendants, being a water company, so negligently laid down
under a certain turnpike road their pipes for supplying water to a
district, and so negligently kept and maintained the pipes in such
insufficient repair, and in such imperfect and leaky condition, that,
while plaintiff was lawfully constructing for reward to the plaintiff a
tunnel across the turnpike road, and was lawfully using the road for
F such purpose, the pipes leaked, and large quantities of water flowed
into the road, and upon the plaintiff's workings, and flooded them,
and plaintiff was hindered and delayed in the work, and suffered
great loss."
The declaration raised precisely the problem which has to be solved in
this case; Blackburn J.'s answer was in these words, at p. 458:
" In the present case there is no pretence for saying that the defendants
were malicious or had any intention to injure anyone. They were, at
most, guilty of a neglect of duty, which occasioned injury to the
property of Knight, but which did not injure any property of the
plaintiff. The plaintiff's claim is to recover the damage which he has
sustained by his contract with Knight becoming less profitable, or, it
H may be, a losing contract, in consequence of this injury to Knight's
property. We think this does not give him any right of action."
Earlier in his judgment he had said, at p. 457: " No authority in
48
Lawton LJ. Spartan Steel v. Martin & Co. (C.A.) [1973]
favour of the plaintiff's right to sue was cited, and, as far as our know-
ledge goes, there was none that could have been cited." There is still "•
no authority directly in point today. Blackburn J.'s judgment has been
cited with approval and followed many times: the judgment of Hamilton
J. in Soci&e Anonyme de Remorquage a Helice v. Bennetts [1911] 1
K.B. 243, 248 and of Widgery J. in Weller & Co. v. Foot and Mouth
Disease Research Institute [1966] 1 Q.B. 569, 588 are instances. For
nearly a 100 years now contractors and insurers have negotiated policies B
and premiums have been calculated on the assumption that the judgment
of Blackburn J. is a correct statement of the law; and those affected
financially by the acts of negligent contractors have been advised time
and time again that merefinancialloss is irrecoverable.
It was argued that the law has developed since 1875, albeit the
development was unnoticed by Hamilton J. and Widgery J. Has it?
Mr. Bathurst based his argument about the law developing beyond the ^
limits delineated by Blackburn J. upon three planks: first, what Lord
Esher M.R. had said in In re London, Tilbury & Southend Railway Co. and
Trustees of Gower's Walk Schools (1889) 24 Q.B.D. 326; secondly,
what Buckley LJ. had said in Horton v. Colwyn Bay and Colwyn Urban
District Council [1908] 1 K.B. 327, 341 and, thirdly, what the House of
Lords had decided in Morrison Steamship Co. Ltd. v. Greystoke Castle D
(Cargo Owners) [1947] A.C. 265. Both Lord Esher M.R. and Buckley
LJ. made general statements about what kinds of damage can be re-
covered; and if those statements are to be followed without any qualifica-
tion, mere financial loss is recoverable in an action for negligence. It is
pertinent to note, however, that both cases were concerned with the assess-
ment of compensation under statute and in each case the court had to
decide how to construe and apply the statute. Clearly both statements ^
were obiter and, in my judgment, over-simplifications. If, in the Greystoke
Castle case, the House of Lords overruled Cattle v. Stockton Waterworks
Co., L.R. 10 Q.B. 453, it did so by an unobserved flanking movement, not
by a direct assault. The two leading counsel, Sir William McNair K.C.
and Sir Robert Aske K.C, do not seem to have appreciated that a bastion
of the common law was in danger of falling, as neither seems to have p
cited Cattle v. Stockton Waterworks Co. The only one of the Law Lords
who did was Lord Simonds, who clearly did so with respect and
approval: his speech, however, was a dissenting one. Lord Roche com-
mented upon the judgment of Hamilton J. in Societe Anonyme de
Remorquage a Helice v. Bennetts [1911] 1 K.B. 243, He sought to ex-
plain it on the ground that the unsuccessful plaintiff had not proved a
breach of duty. Had he intended to disapprove a long-standing judgment Q
of such an eminent common lawyer as Blackburn J., I would have ex-
pected him to have done so in terms. The House did, however, by a
majority, adjudge that the cargo owners had a direct claim against the
owners of the colliding ship for a proportion of the general average con-
tribution. The case was argued and speeches delivered on the basis that
the House was considering a problem of maritime law. I would not have JJ
the temerity to express any opinion as to the extent to which maritime
law and the common law differ as to the kinds of damage which are
recoverable; but having regard to their differing historical developments,
 49
1 Q.B. Spartan Steel v. Martin & Co. (C.A.) Lawton LJ.
it would not surprise me if there were divergences. The policies governing
their developments may well have been different. What I am satisfied
about is that the House of Lords in the Greystoke Castle case [1947] A.C.
265 cannot be said to have overruled Cattle V. Stockton Waterworks Co.,
L.R. 10 Q.B. 453.
The differences which undoubtedly exist between what damage can
be recovered in one type of case and what in another cannot be reconciled
B on any logical basis. I agree with Lord Denning M.R. that such differences
have arisen because of the policy of the law. Maybe there should be one
policy for all cases; the enunciation of such a policy is not, in my judgment,
a task for this court.
Mr. Bathurst appreciated that his broad submission about recovering
financial loss might fall at the hurdle presented by Cattle v. Stockton Water-
Q works Co., L.R. 10 Q.B. 453. As an alternative submission he sought
to rely upon the so-called concept of parasitic damages. Those who
support this concept argue that once physical injury or damage to
property has been proved, all foreseeable financial loss consequent upon
the wrong-doing is recoverable: in some way it becomes hitched on to, or
attached to, the physical injury or damage to property. The cases he
cited in support were, with two exceptions, far removed from actions for
D negligence. The two exceptions were Lampert v. Eastern National Omni-
bus Co. [1954] 1 W.L.R. 1047 and Seaway Hotels Ltd. v. Gragg (Canada)
Ltd. and Consumer Gas Co. (1960) 21 D.L.R. (2d) 264. In the first,
Hilbery J. adjudged that the facts relied upon as the basis of the claim
for financial loss had not been proved so that the case cannot be an
authority for this concept. In the second, doubts were expressed in
E S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd. [1971] 1 Q.B.
337 by both Lord Denning M.R. and Buckley L.J. as to whether the mere
financial loss would have been recoverable under an English judgment.
Thurston v. Charles (1905) 21 T.L.R. 659 was a claim for damages for
the detention and conversion of a letter. In Jackson v. Watson & Sons
[1909] 2 K.B. 193 the successful claim was for damages for a breach of
P warranty on the sale of a tin of salmon which had poisoned the purchaser's
wife whereby he had lost the benefit of her services through her death.
In Griffith v. Richard Clay & Sons Ltd. [1912] 2 Ch. 291, the plaintiff
claimed an injunction and damages for the obstruction by the defendants
of his ancient lights. He was awarded damages but refused an injunction,
a fact which may explain why the basis for the award of damages was as
broad as it was. I do not find it necessary to make a detailed examination
*•* of these cases because, in my judgment, the comment which was made by
the editor of Mayne & MacGregor on Damages, 12th ed. (1961), p. I l l ,
correctly and neatly sums up the position. After referring to Buckley LJ.'s
dictum in Horton v. Colwyn Bay and Colwyn Urban District Council [1908]
1 K.B. 327 upon which I have already commented, he wrote:
„ . "This is an over-simplification and there is no necessity in principle
to adopt such a sweeping statement. Each tort is different and, since
the matter is one of policy, each can be decided in a different way
from the next one."
50
Lawton LJ. Spartan Steel v. Martin & Co. (C.A.) [1973]
In my judgment the rule enunciated in 1875 by Blackburn J. is the correct
one to apply in negligence cases.
When this principle is applied to the facts of this case it produces the
result referred to by Lord Denning M.R, in his judgment. I too would
allow the appeal and reduce the damages to £768.

Appeal allowed with costs in Court of

Appeal. B
Damages reduced to £768.

Solicitors: Allan Jay & Co. for William F. Hatton & Co., Dudley;
Herbert Oppenheimer, Nathan & Vandyk.
H. J.
C

D
[COURT OF APPEAL]

GENERAL ACCIDENT FIRE AND LIFE ASSURANCE

CORPORATION LTD. v. FOSTER

[1970 G. No. 1341] E

1972 July 7 Lord Denning M.R., Sachs and Buckley L.JJ.

Legal Aid—Costs—Act of 1964—Unassisted party successful—
Plaintiff insurance company claiming costs out of legal aid
fund—Whether "proceedings . . . finally decided" in plain-
tiff's favour—Whether "just and equitable"—Whether means p
of applicant bar to successful application—Merits of unsuc-
cessful appeal—Legal Aid Act 1964 (c. 30), s. 1
The plaintiff insurance company claimed £866 against the
defendant in respect of moneys had and received by him as
their agent. The registrar gave them judgment under R.S.C.,
Ord. 14. The defendant got legal aid and appealed. Kilner
Brown J. varied the registrar's order by giving the plaintiffs Q
judgment for £650 with leave to defend as to the balance.
The defendant appealed with legal aid. The Court of Appeal
gave judgment for £450 absolutely with leave to defend as to
£341-50 on condition that the latter sum was brought into
court. The plaintiffs were given an order for costs which was
not to be enforced without further application to the court,
the defendant to have no present liability.
The defendant's solicitors declined to act further for him, „
his legal aid certificate was discharged and the plaintiffs "
obtained judgment in the county court for the £341-50 without
appearance by him.
On the plaintiffs' application under section 1 of the Legal