15 July 1971
|HOLLAND & HANNEN & CUBITTS (SCOTLAND) LTD. DYNAMCO LTD. v. JAMES HARRISON & CO. (BUILDERS) LTD|
The submission for the pursuers was that, on the principles of negligence, including the question of foreseeability as developed in the law of Scotland, the pursuers' averments were relevant. It was maintained that the observations in English cases or the decisions in English cases on which the defenders relied were not in accordance with the law of Scotland and were, in any event, incorrect.
There were some matters of agreement in the submissions by counsel. It was agreed that claims for damages arising from intentional harm were in a different category and that the legal principles to be applied in such cases were of no assistance in the present cases. Claims for damages arising from negligent mis-statements were in different category. Liability for injury to a person or damage to property through an act of negligence extended to all the natural and direct consequences of that injury or damage. Financial or economic loss, including loss of profit, directly arising from physical damage to property by an act of negligence, is a legitimate item of claim by the owner or possessor of the property against the wrongdoer. The question at issue between the parties in the present cases is therefore a narrow one. It is whether actual physical damage to the machinery owned by the pursuers was a necessary prerequisite to claims for loss of profit arising from loss of use of the machinery, or whether there could be competent claims for loss of profit where such machinery was rendered useless for its purpose, although not physically damaged. It was agreed that there was no reported decision in Scotland in which this question was decided and no discussion about it in the Scottish text-books.
I commence by considering the submissions by pursuers' counsel. Reference was made to Erskine's Institute, III, i, 13 and 14, for an example of damages for economic loss for negligence which was unconnected with injury to person or property. That case was very special and was not relied on for a principle, or indeed for anything else. The case relied on for principle was Allan v. Barclay (1864) 2 M 873, 2 Macph. 873, and the principle is that stated by the Lord Ordinary (Kinloch) at p. 874. It is in these terms:
"The grand rule on the subject of damages is, that none can be claimed except such as naturally and directly arise out of the wrong done; and such, therefore, as may reasonably be supposed to have been in the view of the wrongdoer."
The loss of use of the machinery by the pursuers and the loss of profits suffered thereby were, it was said, reasonably foreseeable by the defenders, on the averments, and therefore liability was relevantly averred. The matter was put in another way. The injury of having machinery idle was a "direct" and not a "secondary" result of the negligence which is founded upon and is therefore in the same category as physical damage. I do not think that this principle, although unexceptionable and repeated many times in the authorities, in identical or similar words, necessarily assists the pursuers. The question is, what consequences of a negligent act does the law of Scotland hold to have been "reasonably foreseeable"? The limitations set by the law are important in this connection.
Counsel for the purusers agreed that the law of Scotland, and indeed of England, placed a limit on the consequences which can be said to have been reasonably foreseeable from a negligent act. The case of Allan v. Barclay is a good example, and Lord Kinloch stated, after the passage quoted earlier by me, that a wrongdoer "cannot be held bound to have surmised the secondary injuries done to all holding relations with the individual, whether that of a master, or any other." In that case, as in Reavis v. Clan Line Steamers, 1925 SC 725, it was held that an employer cannot recover damages for an injury done to his servant by a third party. These are truly secondary claims, which are incompetent, and the knowledge or imputed knowledge of the wrongdoer is of no consequence. It was said that such cases an Allan and Reavis were distinguishable because of the contractual relationship, which was not within the scope of reasonable foreseeability.
It is, I think, important to consider why the contractual relationship was held by the Court in Reavis not to be within the scope of reasonable foreseeability by the wrongdoer. Apart from observations on the novelty of the claim by all the judges in Reavis, both the Lord Ordinary (Constable) and the Lord President (Clyde) stated their reasons why, in the circumstances of that case, financial loss which arose from a contractual relationship could not be a legally recognised claim. They both referred in this connection, to the speech of Lord Penzance in Simpson & Co. v. Thomson, 5 R. (H.L.) 40, the Lord Ordinary at p. 732 and the Lord President at p. 740. Lord Penzance said, inter alia(at p. 46):
"principle involved seems to me to be this, that where damage is done by a wrongdoer to a chattel, not only the owner of that chattel, but all those who by contract with the owner have bound themselves to obligations which are rendered more onerous, or have secured to themselves advantages which are rendered less beneficial, by the damage done to the chattel, have a right of action against the wrongdoer, although they have no immediate or reversionary property in the chattel, and no possessory right by reason of any contract attaching to the chattel itself, such as by lien or hypothecation. This, I say, is the principle involve in the respondents' contention. If it be a sound one, it would seem to follow that if by the negligence of a wrongdoer goods are destroyed which the owner of them had bound himself by contract to supply to a third person this person as well as the owner has a right of action for any loss inflicted on him by their destrcution."
After referring to the application of this suggested principle to cases where there was an injury to the person, as was the point in Reavis, he continued:
"Such instances might be indefinitely multiplied, giving rise to rights of action which in modern communities, where every complexity of mutual relation is directly created by contract, might be both numerous and novel."
He later stated his conclusions in these words:
"But the ground upon which I will ask your Lordships to reject this contention of the respondents' counsel is this, that upon the cases cited no precedent or authority has been found or produced to the House for an action against the wrongdoer, except in the name, and therefore in point of law on the part of one who had either some property in or possession of the chattel injured. On the other hand, the existence of authorities in which the suit has been brought in the name of the owner, though for the benefit of persons having a collateral interest, is somewhat strong to shew that such persons had no right of action in themselves."
These observations by Lord Penzance were also discussed and applied in S.C.M. Ltd. and the other case mentioned in S.C.M. Ltd., where the circumstances were similar to those averred in the present cases.
I pause here to say that there was nothing in these submissions on Scots law by pursuers' counsel which could support their submission that their actions were relevant. On the contrary, on the application of the ratio of Reavis and the above opinion of Lord Penzance, their actions are, in my view, irrelevant. It seems to me that, on the submissions made by pursuers' counsel on Scots law, financial or economic loss from damage to property owned by another person is not a legally admissible claim against the negligent wrongdoer, whether or not there was a contractual or other relationship with the owner of the damaged property. A negligence wrongdoer is not to be held bound to have surmised purely financial or economic loss to persons other than the owners or possessors of damaged property.
The submissions by pursuers' counsel were not confined to Scots law. They founded on some judicial dicta in other cases which are quoted in S.C.M. Ltd., in order to try to show that certain observations in S.C.M. Ltd. which were against their submissions were unjustified, and that some cases which were approved in S.C.M. Ltd. were incorrectly decided, even in accordance with English law. Contrary to their earlier submission, their alternative argument was that the laws of Scotland and England were the same on this point.
I do not intend to refer in detail to all the English cases to which I was referred, but it is my opinion that the cases of Weller v. Foot and Mouth Disease Research Institute,  1 Q.B. 569, and Electrohrome v. Welsh Plastics,  2 All E.R. 205, were decided in accordance with principles which are applicable in Scots law today. There was an extensive and detailed review of the authorities, including Simpson & Co., by Widgery J. in Weller & Co. and by Geoffrey Lane J. in Electrohrome. Their views were approved in S.C.M. Ltd. by the Court of Appeal. The submission by pursuers' counsel was that Weller & Co. and Electrochrome were wrongly decided, and that the observations in S.C.M. Ltd. approving them were incorrect. I do not think it necessary to analyse the two cases of Weller & Co. and Electrochrome,but before I consider the judicial dicta which were said by pursuers' counsel to be in line with their submissions, I have some observations on S.C.M. Ltd. I consider this case in more detail because the defenders relied on the observations by the judges and because the judicial dicta on which the pursuers relied are discussed in it.
The case of S.C.M. Ltd. was an appeal on a preliminary question of law whether, on the facts set out in an amended statement of claim, the defendants were liable. The facts, very briefly, were that a workman of the defendants damaged an electric cable so badly that the power to the plaintiffs' factory failed for a time. One result was that molten materials in the machines of their factory solidified owing to lack of electric heat. This caused trouble in clearing the machines and it took the plaintiffs much of the time when the current was off. Some parts of the machines were damaged beyond recovery. The plaintiffs lost not only the value of these items but also the profits from one full day's production, for all of which they claimed damages. It is important that in that case the claim, as expressly stated by the plaintiffs' counsel, was only for material damage to the machines and loss of production consequent on that material damage. The opinion of Lord Denning M.R., with his observations on economic loss arising from loss of use of the machinery which was not damaged, was read in full and founded upon by the defenders. The observations of the other judges on this aspect and their approval of certain other cases were also founded upon. The observations in that case on the point at issue in the present cases are, it was agreed, obiter. I think that these observations, in so far as they relate to the principles which are applicable to the present cases, are in accordance with the law of Scotland, as I understand it and as I have previously stated it.
Some support was sought by pursuers' counsel from dicta by Lord Roche in Morrison Steamship Co. v. Greystoke Castle (Cargo Owners),  A.C. 265, at pp. 279 and 280. This was a case where cargo-owners brought the action for a general average contribution and the facts are very different from those in the present cases. Lord Denning M.R. in S.C.M. Ltd. refers (at p. 346) to the observations by Lord Roche and to the illustration which he gave. Pursuers' counsel argued that the cause of the loss in the present cases was, as Lord Denning said of the illustration given by Lord Roche, "analagous to physical damage." While not necessarily accepting Lord Denning's observation on this, I cannot accept the extension to it suggested by pursuers' counsel. There were, in any event, conflicting dicta in that case and I refer to Lord Simonds' speech at pp. 305–6, where he expressly refers to and adopts the general observations by Lord Penzance in Simpson & Co. to which I have previously referred, and which are more clearly applicable to the circumstances in the present cases. Viscount Simon (at pp. 276–7) concurred with Lord Simonds. Although both were in the dissenting minority, on the decision, Lord Porter, who was in the majority, appeared (at p. 296) to have the same opinion as Lord Simonds on this point. I refer to the observations by Widgery J. in Weller & Co. (at pp. 580 et seqq.) and by Winn L.J. in S.C.M. Ltd. (at p. 351) on this case.
Support for the pursuers' proposition was also sought from dicta in the case of Hedley Byrne & Co. v. Heller & Partners,  AC 465. Great reliance was placed on the observations of Lord Devlin at p. 517. Reference was also made to the observations of Lord Hodson at p. 509 and of Lord Pearce at p. 536. These latter observations clearly do not support the pursuers' submissions, but Lord Devlin's general statement does. Lord Devlin's views on this were fully considered by Widgery J. in Weller & Co. at pp. 586–7, and I agree with his observations and his conclusions at p. 587. I also refer to the observations by Winn L.J. in S.C.M. Ltd. at p. 349. That obiter dictum by Lord Devlin does not, in my opinion, assist the pursuers. It was not and could not be suggested that the principles enunciated in that case had any bearing in the circumstances of the present cases.
I mention finally the only decision where the principle submitted by the pursuers appears to have been accepted. This is the Canadian case of Seaway Hotels Ltd. v. Gragg (Canada) Ltd., (1959) 17 D.L.R. (2d) 292 and (1960) 21 D.L.R. (2d) 264. I have not seen the full reports of that case, but it appears that the Ontario Court of Appeal held that the plaintiffs were entitled to recover the pecuniary loss which they sustained because their electrical supply had been cut off by an accident to a feeder cable. The loss for which they were awarded damages appears to have included damages for loss from closing the dinning room and cocktail bar some hours before the usual time, in addition of lack of electrical power to the refrigerators. This case is referred to in British Celanese Ltd. v. Hunt,  1 W.L.R. 959, at pp. 967–8, where Lawton J. made some adverse comments on it. It was also mentioned in S.C.M. Ltd. by Denning M.R. at p. 343, by Winn L.J. at p. 350 and by Buckley L.J. at p. 356. They approved of the decision only in so far as it related to the damage to the food. On the facts of that case, so far as known to me, the plaintiffs would only have been legally entitled to sue for the loss in regard to damage to food in Scotland.
My opinion is, to summarise, that by the law of Scotland the pursuers cannot competently sue for the financial loss on which their case is based, in that physical damage to property owned or possessed by them was not the cause of the loss. Whether the law should be extended to cover economic loss in cases of negligence, where there has been no damage to the property of the person claiming the loss, in another matter. There are many judicial observations in the cases which I have mentioned, including Reavis, on the multiplicity of litigations which could follow one act of negligence, if the law was as the pursuers stated it, and on the practical necessity for limitations. I refer, for a recent pronouncement in the House of Lords on this aspect, to the speech of Lord Pearce in Hedley at pp. 536–7, where he said:
"How wide the sphere of the duty of care in negligence is to be laid depends ultimately upon the courts' assessment of the demands of society for protection from the carelessness of others. Economic protection has lagged behind protection in physical matters where there is injury to person and property. It may be that the size and the width of the range of possible claims has acted as a deterrent to extension of economic protection."
If the pursuers are correct in their submissions, the results would be "startling," to use the word of Lord President Clyde in Reavis, at p. 740. Every company or person who uses electricity for business could have a claim for loss of profit and other pecuniary loss if a cable was damaged by negligence and electricity was cut off. There could be no distinction between owners or occupiers of factories with or without machinery, of shops, of offices, of hotels, of restaurants, of mines, of quarries, and, in some cases, of houses. The same principles would apply to claims for pecuniary or economic loss which arose from damage to a water pipe, as in Electrochrome, or from the escape of a dangerous virus, as in Weller & Co. It would apply to the consequences of damage to a telephone cable, and in fact there was an unsuccessful attempt to claim damages, in a County Court in England, for loss of business because a workman cut a telephone cable: see Elliott v. Sir Robert M'Alpine & Sons,  2 Lloyd's Rep. 482.
In all the circumstances, and for the reasons which I have given, I sustain the second plea in law for Holland & Hannan & Cubitts (Scotland) Ltd. in the first case and the first plea in law for James Harrison and Company (Builders) Ltd. in the second case and dismiss both actions.
The pursuers reclaimed in both actions, and the cases were heard together before the First Division (without Lord Johnston) on 22nd June 1971.
At advising on 15th July 1971,—
As the pursuers' case is a claim for reparation flowing from a breach of duty, they will have to show that the defenders owed them a duty and were in breach of that duty. The defenders deny that they owed any duty to the pursuers in the circumstances of this case. They also deny they were in breach of duty. So both these questions are open. They do not, however, arise at this stage, for the defenders contend that, even if they were in breach of a duty owed to the pursuers, the damage which they claim to have sustained in not recognised as reparable by the law of Scotland. They contend that there are certain losses in respect of which that law will not sustain a claim. In particular, it will not recognise a claim for financial loss which does not stem from damage to the climants' property.
The pursuers, on the other hand, contend that they have relevantly averred that the defenders owed them a duty to take reasonable care not to damage the electricity supply cable, that the defenders were in breach of that duty because they failed to ascertain the route of the cable and damaged it through the use of their excavator, and that their financial loss was a reasonably foreseeable consequence of the cutting off of electricity. Accordingly the defenders should have had that event in contemplation. Counsel for the pursuers conceded that liability for consequences, even if foreseeable, does not extent to all events which can be causally traced back to the breach of duty, but contended that in this case the pursuers are liable.
While I recognise that it may be difficult to lay down a rule which can be of general application, it is not necessary to do so in this case. The law of Scotland has for over a hundred years refused to accept that a claim for financial loss which does not arise directly from damage to the claimant's property can give rise to a legal claim for damages founded on negligence. That is the conclusion at which the Lord Ordinary has arrived, and I agree with him.
This proposition is supported by three cases. In Allan v. Barclay the pursuer claimed damages in respect of the loss of the services of his workman who was injured in a road accident due to the fault of the defender's servant. Lord Kinloch reported the case to the First Division and the claim was disallowed. Lord Kinloch said (at p. 874):
"The grand rule on the subject of damages is, that none can be claimed except such as naturally and directly arise out of the wrong done; and such, therefore, as may reasonably be supposed to have been in the view of the wrongdoer."
Their Lordships in the Division took the same view, and Lord President M'Neill (at p. 875) said it appeared to be a new proposal in the law of Scotland.
The case of Simpson & Co. v. Thomson concerned a claim by underwriters against the owner of two vessels belonging to the same person, one of which was insured with them. The House of Lords held that the underwriters could have no greater right of action than the owner had, and, as the owner of the insured vessel also the owner of the responsible for the negligent navigation of the wrong-doing vessel, neither he nor the underwriters could sue. In the course of his speech Lord Penzance, dealing with a contention for the pursuers, said (at p. 46):
"The principle involved seems to me to be this, that where damage is done by a wrongdoer to a chattel, not only the owner of that chattel, but all those who by contract with the owner have bound themselves to obligations which are rendered more onerous, or have secured to themselves advantages which are rendered less beneficial, by the damage done to the chattel, have a right of action against the wrongdoer, although they have no immediate or reversionary property in the chattel, and no possessory right by reason of any contract attaching to the chattel itself, such as by lien or hypothecation."
After giving some illustrations he went on to say (at pp. 46–7):
"But the ground upon which I will ask your Lordships to reject this contention … is this, that … no precedent or authority has been found or produced to the House for an action against the wrongdoer, except in the name, and therefore in point of law on the part of one who had either some property in or possession of the chattel injured."
Lord Blackburn agreed.
The third is Reavis v. Clan Line Steamers .Mrs Reavis and her orchestra were involved in a collision between two vessels in which the Rowan sank. Some members of the orchestra were drowned and others were injured. Mrs Reavis claimed, as damages, a sum as compensation for personal injuries and loss of effects; a sum representing loss of profits on the orchestra from the date of the collision to the disbanding of the orchestra; and a sum representing loss of profits through the break-up of the orchestra, which could not continue after losing so many of its members. The only dispute concerned her claims for loss of profits due to the loss of services through death or injuries of some of the members of the orchestra and its consequent disbandment. These claims were disallowed. Lord Constable in the Outer House referred to the passage by Lord Kinloch in Allan v. Barclay and he also referred to the speech of Lord Penzance in Simpson & Co. v. Thomson, from which I have quoted. He draws the conclusion that the sole right of action for injuries to property belongs to those who have legal right therein. Mrs Reavis could claim for loss of musical scores and for loss or diminution of her own earning power, but not for financial loss because she had been deprived of the services of persons who were useful to her. He accordingly dismissed this claim. In the Inner House their Lordships of the First Division took the same view. Lord President Clyde, after referring to Allan v. Barclay and a passage in Lord Fraser's work on Master and Servant (3rd ed., p. 311), said (at p. 740):
"In the law of Scotland … a person claiming reparation for injury by another person's fault cannot go beyond the effects of such injury on his own person, his own health, his own business or their capabilities, and his own property."
His Lordship then referred to the passage from the speech of Lord Penzance and finally reverted to and accepted the passage by Lord Kinloch on the grand rule on the subject of damages—"none can be claimed except such as naturally and directly arise out of the wrong done." Lord Cullen pointed out (at p. 741) that since 1864—the date of the decision in Allan v. Barclay —no instance of an action in respect of a loss of services had emerged in the law of Scotland.
I think this line of authority covers the present case. The pursuers cannot recover for loss of profits unless that loss arises from damage to their plant or materials. They could not recover for financial loss if the wrongful act of the defenders had deprived them of the valuable services of an employee, and I see no difference in principle between that financial loss and the financial loss they have sustained because the wrongful act of the defenders has deprived them of a supply of electricity. It was not their electricity. The damage was done outside their premises and before the cable reached their meter. It was not their cable and no part of their property was damaged.
Mr Cameron, for the pursuers, contended that the authorities I have referred to were before the decision in Donoghue v. Stevenson was pronounced. Lord Atkin said (at p. 44:
"Who, then, in law, is my neighbour ? The answer seems to be—persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question."
Counsel contended that since that decision the range of liability had been extended and that in the present case the defenders ought to have had in contemplation the consequences to the purusers (and other users of electricity) if the supply was cut off. These consequences embraced a stoppage of production followed by a loss of profits. The defenders not only owed a duty to the pursuers but were liable to recompense them for the loss arising from breach of that duty. I do not think the case of Donoghue v. Stevenson, which dealt with persons to whom a wrongdoer owed a duty, has altered Scots law on the measure of damages.
Counsel also contended that the defenders owed a duty to the pursuers not to cut off their electricity and that the stoppage of production was a direct damage to their business arising from the cutting off of the supply. Here again I do not think this contention goes beyond ascertainment of the scope of the duty. Even if the defenders owed such a duty to the pursuers, I do not think it extends the range of the defenders' liability. The wrongful act did not damage their property.
The Lord Ordinary has considered a number of English cases, including S.C.M. Ltd. v. W. J. Whittall . I prefer to decide the present case according to the law of Scotland, but nowhere among the English cases can I find authority for the proposition that a person can recover damages for financial loss which does not arise directly from damage to his property. On the contrary, not only are the dicta of Lord Denning M.R. at p. 344 and Winn L.J. at p. 348 in that case against that proposition, but so are the decisions in a number of the other cases referred to, including Weller & Co. v. Foot and Mouth Disease Research Institute .
In my opinion the Lord Ordinary arrived at the right decision and I would refuse the reclaiming motion and dismiss the action.
I would do the same in the second case.
At the time of these mishaps the industrial estate was said to be in course of development. The damaged cable or cables carried supplies of energy not only to the pursuers but to other occupiers of premises on the estate. It is alleged in both cases that damage was caused through the actions of certain of the defenders' servants because of the defenders' failure to take proper steps to ascertain by inquiry the position of these cables and to warn their servants against interference with them. As a result of these events the reclaimers say they sustained loss calculated by reference to certain estimated figures representative of loss of production and of profit. No actual physical damage is said to have been caused to any of the reclaimers' property, and therefore the claim in this case is based solely on economic damage and loss. The cables themselves were the property not of the reclaimers but of the statutory board. In these circumstances the defenders challenged the relevancy of the pursuers' pleadings, as disclosing no cause of action recognised by the law of Scotland. They also attacked the relevancy of the specific averments of fault themselves and contended that the damages claimed were in any event too remote, but the principal issue in these cases arises on the first point, because, if the defenders are right here, then that is an end of the case.
The damage said to have been sustained was, so the defenders maintained in their submissions to the Lord Ordinary, only indirectly and not directly the result of any negligence of the defenders and therefore too remote to found a relevant claim. The direct result of this negligence was the damage to the cable itself and for this a claim might lie at the instance of the electricity board, but no claim would lie for the indirect consequences, namely, loss arising from the the interruption of supply, albeit over a period of hours, during which the reclaimers' factory was put out of action. It is this contention which the Lord Ordinary has sustained.
The reclaimers are admittedly suing for the injurious consequences to them which arise out of damages caused to the property of another. None of their own property is said to have suffered any physical injury or damage as a result of the consequences of temporary interruption of their supply of electricity. The argument which the respondents successfully advanced can be simply stated and sufficiently supported. The property of the reclaimers was not damaged: therefore they cannot have a claim for consequential loss arising to them out of physical damage caused by negligence to the property of another with whom they were in contractual relations. There was no direct relationship of any kind between the assumed delinquents and themselves, and therefore no claim of damages would lie. The proposition was firmly based on the unchallenged authority of Allan v. Barclay, Simpson & Co. v. Thomson and Reavis v. Clan Line Steamers . To accept the reclaimers' argument would be to ignore the plain meaning and effect of these authorities, and the ratio of these decisions was clear. As Lord Kinloch put it in Allan v. Barclay (at p. 874, "The grnat rule on the subject of damages is, that none can be claimed except such as naturally and directly arise out of the wrong done; and such, therefore, as may reasonably be supposed to have been in the view of the wrongdoer … The personal injuries of the individual himself will be properly held to have been in the contemplation of the wrongdoer. But he cannot be held bound to have surmised the secondary injuries done to all holding realtions with the individual, whether that of a master, or any other."
Now in the later case of Simpson & Co. v. Thomson Lord Penzance dealt with an argument, advanced on behalf of underwriters, that by virtue of the policy which they had entered into the respect of a ship which was lost they had an interest of their own, and it was such as would support an action by them in their own names against the wrongdoer. Lord Penzance in dismissing the argument said this (at p. 46):
"This proposition virtually affirms a principle which I think your Lordships will do well to consider with some care, as it will be found to have a much wider application and signification than any which may be involved in the incidents of a contract of insurance. The principle involved seems to me to be this, that where damage is done by a wrongdoer to a chattel, not only the owner of that chattel, but all those who by contract with the owner have bound themselves to obligations which are rendered more onerous, or have secured to themselves advantages which are rendered less beneficial, by the damage done to the chattel, have a right of action against the wrongdoer, although they have no immediate or reversionary property in the chattel, and no possessory right by reason of any contract attaching to the chattel itself, such as by lien or hypothecation. This, I say, is the principle involved …"
In the case of Reavis,3 while the pursuer was held entitled to sue for her own personal injury and the loss of her baggage and effects in a collision at sea, she was held not entitled to insist in a claim for damages arising out of the loss alleged to have been sustained by her through the drowning of a number of misicians with whom she was in contract. It this line of authority is accepted as applicable to the circumstances of the present case, then it seems to me that the reclaimers cannot succeed.
This is a case of economic loss not associated with or brought about by physical or material injury or damage to corporeal property of the reclaimers. It is, on the contrary, a loss which arises as a consequence of the damage to the cable and one only of the consequences. In these circumstances, and on the line of authority I have cited, the loss would be too remote and indirect to be relevant to found a good claim for reparation. The law of Scotland, as illustrated by the well-known cases to which I have referred, is clear on this point and there is no Scottish authority to the contrary effect. It would also appear that this is in accordance with the law of England—see S. A. de Remorquage à Hélice v. Bennetts in which Hamilton J. (as he then was) adopts, quotes and applies the language of Lord Penzance in Simpson & Co. v. Thomson . It may be noted that Lord Penzance's observations in that case were accepted and concurred in my Lord Blackburn. But the reclaimers argued that this line of authority did not strike at the relevancy of their claim, because here there was a direct interference with the supply of energy which was transmitted by the cables, and that the interruption of production, with consequent probability of financial loss, was a direct interference. That being so, it should have been reasonably foreseeable by anyone in the position of the defenders. Further, it would be absurd to say that, if this interruption of supply had caused material injury to their machinery, there would have been a good claim of damages at their instance based on loss arising from the cost of repair and loss of production, as in the case of British Celanese v. A. H. Hunt Ltd., approved in S.C.M. Ltd. v. W. J. Whittall, but that, if loss occurred through inability to set machinery in motion because of lack of electrical energy, that loss could not be compensated. If injury of one kind could be foreseeable, then equally so could injury of the other. This argument appeared to me initially attractive, as at least it would appear to possess the merit of logical justification. But if it is once admitted, at what point is the line to be drawn ?
I would refer again to the often-quoted words of Lord Justice-Clerk Thomson in Malcolm v. Dickson (at p. 547):
"A wrongdoer is not held responsible for all the results which flow from his negligent act. Practical considerations dictate, and the law accepts, that there comes a point in the sequence of events when liability can no longer be enforced. This rule of convenience and common sense is enshrined in the maxim causa proxima non remota spectatur. It is for this Court to say whether as matter of law the pursuer's claim falls to be classified as proximate or remote. Both sides were agreed as to the test which fell to be applied, and we were referred to various dicta in Bourhill v. Young  AC 92 and Muir v. Glasgow Corporation . I cite but one of these, Lord Macmillian in the former case (at p. 88): ‘The duty to take care is the duty to avoid doing or omitting to do anything the doing or omitting to do which may have as its reasonable and probable consequence injury to others, and the duty is owed to those to whom injury may reasonably and probably be anticipated if the duty is not observed.’ The test of proximity is whether what has flowed from the act is what would have been anticipated by a reasonable man as a natural and probable consequence of it. It is fails to pass that test, it is too remote for the law to take cognisance of it."
I would draw particular attention to the words of Lord Macmillan, who limited the injury for which damages may be recoverable to that which is the "reasonable and probable" consequence of the act or omission which caused it. It is of course true that both Malcolm v. Dickson and Bourhill v. Young were cases of physical injury, but the principles there stated and accepted were not in any way said to be limited to such cases. In my opinion they were and are of general application. Further, law is, as Lord Denning observed in S.C.M. Ltd. v. W. J. Whittall (at p. 344), not conditioned or determined wholly by logic and in no chapter of the law is this more true than in the matter of the extent of legal liability to make reparation for loss sustained through negligent acts or omissions. In the familiar language of Lord Wright in Dredger Liesbosch v. S.S. Edison (at p. 460):
"In the varied web of affairs, the law must abstract some consequences as relevant, not perhaps on grounds of pure logic but simply for practical reasons."
It is in face of these formidable difficulties that the reclaimers' argument, which sought to by-pass Allan v. Barclay, Simpson & Co. v. Thomson and Reavis v. Clan Line Steamers, is to be considered. As put by Mr Cameron in his careful address, it was based on the initial submission that the reclaimers were within the area of those who would be directly affected by a negligent act which caused damage to an electrical supply cable. Two results were said to follow directly and simultaneously from the rupture of the cable: (1) physical damage to the cable, and (2) immediate rupture of the supply of energy. Consequently they were directly affected by the defenders' negligence and such injurious affection was something which should have been within their contemplation. This duty of care was breached and the loss flowing directly from it, albeit not flowing from physical damage to the reclaimers' property, was recoverable. At this point I think it is necessary to see what are the reclaimers' averments of duty in which the defenders are alleged to have failed. They aver:
"The said accident was caused by the fault and negligence of the defenders. The defenders knew or ought to have known that it was probable that services such as electric cables supplying other parts of the said industrial estate would run through the property where they were carrying out the said excavation work. On industrial estates such as the said estate services such as electric cables supplying one factory frequently run thr4ough the ground attached to another factory or other factories. It was accordingly the defenders' duty in carrying out the said work to take reasonable care not to damage such services and so cause loss and damage to other occupies of premises on the said estate, such as the pursuers. It was their duty to ascertain the position of such services, and in particular of electric cables, before commencing excavation work and to take reasonable care to avoid damaging the said cable in the course of the work. It was their duty to inform their employees who operated excavation machinery of the position of such electric cables and to instruct them to avoid such cables when operating such machinery. It is the normal practice of contractors before carrying out excavation work to ascertain from the appropriate electricity board the position of any electric cables at or in the vicinity of the place where the work is to be carried out. In these duties the defenders failed and so caused the said accident."
These averments are of wide generality. There are no special circumstances, such as experience of previous accidents on the site or of warnings of risk given but not heeded, such as distinguish this case from British Celanese v. A. H. Hunt Ltd.
This means that the reclaimers must contend that the duty here was owed to everyone within the possible area of supply from this (or any other) cable on this estate, which is itself a far-reaching proposition, whether the loss arises from physical injury to property in premises served by the supply as a consequence of its rupture or is a financial or economic consequence of disruption of industrial production due to interruption of supply.
But in the law of Scotland the obligation to avoid acts or omissions which in fact result in loss or injury to another, and to take reasonable care to avoid such injury and to insure against it, arises only if that risk is a reasonable and probable consequence of the act or omission. Unless that can be affirmed, that act or omission cannot be branded as negligent. Further, it is not all consequences of negligent acts or omissions which are to be taken into account as qualifying for an award of damages: they may be too remote and remoteness may be determined by considerations of practical expediency or even of public policy.
Even on acceptance of the initial step of the reclaimers' arguments, that they were directly and not indirected affected by the defenders' actions or omision or those of their servants, there are still two major hurdles to be surmounted before the relvancy of their claim could be affirmed: (1) that in the circumstances the duty alleged did lie upon the defenders, and (2) that, if there were a breach of such duty, the damages claimed are recoverable.
I am not satisfied that the reclaimers can succeed in surmounting them. It might be that a reasonable man in the defenders' situation might have contemplated physical damage to a cable consequent upon operations by mechanical tools in the ground if some care were not taken to ascertain its position horizontally and vertically, but that is not this case. What the reclaimers are saying is that this type of loss, purely economic and not in any way associated with physical damage to their property, is one which should have been foreseen as reasonable and probable by the defenders as a consequence of their failure in the only matters condescended upon. How far is this to go ? Is it to extend to every person or premise served by this cable, however far away from the site of rupture ? The reclaimers do not limit the range of the duty geographically. Is it to be anticipated that fracture of one cable at a particular time of day is a reasonable and probable consequence of a failure to take action to ascertain the position and laid depth of cables, which will in turn lead to breakdown of production in this or any other factory or workshop within the range of supply ? The reclaimers do not suggest they are the only concern drawing supplies of electricity from this cable or that the defenders had reason to think that in the area where they were to work supply cables to factories were likely to be laid. No doubt a reasonable man might with some reason surmise that, if a cable were fractured, this might lead to industrial dislocation or even financial loss, but equally it might not. I am far from accepting the proposition put in wide general terms in the reclaimers' pleadings that this duty on which they found was owed to them, and to each and every other person or concern on the line of supply, wherever they might be. There may well be a duty owed to the electricity board, but that is another matter. Further, this is said to be a duty which is of general application, as Winn L.J. noted in the case of S.C.M. Ltd., and, as he observed in that case, the consequences of acceptance would be enormous. There is no authority in the law of Scotland which directly supports as proposition so wide as this, or so momentous and onerous in its application as the reclaimers present it.
But even if the reclaimers' argument upon the existence of such a duty and the relevance of their averments in relation to it were affirmed, on which I express no concluded opinion, there still remains the practical issue whether the damages claimed are, as the respondents also maintain, too remote. The claim is essentially one in respect of alleged loss of profit, no associated with physical injury or damage. No case was cited in the law of Scotland in which such a claim as this has been sustained. When loss of earning capacity or loss of profit has been directly associated with foreseeable physical injury sustained by a pursuer, that loss can enter the assessment of the appropriate monetary reparation. But where there is no physical or material injury or damage on which to base an assessment of loss of earning capacity or profit, the question of what extent or character of loss, if economic loss alone is to be claimed, should be regarded as falling within contemplation of a reasonable man as the natural and direct consequence of a failure in duty of the kind on which alone this case is founded, is much more difficult. I emphasis that the duty which the reclaimers seek to impose on the defenders is not one to be imposed on someone who is intending to carry out work on a cable. Such a case would give rise to other and possibly very different considerations, in particular as to what would or should fall within the scope of foreseeability, as laid down in the leading Scottish authorities to which I have referred. The defenders here had no intention or mind to interfere with or work upon any supply cable. The breach of duty which alone is founded upon is failure to obtain information as to the probable site of cables laid and the depth to which they were laid. If there is such a duty owed in general to anyone who may be to any extent affected by possible interference with any cable, it is going far indeed to assert that every loss of earnings, not merely of earning capacity, which may arise to a commercial or industrial user must be regarded as a natural and direct consequence flowing from the initial negligence.
The initial and only negligence on which the reclaimers found is failure to ascertain the direction in which cables were laid—though this cable was some 500 yards distant from the reclaimers' premises and no reason is alleged why the defenders should have anticipated that a cable supplying the reclaimers' works or factory should have been in particular area of the industiral estate. If that is the negligence of which the reclaimers complain, should that loss which they say they sustained be regarded as the natural and direct consequence, or should it be regarded as too remote from the only breach of duty founded upon ? No doubt this loss was a consequence but it was not the natural consequence; it depended in the first place on a coincidence of time between the interruption of the supply and the need for in the particular but undisclosed operations on which the reclaimers say they were engaged. To bring it about required the intervention of a convenient time factor. Further, as the operations are ex hypothesi unknown to the defenders and not said to be ascertainable by them, it is impossible to determine how far stoppage or breakdown of machinery or equipment, with consequent deleterious effect on production and hence (presumably) loss of earnings or earning capacity, should be regarded as a natural consequence of the alleged failure in duty. Thus it cannot be said that the loss claimed is a natural consequence of the assumed negligence.
Equally I think the loss cannot be characterised as direct, i.e. a direct consequence of failure to ascertain the position or assumed position of cables on the estate. It is in a sense a capricious consequence, depending as it does not only on this alleged failure but on the fortuitous coincidence of an excavator and a supply cable buried at a depth sufficiently shallow to render the cable exposed to risk of damage from the machine. All these things were required to co-operate and coincide to bring about the result of injury to the cable, not to mention loss of earnings to the reclaimers. I think the loss here claimed, even if the duty alleged was in fact breached, is too remote.
In the result, therefore, I think that, if this is to be regarded as a case of damage arising to a third party, i.e. economic loss not associated with physical damage, drom injury negligently caused to person or property of another, then these reclaiming motions must fail. If, on the other hand, it can be regarded, as the reclaimers maintained, as a case of direct injury to their rights without material damage to property, then I am of opinion that, even if such a duty was owed to them, as the reclaimers maintain, in any event the damages said to flow from the defenders' failure in that duty are too remote, and that these reclaiming motions fail on this ground also.
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