England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR. JUSTICE SWANWICK)

		Royal Courts of Justice
		18th May 1977

THE MASTER OF THE ROLLS: We are most grateful to Mr. Justice Swanwick for the admirable way in which he has summarised the evidence and given his judgment. It has saved the parties the expense of a transcript of the evidence and has greatly shortened the time of the appeal. Parsons (Livestock) Ltd. have a fine herd of nearly 700 pigs at their farm in Derbyshire. They call it the Wayside Herd.

They manage it most efficiently. They feed the pigs on special pig-nuts. They use about 10 tons a month of these pig-nuts. In order to store and handle these pig-nuts, Parsons bought in 1968 it a big hopper called a bulk-feed storage-hopper. They bought,from the makers, Uttley Ingham & Co. Ltd., who are sheet-metal workers.

Parsons paid £270 for it. It was a huge round metal bin 28 feet high and 8 feet 6 inches in diameter. It was cylindrical at the top and tapering down into a cone. It had a lid on the top with a ventilator in it. The pig-nuts go into the top and come out at the bottom.

The first hopper was so successful that in 1971 Parsons ordered a second one to be just the same as the first. It cost £275. The makers accepted the order in a letter of 23rd April, 1971 in these terms: "... We are very pleased to book your order for one Bulk Hopper exactly as supplied in 1968... Hopper fitted with ventilated top and complete with filler and breather pipes ... Ex Works Price £275. 00. Carriage charges £15. 00. We deliver in an upright position on your prepared concrete base and bolt down... tipping the Hopper off the back of the vehicle".

On 2nd August, 1971, the makers delivered the hopper to the site. It was exactly the same as the first, but when the delivery man erected it in position he forgot to adjust the ventilator.

He loft it closed. It was fastened with a piece of tape which had been put on so as to stop it rattling on the journey. No one noticed the mistake, because the ventilator was at the top of the hopper 28 feet above the ground. The delivery man went off. The pig farmers used the hopper. They put pig-nuts into it just as they did with the first hopper. On 12th August, 1971 they filled it with 9½ tons of pig-nuts. On 10th September, 8½ tons.

On 1st October 8 tons.

At first all was well. But on 28th September a small number of the nuts appeared to be mouldy. The farmers did not think this would harm the pigs. So they went on feeding them. Parly in October more nuts turned mouldy. But still the farmers were not unduly concerned. As a rule, mouldy nuts do not harm pigs.

On Saturday, 9th October, there was a bigger proportion of mouldy nuts: and some of the pigs were showing signs of illness. About sows six of the twenty-one/suckling litters were very loose: and about seven or eight were not eating all their ration of nuts. Over the weekend the pig farmers became really concerned. They did not know the cause. They telephoned the suppliers of the nuts.

They telephoned the veterinary surgeon. The suppliers of nuts came. The veterinary surgeon came. They stopped feeding the pigs with nuts from the hopper. They got some bagged food and fed them from the bags. They telephoned the makers. On Friday, 15th October, a representative of the makers came. He climbed up to the top of the hopper. He found the ventilator closed.

He opened it. When he came down, he said to the pig farmers:

"That appears to be your trouble".

It was indeed the trouble. After much evidence by experts, the Judge found that the closed ventilator was the cause. But the effects remained so as to affect the herd greatly. A large number of the pigs suffered an attack of E. coli, which is very-bad for pigs. It was "triggered"off by the eating of the mouldy-nuts. The infection spread rapidly. 254 pigs died of a value of £10, 000. They also lost sales and turnover resulting in big financial loss. The total claim is £20, 000 or £30, 000. The question is whether that damage is recoverable from the makers, or whether it is too remote.

THE JUDGE'S FINDINGS

The Judge had before him the speeches in the House of Lords in Czarnikow v. Koufos (1969) 2 AC 350 about remoteness of damage. That case draws a distinction between contract and tort. Remoteness in contract depends in what the parties "reasonably contemplated at the time of the contract": whereas in tort it depends on what could "reasonably be foreseen at the time of the breach". But the Judge did not think either of those tests was applicable. He based his decision on the implied term that the goods should be reasonably fit for the purpose under the implied condition of Section 14(1) of the Sale of Goods Act 1893 as it then was. He held that this was an "absolute warranty" and that, in case of a breach, the seller was liable for all the damage of which the breach was a cause. The Judge said significantly that "The plaintiffs do not have to prove that the toxicity or its results were foreseeable to either party... there is no need to have recourse to the question of the presumed contemplation".

But in case he was wrong on this point, and that, being a breach of contract, he ought to consider what was "reasonably contemplated at the time of the contract", the Judge went on to consider the facts in regard to it. He inquired whether the "damage that occurred through the outbreak of E. Coli was within the reasonable contemplation of the parties". After considering the evidence, he said: "... Although I sympathise with the Plaintiffs, who have no doubt suffered heavy loss as a result in fact' on my findings of a breach of contract, I would not consider that I would be justified in finding that in the Spring of 1971 at the time of the contract either a farmer in the position of the Plaintiffs or a hopper manufacturer in the position of the Defendants would reasonably have contemplated that there was either a very substantial degree of possibility or a real danger or serious possibility that the feeding of mouldy pig-nuts in the condition described by Mr. Parsons would cause illness in the pigs that ate them, even on an intensive farm such as that of the Plaintiffs".

Applying the speeches in Czarnikow v. Koufos, that finding would mean that the illness and death of the pigs was too remote to be an admissible head of damage.

THE TERMS OF CONTRACT

The Judge derived his "absolute warranty" from Section 14(1) of the Sale of Goods Act, 189? about reasonable fitness for the purpose. I agree that the warranty in Section 14(1) is absolute in this sense: that if the goods arc unfit owing to a latent defect, which could not be discovered by any amount of care, nevertheless the seller is liable. But I do not think this absoluteness means that the seller is liable for all consequences of a breach, however remote the consequences may be. He is only liable, as Section 53(2) says, for "the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty". That Section is an attempted codification of the rule in Hadley v. Baxendale and should be so interpreted.

But I am not sure that Section 14(l) was really appropriate here. The contract was divisible into two parts? (i) The sale of the hopper; (ii) The erection of it. Under the second part? the maker was under a duty to use reasonable care in erecting the hopper. But oven so, here again the maker would not be liable for all consequences. He would only be liable for such damage "as may fairly and reasonably be considered as arising naturally, i. e., according to the usual course of things, from the breach" - see Hadley v. Baxendale (1854) 9 Exchequer 341. That is virtually the same as Section 53(2).

On either view, therefore, the maker is not liable for all the consequences: but only for such damage as is not too remote in law. So I turn to examine the Judge's findings of fact in regard to it.

THE JUDGE'S FINDINGS OF FACT

As I read the Judge's findings of fact, he was of opinion that the makers of the hopper could reasonably contemplate these consequences: (i) that the ventilator would remain closed whilst the hopper was in use; (ii) that the pig-nuts stored in it would become mouldy for want of proper ventilation; (iii) that the pig-nuts would be fed to the pigs in a mouldy condition; (iv) that the makers would not reasonably contemplate that there was a serious possibility that the mouldy nuts would cause the pigs to become ill. There may have been a slight possibility, but not a serious possibility. It was so slight that the pig farmers (who fed the nuts to the pigs knowing that they were mouldy) did not themselves feel any concern about feeding the mouldy nuts to the pigs.

By making those findings, the Judge has presented us with a nice problem of remoteness of damage. Mr. Drake, Q. C. submitted that the last finding (iv) means that the pig farmers should fail. The action is in breach of contract. It has, he says, been held by the House of Lords that a contract-breaker is only liable for the consequences which he may reasonably contemplate as a serious possibility, and not for those which he can only foresee as a slight possibility.

THE LAW AS TO REMOTENESS

Remoteness of damage is beyond doubt a question of law. It runs on parallel lines in both contract and tort until it nears the end of the journey. Then the lines diverge. I will first draw the parallel lines. The Court does not, as a rule, look into the mind of the real contract-breaker or the real tortfeasor. It does not inquire into what the real person himself contemplated or foresaw. The Court takes an imaginary man and supposes that he is a reasonable man. It puts him in the place of the real man. It them supposes that that imaginary man or his servants made the contract and broke it: or that he or his servants did the act or omission that amounted to a tort. The Court assumes that this imaginary man, at the time of making the contract, had in mind the actual breach which afterwards took place (see 1969 2 Lloyds at page 465); or, at the time of committing the tort, had in mind the kind of tort that he or his servants were committing. Whereas, of course, in real life, in 99 cases out of 100, the real man would not envisage any such thing or be aware of it in the least. Then, having clothed the imaginary man with all that imaginary knowledge, the Court considers the actual breach of contract or the actual tort that took place: and also the actual consequences which followed after it - post hoc. The Court then carries out an exercise in causation. It segregates the consequences of which the offending act or omission was the cause or one of the causes - propter hoc; and discards the consequences of which it was not a cause.

That exercise in causation is said to depend simply on commonsense: but it may be most uncommonly difficult to decide, particularly when the acts of third parties intervene as in Weld-Blundell v. Stephens (1920) AC 956 and the Dorset Yacht case (1970) AC 1004, in which case the likelihood of the consequence is very relevant. But in the present case the exercise in causation is easily solved. The closed ventilator was clearly the cause, or one of the causes, of the death of the pigs. There was an unbroken sequence all the way. The problem in this case is with remoteness of damage.

Now I leave the parallel lines and turn to the point where they diverge. It is at the point of which the House of Lords spoke in Czarnikow v. Koufos (l969)l AC 350. They say that, in remoteness of damage, there is a difference between contract and tort. In the case of a breach of contract, the Court has to consider whether the consequences were of such a kind that a reasonable man, at the time of making the contract, would contemplate them as being of a very substantial degree of probability. Not merely "on the cards" because that may be too low: but as being "not unlikely to occur" (383A, 388F): or "likely to result or at least not unlikely to result" (406F): or "liable to result" (410G): or that there was a "real danger" or "serious possibility" of them occurring (415D). In the case of a tort, the Court has to consider whether the consequences were of such a kind that a reasonable man, at the time of the tort committed, would foresee them as being of a much lower degree of probability. It is sufficient if the consequences are "liable to happen in the most unusual case" (385G) or in a "very improbable" case (389G)? or that "they may happen as a result of the breach, however unlikely it may be, unless it can be brushed aside as far-fetched" (422 C-D).

There is no doubt a difference between the two tests, but I find them difficult to apply universally to all cases of contract or to all cases of tort: and to draw a distinction between what a man "contemplates" and what he "foresees". In the daily round I soon begin to get out of my depth. I cannot swim in this sea of semantic exercises - to say nothing of the different degrees of probability - especially when the cause of action can be laid either in contract or in tort. I am swept under by the conflicting currents. I go back with relief to the distinction drawn in legal theory by Professors Hart and Honore in their book on "Causation in the Law" at pages 281 to 287. They distinguish between those cases in contract in which a man has suffered no damage to person or property, but only economic loss, such as, loss of profit or loss of opportunities for gain in some future transaction: and those in which he claims damages for an injury actually done to his person or damage actually done to his property (including his lifestock) or for ensuing expense (damnum emergens) to which he has actually been put. That is a distinction which has been under discussion much lately in the law of tort, sec Spartan Steel & Alloys v. Martin & Co. (Contractors) (1973) 1 Queen's Bench 27 at pages 36/37, and underline the words of Lord Wllberforce in Anns v. London Borough of Merton recently, where he classified the recoverable damages as "material, physical damages". If this distinction were to be introduced into the law of contract, it might enable us to keep afloat in these troubled waters. I would suggest this as a solution:

In the former class of case - loss of profit cases - the defaulting party is only liable for the consequences if they ape such as, at the time of the contract, he ought reasonably to have contemplated as a serious possibility or real danger. You must assume that, at the time of the contract, he had the very kind of breach in mind - such a breach as afterwards happened, as for instance, delay in transit - and then you must ask: Ought he reasonably to have contemplated that there was a serious possibility that such a breach would involve the plaintiff in loss of profit? If Yes, the contractor is liable for the loss unless he has taken care to exempt himself from it by a condition in the contract - as, of course, he is able to do if it was the sort of thing which he could reasonably contemplate. The law on this class of case is now covered by the three leading cases of Hadley v. Baxendale (1854) 9 Exchequer 341? the Victoria Laundry case (1949) 2 King's Bench 528; Czarnikow v. Koufos (1969) 1 AC 350. These were all "loss of profit" cases: and the test of "reasonable contemplation" should, I suggest, be kept to that type of loss or, at any rate, to economic loss.

In the second class of case - the physical injury or expense case - the defaulting party is liable for any damage which he ought reasonably to have foreseen at the time of the breach as a possible consequence, even if it was only a slight possibility. You must assume that he was aware of his breach, and then you must ask: Ought he reasonably to have foreseen, at the time of the breach, that something of this kind might happen in consequence of it? This is the test which has been applied in cases of tort, ever since The Wagon Mound cases (1961) AC 388; (1967) AC 617. But there is a long line of cases which support a like test in cases of contract. One class of case which is particularly apposite here concerns latent defects in goods. In many of these cases the manufacturer is liable in contract to the immediate party for a breach of his duty to use reasonable care: and is liable in tort to the ultimate consumer for the same want of reasonable care. The ultimate consumer can either sue the retailer in contract and pass the liability up the chain to the manufacturer: or he can sue the manufacturer in tort and thus by-pass the chain. The liability of the manufacturer ought to bo the same in either case. In nearly all these cases the defects were outside the range of anything that was in fact contemplated, or could reasonably have been contemplated, or by anyone down the chain to the retailers. Yet the manufacturer and others in the chain have been held liable for the damage done to the ultimate user: as for instance the death of the young pheasants in the Hardwick Game Farm case (1969) 2 AC 31; and of the mink in Hill (Christopher)v. Ashington Piggeries (1972) AC 441. Likewise the manufacturers and retailers were held liable for the dermatitis caused by the weave in the woollen underwear case of Grant v. Australian Knitting Mills (1936) AC 85, even though they had not the faintest suspicion of any trouble. So were the manufacturers down the chain to the sub-contractors for the disintegrating roofing-tiles in Young & Marten v. McManus Childs (1969) 1 AC 454.

Another familiar class of case is where the occupier of premises is under the common duty of care, both in pursuant of a contract with a visitor or under the Occupiers Liability Act, 1957. If he fails in that duty and a visitor is injured, the test of remoteness must be the same, no matter whether the injured person enters by virtue of a contract or as a visitor by permission without a contract. No matter whether in contract or tort, the damages must be the same. Likewise when a contractor is doing work on premises for a tenant - and either the tenant or a visitor is injured - the test of remoteness is the same: no matter whether the person injured is a tenant under the contract or a visitor without a contract - see Billings v. Riden (1958) AC 240.

Yet another class of case is where a hospital authority renders medical services in contract to a paying patient and gratuitously to another patient without any contract. The paying patient can sue in contract for negligence. The poor patient can sue in tort - see Cassidy v. Ministry of Health (1951) 2 King's Bench at pages 359/360. The test of remoteness should be the same whether the hospital authorities are sued in contract or in tort - see Petroleum v. Mardon [1976] 2 W.L.R. 583 at page 595.

Instances could be multiplied of injuries to persons or damage to property where the defendant is liable for his negligence to one man in contract and to another in tort. Each suffers like damage. The test of remoteness is, and should be, the same in both.

Come now to the present case. We were told that in some cases the makers of these hoppers supply them direct to the pig farmer under contract with him: but in other cases they supply them through an intermediate dealer - who buys from the manufacturer and resells to the pig farmer on the self-same terms - in which the manufacturer delivers direct to the pig farmer. In the one case the pig farmer can sue the manufacturer in contract. In the other in tort. The test of remoteness should be the same. It should be the test in tort.

CONCLUSION

The present case falls within the class of case where the breach of contract causes physical damage. The test of remoteness in such eases is similar to that in tort. The contractor is liable for all such damage as could reasonably have been foreseen, at the time of the breach, as a possible consequence of it. Applied to this case, it means that the makers of the hopper are liable for the death of the pigs. They ought reasonably to have foreseen that, if the mouldy pig-nuts were fed to the pigs, there was a possiblity that they might become ill. Not a serious possibility. Nor a real danger. But still a possibility to be reckoned with. On that basis the makers were liable for the illness suffered by the pigs. They suffered from diarrhoea at the beginning. This "triggered off" the deadly 0. Coli". That was a far worse illness than could then be foreseen. But that does not lessen this liability. The type or kind of damage was foreseeable even though the extent of it was not - see Hughes v. Advocate (Lord) (1963) AC 837. The makers are liable for the loss of the pigs that died and of the expenses of the vet, and such like. But not for loss of profit on future sales or future opportunities of gain.

So I reach the same result as the Judge, but by a different route. I would dismiss the appeal.

LORD JUSTICE ORR: I agree with the Master of the Rolls and also with Lord Justice Scarman, whose judgment I have had the opportunity of reading, that this appeal should be dismissed, but with respect to the Master of the Rolls I would dismiss- it for the reasons to be given by Lord Justice Scarman and not on the basis that a distinction is to be drawn for the present purposes between loss of profits and personal injury cases. I have not been satisfied that such a distinction is sufficiently supported by the authorities.

For the present purposes the crucial passages in the judgment of Mr. Justice Swanwick are those to be quoted by Lord Justice Scarman at pages 33/34 and page 44 of the transcript and also, in my judgment, the passage at page 35 where the learned judge says: "How far must his (the defendant's) contemplation coincide with the damage that occurs? It is in my view right that his assumed contemplation should be limited to the type of damage that occurs but that he is liable if the quantum is greater than he may be presumed to anticipate. Obviously the principle may be difficult of appreciation in some cases, but I need not elaborate it here because I agree with Mr. Bathurst that E. Coli is not different in type from the digestive upset that might trigger it off. It is simply the proliferation of an organism naturally occurring in the bowel which then upsets the excretory system still further and admittedly much worse".

On this basis, in my judgment correct in law, it was sufficient to establish liability for the damage in question that physical injury to the pigs was a serious possibility if in breach of contract the hopper was unfit for storing nuts suitable to be fed to them and I do not think it matters for this purpose whether there was only one contract, or were two contracts, though I agree with Lord Justice Scarman that there was only one.

For these reasons and in complete agreement with the judgment to be delivered by Lord Justice Scarman, I would dismiss this appeal and I would add my tribute to the manner in which the case was dealt with by the trial judge. LORD JUSTICE SCARMAN: The Plaintiffs, who are pig farmers, claim damages of more than £36, 000 for breach of contract. The Defendants admit a breach of contract but say that the Plaintiffs are entitled to no more that £18 damages. The Judge found for the Plaintiffs and ordered an inquiry to determine the amount of damages. The litigation arises out of the sale of a hopper for the storage in bulk of food to he fed to the Plaintiffs' pigs. Some of the food went mouldy and poisoned some of the pigs. The Judge found, that the food poisoning was caused by bad storage conditions in the hopper and resulted in the Plaintiffs suffering substantial business loss. It was on the basis of this finding that he gave judgment for the Plaintiffs. The issue in this Court is one of remoteness of damage. Plainly, it is of great importance to the parties. It also poses some difficult questions for the Court. The Master of the Rolls would decide the case upon the basis of a distinction which he suggests the law recognises between a breach of contract causing physical damage, and one which causes loss of profit. He treats the famous trilogy of remoteness of damage cases - Hadley v. Baxendale, the Victoria Laundry case, and Czarnikow v. Koufos - as limited in application to the loss of business profits and takes the view that in cases of physical damage the test is the same in tort as in contract. He accordingly concludes that in the class of contract cases in which he puts this case the test is in the "Wagon Mound" test - reasonable. foreseeability.

My conclusion in the present case is the same as that of the Master of the Rolls but I reach it by a different route. I would dismiss the appeal. I agree with him in thinking it absurd that the test for remoteness of damage should, in principle, differ according to the legal classification of the cause of action -though one must recognise that parties to a contract have the right to agree on a measure of damages which may be greater, or less, than the law would offer in the absence of agreement. I also agree with him in thinking that, notwithstanding the interpretation put on some dicta in Czarnikow v. Koufos, the law is not so absurd as to differentiate between contract and tort save in situations where the agreement, or the factual relationship, of the parties with each other requires it in the interests of justice. I differ from him only to this extent; the cases do not, in my judgment, support a distinction in law between loss of profit and physical damage. Neither do I think it necessary to develop the law judicially by drawing such a distinction. Of course (and this is a reason for refusing to draw the distinction in law) the type of consequence - loss of profit or market or physical injury - will always be an important matter of fact in determining whether in all the circumstances the loss or injury was of a type which the parties could reasonably be supposed to have in contemplation.

In Czarnikow v. Koufos (1969) 1 AC 390 (a case of a contract of carriage of goods by sea) the House of Lords resolved some of the difficulties in this branch of the law. The law, which the House in that case either settled or recognised as already settled, may be stated as follows: (1) the general principle regulating damages for breach of contract is that "where a party sustains a loss by reason of a breach of contract he is, so far as money can do it, to be placed in the same situation... as if the contract had been performed: see Lord Pearce at page 414 quoting Baron Parke in Robinson v. Harman (1848) 1 Exchequer, 850 at page 855; (2) the formulation of the remoteness test is not the same in tort and in contract because the relationship of the parties in a contract situation differs from that in tort: see Lord Reid at pages 385-36? (3) the two rules formulated by Baron Alderson in Hadley v. Baxendale are but two aspects of one general principle - that to be recoverable in an action for damages for breach of contract the Plaintiff's loss must be such as may reasonably be supposed would have been in the contemplation of the parties as a serious possibility had their attention been directed to the possibility of the breach which has, in fact, occurred. Two problems are left unsolved by Czarnikow v. Koufos: (1) the law's reconciliation of the remoteness principle in contract with that in tort where, as, for instance, in some product liability cases, there arises the danger of differing awards, the lesser award going to the party who has a contract, even though the contract is silent as to the measure of damages and all parties are, or must be deemed to be, burdened with the same knowledge (or enjoying the same state of ignorance): (2) what is meant by "serious possibility" (or its synonymns): it is a reference to the type of consequence which the parties might be supposed to contemplate as possible though unlikely, or must the chance of it happening appear to be likely? See the way Lord Pearce puts it at pages 416-417 of the report.

As to the first problem, I agree with the Master of the Rolls in thinking that the law must be such that, in a factual situation where all have the same actual or imputed knowledge and the contract contains no term limiting the damages recoverable for breach, the amount of damages recoverable does not depend upon whether, as a matter of legal classification, the Plaintiff's cause of action is breach of contract or tort. It may be that the necessary reconciliation is to be found, notwithstanding the strictures of Lord Reid at pages 389-390, in holding that the difference between "reasonably foreseeable" (the test in tort) and "reasonably contemplated" (the test in contract) is semantic, not substantial. Certainly Lord Justice Asquith in Victoria Laundry v. Newman (1949) 2 King's Bench 528 at page 535 and Lord Pearce in Czarnikow v. Koufos thought so: and I confess I think so too. The second problem - what is meant by a "serious possibility" - is, in my judgment, ultimately a question of fact. I shall return to it, therefore, after analysing the facts, since I believe it requires of the Judge no more - and no less - that the application of commonsense in the particular circumstances of the case. Finally, there are two legal rules relevant to the present case, which were not considered in Czarnikow v. Koufos.

The first relates to sale of goods. Section 53(2) of the Sale of Goods Act 1893 provides that "the measure of damages for breach of warranty is the estimated loss directly an naturally resulting, in the ordinary course of events, from the breach of warranty".

The subsection, clearly a statutory formulation of the first rule in Hadley v. Baxendale, is not, however, intended to oust the second rule, where appropriate: See Section 54. Nevertheless it vindicates the Judge's approach to this case - always assuming that the facts are such as to make the application of the first rule appropriate.

Secondly, the breach does not have to be foreseen, or contemplated. In a breach of warranty case the point may be put in this way: it does not matter if the defect is latent. It may be unknown, oven unknowable? see Grant v. Australian Knitting Mills Limited (1936) AC 85. The court has to assume, though it be contrary to the fact, that the parties had in mind the breach that has occurred. Thus, whenever a question of remoteness of damage arises in a contract case, its solution involves the Court in making a hypothesis, which may, or may not, correspond with fact.

The Court's task, therefore, is to decide what loss to the Plaintiffs it is reasonable to suppose would have been in the contemplation of the parties as a serious possibility, had they had, in mind, the breach when they made their contract.

I now turn to the facts of the case. The Plaintiffs are in business as pig farmers. They own and manage an intensive pig farm in North Derbyshire. They are specialists in this type of farming: and their herd of pigs is classified as a top grade one under the Government's Pig Improvement Scheme. The Defendants are sheet metal workers specialising in the manufacture of bulk food storage hoppers and automatic feeding systems. There was evidence that their knowledge of the risks of bad food was comparable with that of food compounders.

In 1968 the Defendants sold and delivered to the Plaintiffs a 10-ton bulk food storage hopper. Before the contract was concluded Mr. Geoffrey Greenwood, a sales representative of the Defendants, paid a visit to the Plaintiffs' farm, saw the nature of their operation, and had a discussion with their managing director, Mr. Horace Parsons. Mr. Greenwood was told that a large hopper was required for the bulk storage of pignuts in a condition fit for feeding a top grade herd of pigs bred and maintained in an intensive farming unit. He had explained to him the size of the herd (approximately 600 pigs and 70 sows), the method of feeding, and the type and quantity of food required to be stored in the bulk hopper.

Mr. Greenwood appreciated that the hopper must have a ventilated top - which was, indeed, a feature emphasised in his company's advertisements of the hoppers they offered for sale. The contract, when made, was for a hopper "suitable for your requirements", "complete with ventilated top" and "fitted with filler and breather pipes". The Defendants agreed to deliver and erect upon a previously prepared concrete base the hopper ready for use. The hopper was duly delivered and erected. It had a ventilated top, which consisted of a movable cowl adjusted to its fully lifted position. It proved entirely suitable for the purpose for which it was required - a purpose plainly made known to Mr. Greenwood before contract. As the Judge remarked, none of the pignuts it stored was ever found to be mouldy.

In 1971 the Plaintiffs were minded to buy another hopper -encouraged, no doubt, by the success of the first. Mr. Parsons told the Defendants he wanted one exactly as supplied in 1968. The order was accepted by the Defendants in a letter of the 23rd April 1971. They expressed themselves as "pleased to book your order for 1 Bulk Hopper exactly as supplied 1968", and went on to describe the hopper they would be delivering and installing as "fitted with ventilated top and complete with filler and breather pipes".

The hopper is a substantial piece of equipment. It stands 28 feet high. Circular in shape, it has a diameter of 8 feet 6 inches. Its base is tapered, like an inverted cone. At its very top there is a ventilation hole capped by an adjustable cowl. This top is "ventilated" only if the cowl is in its fully lifted position. It is impossible without climbing to the top for anyone to observe whether the top is ventilated or not. The filler and breather pipes are designed for the operation of loading the food into the hopper: their contribution to ventilation ie only marginal, and may be disregarded.

The Defendants, as they had agreed to do, installed the hopper ready for use on the concrete base prepared for it. Their delivery man should have ensured that the top was ventilated by adjusting the cowl to its fully lifted position. Instead, he left it in the closed position. The hopper, as delivered, did not, therefore, have a ventilated top: not was it suitable for the Plaintiffs' requirements.

I agree with the Judge's findings that this was a contract for the sale of goods by description made in circumstances in which the Plaintiffs had made clear to the Defendants that they relied on the Defendants' skill and judgment to supply a hopper reasonably fit for storing pignuts to be fed to the Plaintiffs' pigs.

Accordingly, the contract included the following terms: (1) that the hopper would be suitable for the Plaintiff's requirements - an express term: (2) that the hopper, would have a ventilated top - an express term: (3) that the hopper was of merchantable quality - an implied term under Section 14 (2) of the Sale of Goods Act: (4) that the hopper was reasonably fit for storing pignuts to be fed to. the Plaintiff's pigs - an implied term under Section 14(1) of the Sale of Goods Act.

The Plaintiffs say that the Defendants were in breach of the contract in that the hopper, as delivered, was not suitable for their requirements, did not have a ventilated top, and was not reasonably fit for storing pignuts to be fed to their pigs. They claim damages for the heavy losses they sustained from the death and sickness of a great number of pigs caused by food rendered unfit by bad storage conditions in the un-ventilated hopper.

As I understand Mr. Drake Q. C. for the Defendants (Appellants in this Court), he does not challenge the presence in the contracy of the terms I have listed. He submits, however, that there were two contracts, not one: the sale of the hopper and a contract for its installation. The hopper, he says, complied with the contract. The trouble was that it was installed on site without proper care in that the cowl on the top of the hopper was not adjusted to its lifted, or fully open position. He admits, therefore, a breach of the installation contract, but denies any breach of the contract of sale.

I do not accept Mr. Drake's analysis of two contracts. I think there was only one - for the sale and delivery of a hopper with a ventilated top reasonably fit for the purpose which the Plaintiffs had explained to the Defendants. But I think that the result of this case must be the same, whichever way the contractual position is analysed.

The actual, or imputed knowledge of the parties was the same, whatever the breach which caused the damage, More particularly, the Defendants knew that an unventilated hopper was not suitable for the Plaintiffs' requirements, i. e. the bulk storage of pignuts in a condition fit to be fed to the Plaintiffs' pigs. It cannot, therefore, matter whether this unsuitability arose from a breach of contract in its installation or from a breach of warranty.

At the trial there developed a very complicated dispute about a great many issues, all of which, save that of remoteness of damage, have ceased to be live issues. But, as can be seen from Mr. Justice Swanwick's very careful judgment, they bedevilled both the advocates and the witnesses. In particular, Mr. Bathurst, fighting hard for his clients, the Plaintiffs, had to repel attacks from so many different quarters that he was not always facing the same way or aiming his shafts of argument in the same direction. It is only fair that one should approach, as the trial Judge did, the Plaintiffs' evidence bearing in mind that they came to Court to meet, inter alia, a defence that the Plaintiffs were themselves the cause of their own loss in that they knew or ought to have known that the pignuts were poisonous - a case which assorts ill with the point, which alone is now taken, that the possibility of serious illness arising from the mouldy pignuts was not known or appreciated by anyone, save perhaps a very few experts, at the time of the contract.

To complete the history of the hopper, it was delivered on the 2nd August, 1971. As installed by the Defendants, its cowl was shut - a fact which the Judge found the Plaintiffs could not be expected to detect. On the 22nd September the Plaintiffs' Veterinary Surgeon, Mr. Fletcher, reported that the herd was in good health. On the 20th September Mr. Parsons had noted pignuts, lighter in colour than they ought to have been, coming out of the base of the hopper. By early October, some of the nuts (but not very many) emerging from the hopper were "white with bluey green specks" - definitely off-colour. But Mr. Parsons was not troubled: the herd was in good health. Disturbing signs of ill-health were evident by the 9th October. Mr. Parsons was now concerned, and, not unnaturally, suspected a link between the condition of his sows and the observed condition of some of the pignuts. He telephoned the suppliers of the nuts. On the 10th he called in Mr. Fletcher again. By the 11th, some 70 sows, 21 of them suckling, were affected. On the 12th the supplier's representative made an inspection, took away some nuts for examination, and advised that in the meantime bagged nuts, in place of those in; the hopper, should be fed to the pigs. This was done: and from 13th October no food was fed from the hopper until after the Defendants had located the source of the trouble and opened the top ventilator, and the hopper had been thoroughly cleansed. The health of most of the sows improved rapidly with the switch from the hopper nuts to bagged nuts. No more adult pigs were affected but from the 21st October onwards piglets weaned from the affected sows began to die. The herd was afflicted by an outbreak of an intestinal infection known as "E coli". The medical chemistry is not important: for it is admitted that the outbreaks of "E coli" which continued to cause injury and death amongst later litters were due to the "roll-on" effect of the disease. The Plaintiffs claim that they have lost 254 pigs dead, a substantial sum of gross profit, and have incurred additional costs and expenses in combatting and mastering the outbreak. The Defendants say that the Plaintiffs can recover only the extra cost of the bagged food - a sum of, €18. 02.

The outbreak of "E coli", which did the damage, was, as found by the Judge and now conceded by the Defendants, caused by the mouldy condition of the nuts fed from the hopper. It is also conceded, as the Judge also found, that the lack of top ventilation in the hopper caused this condition. But it is the Defendant's case that at the time of the contract the parties could not have reasonably contemplated that nuts, rendered mouldy by lack of hopper ventilation, would cause serious illness, such as "E coli", in the pigs that fed on them.

A formidable volume of expert evidence upon this point was deployed for the consideration of the Judge. His findings as to the contemplatability of E. coli was as follows: "I would not consider that I would be justified in finding that in the spring of 1971 at the time of the contract either a farmer in the position of the Plaintiffs or a hopper manufacturer in the position of the Defendants would reasonably have contemplated that there was either a very substantial degree of possibility or a real danger or serious possibility that the feeding of mouldy pignuts in the condition described by Mr. Parsons would cause illness in the pigs that ate them, even on an intensive farm such as that of the Plaintiffs".

The Plaintiffs, by their Respondent's notice, challenge this finding. I have done my best to study the evidence as it appears from the detailed and lucid judgment under appeal. I confess that I think I might well have reached a different conclusion: but bearing in mind the inevitable limitations upon an appellate Court's consideration of such a question and the great advantages available to the Judge, and most assuredly used to the full by him, I think it would be wrong to disturb his finding.

But it is necessary to note the essence - and the limits -of the finding. It is a finding that the parties could not reasonably be supposed to have had in contemplation that there was a serious possibility of mouldy nuts causing illness in the plaintiff's pigs. It is not a finding that they could not reasonably have had in contemplation that a hopper unfit for its purpose of storing food in a condition suitable for feeding to the pigs might well lead to illness.

The Judge's other findings of fact may be summarised as follows: He found that there was a warranty - its existence is not disputed by the defendants - to the effect that the hopper should be reasonably fit for the purpose of storing pignuts in a condition suitable for feeding to the plaintiff's pigs. He found that the hopper, being unventilated, was not so fit; that this defect was a breach of the warranty, and that the pignuts were unfit by reason of the breach. He found that the plaintiffs' loss was caused by the breach of warranty. Upon the basis of these findings, the judge held that since the first question is whether "the damage" claimed arises in the ordinary course of things from from the breach, "there is no need to have recourse to the question of the presumed contemplation". He then considered the meaning of the implied term "pleaded and admitted" that the hopper should be reasonably fit for the purpose of storing pignuts to be fed to the Plaintiffs pigs and reached the conclusion, which I respectfully think was inevitable, that it meant that, in so far as proper storage could achieve it, the hopper would keep the pignuts in a condition such as not to make the Plaintiffs' pigs ill. He stressed the importance to be attached to the particular nature of 'this herd of pigs - a very different set of animals from the ordinary farm-yard pig - and to the intensive nature of the Plaintiffs' farming operation, all of which matters were made known to the Defendants before contract. He stated his conclusion in these words: " On this interpretation the inevitable conclusion from the findings I have already made would be that this hopper was not reasonably fit for that purpose and that this caused the nuts to become toxic and that the illness of the pigs was a direct and natural consequence of such breach and toxicity, and that the Plaintiffs do not have to prove that the toxicity or its results were foreseeable to either party. To put it another way, once the question of foreseeability of the breach is Eliminated, as it is by the absolute warranty, the consequences of the breach flow naturally from it".

Mr. Drake criticises strongly this part of the judgment. He says it is based on a misunderstanding of Hadley v. Baxendale: and he referred us to the well-known passage in Lord Reid's speech in Czarnikow v. Koufos where, at page 385, he said that it is not enough that in fact the Plaintiff's loss was directly caused by the Defendant's breach of contract. Lord Reid said: "The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that less of that kind should have "been within his contemplation".

Notwithstanding his choice of language, I think the Judge was making the approach which, according to Lord Reid, is the correct one. He was saying, in effect, that the parties to this contract must have appreciated that, if, as happened in the event, the hopper, unventilated, proved not to be suitable for the storage of pignuts to be fed to the plaintiffs' pigs, it was not unlikely, there was a serious possibility, that the pigs would become ill. The Judge put it in this way at pages 32 and 33 of his transcript: "The natural result of feeding toxic food to animals is damage to their health and may be death, which is what occurred, albeit from a hitherto unknown disease and to particularly susceptible animals. There was therefore no need to invoke the question of reasonable contemplation in order to make the defendants liable" (my underlining).

The judge in this critical passage of his judgment is contrasting a natural result, i. e. one which people placed as these parties were would consider as a serious possibility, with a special, specific result, i. e. E coli disease which, as he later found, the parties could not at the time of contract reasonably have contemplated as a consequence. He distinguishes between "presumed contemplation" based on a special knowledge from ordinary understanding based upon general knowledge and concludes that the case falls within the latter category. He does so because he has held that the assumption, or hypothesis, to be made is that the parties had in mind at the time of contract not a breach of warranty limited to the delivery of mouldy nuts but a warranty as to the fitness of the hopper for its purpose. The assumption is of the parties asking themselves not what is likely to happen if the nuts are mouldy, but what is likely to happen to the pigs if the hopper is unfit for storing nuts suitable to be fed to them. While, on his finding, nobody at the time of contract could have expected E coli to ensue from eating mouldy nuts, he is clearly - and, - as a matter of common sense, rightly - saying that people would contemplate, upon the second assumption, the serious possibility of injury and even death among the pigs.

And so the question becomes - was he right to make the assumption he did? In my judgment, he was - see Grant v. Australian Knitting Hills (1936) AC 85, and particularly the well-known passage in the speech of Lord Wright between pages 97 and 100.

I would agree with Mr. McGregor in his work on Damages (13th Edition) at page 131 (last line) that "in contract as in tort, it should suffice that, if physical injury or damage is within the contemplation of the parties, recovery is not to be limited because the degree of physical injury or damage could not have been anticipated". This is so, in my judgment, not because there is, or ought to be, a specific rule of law governing cases of physical injury but because it would be absurd to regulate damages in such cases upon the necessity of supposing the parties had a prophetic foresight as to the exact nature of the injury that does in fact arise. It is enough if upon the hypothesis predicated physical injury must have been a serious possibility. Though in loss of market or loss of profit cases the factual analysis will be very different from cases of physical injury, the same principles, in my judgment, apply. Given the situation of the parties at the time of contract, was the loss of profit, or market, a serious possibility, something that would have been in their minds had they contemplated breach?

It does not matter, in my judgment, if they thought that the chance of physical injury, loss of profit, loss of market, or other loss as the case may be, was slight or that the odds were against it provided they contemplated as a serious possibility the type of consequence, not necessarily the specific consequence, that ensued upon breach. Making the assumption as to breach that the judge did, no more than commonsense was needed for them to appreciate that food affected by bad storage conditions might well cause illness in the pigs fed upon it.

As I read the judgment under appeal, this was how the judge, whose handling of the issues at trial was such that none save one survives for our consideration, reached this decision. In my judgment, he was right, upon the facts as found, to apply the first rule in Hadley v. Baxendale, or, if the case be one of breach of warranty, as I think it is, the rule in Section 53(2) of the Sale of Goods Act without inquiring as to whether, upon a juridical analysis, the rule is based upon a presumed contemplation. At the end of a long and complex dispute the judge allowed common sense to prevail. I would dismiss the appeal.

(Order: Appeal dismissed with costs. Leave to appeal to the House of Lords granted on condition that there is no application to vary order as to costs here and below and that appellants should pay respondents' costs in the House of Lords).