England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE No CCRTF 97/0743/2

Royal Courts of Justice

Strand

London WC2

Friday, 22nd May 1998

B e f o r e:

LORD JUSTICE HOBHOUSE

LORD JUSTICE SWINTON THOMAS

LORD JUSTICE BUXTON

ANTHONY PERRETT

Plaintiff/First Respondent

- v -

SIMON COLLINS

First Defendant/Second Respondent

LES UNDERWOOD

Second Defendant/First Appellant

PFA (ULAIR) LIMITED

(t/a Popular Flying Association)

Third Defendant/Second Appellant

(Handed down judgment

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

MR G KAVANAGH (Instructed by Ince & Co of London) appeared on behalf of the Appellants

MR S REID (Instructed by Stephens & Sons of Chatham Kent) appeared on behalf of the First Respondent

MR E BAILEY (Instructed by Dibb Lupton Alsop of London) appeared on behalf of the Second Respondent

J U D G M E N T

(As Approved to the Court )

(Crown Copyright)

LORD JUSTICE HOBHOUSE:

This is an action for personal injuries suffered by the Plaintiff Mr Anthony Perrett when the plane in which he was being carried as a passenger crashed on 18th January 1993. The aeroplane was a light aircraft, a Kit Fox model 3 which belonged to and had been assembled by the First Defendant Mr Simon Collins who was piloting the aeroplane at the time that it crashed. The Second and Third Defendants are respectively Mr Les Usherwood and the PFA (ULAIR) Limited. The Third Defendants traded under the name The Popular Flying Association (PFA). Mr Collins was one of their members and Mr Usherwood was one of their inspectors. Mr Usherwood had inspected the aircraft at various stages during its construction and upon its completion and had certified that it was in an airworthy condition. As a result, on 4 January 1993 the Company had issued a certificate for fitness for flight stating that the aircraft "has been inspected and is fit to fly". It was valid for one month - until 4 February 1993. It covered the flights of the aircraft with two persons on board, that is to say the pilot and a passenger, for the purpose of obtaining a permit to fly. It appears that it is normal practice to take a passenger on a proving flight in order to replicate the loading conditions of a normal flight.

The Plaintiff's case is that the personal injuries which he suffered when the aeroplane crashed were caused by the negligence of one or more of the Defendants. He alleges that the aeroplane had a propeller which did not match the gearbox fitted to the engine of the aeroplane. If there is a mismatch, the power absorbtion characteristics of the propeller will not correspond to the power output of the engine and the aircraft will be unable to fly safely. That this was what occurred and was the explanation of why the aeroplane crashed is in dispute. But the Second and Third Defendants have also disputed that they owed the Plaintiff any duty of care. The County Court Judge ordered that preliminary issues be tried as between the Plaintiff and the Second and Third Defendants whether either of them owed the Plaintiff a duty of care. These issues were tried before HHJ Hallgarten QC sitting in the Central London County Court. By a judgment delivered on 23rd April of last year he decided these issues in favour of the Plaintiff. With the leave of the Judge, the Second and Third Defendants have appealed to this Court. The First Defendant has also been represented on this appeal and supports the case of the Plaintiff, no doubt because the First Defendant will, if he is held at the trial to have been at fault, wish to be able to claim a contribution from the Second and Third Defendants towards any damages which he may have to pay to the Plaintiff.

The preliminary issues were ordered to be tried upon an agreed statement of facts. One was prepared. But it was so exiguous that before the Judge both sides put in additional documentary material so as to flesh out the position and role of the Second and Third Defendants and their relationship to the First Defendant. We have had access to the same documentary material and it does not appear that, save possibly on questions of detail, it is controversial. As regards the allegations of fault, these have to be taken from the Plaintiff's Particulars of Claim and assumed for present purposes to be correct (although they will be or may be in dispute at any trial of the issues of fault or causation that may follow). Thus it must be assumed that a reasonably competent inspector in the position of Mr Usherwood would have checked whether the propeller and the gearbox matched each other and would, exercising reasonable care, have observed that they did not and that the aircraft was not in that condition fit to fly; an inspector exercising reasonable care would not have certified that the aircraft was in an airworthy condition. As regards the Company, the Third Defendants, although the Plaintiff does not put his case against them on the basis of vicarious liability but upon inadequate supervision no separate point has been taken. This is no doubt because owing to the fact that the Second and Third Defendants are both covered by the same insurance policy, the question is academic as between them. If it were however to become relevant hereafter, there might have to be further consideration of the extent to which delegation by the Third Defendants to the Second Defendant sufficed to render the Third Defendants responsible for any want of care or other fault of the Second Defendant. But, as I have said, that is not a point with which we are concerned.

No point has been taken in this case on the question of reasonable foresight. It is accepted on behalf of the Defendants that, if reasonable care was not exercised in relation to the airworthiness of this aircraft, it was reasonably foreseeable by persons in the position of the Second and Third Defendants that injuries might be caused to persons being carried in the aircraft such as the Plaintiff. Similarly, although there were delegated statutory functions no argument has been raised that there is any over-riding principle of public policy which protects the Second or Third Defendants from liability. The arguments that are advanced on their behalf are that the criteria of 'proximity', in particular a criterion of 'directness', and what is 'fair, just and reasonable' are not satisfied. In this connection they refer to the role being performed by Mr Usherwood and the statutory scheme within which he and the Company were operating. They also rely upon the decision (by a majority) of the House of Lords in Marc Rich v Bishop Rock [1996] 1 AC 211 and two unreported Court of Appeal decisions, Philcox v Civil Aviation Authority 25th May 1995 and Reeman v Department of Transport and ors 26th March 1997.

What the Second and Third Defendants seek to achieve in this case is to extend decisions upon "economic" loss to cases of personal injuries. It represents a fundamental attack upon the principle of tortious liability for negligent conduct which had caused foreseeable personal injury to others. That such a point should be considered to be even arguable shows how far some of the fundamental principles of the law of negligence have come to be eroded. The arguments advanced in the present case illustrate the danger anticipated by Lord Lloyd in the final paragraph of his dissenting speech in the Marc Rich case. They also illustrate the dangers of substituting for clear criteria, criteria which are incapable of precise definition and involve what can only be described as an element of subjective assessment by the court: such ultimately subjective assessments tend inevitably to lead to uncertainty and anomaly which can be avoided by a more principled approach.

In the common law there has always been a distinct category of liability for causing physical injury to the human body and to goods. The torts of trespass to the person and trespass to goods typify this. These torts originally derived from strict criteria regarding intentional unlawful acts which caused such loss or injury. The law developed from that into a scheme where such intention was not required but unreasonable conduct on the part of the defendant sufficed. However the fundamental point remained the same that the defendant had by some activity caused either injury to the plaintiff's person or damage to his goods. It is the unreasonable conduct of the defendant causing foreseeable injury or damage which provides the legal nexus between the defendant and the plaintiff and founds the liability of the one to the other. Thus the formulations of the existence of a duty of care by the Court of Appeal in Le Lievre v Gould [1893] 1 QB 491 (adopted by the House of Lords in Donoghue v Stevenson [1932] AC 562) are by reference to injury to a person or his property. These are physical concepts arising from physical consequences of the defendant's conduct: They do not relate to economic loss though economic loss may come into account at the time that it is necessary to quantify the plaintiff's loss as a result of the physical consequence of which he is entitled to complain.

Economic loss is altogether a more sophisticated concept. It relates to economic advantage or disadvantage usually in the context of business activities. A number of particular difficulties arise. One is that in a competitive economic society the conduct of one person is always liable to have economic consequences for another and, in principle, economic activity does not have to have regard to the interests of others and is justifiable by the actor having regard to his own interests alone. This principle can be seen illustrated in cases which predate the development of the modern law of negligence such as Mogul SS v McGregor Gow [1892] AC 25. (See also Crofter Hand Woven Harris Tweed v Veitch [1942] AC 435.) Another difficulty is the question of remoteness. Once economic consequences are taken into account independently from and in the absence of any physical consequences, important problems arise for the law in deciding how far the responsibility of the actor should extend. It is in the context of liability for negligent misstatement that these problems have been particularly recognised. The courts have retreated from the extreme proposition that liability for economic loss can be approached in the same way as liability for physical injury. ( eg, Denning LJ in Candler v Crane Christmas [1951] 2 KB 164 at 178-9; Lord Devlin in Hedley Byrne v Heller [1964] AC 465 at 517; Megarry VC in Ross v Caunters [1980] Ch 297 at 323.) The courts have adopted more sophisticated criteria. ( eg, Smith v Bush [1990] 1 AC 831; Caparo v Dickman [1990] 2 AC 605; Murphy v Brentwood [1991] 1 AC 398; D.o.E. v Thomas Bates [1991] 1 AC 499; White v Jones [1995] 2 AC 207.) In Murphy v Brentwood at p.487, Lord Oliver said:

"As was pointed out by Lord Diplock in Dorset Yacht v Home Office [1970] AC 1004, 1060, Lord Atkin's test, though a useful guide to characteristics which will be found to exist in conduct and relationships giving rise to a legal duty of care, is manifestly false if used as a universal; and Lord Reid, in the course of his speech in the same case, recognised that the statement of principle enshrined in the test necessarily required qualification in cases where the only loss caused by the defendant's conduct was economic. The infliction of physical injury to the person or property of another universally requires to be justified. The causing of economic loss does not. If it is to be characterised as wrongful it is necessary to find some factor beyond the mere occurrence of the loss and the fact that its occurrence could be foreseen. Thus the categorisation of damage as economic serves at least the useful purpose of indicating that something more is required and it is one of the unfortunate features of Anns that it resulted initially in this essential distinction being lost sight of."

It was in Caparo v Dickman [1990] 2 AC 605 that Lord Bridge returned (at 617-8) to the question of the extent to which a universal principle could be extracted from the decisions which had followed on from the Dorset Yacht and Anns cases. He said:

"But since Anns a series of decisions of the Privy Council and of your Lordships' House, notably in judgments and speeches delivered by Lord Keith of Kinkel, have emphasised the inability of any single principle to provide a practical test which can be applied to every situation to determine whether a duty of care is owed and, if so, what is its scope. .... What emerges is that, in addition to foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of "proximity" or "neighbourhood" and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon one party for the benefit of the other."

In Caparo, the allegation that auditors were liable to shareholders for a report which they had made to the company was rejected. The House had particular regard to the role which the auditors were performing and the purpose of their report. The avoidance of economic loss to shareholders was not one of those purposes. The House declined to extend the duty of care beyond the limits which had been recognised in previous cases. It is of significance for the present case that at p.618, Lord Bridge said:

"I think the law has now moved in the direction of attaching greater significance to the more traditional categorisation of distinct and recognisable situations as guides to the existence, the scope and the limits of varied duties of care which the law imposes."

Thus where a case fits into a category where the existence of a duty of care and a potential liability in the tort of negligence has already been recognised, the more elusive criteria to which Lord Bridge referred for dealing with the cases that go beyond the recognised category of proximity do not arise.

This does not mean that in cases of personal injuries problems do not arise about the scope or existence of the duty of care. In Donoghue v Stevenson [1932] AC 562 and Grant v Australian Knitting Mills [1936] AC 85, both cases of product liability, the courts had to consider the extent of the duty of care of a manufacturer of a product towards consumers of it. Mere foreseeability did not suffice. In those cases the relevant consideration was whether or not the manufacturer was entitled to expect that there would be an intermediate inspection of the product before it was used by the consumer. This concerned the foresight of a chain of causation between the defendant's conduct and the plaintiff's injury. Cases of nervous shock have given rise to recurrent problems. ( eg, Alcock v Ch. Con. S. Yorks [1992] 1 AC 310; Page v Smith [1996] AC 155.) Other cases have concerned the liability of some public institution or body for adverse consequences suffered by members of the public. There questions arise whether what can be recognised as a general public duty owed to the community as a whole can be used to support an allegation of a duty owed to particular individuals. In Dorset Yacht v Home Office [1970] AC 1004, a case of property damage, the plaintiffs were able to establish such a particular duty of care. In Hill v Chief Constable of West Yorkshire [1989] AC 53 and Barrett v Enfield L.B.C. [1998] QB 367 the plaintiffs were not.

A minimum requirement of particularity and contemplation is required. But it has never been a requirement of the law of the tort of negligence that there be a particular antecedent relationship between the defendant and the plaintiff other than one that the plaintiff belongs to a class which the defendant contemplates or should contemplate would be affected by his conduct. Nor has it been a requirement that the defendant should inflict the injury upon the plaintiff. Such a concept belongs to the law of trespass not to the law of negligence. That this is so is illustrated by the products liability cases. It is also illustrated by Clay v Crump [1964] 1 QB 533 to which I will refer shortly and by the repairer cases such as Herschtal v Stewart Arden [1940] 1 KB 155 and Haseldine v Daw [1941] 2 KB 343. In Haseldine v Daw , a decision of the Court of Appeal, a lift engineer had failed adequately to repair a lift which as result later fell to the bottom of its shaft. The plaintiff happened to be in it at the time and was consequently injured.

In cases of personal injury, it suffices that the activity of the defendant has given rise to the situation which has caused the injury to the plaintiff. Where the defendant is involved in an activity which, if he is not careful, will create a foreseeable risk of personal injury to others, the defendant owes a duty of care to those others to act reasonably having regard to the existence of that risk. The limiting factors are the concepts of foreseeability and reasonableness. ( eg, Woods v Duncan [1946] AC 401.)

In the law of personal injuries two of the leading cases both decided at the level of the Court of Appeal can be referred to. The first is Adler v Dickson [1955] 1 QB 158. The defendants were the master and boatswain of the P&O passenger liner Himalaya. The plaintiff was a passenger who was injured when an insecure gangway slipped and fell. The plaintiff had a contract with P&O which excluded liability for such an injury. The defendants were however held liable. They owed the plaintiff a duty of care in tort. They should have seen that the gangway was properly secured. The defendants' contractual duty was to their employers but this did not mean that they did not owe a duty of care in the law of tort to those who were liable to be affected by any carelessness on their part which was foreseeably capable of causing injury to such persons. It was their conduct which had given rise to the situation (the inadequately secured gangway) which was the situation which caused the plaintiff's injury. Indeed, this point was not in contention in the case; the dispute was whether the defendants could rely upon their employer's contractual exemption.

The second is Clay v Crump [1964] 1 QB 533. The plaintiff was a workman who was injured when an insecure wall collapsed upon him. The relevant defendant was an architect employed in supervising the contract works. If the architect had exercised reasonable care he would not have allowed the wall to remain standing in a dangerous condition. At pp.555-7 Ormrod LJ said:

"It was contended on behalf of the architect that he was employed under a contract with the owners and in consequence was answerable to them alone if by any act or omission he was in breach of that contract. It may be that there was a time when this view of the law would have prevailed. Decisions in recent years however broadened the basis upon which persons may be found liable if they are in default in the performance in their contractual duties and in considering whether the architect in the case owed a duty to the plaintiffs other questions have to be taken into account and the contractual liabilities of the architect to the building owner."

"This is a case in which it can be said that the plaintiff was so closely and directly affected by the acts of the architect as to have been reasonably in his contemplation when he was directing his mind to the acts or omissions which are called into question? In my judgment, there must be an affirmative answer to that question. The architect, by reason of his contractual arrangement with the building owner, was charged with the duty of preparing the necessary plans and making arrangements for the manner in which the work should be done. This involved taking precautions or giving instructions for them to be taken so that the work could be done with safety. It must have been in the contemplation of the architect that builders would go on the site as the whole object of the work was to erect buildings there. It would seem impossible to contend that the plaintiff would not be affected by the decisions and plans drawn up by the architect."

He followed and applied Donoghue v Stevenson . He rejected an argument that the opportunities for intermediate inspection sufficed to relieve the defendant architect of responsibility although it did show that others were at fault as well. The judgments of the other members of the court were to like effect.

Where the plaintiff belongs to a class which either is or ought to be within the contemplation of the defendant and the defendant by reason of his involvement in an activity which gives him a measure of control over and responsibility for a situation which, if dangerous, will be liable to injure the plaintiff, the defendant is liable if as a result of his unreasonable lack of care he causes a situation to exist which does in fact cause the plaintiff injury.

Once this proximity exists, it ceases to be material what form the unreasonable conduct takes. The distinction between negligent misstatement and other forms of conduct ceases to be legally relevant, although it may have a factual relevance to foresight or causation. Thus a person may be liable for directing someone into a dangerous location ( eg, the Hillsborough cases; eg, Sharpe v Avery [1938] 4 AER 85) or a producer may be liable for the absence of an adequate warning on the labelling of his product ( eg, Heaven v Pender 11 QBD 503 at 517, per Cotton LJ). Once the defendant has become involved in the activity which gives rise to the risk, he comes under the duty to act reasonably in all respects relevant to that risk. Similarly none of the particular difficulties which arise in relation to economic loss arise in relation to the causing of personal injury. Once proximity is established by reference to the test which I have identified, none of the more sophisticated criteria which have to be used in relation to allegations of liability for mere economic loss need to be applied in relation to personal injury, nor have they been in the decided cases.

The argument of the Second and Third Defendants is that it is necessary to go further. The injury to the Plaintiff must have been directly caused by them. The Plaintiff must show in addition that it is fair, just and reasonable that they should be under a liability to the Plaintiff. For these propositions they rely on the Marc Rich case.

"Since the decision in Dorset Yacht Co v Home Office [1970] AC 1004, it has been settled law that the evidence of foreseeability and proximity as well as considerations of fairness justice and reasonableness are relevant to all cases whatever the nature of the harm sustained by the plaintiff."

He approved and adopted as a correct summary of the current state of the law what had been said by Saville LJ in the Court of Appeal:

"Whatever the nature of the harm sustained by the Plaintiff, it is necessary to consider the matter not only by enquiring about foreseeability but also by considering the nature of the relationship between the parties; and to be satisfied that in all the circumstances it is fair, just and reasonable to impose a duty of care. Of course these three matters overlap with each other and are really facets of the same thing. For example, the relationship between the parties may be such that it is obvious that a lack of care will create a risk of harm and that as a matter of common sense and justice a duty should be imposed. ... Again in most cases of the direct infliction of physical loss or injury through carelessness, it is self-evident that a civilised system of law should hold that a duty of care has been broken, whereas the infliction of financial harm may well pose a more difficult problem. Thus the three so-called requirements for a duty of care are not to be treated as wholly separate and distinct requirements but rather as convenient and helpful approaches to the pragmatic question whether a duty should be imposed in any given case. In the end whether the law does impose a duty in any particular circumstances depends on those circumstances."

He thus confirms an over-arching formula within which can, and he would say must, be found all cases of recognised duties of care. However he appears to recognise that for some categories of conduct, as for example where it creates a risk of harm (by which I take him to be referring to personal injury), "it is obvious that as a matter of common sense and justice a duty should be imposed". Furthermore, he (like Balcombe LJ in the Court of Appeal, [1994] 1 WLR at 1088-9) appears to be prepared to treat the three factors as interlinked. If this understanding is correct, and it ties in with what Lord Bridge said about attaching greater importance to the more traditional categorisation of established situations of liability (see above), no problem arises. The over-arching formula does not affect the outcome. Established categories, with or without the assistance of 'common sense and justice', provide the answer. The certainty provided by the previous authorities is not undermined. Indeed it would be surprising if Lord Steyn had, by his decision of what he described as a novel question relating to property or economic interests, intended to depart from or call into question established decisions and principles relating to personal injury. It is a truism to say that any case must be decided taking into account the circumstances of the case, but where those circumstances comply with established categories of liability, a defendant should not be allowed to seek to escape from liability by appealing to some vaguer concept of justice or fairness; the law cannot be re-made for every case. Indeed, the previous authorities have by necessary implication held that it is fair, just and reasonable that the plaintiff should recover in the situations falling within the principles they have applied. Accordingly, if the present case is covered by the decisions in or the principles recognised by previous authorities - and it is - Marc Rich does not require us to depart from them; indeed, we remain bound to follow them.

Lord Steyn's next step was to consider the circumstances of the case - the material factors. He took first the question whether the case involved "direct physical loss". He said that "the law more readily attaches the consequences of actionable negligence to directly inflicted physical loss than to indirectly inflicted physical loss". He said (p.237):

"In the present case the shipowner was primarily responsible for the vessel sailing in a seaworthy condition. The role of the NKK was a subsidiary one."

He used this factual conclusion to distinguish the case before him from Clay v Crump . He expressly said that the fact that the carelessness of the surveyor did not involve the direct infliction of physical damage did not exclude the existence of a duty of care; indeed he could not have done so without overruling previous authority. As I have attempted to explain, established principle shows that this is not a requirement. The highest that the point can be put is that where the conduct would amount to a direct invasion or property or personal rights amounting to or closely analogous to trespass, a special justification is required to negative liability. But where on general principle in the context of foreseeable risk of personal injury, a duty of care exists; lack of directness, unless it destroys the causative link, provides the defendant with no answer.

Lord Steyn went on to consider further factors. He pointed out that there was no element of reliance as between the cargo owners and the surveyor; the cargo was already on board the ship and in the charge of the shipowner. The carriage was covered by bill of lading contracts with the shipowner on Hague-Visby terms, an internationally recognised scheme for the division of risk between ship and cargo interests, including undelegable obligations of the carrier. ( International Packers v Ocean S.S.Co, [1955] 2 Lloyds 218) This was a regime where all parties were covered by insurance and principles of limitation of liability apply which would be disrupted if the alleged liability was to be accepted. He considered the special role of classification societies within this scheme and the position of NKK, a non profit-making body performing functions, some of which would have to be performed by governments if classification societies did not exist. He took into account the relationship of NKK to the shipowners and ship interests and the desirability of a simple and clear scheme for the resolution of disputes between cargo interests and ship interests. He considered the cumulative effect of these factors, particularly "the outflanking of the bargain between shipowners and cargo owners, the negative effect on the public role of NKK and other considerations of policy" (p.242) showed that it was not fair, just and reasonable to impose a duty of care on NKK.

In my judgment the decision in Marc Rich does not assist the Second and Third Defendants' argument.

(1) Its reasoning was essentially directed to considerations relevant to economic loss and is not germane to personal injury.

(2) It does not, nor does it purport to, re-open established categories of liability, in particular, established categories of liability for personal injury.

(3) The decision was based upon broad policy considerations relating to the organisation and structure of maritime trade which are peculiar to that situation.

(4) The role of Mr Usherwood was not a subsidiary one to that of Mr Collins; Mr Usherwood had an independent and critical role in the granting of a certificate of fitness for flight for this aircraft, without which it could not take off.

(5) The existence of a duty of care owed by the Second and Third Defendants would not duplicate the liability of Mr Collins; it was perfectly possible that circumstances could exist where an innocent third party would suffer personal injury and be unable to recover from Mr Collins.

(6) A passenger about to be taken up in an aircraft is entitled to assume that it has met the applicable safety requirements and that those involved have taken proper care, and to rely upon it; this element was absent in Marc Rich .

(7) The analogy sought to be drawn between the positions of NKK and the Third Defendants, whilst showing some features in common, suffices neither to bring the present case within the reasoning in Marc Rich nor to take it out of the established categories where defendants, sometimes public bodies, have been held liable for personal injuries suffered by members of the public affected by their activities.

Marc Rich should not be regarded as an authority which has a relevance to cases of personal injuries or as adding any requirement that an injured plaintiff do more than bring his case within established principles. If a plaintiff is attempting to establish some novel principle of liability, then the situation would be different and the considerations discussed by Lord Steyn could be relevant. ( Barrett v Enfield L.B.C. [1998] QB 367) But that is not this case.

In his judgment, Judge Hallgarten, referred to Marc Rich and Co O.G. v Bishop Rock Marine Co Ltd [1996] 1 AC 211 and said that, following what was said in that case and others, the questions that he was required to answer were:

(1) Was the loss or damage foreseeable?

(2) Was there sufficient proximity between the Plaintiff and the Defendant?

(3) Was it fair, just and reasonable to impose a duty on the Defendant?

The Judge answered those questions in the affirmative. It is not now in dispute that the loss or damage was foreseeable.

On the issue as to proximity the Judge said that the Second Defendant was involved with the inspection of the aircraft throughout. He would appreciate that the occupants of the aircraft might suffer injury if the aircraft was passed as fit to fly when it was not. The First Defendant was essentially an amateur and the Second Defendant had extensive powers of control and without the approval of the Third Defendant the aircraft could not have flown. The Judge said that that was in contrast to the facts in the Marc Rich case.

In answering the questions as to whether it was just, fair and reasonable that the Second and Third Defendants be liable to the Plaintiff, the Judge relied on the fact that they were responsible for the safety of the occupants of the aircraft. The Judge did not accept the submission that the First Defendant was primarily responsible for the safety of passengers in the aircraft with the Second Defendant’s role being a subsidiary one. The Judge said that if, in circumstances such as arise in this case, the Second and Third Defendants owed no duty to the Plaintiff, the injured Plaintiff might well be left without a remedy. He took into account the fact that the Second and Third Defendants were not a commercial undertaking but he did not take the view that that factor should tip the balance in their favour. The Third Defendant is obliged under its Rules to indemnify the Second Defendant and both the Second and the Third Defendants are covered by insurance. He then said that the comparison with a classification society and the regime of carriage of good by sea, involved in the Marc Rich case, was flawed and deceptive, and that there were very real distinctions to be drawn between that case and the present case. The Judge then took into account the fact that the Plaintiff had not overtly indicated that he was relying on the Second Defendant to ensure that the aircraft was safe. He took into account the existence of criminal sanctions under Article 99 of the Air Navigation Order and took the view, that insofar as that was a material consideration, it assisted the Plaintiff rather than the Second and Third Defendants. Finally he took into account the submission that there was a trend against the Courts finding a duty of care on the part of Regulators or Supervisors. He said that he could not discern any such trend in cases other than those concerning pure economic loss.

He answered the questions in the affirmative and said that he did not find that it was appropriate to draw any distinction between the Second and the Third Defendant.

In his Notice of Appeal Mr Kavanagh submits that the Judge was wrong to find that there was proximity between the Plaintiff and the Second and Third Defendant because the relationship was not sufficiently direct and close. He says that the danger to the Plaintiff was not created by the Second Defendant but by the First Defendant.

On this issue, as so often in cases relating to the breach of the duty of care, it is helpful to remind oneself of the classic statement of Lord Atkin in Donoghue v Stevenson [1932] AC 562 at page 580:

"At present I content myself with pointing out that in English law there must be, and is, some general conception of relations giving rise to a duty of care, of which the particular cases found in the books are but instances. The liability for negligence, whether you style it such or treat it as in other systems as a species of ‘culpa’, is no doubt based upon a general public sentiment of moral wrongdoing for which the offender must pay. But acts or omissions which any moral code would censure cannot in a practical world be treated so as to give a right to every person injured by them to demand relief. In this way rules of law arise which limit the range of complainants and the extent of their remedy. The rule that you are to love your neighbour becomes in law, you must not injure your neighbour; and the lawyer’s question who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. 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.”

One must bear in mind subsequent warnings, for example by Lord Reid at page 1027 and Lord Morris of Borth-y-Gest at page 1038 in the Dorset Yacht Company v Home Office [1970] AC 1004, that Lord Atkin’s words are not to be treated as though they are contained in a statute.

In Grant v Australian Knitting Mills Ltd [1936] AC 85 at page 103 Lord Wright said:

"All that is necessary as a step to establish a tort of actionable negligence is define the precise relationship from which the duty to take care is deduced. It is, however, essential in English law that the duty should be established; the mere fact that a man is injured by another’s act gives in itself no cause of action. If the act is deliberate, the party injured will have no claim in law even though the injury was intentional so long as the other party is merely exercising a legal right; if the act involves lack of due care, again no case of actionable negligence will arise unless the duty to be careful exists.”

In Marc Rich in the Court of Appeal [1994] 1 W.L.R. 1071 Balcombe, L.J. said at page 1088:

"I doubt whether the words ‘fair just and reasonable’ impose a test additional to that of ‘proximity’; in my judgment these are criteria to be adopted in considering whether the necessary degree of proximity exists.”

One must consider the question of proximity and “fair just and reasonable" in the context of the case under consideration but on the facts of a case such as this the two can conveniently be considered together. Indeed foreseeability is of assistance in considering justice and fairness. There are real dangers in compartmentalising these components in negligence, and doing so is a far cry from the classic dictum of Lord Atkin in Donoghue v Stevenson. This seems to me to be borne out by the well known passage of Lord Bridge in Caparo Industries Plc v Dickman [1990] 2 AC 605 at page 617 when he said:

"What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of ‘proximity’ or ‘neighbourhood’ and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other.”

In the South Pacific Manufacturing Co Ltd v New Zealand Security Consultants and Investigations Ltd , Cooke, P. said:

"A broad two stage approach or any other approach is only a framework, a more or less methodical way of tackling the problem. How it is formulated should not matter in the end. Ultimately the exercise can only be a balancing one and the important object is that all the relevant factors be weighed. There is no escape from the truth that, whatever formula be used, the outcome in a grey area case has to be determined by judicial judgment. Formulae can help organise thinking but they cannot provide answers.”

Accordingly, in this case, I prefer to consider the questions of “proximity” and whether it is “fair, just and reasonable” to impose a liability on the Second and Third Defendants together. However, on the narrow proximity question, going back to Lord Atkin’s test there can be no doubt, as is conceded, that it was foreseeable that if the Second and Third Defendants granted a certificate of fitness to fly in respect of this aircraft with an inappropriate gearbox there was likely to be an accident, then plainly they ought reasonably to have in contemplation a person travelling as a passenger on the Test Flight in the aircraft as being so affected when they were directing their minds to the acts or omissions which are called in to question.

Mr Kavanagh submits that the Judge was wrong to say that it was fair, just and reasonable to impose a duty on these Defendants. He says that the owner of the aircraft is primarily responsible for safety. He stresses that the Defendants are non commercial, non profit making and are giving their services out of goodwill and not for reward. They were in fact paid by the First Defendant at the rate of £20 a visit. That may be a nominal charge but nonetheless the charge was made. He points out that the First Defendant is insured. However he may or may not be liable to the Plaintiff and there might well be similar cases in which the owner was not insured. He says that the Plaintiff was in the aircraft at the invitation of the First Defendant and it is, accordingly, not unfair that he should bear the responsibility for the Plaintiff’s safety. He submits that the imposition of a duty of care may have far reaching potential. There may be an increase in insurance premiums. P.F.A. might decline to continue to carry out this work on behalf of C.A.A. There are, he submits, serious implications for other Regulators. He submits that the Judge failed to place sufficient weight on the responsibilities of the First Defendant and over estimated the degree of control and supervision by the Second and Third Defendants.

Mr Kavanagh relies on the speech of Lord Steyn, with whom the other Lords apart from Lord Lloyd of Berwick, who dissented, agreed in Marc Rich and Co O.G. v Bishops Rock Marine Co Ltd (supra). The headnote reads:

"The First Defendants’ vessel loaded the Plaintiff’s cargo under bills of lading incorporating the Hague Rules in consequence of which the shipowner was owed a non delegable duty to the cargo owners to make the vessel seaworthy at the inception of the voyage. In mid-voyage the vessel was put into port because of a crack in her hull. A Surveyor, acting on behalf of the Third Defendant Classification Society, in which the vessel was entered, carried out inspections of the vessel and recommended that, after repairs specified by him, the vessel should continue on her voyage. A few days after leaving port the vessel sank with the loss of the cargo. The cargo owners brought proceedings against the ship owners, the charterers and the Classification Society. The claim against the ship owners was settled. The action against the charterers was discontinued. The cargo owners sought to recover the balance of their loss from the Classification Society, alleging breach of a duty of care owed by the Society to the cargo owners to take reasonable care in the surveys undertaken and the recommendations made so as not to expose the cargo to a risk of damage or loss. The Society accepted for the purposes of that issue that the damage suffered was physical damage and that it had been foreseeable that lack of care by the Society was likely to expose the cargo owners’ property to the risk of that damage. The House of Lords held that to impose a duty of care on Classification Societies would be unfair, unjust and unreasonable as against ship owners who would ultimately have to bear the costs and that such a duty would be at variance with the international contractual structure between ship owners and cargo owners. Therefore a duty ought not to be imposed on the Society.”

It is absolutely clear that that case depended on its own facts and the facts of that case are very different from the facts of the present case. Lord Steyn stressed that a ship owner was primarily responsible for the vessel sailing in a seaworthy condition. The role of the N.K.K. (the Classification Society) was a subsidiary one. The actual terms of the bills of lading contracts incorporating The Hague Rules were fundamental to the decision. Lord Steyn said at page 239:

"The dealings between ship owners and cargo owners are based on a contractual structure, the Hague Rules, and tonnage limitation on which the insurance of international trade depends...... underlying it is the system of double or overlapping insurance of cargo. Cargo owners take out direct insurance in respect of the cargo. Ship owners take out liability risks insurance in respect of breaches of their duties of care in respect of the cargo. The insurance system is structured on the basis that the potential liability of ship owners to cargo owners is limited under the Hague Rules and by virtue of tonnage limitation provisions. And insurance premiums payable by owners obviously reflect such limitations on the ship owners’ exposure.”

Then on page 240 Lord Steyn said:

"The result of a recognition of a duty of care in this case would be to enable cargo owners, or rather their insurers, to disturb the balance created by the Hague Rules and Hague-Visby Rules as well as by tonnage limitation provisions, by enabling cargo owners to recover in tort against a peripheral party to the prejudice of the protection of ship owners under the existing system. For these reasons I would hold that the international trade system tends to militate against the recognition of the claim in tort put forward by the cargo owners against the Classification Society.”

Those considerations do not apply in this case.

Lord Steyn then went on to say that the fact that a defendant acts for the collective welfare is a matter to be taken into consideration when considering whether it is fair, just and reasonable to impose a duty and that consideration is relevant to the instant case. He placed particular reliance on the bills of lading contracts, the position and role of N.K.K. and policy factors. The first two do not apply to the present case, and the policy factors identified by him in that case are quite different to any policy factors that might arise in the present case. Then finally Lord Steyn said at page 242:

"I conclude that the recognition of a duty would be unfair, unjust and unreasonable as against the ship owners who would ultimately have to bear the cost of holding Classification Societies liable, such consequence being at variance with the bargain between the ship owners and the cargo owners based on an internationally agreed contractual structure. It would also be unfair, unjust and unreasonable towards Classification Societies notably because they act for the collective welfare and unlike ship owners they would not have the benefit of any limitation provisions.

Looking at the matter from the point of view of cargo owners, the existing system provides them with the protection of the Hague Rules or Hague-Visby Rules. But that protection is limited under such rules and by tonnage limitation provisions. Under the existing system any shortfall is readily insurable. In my judgment the lesser injustice is done by not recognising a duty of care. It follows that I would reject the primary way in which counsel for the cargo owners puts his case."

It follows, therefore, that at the conclusion of his speech, Lord Steyn, having set out the relevant considerations which, in the main, do not apply to this case, came to a conclusion on the basis of a “lesser injustice” concept in deciding whether or not a duty of care should be imposed. Applying that test to the present case I would conclude, without difficulty, that a greater injustice would be done to a person injured in circumstances such as those that arise in this case by not imposing a duty upon those responsible for issuing a Fitness to Fly certificate than would result to the defendants in imposing such a duty. The First and Second Defendants have undertaken to discharge the statutory duty for the protection of the public and in my judgment no injustice is done by imposing such a duty on them in respect of a negligent act.

In Reeman v Department of Transport and ors [1997] 2 Lloyds L.R. 648, a ship was built in Holland in 1951 as a Beam Trawler. She was lengthened, overhauled and refitted in about 1972. In 1977 she was imported from Holland into this country by a company who applied for a Fishing Vessel Certificate. A survey was carried out by a Surveyor employed by the Department. He made a negligent error which led to the conclusion that the vessel satisfied the Department’s stability requirements when in fact she failed to do so by a significant margin. The Surveyor made a report and the Department issued a Fishing Vessel Certificate. The same Surveyor later resurveyed and made the same error. The Plaintiffs purchased the vessel and it was ascertained that it did not meet the minimum requirements with the result that the purchaser suffered financially.

Phillips, L.J. giving the leading judgment said at p. 680:

| "The statutory framework in the present case is one designed to promote safety at sea. The scheme adopted to achieve this is to impose duties as to seaworthiness on the owners of vessels and then to provide for the Department to check and certify that these duties have been complied with. The purpose for issuing certificates is not really to encourage skippers or others to rely upon them by putting to sea, or in any other manner. Somewhat paradoxically, the purpose of issuing certificates is to help to prevent fishing vessels which are uncertified and which may be unseaworthy, from putting to sea. More broadly, one can say that the purpose of issuing certificates is the promotion of safety at sea.”

A study of the statutory framework provided by the Fishing Vessels (Safety Provisions) Act, 1970, and the regulations made thereunder shows that they are quite different to the regulatory framework governing the issuing of certificates in relation to aircraft. As was pointed out by Phillips, L.J. the scheme imposes duties as to seaworthiness on the owners of the vessels.

Phillips, L.J. continued on p. 680:

"What I cannot accept is Mr Ullstein’s further submission that, in the case of fishing vessel certificates, a subsidiary purpose for which the certificate is issued is to inform those who may, in the future, consider entering into commercial transactions, such as purchase or charter, in relation to the certified vessel. No trace of such a purpose is to be found in the statute under which the rules are issued....... The protection of those whose commercial interests may foreseeably be affected by unseaworthiness of vessels forms no part of the purpose of the legislation and no part of the purpose for which fishing vessel certificates are issued. So far as the purpose of the advice is concerned, the facts of this case are for more inimical to the finding of a relationship of proximity than the facts in Caparo.”

Accordingly the distinction between that case and the present case is readily apparent. I have no doubt that the regulatory framework provided by the Civil Aviation Act, 1982, referred to above is designed, at least in substantial part, for the protection of those who may be injured if an aircraft is certified as being certified as fit to fly when it is not.

In Philcox v Civil Aviation Authority (Unreported, Transcript 25th May, 1995) the Plaintiff sued the C.A.A. in respect of the issuing of a certificate of airworthiness. The Plaintiff was the assignee of a company who had purchased a light aircraft. Work had been carried out on the aircraft by Bristol and Wessex Aeroplane Club Ltd. The aircraft crashed and was damaged. The Plaintiff sued for the cost of repairs. The issue tried by the Judge was whether the C.A.A. owed a duty to the company which had assigned its interests to the Plaintiff for economic loss. Staughton LJ said at p. 14:

"It is the task of the owner of an aircraft to maintain it properly. He can do it himself or he can engage others to do so. The Air Navigation Order itself provides for a class of licensed maintenance engineers. It is the owner’s job to engage one of those and to see that the task is properly carried out. The Civil Aviation Authority supervises in order to make sure that the owner has done what he, the owner, ought to have done and what is his responsibility. The Civil Aviation Authority is there to protect the public against the owner’s failures and not to protect the owner against his own errors.”

Staughton LJ was certainly not excluding a duty owed by a person issuing a certificate to the general public.

Millett LJ said at page 15:

"In my judgment the question for the Court can be formulated as follows: is a duty of care owed by the Civil Aviation Authority to the owner or operator of an aircraft which is not airworthy to avoid the risk of physical damage to the aircraft and consequential loss arising from its negligent failure to prevent the aircraft from flying by withholding a Certificate of Airworthiness?”

Then on page 17 he said:

"It is clear, to my mind, that the risk which the scheme of the legislation is designed to prevent is the risk that the owner or operator of an aircraft will fly the aircraft even when it is unfit to fly and that the persons for whose protection the scheme has been established are the passengers, the cargo owners, and other members of the public likely to be harmed if an unfit aircraft is allowed to fly.

The owners and operators of the aircraft are not within the class of persons for whose protection the scheme has been established; they are the persons against whose imprudent activities the scheme is designed to protect the public. They are not entitled to rely on the issue of the certificate to exonerate them from their own responsibilities to ensure there aircraft are fit to fly.”

Accordingly, Millett LJ clearly recognised that the scheme of the legislation in relation to Certificates of Airworthiness was specifically designed to protect the public such as passengers but did not extend to the owners and operators to exonerate them from their own responsibility. If that is right, then the regulatory framework was designed specifically to protect persons in the position of the Plaintiff in this case from being taken up in an aircraft which should not have been permitted to fly.

In Swanson et al v The Queen in right of Canada 80 D.L.R. 741 an action was brought against the Crown arising from the crash of an aircraft. The action was brought against the Crown for damages alleging that the negligence of its employees contributed to the loss of the widows and families of passengers killed in the accident. The Trial Judge held that there was a duty owed to them by the Crown, that this duty was breached and that it caused loss to the Plaintiffs. The Plaintiffs alleged negligence by the Inspector employed by Transport Canada, the body appointed by the Canadian Transport Commission to issue licenses to operate commercial air services. The regulatory framework is similar to that in this country. It was alleged that there were a number of violations of Air Navigation Orders by the owners of the aeroplane. To a substantial extent the judgment of the Federal Court of Appeal related to the liability of the Crown under Crown Liability Act, 1985. However, Linden, J.A., giving the judgment of the Court, also considered the question as to the nature of the duty owed by the Inspectors to the passengers travelling in the aircraft.

At page 750 Linden, J.A. said:

"These people were essentially inspectors of airlines, aircraft and pilots, who did not make policy but rather implemented it, although they certainly had to exercise some discretion and judgment during the course of their work, much like other professional people. I agree with Mr Justice Walsh when he stated:

‘The Aeronautics Act and Regulations made thereunder if not, explicitly imposing a duty of care of the general public, at least do so by implication in that this is the very reason for their existence. The flying public has no protection against avaricious airlines, irresponsible or inadequately trained pilots, and defective aircraft if not the Department of Transport and must rely on it for enforcement of the law and regulations in the interest of public safety. Its expressed policy is, as it must be, to enforce these Regulations, but when the extent and manner of the enforcement is sufficient and inadequate to provide the necessary protection, then it becomes more than a matter of policy but one of operation and must not be carried out negligently or inadequately. While there may be no contractual duty of care owed to the public, as the Plaintiff suggests, this does not of itself protect the Defendant from liability in tort.'"

Then a little later he said:

"Their (the Inspectors) task was to enforce the regulations and the A.N.O.’s as far as safety was concerned to the best of their ability with the resources at their disposal. This function was clearly operational. Hence, a civil duty of care was owed to the Plaintiffs to exercise reasonable care in the circumstances.”

Although the facts were somewhat different I respectfully agree with the reasoning in that case and it provides support for the Plaintiff’s contentions in this case.

The regulatory framework recognises the dangers that are inherent in flying. That is the very purpose lying behind the prohibition on taking aeroplanes into the air without a Certificate of Airworthiness and a Permit to Fly, and the appointment of the C.A.A. or those authorised by them to issue such certificates. The whole purpose is one of air safety. In my judgment, any reasonably well informed member of the public, although not in possession of the detailed framework, would expect there to be such a regulatory system in force to ensure his safety when flying and would rely upon it. Furthermore, a member of the public would expect that a person who is appointed to carry out these functions of inspecting aircraft and issuing permits would exercise reasonable care in doing so. The Third Defendants, and those appointed to act on their behalf, are experts in their field the First Defendant is an amateur and inevitably will rely on the Second Defendant as an expert. The Amateur who builds his own aircraft is unlikely to rely on any expertise other than that provided by the P.F.A.. In relation to a ship, as in the Marc Rich case, the owners are likely to employ their own experts to ensure that the ship is seaworthy. In the case of a small private aeroplane, the only expertise which is supplied is that of the Inspector, the Second Defendant. Until the Certificate of Fitness is granted, the aircraft cannot fly. That is in contradistinction to the position in the Marc Rich case where there was no such inhibition on the ship owners. The surveyor acting on behalf of N.K.K. did not issue a permit to sail allowing the ship to go to sea in contradistinction to the Second Defendant in this case who did issue such a permit enabling the aircraft to fly. The primary purpose, as I see it, of the intervention of the C.A.A. or its appointees is the safety of persons who fly in the aircraft which has been granted the Certificate. Moreover the primary purpose is to prevent physical injury as opposed to damage to property. If, as one must assume for the purposes of the preliminary issue, the Second and Third Defendants were negligent, it is difficult indeed to see why they should not owe a duty to the Plaintiff. To hold the opposite would be capable of causing a serious injustice in circumstances such as the owner not being liable or not being insured. We are told by Mr Kavanagh that the P.F.A. has had no claim made against it since its foundation in 1946. That is much to its credit but it does not seem to me to affect the position as to whether or not it should be held liable in negligence. Moreover it makes it much more difficult for Mr Kavanagh to put forward the “floodgates” argument or submissions based on a prohibitive increase in insurance premiums or people being unwilling to undertake the important tasks entrusted to them under the Air Navigational Orders. It is true that the Third Defendants are a non commercial non profit making body and that may be factor to be taken into account, but advantages accrue to the P.F.A. as a result of their regulatory function.

In this case the Second Defendant knew and approved of the fitting of the Type C gearbox. They issued a certificate which, in effect, certified that the aircraft was safe to fly. They knew that a passenger might be taken up in the aircraft. They voluntarily assumed that the responsibility of issuing the Certificate and, accordingly, in effect, certifying that the aircraft was safe.

In my judgment the Judge was right to hold that there was sufficient proximity and that it was fair just and reasonable to impose a duty on the Second and Third Defendants.

I also would dismiss this appeal.

LORD JUSTICE BUXTON:

In Marc Rich & Co v Bishop Rock Ltd [1996] 1 AC 211 [ Marc Rich ] the House of Lords, [1996] 1 AC at p. 236A, upheld as a correct statement of the law of negligence as it now stands the passage from the judgment of Saville LJ in the Court of Appeal that has already been cited by Hobhouse LJ.

Their Lordships added, at p.235E, that it had been settled law for twenty-five years, since the decision of the House in Dorset Yacht Co v Home Office [1970] AC 1004, that the elements of foreseeability and proximity, and considerations of fairness, justice and reasonableness are relevant to all cases, whatever the nature of the harm sustained by the plaintiff.

For my part, if it were literally the case that considerations determining whether a duty exists in law do indeed collapse into a pragmatic decision whether there should be a duty in the particular circumstances, then I would see little role for an appellate court in elucidating that question. Deciding pragmatic issues, especially issues of fairness and reasonableness, would seem to be eminently a task for a first instance judge, with which an appellate court will only interfere on very limited and special grounds, which do not include mere disagreement with the judge's conclusion. It is, however, clear that that is not the effect of the present law. However careful in assessing the competing factors the trial judge may be, and however aware he may be of what those factors are, an appellate court is able to substitute its decision for his simply on the ground that it considers him to have been wrong: see e.g. Reeman v Department of Transport [1997] 2 Lloyds LR 648.

I am saved from pursuing this difficulty as a matter of decision, and from addressing the limits, if any, on this court's powers, because I consider that the decision of Judge Hallgarten QC was not only innocent of any irrationality or lack of material on which it could properly proceed, but also plainly right. Nonetheless, because this court does clearly play an appellate role as to the merits in law of the decision, I venture to indicate the factors that lead me to think, despite the arguments addressed to us, that the judge's decision was correct in law.

"In the straightforward case of the direct infliction of physical injury by the act of the plaintiff there is, indeed, no need to look beyond the foreseeability by the defendant of the result in order to establish that he is in a "proximate" relationship with the plaintiff...The infliction of physical injury to the person or property of another universally requires to be justified": Lord Oliver of Aylmerton in Murphy v Brentwood DC [1991] 1 AC 398 at p486H-487B.

Lord Oliver continued, "The causing of economic loss does not". The root of this distinction therefore lies in the difference, strongly emphasised as being of the first importance in Murphy itself, between physical damage and economic loss. It was the fact that the damage in Anns [1978] AC 720 had been wrongly classified as physical damage that led the House in Murphy to feel able to differ from the result that was based on that classification: see for instance per Lord Bridge, [1991] 1 AC at p.466H. The distinction is not, however, a simple one between physical damage and economic loss, because the cases of (foreseeable) physical damage that are likely to attract liability without more consideration, following the approach referred to by Lord Oliver in Murphy, are cases of "direct" physical damage. That notion is difficult to define, and is not defined in the cases that employ it; but at least one consideration seems to be that damage may be held not to be "direct" if it is inflicted by an act of the tortfeasor that produces the damage without other human intervention. It will of course be noted that this is a different issue from that of causation, since it is perfectly possible for a person to cause damage otherwise than by his own direct act. The existence of this sub-category of physical damage does however mean that where the physical damage is deemed to be indirect, the questions of proximity, justice, fairness and reasonableness remain wholly in issue, and to be established by the plaintiff.

This process is illustrated in Marc Rich . Under a sub-heading "Direct physical loss?" the House of Lords said this, at p.237D:

"Counsel for the cargo owners argued that the present case involved the infliction of direct physical loss. At first glance the issue of directness may seem a matter of terminology rather than substance. In truth it is a material factor. The law more readily attaches the consequences of actionable negligence to directly inflicted physical loss than to indirectly inflicted physical loss. For example, if the N.K.K. surveyor had carelessly dropped a lighted cigarette into a cargo hold known to contain a combustible cargo, thereby causing an explosion and the loss of the vessel and cargo, the assertion that the classification society was in breach of a duty of care might have been a strong one. There would be a paradigm case of directly inflicted physical loss. Counsel for the cargo owners referred your Lordships to Clay v A.J. Crump & Sons Ltd [1964] 1 Q.B. 533 by way of support for the proposition that, in this case, there was a direct infliction of loss in the relevant sense. In that case an architect assured a demolition contractor that he could safely leave a wall standing. The demolition contractor acted on this advice. The wall collapsed on a workman. The workman sued the architect in tort. It was held that the architect owed a duty of care to the workman. The architect was primarily responsible for leaving the wall in a dangerous condition. In the present case the shipowner was primarily responsible for the vessel sailing in a seaworthy condition. The role of N.K.K. was a subsidiary one. In my view the carelessness of the N.K.K. surveyor did not involve the direct infliction of physical damage in the relevant sense. That by no means concludes the answer to the general question. But it does introduce the right perspective on one aspect of this case."

In Clay v Crump this court in my judgement held that the architect was in the same position as the manufacturer of the ginger beer in Donoghue v Stevenson , despite the fact that it was not the architect who did the work on the wall, and that he could in one sense be said to be acting in a secondary capacity in relation to that work. For that conclusion I would draw attention in particular to what was said by Upjohn LJ, [1964] 1 QB at p.567, and by Davies LJ at pp.571-572. I do not understand the House of Lords in Marc Rich to differ from that view, but rather to hold that, on the facts of that case, the physical damage was not "direct" in the sense that was drawn in Clay v Crump from the observations of Lord Atkin in Donoghue v Stevenson [1932] AC at pp.581-582.

In our case, the judge accepted that, as in Marc Rich , the physical damage had been "indirect". If the point matters (which in the present case in the event it does not) I am far from sure that that follows from the House's analysis in Marc Rich . The judge held, in my view entirely rightly, that it was wrong to speak of the First Defendant as primarily responsible, with the Second Defendant's role being only subsidiary. The Second Defendant was not simply an inspector from outside, whose approval was in practice obligatory on the owner because of insurance pressures. Rather, as the judge found, the Second Defendant was involved with the inspection of the aircraft throughout. Further, the judge drew attention to the fact that the declared aims of the Third Defendants, the PFA, were

"to get enthusiastic aviators into the air as cheaply as possible and to promote and supervise the design and construction of light aircraft by amateurs"

One of those enthusiastic aviators was the First Defendant. The judge found as to him that

"In the context of the safety regime operated under the aegis of the Third Defendant, a person in the position of the First Defendant - however skilled - was essentially an amateur"

We were much pressed with the responsibility undertaken by the First Defendant for keeping his aircraft in an airworthy condition, as set out for instance in his application for a permit to fly. Counsel argued that that was inconsistent with the placing of any responsibility on the PFA for a failing in that condition. But it is to be observed first that, that very application, in standard form, was conditional on modifications to the aircraft only having been undertaken with the approval of the PFA, who were deemed to act as the First Defendant's agent for the issue of the permit; and, second, that the fact that another party is at fault in not preventing the occurrence of the damage does not of itself absolve an earlier inspector or adviser of liability for direct physical damage. The latter point is illustrated by Clay v Crump itself, where the building contractor, who had an opportunity to inspect the wall, was held equally liable with the architect.

On the facts of our case, therefore, I consider that the very close involvement of the inspector in the construction of the plane, and the very close involvement in organisational terms between the First Defendant and the PFA, the PFA's role being expressly intended to facilitate the First Defendant's construction and flying, brought the case well within the category of direct physical damage as recognised both in Clay v Crump and in the passage that I have ventured to cite from Marc Rich . However, even if I am wrong about that, the aspects of this case to which I draw attention in the preceding paragraphs are clearly relevant to the other consideration ventilated under the head of direct physical loss in Marc Rich , of putting the nature of the damage in the right perspective: that is to say, the right perspective so far as the justice, fairness and reasonableness of any recovery by the injured party is concerned, those factors unequivocally coming into play when the physical damage is other than "direct". The judge was entirely right to conclude that the nature and purpose of the activities of the PFA and thus also of the Second Defendant rendered it just, fair and reasonable that the plaintiff should recover against them, even though a different inspecting body, with a different role and different responsibilities, had not been held liable in Marc Rich .

I would further add that the particular nature of the activities of the PFA undermines the argument advanced to the judge and to us that this case was a fortiori of Marc Rich , in that the House of Lords had attached importance to the position of the classification society as a non profit-making entity: whereas the PFA was, to quote the judge, not even a commercial non-profit making body, but "a voluntary non-profit making organisation aiming to give the maximum assistance to its members as cheaply as possible". The judge thought that that was undoubtedly a factor that weighed in the Second and Third Defendants' favour, but not one that ought to tip the balance. I certainly agree with the latter assessment, but I would be prepared to go further than did the judge. I do not for a moment seek to cast doubt on the value of the work of the PFA in supporting its members' flying activities. The fact has to be faced, however, that those activities are voluntarily undertaken by the members, for the pursuit of their own interests, and are extremely dangerous to third parties unless carried out with due care. That the activities are recreational rather than commercial in nature, and that the PFA in facilitating them thus can be said to act "non-commercially", cannot in my view improve the position of either the PFA or one of its members if in the course of those activities a third party is negligently injured.

The basic statements of the law of negligence that I have ventured to cite above make a distinction, for the purposes of analysis, between physical damage to person or property on the one hand; and merely economic loss on the other. That is no doubt necessary in order to demonstrate the different and particular considerations that apply in the case of economic loss. However, when one turns to the judgemental issues of justice, fairness and reasonableness the importance of fact that what is put at risk is the plaintiff's body, and not just his goods, is, as Hobhouse LJ has demonstrated, deeply embedded in the law of negligence. That was certainly the judge's view. He started his assessment of justice, fairness and reasonableness by saying:

"It seems to me that what is paramount with aircraft -- at any rate such as those with which the Second and Third Defendants are concerned -- is the physical safety of occupants. In this regard, it is noteworthy that in the Marc Rich case the majority of the House of Lords only adverted to the particular class of interest with which it was directly concerned, namely cargo".

In that connexion we were taken to the judgments in this court in the Reeman v Department of Transport [1997] 2 Lloyds LR 648, and in particular to a passage in the judgment of Phillips LJ, with whose reasoning both Lord Bingham of Cornhill CJ and Peter Gibson LJ agreed. The claim in Reeman was for economic loss suffered by the purchasers of ship that had previously been negligently certified as passing stability tests by the Department's surveyor, but which greatly diminished in value in the hands of the purchasers once the true condition of the vessel became known. Dealing with one particular argument of the plaintiffs Phillips LJ said:

"If those who are charged with survey and certification of such property fail to exercise proper skill and care, a number of consequences may follow:

1. The danger which the regulations are designed to guard against may result in loss of life, injury or damage to third parties. 2. The owner of the property concerned with whom the authority is in direct relationship may suffer pecuniary damage as a result, for instance, of being prohibited from using his property for its commercial purpose, or spending money on unnecessary modifications to it. 3. Third parties induced to purchase, hire insure or finance the property in question may suffer prejudice.

In argument, Mr Ullstein Q.C. for Mr and Mrs Reeman has treat it as axiomatic that, if Mr Reeman had put to sea in the vessel which had then capsized with the consequences that he and the crew had been drowned, the widows of those who lost their lives would have had claims against the department under the Fatal Accidents Acts. For myself, I do not find this axiomatic. In Murphy v Brentwood District Council [1991] 1 AC 398 Lord Mackay at p.457 and Lord Keith at p. 463 expressly left open the question of whether a local authority, which had failed to take reasonable care to ensure compliance with building bylaws, would be legally liable in respect of injury to persons resulting from such failure.

In Philcox v Civil Aviation Authority , (The Times June 8, 1995) The Court of Appeal held that the Civil Aviation Authority's statutory duty to issue certificates of airworthiness involved no duty to the owner of the aircraft to exercise reasonable care to prevent him or his aircraft suffering injury as a result of taking off in an unairworthy condition. Finally, in Marc Rich & Co AG v Bishop Rock Marine Co. Ltd [1996] 1 AC 211 the House of Lords held that a classification society which had certified a vessel as seaworthy when she was not, owed no duty of care to the owners of cargo lost when the vessel sank and, per Lord Steyn at p. 237, could not be said to be directly responsible for that loss. These decisions at least raise a serious question as to whether the department owed any duty to Mr. Reeman, or even to his crew, in respect of the risk of death or injury flowing from the unseaworthiness of the vessel".

As to Philcox, the ratio of that case was as stated by Millett LJ, that the relationship of proximity alleged to exist between the plaintiff and the Civil Aviation Authority was based on the legislative scheme for inspection. Millett LJ continued:

"It is clear, to my mind, that the risk which the scheme of the legislation is designed to prevent is the risk that the owner or operator of an aircraft will fly the aircraft even when it is unfit to fly; and that the persons for whose protection the scheme has been established are the passengers, cargo-owners, and other members of the public likely to be harmed if an unfit aircraft is allowed to fly. The owners and operators of the aircraft are not within the class of persons for whose protection the scheme has been established; they are the persons against whose imprudent activities the scheme is designed to protect the public. They are not entitled to rely on the issue of the certificate to exonerate them from their own responsibility to ensure that their aircraft are fit to fly".

By emphasising that that scheme is intended for the protection of persons in the position of the present plaintiff Philcox, as both Hobhouse and Swinton Thomas LJJ have pointed out, is strongly supportive of liability in our case.

But, more generally, it would not have followed from a finding in Reeman that it was fair just and reasonable that Mr and Mrs Reeman should recover for personal injury caused to them by the negligent survey that they could also recover for economic loss caused to them by that same survey. As Caparo v Dickman [1990] 2 AC 605 emphasised, the fact that the plaintiff can recover in respect of one type or kind of loss or damage does not in itself mean that he can recover for loss or damage of a different type or kind inflicted by the same act of the defendant. In Caparo, the fact that the auditors owed a duty to conduct the audit competently to the plaintiffs as shareholders did not mean that the plaintiffs could recover in respect of different damage, damage as market operators, caused to them by that same audit. I would in particular refer to the speech of Lord Oliver of Aylmerton, [1990] 2 AC at p.651E-G:

"the duty of care is inseparable from the damage which the plaintiff claims to have suffered from its breach. It is not a duty of care in the abstract but a duty to avoid causing to the particular plaintiff damage of the particular kind which he has in fact sustained. I cannot improve on the analysis which is to be found in the judgment of Brennan J in the High Court of Australia in the Shire of Sutherland case, 60 ALR 1:...."a postulated duty of care must be stated in reference to the kind of damage that a plaintiff has suffered and in reference to the plaintiff or a class of which the plaintiff is a member."

The caution expressed by this court in Reeman was therefore justified not least by the fact that it was dealing with an argument that, even if it were successful, would not have displaced the court's view of the proper outcome of the case. But when the question has to be directly confronted, as it does in our case, I agree with my Lords in having no doubt that the judge was entirely right to regard the fact that the plaintiff's claim was for foreseeable physical injury as a potent factor pointing to the existence of a duty. As was pointed out in argument, failure of an aeroplane in flight will almost inevitably lead to injury, and probably, though happily not in this case, to death. A person who has the misfortune to suffer those consequences should surely be able to look to the organisation that has certified the plane as fit to fly, and that exists in order to enable the plane to fly, if that certification was made negligently.

The emphasis placed in Caparo v Dickman on the nature of the interest protected enables me to deal shortly with fears that were expressed to us about the possible effect of our finding in other cases: for instance, if an aircraft should crash and cause not only injury to many persons on the ground, but also extensive damage to property; or if a person injured or killed on a commercial flight should sue the CAA, in an attempt to circumvent the limitations placed on his level of recovery against the carrier by international conventions.

Such cases will have to be dealt with as they arise, on the case by case basis recognised by the House of Lords in Caparo: I refer in that connexion in particular to the observations of Lord Bridge, [1990] 2 AC at p.618C-E. I would, however, add that I do not regard the judge's decision in this case as in any way marking a departure from the principles or, if that is the wrong concept, the approach for long recognised in this branch of the law. The judge recognised that conduct threatening an imminent and obvious danger of physical injury to an identifiable class of persons is a strong candidate for control by the law of negligence. As is demonstrated in the judgment of Hobhouse LJ, there was nothing revolutionary in that.

Counsel for the PFA urged a number of policy considerations that he said pointed away from the imposition of a duty, including the danger that the PFA might withdraw from this work, thus putting the burden on the CAA, with greater expense to small aircraft operators or the taxpayer or both; the possibility of the PFA being charged greater insurance premiums, which cost would be spread generally over aircraft operators or the public; and the danger of "defensive surveying" by the PFA.

There was no evidence to support any of these contentions, not even evidence from the PFA as to its future attitude towards surveying. Counsel said we had to speculate as, he said, the House of Lords had speculated in Marc Rich . I am unable to agree, on either score. In a number of cases, of which Caparo v Dickman was one, wide claims have been made as to the effect of the court's decision, particularly on industry or insurance practice. In my respectful view, the court should be very cautious before reaching or acting on any conclusions that are not argued before it in the way in which technical issues are usually approached, with the assistance of expert evidence. Nor, I have to say, would I in any event find help in a case of the present type in knowing what the implications of a finding of duty would be for the PFA's insurance position or for its inclination to continue with its present work. If the plaintiff has been negligently injured by a failing by the PFA, I cannot see that it would be right to withhold relief from him simply on the ground that to grant that relief might cause a rise in the PFA's insurance premiums, or even cause a more expensive system of inspection to be substituted for that of the PFA.

Further as to policy, this case has none of the complications of Marc Rich , where the claim was seen as conflicting with the settled scheme of obligations between cargo owners and carriers imposed by the Hague Rules, and as introducing serious hinderance to the settlement of cargo claims. It is plain that that was the main consideration leading the House of Lords to its decision, as it had been the principal ground of decision in that case in the Court of Appeal: see [1996] 1 AC at p.238C. Neither the Court of Appeal nor the House of Lords speculated about those matters. They drew on the considerable knowledge of the judges concerned in the case as to the terms and operation of the Hague Rules, matters that are in any event ones of fact and not of prognostication.

I have gone into this matter in some detail because of the suggestion that we should be constrained in this case by the result and reasoning in Marc Rich . But in essence the case is extremely clear. I agree entirely with my Lords that the balance of justice comes down firmly on the side of imposing a duty, and that members of the public would expect to be protected from injury by careful operation of the regulatory system, and to be compensated if injured by its negligent operation. That was the judge's view too. I also would dismiss this appeal.

Order: Appeal dismissed with costs. Leave to appeal was refused [Not part of the approved judgment]