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URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1041.html
Cite as: [2003] PIQR P99, [2003] QB 443, [2002] EWCA Civ 1041, [2002] 3 WLR 1425

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JISCBAILII_CASE_TORT

		Neutral Citation Number: [2002] EWCA Civ 1041
		Case No: B3/2001/1705

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM WATFORD COUNTY COURT
(His Honour Judge Roger Connor)

Royal Courts of Justice
Strand,
London, WC2A 2LL

24 July 2002

B e f o r e :

THE LORD CHIEF JUSTICE OF ENGLAND & WALES
LORD JUSTICE WALLER
and
LORD JUSTICE SEDLEY
____________________

Between:

	Gwilliam	Appellant
	- and -
	West Hertfordshire Hospital NHS Trust & ors	Respondent

____________________

(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)

____________________

Mr Laurence Marsh (instructed by Messrs Collins) for the Appellant
Mr Richard Furniss (instructed by Messrs Beachcroft Wansbroughs) for the First Respondent
____________________

HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
____________________

The Lord Chief Justice:

INTRODUCTION

The facts in this case are straightforward but, as often happens, despite this the resolution of the legal issues which the case raises is by no means easy. For this reason it is important to begin by clarifying the principles which are involved. As can happen in the course of litigation, the arguments advanced before us as to the nature of those principles were different from those advanced in the court below. In these circumstances it is not surprising that in the court below, His Hon. Judge Connor, sitting at Watford County Court did not adopt what I consider to be the correct approach.

There were two issues which it was critical for the judge to determine. Those issues are:

i) Was the Mount Vernon hospital (“the hospital”), the first defendant, under a duty to the claimant to ensure that she would be reasonably safe while visiting the fair which was being held at the hospital.

ii) If the hospital did owe a duty to the claimant, were they in breach of that duty.

There was a third issue as to whether the plaintiff had proved her loss but, in my view, if she succeeds on the two issues I have already identified, it would be wholly unjust to deprive her of a remedy due to any technical lack of evidence on the question of loss. This is because, prior to the trial, it had been ordered on 29 January 2001 that:

“The issue of the 1^st Defendant’s liability under the allegation only that they were under a duty as more particularly set out in para 9 of the particulars of claim . . . be tried before any issue of quantum.”

In addition, immediately prior to giving judgment, the trial judge rejected the claimant’s application to call additional evidence as to her loss. The claimant cannot be criticised for the evidence not being available earlier since she was entitled to consider that her position had been properly protected by the order which had been made.

THE FACTS

Lord Justice Waller has set out in his judgment a full account of the relevant facts and I only need draw attention to what I regard as being those which are critical. These are as follows:

i) The fair was being held on the grounds of the hospital to raise money for the hospital.

ii) The fundraising manager for the hospital, Mr Andrew Wynne, was an employee of the hospital. He had organised four children’s amusement activities for the fair of which one, a ‘splat-wall’, was provided by Mr Cane, the second defendant, who had been chosen from the local telephone book because he traded under the name ‘Club Entertainments’, A ‘splat-wall’ is a category of entertainment which it should have been obvious to the hospital could create danger for those using it if its installation and use was not carefully supervised.

iii) It was Mr Wynne’s evidence that, “When organising fund raising events involving the public you have to make sure that insurance is put in hand. This is basic.”

iv) Mr Wynne had been told by the finance department of the hospital that, if they had this type of entertainment at the fair, extra insurance cover would be required. Therefore, Mr Wynne made an arrangement with Club Entertainments whereby the hospital paid an extra £100 and Club Entertainments provided the staff for the ‘splat-wall’. The hospital was then to have the benefit of Club Entertainments’s public liability insurance.

As the judge held, the initial injury to the claimant was caused by the negligence of Club Entertainments. The immediate cause was that her left foot became caught in the covering on the padding in front of the trampette which forms part of the ‘splat-wall’. The judge held that the claimant was not warned that she should not attempt to use the equipment or that the equipment was unsuitable for a person of her age. She was not aware of the risk arising from the incorrectly assembled unit. There was no negligence on the claimant’s part in failing to jump correctly on the trampette. She had had no instruction in the use of the equipment and cannot have been expected to have the required skill (judgment, page 7).

Club Entertainments agreed to pay the sum of £5,000 to the claimant in respect of damages and costs which sum was accepted by the claimant because Club Entertainments’s insurance had expired. The claimant contended (although this was not proved) that, having regard to Mr Cane’s financial position, this was a reasonable sum at which to settle her claim.

The negligence on which the claimant primarily relied at the hearing was the failure of the hospital to check whether Club Entertainments was insured. The claimant contended she was entitled to recover the difference between the sum which she would have recovered from Mr Cane, if he had been insured, and the sum at which she settled her claim. However, her allegation against the hospital as pleaded included a substantially broader claim. The relevant part of the statement of her case was in these terms:

“The first defendant as organiser of the fair owed a duty to persons making use of the entertainment provided at the fair to take reasonable care in relation to such provision. In particular the first defendant was under a duty to exercise reasonable care in the selection of persons responsible for operating entertainment devices, such as the ‘splat-wall’ at the fair. The duty included a duty to ensure that such persons were covered in respect of public liability and not to allow entertainment’s at the fair where there was no insurance, alternatively to warn visitors about any entertainments where there was no insurance.” (emphasis added)

THE DUTY ISSUE

No doubt because of the way the case was advanced before him, the judge took as his starting point the fact that the only reason there was no insurance was that, while Club Entertainments had had an insurance, this had expired four days earlier and Mr Cane had not appreciated this (see page 12). The judge then proceeded to consider the legal position on what he regarded as being common ground, namely that the claim related to pure economic loss. On that basis, in order to determine whether there was a duty owed to the claimant by the hospital, the judge applied the well known test laid down by Lord Bridge in Caparo Industries Plc v Dickman [1990] 2 App. Cases 605 at p. 617 and 618 and came to the conclusion no duty was owed.

This was the wrong starting point. The correct starting point was s.2 of the Occupiers Liability Act 1957 (“the 1957 Act”). It was not in dispute that the hospital at all times remained in occupation of the hospital grounds where the fair was taking place. Because of the position relating to insurance, the hospital had paid £100 so that the staff operating the ‘splat-wall’ were the employees of Club Entertainments and not of the hospital, but this did not effect the fact that the hospital remained the occupier and, as such, owed the common duty of care under s.2 (1) of the 1957 Act to the claimant. That duty is defined by s.2 (2) as a duty to take such care as, in all the circumstances of the case, is reasonable to see that the claimant would be reasonably safe in using the premises to which she had been invited. Her permission to be present extended to the use of the entertainments such as the ‘splat-wall’ provided at the fair.

It was not in issue that Club Entertainments were independent contractors. However, this, as is made clear by s.2 (4) of the 1957 Act, does not mean that the hospital did not continue to owe a duty to the claimant. The language of s.2 (4) is clear. The subsection, so far as relevant, reads as follows:

“a) In determining whether the occupier of premises has discharged the common duty of care to a visitor, regard is to be had to all the circumstances, so that (for example) –

b) Where damage is caused to a visitor by a danger due to the faulty execution of any work of construction, maintenance or repair by an independent contractor employed by the occupier, the occupier is not to be treated without more as answerable for the danger if in all the circumstances he had acted reasonably in trusting the work to an independent contractor and had taken such steps (if any) as he reasonably ought in order to satisfy himself that the contractor was competent and that the work had been properly done.” (emphasis added)

It is important to note that s.2(4) is concerned not with the question as to whether there is a duty but whether the duty has been discharged. Furthermore, it is to be noted that s.2 (4)(b) is only an example of the circumstances which can indicate that the duty has been discharged. In addition, the language of s.2 (4)(b) cannot be directly applied to the present situation because here we are not concerned with any “work of construction, maintenance or repair”. The statutory example is only capable of having an application by analogy. The important point is that the hospital undoubtedly remained under a duty to the claimant and the judge’s conclusion that no duty was owed was incorrect.

BREACH OF DUTY

The next critical issue is whether the hospital discharged this duty. Although the example in s.2(4)(b) is not directly applicable, I have no doubt that the hospital could fulfil its duty if it employed an appropriate, competent, independent contractor. But, on the other hand, if the hospital had not taken the steps which it should, in order to satisfy itself that the contractor was competent, the hospital would not have discharged the duty which it owed to the claimant. In deciding whether the contractor was competent the hospital had to take into account the nature of the task that the contractors, here Club Entertainments, was required to perform. This involved, in this case, being satisfied that Club Entertainments were sufficiently experienced and reliable to be entrusted with ensuring that members of the public would be reasonably safe using the ‘splat-wall’.

Whether the hospital had taken reasonable steps to satisfy itself as to Club Entertainments’s competence depended upon the evidence of Mr Wynne, confirmed as it is by the evidence by Mr Petherick, Mr Cane’s expert. The evidence was brief. As to the evidence, the judge stated as follows:

“The statement of Mr Wynne and the evidence of Mr Petherick, simply confirmed, in my judgment, the common sense proposition that if you are organising a fete at which equipment is to be used which might lead to a person or persons being injured, it is prudent to see to it that the operator of that equipment or the organisers of the fete are covered by insurance against the possibility of a claim. A professional organiser of such an event, such as Mr Wynne, would be under a duty, in my view to his employer to take steps to see that that is done. But that is not at all the same thing as there being a duty upon the event organisers to ensure that there is insurance in force for the benefit of people using the equipment or indeed even a duty to take reasonable steps to see that there is such insurance in force for the benefit of such people. The reason why organisers of fetes and fairs take such insurance is to protect themselves against the possibility of a claim.”

I agree with the judge in relation to his common sense proposition that prudence required the position as to the insurance to be checked. However, I consider the judge came to the wrong conclusion about the significance of this. Because the judge had not appreciated that the hospital owed a duty to the claimant under section 2 of the 1957 Act, he did not consider whether the existence of insurance could reflect on Club Entertainments’s competence.

While Mr Wynne may have been primarily concerned to protect the hospital by taking the action which he did to ensure that insurance was in place, the purpose of the insurance was to meet any claim of the sort which was in fact made by the claimant against the hospital. Mr Wynne realised, as did Mr Petherick, that if you are engaging a small firm like Club Entertainments to provide an entertainment such as the ‘splat-wall’, it is important that the operators of the equipment should be insured. The fact of insurance would go to their competence. If the firm did not hold themselves out as being insured this would reflect both on their ability to meet any claim and, in addition, suggest that they were unlikely to be a reputable firm which could properly be entrusted with the responsibility of supplying and operating the ‘splat-wall’. If the firm carried insurance this enhanced their standing. It also provided protection for those who would be using their equipment. In these circumstances, on the facts of this case (and these issues are fact specific), in the absence of any other credentials, it seems to me that, in order to discharge the common duty of care, Mr Wynne was under an obligation to enquire into the insurance position of Club Entertainments so as to confirm the firm’s suitability to be entrusted with the supply and operation of the ‘splat-wall’. The firm had been selected from the phone book and Mr Wynne had no information as to their reliability other than what he was told by Mr Cane. To enquire as to whether the firm was insured would be one simple method of checking the firm’s suitability. Certainly there is no authority to which we were referred or which I have been able to ascertain that indicates a contrary conclusion.

Mr Wynne did enquire as to the insurance position although it is true that he did not ask to see the policy. However, as the judge found, “Mr Wynne had no reason to believe that insurance was not in force”. This last conclusion is one which I am prepared to accept on the limited evidence called. If the position was to be otherwise, it would involve finding that the hospital would not only be required to inquire into the insurance position, they would be required to check the terms of the insurance policy. This I would regard as being an unreasonable requirement. It is to be borne in mind that, even if a policy had been produced which indicated that it would be in force on the date of the fair, there could be circumstances which meant that the policy was not one which was enforceable by the claimant. For example, there could have been a breach of the terms by Club Entertainments.

In the result, therefore, I consider that the judge came to the right decision, not because there was no duty but because the duty had been fulfilled.

Before I leave this case, I would emphasise that I do not regard it as being one where the claimant’s case was for economic loss, though this was apparently accepted by the parties. The way the statement of case particularised the claimant’s claim was as follows:

“If and in so far as the claimant is unable to recover any damages and costs awarded to her in (her) action against the second and third defendants, the claimant will have suffered loss by reason of the first defendant’s failure to ensure that there was such insurance, alternatively to warn of the absence thereof, in breach of the duty referred to in paragraph nine above. ”

Although the claimant was looking primarily to the second and third defendants to meet her claim, this does not mean that the claim against the first defendant was for economic loss albeit her claim was limited to the amount she failed to recover from the second and third defendants. The case was one where the hospital, as organiser of the fair, was under an obligation to take reasonable care in relation to the provision of the entertainment. The hospital could fulfil that duty by employing an independent contractor who they had taken reasonable steps to ensure was competent. If there had been no enquiry as to the insurance position, the hospital would not have taken the required reasonable steps. However, as I have just indicated, on the findings of the judge, the hospital had discharged this duty.

Although the claimant has not succeeded on the issue which is the subject of her appeal, either in this court or in the court below, she has succeeded against Mr Cane. She has also succeeded against the hospital in relation to her treatment by the hospital for the injuries she received. Bearing in mind the fair was being held for the benefit of the hospital in circumstances in which the hospital recognised insurance should be in place to protect the hospital from claims and this insurance did not in fact exist, this case is surely one which should have been the subject of ‘Alternative Dispute Resolution’ (“ADR”). I urge that the remaining issue outstanding, namely the amount payable by the hospital for the negligent treatment of the claimant, is resolved by ADR which the Court of Appeal can assist in providing. The amount of costs which have been incurred already are, I suspect, disproportionate to the amount at issue. However, this court can only point out the advantages of ADR, it is for the parties to decide whether they are prepared to resolve their differences by this means.

I would dismiss this appeal.

Lord Justice Waller:

INTRODUCTION

On 5 July 1997 the claimant, then aged 63, was injured when using an apparatus at a fund raising summer fair organised by the Mount Vernon Hospital in Northwood, Middlesex, part of the NHS Trust. The aim of the apparatus was to allow the participant to bounce from a trampoline and adhere by means of Velcro material to a wall. The claimant was injured because the apparatus had been negligently set up by the second defendant, Mr Cane, the proprietor of a business ‘Club Entertainments’ from whom the equipment had been hired. The claimant had settled her action against Club Entertainments in return for payment of £5,000. When the matter came on for trial, before His Honour Judge Roger Connor at Watford County Court, he had to deal with certain issues which arose in relation to the third defendant. He dismissed the claim against the third defendant and that is not pursued on appeal.

The most important issue with which the judge dealt and which is the subject matter of this appeal relates to the extent of the duty of care owed by the hospital to the claimant. It is common ground that Club Entertainments was negligent. It is not alleged that the hospital is vicariously liable for the negligence of Club Entertainments. Club Entertainments was an independent contractor invited to put up the equipment on the hospital’s property. It is not asserted that any of the exceptions apply to the rule that there is no vicarious liability for the negligence of an independent contractor.

What was alleged as against the hospital appears from paragraph 9 of the particulars of claim which asserts:

“The First Defendant, as the organisers of the fair, owed a duty to persons making use of the entertainment provided at the fair to take reasonable care in relation to such provision. In particular the First Defendant was under a duty to exercise reasonable care in the selection of persons responsible for operating entertainment devices, such as the splatwall, at the fair. That duty included a duty to ensure that such persons were covered by insurance in respect of public liability and not to allow entertainments at the fair where there was no insurance, alternatively to warn visitors about any entertainments where there was no insurance.”

At the trial it appears that Mr Furniss for the hospital accepted that the hospital was under a duty to employ only competent contractors. Mr Marsh for the claimant did not dispute that Club Entertainments was competent. It was in those circumstances that this aspect of the trial revolved round the question of the public liability insurance carried or, as it turned out not carried, by Club Entertainments.

I should just go a little further into the facts found by the judge which were uncontested on this appeal.

The fete was organised for the hospital by a Mr Andrew Wynne who was the fund raising manager of the hospital. He did not attend the trial because he lived in Ireland but a written statement signed by him was put in evidence. In that statement he said:

“When organising fund raising events involving the public you have to make sure that insurance is put in hand. This is basic.”

He went on to say that upon the hospital’s finance department having told him that they had no insurance for bouncy castles and such like, he went back to Club Entertainments. He was told by them that if they provided the staff to man the amusements they, that is to say the organisers of the fete, would get the benefit of their public liability insurance and that would involve an additional cost of £100. His statement continued: “I am in no doubt that I did ensure that public liability insurance cover would be provided as I realised this was an essential element of fund raising involving members of the public, and it was always my standard practice to do so.” Mr Wynne did not claim to have seen an insurance certificate and did not claim to have asked when the insurance would expire. That evidence was accepted by the judge since it was supported by a note of 27 May 1997.

Mr Wynne thus made a contract in May that there should be insurance covering an event in July. That does not in my view merit the description of his having made a “perfunctory and ineffectual check”. It would be harsh in my view to expect anyone to go beyond obtaining a contract that there should be insurance in place.

Unfortunately, as it turned out, albeit there was public liability insurance in place so far as Club Entertainments was concerned at the time of the conversations with Mr Wynne in May, that public liability insurance expired on 1 July 1977 and Club Entertainments forgot to renew the same.

A Mr Andrew Petherick was called by the claimant, purportedly as an expert. The judge found that he was no expert but the evidence he gave was also to the effect that it was his experience of fairs and fetes that organisers either take out their own insurance or insist that each contractor has his own insurance cover.

So far as the evidence of Mr Wynne and Mr Petherick is concerned the judge said:

“They simply confirm, in my judgment, the commonsense proposition that if you are organising a fete at which equipment is to be used which might lead to a person or persons being injured, it is prudent to see to it that the operators of that equipment or the organisers of the fete are covered by insurance against the possibility of a claim. A professional organiser of such event, such as Mr Wynne, would be under a duty, in my view, to his employer to take steps to see that that is done. But that is not at all the same thing as there being a duty upon the event organisers to ensure that there is insurance in force for the benefit of people using the equipment, or indeed even a duty to take reasonable steps to see that there is such insurance in force for the benefit of such people. The reason why organisers of fetes and fairs take out such insurance is to protect themselves against the possibility of a claim.”

The judge then turned to the law. He cited the familiar passage in Lord Bridge’s speech in Caparo Industries PLC v Dickman [1990] 2 AC 605 at 617/618 to the effect 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.” He then referred to certain other authorities Reid v Rush & Tompkins Group PLC [1989] 3 AER 228 and Van Oppen v Clerk to the Bedford Charity Trustees [1989] 3 AER 389 (to which I will return) and concluded that no duty in relation to ensuring that insurance was in place should be imposed on the defendants. The judge’s conclusion was summarised in these words:

“In my judgment if it were thought appropriate to impose a duty upon organisers of fairs and fetes to take steps to see that insurances are in force for the benefit of those attending such events, that must be a matter for Parliament and not a matter for the courts.”

The judge did not go on to consider whether if he had thought it proper to hold that a duty existed whether there had, in the circumstances of this case, been a breach of that duty. He did, however, hold in the alternative to his ruling on duty that the claimant had failed to establish damage. Mr Furniss for the hospital had clearly taken the point in his written submissions before the judge that for liability to be established the claimant would have to show damage in addition to the duty, and breach of duty. The case for the hospital was that the claimant had chosen to settle with Club Entertainments for the sum of £5,000 and would have to establish that if she had recovered judgment in full as against Club Entertainments, then she would have recovered no more that £5,000 having regard to Club Entertainments’s financial state and the absence of insurance. Rather late in the day Mr Marsh, just prior to the judge delivering his judgment, sought leave to call his instructing solicitor to give evidence regarding the circumstances in which the settlement with Club Entertainments had been reached. Mr Furniss resisted the introduction of that evidence on the basis that he had felt it unnecessary to cross-examine Mr Cane as to his financial circumstances when Mr Cane gave evidence and that it would be unfair to introduce that evidence without Mr Cane being further exposed to cross-examination. At the moment at the trial when this evidence was being sought to be introduced Mr Cane was no longer present and was unlikely to voluntarily return to the court.

A further point taken on this appeal is that the judge should have allowed that evidence to be called.

I should say straight away that it would seem to me most unfortunate if this case were to fail simply on the basis that the claimant had not established some damage. For my part I would have thought that where a claimant has suffered injury and her case in negligence is accepted as against Club Entertainments, but she accepts only £5,000 in relation to a £60,000 claim, the natural inference would be that she had settled because she had been advised that any additional sum was unlikely to be forthcoming. But, as it seems to me, that is not the key issue on this appeal. The key issues are whether there was any duty owed of the type alleged and, if there was, whether in the circumstances of this case any breach had been shown.

THE DUTY ISSUE

The starting point seems to me to be that it is accepted that there was no vicarious liability for the negligence of the independent contractor in this case. A helpful starting point is paragraph 9-15 in Clerk and Lindsell on Torts 18^th edition where it is said:

“There is no liability under Donoghue v Stevenson for the negligence of independent contractors, provided they were chosen with due care. However, the independent contractor may themselves be liable to the claimants.”

But at the same time it must also be borne in mind that there are certain activities, e.g. extra hazardous activities, for which an employer can be liable if he chooses to have them performed by an independent contractor (see paragraph 5-59 of Clerk & Lindsell on Torts 18^th edition).

At common law it was arguable that an occupier might be liable for the negligence even of independent contractors and even in unexceptional circumstances. However, by the 1957 Act the position has been clarified by section 2(4)(b) which provides:

“Where damage is caused to a visitor by a danger due to the faulty execution of any work of construction, maintenance or repair by an independent contractor employed by the occupier, the occupier is not to be treated without more as answerable for the danger if in all the circumstances he had acted reasonably in entrusting the work to an independent contractor and had taken such steps (if any) as he reasonably ought in order to satisfy himself that the contractor was competent and that the work had been properly done.”

There is no doubt that both at common law and under the above section of the 1957 Act the employer could be liable for failing to select a contractor competent to do the work asked of him by the employer. There appears to be no authority which has suggested that there might be liability for failing to select an independent contractor who is not of sufficient financial standing either by virtue of his own resources or by virtue of being covered by insurance. I should indeed emphasise that, as it seems to me, the duty sought to be imposed by the claimant in this case cannot actually be limited to a duty to see that there is public liability insurance; it must in fact be a duty to see that the independent contractor is in a position to meet a claim.

What has concerned me in relation to the duty sought to be imposed is that the effect of accepting the argument of the claimant might be said to drive a coach and horses through the fundamental position of there being no vicarious liability for the activities of an independent contractor save in the exceptional cases, such as extra hazardous activities, which already exist. However, bearing that danger in mind I would suggest that logically there is no reason why, even though the activity is not so hazardous as to impose liability on the employer without more, it may be hazardous enough and the circumstances such as to impose the slightly lesser duty in relation to the quality of the independent contractor in the sense of the ability of that independent contractor to meet a claim. One factor in considering whether a duty should be imposed must be how difficult it is to comply with that duty. As already indicated, to make a contract that insurance should be in place is all that would be needed, and that is not a difficult or onerous duty to perform. In my view, unless authority dictates that no such duty should be imposed, I would be in favour of imposing that duty.

There are two routes by which the imposition of the duty can be supported. There is the route preferred by my lord, the Lord Chief Justice by a more direct use of the 1957 Act, or by a route which I suggest provides the same answer. I simply pose the question whether, looking at the circumstances of this particular case, is it just and reasonable to impose such a duty and applying the concept of the 1957 Act by analogy. The particular circumstances of this case are that the hospital was seeking to raise funds. It brought onto its land activities which involved risk to members of the public, and in relation to which common sense, including that of the person organising the fair, dictated that public liability insurance should be in place. It is true that Mr Wynne was concerned to protect the position of the hospital but, in recognising the position of the hospital he was clearly also recognising that members of the public needed the protection of public liability insurance.

If one goes back to the wording of section 2(4)(b) of the 1957 Act it will be seen that there are two obligations on the employer of an independent contractor, one is “to act reasonably in entrusting the work to an independent contractor” and the other is to take steps to satisfy himself about the competence etc. If a hospital reasonably wishes to have a somewhat hazardous activity on its land in order to raise money, but wishes to entrust the operation of that activity to an independent contractor, has the hospital acted “reasonably” in the selection of that independent contractor if it has not checked the viability and/or insurance position so far as that independent contractor is concerned? In my view, the language of that section of the 1957 Act allows for consideration of the viability of the independent contractor. It might be said that the section only related to work of “construction, maintenance or repair” but I would suggest that the concepts identified by the section also reflect the position at common law and that, thus, if someone like the hospital seeks to use an independent contractor for carrying out the sort of activities that are the subject of this case, it may be held not to act reasonably if it does not check the viability of that independent contractor.

Mr Furniss would suggest that the above conclusion is inconsistent with such authorities as have considered some form of obligation to see that insurance is in place. In Reid v Rush & Tompkins Group PLC [1990] 1 WLR 212 the Court of Appeal was primarily concerned with whether there was an implied term in a contract of employment which would impose a duty on an employer to provide or advise an employee to obtain specific insurance cover in respect of the risk of injury where the employee was going to a country where it was not compulsory to have third party motor insurance nor any scheme for compensating persons injured in accidents. The court held that no such terms should be implied and then went on to hold that there was no duty in tort and thus the employee failed. In Van Oppen v Clerk to the Bedford Charity Trustees [1990] 1 WLR 235 the Court of Appeal had to consider whether a school was negligent in failing to advise as to the risk of injury in a game of rugby and the consequent need for personal accident insurance. The court held that it was not reasonable to impose a greater duty on the school than there was on the parent and the circumstances thus did not give rise to a duty on the school to advise on the dangers of rugby football and the taking out of insurance.

As it seems to me, those decisions do not impinge on the special factual circumstances that exist in this case. This is a case where members of the public have been invited by the hospital to take part in activities which are inherently risky, which the hospital has chosen to have organised by an independent contractor. It seems to me that, whether or not the 1957 Act brings about direct liability as suggested by the Lord Chief Justice, it is also fair, just and reasonable to impose a duty on the hospital to choose an independent contractor who can properly meet any potential liability which may occur.

I would emphasise that I am not saying that, in relation to every independent contractor employed, there is a duty to check the insurance or viability. It is the nature of the activities which, if not extra-hazardous, were hazardous, in which people were being invited by the hospital to take part, which to my mind distinguishes this case from other cases involving independent contractors.

The Lord Chief Justice may also be right in saying that this is not, in reality, a case about pure economic loss. But on the test which I would apply, even if it was, a duty should be imposed.

BREACH OF DUTY

This is an aspect which the judge did not consider. However, it is at this stage where it seems to me that the claimant has serious difficulties. If there was a duty to inspect the insurance certificate of Club Entertainments then the hospital would obviously be in breach of it. But as it seems to me the only duty is to act reasonably. In the context of this case Mr Wynne checked whether there was insurance and indeed made a contract for that insurance to be in place. To impose a duty that goes further than that would, as it seems to me, be unreasonable. Thus it is that, in my view, the appeal of the appellant must fail.

Lord Justice Sedley:

SUMMARY

I respectfully agree that if there is a breach of duty the loss claimed is recoverable subject to proof. My difficulty is in agreeing with Lord Woolf CJ and Waller LJ that the hospital owed a relevant duty to the claimant. If, however, it did, it seems to me inescapable (again in disagreement with the majority) that it was in breach of that duty.

DAMAGE

The easy way out of the dilemma in the case before us would be to hold that the claimant was anyway bound to fail because she had failed to establish any loss caused by the want of public liability insurance. She had settled with the contractor on her lawyers’ advice for £5,000, but there was nothing to show that he was not worth a good deal more – quite possibly enough to pay all her damages. But a split trial had been ordered, and there was no means on the occasion with which this appeal is concerned of ascertaining whether and by how much the true loss exceeded the settlement figure. When the point was taken, the claimant’s counsel sought at the last minute to call further evidence and was refused permission to do so. In retrospect it is clear that there should not have been a split trial: liability and damage were tangled together. While I think the claimant’s side can legitimately be criticised for being too sanguine about the acceptability at trial of their settlement with the contractor, the pleaded cases did not pose the issue with any clarity and it would not be right to let the case go off on this point. I agree with the other members of the court that, if the loss is otherwise recoverable, there is nothing parasitic or irrecoverably ‘economic’ in the character of the damages.

THE STANDARD OF CARE

I can best explain my reservations by starting with the question not of duty but of breach. Given that, as the majority hold, the common duty of care owed by the hospital to the claimant as a member of the public attending their fête included taking reasonable steps to ensure that the contractor providing the ‘splat-wall’ had public liability insurance, was the duty complied with? In my view, merely obtaining reassurance down the telephone from an unknown person at the contractor’s place of business was not good enough. In the situation described in paragraph 4(iv) of the judgment of Lord Woolf CJ, the simple and responsible course for Mr Wynne, who was after all the hospital’s fundraising manager, was to ask for a copy of the certificate to be sent or faxed to him. He would have seen that it was going to expire before the date of the fête, and he would – or should - have insisted on seeing a current certificate before Mr Cane brought his equipment on site. There was no need for him to examine the policy or do anything complicated; and if he was pardonably misled, the hospital would be free of blame. One can of course postulate a variety of fact situations (printed notepaper saying “Fully Insured”, for example) which will present judges with different judgment-calls; but in the circumstances of this particular case, anything less than the simple inquiry I have described was in my judgment insufficient to discharge the duty of care.

Counsel for the hospital necessarily and rightly pitched his case on the proposition that his clients were not obliged to take any steps at all to check on Mr Cane’s insurance once they had formed the view that he was an experienced and reliable contractor. But once that wall has tumbled, as in the majority’s view it has, there is in my judgment no refuge in half-measures. I cannot see how, if there is a duty to check that a contractor is insured, such a perfunctory and ineffectual check as was made here can be enough to discharge it. The extra £100, it must be remembered, was not for insurance: it was for the contractor’s staff, with an assurance that the contractor’s public liability insurance would come with them To accept this as sufficient seems to me, with great respect, to accept a standard of care so modest as to deny the public the very protection which the majority of the court have concluded the law requires.

In turning to the first issue, the duty of care, I would add this. The reason why this court has been called upon to reach its own primary conclusion as to whether the duty was breached is that the judge below made no finding on it. In future cases it will be necessary for judges of first instance, given a situation in which the novel duty of an occupier to check on a contractor’s insurance is in play, to reach their own judgment on the essentially factual question whether what was done by the occupier was sufficient to discharge the duty. The divergent conclusions of this court on that question perhaps illustrate how fact-specific and therefore open to variant findings is the question how much care is sufficient to discharge the duty.

THE DUTY OF CARE

But was there such a duty? No decided case, so far as we know, has required persons using independent contractors for activities which are not exceptionally hazardous but may foreseeably result in accidental harm to others to ensure so far as reasonably practicable that the contractors are insured. We know from s. 2(4)(b) of the 1957 Act that it can be a breach of the common duty of care, if a contractor causes harm to a visitor, not to have checked that the contractor was competent. The issue before us concerns, as it seems to me, a related but logically different class of risk – the risk that an innocent visitor (or, as I shall suggest, neighbour) may be injured and have no redress precisely because the occupier has acted reasonably in leaving things to a competent contractor, but the contractor, who has nevertheless been negligent, is without insurance.

The troubled modern experience of open-ended principles in the field of negligence has led the courts to move from principles to categories and to limit the enlargement of categories to extension by close factual analogy. As Lord Hoffmann remarked in a different but related context in Frost v Chief Constable of South Yorkshire Police [1999] 2 AC 455, 502:

“The view … that the law of torts should in principle aspire to provide a comprehensive system of corrective justice, giving legal sanction to a moral obligation on the part of anyone who has caused injury to another without justification to offer restitution or compensation, has been abandoned in favour of a cautious pragmatism.”

The pragmatism to which Lord Hoffmann was referring was that described by him in Stovin v Wise [1996] AC 923, 949. Here, having recalled the two-stage Anns test – is there a foreseeable risk that A’s carelessness will harm B? If so, is there a reason to limit the duty to avoid doing such harm? – he pointed out:

“Subsequent decisions in this House and in the Privy Council have preferred to approach the question the other way round, starting with situations in which a duty has been held to exist and then asking whether there are considerations of analogy, policy, fairness and justice for extending to cover a new situation… The trend of authorities has been to discourage the assumption that anyone who suffers loss is prima facie entitled to compensation from a person (preferably insured or a public authority) whose act or omission can be said to have caused it. The default position is that he is not.”

Similarly, Lord Phillips MR in Reeman v Department of Transport [1997] 2 Ll. Rep. 648, 677, explained the effect of Lord Bridge’s seminal speech in Caparo Industries v Dickman [1990] 2 AC 605, 617, in this way:

“This passage has since been generally accepted as representing the correct approach to the identification of a duty of care in the law of negligence. As Lord Justice Saville observed in Marc Rich & Co. A.G. v. Bishop Rock Marine Co. Ltd., [1994] 1 Lloyd’s Rep. 492 at p. 496; [1994] 1 W.L.R. 1071 at p. 1007, foreseeability, proximity of relationship and the question of whether it is fair, just and reasonable to impose a duty of care are matters which overlap and are really facets of the same thing. When confronted with a novel situation the Court does not, however, consider these matters in isolation. It does so by comparison with established categories of negligence to see whether the facts amount to no more than a small extension of a situation already covered by authority, or whether a finding of the existence of a duty of care would effect a significant extension to the law of negligence. Only in exceptional cases will the Court accept that the interests of justice justify such an extension of the law. One recent example of such a case to which we have been referred was White v. Jones, [1995] 2 AC 207. Another, arguably, was Henderson v. Merrett Syndicates Ltd., [1994] 2 Lloyd’s Rep. 468; [1995] 2 AC 145. Both those cases involved professional men who had undertaken contractual duties for reward for the benefit of specific third parties.”

If the step taken by the majority of the court is open to us by the use of close analogy, it is not difficult to postulate a troubling succession of similarly close analogical steps. It is equally hard, I accept, to say why that is a reason for not taking the first. In my mind’s ear is the sardonic voice of Professor Cornford who almost a century ago in Microcosmographia Academica set out his celebrated argument for never doing anything for the first time.

There is, I readily accept, a great deal to be said in favour of the specific development of the law favoured by the majority of this court. It meets important goals of distributive and corrective justice by recognising that in modern society the cushioning of imported risks by insurance is a form of care which an occupier ought reasonably to extend to a visitor (though I am less confident about the fairness of its direct and indirect financial consequences on householders and occupiers at large). But it is not by any means an immediate or an obvious answer to the first question which Lord Woolf CJ poses: was the hospital under a duty to the claimant to ensure that she would be reasonably safe while visiting the fair? For my part, I would regard the critical question in this part of the case as being neither the existence of a duty of care nor the breach of it but its ambit: specifically, whether the undoubted duty of the hospital to enable its visitors to be reasonably safe at the fair included a duty to take reasonable steps to check that its outside contractors had public liability insurance.

It is relevant, first, to observe the legal and logical distance which separates the general duty from this specific one. The occupier’s common duty of care embraces without difficulty an obligation to check on the reliability of contractors with whom visitors may come in contact: on this I have no difference with Lord Woolf CJ. But the reason is important: it is that otherwise visitors’ persons or property may be harmed by the contractor. The journey from here to a duty to check on contractors’ insurance, is anything but straightforward. It has to pass these logical milestones: the contractor is reliable; even a reliable contractor, however, can make mistakes; if he makes one which harms a visitor, he may be unable to pay compensation; if he is reliable, therefore, he will carry public liability insurance in his own interest; if so, such insurance will also be in the interest of the occupier’s visitors. What follows from this? Either – as counsel for the hospital wisely contended – an entitlement to rely on the contractor’s apparent respectability as a sufficient guarantee of insurance without more; or an independent duty to check on his insurance. If it is the latter, it cannot depend on the contractor’s respectability: it will be a direct obligation on any occupier – and arguably others too - who is letting an independent contractor, however apparently competent, put visitors at risk.

There is a reason for this apparently arid analysis of the source and nature of the contentious obligation. The first account of it is, as I understand it, that adopted by Lord Woolf CJ; the second, that preferred by Waller LJ. But both versions involve modes of reasoning which, at least in my understanding of the present state of the law, are closed to us. The first involves not a simple one-step analogical extension of fact situations which already attract occupier’s liability but extended reasoning carrying the occupier from a recognised obligation to use competent contractors to an obligation to check that any shortfall in their competence is covered, in the interests of visitors, by public liability insurance. There is in my opinion a difference of principle (even though I agree that it is not in itself such as to make the damage irrecoverable) between harm to person or property and insurance against inability to recover damages for such harm. The second version does not depend upon analogy: it states a perfectly defensible proposition of legal and public policy which has never been part of the law and represents a considerable leap forward. Insofar as it is based on the view that such a development is fair, just and reasonable, we are unequipped – as Bingham LJ pointed out was the case in this court in Caparo Industries v Dickman [1989] QB 653, 688 – to evaluate its likely economic and social impact. This is no doubt one reason why, to date, obligations to insure have been the creature solely of statute. The test is, as I understand it, at least as much a restrictive as an expansive test, designed among other things to keep a check on the tendency of contemporary Western tort law to creep towards a situation in which anyone can sue anyone for anything.

I would be embarrassed to be the only member of the court unwilling to make the leap if the only reason for hesitation was that it had not been done before. But it is not. If a public institution which invites people into its grounds is to be held to owe them a duty to take reasonable steps to ensure that its independent contractors who might injure them are insured, what shuts out the factual analogy with (a) private occupiers who invite the public on to their land; and (b) occupiers of land whose contractors’ activities harm neighbours rather than the public?

Even accepting that this case affects only the liability of an occupier, occupiers are a large and heterogeneous class, and the duty owed by them to their visitors is not a special duty but the common duty of care. What is there, in a legal system which offers equality before the law by seeking to treat like cases alike, to contain this case in a category peculiar to its own facts? If the ambit of a public institution’s duty to its visitors embraces an obligation to check on contractors’ insurance, why will a private person whose garden is used for a local fete not equally be liable to pay a sum representing full personal injury damages to a visitor injured, perhaps badly, by the negligent supervision of a coconut shy or a greasy pole by an uninsured stallholder? Or why will a householder who fails to check that his or her builder is insured not have to pay heavy damages to a neighbour who has been unable to make a worthwhile claim against the builder when a nail through a water pipe brings the neighbour’s ceiling down or a carelessly handled blowtorch burns their house down. None of these scenarios, as the courts well know, is in the least fanciful; and we cannot say in advance whether – and if so, why - it will be a differentiating factor that the host of local fete is not raising money for herself, or that the stallholder is a volunteer rather than a contractor, or that the victim of fire or flood is a neighbour rather than a visitor. The scenarios are made worse, not better, if the difference between a potentially ruinous tort liability and no liability at all can lie in a perfunctory enquiry met by a casual and verifiably negligent answer.

To construe the duty to ensure that a visitor is reasonably safe from harm at the hands of a third party as embracing a duty to ensure that she is reasonably safe from the consequences the third party’s being uninsured is therefore not merely unprecedented: that can never be a decisive objection in a living system of common law. The objection, to my mind, lies in two distinct things. One is that the shift from the one to the other is not a small extension of an existing category but a jump across a factual and logical gap. The other is the potential of the shift to trigger uncovenanted and unpredictable further movements. Either way, at least in the absence of much fuller information about its potential social and economic consequences, the shift does not seem to me to pass the final test of being fair, just and reasonable.

CONCLUSION

I concur in the conclusion that this appeal fails although, with regret, I differ fairly radically from the majority of the court in my reasons for doing so.

Order: Appeal dismissed with costs here and below agreed order lodged with court.

(Order does not form part of the approved judgment)