England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
STOKE ON TRENT DISTRICT REGISTRY
(His Honour Judge Shand)

		Royal Courts of Justice Strand London Thursday, 11th July 2002

1. LORD JUSTICE KAY: On 15th July 1997 an explosion occurred at a dry cleaning shop in High Street, Cheadle. A number of people were seriously injured as a result. Three of the injured commenced actions for damages against the owner of the shop, Lillian Ivy Steventon, the first defendant in the proceedings and the respondent to this appeal, and against JLA Limited, the second defendant and the appellant in this appeal.
2. The three actions were consolidated for the purposes of the trial of the issues of liability, and at the conclusion of the hearing, the trial judge, His Honour Judge Shand, gave judgment for each claimant against each defendant for damages to be assessed. He apportioned liability between the two defendants as to 80% on the first defendant and 20% on the second defendant.
3. The second defendant now appeals against the judgment entered against it. The claimant has played no part in this appeal which has been resisted by the first defendant. There is also an application by the first defendant to cross appeal.
4. The first defendant, who had some 20 years experience in the trade, was the owner of the dry cleaning shop. In 1990 she purchased from the second defendant a Donini D2080 dry cleaning machine, which had been manufactured in 1989 and which had been used as a demonstrator model. The machine was installed in her premises by one of the second defendant's employees, Mr. Shepherd, over a two day period and put into working order.
5. The machine was designed to clean fabrics in a drum using a non-flammable solvent which had the trade name Perklone DX. Whilst a further load was being cleaned in the drum, it was possible for the solvent used with previous loads to be cleaned by distillation in a still which was integral to the machine. The Perklone vapour generated in the still passed into a water-cooled condenser and the resulting condensed liquid flowed into a clean solvent tank. The heating of the Perklone was achieved in the still by heating oil in a jacket surrounding the still. It was intended that the oil should be maintained by thermostatic control at 170 degrees centigrade. In the event of a failure of the controlled thermostat, an over-heat thermostat was provided which should be set to operate at 185 degrees centigrade.
6. On the judge's findings, which are not in issue in this appeal, the first defendant over the next seven years did very little to maintain the machine in a safe condition. She did not have it serviced regularly or at all. The judge described her failure to appreciate the need for such servicing as "beggaring belief". She changed the oil in the machine just once during the whole period and that was in 1995. She further failed to ensure that the oil level remained topped up to the appropriate level at all times. These failures were the basis of the finding of negligence against her, a finding that was conceded after the evidence had been given at trial.
7. Following installation and commission of the machine, the second defendant had little further to do with the machine, save that in 1995 they effected a repair to the drum in the machine. In 1996 they supplied oil to the first defendant.
8. The precise cause of the explosion was the subject of a number of theories at trial and experts with differing expertise were called by the three parties. The judge's finding of fact, which is not challenged in the appeal, was that the level of the oil had been allowed to fall to such a level that it no longer covered the thermostats installed in the jacket of the machine. As a result the heating elements did not switch off, either when the intended temperature was reached or when the over-heat level was reached. Thus the oil continued to heat until it ignited and the explosion resulted.
9. The judge found that a contributory factor in the happening of the explosion was the type of oil being used within the jacket. When Donini originally manufactured these machines, the recommended oil for use in the heating jacket was Esso Nuray 150 oil. At a later date, and on the judge's findings before manufacture of the machine in question, the oil specified was changed to Essotherm 550. In point of fact there was no Essotherm 550 oil, only Essotherm 300 and 500 oils. It is possible the specification became confused in the translation from Italian to English, although nothing turned upon this aspect of the matter. The oil in use in the machine at the time of the explosion was Esso Nuray 150 oil.
10. Nuray 150 oil had undoubted disadvantages for use for this purpose. Essotherm is a heat transfer oil whereas Nuray 150 is a circulating system oil. Essotherm had a high resistance to thermal cracking and as such would not be liable to degrade to the extent that Nuray 150 would. This factor had two important consequences relevant to the explosion. First, if the oil was not changed regularly, it was likely to degrade and form solid deposits. This would reduce the volume of liquid oil in the jacket and mean that a failure to top up the level regularly would more readily result in a dangerous shortage of oil. Secondly, once the oil degraded it would reduce the auto-ignition point, thereby rendering an explosion more likely.
11. However, Nuray 150 could be used safely in such a machine provided that sufficient care was taken. Evidence was called about the owner of another machine purchased when Nuray 150 was the recommended oil, who had used the oil over many years with proper servicing of the machine, regular oil changing and proper maintenance of oil levels. As a result he had experienced no problems at all.
12. Following the explosion there was a Health and Safety Executive inquiry into the explosion, which resulted in the first defendant pleading guilty before the Leek Magistrates' Court in August 1997 to offences contrary to sections 2(1) and 3(1) of the Health and Safety at Work Act 1974 arising out of the incident.
13. The case as pleaded by each claimant made allegations of negligence and breach of statutory duty against the first defendant. The particulars to these allegations included as particular (ii)(a):

"Failed to maintain the machine in a safe condition in that the incorrect type of oil was used in the machine."

14. The second defendant was made a defendant to the action as a result of correspondence between the solicitors acting for the claimant and those acting for the first defendant, in which the first defendant blamed the second defendant for the accident. The particulars of claim alleged negligence against the second defendant but no doubt because the claimants' primary contention was that fault lay with the first defendant, the particulars of negligence alleged against the second defendant were of a general kind and made reference to the contention advanced by the first defendant in correspondence. They read:

"The best particulars which the claimant can give against the second defendant are as follows. The first defendant contends that she does not know why the machine exploded and denies that the explosion was the result of any negligence or breach of statutory duty on her part. She contends, however, that the machine was effectively serviced on October 18th 1995 by the second defendants and has disclosed documents showing further work done and/or parts supplied by the second defendants during the course of 1996. The claimant alleges negligence on the part of the second defendants in:-

(a) Failing to service and/or maintain the machine so that it was safe to use.

(b) Failing to warn the first defendant that the machine was or might not be safe to use.

(c) Leaving the machine in a hazardous or potentially hazardous condition.

(d) Failing to advise the first defendant that the machine should be serviced regularly and not simply when it malfunctioned."

15. By her defence, the first defendant denied negligence and breach of statutory duty. At paragraph 5 she asserted:

"For the avoidance of any doubt, the machine was run on special thermal oil. This thermal oil had been supplied by the second defendants with the machine, as a bespoken oil and had a label of make, namely 'Nuray 150'. The first defendant secured a supply of this oil from a local supplier having ordered the specification shown on the machine label. Spare thermal oil had been purchased and supplied on the 28 May 1996. The machine was topped up as needed and as the first defendant had been instructed by the second defendants."

16. By paragraph 13 of her defence the first defendant adopted the allegations of negligence made against the second defendant in the particulars of claim. No further allegation was added.
17. By its defence the second defendant denied negligence. It adopted the allegations of negligence and breach of statutory duty made by the claimants in the particulars of claim against the first defendant and added further allegations of negligence, none of which it is necessary to recite.
18. The parties attended for trial on 3rd December 2001. Mr. Main, counsel for the first defendant at trial, applied to the judge for permission to amend the first defendant's defence. The proposed amendments fell into two categories. The first were amendments to some of the detail of paragraph 5 and other related matters within the defence, and the second were amendments to add a range of further allegations of negligence. The latter read:

"(e) failed to realise at the time they supplied the machine to the first defendant that the recommended oil to be used in the oil reservoir for the 'still' had changed from 'Esso Nuray 150' and had been replaced by 'Essotherm 550', a thermal oil;

(f) failed to understand and take heed of the fact that the previously supplied 'Esso Nuray 150' as a circulating or lubricating oil was not appropriate as a thermal oil used in the process of repeated heat transfer and that the machine manufacturers at or about the time of the machine being sold to the first defendant, had changed the recommended oil to Essotherm 550;

(g) failed to draw the first defendant's attention to the fact that her demonstrator machine in fact was supplied with a small instruction plate on the rear which specifically recommended Essotherm 550 oil and not Esso Nuray 150 and yet further supplied the claimant with an old instruction manual which continued to state the oil should still be Esso Nuray 150.

(h) having instructed the first defendant to use Esso Nuray 150 oil to top up the oil reservoir and for oil changes every 1000 hours of usage of the still, notwithstanding the changing of the recommended oil to Essotherm 550 in or about the year of 1990, continued to supply the first defendant with Esso Nuray 150 on or about 28th May 1996 and on or about 13th June 1996, on the attendance of Mr Webster and after discussion with the first defendant, failed to advise her that the oil had changed from Esso Nuray 150 to Essotherm;

(i) failed to advise the first defendant at any stage from time to time of the sale of the machine to the date of the explosion that circulating oils such as Esso Nuray 150 were not designed for prolonged use as a heat transfer oil and would be liable to degrade and thus over time, to overheat;

(j) on the complaint by the first defendant to the second defendant in or about October 1995 that the oil she was using to top up and replace the 'still' reservoir oil was smelling, simply advised the first defendant to top up the reservoir with yet further oil and failed to advise her to check that the oil was not overheating or evaporation in the 'still' and make her aware as to the possibility that one of the thermostats had failed (a factor which they knew could happen silently, there being no form of alarm system) which was allowing the oil to overheat or that there was some other failure in the 'still' oil heating system."

19. That application to amend was opposed by Mr. Burns on behalf of the second defendant. He contended that the second defendant would be evidentially prejudiced if at that stage it had to deal with these new and very detailed allegations which had never been made before.
20. Judge Shand ruled on the application to amend. We do not have a transcript of his ruling but we have been supplied with an agreed note. The effect of the judge's ruling was to allow those amendments which did not alter the allegations of negligence made against the second defendant but to refuse to allow the addition of the further allegations.
21. It is clear from the note of his ruling that he viewed the proposed amendments as "a potentially radical shift" at a late stage. He recognized that there had been discussion of the appropriateness of the oil in the first defendant's expert's report, but observed that nowhere in that report had it been alleged as a cause of complaint against the second defendant. He recognized that if it was a live issue in the case it would "have required further careful consideration", and that it had not been addressed as such. He then accepted that the issue of whether the oil was or was not appropriate might be relevant to deciding how the explosion came to occur and as such would be admissible. But he ruled that it could not at that stage fairly be used by the first defendant as a "stick against the second defendant".
22. Mr. Machell QC, who has appeared with Mr. Main at the appeal, conceded on behalf of the first defendant that the judge's ruling on the proposed amendment was one that was within his range of discretion. The trial therefore proceeded without the addition of the proposed further allegations of negligence against the second defendant.
23. One episode during the giving of evidence is of some potential importance and can conveniently be recorded at this stage. Mr. Shepherd, who installed the machine, gave evidence on behalf of the second defendant. He was cross-examined by counsel for the claimant and was asked his view as to whether the oil was or was not appropriate. He replied that it was not inappropriate. At that point Mr. Burns on behalf of the second defendant intervened, saying:

"My Lord, I apologise for interrupting. I thought the question of appropriateness of oil - the question of causation, I appreciate, is something that your Lordship may have to consider - but the question of appropriateness of oil, I thought had been considered yesterday in my learned friend's amendment.

(Judge Shand): I do not see how I can so compartmentalise the evidence and I will hear submissions in due course as to what I am being asked to make findings on."

24. When the judge came to give his judgment, he dealt with and resolved the issues of fact that he viewed as necessary to reach a conclusion. It is acknowledged that he performed this part of his function in a clear and careful way. He then turned to deal with the case against the first defendant and found the first defendant liable to the claimants. Again, no criticism is or can be made of his judgment in this regard.
25. Finally, he turned to deal with the liability of the second defendant. He first considered whether the second defendant had fallen short of its obligations in commissioning. He found that Mr. Shepherd had made it plain that there was a need for regular servicing and topping up, and he rejected a submission that he should have gone further and explained the dangers of failing to follow such a regime of maintenance. He further rejected the contention that, if the second defendant later became aware that the first defendant was not maintaining the machine properly, there was any duty upon the second defendant to act.
26. He then reminded himself that any finding that he might make had to be consistent with the pleadings and he concluded:

"At the end of the day, any case against the second defendants stands or falls within the terms of the rather wide pleading at paragraph b:failing to warn the first defendant that the machine was or might not be safe to use. In the light of the findings I have made thus far, the only way in which that would sensibly bite was if the second defendants failed to warn the first defendant that the machine might not be safe to use with the Nuray circulating oil, as opposed to Essotherm oil."

27. It is the judge's conclusions on this issue that are the foundation of this appeal and, because it is accepted on both sides that there is some lack of clarity about these conclusions, it is necessary to read them in full:

"It is not part of the pleaded issues before me for me to make formal findings, at least, as to who actually supplied or caused the first defendant to use the Nuray oil. Her case is that Nuray was produced in a can by the second defendants at the time that the machine was commissioned. That seems to me inherently unlikely. I accept the evidence of Mr Shepherd that the oil would already be within the machine; and that it would not be his practice to bring an extra can along.

If I am right in my finding that the plate at the back indicates Essotherm, it would not be from that source that the first defendant would set about purchasing Nuray. But purchase Nuray she did. At some stage, it is abundantly plain that the second defendants acquiesced in the supply of Nuray for this machine. That much is perfectly plain from the invoice of purchase of a can of Nuray by the first defendant from the second defendants at a later stage. It therefore follows that the second defendants were aware, and ought to have been aware, of the fact that the first defendant was using Nuray oil in that machine.

The reality of causation, I have already found, is that the explosion was contributed to in some degree at least by the degradation which was faster with Nuray than it would have been with Essotherm. Therefore, in deciding whether they were negligent in failing to warn the first defendant that the machine was or might not be safe to use (I add the gloss - with Nuray) I must analyse the extent to which the second defendants, as supplier of the machine and supplier of Nuray oil plainly in conjunction with that machine, should have realised that there was a danger.

On the one hand, it might be said that Mr Samuels, in Piccadilly, Manchester, had used Nuray in his machine for a long period of time without problems. It might also be said that Mr Hallam, the engineer, to this day does not seem to grasp the point about the degrading qualities of the circulating (as opposed to thermal) oil.

But although as a specific causative element in this accident, it is only recently that the use of Nuray circulating oil has featured, and really only since the opening up of the still in October of this year, the fact that this was inappropriate oil was recognised by the Health and Safety Executive in the course of their enquiries, although they did not seize on the causative implications of that. It was picked up at an early stage, using his expertise as a chemist, by Dr Borer. It was picked up, using his expertise as a physicist, by Mr Hammond.

I am driven to the conclusion that the second defendants, as suppliers of these machines, as agents in this country for Donini, ought to have been aware of the extra degenerative potential of Nuray as opposed to Essotherm. They ought to have been aware - and there seems a lack of awareness by at least one of their engineers that this was the case - that there had been a change of manufacturer recommendation, manifestly so because of the plate at the back of the still which was destroyed. They ought to have been aware that the first defendant was at risk - although she may not in fact have relied on the manual - of being misled by an outdated manual, which did not have the sort of manuscript updating that we see in the 1996 manual.

Accordingly, I have come to the conclusion that there ought to be judgment also against the second defendants upon the limited basis that they failed to warn the first defendant that the machine was or might not be safe to use in conjunction with the Nuray oil, which they ought to have recognised had a potential for degradation, and therefore for danger."

28. Mr. Turner QC, on behalf of the second defendant, argues that, although this finding is not entirely clear as to when the judge was determining that a duty arose for the second defendant to act and warn the first defendant that the machine might not be safe to use with Nuray 150 oil, it would seem that he was concluding that it was at the stage when the oil was supplied in 1996. Mr. Turner contends that on that basis the judgment cannot be right. To impose on the second defendant a duty to warn the first defendant merely because she ordered from the second defendant's stores department a particular type of oil, without any established suggestion that she had sought advice from the second defendant as to its use is, it is contended, to place a wholly unrealistic burden on the second defendant.
29. Mr. Machell concedes on behalf of the first defendant that the judgment can only be read as a finding of a failure to act at the time of the supply of the oil, and further concedes that such a finding cannot be supported.
30. I have no doubt that each of these concessions is, as one would expect of Mr. Machell, entirely properly made. Since the judge declined to make findings as to who actually supplied or caused the first defendant to use the Nuray oil, it cannot be that he was reaching his conclusion that there was a failure at the commissioning stage. His later reference to the second defendant acquiescing in the supply of Nuray oil, with his justification for this conclusion relating to the invoice for the supply of oil, makes it clear that it was at that stage that he was concluding that liability was established.
31. I am satisfied that the criticism of this basis for such a finding is, as is realistically conceded, wholly unsupportable. To require a storeman, to whom a request was made for a type of oil, to question the customer for its intended use, and to have the necessary knowledge that it would not be safe if used in the negligent way the first defendant chose to use it, would be to require a wholly unrealistic approach from such a person.
32. Thus, it follows that, subject to the cross appeal brought by the first defendant, the second defendant must succeed in its appeal. The cross appeal, for which we have been asked to grant permission, contends that there was a different basis upon which the judge's conclusion that the second defendant was liable to the claimants could be justified.
33. Mr. Turner did not oppose our hearing the cross appeal since he accepted that it was sufficiently bound up with the appeal. We heard full argument upon it. Accordingly, I would grant permission to cross appeal and therefore turn to consider it.
34. The alternative way in which Mr. Machell argues that liability on the part of the second defendant can be justified is that, on the evidence, the judge was bound to conclude, if he had made a formal finding, that the oil as originally supplied to the first defendant by the second defendant was Nuray 150 oil, and that that fact must have been communicated to her so that thereafter she simply continued to use the same oil. Since Nuray 150 oil was potentially dangerous there was, it is submitted, a duty upon the second defendant to warn the first defendant that it was not safe to use the machine with this oil.
35. Mr. Machell recognizes that to found liability in this way it is necessary to conclude that the judge either found or was obliged to find on the evidence three facts: (1) that Nuray 150 was unsafe to use since it was an inappropriate oil for the purpose; (2) that the second defendant caused the first defendant to use Nuray 150 oil, and (3) that she would not have used that oil if she had been advised that it was potentially dangerous to use it.
36. However, Mr. Machell contends that the judge did make findings (1) and (3). As to (2), he argues that, whilst the judge made no such specific finding, merely referring to the second defendant acquiescing in the use of Nuray 150 oil, on the evidence before him, it was the only conclusion to which he could have come if he had felt obliged to reach a conclusion on this issue.
37. However, Mr. Machell concedes that, before he can even reach the stage of persuading the court that these findings of fact were or should have been made, he has a further difficult hurdle to surmount, of satisfying the court that, notwithstanding the failure to obtain permission to amend her defence, the second defendant can nonetheless make a foundation for liability upon the allegations contained within her original unamended pleading of negligence.
38. Mr. Turner would, if necessary, have argued that, even if it is supportable on other grounds, the judge's conclusion that a failure to warn at the time of the supply of oil in 1996 did not come within the pleaded case that the second defendant was required to meet. Equally, he contends that the alternative way in which the first defendant now seeks to uphold the judgment against the second defendant lies outside the case that was pleaded against the second defendant.
39. Mr. Machell starts from the self-evidently right proposition that the first defendant cannot be in a worse position because she sought permission to amend her defence than she would have been if no such application had been made. It is a necessary corollary of such a proposition that, at least in this regard, the application to amend was unnecessary.
40. The issue this court has to address in this regard is whether, under the very general allegation that the second defendant failed "to warn the first defendant that the machine was or might not be safe to use", the allegation can be made that the second defendant caused the first defendant to use an oil which it ought to have appreciated would be unsafe if used without great care being taken to use it under a proper regime of maintenance, so as to require the giving of an appropriate warning.
41. The first point to be made is that counsel for both defendants and the judge at trial clearly did not consider that it could. Mr. Main, on behalf of the first defendant, had drafted the proposed amendment, no doubt because he thought that it was necessary if the allegation was to be made. Mr. Burns, on behalf of the second defendant, clearly thought that it was necessary because he contended that the change of tack took the second defendant by surprise and left the second defendant at an evidential disadvantage. Further, his intervention during the evidence, to which I have earlier referred, showed that, following the judge's ruling, this allegation was not, as he saw it, in issue. The judge, by the terms of his ruling, in my judgment made it clear that amendment was necessary if the allegation was to be pursued. He spoke of a "potentially radical shift" in the case. He referred to the fact that nowhere before had such an allegation been made against the second defendant. He acknowledged that if it was a live issue it would have required further careful consideration by the second defendant. The note refers to his saying in terms "not a matter addressed in the careful empirical way if this was to be a central issue in the case." He went on to rule that the use of inappropriate oil could not be used as "a stick" against the second defendant.
42. I am in no doubt at all that, but for the judge's rejection of this allegation as one that could be made on the existing pleading, Mr. Burns would have acted differently. He would have wanted to consider how he could meet the evidential prejudice that he contends was caused to the second defendant by seeking an adjournment or, at the least, exploring matters with the experts and other witnesses which, in the light of the judge's ruling, he no longer considered to be relevant.
43. The question arises, however, whether this common approach at the trial, that the amendment was necessary if an allegation was to be pursued that the second defendant was negligent in causing an inappropriate oil to be used, was right. I am entirely satisfied that it was.
44. The purpose of pleadings, both before the Civil Procedure Rules and under those rules, is to define the issues to be resolved between the parties so that each party may turn up for trial properly prepared to deal with those issues. This was succinctly put by Lord Woolf, then Master of the Rolls, in McPhilemy v Times Newspapers Ltd [1999] 3 All ER 775,793, when he said:

"Pleadings are still required to mark out the parameters of the case that is being advanced by each party. In particular, they are still critical to identify the issues and the extent of the dispute between the parties."

45. In this case the claimants made clear in the particulars of claim that they were contending that the first defendant had failed to maintain the machine in a safe condition by using the incorrect type of oil in the machine. No doubt because they were largely in the dark as to the dealings between the first defendant and the second defendant, they had made no specific allegation of that kind against the second defendant. The first defendant, who was of course in a position fully to understand all that had occurred between herself and the second defendant, was in my judgment required in her pleading to make clear that she blamed the second defendant for her use of the incorrect type of oil if that was to be a foundation of negligence against the second defendant. Otherwise the second defendant could not be expected to be prepared to meet that allegation at trial. However, the first defendant contented herself with adopting the allegations made by the claimants against the second defendant.
46. Accordingly, I am satisfied that the judge was right to rule, as he clear clearly did when considering the proposed amendment, that it was too late to raise this matter for the first time as a new allegation at a time when the second defendant should have realised that questions of the suitability of the oil would be raised at the hearing, but was wholly unaware that it had to face the allegation that its failure to warn the first defendant not to do so would be a basis for contending that it was negligent. I can only conclude that, by the time he came to give judgment, the judge had lost sight of his own ruling and effectively allowed in by the back door that which he had ruled would be unjust if it was done specifically by amendment.
47. For this further reason I am satisfied that the judge's judgment cannot be allowed to stand and, more importantly, I am equally satisfied that the alternative basis for the decision advanced by Mr. Machell cannot be allowed to succeed. The very specific allegation which it is now suggested was established by the evidence could not properly be made under the general pleading contained in the unamended defence, as I believe was recognized by all that were concerned at the trial at the time, and cannot now be revisited. Without proper notice being given that this allegation was to be made, the second defendant could not be expected to deal with it at trial, and the failure of the application for permission to amend should have been the end of this aspect of the matter so far as the second defendant was concerned.
48. As Mr. Machell acknowledged in argument, it thus becomes unnecessary to examine whether, on the judge's findings or on those that he was really bound to make on the evidence, the factual matters necessary to support such an allegation can be said to have been established.
49. For my part, I have grave doubts that Mr. Machell would have persuaded me that he had crossed all the necessary bridges to justify upholding the judgment, but it is unnecessary to reach any firm view one way or another. Once the amendment had been refused by the judge, and once it is accepted that that decision was one that could not properly be challenged, the allegation now relied upon cannot avail the first defendant.
50. For these reasons I would allow the appeal and reject the cross appeal, setting aside the judgment against the second defendant, from which it would follow that the first defendant solely would be liable to compensate the claimants to the full extent of their claims.
51. MR. JUSTICE FERRIS: I agree and do not wish to add anything of my own.
Order: Appeal allowed with costs here and below; cross appeal dismissed.