England and Wales High Court (Technology and Construction Court) Decisions

You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Tunnel Refineries Ltd v. Bryan Donkin Company Ltd, Alsthom S.A., GEC Alsthom Electromechanique S.A., Imphy S.A., APV Services Ltd, Foundry Imphy Ltd v. Mr Recorder [1998] EWHC Technology 322 (8th May, 1998)
URL: http://www.bailii.org/ew/cases/EWHC/TCC/1998/322.html
Cite as: [1998] EWHC Technology 322

[New search] [Help]

Tunnel Refineries Ltd v. Bryan Donkin Company Ltd, Alsthom S.A., GEC Alsthom Electromechanique S.A., Imphy S.A., APV Services Ltd, Foundry Imphy Ltd v. Mr Recorder [1998] EWHC Technology 322 (8th May, 1998)

In the High Court of Justice Official Referees’ Business

Before: Mr. Recorder Peter Susman Q.C.

Between:

TUNNEL REFINERIES LIMITED Plaintiff

-and-

BRYAN DONKIN COMPANY LIMITED
ALSTHOM S.A.
GEC ALSTHOM ELECTROMECANIQUE S.A. Defendants

-and-

IMPHY S.A.
BRYAN DONKIN COMPANY LIMITED Third Parties

And between:

TUNNEL REFINERIES LIMITED Plaintiff

-and-

APV SERVICES LIMITED
FOUNDRY IMPHY LIMITED
IMPHY S.A. Defendants

Case numbers: 1996 ORB No. 724 and 1998 ORB No. 20

Date of hearing: 27 and 28 April 1998

Date of Judgment: 8 May 1998

Representation: Roger ter Haar QC instructed by Merricks appeared for Tunnel Refineries Limited; Roger Stewart instructed by Masons appeared for Alsthom S.A. and GEC Alsthom Electronique S.A.; Peter Knox instructed by Jeffrey Green Russell appeared for Imphy S.A. in relation to action 1998 ORB No. 29 only.

1. Economic loss. Component of machine defective because of negligence of suppliers breaks and wrecks rest of machine. Claim in tort by owner against suppliers for replacement cost of rest of machine and consequential loss of production fails. Rest of machine held not to be "other property", so that recovery excluded. Murphy v. Brentwood DC [1991] 1 AC 398 (HL) applied. Preliminary issue on partly assumed and partly agreed facts decided in favour of defendant suppliers.

2. The text of the judgment approved by Mr. Recorder Susman Q.C. is as follows:

JUDGMENT

The preliminary issue

1. In these two related actions I have to determine a preliminary issue of law. A factory owner acquired for use in its factory certain machinery in which the supplier had already installed a component acquired from another party. The component later broke in use because of a latent defect resulting from the negligence of the manufacturer and supplier of that component, and the broken component wrecked the machinery of which it was a component. The factory owner sues the supplier and manufacturer of the component in tort. Does product liability in tort extend so far as to enable the factory owner to recover as damages for breach of a relevant duty of care by the supplier and manufacturer of one component of the machinery, the cost of replacing the wrecked machinery, and compensation for lost production?

2. This extended summary of the issue is a formulation in my own words, since in the Orders made by His Honour Judge John Hicks QC in each action on 23rd January 1998 for the preliminary issue to be tried, the issue was defined more concisely, but by reference to a paragraph of the Defence in each action needing explanation to be comprehensible without extensive reference to the pleadings.

The facts

3. The facts on which the preliminary issue is to be tried are identified in the same Orders. Some are allegations which I am to assume are true, and they are to be found in the Plaintiff's pleadings (which include allegations made in the alternative), and in a series of loss adjusters’ reports addressed to the Plaintiff's insurers. Some facts are agreed to be true, and they are set out in an agreed Statement of Facts, with illustrative diagrams and a photograph (both of which are useful and informative in understanding the layout and function of the machine and the component). There are too many facts assumed and agreed to be true for me to recite them in full, and I shall merely summarise the facts which I consider relevant or appropriate for the determination of the preliminary issue.

4. Tunnel Refineries Limited is an English company and it is the Plaintiff in both actions. It owned factory premises in Greenwich, London SE 10 close to the southern end of the Blackwall Tunnel. One of the processes carried on there was a continuous round-the-clock process for the manufacture of syrup from maize and wheat. The vapours given off in the course of that process were used as a source of heat for the process. This involved compressing the vapours, and then allowing decompression to release heat.

5. In 1983 Tunnel Refineries Limited made a contract with Bryan Donkin Company Limited, an English company specialising in the design and supply of compressors and similar equipment, and the First Defendant to action 1996 ORB No. 724. Tunnel Refineries Limited no longer seeks relief against Bryan Donkin Company Limited. However, other Defendants have counterclaimed against Bryan Donkin Company Limited, which therefore remains an active party as Second Defendant to the Counterclaim in that action. In deciding the preliminary issue I am not concerned with the Counterclaim. Under the contract Bryan Donkin Company Limited was to design, manufacture, instal and commission two mechanical vapour compressors, otherwise known as centrifugal compressors. These actions concern one Compressor of the two supplied.

6. The Compressor was a large piece of machinery weighing about 8 tonnes. It included as a component a so-called ‘inducer’, which I would describe as a fan with integral vanes, made of a single steel alloy casting, and which I shall therefore call ‘the Fan’. The purpose of the Fan was to rotate on a shaft at 16,500 rpm in order to compress the vapours passing through it. So it was an essential component of the Compressor. Bryan Donkin Company Limited had machined the Fan so that it would fit into a forged metal base called a ‘radial’. The Fan and the radial were bolted together in order to rotate together on the shaft. Vapours were fed from other components through the radial to be fed smoothly to the Fan. From the Fan the compressed vapours were compelled on through other components. The Fan, the radial and the shaft are together called ‘the Rotating Assembly’, which equally was an essential part of the Compressor. The Rotating Assembly was capable of being installed and removed as a unit, whether in the course of the original fabrication of the Compressor, or for servicing, or for replacement. It was driven through bearings and a gear box by an oil-fired engine. The Compressor also had controls and instruments, and a computer to detect faults and close down the system in emergency.

7. Bryan Donkin Company Limited subcontracted the supply of the Fan to Alsthom S.A. This is a French company which is the Second Defendant in action 1996 ORB No. 724, and whose successor is GEC Alsthom Electromecanique S.A., a French company which is the Third Defendant to that action (and it is they who counterclaim against Bryan Donkin Company Limited). No distinction has been made between the two of them m for the purposes of the preliminary issue, and references to Alsthom S.A. in this judgment include either or both of them.

8. Alsthom S.A. had either manufactured the Fan itself or (and I suspect more probably) had bought it from Imphy S.A. who had manufactured it. Imphy S.A. is a French company which is the Third Defendant in action 1998 ORB No. 29, and is now the only Defendant against whom Tunnel Refineries Limited seeks relief in that action. Imphy S.A. is also the First Defendant to the Counterclaim in action 1996 ORB No. 724, in which action it challenges the jurisdiction of this Court. Imphy S.A. is accordingly insistent that it participates in the trial of the preliminary issue in its capacity as Third Defendant in action 1998 ORB No. 29, and not in its capacity as First Third Party in action 1996 ORB No. 29.

9. Alsthom S.A. and Imphy S.A. each knew or ought to have known that the lack of reasonable care in the manufacture or testing of the Fan might result in loss and damage to whoever might be the ultimate user of the Fan, and that the Fan might not be subject to any further testing before being operated by whoever its ultimate user might be. Alsthom S.A. and Imphy S.A. were each negligent since the Fan was manufactured with one of the vanes suffering from a casting defect which made it liable to metal fatigue and therefore eventually to shatter in use, and since this defect was not discovered in the course of testing.

10. In 1990, after some years of continuous service, the defective vane did shatter in use, wrecking the Compressor, but causing no damage to anything else, and no personal injury. Tunnel Refineries Limited's insurers paid just under £125,000 as the cost of replacing the Compressor, and just over £540,000 to compensate for resulting lost production, and in the name of Tunnel Refining Limited seek to recover that outlay.

The rule that damage must be to "other property"

11. The law of tort does not permit every plaintiff to recover compensation in full for every loss suffered as a result of the wrongdoing of any defendant. In the end I suppose this must be a matter of policy rather than of principle, even though the law strives to justify limiting recovery on a principled rather than an arbitrary basis. One well established limitation is that a plaintiff cannot recover in tort the cost of replacing a defective chattel or building, or any consequential loss, when only the chattel or the building itself is damaged as a result of the defect. In Lord Brandon of Oakbrook's dissenting speech in Junior Books Ltd v. Veitchi Co Ltd [1983] AC 520, since vindicated, he said (at page 549B): -

" . . . it appears to me clear beyond doubt that, there being no contractual relationship . . . in the present case, the foundation, and the only foundation, for the existence of a duty of care . . . is the principle laid down in the decision of your Lordships' House in Donoghue v. Stevenson [1932] AC 527. The actual decision in that case related only to the duty owed by a manufacturer of goods to their ultimate user or consumer, and can be summarised in this way: a person who manufactures goods which he intends to be used or consumed by others, is under a duty to exercise such reasonable care in their manufacture as to ensure that they can be used or consumed in the manner intended without causing physical damage to persons or their property.

3. While that was the actual decision in Donoghue v. Stevenson, it was based on a much wider principle embodied in passages in the speech of Lord Atkin . . . . Put shortly, that wider principle is that, when a person can or ought to appreciate that a careless act or omission on his part may result in physical injury to other persons or their property, he owes a duty to all such persons to exercise reasonable care to avoid such careless act or omission.

4. It is, however, of fundamental importance to observe that the duty of care laid down in Donoghue v. Stevenson . . . was based on the existence of a danger of physical injury to persons or their property. . . . It has further, until the present case, never been doubted, so far as I know, that the relevant property for the purpose of the wider principle on which the decision in Donoghue v. Stevenson was based, was property other than the very property which gave rise to the danger of physical damage concerned."

12. In Murphy v. Brentwood DC [1991] 1 AC 398 (HL), Lord Bridge of Harwich expressed it this way (at page 475A): - "If a manufacturer negligently puts into circulation a chattel containing a latent defect which renders it dangerous to persons or property, the manufacturer, on the well-known principles established by Donoghue v. Stevenson . . . will be liable in tort for injury to persons or damage to property which the chattel causes. But if a manufacturer produces and sells a chattel which is merely defective in quality, even to the extent that it is valueless for the purpose for which it is intended, the manufacturer's liability at common law arises only under and by reference to the terms of any contract to which he is a party in relation to the chattel; the common law does not impose on him any liability in tort to persons to whom he owes no duty in contract but who, having acquired the chattel, suffer economic loss because the chattel is defective in quality. If a dangerous defect in a chattel is discovered before it causes any personal injury or damage to property, because the danger is now known and the chattel cannot safely be used unless the defect is repaired, the defect becomes merely a defect in quality. The chattel is either capable of repair at economic cost or it is worthless and must be scrapped. In either case the loss sustained by the owner or hirer of the chattel is purely economic. It is recoverable against any party who owes the loser a relevant contractual duty. But it is not recoverable in tort in the absence of a special relationship of proximity imposing on the tortfeasor a duty of care to safeguard the plaintiff from economic loss. There is no such special relationship between the manufacturer of a chattel and a remote owner or hirer.

5. I believe that these principles are equally applicable to buildings . . . ."

13. The cost of replacement is therefore irrecoverable. It is usually characterised as economic loss, even though the chattel itself has suffered physical damage. I must admit that I find confusing the label "economic loss" and still more the label "pure economic loss" when applied to a physically damaged chattel. Despite the subsequent refusal of the House of Lords in Murphy v. Brentwood DC to endorse the reasoning of the majority in Junior Books Ltd v. Veitchi Co Ltd, there must still be force in the comment of Lord Roskill (at page 545F) that "it is sometimes overlooked that virtually all damage including physical damage is in one sense financial or economic for it is compensated by an award of damages". Indeed, Lord Oliver of Aylmerton said in Murphy v. Brentwood DC (at page 486G) that he doubted whether the categorisation of damage as "material", "physical", "pecuniary" or "economic" was useful except to emphasise that liability in tort does not arise merely because damage was reasonably foreseeable.

14. In short, the rule is an exclusionary rule. Lord Keith of Kinkel justified it in Murphy v. Brentwood DC (at page 409B) on the ground that a contrary approach:

". . . would open up an exceedingly wide field of claims, involving the introduction of something in the nature of a transmissible warranty of quality". 15. In terms of this exclusionary rule, the preliminary issue involves asking whether the Compressor was a chattel of which the Fan was part, making the Compressor defective and precluding recovery when it was itself damaged; or whether the Fan or some section of the Compressor of which the Fan was part (such as the Rotating Assembly) was defective, so that recovery is possible in relation to the damage suffered by the other property comprising the rest of the Compressor.

The ‘special relationship of proximity’ exception

16. In the passage from his speech in Murphy v. Brentwood DC at page 475 quoted above, Lord Bridge indicated that there was an exception to the exclusionary rule when a special relationship of proximity imposed on the tortfeasor a duty of care to safeguard the plaintiff from economic loss, and it was as an instance of this exception that the House of Lords in Murphy v. Brentwood DC justified the result of Junior Books Ltd v. Veitchi Co Ltd on its own special facts. However, in the passage quoted Lord Bridge went on to say that there is no such special relationship between the manufacturer of a chattel and a remote owner or hirer. Mr ter Haar QC conceded on behalf of Tunnel Refineries Limited that there was no such special relationship on the assumed and agreed facts of the present case. In my judgment that concession was rightly made.

Demise of the complex chattel exception

17. In D & F Estates Ltd v. Church Commissioners for England [1989] AC 177 (HL), the leading speeches were those of Lord Bridge and Lord Oliver, with both of whom Lord Templeman, Lord Ackner and Lord Jauncey of Tullichettle agreed. Lord Bridge said (at page 207A): -

"However, I can see that it may well be arguable that in the case of complex structures, as indeed possibly in the case of complex chattels, one element of the structure should be regarded for the purpose of the application of the principles under discussion as distinct from another element, so that damage to one part of the structure caused by a hidden defect in another part may qualify to be treated as damage to "other property," and whether the argument should prevail may depend on the circumstances of the case. It would be unwise and it is unnecessary for the purpose of deciding the present appeal to attempt to offer authoritative solutions to these difficult problems in the abstract. . . ." 18. This passage is clearly obiter. And although Lord Bridge thought the argument for an exception for complex structures (buildings) might "possibly" apply also to complex chattels, Lord Oliver (at page 214B) thought the exception arguable in relation to buildings in order to differentiate them from chattels, and did not specifically consider whether the exception might be arguable in relation to complex chattels.

19. In Warner v. Basildon Development Corp (1990) 6 Const LJ 146, decided by the Court of Appeal on 25th July 1990, Ralph Gibson LJ in the course of delivering the leading judgment held (at pages 153 to 155) that the subsequent purchaser of a house could not rely upon any theory of complex structures in suing the builder in tort for negligently constructing the foundations, because that theory was an inconsistent limitation of the first principles on which D & F Estates v. Church Commissioners for England was decided. In my judgment, it must follow from this that the complex chattel theory is equally inconsistent with first principles.

20. Murphy v. Brentwood DC was decided by the House of Lords on 26th July 1990, one day after Warner v. Basildon Development Corp. In it Lord Bridge said (at page 476C) that in D & F Estates v. Church Commissioners for England he had not expressed any view whether the complex structure theory was valid, but that in any event it provided no explanation for the result in Anns v. Merton LBC [1978] AC 728 (HL). Lord Oliver said (at page 484E) that the complex structure theory had been rightly criticised by academic writers. He thought that both he and Lord Bridge had made it clear in D & F Estates v. Church Commissioners for England that it was a theory which was not embraced with any enthusiasm but was advanced as the only logically possible explanation of the categorisation of the damage in Anns v. Merton BC as "material, physical damage". He continued that Lord Bridge having in the instant case of Murphy v. Brentwood DC amply demonstrated the artificiality of the theory, he agreed with Lord Bridge that it must now be rejected as a viable explanation for the underlying basis for the decision in Anns v. Merton BC. It seems to me that if the complex structure theory had any place in English law, it would surely have justified the decision in Anns v. Merton BC. Furthermore, I have found no hint of approval of the complex chattel exception in any speech of the House of Lords in Murphy v. Brentwood DC. It would follow that in Murphy v. Brentwood DC the House of Lords specifically declined to approve the complex structure theory or the complex chattel theory.

21. In Jacobs v. Morton and Partners (1994) 72 BLR 92, Mr Recorder Rupert Jackson QC sitting as a Deputy Official Referee interpreted (at page 102) Murphy v. Brentwood DC as having accepted the complex structure exception as part of English law. With respect, I cannot agree with that interpretation. Furthermore, Warner v. Basildon Development Corp had not been cited to Mr Jackson QC. In these circumstances Mr Roger Stewart submitted on behalf of Alsthom S.A. that I cannot follow the lead of Mr Jackson QC in Jacobs v. Morton and Partners, because I am bound by the decision of the Court of Appeal in Warner v. Basildon Development Corp to hold that there is no exception for complex chattels. I agree. Mr ter Haar QC conceded on behalf of Tunnel Refineries Limited that there is no complex chattels exception, and here again I believe that the concession was rightly made.

Judicial examples

22. The researches of counsel have not found any reported case in England in which it needed to be decided whether a faulty component of a chattel that damaged other parts of the chattel had damaged "other property".

23. There are, however, obiter dicta of distinguished judges which I need to consider. In M/S Aswan Engineering Establishment Co v. Lupdine Ltd [1987] 1 WLR 1 (CA) a proprietary liquid waterproofing compound called Lupguard was stacked in plastic pails in Kuwait in full sunshine. The pails collapsed and the Lupguard was lost. The manufacturers of the pails were held not liable in tort. In the course of his judgment, Lloyd LJ said (at page 21): -

"The distinction between a defective product which renders the product itself less valuable, and a defective product which creates a danger to other property of the plaintiff, was the corner-stone of Lord Brandon of Oakbrook's dissenting speech in the Junior Books case . . . . It is a distinction which is well established both in English and American law. Where the defect renders the product less valuable, the plaintiff's remedy (if any) lies in contract. Where it creates a danger to other property of the plaintiff, the remedy (if any) lies in tort . . . .

6. If Aswan had bought empty pails from a third party and then used the pails for exporting the Lupguard, clearly there would have been damage to other property of the plaintiffs. But in the present case the property in the pails and the property in the Lupguard passed to the plaintiffs simultaneously. Indeed, it is rather artificial to think of the property in the pails passing at all. Aswan were buying Lupguard in pails. They were not buying Lupguard and pails. One can think of other cases by way of illustration without difficulty. If I buy a defective tyre for my car and it bursts I can sue the manufacturer of the tyre for damage to the car as well as injury to my person. But what if the tyre was part of the original equipment? Presumably the car is other property of the plaintiff, even though the tyre was a component part of the car, and property in the tyre and property in the car passed simultaneously. Another example, perhaps even closer to the present case, would be if I buy a bottle of wine and find that the wine is undrinkable, owing to a defect in the cork. Is the wine other property, so as to enable me to bring an action against the manufacturer of the cork in tort? Suppose the electric motors in the Muirhead case [1986] QB 507 had overheated and damaged the pumps. Would the plaintiff have recovered for physical damage to the pumps as well as the lobsters?

7. I do not find these questions easy. There is curiously little authority on the point in England compared with America, where the law as to product liability is more highly developed. My provisional view is that in all these cases there is damage to other property of the plaintiff, so that the threshold of liability is crossed. Whether liability would be established in any particular case is, of course, another matter.

8. So while I recognise the existence of the first ground of distinction between the Muirhead case and the present case, and while I accept that the purchase of the pail was only incidental to the purchase of the Lupguard, I am not prepared to decide this case in favour of [the manufacturers of the pails] on that ground."

24. Of the examples given, although Lloyd LJ’s provisional view was that there would be liability in every example he gave, the only example in which he seemed sure of the result was that of the negligent manufacturer of a defective tyre bought as a replacement, which burst and caused damage to the car: he would be liable in tort.

25. In D & F Estates v. Church Commissioners for England [1989] AC 177, Lord Oliver said (at page 211G): -

"If I buy a secondhand car to which there has been fitted a pneumatic tyre which, as a result of carelessness in manufacture, is dangerously defective and which bursts, causing injury to me or to the car, no doubt the negligent manufacturer is liable in tort on the ordinary application of Donoghue v. Stevenson." 26. Lord Oliver seems to have thought that it did not matter whether the tyre was an original or a replacement, so long as the car was secondhand. Presumably the significance of the car being secondhand is that the purchaser of the car had no contract with the manufacturer of the tyre. However, I assume that would invariably be the case even with a new car, since I am not aware that any car manufacturer also makes the tyres originally supplied with the car, and replacement tyres are usually sold by intermediaries. It is well-known that most modern cars contain components made by a variety of manufacturers, often in a variety of different countries.

27. If the negligent manufacturer of a defective tyre is liable for the cost of repairs to the car, would the same apply if the car was damaged on account of the negligence of the manufacturer of a defective radiator fan, or an exploding spark plug, or a seized piston, or a fractured windscreen, or an insecure driver’s seat? In Murphy v. Brentwood DC Lord Bridge (at page 477E) seems to have thought that there should be no difference.

28. I am encouraged by this to conclude that the test being applied in all these examples was the complex chattel exception, under which the negligent manufacturer of a defective tyre fitted on a car when acquired could be held liable in tort for the cost of repair or replacement of any other part of the car, or the negligent manufacturer of an engine driving a pump could be held liable for the cost of repair or replacement of the pump, or the negligent manufacturer of a defective cork could be held liable to the purchaser of a bottle of wine for the cost of replacing the wine. Since I have held that at present English law does not recognise a complex chattel exception, I cannot safely rely upon these judicial examples.

29. I should also mention Nitrigin Eireann Teoranta v. Inco Alloys Ltd [1992] 1 WLR 498, in which a preliminary issue was tried whether a claim was statute-barred. A factory owner was suing for damage caused by negligently manufactured tubing associated with a furnace. It was conceded by counsel for the manufacturer (as recorded at page 501B) that the defective tubing caused damage to other property. Before me Mr ter Haar QC suggested in argument that May J must be taken to have approved the concession, and that the tubing was part of the furnace and had damaged another part of the furnace. I have found no clear indication in the report that the concession referred to damage to another part of the furnace as opposed to part of the factory building, and therefore cannot adopt this suggestion.

Approach

30. In the absence of any guiding authority, Mr Stewart on behalf of Alsthom S.A. and Mr Peter Knox on behalf of Imphy S.A. each submitted that the proper approach for me to adopt was to apply the well-known threefold test propounded in Caparo Industries Plc v. Dickman [1990] 2 AC 605 (HL) in order to decide as a matter of policy whether Tunnel Refineries Limited ought to recover the replacement cost of the rest of the Compressor. They each argued with reference to particular facts, and to the analysis by Professor Jane Stapleton, The Gist of Negligence (1988) 104 LQR 213, 389, that the parties should be left to their rights under contract or collateral warranty, that it was easier and probably cheaper for the end-user than for the supplier or manufacturer to insure, that Parliament had chosen to exclude factory owners from the ambit of the Consumer Protection Act 1987 (prompted by a European directive), and for all these reasons there should as a matter of principle be no recovery.

31. I am persuaded by Mr ter Haar QC that this approach is not justified in this case. In deciding the preliminary issue I do not have to decide whether recovery should be permitted in tort in a particular class of case. All I have to do is categorise the assumed and agreed facts of this case as falling within or outside the established exclusionary rule that applies where the chattel supplied itself suffers damage. Mr ter Haar QC submitted that this is essentially and necessarily a question of fact and degree, which I accept. The exercise of drawing the line does not require consideration of principle or policy. Still less is it appropriate for me to review whether it is desirable for the exclusionary rule to remain part of English law. So I do not need to say whether I agree with those who seem to think so, like Professor Stapleton; or with those who seem to think not, that the requirement of proof of negligence is itself a sufficient exclusionary rule, and that Murphy v. Brentwood DC was wrongly decided, such as Robbie Bernstein in his book on Economic Loss (1993), section 7.5 (see also the foreword by Lord Steyn to that work).

The application of the exclusionary rule

32. The starting point of Mr ter Haar QC was his submission that Tunnel Refineries Limited had no reasonable opportunity of detecting the latent defect in the Fan, and that the failure of the Fan resulted in the direct infliction of physical damage to the rest of the Compressor. In that context, he urged that the crucial matter was that the Fan (or at least the Rotating Assembly) had a separate identity, as shown by the facts that it was separately assembled and installed, and could be separately removed for servicing and replaced. I do not find these facts a convincing ground for holding the Fan or the Rotating Assembly or any other part of the Compressor to be property separate from the rest of the Compressor for the purpose of the exclusionary rule. It seems to me that separate assembly and installation is more a question of design and the need for periodic maintenance or replacement than of separate existence. A component needs to be capable of being separated if it needs to be accessed or replaced. How and where it is assembled and installed depends on a number of matters. To revert to the example of a car, a wheel is assembled and installed as a separate item, and is readily accessible in a way that a piston or crankshaft is not. I do not see why that should make a difference.

33. Mr ter Haar QC also submitted that assistance could be obtained by referring to Tunnel Refineries Limited’s insurance policy exclusion of damage to "property immediately affected". He said that this was a common provision in such policies. Even if this is so, I reject that submission because it seems to me that the wording of an insurance policy, however common, or of any other contract, has no bearing on the scope of a duty or the categorisation of damage in tort.

34. Although I have not felt able to follow Mr Jackson QC in Jacobs v. Morton and Partners in upholding the complex structure or chattel exception, I found helpful the passage in his judgment (at page 103) indicating that it might help to identify a complex structure in a particular case to consider whether the item in question was constructed by someone other than the main contractor; whether it retained its separate identity; whether it positively inflicted damage; and perhaps whether it was constructed at a particular time. These tests are not wholly apposite to a component of a chattel. For example, in the case of a building, ‘construction’ is usually done at and on the building itself, whereas a component is usually constructed separately and away from the chattel of which it is a component. However, I found the tests a useful starting point.

35. Like Mr Jackson QC, I do not intend to formulate any rule or series of tests of general application. The dividing line between recovery and non-recovery in this context must be defined case by case. Nevertheless, in the context of the present case, I consider the following two matters to be particularly significant, the acquisition and the function of machine and component. The acquisition by Tunnel Refineries Limited of the Compressor including the Fan was in essence one transaction with one supplier at one time. The function of the Compressor as a piece of machinery was to compress the vapours, and the Fan was an integral part of the machinery performing that function.

36. In relation to each of these matters, it might well follow from my emphasis on transaction and function that the negligent manufacturer of a defective tyre supplied with the car would not be liable in tort. The purchaser might be imagined saying to himself, ‘What I am doing now is buying a car, for transport’. By contrast, the negligent manufacturer of a defective tyre bought as a replacement might be liable. The purchaser might be imagined saying to himself, ‘What I am doing now is buying a tyre, for my car’. Of course I am not deciding that such a distinction ought to be made in any future case. However, if it is, I would not view it as any more anomalous than any other distinction made in relation to economic loss. This encourages me to adopt these two matters of transaction and function as the main guidance to the categorising of the Fan and the Compressor.

37. When Tunnel Refineries Limited acquired a Compressor from the one supplier at the one time, it might be imagined having said to itself, ‘What I am doing now is buying a Compressor, for my production line’. The Fan was acquired as an integral part of the Compressor in one and the same transaction, to perform a function integral to that of the Compressor.

38. So whatever the merit of the exclusionary rule, in my judgment it excludes any claim of Tunnel Refineries Limited against Alsthom S.A. and Imphy S.A. to recover from either of them the cost of replacing the Compressor after the Fan had wrecked it.

39. In short, when the Fan shattered and wrecked the Compressor, the Compressor was not "other property" for the purpose of the exclusionary rule. The Fan was simply the particular defective part of a defective Compressor.

Lost production

40. If I had held that Tunnel Refineries Limited was able to recover the cost of replacing the Compressor, I would have held it entitled in principle to recover for the loss of syrup actually in production when the Compressor ceased to function. I did not understand either Mr Stewart or Mr Knox to argue the contrary, but if they did, I do not accept their argument. Such recovery was allowed in Muirhead v. Industrial Tank Specialities Ltd [1986] QB 507 (CA), where damages were allowed for the lobsters who died when the water in their tank was not aerated because the electric motors driving the pumps cut out, having been wrongly rated for use in this country.

41. However, I would not have allowed recovery of damages for loss of production of further batches of syrup until the Compressor was brought back into service, on the authority of Spartan Steel and Alloys Ltd v. Martin & Co (Contractors) Ltd [1973] QB 27 (CA), and of Muirhead v. Industrial Tank Specialities Ltd itself, where recovery of damages for future batches of lobsters was denied.

Conclusion

42. On the preliminary issue I hold on the facts assumed and agreed that Tunnel Refineries Limited, whose Compressor was wrecked by fracture of its component Fan caused by the negligence of Alsthom S.A. and Imphy S.A. as supplier and manufacturer of that Fan, cannot recover from either of them as supplier or manufacturer of the Fan, damages in tort in respect of the replacement cost of the Compressor or consequential loss of production, because of the exclusionary rule precluding recovery in tort in respect of damage suffered by the defective chattel itself, since the Compressor is to be seen as one item, and the fracture of the Fan did not cause damage to other property for this purpose.

43. I therefore decide the preliminary issue in favour of Alsthom S.A. and Imphy S.A.

Peter Susman QC

Recorder