Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 115
PD1955/08	OPINION OF LORD UIST in the cause JACQUELINE DONOGHUE Pursuer against GREATER GLASGOW HEALTH BOARD Defenders and LAING O'ROURKE SCOTLAND LIMITED Third Party ­­­­­­­­­­­­­­­­­________________

Pursuer: Digby Brown, LLP

Defenders: Miss Joughin Advocate; RF Macdonald

Third Party: Weatherston, Solicitor; Brechin Tindal Oatts

4 August 2009

Introduction

[1] The pursuer avers that at or about 2 pm on 27 April 2007 she was working in the course of her employment with the defenders as a blood porter at Glasgow Royal Infirmary. As part of her duties she required to deliver blood products from the blood bank to Ward 39. The route she required to take to get to Ward 39 involved her walking along a gravel path adjacent to the car park and then going down a set of 10 concrete stairs. This route between buildings was frequently used by staff and visitors, and the pursuer in particular would use the path and stairs around 20 times each day. The stones from the gravel path tended to get transferred on to the concrete stairs, making them slippery. As the pursuer was making her way down the stairs she slipped on loose stones on the stairs and fell and injured her back. She blames the defenders for her accident on the basis of breach of their common law duty to take reasonable care for her safety and their breach of statutory duties in terms of Regulations 5 and 12 of the Workplace (Health, Safety and Welfare) Regulations 1992 and section 2 of the Occupiers' Liability (Scotland) Act 1960.

[2] The defenders have brought in the third party. They aver that in 2004 they (the defenders) entered into a series of agreements under which Impregilo Parking (Glasgow) Limited ("IPL") would construct and operate a multi-storey car park in the grounds of Glasgow Royal Infirmary. The third party was the subcontractor to IPL and entered into a building sub-contract with IPL. On 27 May 2004 the third party and the defenders executed a warranty in terms of which the third party undertook to comply with the terms of the sub-contract and undertook certain other obligations. Part of the works under the sub-contract consisted of the construction of a path leading to the top of the stairs on which the pursuer avers that she fell. The third party was also responsible for landscaping the area adjacent to the path. In terms of clause 1.1 of the warranty the third party undertook to comply with all terms of the sub-contract. Clause 19.2.4 of the sub-contract required the third party to follow the drawings and specifications with which it was provided. Certain drawings specified that the path should be constructed with a wearing course of asphalt and that the area surrounding the path be grassed. The third party failed to follow the specifications in the drawings. The path was surfaced with gravel. The area adjacent to the path was surfaced with gravel and not with grass.

[3] The defenders go on to aver that in terms of clause 19.2.1 of the sub-contract the third party undertook to carry out and complete the sub-contract works in a good and workmanlike manner and with sound materials of their respective kinds. In terms of clause 19.8 the third party was obliged in carrying out or completing any design of the sub-contract works to "exercise the reasonable skill, care and diligence to be expected of a properly qualified and competent engineer or other appropriate designer who is experienced in carrying out such services in relation to works of a similar scope, nature, timescale and complexity, and on a similar site at a similar location in the sub-contract works". The third party was in breach of the obligations to construct the path and landscape the surrounding area in a good and workmanlike manner. It was a skilled and experienced building contractor. It knew, or ought to have known, that gravel was not a suitable material for landscaping the area adjacent to a path leading to the top of stairs. It knew or ought to have known that the gravel would migrate on to the path and stairs and create a slipping hazard on the stairs. It was in breach of contract. Furthermore, insofar as it designed the path and the landscaping of the surrounding area, the third party was in breach of clause 19.8 of the sub-contract and clause 1.1 of the warranty. In the event that the defenders are found liable to the pursuer they will suffer loss and damage to the extent of the damages they are found liable to pay, through having to pay the pursuer's judicial expenses and incurring their own judicial expenses as a result of the claim. The damages would not have had to be paid or the expenses incurred but for the third party's material breach of contract. In the event of the defenders being found liable to the pursuer in respect of the claim, the third party should be found liable to the defenders on the basis of its said material breach of contract in respect of a claim arising from or in connection with the defenders' liability to the pursuer. The claim that the defenders would have in these circumstances against the third party would be made up of their own liability to the pursuer together with the costs incurred by them in respect of their own judicial expenses.

[4] The third party avers in response that it is under no obligation to make payment to either the pursuer or the defenders. It avers that the defenders' averments against it are irrelevant and lacking in specification and that the action should be dismissed insofar as directed against the third party.

Submissions for the third party

[5] The submission for the third party was that the question which arose was whether the loss claimed by the defenders from the third party was too remote a loss to recover for breach of contract. The contract was completed by the third party sometime around August 2005. The broad proposition advanced on behalf of the third party was that the court could not, on the facts averred by the defenders, draw the conclusion that the breach of contract averred caused the loss, and in any event the prospective loss was too remote from the breach of contract to justify recovery thereof in damages. Essentially there was a missing link in the chain of causation.

[6] The defenders had not averred the date when the work under contract was completed, although the implication must be that the work had been carried out. They did not aver how they satisfied their obligations to the pursuer arising out of the situation. There was a striking omission of any averment by the defenders about how they responded to the state of the premises. There was no averment that the third party owed any obligation to the pursuer. There was no suggestion of joint and several liability to the pursuer and therefore of liability under section 3 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940. The averments made by the defenders about what the third party knew or ought to have known about gravel being a danger were merely assertions and not founded on any facts. The defenders averred that the premises were regularly used but it did not follow from that fact that it was within anyone's knowledge that a problem had been created. In light of that there was no case for the third party to answer and the case against it should be dismissed without further inquiry into the facts. Reference was made to Jamieson v Jamieson 1952 SC (HL) 44 and Mitchell v Glasgow City Council 2009 SLT 247. In A/B Karlshamns Oljefabriker v Monarch Steamship Company Limited 1948 SC (HL) 1 Lord Wright stated that the extra cost incurred for transhipment in that case was the proper subject of damages as constituting the damages naturally and directly resulting from the appellants' breach of contract within the rules of Hadley v Baxendale (1854) 9 Exch 341 at page 354. The natural loss in the present case was the cost of remedying the failure to provide the correct surface - not the damages which the defenders would have to pay for causing personal injury to the pursuer.

[7] In Koufos v Czarnikow Limited [1969] 1 AC 350 the question was whether damages should include the loss incurred from the fall in the value of goods due to a delay in the ship's voyage. Lord Reid, referring to the decision in Hadley v Baxendale, stated at page 385C-E:

"I am satisfied that the court did not intend that every type of damage which was reasonably foreseeable by the parties when the contract was made should either be considered as arising naturally, i.e., in the usual course of things, or be supposed to have been in the contemplation of the parties. Indeed the decision makes it clear that a type of damage which was plainly foreseeable as a real possibility but which would only occur in a small minority of cases cannot be regarded as arising in the usual course of things or be supposed to have been in the contemplation of the parties: the parties are not supposed to contemplate as grounds for the recovery of damage any type of loss or damage which on the knowledge available to the defendant would appear to him as only likely to occur in a small minority of cases.

In cases like Hadley v Baxendale or the present case it is not enough that in fact the plaintiff's loss was directly caused by the defendant's breach of contract. It clearly was so caused in both. The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.

The modern rule of tort is quite different and it imposes a much wider liability. The defendant will be liable for any type of damage which is reasonably foreseeable as liable to happen even in the most unusual case, unless the risk is so small that a reasonable man would in the whole circumstances feel justified in neglecting it. And there is good reason for the difference. In contract, if one party wishes to protect himself against a risk which to the other party would appear unusual, he can direct the other party's attention to it before the contract is made, and I need not stop to consider in what circumstances the other party will then be held to have accepted responsibility in that event. But in tort there is no opportunity for the injured party to protect himself in that way, and the tortfeasor cannot responsibly complain if he has to pay for some very unusual but nevertheless foreseeable damage which results from his wrongdoing".

In the present case it was not suggested that the purpose of the specification made by the defenders in the contract was to stop someone suffering an injury. Nor was it suggested that an accident was reasonably foreseeable because of the choice of materials made by the third party. It was important to bear in mind that this case was a contract case.

[8] In Balfour Beatty Construction (Scotland) Limited v Scottish Power PLC 1994 SC (HL) 20 the issue was whether the demolition and rebuilding of a partly completed structure was a reasonably foreseeable loss arising out of the interruption in an electricity supply. At page 32C Lord Jauncey of Tullichettle stated that at the end of the day it was a question of fact what must have been within the reasonable contemplation of Scottish Power at the date of the contract. The Lord Ordinary in a carefully reasoned judgment had found that the demolition and reconstruction of the aqueduct consequent upon failure of the power supply was not within that contemplation and the Second Division were not justified in differing from those findings.

[9] In Galoo Limited v Bright Grahame Murray [1994] 1 WLR 1360 the issue was whether an auditor's negligence was causative of losses suffered by companies as a result of consequential continued trading. The Court of Appeal held that a breach of contract would sound in damages only if it were the dominant or effective cause of the plaintiff's loss and not if it had merely given the opportunity for the loss to be sustained, and that in determining whether a breach of duty in contract was the cause of a loss or merely the occasion of it, the court would apply common sense to the facts of each case. On the facts of that case it was held that the defendants' alleged breach of contract had provided an opportunity for the trading losses of the plaintiffs to be incurred but had not caused them and that the claims had rightly been struck out. In the present case the same might be said: the breach of contract had provided an opportunity for the accident to occur but had not caused it.

Submission for the defenders

[10] The submission for the defenders proceeded on the basis that it was accepted that the pursuer would not have any right of action directly against the third party. Nevertheless, it did not follow from that fact that the defenders had no claim against the third party. The pursuer's case against the defenders was based on breach of statutory duty and the defenders' claim against the third party was based on breach of contract. If the contract had been complied with there would not have been gravel on the path. The defenders' claim against the third party was based on Rule of Court 26.1(1)(b)(ii), which provides as follows:

"Where, in an action, a defender claims that -

(b) a person whom the pursuer is not bound to call as a defender should be made a party to the action along with the defender in respect that such person is -

(ii) liable to the defender in respect of a claim arising from or in connection with the liability, if any, of the defender to the pursuer,

he may apply by motion for an order for service of a third party notice on that other person in the Form 26.1-A for the purpose of convening that other person as a third party to the action".

The court was considering here the relevancy of the defenders' case against the third party. The fact that there was an intervening period between the completion of the work by the third party and the occurrence of the accident raised an issue which should go to proof. This was an action under Chapter 43 of the Rules of Court, in which simple pleadings sufficed. The defenders were offering to prove that the contract was as averred and that the path and adjacent area were not surfaced in accordance with the contract. Essentially the defenders were claiming that the third party created the danger or the circumstances in which the accident occurred. The defenders averred that damages would not have had to be paid or expenses incurred but for the third party's material breach of contract. It was a matter for proof whether the loss claimed was too remote. Sufficient averments had been made by the defenders to entitle them to a proof on the issue.

[11] In Buchanan & Carswell v Eugene Limited 1936 SC 160 a customer of a firm of hairdressers who averred that she had been injured through the negligence of the hairdressers in using a defective electrical drying machine was awarded damages by a jury and the hairdressers then brought an action against the manufacturers of the machine for payment of the damages and expenses awarded to her. They claimed that they had suffered that loss as a result of a breach of an implied warranty with regard to the condition of the hair drying machine in terms of section 14(1) of the Sale of Goods Act 1893. The Lord Ordinary dismissed the action on the ground that it was truly one of relief, and that, since the ground of the former action was personal fault on the part of the hairdressers, they were not entitled to relief from the manufacturers, who were in no way parties to that fault. The Second Division, reversing the judgment of the Lord Ordinary, held that, whether or not the action was competently laid as one of relief, the hairdressers had relevantly averred a breach of implied warranty on the part of the manufacturers of the machine under the 1893 Act and that, if such a breach of warranty was established, they would be entitled to an award of damages. Lord Justice Clerk Aitchison stated at page 175 that his first impression of the case was that the Lord Ordinary was right in dismissing it as irrelevant upon the ground that the pursuers were in effect seeking to pass on to the defenders a liability which had attached to them in respect of their own negligence but that further consideration had led him to think that there might be a hasty view since the action was laid upon breach of an implied warranty under section 14(1) of the Sale of Goods Act 1893, the warranty alleged being that a certain electrical apparatus for drying hair, which was purchased by the pursuers from the defenders for use in the pursuers' hairdressing establishment, was reasonably fit for its purpose. At page 176 Lord Hunter stated as follows:

"The injured customer brought an action against the pursuers and received an award of damages from a jury. The pursuers now seek to recover these damages, and the expenses to which they were put in defending the action, from the defenders. Their case is that, but for the defenders' breach of warranty, they would not have been subjected to a jury trial and incurred the loss which fell on them. They contend that the whole amount of their claim is a loss naturally flowing - i.e. such a loss as the parties might reasonably contemplate would or might arise - from the defenders' breach of contract. I am not prepared to say that the claim is so remote that the action must be dismissed".

[12] In the recent decision of the House of Lords in Transfield Shipping Inc v Mercator Shipping Inc [2009] 1 AC 61 it was held that since all contractual activity was voluntarily undertaken, liability for damages for breach of contract was founded upon the presumed intention of the parties and required the court to determine objectively what was the common basis on which the parties had contracted; that, insofar as recovery was allowable for loss which was reasonably foreseeable, the required probability was that which would generally happen in the ordinary course of things, since a party entering into a contract could only be supposed to contemplate losses which were likely to result from the breach in question; and that regard was to be had to the nature and object of the business transaction, including the commercial context in which it had been made. The decision in that case was that the charterer of a vessel could not reasonably be regarded as having assumed, on late redelivery of the vessel by him, the risk of the owner's loss of profit on the following charter. Lord Hoffmann at page 68, paras.14 and 15 pointed out that, before one could consider the principle on which one should calculate the damages to which a plaintiff is entitled as compensation for loss, one first had to decide whether the loss for which compensation was sought was of a kind or type for which the contract breaker ought fairly to be taken to have accepted responsibility. In the present case the loss claimed from the third party was the kind or type of loss which the third party could reasonably have contemplated as likely to occur. This was therefore a relevant claim and proof of the facts ought to be allowed. It was claimed that the breach of contract resulted in the gravel being on the stairs and that but for the existence of the gravel the accident would not have happened. The builders of the footpath had assumed responsibilities to the owners of the footpath. It was difficult to come to any concluded view on the issue without hearing evidence and there was therefore a relevant case for inquiry.

Response for the third party

[13] The response for the third party referred to Rule of Court 43.2(1)(a), which provides that there shall be annexed to the summons a brief statement containing averments relating only to those facts necessary to establish the claim. In this case inadequate facts had been averred on whether the type of loss was recoverable. It was open to the defenders to have averred additional facts, but they had not done so.

Discussion and conclusion

[14] In my opinion the issue which I have to determine at this stage is whether the defenders' claim for damages for breach of contract against the third party is so remote that it must be dismissed. In carrying out that exercise I have to apply the law on remoteness of loss for breach of contract as recently explained by the House of Lords in Transfield Shipping Inc v Mercator Shipping Inc. At page 67, paras 12 and 13, Lord Hoffmann stated as follows:

"[12] It seems to me logical to found liability for damages upon the intention of the parties (objectively ascertained) because all contractual liability is voluntarily undertaken. It must be in principle wrong to hold someone liable for risks for which people entering into such a contract in their particular market would not reasonably be considered to have undertaken.

[13] The view which the parties take of the responsibilities and risks they are undertaking will determine the other terms of the contract and in particular the price paid. Anyone asked to assume a large and unpredictable risk will require some premium in exchange. A rule of law which imposes liability upon a party for a risk which he reasonably thought was excluded gives the other party something for nothing."

[15] The cause of the accident, as averred by the pursuer, is that she slipped on loose stones from the gravel path which had got transferred on to the concrete stairs, making them slippery. The defenders' claim against the third party is that the path was surfaced with gravel and not with a wearing course of asphalt with a surrounding grass area, as specified in the contract drawings. It is accepted by the defenders that the pursuer has no direct right of action against the third party (and therefore that the third party has no liability to the pursuer), but at the same time it is averred by the defenders that the damages would not have had to be paid or the expenses incurred but for the third party's material breach of contract. What the defenders are in effect seeking is indemnity or relief from the third party.

[16] I have reached the conclusion that the loss which the defenders claim from the third party cannot be categorised as a loss which was likely to arise from the breach of contract averred or as one which was within the reasonable contemplation of the parties when they entered into the contract. The warranty granted by the third party to the defenders was dated 27 May 2004 and the accident is said to have occurred on 27 April 2007. I accept the submission for the third party that the natural loss here is the cost of remedying the failure to provide the correct surface, and not the damages which the defenders may have to pay to the pursuer for the injury which she sustained. I do not think that it can be said that it was, at the time that the contract was entered into, within the reasonable contemplation of the parties that the third party would be exposed to liability for an accident caused by gravel getting onto the stairs in April 2007. The defenders accept that the pursuer has no direct right of action against the third party: that being so, I find it difficult to see how it can be said that it was within the reasonable contemplation of the parties at the time of the making of the contract that the third party was exposing itself to liability for an accident such as that which occurred.

[17] It seems to me that Buchanan & Carswell v Eugene Limited is distinguishable from the present case. That case involved a defective hairdryer, a piece of machinery obviously capable of causing personal injury in normal use. It is not averred in the present case that the gravel was in itself dangerous or that the third party was responsible for it getting on to the stair. This case involves the nature of the materials used to construct a path and adjacent area, not a faulty piece of machinery which was to be used for the purpose of drying a person's hair. I accept the submission for the third party that the averments about what the third party knew or ought to have known about gravel being a danger are merely assertions, and are not founded on any facts. Gravel paths are commonplace and not generally considered to present a danger. No doubt it may be said that, had the third party not constructed the path with gravel instead of asphalt, the accident would not have occurred, but it does not follow from that that the loss incurred by the defenders in paying damages to the pursuer for her injury is a recoverable loss from the third party for their breach of contract in constructing a path with the wrong material. The defenders do not aver any special knowledge on the part of the third party. In my opinion there is nothing to go to proof in the claim against the third party.

Decision

[18] As I am of the view that the defenders' averments against the third party are irrelevant, I shall dismiss their claim against the third party.