Negligence – Statutory duty – Liability – Appellant factory owner claiming damages following fire at premises – Appellant contending fire caused by failure of probe manufactured by first respondent to detect loss of liquid in hot water tank – Court rejecting claim that first respondent negligent or in breach of statutory duty – Appellant appealing – Whether, at date of fire, first respondent owing continuing duty to appellant – Whether respondent’s breach of duty causing loss – Appeal dismissed
The appellant owned a factory in Exeter. As a result of a fire on the premises, the appellant suffered losses in excess of £20m. The appellant alleged that the fire had been caused by the failure of a thermolevel device manufactured by the first respondent that was supposed to detect a loss of liquid in a hot water tank. The second respondent had been engaged to design, supply and install a new grain etch line which included the tank that caught fire. The third respondent had purchased the probe from the first respondent and installed it as part of a subcontract with the second defendant.
The appellant claimed damages against the respondents alleging negligence and breach of statutory duty based on regulation 14(1) of the Electrical Equipment (Safety) Regulations 1994 (SI 1994/3260). It contended that the probe had been negligently designed so that it was unreliable in service and was not a “failsafe” device. The appellant resolved its claim against the second and third respondents.
The first respondent denied liability. It contended that the losses sustained by the appellant were not within the scope of any duty which it owed, that the fire was caused by acts of the appellant which broke the chain of causation and that there was nothing wrong with what it said was a simple and relatively low-grade product. In the alternative, the first respondent relied on the defence of contributory negligence. The High Court dismissed the appellant’s claim: [2014] EWHC 3933 (TCC); [2014] PLSCS 334.
The appellant appealed contending, among other things, that the judge had erred in attributing to the appellant the knowledge of junior employees concerning the malfunction of the safety device; and in his treatment of reliance in relation to negligence and breach of statutory duty.
Held: The appeal was dismissed.
(1) A company’s primary rules of attribution were to be found in its constitution, supplemented by the general principles of agency. In determining the liabilities of a company, the rules of vicarious liability also operated. However, in exceptional cases, a rule of law might exclude attribution on the basis of the general principles of agency or vicarious liability. The law treated a company as thinking as well as acting through its agents. In determining whether to attribute the action or state of mind of a company, the court had to have regard to both the factual context and the nature of the claim by or against the company. The question was whose act, knowledge or state of mind was, for the purpose of the relevant rule, to count as the act, knowledge or state of mind of the company: Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 and Bilta (UK) Ltd (in liquidation) v Nazir (No 2) [2015] UKSC 23; [2016] AC 1 considered.
In the present case, the relevant employees were those to whom the directors of the appellant had entrusted the task of maintaining and operating the relevant device in a safe manner. The facilities manager was a senior member of that team. Beneath him were the plant engineering manager and the plant engineering technician and three operators of the device. They all knew about the thermolevel malfunction and the collective knowledge of those individuals were properly attributed to the appellant.
(2) As regards the claim in negligence, the manufacturer of an article, in respect of which there would not be intermediate inspection, owed a duty to the end user to take reasonable care to ensure that the article would not cause personal injury or damage to property. Once an article passed through the factory gate, the original manufacturer had no control over who would use it or how they would do so. Therefore, the law imposed restrictions upon a manufacturer’s liability to the end user. If a hidden defect in a chattel was the cause of personal injury or damage to property other than the chattel itself, the manufacturer was liable. But if the hidden defect was discovered before any such damage was caused, there was no longer any room for the application of the principle in Donoghue v Stevenson [1932] AC 562. The chattel was now defective in quality but was no longer dangerous. If one person in the corporate hierarchy became aware of a dangerous situation in the workplace which in breach of duty he failed to report up the line, in subsequent litigation, the company could not rely upon the ignorance of its more senior managers: Taylor v Rover Co Ltd [1966] 1 WLR 1491, Lexmead (Basingstoke) Ltd v Lewis [1982] AC 225, D & F Estates Ltd v Church Commissioners for England [1989] 1 AC 177 and Murphy v Brentwood [1991] 1 AC 398; [1990] EGCS 105 considered.
On the facts of the present case, before the fire occurred, the appellant knew, or should be taken to have known, that the thermolevel was malfunctioning. However, it continued to use the equipment without installing any alternative safety mechanism and the effective cause of the fire was the failure of the system put in place by the appellant to protect its tank following the malfunction of the thermolevel. That state of affairs defeated the appellant’s claims in negligence against the first respondent.
(3) As the judge had found the first respondent to be in breach of the 1994 Regulations, it was in breach of the duty it owed under section 41 of the Consumer Protection Act 1987 to any person affected by that contravention. However, on the day the fire occurred the appellant was relying on alternative means of preventing fire, not the thermolevel as a reliable safety device. Accordingly, it could not be characterised as a person affected by the first respondent’s breach of the 1994 Regulations.
Ben Quiney QC and James Sharpe (instructed by Reynolds Porter Chamberlain LLP) appeared for the appellant; Andrew Bartlett QC and Alexander Antelme QC (instructed by Weightmans LLP) appeared for the first respondent.
Eileen O’Grady, barrister
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