As we have
not infrequently remarked in these columns, the last few years have seen a
quite extraordinary U-turn by the courts on the subject of negligence. The
heady days of Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520
are little more than a memory; Anns v Merton LBC [1977] 2 EGLR 94
itself is under constant attack; and current judicial thinking appears to be
that only the most pressing arguments of policy can justify the imposition of a
legal duty of care in a novel situation. Judges at all levels have eagerly
seized upon the dictum of Lord Keith in Peabody Donation Fund Governors
v Sir Lindsay Parkinson & Co Ltd [1985] AC 210 that ‘in determining
whether or not a duty of care of particular scope was incumbent on a defendant
it is material to take into consideration whether it is just and reasonable
that it should be so’.
It is of
course true that the vast majority of cases raising this issue have concerned
the causing by a defendant to a plaintiff of ‘pure economic loss’ and that
courts have traditionally been reluctant to award damages for such loss in a
tort action (as opposed to claims arising out of a breach of contract).
However, a recent decision of the Court of Appeal suggests that the new
conservatism is in no way limited to cases of this type — the ‘just and
reasonable’ test may equally be applied to what would have been considered
‘mainstream’ negligence, that is the causing of physical damage to property.
The case in
question, Norwich City Council v Harvey (1988) 139 NLJ 40, arose
when the plaintiffs, who owned and operated a swimming pool complex in Norwich,
entered into a JCT standard-form contract with a local building firm for the
erection of a substantial extension. The builders, as they were perfectly
entitled to do under this contract, subcontracted felt roofing work to a firm
called Briggs Amasco Ltd; unfortunately, one of the subcontractors’ employees,
while using a blow torch, caused a fire which damaged both the new extension
and the existing buildings. The plaintiffs accordingly brought an action for
negligence against the subcontractors and the individual employee concerned.
At first
glance, this might seem a very straight-forward case and one in which liability
would readily be established. However, the Court of Appeal (like Garland J at
first instance) were persuaded by counsel that, when the terms of the main
contract and subcontract were examined, it was plain that the parties had a
different intention. The main contract provided that, while the contractors
would be liable for certain types of damage (against which they were
contractually bound to insure and to cause any subcontractor to insure), the
risk of damage by fire to the works or existing buildings was to remain on the
employer (who in turn was obliged to insure). Since this would clearly have
exempted the main contractor from liability for a negligently caused
fire (Scottish Special Housing Association v Wimpey Construction UK
Ltd [1986] 2 All ER 957), and since the subcontract here was expressly made
on the same basis as the main contract, it was successfully argued that to
permit the employer to ignore the contracts and sue the subcontractor in tort
would not be ‘fair and reasonable’.
As we
suggested at the outset, this decision is very much in keeping with recent
trends in the House of Lords and the Court of Appeal. None the less, it should
not be overlooked that the case probably goes further than many others
have done in restricting the scope of a person’s liability for negligence. Two
comments in particular seem appropriate. First, this was not a question
of extending the duty of care into a novel situation (where one would expect a
fair degree of judicial reluctance) but rather a plea that someone should be
relieved of a responsibility which he would normally expect to bear. After all,
if there is no duty of care to avoid setting fire to other people’s property,
what does the tort of negligence cover?
Second, it is worth noting that this was not a case of a nominated
subcontractor (where the employer would in fact have dictated the terms of the
subcontract as well as the main contract) but rather of one selected by the
main contractor. It might therefore have been thought rather less appropriate
to look at that subcontract in defining the rights of the employer in tort. All
in all, the Court of Appeal’s decision goes quite a long way.
auctions, rings and informal agency
The law
which governs sales by auction endeavours to hold some sort of a balance
between the competing interests of the vendor (who naturally wishes to obtain
the best possible price for his property) and the bidders (who equally
naturally wish to ensure that he does not). As far as the vendor is concerned,
the law permits him some measure of self-protection against a sale at an
undervalue (by setting a reserve and/or reserving the right to bid himself or
through an agent); however, it tries to prevent this ‘protection’ from becoming
a source of positive harm to bidders by insisting that they be given notice of
the vendor’s rights. If this is not done, then the sale (whether of land or
chattels) is taken to be ‘without reserve’ and the vendor has no right to bid.
When one
looks at the other side of the coin, namely, the methods of self-preservation
which are open to bidders, it can be seen at once that their armoury is more
limited. True, a wellworded question to the auctioneer can have a thoroughly
depressing effect on the sale price (‘Are you aware that the house has six
inches of water running through the cellar?’
proved quite devastating in Mayer v Pluck (1971) 223 EG
33, 219), but the opportunities for this tactic do not arise every day. Indeed,
it should in any case be used with extreme circumspection, in order to avoid a
claim for misrepresentation or even (as in Mayer v Pluck)
malicious falsehood!
The major
problem for bidders is, of course, that they are in competition with each other
as well as with the vendor. Now, if only they were to work together, they might
well be able to acquire property at bargain basement prices — but would the law
not regard that as an unfair practice against the vendor? Surprising as it may seem, the answer to that
question is basically that the law (or at least the common law) has no
objection whatsoever to a secret agreement among bidders not to compete with each
other with a view to buying as cheaply as possible. Such an arrangement (known
as a ‘ring’ where the participants are dealers) is often coupled with an
agreement to share the spoils, perhaps by holding a later ‘knock-out’ sale of
all items purchased, at which the only bidders are the members of the ring. It
has long been held that, unless a case falls within the provisions of the
Auctions (Bidding Agreements) Acts 1927 and 1969 (which require a chattel
auction and an agreement to which at least one of the parties is a ‘dealer’),
the practice is quite valid — the buyer is entitled to enforce the contract of
sale against the vendor, and the bidding agreement itself is also specifically
enforceable.
A recent
example is the case of Housemayne du Boulay v Raggett [1988] EGCS
155, which concerned the sale by auction of an area of grazing land in Surrey.
The three plaintiffs and the first defendant, all of whom lived in the area,
were interested in purchasing the land and reached an agreement whereby only
the first defendant was to bid for it — if his bid proved to be successful, the
land would subsequently be divided among the parties in agreed proportions. The
first defendant’s bid (of £50,000) was indeed successful, and the land was duly
conveyed into the joint names of himself and his wife. He then denied the
existence of any bidding agreement with the plaintiffs, whereupon they brought
an action for specific performance.
Having lost
the first battle (the judge being quite satisfied that a genuine bidding agreement
had been made as the plaintiffs claimed), the defendant turned to more
technical arguments in an effort to keep the land. He first claimed that, if it
had been intended that he should bid as agent for a consortium of
buyers, this agency agreement was required to be in writing (or at least to be
evidenced in writing) under sections 40 and 53 of the Law of Property Act 1925.
Since no such written evidence existed, it followed that the agreement was
unenforceable. This argument cut little ice with the learned deputy judge, who
held not only that an agency agreement of this kind was perfectly valid though
made orally but also that there was in any event a sufficient act of part
performance by the plaintiffs (in refraining from bidding) to render the agreement
enforceable.
The
defendant’s last (and rather despairing) argument was that, whatever his
position might be, his wife could not be bound by an agreement to which she had
not been a party. This contention, too, received short shrift from the judge —
the defendant’s wife had been well aware of what was going on, and she was
consequently subjected to the same fiduciary duty towards the plaintiffs as her
husband. Specific performance was accordingly granted.
