CHARLES FRANCIS KELLAWAY HAWKES v. MECO ENGINEERING LTD.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

Mr John Scott, instructed by Messrs McKenna & Co., for the fifth defendant

Mr Robert Y.H. Pang, instructed by Messrs Robert Lee & Fong, for the plaintiffs.

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JUDGMENT

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The Relief Claimed.

1. The fifth defendant has issued a summons in each of these actions asking for an order that the plaintiffs' statements of claim be struck out on the ground that they disclose no reasonable cause of action against it.

The Statements of Claim.

2. With one exception, which I will deal with later, the three statements of claim are similar in form. For the purpose of the matter before me, I must take the allegations in the statements as true in fact.

3. The plaintiffs say that some houses were constructed at Headland Drive, Discovery Bay and they were completed in or around the period September to November 1982. The defendants in the actions were concerned in the construction of these houses in various capacities; in particular, the, fifth defendant was the nominated sub-contractor responsible inter alia for the installation and testing of the electrical circuits and related works at the houses. There is no allegation that the fifth defendant had any contractual relationship with the plaintiffs.

4. The plaintiffs allege that they are the owners or occupiers, or both, of different houses. They allege that, prior to rectification by them on various dates during 1988, the electrical installations in the houses were 'defective and/or unsafe', as particularised, by reason of the negligence of the developer. One of the particulars of defects alleges that the wiring was dangerous.

5. There is no need to go into the particulars of negligence alleged in detail. It is enough to say that the allegations include allegations that the installations were dangerous and unsafe.

6. I should say here that there is some confusion in the grammatical tenses used in the statements of claim, but an overall reading makes it clear that the allegations are that the installations were defective, unsafe and dangerous, but, after rectification, they are no longer so.

7. The plaintiffs allege that damage was caused to the houses by work necessarily carried out to render the houses 'safe and/or habitable'. The statement of claim in Action A5958 also alleges that, in consequence of the 'defective and/or unsafe electrical installations', damage was caused to the house concerned in that case, but the particulars of damage alleged make it clear that the damage was caused by the work of rectification. The particulars of damage relate generally to the cost of demolition, repair and restoration, apart from, in each case, an amount claimed for alternative accommodation.

8. Thus far in the statements of claim, there is no allegation regarding the liability of the fifth defendant. However, in Actions A5958 and 5965, the statement of claim recites the following -

'Further or in the further alternative, the aforesaid loss and damage suffered by the Plaintiff was caused or contributed to by the negligence and/or breach of statutory duty on the part of [inter alia the main contractor and the fifth defendant] this servants or agents.'

 

9. In Action A5969, however, this allegation is made only against the architects and their servants or agents. There is no allegation that the fifth defendant was a servant or agent of the architects. This omission, Mr Pang tells me, was accidental, and that the intention is to amend the allegation in Action A5969 so that it reflects the allegation in this regard in the other two actions. For the time being, I will work on the basis that it is necessary to deal with this problem only if the statements of claim, as concerns there allegations against the fifth defendant, otherwise set up a reasonable cause of action. It is a minor problem easily curable by amendment, and I would not strike out on this basis alone.

10. There is an allegation of a breach of statutory duty here, but there is no attempt to identify the breach, the statute or the duty, and the particulars allege nothing but negligence. Mr Scott submits that this allegation of a breach of statutory duty should not taken seriously because it is otherwise clear that the plaintiffs are relying, as against the fifth defendant, only on negligence. I accept that this is right, and Mr Pang did not attempt to argue to the contrary.

11. The particulars of negligence alleged against the fifth defendant suggest that the electrical installations were not safe.

12. The statements of claim conclude by alleging failures by the defendants, despite requests, to remedy the 'defective and/or unsafe electrical installations' and that the defective and/or unsafe electrical installations are endangering and would have [continued] to endanger the life or lives and property of the Plaintiff and/or other lawful occupiers' of the houses. This latter allegation must be taken, after reading the statements of claim as a whole, to refer to the time before the rectification work was effected.

The Argument.

13. Mr Scott submits that, the plaintiffs' claims being founded on the tort of negligence, purely economic loss is not recoverable, and that any loss suffered by the plaintiffs falls into that category. Consequently, he says, the statements of claim do not set up a reasonable cause of action and should be struck out as against the fifth defendant.

14. Mr Scott says that this area of the law was a sea dotted with shoals, but a chart through these dangerous waters has now been provided by the speeches in the case of D. & F. Estates Ltd. v. Church Commissioners [1989] AC 177. A chart it may be, but, although it identifies some of the remaining dangers, it does not provide a complete navigational aid on how to deal with them.

15. The facts in D. & F. Estates Ltd. were that plaster on ceilings and a wall of a flat became loose and some it fell down. The defective plaster was stripped off and replaced. The tenant of the flat brought an action based on negligence against, inter alia, the contractor who had appointed a sub-contractor to do the plaster-work, claiming the cost of the remedial work and the cost of cleaning carpets and other possessions dirtied by the falling plaster. Their Lordships held that the loss sustained by the tenant in stripping and replacing the paster-work in the flat was purely economic loss, which was not recoverable in tort. Under the head of the cost of cleaning the carpet and other possessions, the tenant claimed £50 This seems to be the 'trivial sum' by way of damages that Lord Bridge (at page 208B) thought would have been recoverable by the tenant, but their Lordships found the contractor not liable on other grounds.

16. Lord Bridge decided not to review all the authorities bearing, directly or indirectly, on the question whether the cost of making good defective plaster in that case was irrecoverable as economic loss. He thought that they gave no clear or conclusive answer, and preferred to deal with the problem in the light of first principles.

17. He did, however, deal with the decision of the House of Lords in Junior Books Ltd. v. Veitchi Co. Ltd. [1983] 1 A.C. 520. His view was that this decision could not be regarded as laying down any principle of general application in the law of tort because of the 'unique' factors involved: But he quoted (at page 202C), with approval, from the speech of Lord Brandon, who referred to the principle laid down in Donoghue v. Stevenson [1932] A.C. 562

 

            ' ... 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. 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.'

18. Lord Bridge then (at pages 204 and 205) reviewed a 1986 unanimous decision of the Supreme Court of the United States, and held that this decision and the opinion of Lord Brandon in Junior Books were 'entirely in line' with the majority decision of the Supreme Court of Canada in Rivtow Marine Ltd. v. Washington Iron Works [1973) 6 W.W.R. 692 that the damages recoverable from the manufacturers by the hirers of a crane which was found to have a defect which made it unsafe to use did not include the cost of repairing the defect.

19. Lord Bridge (at page 206) went on to say -

             'These principles are easy enough to comprehend and probably not difficult to apply when the defect complained of is in a chattel supplied complete by a single manufacturer. If the hidden defect in the chattel is the cause of personal injury or of damage to property other than the chattel itself, the manufacturer is liable. But if the hidden defect is discovered before any such damage is caused, there is no longer any room for the application of the Donoghue v. Stevenson principle. The chattel is now defective in quality, but is no longer dangerous. It may be valueless or it may be capable of economic repair. In either case the economic loss is recoverable in contract by the buyer or hirer of the chattel entitled to the benefit of a relevant warranty of quality, but it is not recoverable in tort by a remote buyer or hirer of the chattel.

            If the same principle applies in the field of real property to the liability of the builder of a permanent structure which is dangerously defective, that liability can only arise if the defect remains hidden until the defective structure causes personal injury or damage to property other than the structure itself. If the defect is discovered before any damage is done, the loss sustained by the owner of the structure, who has to repair or demolish it to avoid a potential source of danger to third parties, would seem to be purely economic. Thus, if I acquire a property with a dangerously defective garden wall which is attributable to the bad workmanship of the original builder, it is difficult to see any basis in principle on which I can sustain an action in tort against the builder for the cost of either repairing or demolishing the wall. No physical damage has been caused. All that has happened is that the defect in the wall has been discovered in time to prevent damage occurring.'

20. After discussing the problems involved with a structure more complex than a garden wall, such as a dwelling house, and where the hidden defect causes damage to 'other property' - to which I will return later - Lord Bridge goes on (at page 207F) to say -

        `It seems to me that the cost of replacing the defective plaster itself ... was not an item of damage for which the builder... could possibly be made liable in negligence under the principle of Donoghue v. Stevenson or any legitimate development of that principle. To make him so liable would be to impose upon him for the benefit of those with whom he had no contractual relationship the obligation one who warranted the quality of the plaster as regards materials, workmanship and fitness for purpose. I am glad to reach the conclusion that this is not the law, is only for the reason that a conclusion to the opposite effect would mean that the courts [have gone much further than the effect of the Defective Premises Act 1972].'

21. Mr Pang relied greatly on the case of Anns v. Merton London Borough Council [1978] A.C. 728. Lord Oliver, who delivered the other speech in D. & F. Estates, analyzed the relevant passage in the speech of Lord Wilberforce in Anns. Lord Oliver extracted from that passage a number of points, which I summarise as follows -

22. Lord Oliver commented that these 'propositions involve a number of entirely novel concepts'. And it is clear that they were novel concepts not to his liking. At page 213F of D. & F. Estates Ltd., he says -

           '...so far as they [Lord Wilberforce's observations) concern such liability in respect of damage which has actually been caused by the defective structure other than by direct physical damage to persons or to other property, I am bound to say that, with the greatest respect to their source, I find them difficult to reconcile with any conventional analysis of the underlying basis of liability in tort for negligence. A cause of action in negligence at common law which arises only when the sole damage is the mere existence of the defect giving rise to the possibility of damage in the future, which crystallizes only when the damage is imminent, and the damages for which are measured, not by the full amount of the loss attributable to the defect but by the cost of remedying it only to the extent necessary to avert a risk of physical injury, is a novel concept. ... For my part, therefore, I think the correct analysis, in principle, to be simply that, in a case where no question of breach of statutory duty arises, the builder of a house of other structure is liable at common law for negligence only where actual damage, either to person or to property, results from carelessness on his part in the course of construction. [On the footing that individual parts of a building fall to be treated as separate and distinct items of property] damage caused to other parts of the building ... would ground an action but not for damage to the defective part itself except in so far as that part caused other damage, when the damages would include the cost of repair to that part so far as necessary to remedy damage caused to other parts.'

23. Lord Oliver held (at page 217A) that -

          'In the instant case the defective plaster caused no damage to the remainder of the building and in so far as it presented a risk of damage to other property or to the person of any occupant that was remediable simply by the process of removal. ... the cost of replacing the defective plaster is not an item for which the builder can be liable in negligence.'

24. Another case to which I was referred was Department of the Environment v. Thomas Bates 44 BLR 88, which proceeded to decision on the facts. In that case, the builder constructed pillars that, although sufficient to support the existing load, were not adequate to support the design load. The trial judge found that at no time did the weakness of the pillars give rise to 'imminent danger' to health and safety of employees or the public. Accordingly, it was not necessary for the Court of Appeal to decide if liability existed in a situation where the weakness of the pillars did present an imminent danger. However, Taylor LJ was clearly doubtful as to whether an action would have arisen even if there had been imminent danger. He describes a statement by Lord Oliver in D. & F. Estates Ltd. that may be read as supporting the proposition that an occupier can recover against a negligent builder in tort the cost of remedial work undertaken in advance of any physical damage to the building in order to avert imminent risk of physical injury to persons as 'at most luke-warm'.

25. What Lord Oliver said in this regard in D. & F. Estates Ltd. at page 216G was -

          '... in so far as [Anns] is authority for the proposition that a builder responsible for the construction of a building is liable in tort at common law for damage occurring through his negligence to the very thing which he has constructed, such liability is limited directly to cases where the defect is one which threatens the health and safety of occupants or of third parties and (possibly) other property.'

26. I agree that this statement, as read with other utterances by Lord Oliver, indicate that he is unhappy with the proposition. In any event, the proposition, in so far as it is founded on the dicta of Lord Wilberforce in Anns is obiter, and thus not binding on me.

27. It is fair to say that neither Nicholls LJ nor O'Connor LJ, the other two judges sitting in the Thomas Bates case would have been inclined to favour the claim, even if an imminent danger had existed.

28. In the more recent case of West Kent Cold Storage Co. Ltd. v. Hemmings & Co. Ltd., the judgment in which was reported in The Times of 13 November 1989, certain cold storage panels were alleged to be 'unsafe and unsatisfactory and unfit for the purpose for which they were required and were defective'. Judge Prosser sitting in the Queen's Bench Division found as a fact that there was imminent danger to the safety of occupants and third parties, and relied, in awarding to the plaintiff the expenses necessary to avert the danger, on the statement by Lord Oliver in D. & F. Estates Ltd. described by Taylor LJ as 'at most luke-support' for the proposition relied upon by the plaintiff Judge Prosser commented -

          'It would be absurd to suggest for the plaintiff to succeed in negligence it was necessary for the plaintiff to wait until damage or injury was actually caused before he could claim.'

29. Although the plaintiffs' statements of claim in the case before me do not expressly speak of imminent danger, and, indeed, it seems to have taken some years for anyone to realise the alleged condition of the electrical installation, I am prepared to accept that this allegation is sufficiently raised. If it were not so, simple amendments would cure any defect.

The Questions.

30. It seems to me that the questions that I have to decide in this matter are -

31. The thinking that would give a plaintiff a remedy to recover the money expended on repairing defects to remove an imminent danger has a superficial attractiveness. The apparent logic is reflected most succinctly in the statement by Judge Prosser that I have quoted above from the West Kent Cold Storage case. He suggested that it would be absurd to suggest for the plaintiff to succeed in negligence it was necessary for the plaintiff to wait until damage or injury was actually caused before he could claim.

32. On analysis, however, I do not know why this should be thought absurd. We all know that negligence that causes no damage - negligence in the air - is not actionable. That is elementary. What the Judge Prosser school of thought suggests is that a man who finds that he owns, or is in possession or control of, a imminently dangerous article or building may sue in negligence to recover the cost of rendering that article or building safe because if he did not do so, damage or injury may be caused, and damages in respect of that damage or injury could be recovered, although those damages would not, in the ordinary course, include the cost of remedying the original defects in the dangerous article or building. There is no authority binding on me to this effect, and I do not accept the proposition.

33. In D. & F. Estates Ltd., at page 211G, Lord Oliver said -

             '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, no doubt the negligent manufacturer is liable in tort on the ordinary application of Donoghue v. Stevenson. But if the tyre bursts without causing any injury other than to itself or if I discover the defect before the burst occurs, I know of no principle upon which I can claim to recover from the manufacturer in tort the cost of making good the defect which, in practice, could only be the cost of supplying and fitting a new tyre. That would be, in effect, to attach to goods a non-contractual warranty of fitness which would follow the goods into whosoever's hands they came.'

34. That analysis, in my respectful view, is impeccable in law and logic. Judge Prosser referred to this statement, but said that, in the case before him, the plaintiff was claiming, not 'as per the example of the tyre', but the cost of averting the threat of danger. I cannot see any distinction. If I discover the defect in my tyre before an accident occurs and I change or repair that tyre, the cost of doing so is the cost of averting the threat of danger. It is difficult to think of a more obvious example of this. And yet, clearly, as Lord Oliver says, the law does not allow me to recover that cost. Further, I could not recover the cost of a new tyre, or of repairing the existing tyre, if an accident giving rise to damage or injury did occur, whether or not I knew of the danger.

35. I do not see why this principle illustrated by the example of the defective tyre should not apply with equal force to a building. It is true that the danger being averted may be one that, if it materialised, would be more disastrous than in respect of an article, although not necessarily so, and the cost of averting the danger may be a lot greater, but I cannot accept that this makes any difference to the principle.

36. In only distinction in this regard that was mentioned by Lords Bridge and Oliver in the D. & F. Estates Ltd. case was that, with a complicated structure like a building, the other constituent parts can be treated as separate items of property distinct from that portion of the whole which has given rise to the damage. This, of course, would also apply to complicated things, like machinery, other than buildings, and, as Lord Oliver points out at page 212D, this approach would be no more than the ordinary application of the Donoghue v. Stevenson principle.

37. Perhaps, however, the clearest indication of the binding ratio in the D. & F. Estates Ltd. case is what the House decided to do in that case. The defective plaster concerned in that case created an imminent danger of falling; some of it had already done so. The falling of the plaster could have caused damage to other property or injury to the person. To avert that danger, it was necessary to repair the plasterwork, and yet the House held that the cost of effecting these repairs were not recoverable. In the case before me, it may be that the danger was greater, in the sense that the houses could have been burnt down and people might have lost their lives. It may also be that the cost of the averting the danger was a great deal more that replacing some plaster. But, it seems to me, that there is no legal or logical basis on which I am able to distinguish this case from what was decided in D. & F. Estates Ltd.

38. The other aspect of this case, that of the problem of complex structures mentioned above, is dealt with by Lord Bridge in the D. & F. Estates Ltd. case at page 206H. After dealing with the simple garden wall situation, Lord Bridge said -

          'I can see that more difficult questions may arise in relation to a more complex structure like a dwelling house. One view would be that such a structure should be treated in law as a single indivisible unit. On this basis, if the unit becomes a potential source of danger when a hitherto hidden defect in construction manifests itself, the builder, as in the case of the garden wall, should not in principle be liable for the cost of remedying the defect. ...

            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.'

39. Lord Bridge declined to offer any authoritative solutions, but said that he did not regard the Ann case as settling the matter. In the case before him, Lord Bridge decided that it would be artificial to treat the plaster as distinct from the decorative surface placed upon it.

40. It may very well be that, if, for example, the houses with which I am concerned were destroyed by a fire caused by the defective electrical installations, the plaintiffs would be able to recover damages in respect of the damage to the houses apart from the pre-existing defects to the electrical wiring on the basis that the houses, apart from the electrical installations, were 'other property'. But nothing like that happened in this case. No damage to one part of the structure of the houses has been caused by any hidden defect in another part to make it arguable, within Lord Bridge's analysis, that the damage may qualify to be treated as damage to 'other property'. In this case, any damage to 'other property' was caused, not by the hidden defect - or, more properly, the negligence giving rise to the hidden defect - but by the exercise undertaken to remedy the discovered defect. I know of no basis in law on which one could rest a claim to recover, for example, the cost of chipping away another part of the structure to get at the defective discovered electrical installation in order to render it safe, and the cost of making good that damage. That would be, in my judgment, to allow recovery for the cost of remedying the defects in the very thing said to be defective by reason of the fifth defendant's negligence. It would be no different, in principle, from the situation where a plaintiff seeks to recover the cost of purchasing a jack in order to remove a defective tyre.

The Result.

41. In the result, I find that the plaintiffs have not alleged any reasonable cause of action against the fifth defendant and the statements of claim, as against the fifth defendant, are struck out. Mr Pang has not suggested that, in this event, the plaintiffs' problems could be cured by amendment. It follows that the plaintiffs' actions against the fifth defendant should be dismissed and I so order.

The Costs.

42. On the face of it, there seems no reason why the plaintiffs should not pay the fifth defendant's costs of the action and these applications, and I make an order nisi accordingly