Junior Books Ltd v Veitchi Co Ltd

A nominated specialist sub-contractor may owe a building owner a duty of care in delict even without a contract, where the relationship is exceptionally close and the owner relied on the sub-contractor’s skill. In such a case, the duty may extend beyond avoiding danger to persons or other property and may cover foreseeable economic loss caused by negligent work.

The House of Lords held, by majority, that the pursuers’ averments about a defective factory floor were relevant for inquiry. The case was treated as an exceptional one, marked by close proximity, reliance, and the defenders’ responsibility for the composition and laying of the flooring. The appeal was therefore dismissed and proof before answer allowed.

The respondents owned a factory built under a main contract. The appellants were nominated specialist sub-contractors engaged to lay magnesium oxychloride flooring in the production area. There was no contract between the respondents and the appellants, but the respondents averred that their architects relied on the appellants’ specialist skill.

After completion, the floor developed widespread cracking and some areas lifted from the concrete base. The respondents claimed the cost of replacement and consequential business losses, alleging negligent workmanship in mixing, laying, and curing the floor surface.

The Lord Ordinary allowed a proof before answer. The Second Division refused a reclaiming motion and adhered to that interlocutor. The central issue before the House of Lords was whether, despite the absence of contractual privity and the absence of averred danger to persons or other property, the appellants could owe a delictual duty covering the claimed economic loss.

Held

1. Appeal dismissed by a majority. Lord Roskill delivered the leading speech. Lord Fraser of Tullybelton and Lord Russell of Killowen agreed with him. Lord Keith of Kinkel also dismissed the appeal, but on a narrower basis. Lord Brandon of Oakbrook dissented and would have allowed the appeal.

2. Per Lord Roskill, applying the proximity approach stated in [1978] AC 728 and earlier authorities, the appellants owed the respondents a duty of care. The relationship was exceptionally close. The appellants were nominated specialist sub-contractors. They alone were responsible for the composition and laying of the flooring. They knew the respondents would rely on their skill and that negligent work would foreseeably require the respondents to spend money on remedial measures.

3. On the majority view, that duty was capable of extending to foreseeable economic loss. The absence of privity did not prevent liability in delict. The House rejected the contention that negligence liability was confined to cases involving personal injury, damage to other property, or imminent danger of such damage. In an exceptional case of close proximity and reliance, a claim for the cost of remedying defective work and its direct financial consequences was relevant.

4. Lord Keith concurred more narrowly. He held that the pleadings were relevant because they could be read as averring continuing economic loss from the costly maintenance of the defective floor and reduced profitability of operations. Expenditure on relaying the floor could therefore be recoverable as reasonable mitigation or avoidance of that foreseeable loss. He did not accept a broader proposition that the defective floor itself amounted, without more, to physical damage to property within [1932] AC 562.

5. Lord Brandon dissented. In his view, the duty recognised by [1932] AC 562 remained confined to avoiding danger of physical injury to persons or other property. Since the pleadings contained no averment of such danger, he considered the claim irrelevant and contractual in substance.

6. Order. The interlocutor allowing proof before answer stood. The action was allowed to proceed to inquiry on the facts.

• House of Lords: appeal by the defenders dismissed on 15 July 1982. The House upheld the interlocutor allowing proof before answer.
• Second Division, Court of Session: on 1 September 1980 the reclaiming motion was refused, and the interlocutor of the Lord Ordinary was affirmed.
• Lord Ordinary: on 22 November 1979 Lord Grieve refused the defenders’ general plea to relevancy in hoc statu and allowed a proof before answer.