Muirhead v Industrial Tank Specialities Ltd

A manufacturer may owe a duty of care where the intended use of its product and the risk of physical damage are reasonably foreseeable. Liability for pure economic loss remains restricted. Junior Books is confined to cases involving a very close relationship and reliance, such as a nominated subcontractor’s direct responsibility to a building owner. An ultimate purchaser of ordinary goods bought through commercial intermediaries ordinarily looks to the immediate vendor for economic loss caused by defects. Physical damage is assessed by reference to damage of the relevant type, rather than the precise extent or speed of the loss. Foreseeable negligence by another person does not remove liability unless it is a wholly independent intervening cause.

Robert Muirhead operated a lobster-storage business using pumps installed by Industrial Tank Specialities Ltd. The pumps incorporated electric motors manufactured by Leroy Somer Electrical Motors Ltd and supplied through several commercial intermediaries. The motors repeatedly cut out because they were unsuitable for United Kingdom voltage levels, causing loss of lobsters and consequential financial losses.

The trial judge found Leroy Somer negligent and liable in negligence, although there was no contract between Leroy Somer and Muirhead. The claim against ITT (UK) Ltd was dismissed. Leroy Somer appealed liability, and Muirhead served a respondent’s notice challenging the finding that physical damage to the lobsters was unforeseeable. The central issues were liability for pure economic loss and the proper approach to foreseeability of physical damage.

1. Appeal allowed in part. Leroy Somer was not liable for the respondent’s pure economic loss, but was liable for physical damage to the lobsters and financial loss consequential on that physical damage.
2. Pure economic loss. The majority speeches in Junior Books Ltd v Veitchi Co Ltd were treated as a decision confined to its particular facts. Its significance lay in the very close relationship between the parties and the reliance which supported a direct responsibility akin to contract. Those features were absent here. Muirhead relied on Industrial Tank Specialities to select and install the equipment, and was several contractual stages removed from the motor manufacturer. The claim for losses such as replacement costs and lost profits therefore fell within the ordinary purchaser-manufacturer rule, under which the purchaser must look to the immediate vendor.
3. Physical damage. The proper question was whether physical harm to fish kept in tanks, caused by failure of circulation and oxygenation pumps, was reasonably foreseeable. It was unnecessary that the manufacturer should have foreseen the precise loss of the whole stock or the rapidity with which the lobsters died. Once the intended use of the pumps to preserve fish life was foreseeable, physical harm from motor failure was also foreseeable.
4. Negligence by a supervisor in failing to discover a pump failure would not be a complete defence unless it constituted a wholly independent novus actus interveniens. No such intervening cause existed.
5. The court also concluded, if contractual terms were relevant, that the manufacturer’s acknowledged terms excluded consequential damages and unauthorised replacement expenses. That issue did not arise for decision because the economic-loss claim failed in any event.

• Court of Appeal: Allowed the appeal in part. The appellants were liable only for physical damage to the lobster stock and consequential financial loss. The appellants received half their costs; leave to appeal to the House of Lords was refused.
• High Court, Queen’s Bench Division: Mr Justice Kenneth Jones found Leroy Somer liable in negligence for the claimed heads of economic and physical loss, while dismissing the claim against ITT (UK) Ltd.