Simaan General Contracting Co v Pilkington Glass Ltd (No 2)

Pure economic loss may be recoverable in negligence, but foreseeability alone does not create a duty of care. In a case analogous to negligent misstatement, liability depends on a voluntary assumption of responsibility towards the claimant and a resulting special relationship.

A manufacturer does not ordinarily owe a main contractor a duty to prevent economic loss caused solely by goods failing to conform to their contractual quality or description. Such a duty is especially inappropriate where the parties deliberately arranged a contractual chain providing remedies at each stage. A claimant seeking recovery for loss caused by damage to property must also have owned or possessed that property when the damage occurred.

Pilkington Glass Ltd supplied double-glazed units to a subcontractor for incorporation into the curtain wall of a building in Abu Dhabi. Simaan General Contracting Co, the main contractor, had no contract with Pilkington. The units allegedly displayed inconsistent colours, contrary to the specification and sample, but remained serviceable and had suffered no physical damage.

The building owner withheld money from Simaan. Simaan sued Pilkington in negligence for that economic loss rather than pursuing its contractual remedy against the subcontractor. Judge Newey QC, sitting as an Official Referee, determined a preliminary issue in Simaan's favour by holding that Pilkington owed the asserted duty of care.

Pilkington appealed. The central issue was whether a nominated supplier had assumed responsibility to a main contractor for economic loss caused by non-damaging defects in the quality of goods, despite the absence of any direct contract, reliance or proprietary interest.

1. Appeal allowed unanimously. Bingham LJ, with whose judgment Dillon LJ and the Master of the Rolls agreed, held that Pilkington owed Simaan no duty to take reasonable care to prevent the alleged economic loss. The preliminary issue was answered in the negative and judgment was entered for Pilkington.

2. A negligence claim may in principle recover economic loss without personal injury or property damage. [1964] AC 465 established that possibility. Foreseeability alone, however, does not create a duty. In a case of that kind the necessary special relationship depends on the defendant's voluntary assumption of responsibility towards the claimant.

3. Simaan had not meaningfully relied on Pilkington, and Pilkington had not assumed direct responsibility to it. Simaan required its subcontractor to purchase Pilkington glass because the main contract obliged it to do so. There were no technical dealings between Simaan and Pilkington. A direct responsibility was also inconsistent with the deliberately arranged chain of contracts.

4. [1983] 1 AC 520 was confined to its exceptional facts, including the very close relationship between a building owner and its nominated specialist subcontractor. Bingham LJ treated the later authorities as binding the court to regard that case as involving physical damage. Dillon LJ considered that its extensively disputed reasoning was no longer a useful guide to development of the law.

5. The glass had suffered no physical damage. Its colour represented, at most, non-compliance with contractual conditions concerning description, sample, merchantability or fitness. If damage had occurred, it occurred during manufacture while Pilkington owned the units. Simaan therefore had no legal or possessory interest in the property at the relevant time.

6. It was neither just nor reasonable to impose the proposed duty. The owner, main contractor, subcontractor and supplier each had remedies through the normal contractual chain. A direct tortious claim would disrupt the allocation of liability, exemptions and risk negotiated at each stage, create overlapping proceedings, and complicate the assessment of damages. No gap in the law required a tortious remedy.

1. Court of Appeal: Pilkington's appeal was allowed unanimously. The preliminary issue was answered in the negative, judgment was entered for Pilkington, and leave to appeal to the House of Lords was refused.
2. Official Referee: Judge Newey QC had determined the preliminary issue in Simaan's favour, holding that Pilkington owed the asserted duty of care.