Europe Gas Turbines
NEGLIGENCE: NATURE OF DAMAGE: APPREHENSION OF DAMAGE IS NOT DAMAGE: ASSUMPTION OF RESPONSIBILITY: RECOVERABILITY OF ECONOMIC LOSS: NOT INCONSISTENT WITH CONTRACTUAL STRUCTURE
Where communications between claimants and defendants established that the defendants had assumed responsibility for the carriage of the generator on a suitably equipped trailer, the defendants were liable to the claimants for economic loss arising from the breach of this undertaking. Such liability was not inconsistent with the contractual structure established in this case, even though the result was that the defendants could not rely on contractual protections provided in the Hapag-Lloyd bill of lading, under which Hapag-Lloyd had carried the generator as sub-contractors to MSAS.
DMC Category Rating: Developed
In the event, the trailer used for the road haulage to Lincoln was conventionally sprung. As a result, the claimants were concerned lest the bearings of the generator had suffered vibration damage during the journey from Liverpool. The claimants contacted GE, who advised that the generator be sent to their European agents in Germany, where the generator would be stripped down and the bearings inspected. This was done in May 1991. Although no physical damage could be established, GE recommended that, to avoid any risk that damage might have occurred, all the bearings be replaced; unless this were done, their warranty would be withdrawn. The bearings were accordingly replaced. The claim for the costs incurred in this operation was thus one for ‘pure economic loss’.
The preliminary issues to be determined were therefore the following:
The MSAS defendants did not take part in the proceedings, having gone into liquidation.
On the second issue, the judge stated the general principles to be applied as
3 The governing principle relates to services, not just to the giving of advice. Once a case is seen to fall within the governing principle, there is no longer any need to justify the recovery of economic loss in terms of whether it is ‘fair, just and reasonable’, as might otherwise be required in the light of Caparo Industries Plc v. Dickman  2 AC 605.’
Applying those principles to the present case, the judge held that there was ‘the equivalent of a contract without consideration’ between the claimants and the Hapag-Lloyd defendants - based on communications between the claimants’ forwarding agents and the Hapag-Lloyd agents in Liverpool - by which the defendants undertook the safe carriage of the generator within the UK.
In answer to this the defendants had submitted that they were entitled to the protection of the bill of lading conditions and that those conditions were inconsistent with their liability under an assumption of responsibility for unlimited economic loss. The defendants had pointed out that the claimants had a perfectly good claim against MSAS in contract for the same losses as those claimed against them and that it would not be right, ‘simply because MSAS are no longer financially viable, that the principle of assumption of responsibility should be used to short-circuit the contractual structure put in place by the parties.’ The judge did not accept this argument. He did not find in this case ‘the presence of a contractual chain which would be inconsistent with an assumption of responsibility…. the safe carriage of this generator was in fact the responsibility of all the defendants. In my judgment, the claimants were entitled to sue [MSAS] under the contract and the [Hapag-Lloyd] defendants under the assumption of responsibility.’
He accordingly found in favour of the claimants.
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