Yuen Kun Yeu and Others v. Attorney General
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CACV000119/1985
Negligence - whether duty of care owed to depositors by Commissioner of Deposit-taking Companies under Cap. 328. Four depositors in a Deposit-taking Company issued a writ, indorsed with Statement of Claim, whereby they claimed against the Attorney General (for and on behalf of the Commissioner for Deposit-taking Co Companies) damages caused by the insolvency of the Company and by the Commissioner's failure to exercise the duty of care which, by reason of his office and of the provisions of the Deposit-taking Companies Ordinance he owed them at common law. The Attorney General moved to strike out the Statement f Claim pursuant to 0.18 r.19 of the R.S.C. and under the inherent jurisdiction, on the ground that it disclosed no reasonable cause of action. The application was successful. The plaintiffs appealed.
BETWEEN
________________ Coram: Sir Alan Huggins, V.-P., Fuad & Kempster, JJ.A. Dates of Hearing: 29 - 31 January, 3 and 4 February 1986 Date of Judgment: 7 March 1986 __________ JUDGMENT __________ Sir Alan Huggins, V.-P.: 1. This case raises difficult questions relating to the liability of a public officer for negligence in the discharge of his duties. The Attorney General is sued for damages under the Crown Proceedings Ordinance in respect of losses alleged to have been suffered by four depositors in America and Panama Finance Co. Ltd. (a deposit-taking company registered under the Deposit-taking Companies Ordinance) as a result of the company's going into liquidation. 2. The appeal before this court is against an order of Jones, J. under 0.18 r.19 striking out the Statement of Claim on the ground that it discloses no reasonable cause of action. The Statement of Claim alleged that prior to the dates on which the plaintiffs made their deposits it was, or should have been, apparent to the Commissioner for Deposit-taking Companies that this company was being run in such a manner that its collapse was imminent, and further alleged, in effect, that the Commissioner was therefore under a duty to take steps to protect the Plaintiffs against the alleged losses. The contention of the Attorney General, which found favour with the judge was that the Commissioner was under no such duty. 3. Mr. Litton, on behalf of the Plaintiffs, contends that it was not appropriate to strike out the Statement of Claim under 0.18 r.19, because it was not open to the judge to decide as a pure matter of law that the suggested duty of care did not exist: whether or not there was such a duty was a question of mixed fact and law and it could not be decided until the evidence had been heard: therefore it could not be said as a matter of law that the action must fail. The answer to that is that, although the existence of a duty of care is a question of mixed fact and law, on an application under 0.18 r.19 the judge is bound to assume the primary facts alleged in the Statement of Claim in favour of the Plaintiff. If on those assumed facts there is an arguable cause of action, the Statement of Claim will not be struck out. The Attorney General submits, however, that even when all the primary facts alleged here are assumed the circumstances are such that the Commissioner cannot be held liable to the Plaintiffs. The basis of that submission is that the Commissioner, even if negligent, owed no duty of care to the Plaintiffs and, alternatively, that the damage suffered by the Plaintiffs was such that the Commissioner should not be held liable to compensate for it. We were referred to Williams & Humbert Ltd. v W & H Trade Marks (Jersey) Ltd. 1986 2 W.L.R. 24, where the House of Lords approved the distinction drawn by Sir Nathaniel Lindley, M.R. in Hubbuck & Sons Ltd_. v Wilkinson 1899 1 Q.B. 86, 91 between the trial of a preliminary point of law and an application to strike out the Statement of Claim. Lord Templeman cited from the judgment of the Master of the Rolls where he said:
It may well be that the present case was more appropriate for the first method, but the matter was in fact fully argued below and before us and, as in the case before the House of Lords, no harm has been done. 4. I think the rest of Mr. Litton's argument can fairly be summarized as follows. He says that a public officer is not, solely by reason of his status as such, exempt from liability in negligence, and that, if the officer has been negligent, there may be circumstances in which an action does lie against him. Accordingly the proper approach is in the first instance to regard him like any other defendant and to inquire whether on general principles he is prima facie liable in damages. If he is, then the further question has to be asked, whether there are any considerations which, as a matter of public policy, ought to negative that liability because (1) the particular plaintiff is in a class of persons to whom he should not owe a duty, (2) the duty to that plaintiff should be limited in scope, or (3) the damages for breach of the duty ought to be limited. The Attorney General does not argue against this approach, but his case is that the Commissioner is not in such a relationship with the Plaintiffs that a prima facie liability arose and that even if that relationship did exist, there were good policy grounds for holding that his liability did not extend to compensate the Plaintiffs in the present case. 5. Mr. Litton's assertion that public officials as such are not exempt from liability is not disputed, nor could it be: there are numerous cases where they have been held to be liable, and Dorset Yacht Co. Ltd. v Home Office 1970 A.C 1004, which has figured so prominently in the argument, is one of them. 6. The summary of the rest of his case is based upon a passage in the speech of Lord Wilberforce in Anns v Merton London Borough Council 1978 A C. 728, 751F which has been constantly cited in subsequent cases and which appears to be one of the few relevant statements of principle which have been repeatedly followed:
I appreciate that in The Aliakmon 1985 2 W.L.R. 289, 305A Oliver, L.J, said
It is true that Lord Wilberforce did not suggest that his first question was a sufficient analysis of the duty of care: that was clear from his second question, which recognized that the scope of the duty might be negatived or limited. Nevertheless, without treating what Lord Wilberforce said as a statutory definition, I prefer to wait until the House of Lords holds that his exposition was, not appropriate for general application before departing from it. The Aliakmon was concerned with a casualty from which physical damage could and did result, although the cargo involved was not the property of the plaintiff: the plaintiff was merely a buyer to whom the bill of lading had been endorsed and delviered. Sir John Donaldson, M.R. thought that there was sufficient relationship of proximity or neighbourhood between the plaintiff and the defendant shipowner to raise a prima facie duty of care but that there were policy considerations, including the operation of the Hague Rules, which limited that duty. Goff, L.J., on the other hand, saw no good reason why the buyer should not have a direct cause of action against the shipowner in tort and based his decision upon the absence of any responsibility for storage on the shipowner under the time charter and therefore of any breach by the shipowner of its duty of care. I do not think they differed on the issue of proximity and for my part I respectfully build on Lord Wilberforce's statement as the foundation for my judgment. 7. Prima facie liability in negligence arises where the defendant is a "neighbour" of the plaintiff within the principle ennunciated by Lord Atkin in Donoghue v Stevenson 1932 A.C 562 and the loss in respect of which the claim is made is not too remote. The relevant passage in Lord Atkin's speech is at p.580:
Mr. Litton submits that the Commissioner comes well within that principle because it was obvious that, if he did not take steps which were open to him to prevent the company from carrying on its business in a fraudulent or reckless manner, loss of the Plaintiffs' deposits was readily foreseeable. The duty on him, it is said, was imposed by the statute, the preamble to which reads:
8. As I understand the Attorney General's argument, it seeks to alter the first stage of the inquiry by the addition of words which would make the necessary relationship of proximity or neighbourhood one where carelessness on the part of the Defendant would be likely not merely to cause damage to the plaintiff but to cause damage of the kind in fact alleged. On that basis he argues that the Commissioner was not in such a relationship of proximity that the Plaintiffs can succeed on the first stage of the inquiry. I am quite unable to accept that contention, it is to confuse the proximity of the relationship with the proximity of the damage which may be caused by the Defendant's negligence - the existence of a duty of care with the possible remoteness or irrecoverability of the damage which may flow from a breach of that duty. It is immaterial that since The Wagon Mound 1961 A.C. 388 an element of foreseeability must be present both to establish the duty and to bring the damage inside the area within which it must lie if compensation is to be granted: it is not the same element of foreseeability. 9. In Spartan Steel & Alloys Ltd. v Martin & Co. (Contractors) Ltd. 1973 Q.B. 27, 37 Lord Denning, M.R. said that he had difficulty in separating the cases on duty from those on remoteness of damage, and Oliver, L.J. cited that judgment in The Aliakmon at p.311. Lord Wilberforce recognized the difficulty introduced by the concept of foreseeability in McLoughlin v O'Brian 1983 1 A C. 410, 420F:
10. The Plaintiffs being persons who deposited money, they must have been within the contemplation of the Commissioner. Moreover, the loss (if any) which they will incur is the very loss which the Commissioner should have foreseen would be suffered if he were negligent: it was the only direct loss which the depositors as such could suffer, although they might also suffer remote damage as a result of a failure to repay the deposits. It was, of course, conceded that there was no duty on the Commissioner to take any specified action, but the argument is that the general duty to make provision for the protection of depositors required that this Company should not have been registered in the first place and, if registered, should not have been allowed to continue in business: at least the Commissioner should have considered the suspension or revocation of the company's licence. (I think this should be a reference to the revocation of the registration, since licences are issued not by the Commissioner but by the Financial Secretary: s.16B). Mr. Litton suggests that the apparent inaction of the Commissioner amounted in the circumstances to a total abrogation of his responsibilities and not to a mere error in the exercise of a discretionary power. Indeed, it created a trap to members of the public who might, in reliance upon an assumption that the Commissioner had satisfied himself as to the proper conduct of the Company's business, deposit money with it. He placed great reliance on Home Office v Dorset Yacht Co. Ltd. 1970 A C. 1004 and in particular on this passage from the speech of Lord Morris at p.1035G:
The facts of that case were that seven Borstal boys who had been taken to Brownsea Island in Poole Harbour escaped while the officers in-charge of them were asleep. They boarded a yacht which was moored in the vicinity. Having collided with a second yacht they boarded the second yacht, cast her adrift and caused her considerable damage. Lord Pearson said at p.1053F:
It was held that the Home Office was vicariously liable for the negligence of the officers in failing to prevent such interference. At p.1053G Lord Pearson further said:
He cited with approval the statement of Dixon J. in Smith v Leurs (1945) 70 C.L.R. 256, 262:
and he thought that the case before him fell under the exception and not under the rule, 'because there was a special relation". In the present case the duty of the Commissioner was not to "control" the company at all but to regulate and register deposit-taking companies generally. Accordingly the case comes under the rule, not the exception. I accept that a public official who, by his conduct, shows that he has totally abrogated his responsibilities so as to frustrate the objects of a statute may be said to be in breach of his "operational" functions as distinct from his "policy" functions, but there is no allegation of such abrogation of responsibility: on the contrary, it is common ground that the Commissioner did make some inquiries into the business of the company, and the allegation is that the Commissioner was negligent in not acting differently upon the information obtained In deciding whether there is a prima facie duty "to some extent the decision ...... must be a matter of impression and instinctive judgment as to what is fair and just" : per Lord Pearson in Home Office v Dorset Yacht Co. Ltd. 1970 A C. at 1054G. In my judgment a prima facie duty of care clearly arose in this case. I have had the advantage of reading Fuad, J.A 's detailed analysis of the provisions of the Ordinance and I do not think it necessary to say more than that the legislature clearly intended that the Commissioner should keep in mind the interests of depositors and the possibility of loss to them and that, in the words of Lord Morris in Home Office v Dorset Yacht Co. Ltd. at p.1034A, "the risk of such a happening was glaringly obvious". 11. I turn therefore to the second stage of the inquiry. This presents much greater difficulty, for it raises matters of policy, which, being based substantially on subjective opinion, inevitably introduce a large measure of uncertainty into the law. It has been said that public policy is an unruly horse and I make so bold as to suggest that the discussions on public policy in relation to the law of negligence have taken on the appearance of a judicial rodeo in which the bucking bronco has given many a judge an uncomfortable ride. 12. The policy reasons advanced by the Attorney General for denying depositors a cause of action against the Commissioner are summarized by him as follows.
13. In the course of the argument I think reason (a) was expanded to include "would-be depositors", and it was suggested that there was nothing to prevent anyone in the world with $50,000 to invest from becoming a depositor. Nothing can turn upon that, because in practice no question of actionable loss could arise until the plaintiff had made a deposit. Thus, even if a duty of care were owed to all the world, the only damage which could reasonably be in the contemplation of the Commissioner would be damage to actual depositors. I see no reason why the class of depositors should be regarded as too indeterminate: the depositors might vary from day to day but their names were readily ascertainable at any time. 14. The real debate revolves around the fact that the damage suffered by the Plaintiffs (if any) will be what is described as "pecuniary" or "economic" loss as distinct from physical damage to person or property. (I keep saying if any" because, until the liquidation of the company is complete, it will not be known for certain that the depositors cannot recover their deposits in full with interest - unlikely as that outcome may be.) It is accepted that in a sense all actionable loss is economic loss, but the Attorney General contends that the existence of physical damage is a prerequisite in any claim for damages. Here there is no physical damage: in the nature of things the loss suffered by the Plaintiffs is, and could only be, the diminution in value of a chose in action, their rights to recover their deposits with interest. Reliance is placed on this passage in the judgment of Oliver, L.J. in The Aliakmon 1985 2 W.L.R. 289, 311F:
In the event Goff, L.J. appears to have been less impressed by the fact that there was no physical damage to the property of the Plaintiffs. 15. Although cited in argument The Aliakmon was not referred to in the judgments in Muirhead v Industrial Tank Specialities Ltd. & others 1985 3 W.L.R. 993. That was a case where the Plaintiff, a fish merchant, engaged the 1st defendant to supply and install a tank for the storage of lobsters. The installation was to include electric pumps for the oxygenation of the water. The pumps were supplied by the 2nd defendant and were fitted with motors supplied by the 3rd defendant, which was treated as the manufacturer of the motors, although the motors had in fact been manufactured in France by the 3rd Defendant's parent company. The pumps proved to be unsatisfactory because the motors were not wound for the range of voltages found in the United Kingdom. As a result a large number of lobsters died. The judge held that the physical damage (i.e the death of the lobsters) was not foreseeable by the 3rd defendant but that the 3rd defendant should have foreseen the type of special damage in respect of which the plaintiffs claimed, namely:
He awarded damages under each of those heads but held that damages claimed for inconvenience and anxiety suffered by the plaintiff were too remote. The Court of Appeal held that damages for purely economic loss were recoverable only where the relationship between the parties was so close that the defendant should be taken as having voluntarily assumed direct responsibility to the plaintiff, a close relationship which did not exist in that case. This was an approach which the court felt compelled to adopt by the decision in Junior Books Ltd. v Veitchi Co. Ltd. 1983 1 A. C. 520 and I must therefore go on to consider what was the ratio decidendi there. 16. The pursuer was the owner of a site upon which a third party contracted to erect a building. The third party as main contractor nominated the defendant as sub-contractor to lay flooring. The flooring was completed but later began to show defects which were alleged to be due to bad materials or bad workmanship or both. The pursuer did not claim in contract against the main contractor but in delict against the defendant only. The damage alleged consisted of the estimated cost of repairs and several items of economic or financial loss. The defendant tabled a plea to the relevance of the pursuer's averments. In the course of his speech Lord Roskill said at p.545E:
He then referred to the two questions posed by Lord Wilberforce in Anns v Merton London Borough Council (supra) and head (1) that there was sufficient proximity and (2) that there was nothing whatsoever to restrict the duty of care which prima facie had arisen, nor any reason why the damages should be limited so as to exclude economic or financial loss. It will thus be seen that he did not cast aside the clear division which Lord Wilberforce had drawn between the two stages of the inquiry. He said at p.546F:
In view of the attempt which had been made-an attempt to which has been repeated in the present case - to treat Hedley Byrne & Co. Ltd. v Holler & Partners Ltd. 1964 A C. 465 as a special and isolated case, he added that the concept of proximity must, at least in most cases, involve some degree of reliance. (I also observe that at the end of his speech he clearly held reservations about some of the earlier cases.) The degree of reliance may, therefore, be an indicator of the existence or absence of the necessary proximity of relationship to establish a duty of care, but it does not seem to me to supply a good reason for excluding economic damage in a case where compensation for physical damage is allowed: that must depend upon remoteness of the damage or some other aspect of public policy. 17. Why, then, should economic damage necessarily be ignored where there is no physical damage - otherwise than on the ground of remoteness or some other reason of public policy? It is common ground that, on the facts, Baird v Reg. (1983) 148 D.L.R. (3d) 1 is the closest to ours. Mr. Litton contends that it is directly in point and argues that it is desirable that the courts in all the Common Law jurisdictions should advance in the same direction. The Attorney General submits that the Canadian Federal Court of Appeal wrongly analysed Anns v Merton London Borough Council and that the decision does not represent the law applicable in Hong Kong. The action was brought against the Crown for negligence and breach of statutory duty on the part of the Minister of Finance and Superintendent of Insurance in licensing, inspection and regulation under their Companies Act. The judge at first instance dealt with the case as a matter of ascertaining the intention of the Legislature. Le Dain J. (with whom the others agreed) said at p.9:
I adopt that as indicating the correct approach, although the constant repetition of, and emphasis on, the words "in a public law context'' during the argument before us leads me to say that the context does not alter the principles. The Court of Appeal held first that the financial condition and conduct of a controlling shareholder could conceivably be relevant to the opinion to be formed by the Minister of Finance whether the company was in a financial position to justify its transaction of the business of a trust company. That was relevant to the power of the Minister under s.71(2) to issue a licence to a company where the Minister was of opinion that the company was in such a financial position. As I understand it, the Attorney General's submission here is that, even though the financial condition and conduct of a controlling shareholder could conceivably be relevant to the Minister's opinion, that does not mean that the Minister could be held liable for issuing a licence where, as a result of his negligence, he formed the wrong opinion even less, in the present case, could the Commissioner be liable for failing to remove the America and Panama Finance Co. Ltd. from the Register. Secondly, the Federal Court of Appeal was not prepared to say that there might not be actionable negligence in the Superintendent's failing to report the improper practices alleged against the company and in his failing to request the company to dispose of, and realise, unauthorized investments. Again, as I understand it, the Attorney General argues that, however negligent the Superintendent may have been, it was wrong to say that he could be held liable for loss of moneys invested in associated companies, and he bases that argument (i) on the ground that there could be no recovery for purely economic loss and (ii) that the Superintendent ought not to have been held liable for any loss resulting from such negligence. 18. Having regard to the conclusion which I have reached as to the principle involved, I am driven to agree that Baird v Reg. ought not to be followed in Hong Kong. In the present case the damage which has resulted was, as I have said, the very damage which could be foreseen as a likely result of any negligent performance of the Commissioner's duties. It follows that, if liability is to be excluded, it must be on the basis of some factor other than remoteness, than the mere fact that the Commissioner was a public official and than the mere fact that the loss was economic. In the result I am of opinion that it should be excluded on the basis that the damage alleged was not of a kind for which the Commissioner should be required to pay compensation. The clue to the resolution of the problem seems to me to lie in the fact that the Attorney General has argued not simply for the exclusion of "pecuniary loss" but of "pecuniary loss arising from a commercial transaction". The purpose of the Deposit-taking Companies Ordinance was not to guarantee the financial stability of every registered deposit-taking company. It was conceded that if the Commissioner had given a direct undertaking to the Plaintiffs of the stability of the America and Panama Finance Co. Ltd. the position might be very different: it would come directly within the Hedley Byrne principle. The duty of the Commissioner towards the Plaintiffs was no different from that which he owed to everyone else. The damage which they suffered flowed as much from their own misjudgment of the company's stability as from the assumed negligence of the Commissioner. It is argued that the Plaintiffs were lulled into a sense of security by their knowledge of the existence of the Ordinance. Again, we must assume that they were - it is not impossible, because the advent of the welfare state has produced an attitude which looks to the state for protection against all the world's ills and regards self-responsibility as an anachronism. However, we have not yet in Hong Kong reached the stage where the existence of legislation under which a public official is appointed to regulate a trade in the interests of the consumer guarantees the consumer against loss. I appreciate that the Commissioner had means of knowledge - and, on the assumption which we are bound to make at this stage of the action, had actual knowledge - which the Plaintiffs did not have. Nevertheless, it was a matter of discretion what steps the Commissioner should have taken. He had to consider many factors, some of which we could enumerate but some of which would be known only to him there might be circumstances in which even a deposit-taking company which was found to be operated fraudulently should not be struck from the Register forthwith. Bearing in mind the warning of Lord Roskill in Junior Books Ltd. v Veitchi Ltd. at 1983 A.C 539D that there is a limit to the application of the "floodgates argument", I think it will not hinder the proper development of the law if we deny any general rule of exclusion of pecuniary loss caused by negligence but draw a line against allowing claims for such loss in cases where the loss has resulted as much from the plaintiff's own commercial misjudgment as from the defendant's failure to take action which was open to him in the performance of his public duties. 19. I would dismiss the appeal. Fuad, J.A.: 20. I have had the advantage of reading in draft the judgment just delivered by my Lord the Vice-President, and the judgment about to be delivered by my Lord Kempster J.A. Their review of the background of the appeal and the issues raised makes it possible for me move directly to addressing certain aspects of the issues before us, which seem to me to be important and, indeed, conclusive. Before doing so, I think it would be helpful to review the provisions of the Deposit-taking Companies Ordinance (Cap. 328) as shortly as may be, for it is upon its provisions that the appellants found their stand. The common law duty of care which they seek to invoke is vitally affected by the statutory environment within which the Commissioner of Deposit-taking Companies is required to exercise his powers and duties. 21. We are faced, as was Jones J., with a noval situation and, speaking for myself, I would have perfectly understood it, if at an early stage of the application to strike out, the Judge had declined to proceed further with the argument in view of the importance and difficulty of the issues, allowing the matter to go to trial. However he did not take this course and, as will be seen, I consider it possible to decide the crucial points of law raised on the assumption that all the assertions in the Statement of Claim are correct. 22. The Deposit-taking Companies Ordinance ("the Ordinance") was enacted in 1976 and has fairly frequently been amended. In its present form, the long title of the Ordinance is: "To regulate the taking of money on deposit and to make provision for the protection of persons who deposit money and for the regulation of deposit-taking business for monetary policy purposes." Section 3A appoints the Commissioner of Banking as the Commissioner of Deposit-taking Companies. The Commissioner is a member of the Deposit-taking Companies Advisory Committee established by s.4(1), whose functions under s.4(2) are "to advise the Governor on matters relating to [the] Ordinance." Unless the person or body taking deposits is exempted, only registered, or licensed, deposit-taking companies may carry on the business of taking deposits. 23. Except from certain persons or bodies specified, a registered D.T.C. may not accept as a deposit a sum less than $50,000. The lower limit for deposits with licensed D.T.C.s is $500,000 (s.8(1) and the First Schedule). 24. Part IV of the Ordinance provides for the registration of D.T.C.s. Section 9 deals with the form of the application for registration and the information which the applicant is required to furnish. Section 10(1) provides that the Commissioner must register the applicant company, subject to subsection (2) which sets out the circumstances in which he must refuse the application. This section does not, on its face, give the Commissioner any discretion, but paragraph (e) of subsection (2) of s.10 states that he must refuse to register a company: "if it appears to the Commissioner that by reason of any circumstances whatsoever, the company is not a fit and proper body to be registered." Section 12(1) requires the Commissioner to maintain a register of D.T.C.s which shall contain "such other particulars [as well as the name and business address of the D.T.C.] of such companies as the Commissioner thinks fit." Section 12(2) provides that the register must be kept in a place notified in the Gazette, and under subsection (3) any member of the public has access to it, and may obtain a copy or extract of documents lodged with the Commissioner when the application for registration was made, and of the annual accounts required to be lodged with the Commissioner under s.17. At least once a year the names of all registered D.T.C.s must be published in the Gazette. 25. The Commissioner is given power under s. 14(1) to revoke a registration in certain circumstances. One of the grounds upon which he may do so, is "if it appears that - the company is not a fit and proper person to remain registered." Under s.14(2) the Commissioner has power to revoke a registration, on request by the company "if he is satisfied that the interests of depositors .... are adequately safeguarded." 26. Part IVA deals with the licensing (by the Financial Secretary) of licensed D.T.C.s, who must obtain a licence before they commence business (s.16A & 16B). The Commissioner is required to enter the names etc. of licensed D.T.C.s in the register, which is open to inspection by the public (s.16D). Section 16F gives the Financial Secretary power to revoke their licences in certain circumstances. Under s.16F(2) the Financial Secretary has the same powers of revoking a licence, as has the Commissioner a registration, under s.14(2). 27. Part V of the Ordinance contains provisions relating to the obligations of every D.T.C.: it must lodge annual accounts (s.17); have a place of business in Hong Kong (s.17A); appoint as its chief executive a person normally resident in Hong Kong (s.17B); exhibit its accounts etc. at its place of business (s.18); notify certain changes to the Commissioner (s.19); report to him likely inability to meet its obligations (s.19A); and submit certain monthly and quarterly returns (s.20). 28. I will not refer to all the other obligations and restrictions imposed by the Ordinance upon D.T.C.s. However, under s.6(1D) a registered D.T.C. is not permitted to repay a deposit within three months of the deposit having been made, without the Commissioner's permission. They must maintain reserves in accordance with s.21A. There are restrictions on the payment of dividends (s.21B). They may not grant advances etc against the security of their own shares (s.21C). There are severe limitations imposed by s.22 in granting advances etc. (or in allowing them to remain outstanding) to certain persons and companies, including (by s.23A) their own employees. Limitations are placed upon their shareholding (s.23B) and upon their holding of interests in land (s.23C). Minimum holdings of specified liquid assets are insisted upon (s.24A). They must allow inspection of all their books etc. by the Commissioner's examiners (s.31B). Most of the obligations of D.T.C. s have the sanction of serious penalties upon conviction. 29. The Commissioner has power to require further information from D.T.C.s "as he may consider necessary for the proper understanding of the financial position of the company" (s.20(2)). He may require additional information about subsidiaries (s.20A). He may permit transactions otherwise prohibited by s.22 in certain circumstances (s.22(2) - (10).). He may restrain advances to foreign banks (s.22A); he may exercise his powers under s.22A, inter alia, if he is "of the opinion that the extent or manner in which such advances ..... have been made is not in the interests of the depositors ...." He may examine the books etc. of the D.T.C. at any time (s.31A). 30. The Commissioner may report to the Financial Secretary if it appears to him "that it is in the interests of depositors ..... or in the public interest..... that any inquiry should be made into the affairs of [the] company." The Financial Secretary may order an investigation (s.38) and petition for the winding-up of a D.T.C. (s.40), and he has certain other powers under the Ordinance. If the D.T.C. is a registered D.T.C., the Commissioner, if he considers that "urgent action is expedient", may suspend its registration for a limited period (ss. 45 and 4b). 31. The Governor has power, under s.3B to give certain directions to the Commissioner and the Financial Secretary which must be obeyed. 32. Section 25 contains provisions regarding official secrecy, and expressly excludes from its embrace (s.25(2)(e)) the disclosure of information by the Commissioner to the Financial Secretary, if the Commissioner thinks it is in the interests of depositors or the public interest" to make such disclosure. By s.25A, the Commissioner is also permitted, in certain circumstances, if he considers it is in the interests of the depositors so to do, to disclose information relating to a D.T.C. to appropriate authorities outside Hong Kong. 33. I will conclude my review of the main provisions of the Ordinance by noting that by an amendment made by Ordinance No. 66 of 1983, the following indemnity was inserted into the Ordinance (it is common ground that this new section has no relevance to the issues that are before us):-
34. Having regard to the nature of the duties of the Commissioner spread throughout the Ordinance, I am bound to say that, if the decision in this appeal turned on the simple basis of proximity, I would have no difficulty in reaching the conclusion that the necessary proximity existed between the Commissioner and the depositors, so that the answer to the first question posed by Lord Wilberforce in his two stage formulation in Anns v. Merton London Borough Council(1) in the passage, at pp. 751-752, which has been read by the Vice-President, would be answered in the depositors' favour. In the context of the financial scene of Hong Kong, the legislature has thought it necessary to control the activities of D.T.C.s and, by amending Ordinances enacted almost every year since the coming into force of the principal Ordinance, the legislature has sought to strengthen that control by imposing further obligations and restrictions upon D.T.C.s, and by giving additional powers to the Commissioner. Despite the other objects for which the Ordinance was passed, indicated by its long title, I do not consider that a fair reading of the statute can deny that it was the interests of depositors with which the legislature was primarily concerned: to protect depositors, so far as a regulatory statute can, from the risk of losing their money. In my judgment, a notional Commissioner cannot be heard to say that if he neglected his duties he could not reasonably foresee that they would be likely to suffer loss. But, as the cases show, this is not conclusive on the issue whether a duty was, or was not, owed. 35. I now return to address Lord Wilberforce's formulation in Anns v. Merton London Borough Council. (1) In my respectful judgment, the present state of the law does not require us to attempt to answer either of Lord Wilberforce's two questions without bearing in mind other considerations, laid down by authorities which bind this Court, or which are of high persuasive authority. I am emboldened to say this, in view of the speech Lord Keith of Kinkel in Peabody Fund v. Sir Lindsay Parkinson Ltd. (2) at p.240: "There is a tendency in some recent cases to treat these passages as being of themselves of a definitive character. This is a temptation which should be resisted." This note of warning was adverted to by Lord Frazer of Tyllybelton, giving the advice of the Privy Council in Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd.(3) (an appeal from New South Wales) at p.390. 36. I say all this because it seems to me that we are bound to consider whether the depositors are right in submitting that claims for "pure economic loss" have, once and for all been assimilated into the mainstream of the principles of negligence, so that the line of authority which restricts the recoverability of such loss has been rendered irrelevant. 37. I think it can safely be said that, historically, the law of tort did not recognise claims for pure economic or financial loss. An early case, often relied upon in subsequent decisions of the Courts, was Cattle v. Stockton Waterworks Ltd. (4) where a builder had contracted, by a "lump sum" contract, to build a tunnel under a road. He failed in his action for the additional costs he had incurred by reason of the delay caused by water percolating into the tunnel from a pipe owned by the defendants which had been fractured by their negligence. The cases that followed showed that it was taken as authority for the denial of a remedy for purely economic loss in tort to someone who had suffered loss of this kind as a result of damage to, or even the destruction of, a chattel in which he had no possessory or proprietary interest. 38. But in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. (5) the House of Lords recognised as valid a claim in negligence by a person who had suffered pecuniary loss through relying on false statements carelessly made, where the defendant had assumed responsibility for the advice, opinion or information which he had tendered to the plaintiff, in circumstances that the plaintiff could reasonably rely on the defendant's skill and judgment. There the plaintiffs asked their bankers to look into the financial stability of a company with which they contemplated having business dealings. When the bankers did this, the company's bankers carelessly gave favourable references about the company's financial standing. The plaintiff relied on these references and lost ￡17,000. They would have succeeded against the company's bankers but for the fact that the latter had expressly disclaimed responsibility for the information they had supplied. 39. It was in this case that Lord Devlin characterized as nonsensical the distinction that had been sought to be drawn between physical and economic loss, pointing out that where there had been damage or injury, no difficulty arose in claiming consequential economic loss. In the course of his speech he said, at p.517: "The interposition of the physical injury is said to make a difference in principle. I can find neither logic or common sense in this." These sentiments have been echoed in later cases. 40. Nevertheless, the special status of "economic loss" cases has persisted. An example is Weller & Co. v. Foot and Mouth Disease Research Institute. (6) There the defendant Institute negligently allowed virus to escape which infected cattle in the neighbourhood. The responsible Minister thereupon made a statutory order closing the local cattle market thus making it impossible for the plaintiffs (who were a firm of auctioneers at the market) to carry on their business. The plaintiffs' claim failed before Widgery J. (as he then was). He said, at p.587: "The decision in Hedley Byrne does not depart in any way from the fundamental that there can be no claim for negligence in the absence of a duty of care owed to the plaintiff......", and later, "What that case does not decide is that an ability to foresee indirect or consequential loss to another as the result of one's conduct automatically imposes a duty to take care to avoid that loss." On my understanding of the later authorities to which we have been referred, it cannot be said that Hedley Byrne wholly abolished the distinction between cases where pure economic loss alone is claimed and where such loss is claimed as a consequence of personal injury or physical damage. Two very recent cases (to which I shall have to return) show that this distinction still has some vitality: Leigh & Sillivan Ltd. v. Aliakmon Shipping Co. Ltd.(7) and Muirhead v. Industrial Tank Specialities Ltd.,(8) both cases in the Court of Appeal. 41. I think it can be said, too, of Junior Books Ltd. v. Veitchi Co. Ltd. (9) that although the House of Lords applied Anns v. Merton London Borough Council(1) their Lordships had in mind economic loss considerations. In that case the defendants were sub-contractors who had no contractual relationship with the plaintiffs. They laid a defective floor in a factory they were building for the plaintiffs, who were put to expense in re-laying the floor and suffered a loss of profit while the new work on the floor was being undertaken. The plaintiffs' claim was upheld by a majority. Although Lord Roskill firmly rejected the "floodgates" argument, Lord Frazer of Tulleybelton emphasized that the basis of his decision was on the facts. At p.533 he said:
42. Lord Roskill, at p.546, listed eight factors in the case which he regarded as being of "crucial importance" in deciding whether there was "the requisite degree of proximity so as to give rise to the relevant duty of care..." In his short concurring speech, Lord Russell of Killowen made reference to the "immediate proximity" of the parties. 43. In my opinion, although Junior Books enabled claims for economic loss to be made which would earlier have failed, it did not absolve the courts from taking into consideration other relevant factors in "pure economic loss" cases. I gain support for this view from the judgment of Robert Goff L.J. (as he then was) in Muirhead v. Industrial Tank Specialities Ltd. (8) where he said, at p.1107: ".... it is, I think, safest for this court to treat Junior Books as a case in which, on its particular facts, there was considered to be such a very close relationship between the parties that the defenders could, if the facts as pleaded were proved, be held liable to the pursuers." And Nourse L.J. had this to say, at p.1012:
44. In Leigh & Sillivan Ltd. v. Aliakmon Shipping Co. Ltd. (7) Oliver and Robert Goff L.JJ. (as they then were) reviewed many of the authorities to which we were referred. I say at once, and with great respect, that I have found their analysis of the cases of great assistance in reaching my decision in this appeal. In referring to the passage of Lord Wilberforce's speech in the Ann's case(1) at p.751, Oliver L.J. said at p.305:
45. I regard the following passage from Oliver L.J.'s judgment, at p.308, of particular importance:
46. In referring to the recoverability of economic loss not associated with damage to the plaintiff's property, at pp. 311-312, Oliver L.J. summarised the present state of the law, as follows:
47. Robert Goff L.J. was of the same view - at P.325 he said: "And so we have seen the development of the cases, not as a generalised right or recovery in negligence for economic loss, but of recovery in specific cases." And at P.326, occurs the following passage:
Further on, at p.327, Robert Goff L.J. added:
48. We are not bound by decisions of the English Court of Appeal, but as I have already indicated I have found the reasoning in the Aliakmon case very helpful and I respectfully adopt it. There is, in my view, guidance upon the issue to be found in the advice of the Privy Council in Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd.(3) an authority which, of course, does bind us. That was a case which decided whether a time charterer could recover damages for pecuniary loss caused by the damage to the chartered vessel by a third party. Lord Frazer of Tulleybelton, at p.385 described the issue as "one of fundamental importance in maritime law and in the law of negligence generally." At p.394, he had this to say:
49. Approaching the issues before us at "the second stage" as required by the last sentence of the passage I have just quoted, I turn to consider "whether there are any considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach of it may give rise ...." in an attempt to answer the second of Lord Wilberforce's two questions. 50. I start by noting that no case has been cited from any of the jurisdictions which make up the Commonwealth, so rich a source of authority, that has recognised the kind of claim made here. The Canadian case, Baird v. The Queen(10) certainly involved just such a claim, but it concerned an appeal to the Federal Court of Appeal from an order striking out a statement of claim, where no final decisions on the points of law raised were reached, for the action was remitted for trial. So we are faced, it can truly be said, with a novel action. 51. It seems to me that the situation revealed by the facts of this particular case as pleaded cannot be looked at in isolation, for if this claim is to be allowed, any principle upon which the decision is reached, will apply to many situations in the financial and commercial life of Hong Kong where a public officer is given powers and duties by regulatory statutes and subsidiary legislation. I may interpolate here that I do not think it to be a conclusive consideration that the legislature can always (as it has now done in respect of the Ordinance) limit, the liability of such officials by express provision. Similar cases might arise out of the Banking Ordinance (Cap. 155), the Commodities Trading Ordinance (Cap. 250), the Credit Unions Ordinance (Cap. 119), the Securities Ordinance (Cap. 333), the Insurance Companies Ordinance (Cap. 41) and the Travel Agents Ordinance 1986, to mention just some of the statutes that regulate activity in the financial and commercial field, in an effort to prevent or minimise loss to the public. 52. In my view it is right to bear in mind how indeterminate would be the class of persons who might have a cause of action in analogous circumstances if the present claim were to be recognised; a very wide field of potential liability would be opened up. I do not think that the legislature should be discouraged from doing what it can to promote and protect the interests of the public. This claim arises out of the loss of money from a commonplace financial transaction. I am mindful of the fact that the Statement of Claim, in the form in which it is proposed to be amended if the case goes on, avers that the depositors/ plaintiffs relied on the Commissioner's due performance of his duties, but I can see no reason why they should be allowed to pray in aid this alleged reliance. Surely it must be a commercial decision by an individual whether to put his money safely at sometimes low interest in a respectable bank or to go after higher interest in a D.T.C. The latter form of investment has, in it, an element of speculation. There is always a risk that a D.T.C. will fail for one reason or another however sensibly the Commissioner exercises his powers or performs his duties. He has no control over the extent of his resources. There is plenty of advice to be had in Hong Kong from professionals in the relevant fields. The Commissioner has no duty to advise or inform depositors. Although the Commissioner necessarily has, and can acquire, more information than a depositor about a D.T.C., a depositor (as I have sought to show by my review of the Ordinance) is free, for example, to examine the basic documents relied upon by the Commissioner when he made his decision to register a D.T.C., and also the D.T.C.'s annual accounts. He can find out what he can about the directors of the company. 53. I bear in mind what Lord Keith of Kinkel said, at pp.240-241 of his speech in Peabody Fund v. Sir Lindsay Parkinson Ltd. (2a):
54. In my judgment it would be neither just nor reasonable to hold that the Commissioner owed the depositors "a duty of care having the scope which is contended for". To admit this claim would, in my view, have overwhelming implications, and would be tantamount to making the Commissioner the D.T.C.'s guarantor, or the depositors' insurer, at the expense, ultimately, of the whole body of tax-payers, some of whom will have been more cautious, and have invested their money more securely, if less profitably. 55. I have reached the firm conclusion that as a matter of law, a statutory authority cannot be held liable in negligence for economic loss suffered by another as a result of the failure of a third party to meet his contractual obligations in a financial or commercial transaction, even if it can be shown that the authority has failed to perform statutory functions whose objects are to prevent or mitigate that type of loss. This, it seems to me, would be to impose a limitation or "control mechanism" upon common law principles governing liability for negligence in the public law context which can be readily understood and applied, and which would not lead to a capricious result. 56. In my view the only sanction depositors have against the Commissioner in respect of the alleged negligence pleaded is political, by harnessing public opinion; and, of course, the Commissioner is generally accountable to the legislature. 57. In the light of these conclusions, it is not necessary for me to examine the other issues raised by this appeal. I have no doubt that Jones J. was right to strike out the Statement of Claim, for neither principle nor authority justified the contention that a viable cause of action had been pleaded, and, for the reasons I have given, I would dismiss this appeal. (1) [1978] A.C. 728. Kempster, J.A.: 58. On 4th March 1985 four depositors in Panama Finance Co., Ltd. issued a writ, indorsed with Statement of Claim, whereby, in summary, they claimed against the Attorney General, for and on behalf of the Commissioner for Deposit-taking Companies, damages caused by the insolvency of the company and by the Commissioner's failure to exercise the duty of care which, by reason of his office and of the provisions of the Deposit-taking Companies Ordinance (Cap. 328) he owed them at common law. The Attorney General moved to strike out the Statement of Claim pursuant to Order 18 rule 19 of the Rules of the Supreme Court and under the inherent jurisdiction on the ground that it disclosed no reasonable cause of action. The application was successful. After a four day hearing Jones J. made the order sought on 9th July 1985. The plaintiffs appeal. Thus we find ourselves in the unwelcome but inescapable predicament of having to reach important conclusions of law in a developing and fluid area of tortious liability on hypothetical facts. Any determination we make will necessarily fall to be read in that context. On the other hand a decision on these points of law may be of value to a great number of potential litigants and to the Crown. 59. It is accepted that, if and on the assumption that an "agreed question" is susceptible of an answer at all on the basis of the facts alleged in the Statement of Claim and in proposed amendments, an affirmative answer will result in the appeal being allowed and the action being allowed to continue. Conversely a negative answer will result in the appeal and the action being dismissed. The "agreed question" is "Did the Commissioner owe a duty of care to the plaintiffs as depositors in the circumstances alleged in respect of the type of loss or damage claimed?" 60. The proposed Amended Statement of Claim runs to 39 pages of foolscap but the gravamen is that by statute the Commissioner was enjoined to have the interests of depositors and potential depositors in mind and given powers to protect them. He was required prudentially to supervise Panama Finance Co., Ltd. Upon all these considerations the plaintiffs claim to have relied in making their deposits. The Commissioner is alleged to have owed them a duty of care accordingly. Then it is alleged that, having been made aware as from 22nd September 1980, when it was registered, of Panama Finance Co., Ltd.'s under-capitalization, its suspect bona fides, its breaches of the terms of the ordinance and later of its fraud the Commissioner, in breach of his alleged duty of care, failed and neglected so to exercise, or to consider the exercise of, any of his powers as to revoke or suspend the company's registration before the plaintiffs made their respective deposits or, alternatively, to prevent its failure thereafter. The damage claimed is the loss of the several deposits made by the plaintiffs during 1982, being their life savings, together with interest. On analysis this means that their several choses in action became worthless or diminished in value. These are claims in tort for economic loss. 61. Jones J. accepted the submissions of the Attorney General that, prima facie, no duty of care is owed to prevent economic loss unrelated to injury to person or property even if foreseen; that the terms of the ordinance do not have the effect of creating proximity as between the Commissioner and depositors or potential depositors apt to satisfy the neighbour test postulated by Lord Atkin in Donoghue v. Stevenson (1) at pp. 581-2 and that considerations of public policy preclude the courts from allowing the plaintiffs relief in the circumstances. "It would lead" he held "to the opening of the flood-gates - " 62. The classic test postulated by Lord Atkin at PP.580 and 581 and referred to above was couched in these terms:
Clearly this duty was confined to the prevention of personal injury or damage to property. It was so generally understood for over fifty years albeit in Hadley Byrne v. Heller (4) the House of Lords allowed recovery for economic loss unrelated to personal injury or damage to property in circumstances where the representations of a party possessed of a special skill, which he accepts is relied upon by another, are made negligently to the other's detriment. Of Donoghue v. Stevenson (1) Lord Reid said, at p. 482:
Lord Morris made the more general observation at P. 509:
Salmon L.J. spoke to like effect in Ministry of Housing and Local Government v. Sharp (5) at p. 278. In Hedley Byrne v. Heller (4) itself, at P. 517, Lord Devlin expressed the opinion that no reasonable distinction was to be drawn between acts done or omitted and negligent statements. 63. In Anns v. Merton L.B.C. (6) at p. 760, having found the dissenting judgment of Laskin J. in Rivtow Marine v. Washington Mronworks(7) of "strong persuasive force" Lord Wilberforce stated that the plaintiffs' cause of action arose "when the state of the building is such that there is a present or imminent danger to the health or safety of persons occupying it"; thereby purporting to allow the recovery of moneys spent in preventing damage to person or property and mitigating the potential liability of the defendant. Lord Keith's speech in Junior Books v. Veitchi (8) at p. 535 was to like effect. However, as his speech in Anns v. Merton L.B.C. (6) proceeded, at p.759, Lord Wilberforce concluded that "the relevant damage is - material, physical damage." That was a case where the local authority, by its surveyors, was held potentially liable in damages to leaseholders in respect of maisonettes which had developed cracks due to failure properly to inspect the foundations. The test of proximity was satisfied by the duties imposed on the local authority by statute. 64. The first English case in which economic loss was held recoverable in a situation where the conditions for liability specified in Hedley Byrne v. Heller (4) were not met was Ross v. Caunters (9). There a beneficiary under a will recovered against a testator's solicitor the value of the benefits she had lost - or failed to gain - through the solicitor's failure to advise the testator as to the provisions of the Wills Act 1837. A duty of care was found to have been owed under the neighbour principle of Donoghue v. Stevenson (1). No question of reliance arose. 65. In the meanwhile recovery of economic loss had been allowed in Australia: Caltex Oil (Australia) Pty. V. The Dredge Willemstad (10). Two of the judges held that only plaintiffs who were specifically identifiable, as opposed to an indeterminate class, could recover damages caused them by the fracture of another's oil-pipeline and which was attributable to the defective navigation of a dredger operated by one defendant and to a defective chart prepared by another. The question had also thoroughly been examined in New Zealand: Bowen v. Paramount Builders (11). 66. The next English case to allow recovery for economic loss was Junior Books Ltd. v. Veitchi Co. Ltd. (8) the ratio decidendi of which effectively binds this court. It is of critical importance to establish what that ratio decidendi was and I do not believe that we can hide behind the anodyne formula "a decision on its own special facts". The supposed facts were that defendants laid a defective floor, which posed no present or foreseeable danger to person or property, in a factory being built for the plaintiffs with whom as nominated sub-contractors, they had no contractual relationship. They made no negligent misstatement as to its suitability. Economic loss was suffered by the plaintiffs in that they would be put to the expense of replacing the floor and sustain reduced profits meanwhile. By a majority the House of Lords held that the plaintiffs could recover these monies by way of damages and thus gave effect to the opinion which had been expressed by Lord Reid in Home Office v. Dorset Yacht Co. Ltd. (12) at p. 1026 to the effect that Lord Atkin's statement of principle in Donoghue v. Stevenson (1) "ought to apply unless there is some justification or valid explanation for its exclusion", but not to his view that economic loss was validly to be excluded. Lord Roskill at pp. 545-6 accepted the principles of the tort of negligence which had been enunciated by Lord Wilberforce in Anns v. Merton L.B.C. (6) at p. 751 and, in the light of the plaintiffs' reliance on the defendants' skill and knowledge, that the test of proximity was satisfied. In relation to policy he concluded:
Lord Fraser and Lord Russell agreed as, with some reservations, did Lord Keith. The only obstacle to recovery for economic loss postulated by Lord Russell which would not be surmounted on proof of the supposed facts before us is that of identification by the Commissioner of the potential depositors but in Candlewood v. Mitsui (13) at p.24 Lord Fraser explained:
He went on to suggest that it would matter not were the ascertained class large. 67. On the basis of the supposed facts before us the Commissioner is charged not with causing the financial collapse of Panama Finance Co., Ltd. but with failing to prevent such an eventuality or to suspend the company's registration. His position closely parallels that of the building inspectors in Dutton v. Bognor Regis U.D.C. (14) and Anns v. Merton L.B.C. (6) and also of the prison officers in Home Office v. Dorset Yacht Co. Ltd. (12). The neighbour principle necessarily imports a duty of care to prevent the occurrence of harm. Lord Atkin had referred to persons affected by omissions as well as by acts. 68. In Spartan Steel v. Martin & Co. (15) at p. 37 Lord Denning M.R., after considering a wealth of authorities, concluded:
Applying that test to the supposed facts before us and despite the submissions of the Attorney General that many organs of government might, by way of analogy, find themselves subject to claim for compensation were we to allow this appeal, I see no policy reason or reason in strict logic why damages, which, in general terms, the Commissioner must have foreseen would result from failure effectively to exercise his powers, should not be recoverable if the plaintiffs are able to demonstrate at trial that, far from concerning themselves only with the rate of interest offered or exercising personal judgment on the basis of generally available information, they indeed relied upon the Commissioner to protect their interests and that for no acceptable reason he failed so to do in the lamentable manner alleged. The Commissioner must, in any event, have appreciated that at least some depositors and potential depositors would be relying on the prudential exercise of his responsibilities. As Lord Russell said in Junior Books v. Veitchi Co. Ltd. (8) at pp. 539 and 545:
In my view the outcome of this appeal turns not on policy or logic but on the state of the law. 69. In Tate & Lyle v. G.L.C. (16) at p. 530 Lord Templeman, with whom Lord Keith and Lord Russell agreed, said:
With all respect this is true only in the sense that the floor had become part of the freehold. As Lord Brandon stated in Junior Books v. Veitchi Co. Ltd. (8) at p. 549:
To like effect Lord Fraser at p. 532, Lord Keith at pp. 534, 535 and 536 and Lord Roskill at pp. 538 and 545. While " - 'property' is not a term of art, but a common English word, which must be taken in an ordinary sense, and any ordinary person would certainly think it strange, if he were told that a debt due to him was not part of his property." [per Bramwell B. in Queensbury Industrial Society v. Pickles (17) at p.4.] A chose in action is not "property" in this context. What I understand Lord Templeman to have been emphasising was that a duty of care based on the neighbour principle has hitherto and properly been held to arise when and only when damage resulting from injury or from defects in tangible and physical property has been foreseeable. 70. The Attorney General has relied on several authorities in support of his submission that Junior Books (8) is to be understood in a more limited sense than may appear on first reading. One of those cases was Leigh and Sillivan Ltd. v. Aliakmon Ltd. (18) where Goff L.J. held that buyers of steel coils were unable to recover from shipowners damages to the goods sustained as a result of bad storage. His reasons were that storage was not the (vicarious) responsibility of the shipowners. Sir John Donaldson M.R. was of the opinion that although the necessary degree of proximity obtained as between the parties, special considerations, including the operation of the Hague Rules, precluded recovery while Oliver L.J. thought that foreseeability alone did not suffice to create a duty of care stating at pp. 374 and 382:
No well established line of decisions is available to guide us in the particular circumstances of the instant appeal. The supposed facts before us have given rise' to a novel claim but, as Lord. Wilberforce said in Anns v. Merton L.B.C. (6) at p. 751:
In that case, at p. 763, Lord Salmon said that it was:
Here it is impossible to think of anyone more closely and directly affected by the Commissioner's alleged dereliction of responsibility than depositors and potential depositors. 71. Another authority relied upon by the Attorney General was Candlewood v. Mitsui (13) to which I have already referred. That was a decision of the Privy Council on appeal from the Supreme Court of New South Wales holding that a time-charterer was not entitled to recover from the owner of a vessel which had negligently collided with the ship chartered loss deriving from its resulting unserviceability.
Per Lord Fraser at pp. 15 and 17. As regards Junior Books (8) he said, at pp.24 and 25:
72. Finally reliance was placed on Muirhead v. Industrial Tank Specialities Ltd. (20); a decision of the English Court of Appeal reached very shortly after that of the Privy Council in Candlewood v. Mitsui (13). One of the defendants had manufactured pumps used for the oxygenation of fish tanks in which reposed the plaintiff's lobsters. The pumps failed, the lobsters died and the plaintiff claimed damages for breach of the duty of care said to be owed him by the defendant in question. It was held that there had been insufficient reliance by the plaintiff on the defendant and insufficient proximity to give rise to a duty of care in respect of economic loss but sufficient to allow recovery for the damages to and death of the lobsters and for the loss that resulted from such physical damage. In effect the court held that more exacting criteria are required to establish a duty in respect of economic loss unrelated to physical or material damage as compared with the criteria required to establish a duty when those factors are present. Robert Goff L.J. concluded at p. 1007:
Nourse and O'Connor L.JJ. agreed and emphasized the requirements of close proximity and reliance. 73. For my part I accept as the ratio decidendi of Junior Books (8) the proposition that when a plaintiff is shown, by the application of the neighbour principle, to be so closely proximate to the defendant that the defendant must have realised that the plaintiff relied or would rely upon his knowledge or skill in relation to tangible and physical property the plaintiff can recover economic loss which, by reason of the defendant's failure to use such knowledge or skill and of consequent defect in the property, he has suffered. Applying that proposition to the supposed facts before us - whether or not the draft amended pleading explicitly avers each relevant factor; to the provisions and effect of the Ordinance, already carefully analysed by Fuad J.A., and to the "agreed question" I conclude that the test of proximity fails because no knowledge or skill in relation to tangible and physical property was relied upon. The other requirements are apparently satisfied. In consequence the Commissioner would, were the supposed facts established, not be held to have owed the plaintiffs a duty of care as depositors in the circumstances alleged in respect of the type of loss or damage claimed. 74. For these reasons I too would dismiss this appeal.
(1) [1932] A.C. 562 7th March 1986 Sir Alan Huggins, V.-P.: 75. We make an order nisi that the Respondent have the costs of the appeal. Legal Aid taxation. 7th March 1986 Representation: Mr. Henry Litton, Q.C., and Mr. Nicholas Pirie (Director of Legal Aid) for the Appellants. Mr. Michael Thomas, Q.C., Attorney General, and Mr. S.M. Gannon for the Respondent. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||