1. [1932] AC 562.

2. Ibid at 619.

3. [1982] 3 WLR 477.

4. Lord Fraser, Lord Russell and Lord Roskill, Lord Brandon dissenting. The compromise view of Lord Keith will be noted below.

5. J. C. Smith and Peter Burns ‘Donogue v Stevenson - The Not So Golden Anniversary’ (1983) 46 MLR 147 at 153.

6. B. A. Hepple, ‘The All England Law Reports Annual Review 1982’, at 305.

7. [1964] AC 465.

8. Post, pp 316–320.

9. See eg A. C. Billings & Sons Ltd v Riden [1958] AC 240; Sharp v E. C. Sweeting & Son Ltd [1963] 1 WLR 665; Voli v Inglewood Shire Council (1963) 110 CLR 74; Rimmer v Liverpool City Corpn [1984] 1 AII ER 930.

10. [1972] 1 QB 373.

11. See eg Dutton v Bognor Regis UDC, supra, at 396; Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 394 at 410, 417, 423; and note Riutow Marine Ltd v Washington Iron Works (1974) 40 DLR (3d) 530 per Laskin J at 548.

12. [1978] AC 728.

13. Ibid per Lord Wilberforce at 759; Dennis v Charnwood Borough Council [1982] 3 WLR 1064.

14. Bowen v Paramount Builders (Hamilton) Ltd, supra. Note that Richmond P thought that the cost of repairs actually incurred to prevent threatened damage were recoverable (at 414) whereas Woodhouse and Cooke JJ both thought that such costs were recoverable whether or not the work had actually been carried out (at 418, 425).

15. This is implicit in Anns' case although physical damage had in fact occurred there and Lord Wilberforce was careful to say that the court was not concerned with any issue relating to remedial action (supra, at 760). Anns was applied in Batty v Metropolitan Property Realisations Ltd [1978] QB 554 where the plaintiffs house had suffered no damage at all at the time of action but the expert evidence was that the house would within the next 10 years slip into a nearby valley.

16. Tort (11th edn, 1979), at 83.

17. [1979] 2 NZLR 234.

18. Bowen was regarded as having laid down this principle although, as noted above, the court in fact seemed to regard the owner as suing on account of physical damage.

19. This distinction is drawn in Fleming The Law of Torts (6th edn, 1983), at 166.

20. [1982] 3 WLR 478 at 481.

21. Ibid. at 487. Lord Russell agreed with the speeches of both Lord Fraser and Lord Roskill: Ibid, at 483.

22. Ibid, at 497. Lord Keith, although one of the majority, seemed to regard the respondent as having suffered a species of consequential loss and only on this basis was he prepared to allow recovery. His Lordship drew attention to the respondents' averment that the cost of maintaining the floor was heavy and that it necessarily followed that the respondents' manufacturing operations were less profitable and that they were therefore suffering economic loss. The expenditure incurred in order to avert or mitigate such loss, perhaps by relaying the floor, was the measure of the appellants' liability. In his Lordship's opinion this analysis of the situation served to distinguish the case from the one in which the respondents simply complained that they had got a bad floor instead of a good one (ibid, at 48–86). The distinction drawn here is surely untenable. The need to repair arose simply from the defective state of the floor. Would a householder with such a floor have no claim because he had not suffered any such ‘consequential’ loss?

23. Backhouse v Bonomie (1861) 9 HLC 503. In equity, quia timet injunctions may be granted against apprehended or threatened wrongs which have not yet been committed. The Chancery Amendment Act 1858, s 2 (UK) (Lord Cairns' Act) confers jurisdiction in equity to award damages in addition to or in substitution for an injunction and in Leeds Industrial Co-operative Socieg v Slack [1924] AC 951 the House of Lords held that damages under the Act could be awarded in lieu of a quia timet injunction even though no damage had occurred at the time of the hearing. Lord Cairns' Act applies in New Zealand and has been adopted by legislation in Australia and Canada.

24. It is well established that a single act may violate two separate interests protected by the law and may thus give rise to two causes of action. See Brunsden v Humphrey (1884) 14 QBD 141. Cf Cahoon v Franks (1968) 63 DLR (2d) 274.

25. [1982] 3 WLR 477 at 494.

26. [1964] AC 465.

27. Ibid, at 528–529.

28. Supra, at 495.

29. This is made apparent in many of the building cases from Dutton onwards. See, in particular, Stieller v Porirua City Council [1983] NZLR 628.

30. [1983] NZLR 22.

31. See eg Dimond Manufacturing Co Ltd v Hamilton [1969] NZLR 609; Toromont Industrial Holdings Ltd v Thorne (1975) 62 DLR (3d) 225; Haig v Bamford (1977) 72 DLR (3d) 68; Scott Group Ltd v McFarlane [1978] 1 NZLR 553; Yianni v Edwin Evans & Sons [1982] QB 438; Cantwell v Petersen (1983) 139 DLR (3d) 366; J.E.B. Fasteners Ltd v Marks, Bloom & Co [1983] 1 AII ER 583; Allied Finance Ltd v Haddow & Co, supra.

32. [1970] 2 QB 223; noted (1971) 34 MLR 317.

33. (1976) 136 CLR 529; cp Millar v Candy (1981) 38 ALR 799.

34. Ross v Counters [1980] Ch 297; Whittington v Crease (1978) 88 DLR (3d) 353; Tracy v Atkins (1979) 11 CCLT 57; Watts v Public Trustee for Western Australia [1980] WAR 97; Gartside v Sheffield, Young and Ellis [1983] NZLR 37. In Seale v Perry [1982] VR 193 (noted (1983) 99 LQR 346) the Full Court of the Supreme Court of Victoria denied any duty in these circumstances. McGarvie J put this on the basis of the binding authority of the decision of the House of Lords in Robertson v Fleming (1861) 4 MacQ 167. Lush and Murphy J J gave a number of reasons for holding that a solicitor owed no duty in this particular type of case. One of these was that to allow the disappointed beneficiary to recover damages would be to circumvent the rules of privity of contract by allowing the plaintiff in effect to sue on the contrac: between testator and solicitor, to which he was not a party. The validity of this contention is examined post, p 324. Apart from this, however, their Honours also regarded with suspicion some of the recent developments concerning the recovery of negligently inflicted financial loss.

35. Schiffahrt v Chelsea Maritime Ltd [1982] 2 WLR 422 (damage to property belonging to another but being carried at plaintiff's risk); The Nea chi [1982] I Lloyd's Rep 606; Hofstrand Farms Ltd v R (1982) 131 DLR (3d) 464; Baird v R (1983) 148 DLR (3d) 1; Moorgate Mercantile Co Ltd v Twitchings [1976] QB 225 per Lord Denning MR at 239. [1977] AC 890 per Lord Salmon at 908. In L. Shaddock & Associates Pty Ltd v Parramatta City Council (1981) 55 ALJR 713 both Gibbs CJ and Mason J viewed Ministry of Housing and Local Government v Sharp with approval (at 717, 723).

36. Seale v Perry, supra; Balsamo v Medici [1984] 2 AII ER 304. (Plaintiff owner of vintage car arranged with first defendant to sell car by auction and pay proceeds to relative of plaintiff. First defendant asked second defendant, who was unaware of plaintiff's existence, to collect money and give to relative as instructed. Second defendant negligently paid money to rogue. Held Plaintiff's only cause of action was against first defendant to account for proceeds of sale. Sed quaere.)

37. [1983] 2 NSWLR 268; cp Meates v Attorney-General [1983] NZLR 308.

38. Ibid, per Hutley JA at 286, Glass JA at 308–309 and Mahoney JA at 329–330.

39. Ibid, per Hutley JA at 286–287, Mahoney JA at 332–333. Glass JA relied on this argument at least insofar as the plaintiff's claim was based on the defendant's adherence to the plan and failure to warn the plaintiff's after they knew that it would have to be abandoned (at 313–314). See, further, Wellbridge Holdings Ltd v Metropolitan Corpn of Greater Winnzpeg (1970) 22 DLR (3d) 470 (Sup Ct of canada).

40. Ibid, per Glass JA at 299, Mahoney JA at 328.

41. Thus Glass JA required that there be actual knowledge of the plaintiff as a specific individual and that the harm be probable rather than possible; ibid, at 298, 302.

42. Ibid, per Glass JA at 300, Mahoney JA at 328.

43. An appeal has been lodged.

44. Supra, n 35.

45. Lord Fraser specifically left the point open: supra, at 483.

46. For recent examples see Sutherland Shire Council v Heyman [1982] 2 NSWLR 618; Stieller v Porirua City Council [1983] NZLR 628; Nielson v City of Kamloops (1982) 129 DLR (3d) 111; and note Rutherford v Attorney General [1976] 1 NZLR 403 per Cooke J at 412.

47. Supra, at 493.

48. Supra, at 493–494.

49. This was the argument which appealed to the majority in the decision of the Supreme Court of Canada in Rivtow Marine Ltd v Washington Iron Works (1974) 40 DLR (3d) 530.

50. Supra, at 499–500.

51. Supra, at 500. See also, Young & Martin Ltd v McManus Childs Ltd [1969] I AC 454 per Lord Pearce at 469.

52. Supra, at 483.

53. [1977] 1 NZLR 394 at 407, 419. See, also, Voli v Inglewood Shire Council (1963) 110 CLR 74 per Windeyer J at 85.

54. Supra, at 486.

55. (1968) 122 CLR 556 at 570.

56. [1981] 3 WLR 843, esp at 859–860.

57. Supra, at 495.

58. Lawrence v Fox 20 NY 268 (1859) is generally credited with making the decisive break from UK doctrine. A number of States have enacted statutes to the same effect.

59. Robins Dry Dock & Repair Co v Flint 275 US 303 (1927).

60. Seaboard Construction Co v Continental Mortgage Investors Inc 298 F Supp 519 (1969).

61. Compare HR. Moch Co v Rensselaer Water Co 247 NY 160 (1928) (Contract to supply a given amount of water pressure to a city is not for the benefit of property owners) with La Mourea v Rhude 295 NW 304 (1940) (Promisor agreed to be liable for damages done to the work or other structure or public or private property and injuries sustained by persons).

62. Ridder v Blethen 166 P 2d 834 (1946).

63. Calamari and Perillo, Contracts (West Publishing Co, 1977) at 611.

64. See eg Ratzlaff v Franz Foods 468 SW 2d 239 (1971) (violation of contract not to oversaturate city's sewage system gives cause of action for pollution of a stream running through plaintiffs property); Blair v Anderson 325 A2d 94 (1974) (federal prisoner kept in a Delaware State prison under a contract between the State and the United States is a third party beneficiary of that contract, permitting him to recover for injuries suffered in an assault in the prison); St Joseph Light & Power Co v Kaw Valley Tunneling Inc 589 SW 2d 260 (contract between City of St Joseph and defendant contractor for construction of sewer tunnel gave cause of action to plaintiff power company for buildings damaged in the course of the work).

65. Restatement, Contracts (2d) s 142(1)–(3). See Sears, Roebuck & Co v Jardel Co 421 F 2d 1048 (1970).

66. Blue Cross Inc v Ayotte 315 NYS 2d 998 (1970).

67. Property Law Act 1969, s 11.

68. Property Law Act 1974, s 55.

69. Contracts (Privity) Act 1982.

70. The contract must ‘extressly in its terms’ purport to confer a benefit ‘directly’ on a third person seeking to enforce it.

71. See the cases cited ante, n 64.

72. 56 Cal 2d 583 (1961) (noted (1965) 81 LQR 478). The Supreme Court of California held that the lawyer had not in fact been negligent as he could not have been expected to understand the complexities of the rule against perpetuities.

73. [1983] NZLR 37.

74. [1981] 2 NZLR 547. The decision was handed down before the Contracts (Privity) Act 1982 came into force.

75. Supra, at 49.

76. See also the judgments of Cooke J, supra at 41–42 and of McMullin J, supra at 54.

77. A clear example of acceptance of risk is seen in Hedley Byrne's case itself. See also, Ashdown v Samuel William [1957] 1 QB 409; White v Blackmore [1972] 2 QB 651; Birch v Thomas [1972] 1 WLR 294.

78. Scruttons Ltd v Midland Silicones Ltd [1962] AC 446.

79. Morris v C. W. Martin & Sons Ltd [1966] 1 QB 716.

80. Scruttons Ltd v Midlands Silicones Ltd, supra.

81. Johnson Matthy & Co Ltd v Corntantine Terminals Ltd [ [1976] 2 Lloyd's Rep 215 (noted [1977] CLJ 17).

82. The nature of the proximity test may, in fact, often result in the owner having that knowledge.

83. Note the judgment of Richmond P in Bowen's case, supra at 415.

84. In Voli v Inglewood Shire Council (1963) 110 CLR 74 Windeyer J said that if the task of an architect was to design a stage to bear only some specified weight he would not be liable for the consequences of someone thereafter negligently permitting a greater weight to be put on it (at 85).

85. If a manufacturer is now to be held liable to purchasers of his inferior chattels (as to which see post, pp 330–331), reasonable notice could be given, by eg marking them or giving relevant information on any documents or packaging.

86. [1976] QB 858.

87. [1978] AC 728 at 760.

88. Lewisham London Borough v Leslie & Co [1979] 250 EG 1289; Eames London Estates Ltd v North Herfs DC (1981) 259 EG 491; Crump v Torfaen UDC (1982) 261 E.G. 678; Dennis v Charnwood BC [1982] 3 WLR 1064.

89. Ordog v District of Mission (1980) 110 DLR (3d) 718; Neilsen v City of Kamloops (1982) 129 CLR (3d) III; Robert Simpson Co Ltd v Foundation Co of Canada Ltd (1982) 134 DLR (3d) 459.

90. Mount Albert BC v Johnson [1979] 2 NZLR 234 per Cooke and Somers JJ at 239 (obiter). The matter does not appear to have arisen directly in Australia. In State of South Australia v Johnson (1982) 42 ALR 161 the plaintiff was granted a lease over land assured by the defendants to be ‘suitable for fat lambs and wool production’. The land was in fact covered with clover which caused severe losses and infertility in the sheep. The High Court of Australia held, inter alia, that the plaintiff's cause of action was complete when evidence of clover disease in the sheep became sufficiently cogent. The case is not directly in point because the claim was for actual damage to the sheep and cosequential losses flowing therefrom, not for diminution in value of the land.

91. [1983] 2 WLR 6.

92. This is clear from the cases cited ante, pp 317–318, and is confirmed by Junior Books. In Gartside's case Richardson J. referred to Lord Roskill's judgment with apparent approval and stated quite explicitly that the duty of care may extend to liability for foreseeable economic loss even in the absence of identifiable physical damage or injury or any identifiable danger or threat thereof (supra, at 47).

93. Supra, at 14.

94. Cp comment in The All England Law Reports Annual Review 1983, p 332, which overlooks this point.

95. This whole matter is discussed in greater detail in ‘Latent Defects in Property and the Limitation Act: a Defence of the “Discoverability” Test’ (1983) 10 NZULR 311.

96. Brian Morgan v Park Developments [1983] ILRM 156.

97. In Ferbert v Otago Hospital Board unreported, NZHC, Dunedin, 18 May 1983, Roper J observed that a view much more liberal than that espoused in Pirelli had been taken in NZ and clearly saw no reason for change. In Paaske v Sydney Construction Co Ltd unreported, NZHC Auckland, 24 June 1983 Thorp J. reached the extremely odd conclusion that the Sparham-Souter rule applied to the action against the defendant local authority whereas Pirelli applied to the action against the defendant builder.

98. [1983] 2 NSWLR 268.

99. Ibid, per Hutley JA at 290, Glass JA at 315–316.

100. Nielsen v City of Kamloops (1981) 129 DLR (3d) III. Note, also, Robert Simpson Co Ltd v Foundation Co of Canada Ltd (1982) 134 DLR (3d) 459, a similar building case, where the Ontario Court of Appeal managed to base liability on the Hedley Byrne principle.

101. Dutton was approved in passing in the majority judgment of Spence J. in the Supreme Court in O'Rourke v Schacht (1975) 55 DLR (3d) 96 at 118–119.

102. (1974) 40 DLR (3d) 530.

103. Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 394; Mount Albert BC v Johnson [1979] 2 NZLR 234. See, also, Meates v Attorney General [1983] NZLR 308.

104. It need not, for reasons given ante, pp 318–319.

105. On the issue of liability for omissions see Smith and Burns, ‘Donoghue v Stevenson - The Not So Golden Anniversary’ (1983) 46 MLR 147.

106. Weir, A Casebook on Tort (5th edn, 1983) at 33.

107. This type of argument is developed in detail by Bishop in ‘Negligent misrepresentation: an economic reformulation’ in Burrows and Veljanovski The Economic Approach to Law (1981) at 167.

108. Weir, op cit, at 34.

109. Ante, pp 325–326.

110. For somewhat similar problems arising out of concurrent judicial and arbitral proceedings, see Northern Regional Health Authority v Derek Crouch Construction Co Ltd [1984] 2 AII ER 175.

111. An analogy may be seen in the law of bailments, where it has been found convenient not to restrict the bailor to actions against the bailee but to allow him to sue direct a third party who wrongfully lost, damaged or detained goods: Morris v C.W. Martin & Sons Ltd [1966] 1 QB 716, per Lord Dennig MR at 728–729; Mason v Attorney General, unreported, NZHC Hamilton, 10 June 1983; cp Balsumo v Medici, supra.

112. [1983] 2 WLR 649.

113. Ibid, at 654–656.

114. Lord Keith thought that on the majority view the manufacturer would be liable (supra, at 486). Lord Roskill said it would not be easy to find the required proximate relationship in this type of case because it was ‘obvious’ the real reliance would be on the vendor (supra, at 495). But is this so obvious? And is reliance really necessary?

115. In Australia the Trade Practices Act 1974, s 74B gives a ‘consumer’ of goods a direct action against the manufacturer in respect of goods acquired by the consumer which are not reasonably fit for their purpose. Something rather similar was proposed for New Zealand in the Contracts and Commercial Law Reform Committee Working Paper on Warranties in the Sale of Consumer Goods (1977) but no legislation has followed.