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Review Your SQE 1 Practice Records

Examination Timing: 00H00M19S

A fish merchant named Andrew contracted with a fitter to install a pumping system in tanks for summer storage of lobsters when prices are low, intending to sell them on the Christmas market when prices are high. The pumps proved to be defective and, despite making great efforts to repair them, the lobsters died. Andrew seeks to sue the manufacturer in negligence for the loss of the lobsters, cost of repair, and his loss of profit on the whole venture. Which option best states the grounds on which Andrew can sue the manufacturers of the pumps in negligence, if at all?

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The correct option is based on the principles established in Muirhead v Industrial Tank Specialities Ltd [1986], where it was held that the killing of the lobsters constituted physical damage. Therefore, Andrew is entitled to recover damages for the loss of the dead lobsters. However, his claim for the profits that would have been made if the pumps had functioned properly, as well as the cost of repair, would be considered pure economic loss, which is not recoverable in negligence. The court in Muirhead distinguished the case from Junior Books Ltd v Veitchi Co Ltd [1983], stating that the necessary degree of proximity was lacking in the ordinary consumer-manufacturer relationship. 


Key Point: The Muirhead v Industrial Tank Specialities case underscores the distinction between physical damage and pure economic loss in negligence claims. While physical damage to property (such as the dead lobsters) is recoverable, purely economic losses, such as lost profits and repair costs resulting from defective goods, are generally not recoverable unless there is a special relationship of proximity, which was not present in this case. This principle helps delineate the scope of liability for manufacturers and protects them from unbounded claims for economic loss.

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