Muirhead v Industrial Tank Specialties [1986]

Court: Court of Appeal

Facts: Robert Muirhead, a fish merchant, employed Industrial Tank Specialties (ITS) to design, supply, and install a fish tank for storing lobsters. Muirhead's business model involved purchasing lobsters in summer at lower prices and selling them during the Christmas period when prices were higher. ITS subcontracted the motor manufacturing for the tank’s pumps to Leroy Somer Electric Motors Ltd. However, the motors supplied were unsuitable for the UK's electrical voltage, leading to pump failure and resulting in the death of Muirhead’s lobster stock. Due to ITS's insolvency, Muirhead sued Leroy Somer Electric Motors for various losses, including the cost of the pumps, loss of profit from the lobsters, and damages for inconvenience and anxiety.

Issue: Can Muirhead recover for pure economic loss resulting from the defective pumps supplied by Leroy Somer Electric Motors, or is he limited to claims for physical damage to his lobster stock?

Held: The Court of Appeal held that Muirhead could recover damages for the physical loss of the lobsters and consequential losses related to that physical damage, but not for pure economic loss associated with the pumps.

Key Judicial Statement: Lord Goff emphasized that the case of Junior Books v. Veitchi should be confined to its unique facts. He stated that while the elements of proximity and reliance indicated a potential duty of care for pure economic loss, the circumstances of Junior Books were distinct and could not be generalized. Muirhead could only recover for foreseeable physical loss and the consequential economic loss that directly resulted from that physical damage: “I therefore conclude that the third defendant should be held liable to the plaintiff, not in respect of the whole economic loss he suffered but only in respect of the physical damage caused to his stock of lobsters, and of course any financial loss suffered by the plaintiff in consequence of that physical damage” (per Robert Goff L.J. at p. 533).

💡 Leveluplaw: clarifies the limits of liability for pure economic loss in tort claims, reinforcing that the principles established in Junior Books are not universally applicable. The ruling underscores that damages can be recovered for physical damage and consequential losses directly related to that damage, but not for broader economic losses stemming from defective products, thereby shaping the scope of recovery in negligence cases involving economic loss.