Transco Plc v United Utilities Water Plc

By a claim issued on 11 May 2004, Transco Plc instituted proceedings against United Utilities Water Plc alleging that they had suffered loss and damage as a result of an employee of the defendants negligently shutting off a valve on the defendants’ medium pressure gas network on 29 November 2002 and thereby interrupting the gas supply to 2,600 of the claimants’ customers in the Shavington area of Crewe. By order of Master Tenant, made on 24 May 2005, it was ordered that there be a split trial, the issue of liability being determined as a preliminary issue. This is my judgment on that preliminary issue.

The factual matrix within which I am to consider the preliminary issue is wholly agreed. I summarise the position in the following way. The claimants, Transco, are responsible for the operation of the gas transmission and distribution network throughout the United Kingdom. The defendants operate water and waste water networks in the United Kingdom. On or around 29 November 2002, a network controller of the defendants closed off a valve on Transco’s gas network in the Rope Lane and Grestry Road area of Shavington in Crewe. It is accepted on behalf of the defendants that the work then being carried out by and on behalf of the defendants, was “street works”. It is quite obvious that a hole had been excavated to enable the defendants to carry out some work of repair or renewal or inspection of their utility, in the course of which the valve was turned off of the claimants’ utility.

As a result of the closure of the valve, about 2,600 of Transco’s customers in the Shavington area of Crewe had their gas supply cut off. Once alerted to the interruption of the gas supply, Transco took steps to investigate the interruption and to restore the gas supply. In consequence they incurred, it is said, costs and expenses, including contractor’s costs, engineering staff overtime costs and non-engineering staff over-time costs, amounting in broad terms, to a little less than £100,000.

Furthermore, Transco was obligated to pay compensation payments of about £74,000 to affected customers, and also incurred a small amount of costs in relation to the supply of appliances which had presumably been damaged in consequence of the interruption of supply.

The claimants, by their particulars of claim, allege that the defendants were negligent in various specific respects, including failing to liaise with Transco to request any plans showing the location of gas valves and pipes in the relevant area and failing to operate any, or any adequate monitoring of the effect of the work performed. In addition to liability for negligence, the claimants allege that the defendants are liable for conversion, liable for trespass to goods and in breach of obligations relating to highway work.

As to those alternative bases, Mr Thomas, on behalf of the claimants, accepts that if he fails to establish negligence or liability for trespass, the liability for conversion advances his claim no further. However, he asserts that the breach of obligations relating to highway work is a freestanding head of claim which falls to be determined whatever my conclusions are in relation to the other areas.

On behalf of the defendants, it is admitted that the network controller was negligent in shutting off the gas valve rather than the water valve. It is further admitted that as a result of the gas supply being shut off, a number of the claimants’ customers were affected, the exact number of which not being within the defendants’ knowledge. It is further admitted that the claimants employed its own staff and other contractors in order safely to re-establish the supply of gas to the customers, and that there were inevitable cost consequences as a result thereof.

The defendants, however, submit that the losses claimed are pure economic loss and therefore not recoverable in law. There is no evidence, it is said, that there was any physical damage to any item belonging to the claimants or any customer as a result of the interruption in the supply of gas.

Against that factual background, I turn to consider the competing submissions of law.

First I consider the issue of negligence. Mr Thomas submits that there is here a clear duty owed by the defendants to the claimants, that there has been a breach of that duty, and that, accordingly, it is reasonable just and fair that there should be liability to compensate for the damage sustained. On behalf of the defendants, it is submitted that, whilst the foreseeability of damage is satisfied here, the proximity of the relationship between the two utility companies is not such as to satisfy the threefold test referred to in Caparo Industries v Dickman [1990] 2 AC 605, nor is it reasonable to impose a duty. There was, it is submitted, no special relationship here between defendants and claimants. True it is that the defendants owned water pipes in the same area as the claimants owned gas pipes, but there was no special fiduciary or other relationship of exceptional particular proximity from the mere fact that the pipes happened to be in physical proximity.

In my judgment, however, there is such a special proximity in this relationship. It is not sensible, in my judgment, to conclude that two public utilities, both using the sub-strata area under the same street in which to convey their respective commodities, do not have a close relationship, the one with the other. They must be aware, in my judgment, that their actions or omissions may affect the installations of other providers of utilities which, in broad terms, are likely to be using precisely the same sub-strata underneath the streets. It is a commonplace, if I may observe from my own experience, to note a hole in the road being created and used in order to facilitate some works on behalf of, let us say, the electricity suppliers. The hole is reinstated and the following week, to the frustration of the motorist, the hole is opened up again, this time, let us say, by the gas provider and the week after by the water supplier. It is well known that such is the position and, in my judgment, that sort of situation, is capable of, and in this case does, provide a special relationship, the one with the other.

Is it reasonable to impose a duty to take reasonable care not to harm another utility’s installation? For reasons already sufficiently expressed, in my judgment it plainly is. I therefore hold that it is both reasonable and proportionate to impose a duty of care in considering the conduct of the two utilities in this case, one, I should say, with the other. Just as the defendants owed that duty of care to the claimants, so do the claimants owe such a duty to the defendants, and indeed so would any other utility provider using the same general area.

But, says Mr Field, this is pure economic loss. Mr Field QC accepts that, if the defendants’ employee had damaged the valve when turning off the gas supply, thereby causing gas to cease to flow through the pipe, there could be no argument that he could advance properly to dissuade the court from finding that the claimants should succeed in recovering whatever damages flowed from that event. But, said Mr Field, because the wrongful act resulting in that consequence did not cause physical damage to the pipe or valve, the defendants are not liable for the extensive damage their negligent act plainly caused.

He puts this matter this way (these, I have to say are my words not his, but I hope they accurately encapsulate the basis of his submission). There is, he says, clear authority that pure economic loss is not, in general terms, recoverable where it arises as a result of tortious negligence, not consequent on physical damage. The courts, he submits, must be astute to ring-fence the outer limits of liability for negligence giving rise to economic loss. There must ultimately be an outer edge of liability, and in this case the cost of the washer damaged in turning off the value, if such had occurred (and it did not) provides the perimeter fence for the liability of the defendants in such circumstances as this. Outwith any such damage they are not liable. That is, said Mr Field, because that is the public policy of the courts and it should be upheld, however apparently unfair it may, at first glance, appear to be.

As I have already observed, the term “pure economic loss” is well known in the realm of tortious negligence where it refers to economic loss that is not consequent on physical damage. What then is physical damage? Physical damage must most obviously comprise personal injury or property damage, but its “spirit”, to adopt the expression used by Professor Andrew Burry in the current edition of Remedies for Torts in Breach of Contract, also, in my judgment, includes (amongst other things) damage to reputation and wrongful interference with goods or land, quite apart from property damage.

Mr Field refers me, helpfully, to the decision of Spartan Steel v Martin & Co [1973] 1 QB 27. That was a case in which the defendants’ employees were digging up a road when they negligently damaged an electric cable which the defendants knew was the direct supply from the Electricity Board’s power station to the plaintiff’s factory. The plaintiffs were without electricity until the Board was able to repair the cable. The owners of the factory brought proceedings seeking compensation first for the physical damage to their factory, secondly for consequential economic loss arising from that physical damage and thirdly pure economic loss, described by counsel in submissions as “parasitic damages”, a phrase which Lord Denning MR disliked.

Giving the majority judgment of the court, Lord Denning observed (page 36D):

“At bottom I think the question of recovering economic loss is one of policy. Whenever the courts draw a line to mark out the bounds of duty ,they do it as matter of policy so as to limit the responsibility of the defendant. Whenever the courts set bounds to the damages recoverable - saying that they are, or are not, too remote - they do it as matter of policy so as to limit the liability of the defendant.”

Lawton LJ, giving a concurring judgment observed at page 46H:

“… whether a plaintiff can recover from a defendant, proved or admitted to have been foreseeable financial damage which is not consequential upon foreseeable physical injury or damage to property [the question raised by the appeal]. Any doubts there may have been about the recovery of such consequential financial damage were settled by this court in SCM (United Kingdom) Ltd v WJ. Whittall & Son Ltd [1971] 1 QB 337. In my judgment the answer to this question is that such financial damage cannot be recovered save when it is the immediate consequence of a breach of duty to safeguard the plaintiff from that kind of loss … Negligent interference with such services is one of the facts of life and can cause a lot of damage, both physical and financial. Water conduits have been with us for centuries; gas mains for nearly a century and a half; electricity supply cables for about three-quarters of a century; but there is not a single case in the English law reports which is an authority for the proposition that mere financial loss resulting from negligent interruption of such services is recoverable. Why?”

That citation, it seems to me, is not strictly to the point. This is a case in which the defendants negligently directly interfered with property owned by the claimants and loss was sustained in consequence. It is not consequential loss flowing from the interruption of supply that is sought to be recovered by the claimants, but the cost of rectifying the damage that the defendants negligently caused. That, to my mind, is a different proposition altogether.

In my judgment, there is sufficient proximity between the defendants and the claimants. Negligence is admitted. The duty is plainly owed and in those circumstances I am satisfied on the basis of the defendants’ admitted negligence, that liability to compensate the claimants for such loss and damage as they may prove is established on that ground.

I turn to consider the alternative basis on which the claimants put their case, namely that of wrongful interference with the property of the claimants. I have to say I am not entirely sure, one way or the other, whether this is a wholly independent cause of action, or whether, to some extent, it is bound up with the issue of negligence. But effectively what the claimants allege is that they are entitled here to recover on the grounds of trespass. Trespass, submits Mr Thomas, is properly defined with the direct, immediate interference with the claimants’ possession or use of a chattel. A mere touching is enough to establish the right of action if damage is caused which can include, he submits, economic damage as well as physical damage.

Not so, submits Mr Field. He submits that trespass is an unlawful disturbance of possession of goods by seizure or removal or by direct act causing damage to those goods. Here there has been no unlawful disturbance of possession. The goods remained (if they are goods) still in the ground. The valve still remained attached to the pipe and there has been no damage to either pipe or valve. Accordingly trespass is not appropriate as a cause of action.

As it seems to me, the admitted negligent acts of the defendants are classically to be described as wrongful interference with the physical property of the claimants. The fact that the wrongful interference caused no direct physical damage to the pipeline or the valve is nothing to the point. The valve was open and the gas flowed before the negligent intervention of the defendants. After that negligent intervention, the valve was closed, rendering the pipe thereby inoperable and gas ceased to flow along the pipe. That caused significant damage in consequence.

If that is not wrongful interference with the physical property of the claimants, it is difficult to see how it could otherwise be described. I am satisfied that it was such a wrongful interference and that it amounted to the tort of trespass in the circumstances of this case and accordingly on that ground too, I hold that there is liability for the defendants to compensate the claimants.

Mr Thomas in addition relies on the Torts (Interference with Goods) Act 1977, an Act which applies to goods defined as “all chattels personal other than things in action and money”. Wrongful interference in the Act is described as “trespass to goods”. In my judgment, it is a perfectly legitimate basis of putting the claim that there is here a wrongful interference with the goods which, to my mind, does include the pipe through which the gas supply was to run until that supply was interrupted by the activities of the defendants.

The claimants finally plead that the defendants were under a non-delegable duty to exercise reasonable skill and care in the performance of the relevant operation on a highway within the provisions of the New Road and Street Works Act 1991. Mr Field accepts that the activities upon which the defendants were embarked, was the undertaking of street works. He further accepts that the defendants were an undertaker for the purposes of the Act. In those circumstances, section 82(1)(b) provides:

“(1)

An undertaker shall compensate -

…

(b)

any other person having apparatus in the street in respect of any expense reasonably incurred in making good damage to that apparatus

as a result of the execution by the undertaker of street works or any event of a kind mentioned in subsection (2).”

Mr Field submits that the duty applies only to the Highway Authority when carrying out highway maintenance and repair. The defendants are not and were not the Highway Authority and at the material time was not purporting to do any work of highway maintenance or indeed any work relating to the highway. However, since he now accepts that the defendants were carrying out street works, that, in my judgment, rather falls away in the context of this head of claim.

He further submits that, if there is any liability upon the defendants under section 82, it relates only to the cost in respect of any expense reasonably incurred in making good damage to that apparatus. He submits, in effect, the cost that the claimants are entitled to recover under that head is simply that of employing a workman to come along and turn the pipe back on again, and no doubt also to check that the services were in good working order, they having been interrupted.

The extent of the loss and damage recoverable under section 82 is not for me to decide. But in my judgment, under that head too, the claimants are entitled to recover. The extent of the recovery under that head will depend on the resolution of the issues of quantum, which will be a matter for another judge on another day.

It is in those circumstances that I find that there is liability on the defendants to compensate the claimants in accordance with the terms of the judgment I have delivered.