H Parsons (Livestock) Ltd v Uttley Ingham & Company Ltd [1977] EWCA Civ 13 (18 May 1977)

A farmer bought a pig-feed hopper with a faulty ventilator, causing the feed to go mouldy. After eating it, numerous pigs died from a rare intestinal infection. The court held this loss was not too remote as physical harm was foreseeable.

Facts

The plaintiffs, farmers who ran a pig-rearing business, purchased a large bulk feed storage hopper from the defendant manufacturers for £275. The purpose of the hopper was to store pignuts for their herd of top-quality pigs. The defendants delivered and installed the hopper. However, during installation, the ventilator on top of the hopper was not opened; it was left in the closed position. Consequently, the hopper was not properly ventilated. After the plaintiffs started using the hopper, the pignuts stored within it became mouldy. The plaintiffs did not realise the cause or severity of the problem and continued to feed the mouldy nuts to their pigs. This led to an outbreak of a rare intestinal disease, E. coli, which afflicted the pigs. Tragically, 254 pigs died as a direct result of the toxic feed. The plaintiffs claimed damages for breach of contract, seeking compensation for the value of the dead pigs (£25,000) and associated losses of profit.

Issues

The central legal issue was the test for remoteness of damage for a breach of contract. The defendants admitted the hopper was unfit for purpose and thus that they were in breach of contract. However, they argued that the death of the pigs from E. coli was a consequence so unforeseeable that it was too remote in law to be compensatable. The key questions for the court were:

1. What is the correct test for remoteness of damages in contract?
2. Should the test be based on the reasonable ‘contemplation’ of the parties as per Hadley v Baxendale, or the reasonable ‘foreseeability’ test used in tort?
3. Was the specific outcome (death from E. coli) required to be contemplated/foreseen, or was it sufficient that some form of harm (e.g., pig illness) was a serious possibility?

Judgment

The Court of Appeal unanimously dismissed the appeal, holding that the defendants were liable for the loss of the pigs. However, the judges provided different reasoning on the applicable legal test.

Lord Denning M.R.

Lord Denning argued for assimilating the rules of remoteness in contract and tort. He proposed that for economic loss, the stricter contractual test of ‘reasonable contemplation’ should apply. However, where a breach of contract causes physical damage, the less strict tortious test of ‘reasonable foreseeability’ should be used. In this case, since the breach led to physical harm to the pigs, the question was whether illness was a reasonably foreseeable consequence of feeding them mouldy nuts.

In a case of breach of contract, the court has to consider whether the consequence was of such a kind that a reasonable man, at the time of making the contract, would contemplate that it would be a serious possibility… It was ‘on the cards’ that the pignuts would become mouldy and that, if they were fed to the pigs, the pigs would become ill. It might be a mild or a serious illness. It might be enteritis or it might be E. coli. That does not matter. The makers are liable for the loss of the pigs, not only for the cost of the hopper.

Since it was foreseeable that the pigs would become ill, the defendants were liable for the full extent of the physical damage that transpired, even if the specific disease and its high mortality rate were unforeseeable.

Scarman L.J.

Scarman L.J. (with whom Orr L.J. agreed) rejected Lord Denning’s two-tiered approach. He held that a single, uniform test for remoteness applies to all breaches of contract, derived from Hadley v Baxendale and clarified in Victoria Laundry v Newman Industries. The test is what the parties would have reasonably contemplated as a ‘serious possibility’ or a ‘real danger’ at the time of the contract. He distinguished between the type of harm and its extent. He concluded that the parties would have contemplated that feeding pigs bad food could cause them to become ill. This ‘type’ of harm was within their contemplation.

I would agree with the Master of the Rolls that the law is not so absurd as to differentiate between contract and tort save in situations where the agreement, or the factual relationship, of the parties with each other requires it in the interests of justice… It is enough if he could foresee that the breach would cause physical injury to the pigs. It does not matter if he could not foresee the precise nature of the injury.

Therefore, because the general type of harm (physical illness) was a serious possibility, the defendant was liable for the full extent of that harm (death from E. coli), even though the specific mechanism and severity were not contemplated.

Orr L.J.

Orr L.J. delivered a short judgment concurring entirely with the reasoning of Scarman L.J., thereby establishing it as the majority view.

Implications

The decision in H Parsons v Uttley Ingham is significant for clarifying the application of the remoteness test in contract law, particularly in cases involving physical damage. While Lord Denning’s attempt to unify the rules for physical damage in contract and tort was influential, the majority decision reaffirmed that the test from Hadley v Baxendale applies to all contractual breaches. The crucial principle established is that a claimant can recover for losses so long as the ‘type’ or ‘kind’ of loss was within the reasonable contemplation of the parties as a serious possibility. The defendant does not need to have contemplated the precise ‘extent’ of the loss or the specific scientific manner in which it would occur. This case confirms that if physical harm is a contemplated risk, the contract-breaker is responsible for the full and direct consequences of that harm.

Verdict: The appeal was dismissed. The defendant manufacturer was held liable for the loss of the pigs and associated loss of profits arising from the breach of contract.

Source: H Parsons (Livestock) Ltd v Uttley Ingham & Company Ltd [1977] EWCA Civ 13 (18 May 1977)