Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27

Facts

• The defendants, contractors for the electricity board, negligently damaged a power cable during roadworks.
• The power cable supplied electricity to the claimant’s factory, Spartan Steel, resulting in an immediate outage.
• As a direct result, Spartan Steel suffered three types of loss: (1) reduction in value of metal being smelted at the time, (2) loss of profit from the damaged metal, and (3) loss of profit due to factory downtime during the outage.
• The primary legal issue was whether the claimant could recover for all three losses or whether the loss of profit from downtime was non-recoverable pure economic loss.
• The electricity cable belonged to the electricity board, not Spartan Steel; there was no physical damage to the claimant's property other than the metal being processed at the time.

Issues

1. Whether a claimant can recover damages in negligence for pure economic loss resulting from a defendant’s actions, as opposed to consequential economic loss linked to physical damage.
2. Whether the loss of profit sustained by Spartan Steel during downtime due to the power outage constitutes consequential or pure economic loss.
3. Whether exceptions to the bar on recovery for pure economic loss, such as assumption of responsibility, applied in this case.

Decision

• The Court of Appeal held that Spartan Steel could recover for the physical damage to the metal in the furnace and the consequential loss of profit from that damaged metal.
• The court ruled that loss of profit from the factory's downtime, being independent of any physical property damage to Spartan Steel, was pure economic loss and not recoverable.
• The decision confirmed that such pure economic losses do not satisfy the requirements for recovery in negligence under English law.

Legal Principles

• Pure economic loss in negligence is financial harm not arising as a direct consequence of physical damage or personal injury and is generally not recoverable.
• Consequential economic loss, directly caused by physical damage to the claimant’s property, is recoverable.
• Assumption of responsibility can create exceptions allowing for recovery of pure economic loss, especially in cases of negligent professional services, but this principle did not apply in the operational context present in this case.
• The judgment reflects the policy concern of avoiding indeterminate liability for defendants in negligence claims.

Conclusion

Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27 affirmed that pure economic loss, occurring independently of physical damage, is not recoverable in negligence. Only economic losses that are a direct consequence of damage to property are compensable. The decision draws a clear boundary between consequential and pure economic loss, which continues to influence the law of torts.