Trebor Bassett Holdings Limited (1) The Cadbury UK Partnership (2) v ADT Fire and Security Plc [23.08.12]
Supplier of bespoke fire suppression system found in breach of implied contractual obligation to exercise reasonable skill and care; however, the design and installation could not be equated to with supply of goods under the Supply of Goods and Services Act 1982 nor could the contract be construed as guaranteeing success of the system.
In the case, the Court of Appeal agreed that the Defendant had failed to comply with its obligation to exercise reasonable skill and care in designing a fire suppression system. However, it was satisfied that the Claimants were contributory negligent for the destruction of their premises when they failed to install a sprinkler system and segregate a known hazardous production area.
The detailed decisions at trial and on appeal provide helpful analysis of the difficult issue of concurrent duties in contract and tort and the scope for arguing contributory negligence where the defendant is in breach of its duty to exercise reasonable skill and care. The Court of Appeal emphasised the distinction between supplying a bespoke system requiring skill and care in design, and supplying goods only. The former would not attract the implied terms of satisfactory quality and fitness for purpose under the Sale of Goods and Services Act 1982 - only the reasonable skill and care term will be implied to the design element in the absence of any specific contractual term.
The First Claimant was the owner of a factory in Pontefract which was used by the Second Claimant for the production of popcorn. Part of the unit was used for the "oil pop" method – heating the popcorn in pans of oil over a naked gas flame until it "pops" (the oil pop production area). This was recognised as a hazardous method of producing popcorn.
In 2003, the Defendant had been commissioned by the Second Claimant to design, supply and install a fire suppression system in the oil pop production area. However, on 8 June 2005 the entire factory was destroyed by a fire which began in the oil pop production area - the fire suppression system did not function and the fire was not extinguished.
The Judge at First Instance held the Defendant had failed to comply with its obligation to exercise reasonable skill and care in designing the system. However, the judge reduced the damages by 75 per cent on the basis that the Second Claimant had failed to segregate the oil pop production area and to install sprinklers in the factory (Law Reform (Contributory Negligence) Act 1945 applied).
The Second Claimant appealed the decision on the basis that the Defendant owed it further contractual duties which fall outside the ambit of the 1945 Act. It argued that the ambit of the duty guaranteed the success of the fire suppression system. The Defendant disagreed. It submitted that a similar fire the previous year had demonstrated that the fire suppression system was ineffective and could not be relied on. As such the Second Claimant should have taken steps to avoid another fire and the Defendant was not liable. The Defendant also contended that the Second Claimant’s employees’ actions caused the fire to spread, which resulted in the destruction of the factory, thereby breaking the chain of causation.
With Lord Justice Tomlinson delivering the lead judgment, the Court of Appeal held that the design and supply of a system could not be equated with the sale of goods. The design of the fire prevention system was not an "off the shelf" system or product. As such an implied term of fitness for purpose could not be inferred under the 1982 Act.
The Court also held that it was inappropriate to read the Specification included in the contract as providing a guarantee of the success of the system - the object of the contract was fire suppression, not fire prevention. It would require very clear wording to guarantee the desired result of a fire suppression system that extinguished all fires. In the circumstances, there was no absolute obligation, merely an obligation to exercise reasonable care and skill.
With regard to the prior knowledge of the earlier fire, the Court considered whether it broke the chain of causation or placed a duty on the First Claimant to mitigate its losses resulting from the 2005 fire. The Court accepted the judge had been wrong in not making a finding upon the basis of which knowledge of the earlier fire could properly be attributed to the Second Claimant. It was uncertain whether the knowledge of the earlier fire was sufficient to impress upon the Second Claimant a corporate knowledge of what had occurred. The evidence suggested that no report had been made to management level and, unlike the 2005 fire; the previous one had not caused alarm and was not difficult to extinguish. The Court was satisfied that the earlier fire did not preclude recovery.
Finally, the Court dismissed the suggestion that the actions of the employees’ had in anyway caused the fire to spread. Their reaction to the emergency – which included trying to stamp out the burning popcorn - was entirely predictable and the spread of the fire was a "seamless development".