The Gazette 1989

GAZETTE

FEBRUARY 1989

Court decision in

East River Steam-

ship Corporation -v- Transamerica

Delaval Inc.

This was an admiralty

case in which the Court, having

considered products liability

precedents in several jurisdictions,

held that, "whether stated in

negligence or strict liability, no

products liability claim lies in

admiralty when a commercial party

alleges injury only to the product

itself resulting in purely economic

loss".

Blackmun, J., delivering the

judgment of the Court, had said that

the Court did not:

"find persuasive a distinction that

rests on the manner in which the

product is injured. We realize that

the damage may be qualitative,

occurring through gradual

deterioration or internal breakage.

Or it may be calamitous . . . But

either way, since by definition no

person or other property is

damaged, the resulting loss is

purely economic. Even when the

harm to the product itself occurs

through an abrupt, accident-like

event, the resulting loss due to

repair costs, decreased value, and

lost profits is essentially the failure

of the purchaser to receive the

benefit of its bargain

traditionally the concern of

contract law . . .".

In Lord Bridge's view, Blackmun,

J.'s statement of law appeared "to

undermine" the earlier American

authorities referred to by Richmond,

P., in the New Zealand case of

Bowen -v- Paramount Builders

(Hamilton) Ltd.

He considered that

Lord Brandon's approach and that of

the United States Supreme Court

were "entirely in line" with the

majority decision of the Supreme

Court of Canada in

Rivtow Marine

that the damages recoverable by the

hirers of the crane from the

manufacturer did not include the cost

of repairing the defect.

Lord Bridge's reliance on

East River

Steamship

is questionable on two

counts. First, Lord Bridge appears to

misunderstand the force of the case

as a precedent within the American

system of law. Unlike a decision of

the United States Supreme Court on

a constitutional issue, which would

of course take precedence over the

decisions of state courts, a decision

of that Court in the exercise of its

appellate admiralty jurisdiction does

not have the same effect in relation

to the products liability issue raised

East River Steamship.

Secondly,

Lord Brandon was dealing with the

issue of compensation for

prevention

of damage. This was certainly not at

the centre of Blackmun, J.'s analysis.

Lord Bridge's Central

Analysis

In the key passage in his speech,

Lord Bridge stated:

"These principles are easy enough

to comprehend and probably not

difficult to apply when the defect

complained of is in a chattel

supplied complete by a single

manufacturer. If the hidden defect

in the chattel is the cause of

personal injury or of damage to

property other than the chattel

itself, the manufacturer is liable.

But if the hidden defect is

discovered before any such

damage is caused, there is no

longer any room for the

application of the

Donoghue -v-

Stevenson

principle. The chattel is

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