United Kingdom
Damages, Torts, Property, Liability, Contract, Causation, Licences, Audits, Precaution, Marine Pollution
The claimants were all livestock farmers who suffered loss and damage as a result of the outbreak of foot and mouth disease (‘FMD’) that occurred in two phases between August and September 2007 in the vicinity of laboratories operated by the first two defendants at a site in Pirbright, Surrey, which was the source of the outbreak. Originally, the claimants fell into two categories. The first group consisted of farmers whose livestock had been infected or exposed to a direct threat of infection and, as a result, had to be culled. The second group consisted of farmers whose animals were neither infected nor exposed to the risk of infection and were not, therefore, culled, but who suffered loss and damage as a result of the restrictions placed on the movement and/or export of livestock, including lost income as a result of inability to sell or export animals, loss of milk production, extra cost of feeding and keeping animals, losses sustained through disruption to normal breeding patterns, and losses resulting from what were described as ‘loss of condition’ and/or ‘welfare problems’. Defendants were the Institute for Animal Health (‘IAH’), a government-funded research body which carries out research into FMD at the Pirbright site, Merial, a private company which sub-lets part of the Pirbright site, at which it produces FMD vaccine, and DEFRA,the government department responsible for licensing IAH and Merial to carry out work with FMD virus. The claimants alleged that the outbreak was caused by the negligence IAH and/or Merial, in particular by allowing FMD virus to escape through faulty drains. In respect of the claimants in the second category (i.e. farmers whose animals were neither infected nor culled), the defendants pursued applications to strike out their claims and/or for summary judgment, on the basis that the losses sustained by claimants in that category were outside the scope of any duty owed by the defendants, either because they were pure economic losses or because they were indirect or consequential losses resulting from the imposition of government measures rather than directly from the escape of FMD virus. The defendants’applications for strike-out and/or summary judgment were granted by the judge, who held that the question of whether a particular loss is to be characterised as physical damage or pure economic loss will turn upon the particular facts and that the claimants had a real prospect of succeeding in their contention that at least some of their losses constituted physical damage because, they could be the effects of less tangible ‘external factors’ such as a delay in taking particular action which causes the produce or livestock to become too fat (or thin), or too ripe. That argument may depend upon more detailed information as to their precise losses and their causes that was not available at this stage of proceedings. The claimants could not recover damages for their pure economic losses because of the ‘exclusionary rule’ which excludes such losses from the scope of any duty of care. The purpose of the exclusionary rule which applies in respect of pure economic losses flowing from direct physical damage to the property of a third party is to avoid opening the floodgates to unlimited liability to an indefinite number of persons. In particular, that rule has been applied so as to exclude liability to auctioneers affected by an outbreak of FMD. In respect of the damage which might arguably be characterised as physical damage, the judge held that such losses were also outside the scope of any duty of care that might be owed by the defendants because the damage in question was indirect. There was no ‘connecting link’ between the livestock that was actually infected by the FMD virus which the defendants (allegedly) caused to escape and the indirect or consequential losses sustained by the claimants (whether physical or economic). Therefore, applying the principles upon which the exclusionary rule is based, the claimants’ losses were outside the scope of any duty of care which might have been owed by the defendants.