The Gazette 1989

FEBRUARY 1989

GAZETTE

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 in 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

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. 11 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

Court decision in East River Steam- ship Corporation -v- Transamerica Delaval Inc. 10 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

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