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Tort law must be established
For damages to be claimable in tort law it must be established that the Defendant owed the claimant a duty of care, that the duty was breached and that this breach of duty caused the claimant some harm. Thus in this case Tom must show that Ken owed him a duty of care, that the duty was breached and that Ken's breach of duty caused the harm suffered, which can be identified in this case as the need to pay £20,000 for repairs. Similarly for Leo to claim against Tom he must show that Tom owed him a duty of care, that Tom breached that duty and that this breach caused the harm to his business and the losses that resulted.
Initial Negligently Conducted Survey
Tom could attempt to claim against Ken's initial survey that he relied upon in buying the yacht. Ken was contracted to the bank and therefore may argue that he only owed a duty of care to the bank and not to Tom. In an attempt to rebut this Tom may rely on the binding precedent set in the case of Smith v Eric S Bush where the House of Lords found that despite the fact the surveyors contract was not directly with the Claimant they still owe the claimant a duty of care when conducting the survey as it is clear the claimant would rely on the survey when deciding whether r of not to purchase a property.
It is clear that Ken breached his duty of care by not conducting the survey to the standard that would reasonably be expected of the ‘ordinary skilled man professing to exercise that skill'.
There are two parts to causation, Factual causation and legal causation- also referred to as scope of liability. Causation can be established using the ‘But For' test, illustrated in the case of Barnett v Chelsea which asks ‘but for the defendants actions would the claimant have been harmed?' In this case it is clear that ‘but for' Kens report that the yacht was in good condition Tom would not have bought it and therefore would not be in the position of having to pay for the repairs. Scope of liability can be established using principles laid down in ‘The Wagon Mound No 1' that defendants would be liable for any foreseeable consequences of their breach of duty. It is foreseeable that Tom would incur repair costs for the flaws in the yacht as a result of Ken's breach of duty to survey the yacht satisfactorily therefore Ken would be legally the cause of putting Tom in his current position.
The harm suffered in relation to Ken's negligence could be viewed as pure economic loss. There is a prima facie understanding, supported by the case of Spartan Steel v Martin& Co, that recovery for pure economic loss is not generally allowed. However there are exceptions to this rule; The House of Lords laid down four conditions in the case of Hedley Bryne v Heller that if met may make a claim for pure economic loss possible under the new tort of negligent misstatements. The conditions are as follows: firstly that there is a special (or fiduciary) relationship of trust and confidence between the parties; Secondly that the party preparing the advice/information has voluntarily assumed the risk (express or implied); Thirdly that there has been reliance on the advice/information by the other party; Fourthly that such reliance was reasonable in the circumstances. It is clear that in this case these conditions are all satisfied so a claim under the tort of negligent misstatements may be possible. Further the case of Hamlin v Edwin Evans implies that claims against surveyors (for negligent reports where economic loss is suffered in the form of paying for repairs for defects that should have been identified in their report) are possible given that they are brought within the relevant time constraints.
Under the Law Reform Act 1945 Ken may be able to reduce the amount of damages Tom can claim due to his contributory negligent act of steering the yacht into the harbour wall as this would have caused some of the damage to the yacht therefore contributes to the £20,000 worth of repairs. The Act allows for damages to be reduced but not defeated. The requirements for this defence are that the claimant failed to take reasonable care that this failure contributed directly to the damage suffered, the court will then address the question of what percentage the damages should be reduced by. It is clear in this case that Tom failed to take reasonable care when sailing his yacht causing it to crash into the harbour wall. We can presume that this hitting the harbour wall would have caused some damage to the yacht. When deciding what percentage the damages should be reduced by the court can rely on the guideline set out in the case of Froom v Butcher that without the claimant's negligence the harm would have been completely prevented damages would be reduced by 25 per cent. If the harm would have only been less severe, damages would be reduced by 15 per cent. If the claimant's negligence made no difference to the harm then there would be no reduction in damages. It is clear that without Tom's negligence the harm would only be less severe so the courts may reduce damages by up to 15 per cent.
Negligence Affecting Leo's Business
Leo must show that Tom owed him a duty of care before he can consider claiming against Tom. According to the case of Spartan Steel v Martin & Co Tom may owe Leo a duty of care. In this case the defendant's negligently cut off the power supply to the claimant's factory in much the same way that Tom's act cut off the salt water supply to Leo's factory disrupting production. The courts found that it was possible for a claim to be brought.
Leo must then show that Tom breached this duty. Leo can do this by using the doctrine of Res ipsa Loquitur meaning ‘the thing or accident speaks for itself'. This doctrine arises from the Earle CJ in Scott v London Docks Co. It is clear that in the normal scheme of things yachts do not crash into harbour walls, it is therefore possible to say this accident speaks for itself in that without some breach of duty to take reasonable care, on Tom's part he would not have crashed into the harbour wall and Leo's factory would not have suffered any harm. Breach is therefore established.
It is now necessary for Leo to prove that Tom caused the harm. Using the ‘but for' test from Barnett v Chelsea we can establish factual causation as ‘but for' Tom's negligence the pipe would not have ruptured and Leo would not have suffered any loss. To establish legal causation one can apply the principles laid down in ‘The Wagon Mound No 1' that if it is reasonably foreseeable that defendant's actions would cause the claimant harm then the action can be viewed as a cause in law of the harm. It is reasonably foreseeable that negligently steering into a harbour wall and rupturing a pipe will cause harm to the person relying on that pipe so Legal causation can be established here.
Damages claimable for Leo depend on the way the harm suffered by him is classified. The law distinguishes between Pure Economic loss, where the harm suffered is only financial, and Consequential Economic loss, where the harm suffered is a direct consequence to the defendant's actions. The losses Leo made can be divided into these two categories. The lobsters that perished and the loss of profit due to this can be classed as consequential economic loss as it is clear that these losses were a direct consequence of Tom's action. Whereas the inability to store more lobsters during the two subsequent days and the projected loss of £1500 profit can be classified as pure economic loss as this profit is only a projected figure. This is applying the reasoning used in the Spartan Steel v Martin & Co case where damage caused to the steel being processed at the time of the negligence and the profit lost on this batch was classed as consequential economic loss and the projected lost profit due to the delay in repairing the power line was classed as pure economic loss. According to the Spartan Steel case recovery for pure economic loss is not possible but damages may be recoverable for consequential economic loss. However the case of Eletrochrome v Welsh Plastics damages were not recoverable even for consequential economic loss as there was no actual physical damage, so it is possible that recovery will be denied as there is no mention of any actual physical damage.
It is likely that Tom will be able to recover a large amount of damages, covering the majority of the repair costs although he will probably not be able to recover the full amount due to his contributory negligent act of steering into the harbour wall.
As for Leo recovering damages from Tom it is likely that he will be able to recover for the consequential economic loss of the dead lobsters and lost profit on that batch of £ 5000. However it is likely that recovery for the pure economic loss due to the delay in repairing the pipe, of £1500 will be denied.
Law Reform (Contributory Negligence) Act 1945, S1(1)
Barnett v Chelsesa and Kensington Hospital Management Committee  1 QB 428
Bolam v Friern Hospital Management Committee (1957) 1 ALL ER 118, QBD,
Eletrochrome v Welsh Plastics 
Froom v Butcher  QB 286
Hamlin v Edwin Evans  29 HL 141
Hedley Bryne & Co Ltd v Heller and Parnters  2 ALL ER 575
Overseas Tankship (UK) v Morts Dock and Engineering Co (The Wagon Mound) (No 1)  AC 388
Scott v London and St Katherine Docks Co  All ER Rep 248
Smith v Eric S Bush  AC 831
Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd  1 QBD 27
K.Horsey and E.Rackley, Tort Law, Oxford University Press, (2009) 69, 170-250
R. Kidner, Casebook on Torts, Oxford University Press, (2008) 143
R. Bagshaw, Case Notes Negligence- public authority- pure economic loss, Student Law Review 57. 2009, 59
O. Catchpole, Surveyor's reports 1 cherry, 1 bite, 150 New Law Journal 2000 197
Stapleton, Duty of Care and Pure Economic loss: A wider agenda. 107 Law Quarterly Review 1991, 249
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