Editorial Summary: The Spartan Steel v. Martin & Co. case remains a pivotal benchmark in distinguishing recoverable damages from mere economic loss under common law. As Accra Street Journal breaks down, the court drew a firm line between physical damage and purely financial fallout—ruling that while direct loss from property damage is compensable, lost profits from interrupted business operations alone aren’t enough. The ruling echoes loud today: if there’s no duty breached that causes tangible harm, your profits are on their own
Detailed Insight and Picture this: You run a thriving chocolate factory in Accra. Production is in full swing for the Easter season. Machines are humming, mixers are churning, and your team is racing to meet a surge in orders. Suddenly, the entire factory goes dark. A power cut.
You later learn that a construction team working just outside your premises accidentally damaged the underground power cable. They knew it was a critical line yet failed to take necessary precautions. By the time electricity is restored, you’ve lost a whole batch of premium chocolate, missed several delivery deadlines, and stalled production for the rest of the day.
Who pays?
This is precisely the dilemma at the heart of Spartan Steel & Alloys Ltd v. Martin & Co. (Contractors) Ltd (1972), an English case that continues to influence how courts assess economic loss in negligence. Though decided in the UK, its relevance in Ghana stems from Article 11 of the 1992 Constitution, which recognises the common law, including decisions from English courts as part of Ghana’s legal framework. As such, Ghanaian courts often draw on such precedents when dealing with similar legal issues.
The Case in Brief
In Spartan Steel, road workers carelessly damaged a power cable that fed directly into a metal factory. The blackout caused three types of loss:
- Physical damage: Molten metal in the furnace had to be discarded (£368).
- Immediate profit loss: The ruined batch would’ve generated profit (£400).
- Future production loss: No metal could be produced during the outage (estimated at over £1000).
The factory sued for all three. The question before the Court of Appeal: how much of that loss could legally be recovered?
The Legal Divide
Despite these differing philosophies, the court ultimately ruled that only two of the three losses were recoverable:
- Physical damage to the metal.
- The Profit lost from that specific batch.
- But not the loss from idle time and unproduced metal. That was considered too remote, an economic ripple effect beyond the immediate harm.
The Modern Parallel
Back to our chocolate factory.
You could likely claim for the ruined batch and the profits you missed from that specific production. But the revenue you could have earned from future chocolate bars during the outage? Under current legal thinking, that loss may be considered too indirect or remote, unless you had a special contractual relationship with the contractors or they owed you a particular duty.
What Businesses Should Take Away
Understand your risk exposure: If you rely heavily on external utilities or third-party infrastructure, make sure your contracts and insurance policies cover those risks explicitly.
Don’t assume all losses are recoverable: The law distinguishes between direct loss (e.g., damaged goods) and indirect or consequential loss (e.g., missed opportunities). In the world of economic loss the latter often falls outside the scope of legal recovery.
Contractors must consider more than immediate harm: Negligence can trigger wide-reaching financial consequences. If a loss is foreseeable, particularly in critical supply chains, businesses may be held liable.
Insure against business interruption: A single incident can halt operations and cause cascading losses. Business interruption insurance can be a lifeline in such scenarios.
Spartan Steel reminds us that while negligence may seem straightforward, the recovery of economic loss is anything but. Courts draw a fine line between what is compensable and what must be absorbed as part of doing business. For today’s companies, especially those in manufacturing, logistics, or any time-sensitive industry, the lesson is clear: plan for disruption, and know when the law will, and won’t, stand in your corner.
Last Updated on May 2, 2025 by samboad
