Duty of Care; Defective Building

What are the exceptions to the general rule that there is no liability for pure economic loss?

1. Assumption of responsibility (more on this is coming weeks) 2. Defective Premises Act 1972

What are possible exceptions to the non-liability for defects in homes where not causing personal or property damage?

1. Where the property is dangerous to others (ex. neighbours) ➤ Murphy v Brentwood DC, Lord Bridge at 475: '...the building owner ought, in principle, to be entitled to recover in tort from the negligent builder the cost of obviating the danger, whether by repair or by demolition, so far as that cost is necessarily incurred in order to protect himself from potential liability to third parties.' - As it is absurd that C should "have to wait" for their neighbour to be hurt in order to hold D accountable for their negligence 2. Complex structure ➤ D&F Estates Ltd v Church Commissioners for England and Wales [1989] AC 177 -Where a newer structure is built onto an existing one, a defect within it may give rise to liability if it damages the older structure -This exception may apply where the added property is ancillary and not intrinsic, meaning that it can be removed without completely destroying the original structure (ex. AC) Highly critiqued, although Jackson LJ in Robinson v PE Jones Ltd [2011] 3 WLR 815 was not prepared to say it had disappeared from English law ➤ Lord Bridge in D&F Estates: Limited endorsement ➤ Murphy v Brentwood DC - Lord Bridge from 476 and Lord Keith: Limited endorsement - Bridge at 478: 'I cannot see any way in which the reasoning in the paragraph quoted and the consequences in relation to the measure of damages can in principle be supported except by an extreme application of the complex structure theory treating each part of the entire structure as a separate item of property. But such an application of the theory seems to me quite unrealistic. The reality is that the structural elements in any building form a single indivisible unit of which the different parts are essentially interdependent. To the extent that there is any defect in one part of the structure it must to a greater or lesser degree necessarily affect all other parts of the structure. Therefore any defect in the structure is a defect in the quality of the whole and it is quite artificial, in order to impose a legal liability which the law would not otherwise impose, to treat a defect in an integral structure, so far as it weakens the structure, as a dangerous defect liable to cause damage to "other property."' - 'A critical distinction must be drawn here between some part of a complex structure which is said to be a "danger" only because it does not perform its proper function in sustaining the other parts and some distinct item incorporated in the structure which positively malfunctions so as to inflict positive damage on the structure in which it is incorporated. Thus, if a defective central heating boiler explodes and damages a house or a defective electrical installation malfunctions and sets the house on fire, I see no reason to doubt that the owner of the house, if he can prove that the damage was due to the negligence of the boiler manufacturer in the one case or the electrical contractor on the other, can recover damages in tort on Donoghue v. Stevenson [1932] A.C. 562 principles. But the position in law is entirely different where, by reason of the inadequacy of the foundations of the building to support the weight of the superstructure, differential settlement and consequent cracking occurs. Here, once the first cracks appear, the structure as a whole is seen to be defective and the nature of the defect is known.' - Lord Jauncey: 'quite unrealistic' - Lord Oliver: 'artificial' ➤ No longer tenable per Payne & Ors v John Setchell Ltd [2001] EWHC 457

How does the law treat defects of buildings? What does this mean for the duty of care? Case examples?

As a purely economical loss rather than property damage - C cannot recover where a defect (due to negligence) in the building causes it damage, as it is a pure economic loss - C can only recover where that loss is coupled with either personal injury or damage to other property (subject to exceptions) ➤ D&F Estates Ltd v Church Commissioners for England and Wales [1989] AC 177, Lord Bridge: 'Liability can only arise if the defect remains hidden until the defective structure causes personal injury or damage to property other than the structure itself. If the defect is discovered before any damage is done the loss sustained by the owner of the structure, who has to repair or demolish it to avoid a potential source of danger to third parties, would seem to be purely economic loss' ➤ Murphy v Brentwood District Council [1991] 1 AC 398, Lord Bridge: 'If the defect becomes apparent before any injury or damage has been caused, the loss sustained by the building owner is pure economic loss... In the absence of a special relationship of proximity they are not recoverable in tort.' ➤ Henderson v Merrett Syndicates Ltd, Lord Goff: 'There is generally no assumption of responsibility by the sub-contractor or supplier direct to the building owner, the parties having so structured their relationship that it is inconsistent with any such assumption of responsibility.'

What happens where a defect in a building causes personal or property damage?

C can either claim: 1. In negligence where the defect has caused personal injury or property damage - For the breach of duty of care to avoid (a) Personal injury or (b) Damage to other property consequential on the defect 2. Or under s. 1(1) Defective Premises Act 1972 if the claim falls therei

Why are buildings considered by the law to be of a purely economical nature?

Factors at play: 1. Risk Indeterminate Liability - Ownership is "forever", will the builder be forever liable (ex. to the person owning the house in a hundred years?) - Why is this bad? If we do not want builder's heirs to have burden why not just limit to their life? 2. Parliamentary Intent - If the claim does not fall within the Defective Premises Act, it is not for the court's to allow such a claim 3. Incremental Development - Imposing a duty of care in these situations is too great a leap from existing case law 4. Consistency in Principle - Linked to consideration 1. - Liability for manufacturing and building should be comparative (ex. buying vintage no longer imposes on manufacturer) 5. Inconsistency with the Contract - Where no remedy is provided by the contract/statute of limitations (existing for a reason!), it is not for courts to come in

Explain Murphy v Brentwood District Council [1991] 1 AC 398

Facts - Lord Keith at 458: 'The plaintiff's neighbour at 36, Vineway also suffered damage to his house through the settlement, and made a claim on his insurers. Liability was not accepted, and accordingly the neighbour was unable to afford any contribution to the cost of remedial work to the joint structure of the two houses. The plaintiff's insurers, Norwich Union, were not prepared to pay the whole cost. The plaintiff therefore decided to sell his house and move elsewhere. He sold it in July 1986 for £30,000 to a builder who was aware of the structural defects, and who has since occupied it with his family without carrying out any remedial work. The value of the house had it been free from defect was agreed to have been at the time £65,000.' - 459: 'Both Judge Esyr Lewis and the Court of Appeal proceeded on the basis that the plaintiff had a good cause of action by virtue of the decision in Anns . It was held that the diminution in the value of the plaintiff's house by reason of the state of its foundations formed an item of damages recoverable in law' - 460: 'As is well known, it was held in Anns that a local authority might be liable in negligence to long lessees occupying maisonettes built on inadequate foundations not complying with relevant building regulations, on the ground of failure by the authority to discover by inspection the inadequacy of the foundations before they were covered over' - 461: 'Lord Wilberforce [in Anns] went on, at pp. 758-759, to consider the position of the builder, upon the view that it would be unreasonable to impose liability in respect of defective foundations upon the council if the builder, whose primary fault it was, should be immune from liability. This consideration was, I think, a necessary part of the reasoning which led to his conclusion about the liability of the local authority.' - 463: 'Counsel for the council did not seek to argue that a local authority owes no duty at all to persons who might suffer injury through a failure to take reasonable care to secure compliance with building byelaws. He was content to accept that such a duty existed but maintained that its scope did not extend beyond injury to person or health and (possibly) damage to property other than the defective building itself.' Decision - Lord Keith at 466: 'In my opinion it must now be recognised that, although the damage in Anns was characterised as physical damage by Lord Wilberforce, it was purely economic loss.' - Deane J. said, at pp. 503-505 Australian High Court case Council of the Shire of Sutherland v. Heyman 157 CLR 424: 'The building itself could not be said to have been subjected to 'material, physical damage' by reason merely of the inadequacy of its foundations since the building never existed otherwise than with its foundations in that state' (referenced at p. 467) - 469: 'To start with, if such a duty is incumbent upon the local authority, a similar duty must necessarily be incumbent also upon the builder of the house. If the builder of the house is to be so subject, there can be no grounds in logic or in principle for not extending liability upon like grounds to the manufacturer of a chattel. That would open up an exceedingly wide field of claims...The purchaser of an article who discovered that it suffered from a dangerous defect before that defect had caused any damage would be entitled to recover from the manufacturer the cost of rectifying the defect, and presumably, if the article was not capable of economic repair, the amount of loss sustained through discarding it' - 'A similar problem could arise, if the Anns principle is to be treated as confined to real property, where a building collapses when unoccupied' - 471: 'In my opinion it is clear that Anns did not proceed upon any basis of established principle, but introduced a new species of liability governed by a principle indeterminate in character but having the potentiality of covering a wide range of situations, involving chattels as well as real property, in which it had never hitherto been thought that the law of negligence had any proper place...be regarded as a somewhat superficial examination of principle and there has been extreme difficulty, highlighted most recently by the speeches in D. & F. Estates , in ascertaining upon exactly what basis of principle it did proceed.' - 'There can be no doubt that to depart from the decision would re-establish a degree *472 of certainty in this field of law which it has done a remarkable amount to upset' - 'So far as policy considerations are concerned, it is no doubt the case that extending the scope of the tort of negligence may tend to inhibit carelessness and improve standards of manufacture and construction. On the other hand, overkill may present its own disadvantages, as was remarked in Rowling v. Takaro Properties Ltd. [1988] A.C. 473 , 502. There may be room for the view that Anns -type liability will tend to encourage owners of buildings found to be dangerous to repair rather than run the risk of injury. The owner may, however, and perhaps quite often does, prefer to sell the building at its diminished value, as happened in the present case...To overrule it is unlikely to result in significantly increased insurance premiums for householders' - 'My Lords, I would hold that Anns was wrongly decided as regards the scope of any private law duty of care resting upon local authorities in relation to their function of taking steps to secure compliance with building byelaws or regulations and should be departed from. It follows that Dutton v. Bognor Regis Urban District Council [1972] 1 Q.B. 373 should be overruled, as should all cases subsequent to Anns which were decided in reliance on it' Established the exception to the general rule (in principle) that there is no liability for defective buildings: Where the property is dangerous to others (ex. neighbours) - Lord Bridge at 474: Agrees to depart from Anns - 'The present position in our own jurisdiction: Here, as Lord Keith of Kinkel has pointed out, we have shown a marked inclination to confine the Anns doctrine within narrow limits, as in Governors of the Peabody Donation Fund v. Sir Lindsay Parkinson & Co. Ltd. [1985] A.C. 210 and Curran v. Northern Ireland Co-ownership Housing Association Ltd. [1987] A.C. 718 , and most recently, in examining the liability in tort of a builder for defects in the quality of a building which presented no danger, the reasoning of the speeches in D. & F. Estates Ltd. v. Church Commissioners for England [1989] A.C. 177 has gone far to question the principles on which the doctrine rests.' - 'the choice before the House lies between following Australia and rejecting Anns altogether or following Canada and New Zealand in carrying the Anns doctrine a large, legislative step forward to its logical conclusion and holding that the scope of the duty of care, imposed by the law on local authorities for the negligent performance of their functions under the relevant statutes, embraces all economic loss sustained by the owner or occupier of a building by reason of defects in it arising from construction in breach of building byelaws or regulations' - Because: Draws analogy to chattel defective in quality at 475: 'the common law does not impose on him any liability in tort to persons to whom he owes no duty in contract but who, having acquired the chattel, suffer economic loss because the chattel is defective in quality...the loss sustained by the owner or hirer of the chattel is purely economic. It is recoverable against any party who owes the loser a relevant contractual duty. But it is not recoverable in tort in the absence of a special relationship of proximity imposing on the tortfeasor a duty of care to safeguard the plaintiff from economic loss. There is no such special relationship between the manufacturer of a chattel and a remote owner or hirer.' - 'I believe that these principles are equally applicable to buildings...If the defect can be repaired at economic cost, that is the measure of the loss. If the building cannot be repaired, it may have to be abandoned as unfit for occupation and therefore valueless. These economic losses are recoverable if they flow from breach of a relevant contractual duty, but, here again, in the absence of a special relationship of proximity they are not recoverable in tort.' - 'The only qualification I would make to this is that, if a building stands so close to the boundary of the building owner's land that after discovery of the dangerous defect it remains a potential source of injury to persons or property on neighbouring land or on the highway, the building owner ought, in principle, to be entitled to recover in tort from the negligent builder the cost of obviating the danger, whether by repair or by demolition, so far as that cost is necessarily incurred in order to protect himself from potential liability to third parties. - p. 479: 'I am content for present purposes to assume, though I am by no means satisfied that the assumption is correct, that where the local authority, as in this case or in Dutton , have in fact approved the defective plans or inspected the defective foundations and negligently failed to discover the defect, their potential liability in tort is coextensive with that of the builder.' - 'A necessary element in the building owner's cause of action against the negligent local authority, which does not appear to have been contemplated in Dutton but which, it is said in Anns, must be present before the cause of action accrues, is that the state of the building is such that there is present or imminent danger to the health or safety of persons occupying it' - Difficulties arising from this: 'The first difficulty will arise where the relevant defect in the building, when it is first discovered, is not a present or imminent danger to health or safety. What is the owner to do if he is advised that the building will gradually deteriorate, if not repaired, and will in due course become a danger to health and safety, but that the longer he waits to effect repairs the greater the cost will be? Must he spend £1,000 now on the necessary repairs with no redress against the local authority? Or is he entitled to wait until the building has so far deteriorated that he has a cause of action and then to recover from the local authority the £5,000 which the necessary repairs are now going to cost? I can find no answer to this conundrum. A second difficulty will arise where the latent defect is not discovered until it causes the sudden and total collapse of the building, which occurs when the building is temporarily unoccupied and causes no damage to property except to the building itself. The building is now no longer capable of occupation and hence cannot be a danger to health or safety. It seems a very strange result that the building owner should be without remedy in this situation if he would have been able to recover from the local authority the full cost of repairing the building if only the defect had been discovered before the building fell dow

How did older cases treat the purely economical nature of buildings?

Much more generously: ➤ Dutton v Bognor Regis Urban District Council [1972] 1 QB 373, Lord Denning MR: 'The damage done here was not solely economic loss. It was physical damage to the house. If Mr. Tapp's submission were right, it would mean that if the inspector negligently passes the house as properly built and it collapses and injures a person, the council are liable: but if the owner discovers the defect in time to repair it - and he does repair it - the council are not liable. That is an impossible distinction. They are liable in either case.' ➤ Anns v Merton London Borough Council [1977] UKHL 4 - Lord Wilberforce: 'Passing then to the duty as regards inspection, if made. On principle there must surely be a duty to exercise reasonable care. The standard of care must be related to the duty to be performed - namely to ensure compliance with the byelaws. It must be related to the fact that the person responsible for construction in accordance with the byelaws is the builder, and that the inspector's function is supervisory. It must be related to the fact that once the inspector has passed the foundations they will be covered up, with no subsequent opportunity for inspection.'

Is there any duty connected to building dwellings?

Yes: Defective Premises Act 1972 s. 1 Duty to build dwellings properly (1) A person taking on work for or in connection with the provision of a dwelling (whether the dwelling is provided by the erection or by the conversion or enlargement of a building) owes a duty— (a) if the dwelling is provided to the order of any person, to that person; and (b) without prejudice to paragraph (a) above, to every person who acquires an interest (whether legal or equitable) in the dwelling; to see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that as regards that work the dwelling will be fit for habitation when completed (2) A person who takes on any such work for another on terms that he is to do it in accordance with instructions given by or on behalf of that other shall, to the extent to which he does it properly in accordance with those instructions, be treated for the purposes of this section as discharging the duty imposed on him by subsection (1) above except where he owes a duty to that other to warn him of any defects in the instructions and fails to discharge that duty. (3) A person shall not be treated for the purposes of subsection (2) above as having given instructions for the doing of work merely because he has agreed to the work being done in a specified manner, with specified materials or to a specified design. (4) A person who—(a) in the course of a business which consists of or includes providing or arranging for the provision of dwellings or installations in dwellings; or (b) in the exercise of a power of making such provision or arrangements conferred by or by virtue of any enactment; arranges for another to take on work for or in connection with the provision of a dwelling shall be treated for the purposes of this section as included among the persons who have taken on the work. (5) Any cause of action in respect of a breach of the duty imposed by this section shall be deemed, for the purposes of [F1the Limitation Act 1980], to have accrued at the time when the dwelling was completed, but if after that time a person who has done work for or in connection with the provision of the dwelling does further work to rectify the work he has already done, any such cause of action in respect of that further work shall be deemed for those purposes to have accrued at the time when the further work was finished.

What are the exceptions to the duty imposed by s. 1 Defective Premises Act?

s. 2 Cases excluded from the remedy under section 1 (1) Where— (a) in connection with the provision of a dwelling or its first sale or letting for habitation any rights in respect of defects in the state of the dwelling are conferred by an approved scheme to which this section applies on a person having or acquiring an interest in the dwelling; and (b) it is stated in a document of a type approved for the purposes of this section that the requirements as to design or construction imposed by or under the scheme have, or appear to have, been substantially complied with in relation to the dwelling; no action shall be brought by any person having or acquiring an interest in the dwelling for breach of the duty imposed by section 1 above in relation to the dwelling. (2) A scheme to which this section applies— (a) may consist of any number of documents and any number of agreements or other transactions between any number of persons; but (b) must confer, by virtue of agreements entered into with persons having or acquiring an interest in the dwellings to which the scheme applies, rights on such persons in respect of defects in the state of the dwellings. (3) In this section "approved" means approved by the Secretary of State, and the power of the Secretary of State to approve a scheme or document for the purposes of this section shall be exercisable by order, except that any requirements as to construction or design imposed under a scheme to which this section applies may be approved by him without making any order or, if he thinks fit, by order. (4) The Secretary of State— (a) may approve a scheme or document for the purposes of this section with or without limiting the duration of his approval; and (b) may by order revoke or vary a previous order under this section or, without such an order, revoke or vary a previous approval under this section given otherwise than by order. (5) The production of a document purporting to be a copy of an approval given by the Secretary of State otherwise than by order and certified by an officer of the Secretary of State to be a true copy of the approval shall be conclusive evidence of the approval, and without proof of the handwriting or official position of the person purporting to sign the certificate. (6) The power to make an order under this section shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution by either House of Parliament. (7) Where an interest in a dwelling is compulsorily acquired— (a) no action shall be brought by the acquiring authority for breach of the duty imposed by section 1 above in respect of the dwelling; and (b) if any work for or in connection with the provision of the dwelling was done otherwise than in the course of a business by the person in occupation of the dwelling at the time of the compulsory acquisition, the acquiring authority and not that person shall be treated as the person who took on the work and accordingly as owing that duty.

Break down s. 1 Defective Premises Act

➤ Murphy v Brentwood DC, Lord Bridge at 480-481: By s. 1 of the Defective Premises Act 1972, 'Parliament has, in fact, imposed on builders and others undertaking work in the provision of dwellings the obligations of a transmissible warranty, of the quality of their work and of the fitness for habitation of the completed dwelling' - 'But besides being limited to dwellings, liability under the Act is subject to a limitation period of six years from the completion of the work and to the exclusion provided for by section 2. It would be remarkable to *481 find that similar obligations in the nature of a transmissible warranty of quality, applicable to buildings of every kind and subject to no such limitations or exclusions as are imposed by the Act of 1972, could be derived from the builder's common law duty of care or from the duty imposed by building byelaws or regulations.' 1. What is the nature of the duty? (i) workmanlike/professional manner; (ii) proper materials; and (iii) fit for habitation (a) A single duty: One complete and unseverable duty, all parts must be breached for liability ➤ Buckely LJ in Alexander v Mercouris (1979) - Favouring D (b) A three-part duty: The three components should be read separately, only one need to be breached for liability ➤ Harrison v Shepherd Homes Ltd [2011] EWHC 1811 - Favouring C 2. What is a Dwelling? 'a building used, or capable of being used, as a dwelling house, and not a building which is used predominately for commercial and /or industrial purposes.' - Here a hunting cabin not continuously lived in constituted a dwelling ➤ Catlin Estates Ltd. v Cater Jonas [2005] EWHC 2315 3. Fit for Human Habitation? Factors to consider per Dyson LJ: - Security of the home - Live safely without inconvenience - Whether necessary to vacate for remedial works ➤ Bole & Anor v Huntsbuild Ltd [2009] EWCA Civ 1146 Concerns All people who might reasonably be expected to occupy: Including more vulnerable such as asthmatics - So if not sufficient for their habitation, then considered not fit for human habitation generally ➤ Rendlesham Estates Plc v Barr Ltd [2014] EWHC 3968 There is almost no jurisprudence on this, Carnwath LJ: 'For a statute that has been on the books since 1972, there is a surprising death of authority on the precise meaning and effect of the "fitness for habitation test"'. ➤ Bole & Anor v Huntsbuild Ltd [2009] EWCA Civ 1146