![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] |
|
United Kingdom House of Lords Decisions |
||
|
You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Murphy v Brentwood District Council [1991] UKHL 2 (26 July 1990) URL: http://www.bailii.org/uk/cases/UKHL/1991/2.html Cite as: [1991] 1 AC 398, [1990] 2 All ER 908, [1991] UKHL 2 |
||
[New search] [Help]
Parliamentary
Archives,
HL/PO/JU/18/250
Murphy (Respondent)
v.
Brentwood District
Council (Appellants)
JUDGMENT
Die Jovis 26° Julii 1990
Upon Report from the Appellate Committee to
whom was
referred the Cause Murphy against Brentwood District
Council,
That the Committee had heard Counsel on Monday the
14th,
Tuesday the 15th, Wednesday the 16th, Tuesday the 17th,
Monday
the 21st, Tuesday the 22nd and Wednesday the 23rd days of
May
last, upon the Petition and Appeal of Brentwood
District
Council of Council Offices, Brentwood, Essex, praying
that the
matter of the Order set forth in the Schedule thereto,
namely
an Order of Her Majesty's Court of Appeal of the 21st day
of
December 1989, might be reviewed before Her Majesty the
Queen
in Her Court of Parliament and that the said Order might
be
reversed, varied or altered or that the Petitioners might
have
such other relief in the premises as to Her Majesty the
Queen
in Her Court of Parliament might seem meet; as upon the
case
of Thomas Murphy lodged in answer to the said Appeal; and
due
consideration had this day of what was offered on either
side
in this Cause:
It is Ordered and Adjudged, by
the Lords Spiritual and
Temporal in the Court of Parliament of Her
Majesty the Queen
assembled, That the said Order of Her Majesty's
Court of
Appeal of the 21st day of December 1989 complained of in
the
said Appeal be, and the same is hereby, Set Aside and
that the
Order o£ His Honour Judge Esyr Lewis of the 25th
day of
February 1988 be and the same is hereby Set Aside: And
it is
further Ordered, That the Respondent do pay or cause
to be
paid to the said Appellants the Costs incurred by them in
the
Courts below and also the Costs incurred by them in respect
of
the said Appeal to this House, the amount of such
last-
mentioned Costs to be certified by the Clerk of
the
Parliaments if not agreed between the parties: And it is
also
further Ordered, That the Cause be, and the same is
hereby,
remitted back to the Queen's Bench Division of the High
Court
of Justice to do therein as shall be just and consistent
with
this Judgment.
Cler: Parliamentor:
Judgment: 26.7.90
HOUSE OF LORDS
MURPHY
(RESPONDENT)
v.
BRENTWOOD DISTRICT
COUNCIL
(APPELLANTS)
Lord
Chancellor
Lord Keith of Kinkel
Lord Bridge of Harwich
Lord
Brandon of Oakbrook
Lord Ackner
Lord Oliver of Aylmerton
Lord
Jauncey of Tullichettle
LORD MACKAY OF CLASHFERN L.C.
My Lords,
I have had the advantage of
reading in draft the speeches
of my noble and learned friends Lord
Keith of Kinkel and Lord
Bridge of Harwich. They have
comprehensively analysed the issues
arising in this appeal and in
consequence I am able to express my
conclusion briefly.
We are asked to depart from the
judgment of this House in
Anns v. Merton London Borough Council
[1978] A.C. 728 under the
practice statement of 1966 (Practice
Statement (Judicial
Precedent) [1966] 1 W.L.R. 1234). That
decision was taken after
very full consideration by a committee
consisting of most eminent
members of this House. In those
circumstances I would be very
slow to accede to the suggestion
that we should now depart from
it. However, the decision was taken
as a preliminary issue of law
and accordingly the facts had not at
that stage been examined in
detail and the House proceeded upon
the basis of the facts stated
in the pleadings supplemented by
such further facts and documents
as had been agreed between the
parties. Under the head "Nature
of the damages recoverable
and arising of the cause of action"
Lord Wilberforce said, at
p. 759:
"There are many questions
here which do not directly arise
at this stage and which may never
arise as the actions are
tried. But some conclusions are necessary
if we are to deal
with the issue as to limitation."
When one attempts to apply the
proposition established by the
decision to detailed factual
situations difficulties arise and this
was clearly anticipated by
Lord Wilberforce when he said, at p.
760:
"We are not concerned at this
stage with any issue relating
to remedial action nor are we called
upon to decide upon
what the measure of the damages should be;
such questions,
possibly very difficult in some cases, will be for
the court
- 1 -
to
decide. It is sufficient to say that a cause of action
arises
at the point I have indicated."
That point was when damage to the
house had occurred resulting
in there being a present or imminent
danger to the health or
safety of persons occupying it.
As I read the speech of Lord
Wilberforce the cause of
action which he holds could arise in the
circumstances of that
case can only do so when damage occurs to
the house in question
as a result of the weakness of the
foundations and therefore no
cause of action arises before that
damage has occurred even if as
a result of information obtained
about the fundations it may
become apparent to an owner that such
damage is likely.
The person to whom the duty is
owed is an owner or
occupier of the house who is such when the
damage occurs. And
therefore an owner or occupier who becomes
aware of the
possibility of damage arising from a defective
foundation would not
be within the class of persons upon whom the
right of action is
conferred.
As had been demonstrated in the
speeches of my noble and
learned friends, the result of applying
these qualifications to
different factual circumstances is to
require distinctions to be
made which have no justification on any
reasonable principle and
can only be described as capricious. It
cannot be right for this
House to leave the law in that
state.
Two options call for
consideration. The first is to remove
altogether the
qualifications on the cause of action which Anns
held to
exist. This would be in itself a departure from Anns
since
these qualifications are inherent in the decision. The other
option
is to go back to the law as it was before Anns was
decided and
this would involve also overruling Dutton v. Bognor
Regis Urban
District Council [1972] 1 Q.B. 373.
Faced with the choice I am of the
opinion that it is
relevant to take into account that Parliament
has made provisions
in the Defective Premises Act 1972 imposing on
builders and
others undertaking work in the provision of dwellings
obligations
relating to the quality of their work and the fitness
for habitation
of the dwelling. For this House in its judicial
capacity to create
a large new area of responsibility on local
authorities in respect of
defective buildings would in my opinion
not be a proper exercise
of judicial power. I am confirmed in this
view by the
consideration that it is not suggested, and does not
appear to have
been suggested in Anns, that the Public
Health Act 1936, in
particular Part n, manifests any intention to
create statutory
rights in favour of owners or occupiers of
premises against the
local authority charged with responsibility
under the Act. The
basis of the decision in Anns is that
the common law will impose
a duty in the interests of the safety
and health of owners and
occupiers of buildings since that was the
purpose for which the
Act of 1936 was enacted. While of course I
accept that duties at
common law may arise in respect of the
exercise of statutory
powers or the discharge of statutory duties
I find difficulty in
reconciling a common law duty to take
reasonable care that plans
should conform with byelaws or
regulations with the statute which
- 2 -
has imposed on the local authority
the duty not to pass plans
unless they comply with the byelaws or
regulations and to pass
them if they do.
In these circumstances I have
reached the clear conclusion
that the proper exercise of the
judicial function requires this
House now to depart from Anns
in so far as it affirmed a private
law duty of care to avoid
damage to property which causes
present or imminent danger to the
health and safety of owners, or
occupiers, resting upon local
authorities in relation to their
function of supervising
compliance with building byelaws or
regulations, that Dutton v.
Bognor Regis Urban District Council
should be overruled and
that all decisions subsequent to Anns
which purported to
follow it should be overruled. I accordingly
reach the same
conclusion as do my noble and learned friends.
I should make it clear that I
express no opinion upon the
question whether, if personal injury
were suffered by an occupier
of defective premises as a result of
a latent defect in those
premises, liability in respect of that
personal injury would attach
to a local authority which had been
charged with the public law
duty of supervising compliance with
the relevant building byelaws
or regulations in respect of a
failure properly to carry out such
duty.
LORD KEITH OF KINKEL
My Lords,
This appeal raises directly the
question whether Anns v.
Merton London Borough Council
[1978] A.C. 728 was in all respects
correctly decided.
The facts are that over a period
ending in 1969 a concern
called ABC Homes constructed an estate of
160 dwelling houses on
a site in Brentwood. Two of these houses,
nos. 36 and 38
Vineway, were built over filled ground upon a
concrete raft
foundation. The raft was designed by a firm of civil
engineers
called Grahame Rudkins Associates. The design, which
included
certain steel reinforcement, was submitted to the
appellant
council, together with supporting calculations, for
approval under
section 64 of the Public Health Act 1936. The
council, whose
building control staff did not include any persons
qualified to judge
the suitability of the design, sought the
advice of independent
consulting engineers, Messrs. S. D. Mayer &
Partners. Their
advice was to the effect that the design was
appropriate to the
conditions and could properly be approved. The
council accordingly
approved it on 1 January 1969. The plaintiff
purchased 38,
Vineway from ABC Homes in 1970 and took up residence
there.
From 1981 onwards serious cracks started appearing in the
internal
walls of the house. In addition, wet patches appeared in
the lawn.
The plaintiff dug a hole in front of the house and
exposed part of
the foundation raft. He observed a crack in it
about three-
quarters of an inch wide at the bottom tapering to
nothing at the
top. The plaintiff contacted his insurance company,
Norwich
Union, which caused investigations to be made by
consulting
- 3 -
engineers. These revealed that the
concrete raft had subsided
differentially, so causing distortion
and cracking. In July 1985 the
gas pipe leading to a fire in the
living room cracked and was
replaced at a cost of £48. It
was found that the soil pipe leading
to the main drain had cracked
and was leaking into the
foundations. 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. Norwich Union paid the
plaintiff £35,000 in
settlement of his claim for subsidence damage.
There was evidence
that the cost of remedial work on the
foundations of the house
would have been in the region of £45,000.
The damages
claimed by the plaintiff against the council, in
proceedings
commenced in September 1983, included the sum of
£35,000 and
also the sum of £3,631.25 in respect of costs incurred
in
selling 38, Vineway and buying a new house and moving there,
£98
for refitting carpets in the new house, and £48 for
replacing
the fractured gas pipe.
The case was tried before Judge
Esyr Lewis Q.C. as official
referee. He gave judgment on 18 March
1988 awarding the
plaintiff damages of £38,777.25, made up
of the four items
mentioned above, together with interest of
£7,173.75. In the
course of his judgment he made the
following findings: (a) The
design of the concrete raft was
defective in that it did not
provide for sufficient steel
reinforcement and was therefore
unsuitable for the site. (b)
Messrs. Mayer were competent
engineers and the council were
entitled to rely on their skill and
experience. (c) Messrs. Mayer
were negligent in approving the
design of the concrete raft as
suitable for the site, (d) As a
result of its defective design the
raft cracked and became
distorted so that differential settlement
occurred and cracks were
caused in some walls and a gas pipe and a
soil pipe were
fractured, (e) Sporadic and unpredictable
settlement of the raft
would occur in the future though the total
amount of future
settlement might be small, (f) There was a risk
that the main
gas pipe might fracture and that water pipes might
also fracture
causing water to leak into electrical fittings.
This, together with
leakage of sewage into the foundations from
the fractured soil
pipe, constituted an imminent danger to the
health and safety of
occupants of the house.
In the light of these findings
Judge Esyr Lewis held that the
council were liable to the
plaintiff in negligence under the
principle of Anns v. Merton
London Borough Council. He further
held that the council's
duty to take reasonable care in considering
the suitability of the
design of the concrete raft had not been
discharged by obtaining
and acting upon the advice of competent
independent consulting
engineers. He also decided against the
council a limitation point
which is no longer a live issue.
- 4 -
An appeal by the council to the
Court of Appeal was
dismissed by that court (Fox, Ralph Gibson and
Nicholls L.JJ.)
[1990] 2 W.L.R. 944 on 21 December 1989. The
council now
appeals, with leave given in the Court of Appeal, to
your
Lordships' House.
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. Ralph
Gibson L.J. said, at pp.
966-967:
"In this case, upon the facts
as the plaintiff contended that
they were on the evidence, the
plaintiff's loss on sale as
awarded was substantially less than
the cost of eliminating
the danger found by the judge to exist.
Full effect is given
to the nature of the cause of action as
established in Anns,
and to any limitations necessarily
imposed upon that cause
of action by the nature of the statutory
purposes of the
[Public Health Act 1936], if the damages awarded
are
justified by proof of imminent danger to health and safety,
by
proof of the fact that the loss on sale was caused by
the
existence of that danger, and proof that the amount
awarded does
not exceed the cost of eliminating that
danger."
Before your Lordship's House it
was argued on behalf of the
council that Anns was wrongly
decided and should be departed
from under the practice statement
of 26 July 1966 (Practice
Statement (Judicial Precedent)
[1966] 1 W.L.R. 1234). The
speeches of my noble and learned
friends Lord Bridge of Harwich
and Lord Oliver of Aylmerton in D.
& F. Estates Ltd v. Church
Commissioners for England
[1989] A.C. 177 contain some passages
expressing doubts as to the
extent to which the decision in Anns is
capable of being
reconciled with pre-existing principle. It is
therefore
appropriate to subject the decision to careful
reconsideration.
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.
The proceedings arose out of the trial of
a preliminary issue as
to whether or not the plaintiffs had any
cause of action against
the local authority, and the damages
claimed by them were not
specified in the pleadings. It appeared,
however, that such
damages would include the cost of repairing
cracks in the
structure and of underpinning the foundations of the
block of
maisonettes.
The leading speech was that of
Lord Wilberforce. His
examination of law started with the
formulation of the two stage
test of liability in negligence
which, though it has since become
very familiar, I venture to
quote again [1978] A.C. 728, 751-752:
'Through the trilogy of cases in
this House - Donoghue v.
Stevenson [1932] A.C. 562, Hedley
Byrne & Co. Ltd. v.
- 5 -
Heller & Partners Ltd.
[1964] A.C. 465, and Dorset Yacht
Co. Ltd. v. Home Office
[1970] A.C. 1004, the position has
now been reached that in order
to establish that a duty of
care arises in a particular situation,
it is not necessary to
bring the facts of that situation within
those of previous
situations in which a duty of care has been held
to exist.
Rather the question has to be approached in two
stages.
First one has to ask whether, as between the
alleged
wrongdoer and the person who has suffered damage there
is
a sufficient relationship of proximity or neighbourhood
such
that, in the reasonable contemplation of the
former,
carelessness on his part may be likely to cause damage
to
the latter - in which case a prima facie duty of care
arises.
Secondly, if the first question is answered affirmatively,
it
is necessary to consider whether there are any
considerations
which ought to negative, or to reduce or limit
the scope of the
duty or the class of person to whom it is
owed or the damages to
which a breach of it may give rise:
see Dorset Yacht case
[1970] A.C. 1004, per Lord Reid at
p. 1027. Examples of
this are Hedley Byrne's case [1964]
A.C. 465 where the
class of potential plaintiffs was reduced
to those shown to have
relied upon the correctness of
statements made, and Weller &
Co. v. Foot and Mouth
Disease Research Institute [1966] 1 Q.B.
569; and (I cite
these merely as illustrations, without
discussion) cases about
"economic loss" where, a duty
having been held to exist, the
nature of the recoverable damages
was limited: see S.C.M.
(United Kingdom) Ltd. v. W. J. Whittall
& Son Ltd. [1971] 1
Q.B. 337 and Spartan Steel &
Alloys Ltd. v. Martin & Co.
(Contractors) Ltd. [1973] Q.B. 27."
I observe at this point that the
two-stage test has not been
accepted as stating a universally
applicable principle. Reservations
about it were expressed by
myself in Governors of the Peabody
Donation Fund v. Sir Lindsay
Parkinson & Co. Ltd. [1985] A.C.
210, 240, by Lord Brandon
of Oakbrook in Leigh and Sillavan Ltd.
v. Aliakmon Shipping Co.
Ltd. [1986] A.C. 785, 815 and by Lord
Bridge of Harwich in
Curran v. Northern Ireland Co-ownership
Housing Association
Ltd. [1987] A.C. 718. In Council of the Shire
of Sutherland
v. Heyman (1985) 157 C.L.R. 424, where the High
Court of
Australia declined to follow Anns, Brennan J. expressed
his
disagreement with Lord Wilberforce's approach, saying, at p.
481:
"It is preferable, in my
view, that the law should develop
novel categories of negligence
incrementally and by analogy
with established categories, rather
than by a massive
extension of a prima facie duty of care
restrained only by
indefinable 'considerations which ought to
negative, or to
reduce or limit the scope of the duty or the class
of person
to whom it is owed.'"
In the Privy Council case of Yuen
Kun Yeu v. Attorney-
General of Hong Kong [1988] A.C. 175, 191
that passage was
quoted with approval and it was said, at p. 194:
"In view of the direction in
which the law has since been
developing, their Lordships consider
that for the future it
should be recognised that the two-stage
test ... is not to
- 6 -
be regarded as in all
circumstances a suitable guide to the
existence of a duty of
care."
Finally, in Yuen Kun Yeu
193, and in Hill v. Chief
Constable of West Yorkshire [1989] A.C. 53, 63, I expressed the
opinion, concurred in by the other
members of the House who
participated in the decisions, that the
second stage of the test
only came into play where some particular
consideration of public
policy excluded any duty of care. As
regards the ingredients
necessary to establish such a duty in
novel situations, I consider
that an incremental approach on the
lines indicated by Brennan J.
in the Shire of Sutherland
case is to be preferred to the two-stage
test.
Lord Wilberforce thereafter went
on to consider the
purposes of the Act of 1936, to hold that the
local authority were
under a duty to give proper consideration to
the question whether
they should inspect or not and to hold
further that in relation to
an inspection which it was decided to
make there was a duty to
exercise reasonable care in making it.
Having considered East
Suffolk Rivers Catchment Board v. Kent
[1941] A.C. 74 and Dorset
Yacht Co. Ltd. v. Home Office [1970] A.C. 1004, he continued, at
p. 758:
"To whom the duty is owed.
There is, in my opinion,
no difficulty about this. A reasonable
man in the position
of the inspector must realise that if the
foundations are
covered in without adequate depth or strength as
required
by the byelaws, injury to safety or health may be
suffered
by owners or occupiers of the house. The duty is owed
to
them - not of course to a negligent building owner, the
source
of his own loss. I would leave open the case of
users, who might
themselves have a remedy against the
occupier under the Occupiers'
Liability Act 1957. A right
of action can only be conferred upon
an owner or occupier,
who is such when the damage occurs (see
below). This
disposes of the possible objection that an
endless,
indeterminate class of potential plaintiffs may be called
into
existence.
"The nature of the duty.
This must be related
closely to the purpose for which powers of
inspection are
granted, namely, to secure compliance with the
byelaws.
The duty is to take reasonable care, no more, no less,
to
secure that the builder does not cover in foundations which
do
not comply with byelaw requirements. The allegations in
the
statements of claim, in so far as they are based upon
non-compliance
with the plans, are misconceived."
Lord Wilberforce 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. The Dorset Yacht case, upon
which Lord
Wilberforce was proceeding, was concerned with the
liability of
prison officers for failing to take reasonable care to
prevent the
Borstal boys in their charge from acting tortiously
- 7 -
towards the owners of yachts
moored in the vicinity of their
encampment. If the conduct of the
boys had not been tortious
there would have been no liability on
the prison officers. So,
likewise, if the builder of defective
foundations had been under no
liability in tort, the local
authority could have been under no
liability for not taking
reasonable care to see that he did not
construct defective
foundations. Lord Wilberforce took the view
that the principle of
Donoghue v. Stevenson [1932] A.C. 562
applied to the
builder of defective premises, there being no sound
reason why
that principle should be limited to defective chattels.
I see no reason to doubt that the
principle of Donoghue v.
Stevenson does indeed apply so as
to place the builder of premises
under a duty to take reasonable
care to avoid injury through
defects in the premises to the person
or property of those whom
he should have in contemplation as
likely to suffer such injury if
care is not taken. But it is
against injury through latent defects
that the duty exists to
guard. I shall consider this aspect more
fully later.
Lord Wilberforce went on, at pp. 759-760:
"Nature of the damages
recoverable and arising of the
cause of action. There are many
questions here which do
not directly arise at this stage and which
may never arise if
the actions are tried. But some conclusions are
necessary if
we are to deal with the issue as to limitation.
The
damages recoverable include all those which foreseeably
arise
from the breach of the duty of care which, as regards
the council,
I have held to be a duty to take reasonable
care to secure
compliance with the byelaws. Subject always
to adequate proof of
causation, these damages may include
damages for personal injury
and damage to property. In my
opinion they may also include damage
to the dwelling house
itself; for the whole purpose of the byelaws
in requiring
foundations to be of a certain standard is to
prevent
damage arising from weakness of the foundations which
is
certain to endanger the health or safety of occupants.
"To allow recovery for such
damage to the house
follows, in my opinion, from normal principle.
If
classification is required, the relevant damage is in
my
opinion material, physical damage, and what is recoverable
is
the amount of expenditure necessary to restore the
dwelling to a
condition in which it is no longer a danger to
the health or
safety of persons occupying and possibly
(depending on the
circumstances) expenses arising from
necessary displacement. On
the question of damages
generally I have derived much assistance
from the judgment
(dissenting on this point, but of strong
persuasive force) of
Laskin J. in the Canadian Supreme Court case
of Rivtow
Marine Ltd. v. Washington Iron Works [1973] 6
W.W.R. 692,
715 and from the judgments of the New Zealand Court
of
Appeal (furnished by courtesy of that court) in Bowen
v.
Paramount Builders (Hamilton) Ltd.[1975] 2 N.Z.L.R. 546.
"When does the cause of
action arise? We can leave
aside cases of personal injury or
damage to other property
as presenting no difficulty. It is only
the damage for the
- 8 -
house which requires
consideration. In my respectful opinion
the Court of Appeal was
right when, in Sparham-Souter v.
Town and Country
Developments (Essex) Ltd. [1976] Q.B. 858
it abjured the view
that the cause of action arose
immediately upon delivery, i.e.,
conveyance of the defective
house. It can only arise when the
state of the building is
such that there is present or imminent
danger to the health
or safety of persons occupying it. We are not
concerned at
this stage with any issue relating to remedial action
nor are
we called upon to decide upon what the measure of
the
damages should be; such questions, possibly very difficult
in
some cases, will be for the court to decide. It is
sufficient
to say that a cause of action arises at the point I
have
indicated."
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. Not having heard argument upon the
matter, I prefer to
reserve my opinion on the question whether
any duty at all exists.
So far as I am aware, there has not yet
been any case of claims
against a local authority based on injury
to person or health
through a failure to secure compliance with
building byelaws. If
and when such a case arises, that question
may require further
consideration. The present problem is
concerned with the scope of
the duty. The question is whether
the appellant council owed the
respondent a duty to take
reasonable care to safeguard him against
the particular kind of
damage which he has in fact suffered, which
was not injury to
person or health nor damage to anything other
than the defective
house itself (see Overseas Tankship (U.K.)
Ltd. v. Morts Dock and
Engineering Co. Ltd., (The Wagon Mound)
[1961]) A.C. 388, 425,
per Viscount Simonds: Caparo
Industries Plc, v. Dickman [1990] 2
W.L.R. 358, 373, 396 per
Lord Bridge of Harwich and Lord Oliver
of Aylmerton, quoting the
judgment of Brennan J. in the Shire of
Sutherland case; 157
C.L.R. 424, 487). 60 A.L.R. 1, 48.
Lord Wilberforce, in the passage
last quoted from his speech
in Anns, does not devote
precise consideration to the scope of the
duty owed by a local
authority as regards securing compliance with
building byelaws.
The question whether recovery could be allowed
for damage to the
house and for the cost putting it in such a
state as to be no
longer a danger to health or safety was treated
in the context of
the measure of damages and the answer was said
to follow from
normal principle. It appears that the normal
principle concerned
was that which emerged from Donoghue v.
Stevenson, as
extended to the sphere of statutory functions of
public bodies in
Dorset Yacht Co. Ltd. v. Home Office. However,
an essential
feature of the species of liability in negligence
established by
Donoghue v. Stevenson was that the carelessly
manufactured
-product should be intended to reach the injured
consumer in the
same state as that in which it was put up with
no reasonable
prospect of intermediate examination (see per Lord
Atkin,
at p. 599; also Grant v. Australian Knitting Mills Ltd.
[1936]
A.C. 85, per Lord Wright, at pp. 103-105). It is the
latency
of the defect which constitutes the mischief. There may be
room
- 9 -
for disputation as to whether the
likelihood of intermediate
examination and consequent actual
discovery of the defect has the
effect of negativing a duty of
care or of breaking the chain of
causation (compare Farr v.
Butters Brothers & Co. [1932] 2 K.B.
606 with Denny v.
Supplies & Transport Co. Ltd. [1950] 2 K.B.
374). But
there can be no doubt that, whatever the rationale, a
person who
is injured through consuming or using a product of the
defective
nature of which he is well aware has no remedy against
the
manufacturer. In the case of a building, it is right to accept
that
a careless builder is liable, on the principle of Donoghue
v.
Stevenson, where a latent defect results in physical injury
to
anyone, whether owner, occupier, visitor or passer-by, or to
the
property of any such person. But that principle is not apt
to
bring home liability towards an occupier who knows the full
extent
of the defect yet continues to occupy the building. The
Dorset
Yacht case was concerned with the circumstances
under which one
person might come under a duty to another to take
reasonable
care to prevent a third party from committing a tort
against that
other. So the case had affinities with Anns
where a local
authority was held to be under a duty to take
reasonable care to
prevent a builder from causing damage through
carelessness to
subsequent occupiers of houses built by him. In
Dorset Yacht,
however, the damage caused was physical
damage to property, and,
as I explained in Hill v. Chief
Constable of West Yorkshire [1989]
A.C. 53, 61, the prison
officers in charge of the Borstal boys had
created a potential
situation of danger for the owners of yachts
moored in the
vicinity of the encampment by bringing the boys
into that
locality. No such feature was present in Anns.
In Anns the House of Lords
approved, subject to explanation,
the decision of the Court of
Appeal in Dutton v. Bognor Regis
Urban District Council
[1972] 1 Q.B. 373. In that case Lord
Denning M.R. said, at p. 396:
"Mr Tapp [for the council]
submitted that the liability of
the council would, in any case, be
limited to those who
suffered bodily harm: and did not extend to
those who only
suffered economic loss. He suggested, therefore,
that
although the council might be liable if the ceiling fell
down
and injured a visitor, they would not be liable
simply
because the house was diminished in value. ... I
cannot
accept this submission. 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. I
would say the same about the
manufacturer of an article.
If he makes it negligently, with a
latent defect (so that it
breaks to pieces and injures someone),
he is undoubtedly
liable. Suppose that the defect is discovered in
time to
prevent the injury. Surely he is liable for the cost
of
repair."
The jump which is here made from
liability under the Donoghue v.
Stevenson principle for
damage to person or property caused by a
latent defect in a
carelessly manufactured article to liability for
- 10 -
the cost of rectifying a defect in
such an article which is ex
hypothesi no longer latent is
difficult to accept. As Stamp L.J.
recognised in the same case, at
pp. 414-415, there is no liability
in tort upon a manufacturer
towards the purchaser from a retailer
of an article which turns
out to be useless or valueless through
defects due to careless
manufacture. The loss is economic. It is
difficult to draw a
distinction in principle between an article
which is useless or
valueless and one which suffers from a defect
which would render
it dangerous in use but which is discovered by
the purchaser in
time to avert any possibility of injury. The
purchaser may incur
expense in putting right the defect, or, more
probably, discard
the article. In either case the loss is purely
economic. Stamp
L.J. appears to have taken the view that in the
case of a house
the builder would not be liable to a purchaser
where the defect
was discovered in time to prevent injury but that
a local
authority which had failed to discover the defect by
careful
inspection during the course of construction was so liable.
Batty v. Metropolitan Property
Realisations Ltd. [1978] Q.B.
554 was a case where a house
which suffered no defects of
construction had been built on land
subject to the danger of
slippage. A landslip carried away part of
the garden but there
was no damage to the house itself. Due to the
prospect, however,
that at some future time the house might be
completely carried
away, it was rendered valueless. There was no
possibility of
remedial works such as might save the house from
being carried
away. The Court of Appeal allowed recovery in tort
against the
builder of damages based on loss of the value of the
house. That
again was purely economic loss.
Consideration of the nature of the
loss suffered in this
category of cases is closely tied up with
the question of when the
cause of action arises. Lord Wilberforce
in Anns [1978] A.C. 728,
760 as regarded it as arising when
the state of the building is
such that there is present an
imminent danger to the health or
safety of persons occupying it.
That state of affairs may exist
when there is no actual physical
damage to the building itself,
though Lord Wilberforce had earlier
referred to the relevant
damage being material physical damage. So
his meaning may have
been that there must be a concurrence of
material physical
damage and also present or imminent danger to
the health or
safety of occupants. On that view there would be no
cause of
action where the building had suffered no damage (or
possibly,
having regard to the word "material," only
very slight damage) but
a structural survey had revealed an
underlying defect, presenting
imminent danger. Such a discovery
would inevitably cause a fall
in the value of the building,
resulting in economic loss to the
owner. That such is the nature
of the loss is made clear in cases
where the owner abandons the
building as incapable of being put in
a safe condition (as in
Batty), or where he choses to sell it at the
lower value rather
than undertake remedial works. In Pirelli
General Cable Works
Ltd. v. Oscar Faber & Partners [1983] 2 A.C.
1 it was held
that the cause of action in tort against consulting
engineers who
had negligently approved a defective design for a
chimney arose
when damage to the chimney caused by the
defective design first
occurred, not when the damage was
discovered or with reasonable
diligence might have been
discovered. The defendants there had in
relation to the design
been in contractual relations with the
plaintiffs, but it was
- 11 -
:
common ground that a claim in
contract was time-barred. If the
plaintiffs had happened to
discover the defect before any damage
had occurred there would
seem to be no good reason for holding
that they would not have had
a cause of action in tort at that
stage, without having to wait
until some damage had occurred.
They would have suffered economic
loss through having a defective
chimney upon which they required
to expend money for the
purpose of removing the defect. It would
seem that in a case
such as Pirelli where the tortious
liability arose out of a
contractual relationship with
professional people, the duty extended
to take reasonable care not
to cause economic loss to the client
by the advice given. The
plaintiffs built the chimney as they did
in reliance on that
advice. The case would accordingly fall within
the principle of
Medley Byrne & Co. Ltd. v. Heller & Partners
Ltd.
[1964] A.C. 465. I regard Junior Books Ltd. v. Veitchi Co.
Ltd.
[1983] 1 A.C. 520 as being an application of that principle.
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. In Council of the Shire
of Sutherland v.
Heyman, 157 C.L.R. 424 where, as observed
above, the High
Court of Australia declined to follow Anns when
dealing
with a claim against a local authority in respect of a
defectively
constructed house, Deane J. said, at pp. 503-505:
"Nor is the respondents'
claim in the present case for
ordinary physical damage to
themselves or their property.
Their claim, as now crystallized, is
not in respect of
damage to the fabric of the house or to other
property
caused by collapse or subsidence of the house as a result
of
the inadequate foundations. It is for the loss or
damage
represented by the actual inadequacy of the
foundations,
that is to say, it is for the cost of remedying a
structural
defect in their property which already existed at the
time
when they acquired it. In Anns v. Merton London
Borough
Council [1978] A.C. 728, it was held by the House of
Lords
that a local government authority owed a relevant duty
of
care, in respect of inspection of the foundations of
a
building, to persons who subsequently became long term
lessees
(either as original lessees or as assignees) of parts of
the
building. Lord Wilberforce, at p. 759, in a speech with
which
three of the other four members of the House of
Lords agreed,
expressed the conclusion that the appropriate
classification of
damage sustained by the lessees by reason
of the inadequacy of the
foundations of the completed
building was 'material, physical
damage, and what is
recoverable is the amount of expenditure
necessary to
restore the dwelling to a condition in which it is no
longer
a danger to the health or safety of persons occupying
and
possibly (depending on the circumstances) expenses
arising
from necessary displacement.' While, in a case where
a
subsequent purchaser or long term tenant reasonably elects
to
retain the premises and to reinforce the foundations, one
possible
measure of the damages involved in the actual
inadequacy would (if
such damages were recoverable) be that
suggested by his Lordship,
I respectfully disagree with the
classification of the loss
sustained in such circumstances as
'material, physical damage.'
Whatever may be the position
with respect to consequential damage
to the fabric of the
- 12 -
building or to other property
caused by susequent collapse or
subsidence, the loss or Injury
involved in the actual
inadequacy of . the foundations cannot, in
the case of a
person who purchased or leased the property after
the
inadequacy existed but before it was known or
manifest,
properly be seen as ordinary physical or material
damage.
The only property which could be said to have been
damaged
in such a case is the building. 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. Moreover, even if the
inadequacy of the
foundations could be seen as material,
physical damage to the
building, it would be damage to
property in which a future
purchaser or tenant had no
interest at all at the time when it
occurred. Loss or injury
could only be sustained by such a
purchaser or tenant on or
after the acquisition of the freehold or
leasehold estate
without knowledge of the faulty foundations. It
is arguable
that any such loss or injury should be seen as
being
sustained at the time of acquisition when, because
of
ignorance of the inadequacy of the foundations, a higher
price
is paid (or a higher rent is agreed to be paid) than is
warranted
by the intrinsic worth of the freehold or leasehold
estate that is
being acquired. Militating against that
approach is the
consideration that, for so long as the
inadequacy of the
foundations is neither known nor manifest,
no identifiable loss
has come home: if the purchaser or
tenant sells the freehold or
leasehold estate within that
time, he or she will sustain no loss
by reason of the
inadequacy of the foundations. The alternative,
and in my
view preferable, approach is that any loss or injury
involved
in the actual inadequacy of the foundations is sustained
only
at the time when that inadequacy is first known or
manifest.
It is only then that the actual diminution in the
market value of
the premises occurs. On either approach,
however, any loss
involved in the actual inadequacy of the
foundations by a person
who acquires an interest in the
premises after the building has
been completed is merely
economic in its nature."
I find myself in respectful
agreement with the reasoning
contained in this passage, which
seems to me to be
incontrovertible.
It being recognised that the
nature of the loss held to be
recoverable in Anns was pure
economic loss, the next point for
examination is whether the
avoidance of loss of that nature fell
within the scope of any duty
of care owed to the plaintiffs by the
local authority. On the
basis of the law as it stood at the time
of the decision the
answer to that question must be in the
negative. The right to
recover for pure economic loss, not flowing
from physical injury,
did not then extend beyond the situation
where the Joss had been
sustained through reliance on negligent
mis-statements, as in
Hedley Byrne. There is room for the view
that an exception
is to be found in The Greystoke Castle [1947]
A.C. 265.
That case, which was decided by a narrow majority,
may, however,
be regarded as turning on specialties of maritime
Jaw concerned in
the relationship of joint adventurers at sea.
- 13 -
Further, though the purposes of
the Act of 1936 as regards
securing compliance with building
byelaws covered the avoidance of
injury to the safety or health of
inhabitants of houses and of
members of the public generally,
these purposes did not cover the
avoidance of pure economic loss
to owners of buildings (see
Governors of the Peabody Donation
Fund v. Sir Lindsay Parkinson
& Co. Ltd. [1985] A.C. 210,
241). Upon analysis, the nature of
the duty held by Anns to
be incumbent upon the local authority
went very much further than
a duty to take reasonable care to
prevent injury to safety or
health. The duty held to exist may be
formulated as one to take
reasonable care to avoid putting a
future inhabitant owner of a
house in a position in which he is
threatened, by reason of a
defect in the house, with avoidable
physical injury to person or
health and is obliged, in order to
continue to occupy the house
without suffering such injury, to
expend money for the purpose of
rectifying the defect.
The existence of a duty of that
nature should not, in my
opinion, be affirmed without a careful
examination of the
implications of such affirmation. 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 grounds in logic or in
principle for not extending
liability upon like grounds to the
manufacturer of a chattel. That
would open on an exceedingly
wide field of claims, involving the
introduction of something in the
nature of a transmissible
warranty of quality. 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. Then it would
be open to question
whether there should not also be a right to
recovery where the
defect renders the article not dangerous but
merely useless. The
economic loss in either case would be the
same. There would also
be a problem where the defect causes the
destruction of the
article itself, without causing any personal
injury or damage to
other property. A similar problem could
arise, if the Anns
principle is to be treated as confined to real
property, where a
building collapses when unoccupied.
In America the courts have
developed the view that in the
case of chattels damage to the
chattel itself resulting from
careless manufacture does not give a
cause of action in negligence
or in product liability. Thus in
East River Steamship Corporation
v. Transamerica Delaval Inc.
(1986) 106 S.Ct. 2295 charterers of a
supertanker were denied
recovery on either of these grounds,
against the manufacturers of
turbines which had suffered damage
through design or manufacturing
defect and which had had to be
replaced. Blackmun J. delivering
the judgment of the Supreme
Court expressed the opinion, at pp.
2302-2304, that a claim of this
character fell properly into the
sphere of warranty under contract
law. This judgment was followed
by the United States Court of
Appeals, Third Circuit, in Aloe
Coal Co. v. Clark Equipment Co.
(1987) 816 F.2d 110, where
recovery in negligence was refused in
respect of damage to a
tractor shovel which caught fire and was
destroyed, allegedly due
to careless manufacture. The view of
these courts is in line with
the dissenting judgment of Lord
Brandon of Oakbrook in Junior
Books Ltd. v. Veitchi Co. Ltd.
[1983] 1 A.C. 520.
- 14 -
These American cases would appear
to destroy the authority
of the earlier decision in Quackenbush
v. Ford Motor Co. (1915)
153 N.Y.S. 131 founded on by the New
Zealand Court of Appeal in
Bowen v. Paramount Builders
(Hamilton) Ltd. [1977] 1 N.Z.L.R.
394. from which Lord
Wilberforce in Anns [1978] A.C. 728, 759-760
said he had
derived assistance. He referred similarly to the
dissenting
judgment of Laskin J. in the Canadian Supreme Court
case of Rivtow
Marine Ltd. v. Washington Iron Works [1973] 6
W.W.R. 692, 715.
That was a case where a crane installed on the
plaintiffs' barge
was revealed as being dangerously defective as a
result of a
similar crane having collapsed and killed a man while
being
operated elsewhere. The manufacturers and the suppliers
were aware
of this occurrence but delayed considerably in warning
the
plaintiffs so that they were placed under the necessity of
taking
the crane out of service for rectification at the height of
the
logging season instead of in the slack season. The majority of
the
Supreme Court held the manufacturers and suppliers liable for
the
loss of profit sustained by the plaintiffs through not having
been
given earlier warning of the defect. This was upon the
Hedley
Byrne principle. They did not allow recovery for the cost
of
putting right the defect. The minority, Laskin and Hall JJ.,
were
in favour of allowing recovery of that cost. For my part, I
consider
that the decision of the majority was correct. The
defect in the
crane was discovered before it had done any damage,
so that there
could be no question of application of the Donoghue
v.
Stevenson [1932] A.C. 562 principle. The cost of rectifying
the
defect was incurred for the purpose of enabling the crane to
be
profitably operated. The danger of injury from the defect, once
it
was known, could have been averted simply by laying up the
crane.
The loss was purely economic.
In D. & F. Estates Ltd. v.
Church Commissioners for
England [1989] A.C. 177 both Lord
Bridge of Harwich and Lord
Oliver of Aylmerton expressed
themselves as having difficulty in
reconciling the decision in
Anns with pre-existing principle and as
being uncertain as
to the nature and scope of such new principle
as it introduced.
Lord Bridge, at p. 206, suggested that in the
case of a complex
structure such as a building one element of the
structure might be
regarded for Donoghue v. Stevenson purposes as
distinct
from another element, so that damage to one part of the
structure
caused by a hidden defect in another part might qualify
to be
treated as damage to "other property." I think that
it
would be unrealistic to take this view as regards a building
the
whole of which had been erected and equipped by the
same
contractor. In that situation the whole package provided by
the
contractor would, in my opinion, fall to be regarded as one
unit
rendered unsound as such by a defect in the particular part.
On
the other hand where, for example, the electric wiring had
been
installed by a subcontractor and due to a defect caused by
lack of
care a fire occurred which destroyed the building, it
might not be
stretching ordinary principles too far to hold the
electrical
subcontractor liable for the damage. If in the East
River case the
defective turbine had caused the loss of the
ship the manufacturer
of it could consistently with normal
principles, I would think,
properly have been held liable for that
loss. But even if Lord
Bridge's theory were to be held acceptable,
it would not seem to
extend to the founding of liability upon a
local authority,
considering that the purposes of the Act of 1936
are concerned
- 15 -
with averting danger to health and
safety, not danger or damage
to property. Further, it would not
cover the situation which might
arise through discovery, before
any damage had occurred, of a
defect likely to give rise to damage
in the future.
Liability under the Anns
decision is postulated upon the
existence of a present or imminent
danger to health or safety.
But considering that the loss involved
in incurring expenditure to
avert the danger is pure economic
loss, there would seem to be no
logic in confining the remedy to
cases where such danger exists.
There is likewise no logic in
confining it to cases where some
damage (perhaps comparatively
slight) has been caused to the
building, but refusing it where the
existence of the danger has
come to light in some other way, for
example through a structural
survey which happens to have been
carried out, or where the
danger inherent in some particular
component or material has been
revealed through failure in some
other building. Then there is the
question whether the remedy is
available where the defect is
rectified, not in order to avert
danger to an inhabitant occupier
himself, but in order to enable
an occupier, who may be a
corporation, to continue to occupy the
building through its
employees without putting those employees at
risk.
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.
The practice statement of 26 July
1966 (Practice Statement
(Judicial Precedent) [1966] 1
W.L.R. 1234) leaves it open to this
House to depart from a
previous decision of its own if it so
chooses. In Reg. v.
National Insurance Commmissioner, Ex parte
Hudson [1972] A.C.
944, 966 Lord Reid said:
"The old view was that any
departure from rigid adherences
to precedent would weaken [the
certainty of the law]. I did
not and do not accept that view. It
is notorious that where
an existing decision is disapproved but
cannot be overruled
courts tend to distinguish it on inadequate
grounds. I do
not think that they act wrongly in so doing: they
are only
adopting the less bad of the only alternatives open to
them.
But this is bound to add to uncertainty for no one can
say
in advance whether in a particular case the court will or
will
not feel bound to follow the old unsatisfactory decision.
On
balance it seems to me that overruling such a decision
will
promote and not impair the certainty of the law."
In my opinion there can be no
doubt that Anns has for long
been widely regarded as an
unsatisfactory decision. In relation to
the scope of the duty owed
by a local authority it proceeded upon
what must, with due respect
to its source, 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. I think it must now be recognized that it did
not
proceed on any basis of principle at all, but constituted a
- 16 -
remarkable example of judicial
legislation. It has engendered a
vast spate of litigation, and
each of the cases in the field which
have reached this House has
been distinguished. Others have been
distinguished in the Court of
Appeal. The result has been to keep
the effect of the decision
within reasonable bounds, but that has
been achieved only by
applying strictly the words of Lord
Wilberforce and by refusing to
accept the logical implications of
the decision itself. These
logical implications show that the case
properly considered has
potentiality for collision with long-
established principles
regarding liability in the tort of negligence
for economic loss.
There can be no doubt that to depart from the
decision would
re-establish a degree 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.
It must, of course, be kept in
mind that the decision has
stood for some 13 years. On the other
hand, it is not a decision
of the type that is to a significant
extent taken into account by
citizens or indeed local authorities
in ordering their affairs. No
doubt its existence results in local
authorities having to pay
increased insurance premiums, but to be
relieved of that necessity
would be to their advantage, not to
their detriment. To overrule
it is unlikely to result in
significantly incurred insurance premiums
for householders. It is
perhaps of some significance that most
litigation involving the
decision consists in contests between
insurance companies, as is
largely the position in the present case.
The decision is capable
of being regarded as affording a measure
of justice, but as
against that the impossibility of finding any
coherent and
logically based doctrine behind it is calculated to put
the law of
negligence into a state of confusion defying rational
analysis. It
is also material that Anns has the effect of imposing
upon
builders generally a liability going far beyond that which
Parliament
thought fit to impose upon house builders alone by the
Defective
Premises Act 1972, a statute very material to the policy
of the
decision but not adverted to in it. There is much to be
said for
the view that in what is essentially a consumer protection
field,
as was observed by Lord Bridge of Harwich in D. & F.
Estates,
at p. 207, the precise extent and limits of the liabilities
which
in the public interest should be imposed upon builders and
local
authorities are best left to the legislature.
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.
- 17 -
In the circumstances I do not
consider it necessary to deal
with the question whether, assuming
that the council were under a
duty of the scope contended for by
the plaintiff, they discharged
that duty by acting on the advice
of competent consulting
engineers.
My Lords, for these reasons I would allow the appeal.
LORD BRIDGE OF HARWICH
My Lords,
The speech of my noble and learned
friend Lord Keith of
Kinkel addresses comprehensively all the
issues on which the
outcome of this appeal depends. I find myself
in full agreement
with it and would not think it necessary to say
more if we were
not proposing to take the important step of
departing, under the
practice statement of 1966 (Practice
Statement (Judicial
Precedent) [1966] 1 W.L.R. 1234, from
propositions of law laid
down by this House in Anns v. Merton
Borough London Council
[1978] A.C. 728, which have had a
profound influence throughout
the common law world. In the
circumstances I think it right to
explain in my own words, as
briefly as I may, my reasons for
thinking it right to take that
step.
The origin of the Anns doctrine
The Anns doctrine,
expressed in its most general form, holds
a local authority which
exercises statutory control over building
operations liable in
tort to a building owner or occupier for the
cost of remedying a
dangerous defect in a building which results
from the negligent
failure by the authority to ensure that the
building was erected
in conformity with applicable standards
prescribed by building
byelaws or regulations. The liability arises
not from the breach
of any statutory duty, but from the breach of
a common law duty of
care said to arise from the performance of
the statutory
functions. The doctrine, as propounded in the speech
of Lord
Wilberforce in this House, was, with some modifications,
an
adoption of principles of law first enunciated by the Court of
Appeal
in Dutton v. Bognor Regis Urban District Council [1972] 1
Q.B.
373. That decision was certainly without precedent and was,
I
think, widely regarded as judicial legislation. If one reads
the
passage in the judgment of Lord Denning M.R., at pp.
397-398,
under the rubric "Policy," it is difficult to
think that he would
have demurred to that criticism.
Development of the Anns doctrine in the Commonwealth
The doctrine arises from statutory
provisions of a kind to be
found in any developed society. The
relevant statutes which
operate in various Commonwealth
jurisdictions differ in detail but
have sufficient in common in
their general structure and operation
to make it legitimate and
instructive to compare the fate of the
Anns doctrine in
those jurisdictions. The High Court of Australia
declined to
follow Anns in Council of the Shire of Sutherland
v.
Heyman. 157 C.L.R. 424. In Canada and New Zealand,
however,
the Anns doctrine has been both followed and
further developed.
- 18 -
In City of Kamloops v. Nielsen
(1984) 10 D.L.R. (4th) 641, the
Supreme Court of Canada, by a
majority of three to two, held the
municipal authority liable in
damages in the following
circumstances. When a dwelling house was
in course of
construction, the authority discovered that the
foundations were
defective. They issued a "stop work"
order to prevent further
building until proper foundations had
been provided. The builder
and the building owner ignored the
order and when the building
was completed the owner went into
occupation without the
requisite occupancy permit. Three years
later he sold the house
to the plaintiff who, after acquisition,
discovered the defects in
the foundation and sued the original
owner in fraud and the
authority in negligence. The only fault of
the authority was their
failure to take the appropriate legal
proceedings to enforce the
"stop work" order or to
prevent occupation of the house without
an occupancy permit. They
were held liable jointly with the
original owner. The majority of
the court held in terms that the
plaintiff was entitled to recover
his purely economic loss
represented by the cost of making good
the foundations. The
decision of the New Zealand Court of Appeal
in Stieller v. Porirua
City Council [1986] 1 N.Z.L.R. 84 is
no less striking. In that case
the plaintiffs had bought a house
under construction. It was found
in due course that the
weather-boards on the exterior of the house
were not of the
standard required by the building byelaws. The
court held the
local authority liable in damages for their failure to
discover
this on inspection notwithstanding that the condition of
the
weather-boards never represented in any sense a danger to
persons
or property.
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.
Meanwhile,
uncertainty in the law has inevitably been a fertile
breeding
ground for litigation and the Court of Appeal have
grappled as
best they could with the problem of seeking to
determine where
the limits of the doctrine are to be drawn: see
for example
Investors in Industry Commercial Properties Ltd. v.
South
Bedfordshire District Council [1986] Q.B. 1034 and
Richardson v.
West Lindsey District Council [1990] 1 W.L.R.
522. Sooner or
later, in this unhappy situation, a direct
challenge to the authority
of Anns was inevitable. Perhaps
it is unfortunate that it did not
come sooner, but the House could
not, I think, have contemplated
departing from the decision of an
Appellate Committee so
eminently constituted unless directly
invited to do so. Now that
the challenge has to be faced, I
believe, for reasons which I hope
will become apparent, that 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
- 19 -
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.
Dangerous defects and defects of quality
If a manufacturer negligently puts
into circulation a chattel
containing a latent defect which
renders it dangerous to persons or
property, the manufacturer, on
the well known principles
established by Donoghue v. Stevenson
[1932] A.C. 562, will be
liable in tort for injury to persons or
damage to property which
the chattel causes. But if a manufacturer
produces and sells a
chattel which is merely defective in quality,
even to the extent
that it is valueless for the purpose for which
it is intended, the
manufacturer's liability at common law arises
only under and by
reference to the terms of any contract to which
he is a party in
relation to the chattel; 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. If a
dangerous defect
in a chattel is discovered before it causes any
personal injury or
damage to property, because the danger is now
known and the
chattel cannot be safely be used unless the defect
is repaired, the
defect becomes merely a defect in quality. The
chattel is either
capable of repair at economic cost or it is
worthless and must be
scrapped. In either case 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 a builder erects a
structure containing a latent
defect which renders it dangerous to
persons or property, he will
be liable in tort for injury to
persons or damage to property
resulting from that dangerous
defect. But if the defect becomes
apparent before any injury or
damage has been caused, the loss
sustained by the building owner
is purely economic. 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.
- 20 -
The fallacy which, in my opinion,
vitiates the judgments of
Lord Denning M.R. and Sachs L.J. in
Dutton [1972] 1 Q.B. 373 is
that they brush these
distinctions aside as of no consequence: see
per Lord
Denning M.R., at p. 396D-F, and per Sachs L.J., at
pp.
403H-404B. Stamp L.J., on the other hand, fully understood
and
appreciated them and his statement of the applicable
principles as
between the building owner and the builder, at p.
414D-H, seems
to me unexceptionable. He rested his decision in
favour of the
plaintiff against the local authority on a wholly
distinct principle
which will require separate examination.
The complex structure theory
In my speech in D. & F.
Estates at pp. 206G-207H I mooted
the possibility that in
complex structures or complex chattels one
part of a structure or
chattel might, when it caused damage to
another part of the same
structure or chattel, be regarded in the
law of tort as having
caused damage to "other property" for the
purpose of the
application of Donoghue v. Stevenson principles. I
expressed
no opinion as to the validity of this theory, but put it
forward
for consideration as a possible ground on which the facts
considered
in Anns [1978] A.C. 728 might be distinguishable from
the
facts which had to be considered in D. & F. Estates
itself. I
shall call this for convenience "the complex
structure theory" and
it is, so far as I can see, only if and
to the extent that this
theory can be affirmed and applied that
there can be any escape
from the conclusions I have indicated
above under the rubric
"Dangerous defects and defects of
quality."
The complex structure theory has,
so far as I know, never
been subjected to express and detailed
examination in any English
authority. I shall not attempt a review
of the numerous
authorities which bear upon it in the different
state jurisdictions in
the United States of America. However, some
significant
landmarks must be mentioned. In Quackenbush v. Ford
Motor Co.,
153 N.Y.S. 131, a decision of the Appellate
Division of the
Supreme Court of New York, the plaintiff recovered
damages in
tort from the manufacturer for damage to her Ford motor
car
caused by an accident attributable to faulty manufacture of
the
brakes. It is at least highly doubtful if the reasoning of
this
decision can now be supported consistently with the
unanimous
opinion of the United States Supreme Court in East
River
Steamship Corporation v. Transamerica Delaval Inc.,
(1986) 106 S.
Ct. 2295 that a manufacturer incurs no liability in
tort for damage
occasioned by a defect in a product which injures
itself.
Blackmun J., delivering the opinion of the court, said, at
p. 2302:
"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 lost
profits is
essentially the failure of the purchaser to receive
the
benefit of its bargain - traditionally the core concern
of
contract law."
- 21 -
Quackenbush is, in any
event, no authority for the
proposition that, once a defect in a
complex chattel is discovered,
there is a remedy in tort against
the manufacturer on the ground
that the cost of repairing the
defect was necessarily incurred in
order to prevent further damage
to other parts of the chattel. A
striking illustration of this is
Transworld Airlines Inc. v. Curtiss-
Wright Corporation
(1955) 148 N.Y.S. 2d 284 in which the airline,
having
discovered defects in the engines fitted to some of their
planes,
fortunately before any accident occurred, chose not to sue
the
plane manufacturer in contract, but sued the engine
manufacturer
in tort. The manufacturer was held not liable. This
and other
relevant American authorities are extensively reviewed
in the
illuminating judgment of the British Columbia Court of
Appeal
delivered by Tysoe J.A. in Rivtow Marine Ltd v.
Washington Iron
Works [1972] 3 W.W.R. 735. The court held that
the
manufacturers were not liable in tort to the hirers of a crane
for
the cost of repair rendered necessary when the crane was
found to
be dangerously defective in use. This decision was
affirmed by the
Supreme Court of Canada by a majority of seven
to two [1973] 6
W.W.R. 692. Since Lord Wilberforce in Anns
referred with
approval to the dissenting judgment of Laskin J. in
that case,
which he described, at p. 760, as "of strong persuasive
force,"
I have read and re-read that judgment with the closest
attention.
I have to say, with all respect, that I find it wholly
unconvincing.
It depends on the same fallacy as that which
vitiates the
judgments of Lord Denning M.R. and Sachs L3 in
Dutton. In
particular, in equating the damage sustained in
repairing the
chattel to make it safe with the damage which would
have been
suffered if the latent defect had never been discovered
and the
chattel had injured somebody in use, the judgment ignores
the
circumstance that once a chattel is known to be dangerous it
is
simply unusable. If I buy a second hand car and find it to be
faulty,
it can make no difference to the manufacturer's liability in
tort
whether the fault is in the brakes or in the engine, i.e.
whether
the car will not stop or will not start. In either case the
car is
useless until repaired. The manufacturer is no more liable
in tort
for the cost of the repairs in the one case than in the
other.
Bowen v. Paramount Builders
(Hamilton) Ltd. [1977] 1
N.Z.L.R. 394 was a case where the
plaintiff building owner sued
the builder in tort for the cost of
making good damage caused by
subsidence caused by inadequate
foundations. The trial judge
dismissed the claim on the ground
that the principle of Donoghue
v. Stevenson did not apply
to entitle the plaintiff to recover in
tort for a defect in the
quality of the building. The judgments of
the New Zealand Court of
Appeal to the opposite effect were
referred to with approval by
Lord Wilberforce in Anns. The
critical paragraph from the
judgment of Richmond P., at p. 410,
reads:
"Does damage to the house
itself give rise to a cause of
action? As I have already said,
I agree with Speight J. that
the principles laid down in Donoghue
v. Stevenson [1932]
A.C. 562 apply to a builder erecting a
house under a
contract with the owner. He is under a duty of care
not to
create latent sources of physical danger to the person
or
property of third persons whom he ought reasonably to
foresee
as likely to be affected thereby. If the latent
- 22 -
defect causes actual physical
damage to the structure of the
house then I can see no reason in
principle why such
damage should not give rise to a cause of
action, at any
rate if that damage occurs after the house has
been
purchased from the original owner. This was clearly the
view
of Lord Denning M.R. and of Sachs L.J. in Dutton v.
Bognor
Regis Urban District Council [1972] 1 Q.B. 373, 396,
403-404.
In the field of products liability this has long been
the law in
the United States: see Prosser's Law of Torts, p.
665, sec.
101, and Quackenbush v. Ford Motor Co., 167
Appellate
Division 433, 153 N.Y.S. 131 (1915). For the
purposes of the
present case it is not necessary to deal with
the question of
'pure' economic loss, that is to say
economic loss which is not
associated with a latent defect
which causes or threatens physical
harm to the structure
itself."
Richmond P. goes on to hold that
the measure of damages
would include the whole cost of remedial
works plus any
diminution in value of the house in so far as it
was impossible to
effect a complete remedy.
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. Even if,
contrary to my view, the initial
damage could be regarded as
damage to other property caused by a
latent defect, once the
- 23 -
defect is known the situation of
the building owner is analogous to
that of the car owner who
discovers that the car has faulty
brakes. He may have a house
which, until repairs are effected, is
unfit for habitation, but,
subject to the reservation I have
expressed with respect to
ruinous buildings at or near the boundary
of the owner's property,
the building no longer represents a source
of danger and as it
deteriorates will only damage itself.
For these reasons the complex
structure theory offers no
escape from the conclusion that damage
to a house itself which is
attributable to a defect in the
structure of the house is not
recoverable in tort on Donoghue
v. Stevenson principles, but
represents purely economic loss
which is only recoverable in
contract or in tort by reason of some
special relationship of
proximity which imposes on the tortfeasor
a duty of care to
protect against economic loss.
The relative positions of the builder and the local authority
I have so far been considering the
potential liability of a
builder for negligent defects in the
structure of a building to
persons to whom he owes no contractual
duty. Since the relevant
statutory function of the local authority
is directed to no other
purpose than securing compliance with
building byelaws or
regulations by the builder, I agree with the
view expressed in Anns
[1978] A.C. 728 and by the majority
of the Court of Appeal in
Dutton [1972] 1 Q.B. 373 that a
negligent performance of that
function can attract no greater
liability than attaches to the
negligence of the builder whose
fault was the primary tort giving
rise to any relevant damage. 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.
Only Stamp L.J. in Dutton
was prepared to hold that the
law imposed on the local authority a
duty of care going beyond
that imposed on the builder and
extending to protection of the
building owner from purely economic
loss. I must return later to
consider the question of liability
for economic loss more generally,
but here I need only say that I
cannot find in Hedley Byrne & Co.
Ltd. v. Heller &
Partners Ltd. [1964] A.C. 465 or Dorset Yacht
Co. Ltd. v.
Home Office [1970] A.C. 1004 any principle applicable
to the
circumstances of Dutton or the present case that
provides
support for the conclusion which Stamp L.J. sought to
derive from
those authorities.
Imminent danger to health or safety
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.
Correspondingly the
damages recoverable are said to include the
amount of expenditure
necessary to restore the building to a
- 24 -
condition in which it is no longer
such a danger, but presumably
not any further expenditure incurred
in any merely qualitative
restoration. I find these features of
the Anns doctrine very
difficult to understand. The
theoretical difficulty of reconciling
this aspect of the doctrine
with previously accepted legal principle
was pointed out by Lord
Oliver of Aylmerton in D. & F. Estates
[1989] A.C. 177,
212D-213D. But apart from this there are, as it
appears to me, two
insuperable difficulties arising from the
requirement of imminent
danger to health or safety as an
ingredient of the cause of action
which lead to quite irrational and
capricious consequences in the
application of the Anns doctrine.
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 down.
Liability for economic loss
All these considerations lead
inevitably to the conclusion
that a building owner can only
recover the cost of repairing a
defective building on the ground
of the authority's negligence in
performing its statutory function
of approving plans or inspecting
buildings in the course of
construction if the scope of the
authority's duty of care is wide
enough to embrace purely
economic loss. The House has already held
in D. & F. Estates
that a builder, in the absence of
any contractual duty or of a
special relationship of proximity
introducing the Hedley Byrne
principle of reliance, owes no
duty of care in tort in respect of
the quality of his work. As I
pointed out in D. & F. Estates, to
hold that the
builder owed such a duty of care to any person
acquiring an
interest in the product of the builder's work would be
to impose
upon him the obligations of an indefinitely transmissible
warranty
of quality.
By section 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
- 25 -
provided for by section 2. It
would be remarkable to 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. In Anns
Lord Wilberforce expressed
the opinion that a builder could be held
liable for a breach of
statutory duty in respect of buildings which
do not comply with
the byelaws. But he cannot, I think, have
meant that the statutory
obligation to build in conformity with the
byelaws by itself gives
rise to obligations in the nature of
transmissible warranties of
quality. If he did mean that, I must
respectfully disagree. I find
it impossible to suppose that anything
less than clear express
language such as is used in section 1 of
the Act of 1972 would
suffice to impose such a statutory
obligation.
As I have already said, since the
function of a local
authority in approving plans or inspecting
buildings in course of
construction is directed to ensuring that
the builder complies with
building byelaws or regulations, I
cannot see how, in principle, the
scope of the liability of the
authority for a negligent failure to
ensure compliance can exceed
that of the liability of the builder
for his negligent failure to
comply.
There may, of course, be
situations where, even in the
absence of contract, there is a
special relationship of proximity
between builder and building
owner which is sufficiently akin to
contract to introduce the
element of reliance so that the scope of
the duty of care owed by
the builder to the owner is wide enough
to embrace purely economic
loss. The decision in Junior Books
Ltd v. Veitchi Co. Ltd.
[1983] 1 A.C. 520 can, I believe, only be
understood on this
basis.
In Council of the Shire of
Sutherland v. Heyman 157 C.L.R.
424 the critical role of the
reliance principle as an element in the
cause of action which the
plaintiff sought to establish is the
subject of close examination,
particularly in the judgment of Mason
J. The central theme of his
judgment, and a subordinate theme in
the judgments of Brennan and
Deane JJ, who together with Mason
J formed the majority rejecting
the Anns doctrine, is that a duty
of care of a scope
sufficient to make the authority liable for
damage of the kind
suffered can only be based on the principle of
reliance and that
there is nothing in the ordinary relationship of a
local
authority, as statutory supervisor of building operations, and
the
purchaser of a defective building capable of giving rise to such
a
duty. I agree with these judgments. It cannot, I think, be
suggested,
nor do I understand Anns or the cases which have
followed
Anns in Canada and New Zealand to be in fact
suggesting,
that the approval of plans or the inspection of a
building in the
course of construction by the local authority in
performance of
their statutory function and a subsequent purchase
of the building
by the plaintiff are circumstances in themselves
sufficient to
introduce the principle of reliance which is the
foundation of a
duty of care of the kind identified in Hedley
Byrne.
In Dutton Lord Denning M.R. said, at pp. 397-398:
- 26 -
"Mrs. Dutton has suffered a
grievous loss. The house fell
down without any fault of hers. She
is in no position
herself to bear the loss. Who ought in justice
to bear it?
I should think those who were responsible. Who are
they?
In the first place, the builder was responsible. It was
he
who laid the foundations so badly that the house fell down.
In
the second place, the council's inspector was responsible.
It was
his job to examine the foundations to see if they
would take the
load of the house. He failed to do it
properly. In the third
place, the council should answer for
his failure. They were
entru