Murphy v Brentwood DC

Facts

Murphy bought a house built on an infilled site on a concrete raft foundation, designed by consulting engineers whose plans the council approved under the building regulations. The foundation was defective and the house cracked, creating a danger to health or safety. Unable to afford repairs, Murphy sold the house at a price reflecting the defect and sued the council for the loss in value, alleging negligent approval of the plans.

History

The trial judge found the council liable, applying Anns v Merton London Borough Council [1978] AC 728, and the council appealed to the House of Lords, which was asked to depart from Anns.

Issue

Whether a local authority owed a duty of care to a house owner for the cost of repairing a defect that threatened health or safety, and whether Anns should be departed from under the Practice Statement.

Held

Appeal allowed. Anns was overruled. The cost of repair of a defective building which has not caused injury to persons or damage to other property is pure economic loss and is not recoverable in negligence.

Ratio

• A builder or local authority is not liable in negligence for the cost of remedying a defect in a building which has damaged neither persons nor other property, since the loss is pure economic loss and falls outside the established categories of duty.
• The decision in Anns, which treated such a loss as damage to the building and imposed a duty on local authorities, was wrongly decided and was overruled, on the basis that it was a distortion of principle and that the law of statutory powers does not impose a duty of that kind.

The judgments

Key reasoning

• The defect lay in the house itself, and the loss was the cost of putting right a defective product, which is the kind of loss that has traditionally been left to contract and not tort.
• The reasoning in Anns introduced liability for a sort of economic loss on the basis of a statutory power to inspect, which had no basis in the statute, and it created uncertainty for the law.
• Because Parliament had addressed liability for defective buildings through the Defective Premises Act 1972, the courts should be reluctant to expand the common law in a way that would cut across it.
• It was appropriate to depart from the earlier decision because it was not clearly right, it had created uncertainty, and the departure would not unsettle established property or contractual arrangements.

Obiter

• The complex structure theory, that a defective part of a building may cause damage to other property of the same owner, was left open, and the speeches suggest it could apply, if at all, only in narrow circumstances.

Where it fits in the module

For FHS Tort, Murphy is the starred authority on negligent damage to property and on the boundary between pure economic loss and physical damage. It frames the debate about the proper role of tort in relation to contract and statute, the justifications for the economic loss rule, and the proper use of the Practice Statement. Students should connect it to Donoghue v Stevenson, Junior Books v Veitchi and D & F Estates v Church Commissioners.

Criticisms

• Treating a dangerous defect as pure economic loss is not self-evident, because the owner who has to spend money to prevent injury is in a different position from a person who has bought an inferior product.
• The reasoning gives weight to the Defective Premises Act 1972 despite that Act's limited scope, and the result leaves house buyers with no remedy against local authorities that failed to enforce building standards.
• The overruling of Anns left the complex structure theory unresolved, so the law about what counts as other property remains uncertain.