“House of Lords restricts pure economic loss claims in negligence”
The House of Lords held that the local authority owed no duty of care to the claimant for pure economic loss. The council was not liable for the financial consequences of approving defective plans.
The claimant purchased a house built on a concrete raft foundation that had been approved by Brentwood District Council. The foundation was defectively designed and constructed, causing differential settlement and cracking. The claimant discovered the defects and sold the house at a reduced price, then sued the council for the economic loss suffered.
Whether a local authority owes a duty of care to subsequent purchasers of property in respect of economic loss caused by negligent approval of defective building plans.
The court distinguished between physical damage and pure economic loss, holding that the latter is generally not recoverable in negligence. The defective foundation constituted a defect in the building itself rather than damage to other property, and the loss was purely economic rather than physical harm to persons or property.
This case fundamentally restricted the scope of negligence liability for pure economic loss and overruled the expansive approach in Anns v Merton. It remains the leading authority on local authority liability and pure economic loss in construction cases.
Local authorities owe no duty of care in negligence for pure economic loss arising from defective building inspection approvals. Only dangerous defects causing personal injury or property damage are recoverable.
The House of Lords held that Brentwood Council was not liable for Murphy's financial losses caused by purchasing a defectively built house that the council had negligently approved.
It clarified the boundaries of recoverable loss in negligence by distinguishing dangerous defects from mere defective quality, and limited local authority liability for building inspection failures.
The House of Lords made broad statements about the general principle that pure economic loss is not recoverable in negligence absent special relationships or exceptional circumstances.
OSCOLA Citation
Murphy v Brentwood DC [1991] 1 AC 398 (HL)
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[2026] EWHC 1095 (KB)
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