A newly
reported decision of the House of Lords ranks as one of the more important in
the fields of negligence in general, and defective buildings in particular, to
have emerged in recent years. Just how far the implications of this complex and
controversial case will ultimately extend remains, for the moment at least, a
matter of speculation; their lordships’ pronouncements were in many respects
somewhat Delphic, and the attitude of future courts will be crucial. However,
this much can be said with confidence — after D & F Estates Ltd v Church
Commissioners for England [1988] 2 EGLR 263, life will never be quite the
same.
Between 1963
and 1965, Wates Ltd built a block of flats on land in London which was owned by
the Church Commissioners, sub-contracting the plastering work to a firm called
RS Hitchens. When the block was completed, the Church Commissioners let one of
the flats on a 98-year lease to the plaintiff company, which allowed its
controlling shareholders (a Mr and Mrs Tillman) to occupy the flat as
licensees. In 1980, while the Tillmans were away on holiday and the flat was
being redecorated, large areas of plaster fell from the ceiling, necessitating
substantial repairs costing some £10,700; within a short period of time, the
plaintiff company and the Tillmans instituted legal proceedings in respect of
this cost. In 1983, before the action came on for trial, expert investigation
revealed further defective plaster in both walls and ceilings of the flat; the
estimated cost of repairing this was some £53,500, and to carry out the work
would lead to a probable loss of rent of some £24,000. These sums were
accordingly added to the plaintiffs’ claim.
The cause of
all the trouble, as found by the trial judge, was that the sub-contractors, in
using what was then a new type of plaster, had not followed the manufacturers’
clear instructions. In applying a total of three coats instead of two, they had
caused the plaster to lose its key and thus to require complete replacement.
This, not surprisingly, was held to amount to negligence on the plasterers’
part, for which they would undoubtedly be liable. However, for reasons which
were not made clear (but may well have involved the sub-contractors’ financial
resources or lack of them), the plaintiffs pursued their claim primarily
against the Church Commissioners, as their landlords, and Wates, as main
contractors.
the lower courts
At the trial
in 1985, the Church Commissioners were completely exonerated from any form of
liability on the ground that, having never sought to exercise any degree of
supervision or control over the day-to-day building operations, they could not
be said to owe any duty of care in respect of the work. However, Wates were
held liable for all the sums mentioned above (plus £500 to each of the Tillmans
for inconvenience) on the basis that they had failed adequately to supervise
the plasterers’ work and that this constituted a breach of the established duty
of care owed by every builder to purchasers and future occupiers of the
property which he constructs.
In February
1987, the Court of Appeal reversed the judge’s decision against Wates, holding
that they could not be made responsible for the sub-contractor’s negligence,
either vicariously or on the basis of a negligent failure to supervise their
work. The court also considered another argument advanced on behalf of Wates,
namely, that the cost of repairing or replacing defective plaster would anyway
be totally irrecoverable in an action for negligence, since it was pure
economic loss. As to this, it was ruled that the liability of a builder, like
that of a local authority in respect of building inspections, is limited to
those defects which constitute a present or imminent danger to health or
safety. Applying this test, it was held (for reasons which are obscure, to say
the least) that, while the original £10,000 would in principle have been
recoverable, the other sums were indeed to be regarded as pure economic loss
and would therefore not have been recoverable in any event.
Undaunted by
this reversal, the plaintiffs obtained leave to appeal to the House of Lords,
which has now pronounced upon both these important issues.
supervise?
On the
question of whether Wates could be made to answer for their sub-contractors’
default, their lordships’ unanimous opinion (delivered by Lord Bridge) was that
they could not. True vicarious liability (in the master-servant sense) was out
of the question, and the court could find no reason to impose what in other
contexts is termed a ‘non-delegable duty of care’. Further, it was firmly ruled
(apparently from a fear of exposing a client to possible liability for
defective work by his builder) that a main contractor who employs an apparently
competent sub-contractor does not thereby undertake a duty of care to anyone in
respect of what that sub-contractor does. The court would go no further than to
say that, if a builder actually comes to know that the work is being done in a
defective and foreseeably dangerous way and he condones that negligence, he
will be jointly liable with the sub-contractor; however, he owes no duty to
anyone in tort to supervise the work and cannot therefore be made liable on the
basis of what he ought to have discovered.
On this
aspect of the decision (which will presumably receive an enthusiastic welcome
from the construction industry), two comments may be made. First, to hold Wates
liable would not have been tantamount to saying (as Lord Bridge appeared to
think) that they had assumed a personal duty to the whole world to ensure that
the property would be free of dangerous defects. That is the language of strict
liability, whereas what was sought was merely a declaration that they should
take reasonable care. Second, if there are indeed strong reasons of policy for
exonerating the main contractor where the fault lies with a sub-contractor, why
should the former be liable (as the House of Lords assumed he would be) for
negligence in selecting the sub-contractor in the first place?
builder’s liability
Important
though it undoubtedly is, their lordships’ ruling on questions of supervision
will cause far fewer legal problems than their decision on the second issue in
the case, namely, the type of loss for which a negligent builder can be made
responsible. As to this, the unanimous view (this time expressed by both Lord
Bridge and Lord Oliver, after a thorough review of English and Commonwealth
authorities) was that a builder, or the manufacturer of a product, is not to be
made liable in the tort of negligence on the basis that his work constitutes a
danger to health or safety; the crucial question is whether his defective work
has caused injury to a person or damage to property other than the product
itself. Where (as here) it is only the defective item itself which suffers
‘damage’, the costs of repairing this (plus any consequential costs) must be
seen as pure economic loss and are accordingly not recoverable.
If this
logic were ruthlessly followed (and there were indications that Lord Bridge at
least would have liked it to be), it would rule out altogether any negligence
action against a builder for damage to the building itself. Dutton v Bognor
Regis UDC [1972] 1 QB 373, Anns v Merton LBC [1977] 2 EGLR
94, Batty v Metropolitan Property Realisations Ltd [1978] 1 EGLR
148 — all could be consigned to history’s dustbin! (Indeed, since judges in
those cases regarded it as essential to the liability of a local authority
liability that the builder, too, could be made responsible, it should mean that
actions based on negligent building inspections would also cease to be
possible.)
This would
indeed be lawmaking on the grand scale, and the House of Lords finally backed
away from the abyss to which their reasoning appeared to be leading them. It
was said that some at least of the earlier cases could be justified on the
ground that the part of the building which was defective (eg the foundations)
was sufficiently separate from the part which was damaged that the latter could
rank as ‘property other than the defective product itself’, with the result
that the ‘pure economic loss’ problem would conveniently disappear.
This rather
tenuous rationalisation may have spared the House of Lords the embarrassment of
having to overrule a great number of previous cases (though it is difficult to
see how their own previous decision in Pirelli General Cable Works Ltd v
Oscar Faber & Partners [1983] 1 EGLR 135, which was not mentioned in
the present case, stands up to the new test). However, the ‘separate parts of
the structure’ test seems destined to provide ample scope for litigation — the
judgments themselves accept that defective foundations may be said to ‘damage’
walls, but that defective plaster may not be said to damage the wallpaper or
paint with which it is decorated!
For the time
being at least, all the cases on defective buildings (including those on
sub-contractors, architects, local authorities etc) reported since Dutton
v Bognor Regis UDC [1972] 1 QB 373) will require re-evaluation in the
light of this latest decision. Action Required.
