Underlease held by appellants — Defects appearing in building — Appellants contributing towards remedial works — Appellants claiming in tort against builders — Economic loss — Reliance on Annscase — Whether builders owed duty of care for economic loss — Appeal dismissed
The freeholders of a complex known as Great Oaks House, Basildon, Essex, are the Basildon Corporation. They granted a lease to EMI Development Holdings Ltd who engaged the first respondents to construct the building complex under a JCT standard form of building contract. Before completion of the work in 1971, the lessees granted a 42-year underlease to the appellant department. Following the discovery of faults in supporting pillars, the appellants made a financial contribution towards remedial works. Their appeal against the decision of His Honour Judge Smout QC (Official Referee), who had dismissed their claim in tort for this contribution and other losses, was dismissed by the Court of Appeal ([1989] 2 EGLR 139; [1989] 26 EG 21).
The department appealed, relying on the Anns case and contending that the respondent builders owed them a duty of care and were liable for the costs of the remedial works.
Held The appeal was dismissed.
The House had held in Murphy v Brentwood District Council [1990] EGCS 105 that Anns v Merton London Borough Council [1978] AC 728 had been wrongly decided. The loss suffered by the department had been entirely economic. In Murphy it was the unanimous view that, while a builder would be liable under the principle of Donoghue v Stevenson [1932] AC 562 in the event of the defect, before it had been discovered, causing physical injury to persons or damage to property other than the building itself, there was no sound basis in principle for holding him liable for the pure economic loss suffered by a purchaser who discovered the defect, and required to expend money in order to make the building safe and suitable for its intended purpose.
John Uff QC and Michael Lerego (instructed by the Treasury Solicitor) appeared for the appellants; and David Hunt QC and Terence Mowschenson (instructed by Tolhurst & Fisher, of Southend-on-Sea) appeared for the first respondents. The second and third respondents did not appear and were not represented.