Negligence — Liability of builder in tort — ‘Yet another variant of a vexed question’ of liability for economic loss — Whether cost of remedial work undertaken in advance of physical damage to building could be recovered — Position if imminent risk of injury to persons — Case again raising questions on the boundary between contract and tort — Court of Appeal unanimous in rejecting liability in the circumstances, but leave given to appeal to House of Lords
department, underlessees of parts of a building complex, sued the builders for
negligence — Plaintiffs occupied parts of a low-rise building with a flat roof
and also occupied the upper nine storeys of an 11-storey tower block on which
the low-rise building abutted — The plaintiffs succeeded, at least partially,
in the official referees’ court in a claim in respect of leakages from the flat
roof and there was no appeal under that head — They failed, however, in their
claim to recover expenditure in strengthening eight pillars supporting the
various floors of the tower block — It appeared that low-strength concrete had
been used by the defendant builders in the construction of these pillars — An
important finding of fact made by the trial judge was that the weakness of the
pillars did not give rise to imminent danger to health or safety of the
plaintiffs’ employees or the general public (the offices in the tower block
included that of the Department of Health and Social Security to which the
public had regular access) — The plaintiffs had heeded a warning not to
increase the existing loading on the tower block — Their purpose in
strengthening the pillars was not to avert imminent danger but to cure a defect
which would have prevented the full loading for which the building was designed
— The judge, relying on the decision in Pirelli General Cable Works Ltd v Oscar Faber
& Partners as showing that a cause of action was complete only when
physical damage occurred, decided against the plaintiffs, who appealed
giving the first judgment in the Court of Appeal, reviewed a number of
authorities, examining in some detail speeches in the House of Lords in the
cases of Anns v Merton London Borough Council and D & F Estates Ltd v Church
Commissioners for England as well as a dictum by Ralph Gibson LJ in London
Congregational Union Inc v Harriss & Harriss — The appellants (plaintiffs below) relied
partly on the latter dictum, in addition to other authority, in support of the
proposition that an occupier is entitled to recover against a negligent builder
in tort the cost of remedial work undertaken in advance of any physical damage
to the building in order to avert imminent risk of physical injury to persons —
The Court of Appeal did not, however, pronounce upon the validity of this
proposition as all three members agreed that the trial judge’s findings of fact
were fatal to the appellants’ claim — There had been no imminent danger; once
the warning about loading was given and accepted there was no threat to safety
— The remedial works were done to restore to the appellants the full loading
capacity of the building for which they bargained by their underlease
the decision on the main issue the court did not find it necessary to consider
the claim in the respondents’ cross-appeal that even if there were a cause of
action it was statute-barred — Appeal dismissed but, no doubt in view of the
state of the authorities, leave was given to appeal to the House of Lords
The following
cases are referred to in this report.
Anns v Merton London Borough Council [1978]
AC 728; [1977] 2 WLR 1024; [1977] 2 All ER 492; (1977) 75 LGR 555; [1977] EGD
604; 243 EG 523 & 591, [1977] 2 EGLR 94; [1977] JPL 514, HL
Batty v Metropolitan Property Realisations
Ltd [1978] QB 554; [1978] 2 WLR 500; [1978] 2 All ER 445; [1978] EGD 742;
(1977) 245 EG 43, CA
D & F Estates Ltd v Church Commissioners for
England [1988] 3 WLR 368; [1988] 2 All ER 992; [1988] 2 EGLR 263, HL
Donoghue v Stevenson [1932] AC 562, HL
Dutton v Bognor Regis Urban District Council [1972]
1 QB 373; [1972] 2 WLR 299; [1972] 1 All ER 462; (1971) 70 LGR 57; [1972] 1
Lloyd’s Rep 227, CA
Greater Nottingham Co-operative Society
Ltd v Cementation
Piling and Foundations Ltd [1988] 3 WLR 396; [1988] 2 All ER 971, CA
Junior Books Ltd v Veitchi Co Ltd [1983]
1 AC 520; [1982] 3 WLR 477; [1982] 3 All ER 201, HL
Ketteman v Hansel Properties Ltd [1984] 1
WLR 1274; [1985] 1 All ER 352; [1984] EGD 903; (1984) 271 EG 1099, [1984] 2
EGLR 157, CA; [1987] AC 189; [1987] 2 WLR 312; [1988] 1 All ER 38; (1987) 85
LGR 409; [1987] 1 EGLR 237, HL
London Congregational Union Inc v Harriss & Harriss [1988]
1 All ER 15; [1986] 2 EGLR 155; (1986) 280 EG 1342, CA
Pirelli General Cable Works Ltd v Oscar Faber &
Partners [1983] 2 AC 1; [1983] 2 WLR 6; [1983] 1 All ER 65; [1983] EGD 889;
(1982) 265 EG 979, [1983] 1 EGLR 135, HL
Simaan General Contracting Co v Pilkington Glass Ltd (No
2) [1988] 2 WLR 761; [1988] 1 All ER 791, CA
Smith v Eric S Bush (a firm) [1989] 2
WLR 790; [1989] 2 All ER 514; [1989] 1 EGLR 169; [1989] 17 EG 68 & 18 EG
99, HL
Ultramares Corporation v Touche (1931) 174 NE
441; 255 NY 170
This was an
appeal by the plaintiffs, the Department of the Environment, underlessees of
parts of Great Oaks House, Basildon, Essex, from the decision of the late Judge
Smout QC, sitting on official referees’ business, who had dismissed the
plaintiffs’ claim for the recovery of the costs of strengthening defective
pillars at the building complex. The defendants (present respondents) were the
builders, Thomas Bates & Son Ltd.
John Laws and
M J Lerego (instructed by the Treasury Solicitor) appeared on behalf of the
appellants; D Hunt QC and T Mowschenson (instructed by Tolhurst & Fisher,
of Southend on Sea) represented the respondents.
Giving the
first judgment at the invitation of O’Connor LJ, TAYLOR LJ, said: This case
raises yet another variant of a vexed question: what is the liability of a
builder in tort for economic loss? The
plaintiffs are underlessees of parts of a building complex. They sued the
defendants, who built the complex, alleging negligence. Two separate complaints
were made. The first related to leakage through a defective flat roof; the
second concerned weakness of the concrete used to construct supporting pillars.
The action was tried by His
the learned judge gave his judgment on January 26 1987. He found for the
plaintiffs, although not to the full extent of their claim, in respect of the
flat roof. There is no appeal against that part of his judgment. However, he
found for the defendants in respect of the defective pillars, ruling that the
plaintiffs had no cause of action. They now appeal against that finding. There
is a cross-appeal by which the builders contend that if the plaintiffs did have
a cause of action it was statute-barred.
The building
complex is known as Great Oaks House at Basildon in Essex. The freeholder,
Basildon Corporation, granted a lease to EMI Development Holdings Ltd. EMI
engaged the defendants as builders, under a JCT contract, to construct the
building complex. This they did during 1970 and 1971. On October 15 1971, prior
to the completion of the works, EMI agreed to grant the plaintiff department an
underlease of part of the complex. The plaintiffs went into occupation on
December 30 1971 in accordance with the terms of the underlease, which was for
42 years and was dated March 16 1972. EMI’s reversion in the property, less a
day, was acquired by the Church Commissioners on April 14 1972. At the centre
of the complex was a low-rise, two-storey building with a flat roof consisting
of offices, a job centre and a supermarket with ancillary accommodation. One
end of this low-rise building abuts on an 11-storey tower block, the upper nine
storeys of which comprise offices. There are other buildings in the complex not
concerned in these proceedings. By their underlease the plaintiffs occupied
parts of the low-rise building, but the reversioner retained the main structure
of the building including the roof. The plaintiffs also occupy the upper nine
storeys of the tower block.
For over seven
years the plaintiffs occupied and used the premises without trouble. But in
March 1979 water began to drip through the ceiling of the job centre from the
flat roof. Leakages continued in 1980 and 1981. Alternative accommodation for
the plaintiffs’ staff had to be found. Eventually, remedial work was done
between September 1981 and August 1982. In 1982 and 1983, there was litigation
about these matters. The cases were settled, but in the present proceedings the
plaintiffs sought to recover from the defendants what they had paid towards the
remedial works, together with the costs of the alternative accommodation. The
learned judge found that the condition of the roof ‘presented imminent danger
to the health of the plaintiffs’ employees and was likely if not remedied to
cause further damage to the plaintiffs’ premises’. After reviewing the
authorities, the learned judge held that the plaintiffs were entitled to
recover the cost of remedying the defects in the roof, ie averting the danger,
but they were not entitled to recover any other loss, eg the cost of
alternative accommodation.
I turn now to
the defective pillars, the subject of the finding under appeal. While the
defective roof was being remedied it was discovered that some of the concrete
beams there were soft. This led to a wider investigation which revealed that
low-strength concrete had been used by the defendants in pillars supporting the
various floors in the 11-storey tower block. The plaintiffs’ expert concluded
that nine of those pillars, while sufficient to support the existing load, were
insufficient to support the design load. Accordingly in 1985, on his advice,
the pillars were strengthened. Again, the plaintiffs sought to recover in tort
from the defendant builders what they had paid in respect of the remedial works
in accordance with their underlease. Although the learned judge accepted the
need to strengthen eight of the nine pillars, he held that the plaintiffs had
no cause of action against the defendant builders. It will be necessary to
examine closely his findings of fact and the reasons for his decision. First,
however, it is convenient to consider the law presently applicable in this
field.
The problems
facing the courts have been threefold. First, liability in tort for negligence
on the principles of Donoghue v Stevenson [1932] AC 562 required
proof of physical injury to persons or their property. How, if at all, can such
liability attach in respect of a defective building which has not yet caused
injury to persons or damaged other property?
Second, if such liability can exist, what is its touchstone, short of
equating tortious liability to a breach of warranty of fitness appropriate only
in contract? Third, what damages are to
be recoverable having regard to the court’s reluctance to allow claims for pure
economic loss which might lead ‘to a liability in an indeterminate amount for
an indeterminate time to an indeterminate class’ (per Chief Justice Cardozo in Ultramares
Corporation v Touche (1931) 174 NE 441 at p 444.
Counsel on
both sides have helpfully referred to the relevant authorities, English,
Commonwealth and American. They began with Dutton v Bognor Regis
Urban District Council [1972] 1 QB 373 in which, for the first time, Donoghue
v Stevenson was applied to real property. There followed a long
series of cases, including the landmark decision of the House of Lords in Anns
v Merton London Borough Council [1978] AC 728 and culminating in the
most recent House of Lords authority, D & F Estates Ltd v Church
Commissioners for England [1988] 3 WLR 368*. I propose to refer only to
those two decisions of the House of Lords, since the authorities cited by
counsel were fully reviewed and considered in the latter case by Lord Bridge
and Lord Oliver.
*Editor’s note: Reported also at [1988] 2
EGLR 263.
Anns v Merton was a case in which the foundations of a block of
maisonettes were too shallow, so that some eight years after they were built,
structural damage was caused. The appellant council was alleged to have passed
the plans negligently and in breach of building byelaws made under statute and
to have failed to make proper inspections. The case was argued on a preliminary
issue as to whether on assumed facts any action lay against the council and if
so whether it was statute-barred. The case did not, therefore, directly concern
the tortious liability of the builder. However at p 758, Lord Wilberforce said:
The position of the builder. I agree with the majority in
the Court of Appeal in thinking 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. So it is necessary
to consider this point, although it does not directly arise in the present
appeal. If there was at one time a supposed rule that the doctrine of Donoghue
v Stevenson [1932] AC 562 did not apply to realty, there is no doubt
under modern authority that a builder of defective premises may be liable in
negligence to persons who thereby suffer injury: see Gallagher v N
McDowell Ltd [1961] NI 26 per Lord MacDermott CJ — a case of
personal injury. Similar decisions have been given in regard to architects (Clayton
v Woodman & Son (Builders) Ltd [1962] 2 QB 533 and Clay v
A J Crump & Sons Ltd [1964] 1 QB 533). Gallagher’s case expressly leaves
open the question whether the immunity against action of builder owners,
established by older authorities (eg Bottomley v Bannister [1932]
1 KB 458) still survives.
That immunity, as I understand it, rests
partly upon a distinction being made between chattels and real property, partly
upon the principle of ‘caveat emptor’ or, in the case where the owner leases
the property, on the proposition ‘for, fraud apart, there is no law against
letting a tumbledown house’: see Robbins v Jones (1863) 15 CBNS
221, 240 per Erle CJ. But leaving aside such cases as arise between
contracting parties, when the terms of the contract have to be considered (see Voli
v Inglewood Shire Council (1963) 110 CLR 74, 85, per Windeyer
J), I am unable to understand why this principle or proposition should prevent
recovery in a suitable case by a person, who has subsequently acquired the
house, upon the principle of Donoghue v Stevenson: the same rules
should apply to all careless acts of a builder: whether he happens also to own
the land or not. I agree generally with the conclusions of Lord Denning MR on
this point in Dutton v Bognor Regis Urban District Council [1972]
1 QB 373, 392-394. In the alternative, since it is the duty of the builder
(owner or not) to comply with the byelaws, I would be of the opinion that an
action could be brought against him, in effect, for breach of statutory duty by
any person for whose benefit or protection the byelaw was made. So I do not
think that there is any basis here for arguing from a supposed immunity of the
builder to immunity of the council.
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 WWR 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 and McKay [1975]
2 NZLR 546.
When does the cause of action arise? We can leave aside the cases of personal
injury or damage to other property as presenting no difficulty. It is only the
damage for the 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] QB 858 it abjured the view that the cause
of action arose immediately upon delivery, ie 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.
In D &
F Estates Ltd the third defendants, a building company, were the main
contractors for the construction of a block of flats owned by the first
defendant. The builders engaged a subcontractor for the plaster-work,
reasonably believing him to be skilled and competent. In fact the subcontractor
carried out the work negligently. The plaintiffs were the lessees and occupiers
of a flat in the block. Some 15 years after the flats were built and again some
three years later, the plaintiffs found that plaster in their flat was loose.
They brought an action against, inter alios, the builders, claiming the
cost of remedial work already done and the estimated cost of future remedial
work. The plaintiffs succeeded at first instance, but the Court of Appeal
reversed the decision on two grounds. First, the builders owed no further duty
of care to the plaintiffs, having employed a competent subcontractor; and,
second, the cost of replacing the defective plaster was not recoverable in tort
because it was pure economic loss. The House of Lords unanimously upheld the
decision on both grounds. It is necessary to refer in some detail to the
speeches of Lord Bridge and Lord Oliver, with which all their lordships agreed.
After considering the provisions of the Defective Premises Act 1972, which was
based on the recommendations of a Law Commission report, Lord Bridge reviewed
the authorities prior to Anns v Merton. He then set out the
passage from Lord Wilberforce’s speech, quoted above, with which Lord Diplock,
Lord Simon and Lord Russell had agreed. At p 380H he said:
It is particularly to be noted that Lord
Wilberforce founded his view of the builders’ liability on the alternative
grounds of negligence and breach of statutory duty and that his opinion as to
the nature of the damages recoverable is strictly applicable to the liability
of the local authority, and perhaps also to the liability of the builder for
breach of duty under the byelaws, but is obiter in relation to the builders’
liability for the common law tort of negligence. It is, moreover, difficult to
understand how a builder’s liability, whatever its scope, in respect of a
dangerous defect in a building can arise only when there is imminent danger to
the health and safety of occupiers. In any event the last sentence in the
passage quoted leaves open the critical question as to the measure of damages
in relation to remedial action.
Lord Bridge went on to consider later
authorities and at p 385 summarised the principles applicable first to chattels
and then to real property as follows:
If the hidden defect in the chattel is
the cause of personal injury or of damage to property other than the chattel
itself, the manufacturer is liable. But if the hidden defect is discovered
before any such damage is caused, there is no longer any room for the
application of the Donoghue v Stevenson [1932] AC 562 principle.
The chattel is now defective in quality, but is no longer dangerous. It may be
valueless or it may be capable of economic repair. In either case the economic
loss is recoverable in contract by a buyer or hirer of the chattel entitled to
the benefit of a relevant warranty of quality, but is not recoverable in tort
by a remote buyer or hirer of the chattel.
If the same principle applies in the
field of real property to the liability of the builder of a permanent structure
which is dangerously defective, that liability can only arise if the defect
remains hidden until the defective structure causes personal injury or damage
to property other than the structure itself. If the defect is discovered before
any damage is done, the loss sustained by the owner of the structure, who has
to repair or demolish it to avoid a potential source of danger to third
parties, would seem to be purely economic. Thus, if I acquire a property with a
dangerously defective garden wall which is attributable to the bad workmanship
of the original builder, it is difficult to see any basis in principle on which
I can sustain an action in tort against the builder for the cost of either
repairing or demolishing the wall. No physical damage has been caused. All that
has happened is the defect in the wall has been discovered in time to prevent
damage occurring. I do not find it necessary for the purpose of deciding the
present appeal to express any concluded view as to how far if at all, the ratio
decidendi of Anns v Merton London Borough Council [1978] AC 728
involves a departure from this principle establishing a new cause of action in
negligence against a builder when the only damage alleged to have been suffered
by the plaintiff is the discovery of a defect in the very structure which the
builder erected.
Lord Bridge then considered the argument
that in a complex structure a defect in one part causing damage in another
might be said to have caused damage to ‘other property’, but he held that could
not apply to the defective plaster on the ceiling in that case. The relevant
part of the speech concluded with these words:
It seems to me clear that the cost of
replacing the defective plaster itself, either as carried out in 1980 or as
intended to be carried out in future, was not an item of damage for which the
builder could possibly be made liable in negligence under the principle of Donoghue
v Stevenson or any legitimate development of that principle. To make
him so liable would be to impose upon him for the benefit of those with whom he
had no contractual relationship the obligation of one who warranted the quality
of the plaster as regards materials, workmanship and fitness for purpose. I am
glad to reach the conclusion that this is not the law, if only for the reason
that a conclusion to the opposite effect would mean that the courts, in
developing the common law, had gone much farther than the legislature were
prepared to go in 1972, after comprehensive examination of the subject by the
Law Commission, in making builders liable for defects in the quality of their
work to all who subsequently acquire interests in buildings they have erected.
The statutory duty imposed by the Act of 1972 was confined to dwelling-houses
and limited to defects appearing within 6 years. The common law duty, if it
existed, could not be so confined or so limited. I cannot help feeling that
consumer protection is an area of law where legislation is much better left to
the legislators.
Lord Oliver began with the quoted passage
from Lord Wilberforce’s speech in Anns from which he distilled a number
of points. At p 390F, he went on:
These propositions involve a number of
entirely novel concepts. In the first place, in no other context has it
previously been suggested that a cause of action in tort arises in English law
for the defective manufacture of an article which causes no injury other than
injury to the defective article itself.
Lord Oliver drew attention to a number of
anomalies arising from these propositions, pointing out more than once that
they involved an entirely new concept of the law of negligence in relation to
building cases. At p 392C, he said:
Moreover, it is, I think, now entirely
clear that the vendor of a defective building who is also the builder enjoys no
immunity from the ordinary consequences of his negligence in the course of
constructing the building, but beyond this and so far as the case was concerned
with the extent of or limitations on his liability for common law negligence
divorced from statutory duty, Lord Wilberforce’s observations were, I think,
strictly obiter. My lords, so far as they concern such liability in respect of
damage which has actually been caused by the defective structure other than by
direct physical damage to persons or to other property, I am bound to say that,
with the greatest respect to their source, I find them difficult to reconcile
with any conventional analysis of the underlying basis of liability in tort for
negligence. A cause of action in negligence at common law which arises only
when the sole damage is the mere existence of the defect giving rise to the
possibility of damage in the future, which crystallises only when that damage
is imminent, and the damages for which are measured, not by the full amount of
the loss attributable to the defect but by the cost of remedying it only to the
extent necessary to avert a risk of physical injury, is a novel concept . . .
For my part, therefore, I think the correct analysis, in principle, to be
simply that, in a case where no question of breach of statutory duty arises,
the builder of a house or other structure is liable at common law for
negligence only where actual damage, either to person or to property results
from carelessness on his part in the course of construction.
Finally, Lord Oliver concluded at p 395C:
My lords, I have to confess that the
underlying logical basis for and the boundaries of the doctrine emerging from Anns
v Merton London Borough Council . . . are not entirely clear to me
and it is in any event unnecessary for the purposes of the instant appeal to
attempt a definitive exposition. This much at least seems clear: that in so far
as the case is authority for the proposition that a builder responsible for the
construction of the building is liable in tort at common law for damage
occurring through his negligence to the very thing which he has constructed,
such liability is limited directly to cases where the defect is one which
threatens the health or safety of occupants or of third parties and (possibly)
other property. In such a case, however, the damages recoverable are limited to
expenses necessarily incurred in averting that danger.
In summary,
the effect of their lordships’ speeches in D & F Estates Ltd can be
stated thus: (1) the propositions as to the tortious liability of a builder
contained in Lord Wilberforce’s speech represent a departure from the
established principles of the law of tort; (2) they were obiter; (3) (per Lord
Oliver) in so far as they are authoritative, such liability is limited directly
to the cost of averting danger where the defect in the building imminently
threatens the health or safety of occupants or of third parties and (possibly)
other property.
I now return
to the learned judge’s findings of fact, which he set out very clearly in his
judgment. He heard evidence from experts from both sides: Mr Heggie for the
plaintiffs and Mr Ham for the
Heggie’s report as follows:
6.02 Although
this structure shows no signs of distress in the critically loaded members, the
compressive failure mode of a reinforced concrete column is sudden and not
progressive. No noticeable increasing deformation would be expected as a
failure approached. It is clear that existing factors of safety in the eight
members noted above are much lower than those provided in any properly designed
structure. As a result the probability of collapse is at an unacceptable level.
6.03 Since
the situation has persisted for a number of years, we do not consider
evacuation to be essential. It is important that alterations in internal layout
are minimised and any potential build-up of loading prevented (eg new filing
room). Remedial works should be carried out as soon as practicable so that the
building can be used without restriction and its occupants can enjoy the level
of safety normally expected.
The learned judge then commented as
follows:
Taking the evidence as a whole I do not
accept, nor do I think Heggie intended to convey, that the probability of
collapse was at an unacceptable level on the actual loading then imposed on the
tower block. Nor do I accept that the occupants had not at all times enjoyed a
satisfactory level of safety. Had it been otherwise Heggie would have ordered
immediate evacuation. But it was Heggie’s view that in due course danger would
arise if, as might be expected in an office building, the actual load were to
increase over the years and were to approach the design load. That view was
challenged by Ham and must be examined.
He then considered the rival arguments
and, for the reasons given by Mr Heggie, accepted the need to strengthen all
eight pillars. He summarised his findings of fact in tabular form as follows:
(1) Until 1982 or thereabouts, the plaintiff had
no knowledge of any need for any limitation on use of the tower block. Until
that time the plaintiff had used the tower block as freely as it wished but had
not in fact loaded to design capacity.
(2) In or about late 1982 the plaintiff was
warned by the consultants not to increase the then loading on the tower block.
The warning was heeded. No other restriction was placed on its use.
(3) The offices in the tower block included that
of the Department of Health and Social Security to which the public had regular
access.
(4) At no time did the weakness of the concrete
in the pillars of the tower block give rise to imminent danger to health or
safety of either the plaintiff’s employees or of the public. However, had the
tower block been loaded to design capacity at any time prior to strengthening
of the pillars in January 1985 imminent danger would have resulted.
(5) There is no evidence that there was at any
time cracking of the tower block occasioned by the weakness of the concrete.
(6) The strengthening of the pillars by the
plaintiff was not with the intention of averting imminent danger to health or
safety for it was recognised that there was no such imminent danger. The
purpose was to cure a defect which otherwise prevented the plaintiff from
making full use of the building to the extent for which it was designed.
On these
findings there was, in the learned judge’s words at p 27 of his judgment:
no injury threatened by the mere use of
the tower block: rather there was a restriction on the full extent of future
use.
The learned
judge did not have the advantage of reading the decision in D & F
Estates, which was given 18 months later. He relied, in rejecting the
plaintiffs’ claim, upon the decision of the House of Lords in Pirelli
General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1.
The issue in that case was when a cause of action arose in tort against
engineers in respect of a defective building. A factory chimney had been lined
with unsuitable material when built in 1969. Cracks developed by April 1970.
The plaintiff occupiers could not have discovered the damage until October 1972
and did not do so until November 1977. Extensive remedial work was carried out.
In October 1978, the plaintiffs issued their writ against the defendant
engineers who had designed the chimney. It was held that the cause of action in
tort arose when the damage came into existence, not when it was discovered or
ought to have been discovered. The claim was therefore barred. In the present
case the learned judge relied upon Pirelli as showing that the cause of
action was complete only when physical damage occurred, not when the defect
causing the damage (ie the use of the unsuitable lining) occurred or was discovered.
He said:
In the instant case the constitution of
the concrete was likewise the defect: no cracks occurred because on discovery
of the defect sensible precautions were taken to ensure that the concrete was
not loaded beyond its bearing capacity. The subsequent remedial work has
enabled the concrete pillars to be reconstructed so as to be capable of bearing
the intended load as designed. There has thus been no physical damage in the
sense of cracks of any significance at any time. Nor has there been any other
form of physical damage. The weak concrete was not physical damage, that was
the defect. The discovery of the defect cannot convert the defect into physical
damage for physical damage is objective not subjective.
Anticipating
the decision of the House of Lords in D & F Estates, the learned
judge referred to a dictum of Ralph Gibson LJ in London Congregational Union
Inc v Harriss & Harriss, which has since been reported at [1988]
1 All ER 15. That case also concerned limitation and the court again drew a
distinction between a defect and resultant physical damage, only the latter of
which gave a cause of action. At p 24G Ralph Gibson LJ said:
For my part I am not impressed by the
prophecy of unjust denial of relief to plaintiffs who have discovered a negligent
defect but are not entitled to relief in contract and are faced by the prospect
of physical damage which has not yet been caused but is likely to result from
the defect. Firstly, of course, the concept of negligence is not intended to
afford to owners of buildings rights equivalent to contractual rights. Justice
does not require that a defendant pay damages in tort for a defect in design
which in Lord Fraser’s words: ‘may never lead to any damage at all to the
building’ (see the Pirelli case [1983] 1 All ER 65 at p70, [1983] 2 AC 1
at p16). Secondly, if a negligent defect is discovered and the building owner
can prove an immediate duty or clear need, in protection of himself or of
others or of the building, to carry out repairs to remove the defect so as to
avoid physical damage which is shown to be impending, ie likely to occur in the
immediate future, it seems to me that the law would accept such a situation as
proof of damage.
The learned judge considered that the
second of these observations was irreconcilable with the ratio of Pirelli.
This conflict is essentially the same as that with which the House of Lords
wrestled in D & F Estates when considering the impact of Anns on the
established principles of the law of negligence.
Mr Laws
submits the learned judge was wrong to regard this case as governed by Pirelli,
a limitation case not specifically concerned with the problem of a present
defect and only anticipated damage. He submits that an occupier can recover
against a negligent builder in tort the cost of remedial work undertaken in
advance of any physical damage to the building in order to avert imminent risk
of physical injury to persons. That proposition is, he says, supported by the
dictum of Ralph Gibson LJ in the London Congregational Union case, by Anns,
and by the dissenting speech of Lord Brandon in Junior Books Ltd v Veitchi
Co Ltd [1983] 1 AC 520 at pp 549 to 552, approved in D & F Estates.
It is even supported, he submits, by Lord Oliver in D & F Estates itself,
although, as already demonstrated, that support might be described as at most
lukewarm. Even assuming Mr Laws’ proposition is right and supported by
authority, however, the question remains as to whether, on the learned judge’s
findings, the plaintiffs can succeed here.
Crucially, the
question is whether the remedial works were ‘to avert imminent risk of physical
injury to persons’. The learned judge found that there had been no danger.
Danger would have arisen only if the loading in the tower block had increased
towards the design load. Once the warning was given, there was no question of
that happening. So, the remedial works were not to avert imminent danger; they
were to enable the building to be used to the full extent of the design load.
Mr Laws says
this was to avert imminent danger because (a) the word ‘imminent’ should
not be interpreted too restrictively as to time and (b) there would be danger
if the building were to be used as it was intended or might be expected to be
used.
As to (a), he
submitted that ‘imminent’ means no more in this context than ‘soon’. The danger
does not have to be immediate. In support of this, he cited a passage from the
judgment of Lawton LJ in Ketteman v Hansel Properties Ltd [1984]
1 WLR 1274. That was a case in which faulty foundations caused cracks in the
walls of five houses. In an action against the builders, the local authority
and the architects, the test of ‘imminent danger to health and safety of the
plaintiffs’ derived from Anns was applied. At p 1290, Lawton LJ said:
An absurd situation, said Mr Auld, would
arise if the occupiers of a building which was structurally unsound due to a
local authority’s negligence and which was likely to become a danger to health
or safety unless remedial action were taken had to wait until it was about to
collapse before his right of action against the local authority was accrued. Mr
Owen submitted that the occupier did have to wait until there was a present or
imminent danger to health or safety because that is what Lord Wilberforce had
said . . . . Having regard to the absurdity to which Mr Auld invited our
attention, it seems to me that Lord Wilberforce’s use of the word ‘imminent’
should be understood to mean a danger which was likely to arise soon — and how
long soon was in any case would depend upon the facts and would be a matter of
degree . . . . Having regard to the nature and extent of the cracks and the
likelihood that the
to the safety of the occupiers of all five houses.
In that case there was no doubt that
damage was going to occur at some stage unless remedial underpinning were done.
Here, once the weakness was detected in the eight pillars and warning was
given, the danger was eliminated. It was not going to occur immediately, soon
or at all.
As to (b), the
building could continue to be used as it had been in safety provided that the
load was not increased. The remedial works were done, therefore, not to avert
otherwise inevitable danger but to restore to the plaintiffs the full capacity
of the building for which they had bargained by their underlease. To allow
recovery in tort if defective building makes remedial work necessary to avoid
injury, but not if it is necessary only to render the building fit for its intended
use, may seem a dismal distinction to an aggrieved occupier. But it is a
necessary distinction if, as at present, the law declines to allow an action in
tort equivalent to the enforcement in contract of a warranty of fitness.
In my
judgment, therefore, on the facts of this case, Mr Laws is unable to bring his
claim within the proposition upon which he relies. For these reasons, which
differ slightly from those of the learned trial judge, I would agree with him
that the plaintiffs have failed to establish a cause of action in tort against
the defendants.
Mr Hunt, to
whose lucid argument I pay tribute, submitted in support of his cross-appeal
that even if there were a cause of action it was statute-barred. In view of the
conclusion I have reached on the main issue, it is unnecessary to consider this
issue raised by the respondent’s notice. I would dismiss this appeal.
Agreeing that
the appeal should be dismissed, NICHOLLS LJ said: This appeal is concerned with
an area of the law which is currently in a state of considerable uncertainty.
In D & F Estates Ltd v Church Commissioners [1988] 3 WLR 368
both Lord Bridge (at p 380H) and Lord Oliver (p 392D) noted that the
observations made in Anns v Merton London Borough Council [1978]
AC 728 regarding the liability of the builder for the common law tort of
negligence were obiter. Both of them evinced concern, for reasons stated by
them and which I would respectfully echo, regarding the rationale and ambit of
this head of liability. Neither of them, however, expressed any concluded view.
Furthermore, both Lord Bridge (at pp 381C and 386C) and Lord Oliver (at p 395B)
doubted the correctness of the decision of this court in Batty v Metropolitan
Property Realisations Ltd [1978] QB 554 so far as it related to the liability
of the builder. The House of Lords, however, did not overrule that decision.
For my part, I
have difficulty in distinguishing the present case from Batty. There the
builder’s negligence consisted of failing to appreciate the unsuitability of
the site. At the time the action was heard the house, as distinct from the
garden, had not yet suffered any physical damage such as cracking. Likewise in
the present case, no physical damage was sustained by the building as a result
of the defectively prepared cement used in the structural pillars. If,
therefore, Batty was wrongly decided as to the builder, and the builder
was under no liability in negligence in that case even though the house was
doomed, it must surely follow that the builders were under no liability in
negligence in the present case. I cannot see that the different form which the
builder’s negligence took in the two cases represents an acceptable ground of
distinction.
In my view,
however, this court is not required to decide what is the present status of the
decision in Batty, for the following reason. Let it be assumed, in
favour of the plaintiffs in the present action, that Batty was correctly
decided against the builder. Even so, in order to succeed the plaintiffs must,
at the very least, show that the weakness in the concrete threatened the safety
of occupants or users of the building. That is a question of fact. On that
question the judge found that at no time did the weakness of the pillars give
rise to ‘imminent danger’ to health or safety either of the plaintiffs’
employees or the public. The occupants at all times enjoyed a satisfactory
level of safety. He also found that the plaintiffs’ purpose in strengthening
the pillars early in 1985 was to cure a defect which otherwise prevented the plaintiffs
from making use of the building to the full extent for which it was designed.
In my view,
the effect of these findings is tolerably clear. Those who used the building
were never in danger. Nor would users have been in danger if the existing manner
of use of the tower block had continued without any strengthening of the
pillars. Danger would have arisen if, but only if, the loading of the building
had been increased up to its design capacity. If there were any doubt that this
is what the judge meant, the doubt would be removed by a later passage in his
judgment where the judge said:
there was no injury threatened by the
mere use of the tower block; rather there was a restriction on the full extent
of future use.
In fact, as
the judge also found, the plaintiffs always enjoyed substantial and effective
use of the tower block after taking occupation in 1972. Precisely what were the
activities likely to be undertaken in this office block in the future which
could not have been pursued safely without strengthening of the pillars was not
a matter explored by the judge, beyond a reference by him to a passage in the
report of Mr Heggie, the plaintiffs’ expert, which mentions the ‘build-up of
loading . . . (eg new filing room)’. Given the extent to which the plaintiffs
enjoyed and, more importantly, could have continued to enjoy this office block
without danger, I do not think that the defective pillars can be said to have
given rise to a danger, imminent or otherwise, to the safety of the occupants.
True, the pillars could not safely support the design load. But the claim in
this action against the contractors is in negligence, not in contract. If,
despite inability to support the design load, the building was fit for the
purpose for which it would normally be used, namely, as offices, then the claim
in negligence must fail. In my view, the judge’s findings of fact are fatal to
the plaintiffs’ claim. Apart from any other difficulties confronting the
plaintiffs in this action, their claim must fail on this narrow point.
I add only one
further comment. One of the arguments advanced by Mr Hunt concerned limitation.
He submitted that if the plaintiffs have a cause of action in this case it
arose when the building was handed over, in which event the plaintiffs’ claim was
time-barred long before the writ was issued in October 1982. He pointed out
that there was no physical damage to the building. He submitted that the cause
of action could not have accrued when the plaintiffs discovered the defect,
because that would be contrary to the decision in Pirelli General Cable
Works Ltd v Oscar Faber & Partners [1983] 2 AC 1. Nor, he
further submitted, could the cause of action have accrued when the plaintiffs
incurred expenditure in remedying the defect in the pillars, because that would
enable the plaintiffs to postpone the actual accrual of the cause of action
until such time as he might choose to carry out remedial works. This conundrum
does not need to be solved on this appeal; but it is another difficulty which
will need to be faced when the correctness of the decision in Batty as
against the builder falls to be decided.
Also agreeing,
O’CONNOR LJ said: I have had the advantage of reading the judgment prepared by
Taylor LJ and I agree that this appeal should be dismissed for the reasons
given by him. I add a few words of my own out of deference to the arguments
addressed to us by Mr Laws on behalf of the appellants.
There is a
formidable body of judicial opinion that no cause of action in tort arises
against a party as a result of whose negligence a latent defect is present in a
building unless and until the building suffers some physical damage. As I
pointed out in London Congregational Union v Harriss & Harriss [1988]
1 All ER 15 at pp 35-37, numerous attempts have been made to produce a cause of
action before damage founding on the speech of Lord Fraser in Pirelli (1983)
2 AC 1 at p 16:
There may perhaps be cases where the
defect is so gross that the building is doomed from the start, and where the
owners’ cause of action will accrue as soon as it is built, but it seems
unlikely that such a defect would not be discovered within the limitation
period. Such cases, if they exist, would be exceptional.
In Ketteman
v Hansel Properties Ltd [1987] AC 189* at p 205, Lord Keith finally
disposed of the ‘doomed from the start’ argument. He said:
The appellants’ presentation of this
argument involved two aspects. In the first place it was maintained that the
houseowners’ respective causes of action accrued, not when the physical damage
to their houses occurred, but when they became the owners of houses with
defective foundations. It was argued that they then suffered economic loss
because the houses were less valuable than they would have been if the
foundations had been sound. The proposition that a cause of action in tort
accrued out of negligence resulting in pure economic loss was sought to be
vouched by reference to Junior Books Ltd v Veitchi Co Ltd (1983)
1 AC 520. That case was also cited in Pirelli General Cable Works Ltd v Oscar
Faber & Partners [1983] 2 AC 1, in support of the argument that, since
in that case there was economic loss when the chimney was built, the cause of
action arose then. The argument was clearly
of their lordships who participated in the decision. At p 16, he expressed the
opinion that a latent defect in a building does not give rise to a cause of
action until damage occurs. In the present case there can be no doubt that the
defects in the houses were latent. No one knew of their existence until damage
occurred in the summer of 1976. This branch of the argument for the architects
is, in my opinion, inconsistent with the decision in the Pirelli case,
and must be rejected.
In the second branch of the argument it
was maintained that a distinction fell to be drawn between the case where the
defect in a building was such that damage must inevitably eventuate at some
time and the case of a defect such that damage might or might not eventuate.
The former case was that of a building ‘doomed from the start’ such as was in
the contemplation of Lord Fraser of Tullybelton when he made reference to that
concept in his dicta in the Pirelli case, at p 16. In the present case
the houses were doomed from the start because the event showed that damage was
bound to occur eventually. My Lords, whatever Lord Fraser may have had in mind
in uttering the dicta in question, it cannot, in my opinion, have been a building
with a latent defect which must inevitably result in damage at some stage. That
is precisely the kind of building that the Pirelli case was concerned
with, and in relation to which it was held that the cause of action accrued
when the damage occurred. This case is indistinguishable from the Pirelli
case and must be decided similarly. The second branch of the architects’
argument fails. I understand that all your lordships agree.
*Editor’s note: Reported also at [1987] 1
EGLR 237.
Alongside this
line of authority there has been a stream of authority where attempts have been
made to recover economic loss arising from negligence in the construction of a
building: Simaan General Contracting Co v Pilkington Glass Ltd (2) [1988]
2 WLR 761; Greater Nottingham Co-operative Society Ltd v Cementation
Piling & Foundations Ltd [1988] 3 WLR 396; and, finally, D & F
Estates Ltd v Church Commissioners for England in the House of Lords
[1988] 3 WLR 368.
Mr Laws
attempted a Houdini escape from the chains by which the appellant was bound.
Armed with the approval given to it by Lord Bridge in D & F Estates he
turned to the speech of Lord Brandon in Junior Books [1983] 1 AC 520 at
p 550:
My lords, a good deal of the argument
presented to your lordships during the hearing of the appeal was directed to
the question whether a person can recover, in an action founded on delict
alone, purely pecuniary loss which is independent of any physical damage to
persons or their property. If that were the question to be decided in the
present case, I should have no hesitation in holding that, in principle and
depending on the facts of a particular case, purely pecuniary loss may be
recoverable in an action founded on delict alone. Two examples can be given of
such cases. First, there is the type of case where a person suffers purely
pecuniary loss as a result of relying on another person’s negligent
misstatements: Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964]
AC 465. Secondly, there may be a type of case where a person, who has a cause
of action based on Donoghue v Stevenson [1932] AC 562, reasonably
incurs pecuniary loss in order to prevent or mitigate imminent danger of damage
to the persons or property exposed to that danger: see the dissenting judgment
of Laskin J in the Canadian Supreme Court case of Rivtow Marine Ltd v Washington
Iron Works (1973) 40 DLR (3d) 530, referred to with approval in the speech
of Lord Wilberforce in Anns v Merton London Borough Council (1978)
AC 728, 760.
And again the passage at p 551:
The first consideration is that, in Donoghue
v Stevenson itself and in all the numerous cases in which the
principle of that decision has been applied to different but analogous factual
situations, it has always been either stated expressly, or taken for granted,
that an essential ingredient in the cause of action relied on was the existence
of danger, or the threat of danger, of physical damage to persons or their
property, excluding for this purpose the very piece of property from the
defective condition of which such danger, or threat of danger, arises. To
dispense with that essential ingredient in a cause of action of the kind
concerned in the present case would, in my view, involve a radical departure
from long-established authority.
Mr Laws
submitted that as soon as the defect in the pillars was discovered there was a
‘threat’ of danger of physical damage to persons sufficient to produce ‘an
imminent danger’ which justified the incurring of pecuniary loss.
I would reject
this argument on two grounds; first, on the facts I do not think it right to
say that there was any imminent danger of damage to persons. Second, the eight
pillars were ‘the very piece of property from the defective condition of which’
any threat of danger arose and were thus excluded by Lord Brandon.
Mr Laws
submitted that to allow this claim would not be to transfer a warranty of
fitness from the sphere of contract to the sphere of tort, but properly be
looked at as a warranty of safety which public policy might dictate as having a
proper place in tort. This is an attractive argument, but I do not think that
it can prevail in the face of the authorities.
I, too, would
dismiss this appeal.
The appeal was dismissed with costs.
Leave to appeal to the House of Lords was granted.
