Building contract — Main contractor — Work of sub-contractors defective — Whether economic loss recoverable in tort — Whether main contractor owed duty of care in respect of sub-contractors
Wates Ltd, the third defendants in this case, were employed by a company now in liquidation to construct a block of flats for the Church Commissioners, the first defendants. Wates employed a sub-contractor for plastering work; that work was held to have been negligently done. The Church Commissioners granted a 98-year lease of one flat to the first plaintiff, a company controlled by Mr and Mrs Tillman, and the latter occupied the flat. The first plaintiff claimed damages due to the defective plaster and Mr and Mrs Tillman claimed for disturbance. In reversing the decision of the trial judge, the Court of Appeal decided that Wates, having employed competent sub-contractors to carry out the plastering work owed no further duty of care to the plaintiffs in relation to the execution of the work by the sub-contractors.
The Court of Appeal considered a submission by Wates that the cost of repairing the defective plaster, even if the plaster work had been done by Wates’ employees, was not damage that the first plaintiff could recover in tort, as it represented economic loss. This was rejected in relation to the costs of repair actually carried out on the ground that the first plaintiff, as owner of the lease, was liable to Mr and Mrs Tillman to carry out the repairs, but accepted in relation to the cost of future remedial works yet to be carried out. The plaintiffs appealed.
Held The appeals were dismissed. There have been two developments of the law in relation to a builder’s liability in tort for defective premises: the Defective Premises Act 1972, which created certain limited rights to claim damages for defective work, and a series of cases starting with Dutton v Bognor Regis Urban District Council [1972] 1 QB 373. The principles that are of fundamental importance to determine the scope of the duty of care owed by one party to another in the absence of either a contractual relationship or a uniquely proximate relationship, as in Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520, are derived from Donoghue v Stevenson [1932] AC 562. The duty of care is based on the existence of a danger of physical injury to persons or their property.
Lord Brandon of Oakbrook’s dissenting speech in Junior Books, in dealing with the considerations that might limit the scope of the duty of care, argued that without limitation a wide duty of care would create, as between parties not in contractual relationship with each other, obligations of one of those parties to the other which are really only appropriate as between persons who do have such a relationship. That speech was given support by the Supreme Court of the United States in East River Steamship Corporation v Transamerica Delaval Inc (1986) 106 SCt 2295.
No duty of care is owed under Donoghue v Stevenson in respect of a chattel that contains a dangerous defect if that defect is discovered before damage is done; the costs of repair are economic loss and only recoverable in contract not tort. It follows that where a building contains a defect liability in tort will arise only if the defect causes personal injury or damage to property other than the building (or in the case of complex structures some other part of the structure). If the defect is discovered before any damage is done, the cost of repair is economic loss and not recoverable in tort. On that basis only the damage caused by the fall of the plaster to other property of the plaintiffs, which was minimal, might have been recoverable in tort.
As to whether Wates owed a non-delegable duty of care in the first place, in respect of the negligence of their sub-contractor, there is no legal principle imposing any duty of care of this nature on a contractor employing sub-contractors.
R Fernyhough QC and Robert Glancy (instructed by Mishcon de Reya) appeared for the appellants; and Donald Keating QC and Richard Seymour (instructed by Masons) appeared for the respondent, Wates Ltd.
