Negligence — Whether engineers and surveyors owed common law duty of care — Whether causes of action statute-barred — Whether warranties given
plaintiffs, Mr and Mrs Hiron, are the owner/occupiers of a dwelling at Pickwick
Place, Harrow-on-the-Hill, Middlesex; the second plaintiffs, Legal &
General Assurance Society Ltd, are the insurers of the house — In October 1976
damage first appeared to the house and in September 1977 the first plaintiffs
retained the fourth defendants, Leo Lewis & Co, as building surveyors to
advise them — In February 1978 the first plaintiffs made a claim upon their
policy of insurance with the second plaintiffs — In September 1978 the second
plaintiffs retained the third defendants, Peter M Olley & Associates as
structural engineers to advise them as to the cause of and remedy for the
damage — In February 1980 the first plaintiffs entered into a contract with the
second defendants, Pynford Services Ltd, to carry out a site investigation — In
September 1980, following the second defendants’ report and further reports
thereon by the third and fourth defendants, the first plaintiffs entered into
an agreement with the first defendant, Pynford South Ltd, to carry out works to
the house to be supervised by the third and fourth defendants — After the work
was completed, and in May 1983, further physical damage developed to the house
which continued — The first plaintiffs believed that the first defendant would
give a guarantee of its work; no such guarantee appeared to have been issued —
The plaintiffs issued their writ on May 4 1989
preliminary issue, the parties sought determination of the following issues:
(1) whether the third and fourth defendants respectively owed to either of the
plaintiffs the common law duty to take reasonable care; (2) if so, and upon the
assumption that the first and second defendants also owed such duties, whether
the causes of action arose more than six years before the issue of the writ;
(3) whether warranties alleged in the reamended statement of claim were given;
and (4) if so, in respect of the warranties, the event upon which the cause of
action thereunder arose
economic loss, the existence of a contract between the plaintiff and the
defendant is a very important consideration in deciding whether there was
sufficient proximity between them and whether it is just and reasonable that
the defendant should owe a duty in tort — The third defendants must or should
have foreseen that if they gave wrong advice to the second plaintiffs and in
consequence inadequate underpinning was carried out the first plaintiffs would
suffer financially as a result of fresh subsidence — The first plaintiffs had
the fourth defendants to advise them — On balance there was not sufficient
proximity between the first plaintiffs and the third defendants who did not
thereby owe them a duty of care as only the first requirement for the existence
of such a duty in either Donoghue v Stevenson or Hedley Byrne v Heller
was fulfilled — It was not just and reasonable that the third defendants should
owe the second plaintiffs a duty in tort which would merely have duplicated an
implied term in the contract between them — Accordingly, the last requirement
for a duty in Donoghue v Stevenson or in Hedley Byrne v Heller
was not satisfied and the third
the fourth defendants did not owe a duty in tort to the first plaintiffs —
There was not sufficient proximity or reliance between the second plaintiffs
and the fourth defendants and it would not have been just and reasonable that
the fourth defendants should owe a duty in tort to the second plaintiffs
that a cause of action arises when damage is suffered and not when the damage
is discovered whether the action is for personal or physical damage or
financial or other economic loss — The plaintiffs’ causes of action against the
individual defendants must have arisen when the second plaintiffs provided the
first plaintiffs with the money to pay for the works and the first and/or
second defendants were paid — Although the date when the second plaintiffs put
the first plaintiffs in funds or the first plaintiffs paid the first
defendants’ final invoice on February 13 1981: both dates were well before May
4 1983, being six years before the writ, and accordingly the plaintiffs’ claims
were statute-barred
entitled to a ‘guarantee’ and the first and second defendants acted in breach
of contract by not supplying the guarantee: but since this breach must have
occurred in or about 1981 the first plaintiffs’ claim in respect of it was
statute-barred
its terms, the ‘event’ upon which the first plaintiffs would have had a cause
of action under it was when the ‘strengthened foundations’ showed continuous
‘instability’
The following
cases are referred to in this report.
Bagot v Stevens Scanlan & Co Ltd [1966] 1 QB 197; [1964] 3 WLR
1162; [1964] 3 All ER 577; [1964] 2 Lloyd’s Rep 353
Bell v Peter Browne & Co [1990] 2 QB 495; [1990] 3 WLR 510;
[1990] 3 All ER 124, CA
Caparo
Industries plc v Dickman [1990] 2 AC 605;
[1990] 2 WLR 358; [1990] 1 All ER 568, HL
Cartledge v E Jopling & Sons Ltd [1963] AC 758; [1963] 2 WLR 210;
[1963] 1 All ER 341, HL
D & F
Estates Ltd v Church Commissioners for England
[1989] AC 177; [1988] 3 WLR 368; [1988] 2 All ER 992; [1988] 2 EGLR 263, HL
Donoghue v Stevenson [1932] AC 562, HL
Esso
Petroleum Co Ltd v Mardon [1976] QB 801;
[1976] 2 WLR 583; [1976] 2 All ER 5; [1976] 2 Lloyd’s Rep 305, CA
Forster v Outred & Co [1982] 1 WLR 86; [1982] 2 All ER 753, CA
Groom v Crocker [1939] 1 KB 194; [1938] 2 All ER 394, CA
Hedley
Byrne & Co Ltd v Heller & Partners Ltd
[1964] AC 465; [1963] 3 WLR 101; [1963] 2 All ER 575; [1963] 1 Lloyd’s Rep 485,
HL
Iron
Trade Mutual Insurance Co Ltd v J K Buckenham
Ltd [1990] 1 All ER 808; [1989] 2 Lloyd’s Rep 85
Islander
Trucking Ltd v Hogg Robinson & Gardner
Mountain (Marine) Ltd [1990] 1 All ER 826
Lee v Thompson Journal of Professional Negligence, May 1989
Lister v Romford Ice & Cold Storage Co Ltd [1957] AC 555;
[1957] 1 All ER 125; [1957] 2 WLR 158; [1956] 2 Lloyd’s Rep 505, HL
Midland
Bank Trust Co Ltd v Hett, Stubbs & Kemp
[1979] Ch 384; [1978] 3 WLR 167; [1978] 3 All ER 571
Moore
(DW) & Co Ltd v Ferrier [1988] 1 WLR
267; [1988] 1 All ER 400, CA
Murphy v Brentwood District Council [1991] 1 AC 398; [1990] 3 WLR
414; [1990] 2 All ER 908; [1990] 2 Lloyd’s Rep 467; (1990) 89 LGR 24, HL
Norwich
City Council v Harvey [1989] 1 WLR 828;
[1989] 2 All ER 1180, CA
Pacific
Associates Inc Baxter [1990] 1 QB 993; [1989] 3 WLR
1150; [1989] 2 All ER 159, 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
Punjab
National Bank v De Boinville unreported, May
17 1991
Secretary
of State for the Environment v Essex Goodman
& Suggitt [1986] 1 WLR 1432; [1986] 2 All ER 69; [1985] 2 EGLR 168;
(1985) 276 EG 308
Smith v Eric S Bush (a firm) [1990] 1 AC 831; [1989] 2 WLR 790;
[1989] 2 All ER 514; [1989] 1 EGLR 169; [1989] 17 EG 68 & 18 EG 99, HL
Tai
Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd
[1986] AC 80; [1985] 3 WLR 317; [1985] 2 All ER 947; [1985] 2 Lloyd’s Rep 313,
PC
This was a
hearing to try four preliminary issues which it was agreed arose in a claim by
the first plaintiffs, Peter and Brenda Hiron, and the second plaintiffs, Legal
& General Assurance Society Ltd, against the first to fourth defendants,
Pynford South Ltd, Pynford Services Ltd, Peter M Olley & Associates and Leo
Lewis & Co, for damages for alleged breaches of contract and/or common law
duty of care.
Adrian Cooper
(instructed by Lawrence Graham) appeared for the first and second plaintiffs;
Nigel Pitt (instructed by Jaques & Lewis) represented the first and second
defendants; Paul Rees (instructed by Berrymans) represented the third
defendants; Mark Cannon (instructed by Pinsent & Co) represented the fourth
defendants.
Giving
judgment, JUDGE NEWEY QC said: In this case the first plaintiffs are Mr
and Mrs Peter Hiron, owners and occupiers of a house known as 7 Pickwick Place,
Harrow-on-the-Hill, Middlesex, and the second plaintiffs are the Legal &
General Assurance Society Ltd, who are insurers of the house. The first and
second defendants are Pynford South Ltd (formerly known as Pynford London Ltd)
and Pynford Services Ltd, companies in a group which specialise in the
investigation of foundation failures and the design and construction of
remedial works for them. The third defendants are Peter M Olley &
Associates, structural engineers, and the fourth defendants are Leo Lewis &
Co, building surveyors. The first plaintiffs are claiming against all of the
defendants and the second plaintiffs are claiming against the third defendants.
In an attempt
to save time and costs the parties have agreed that I should try four
preliminary issues and that I should do so on the assumption that the facts
alleged in paras 1-24 of the reamended statement of claim will be established
at the trial and also taking into account certain evidence which was given
before me. The issues are:
(1) Whether the third and fourth defendants
respectively owed to either of the plaintiffs the common law duty pleaded in
the reamended statement of claim to take reasonable care to safeguard against
the loss and damage alleged.
(2) If so, and upon the assumption that the first
and second defendants also owed such duties, whether the causes of action
thereunder arose more than six years before the issue of the writ.
(3) Whether either of the warranties alleged in
paras 15 and 15A of the reamended statement of claim was given.
(4) If so, in respect of each warranty given,
what the event was upon which the cause of action thereunder arose.
Facts
stated in reamended statement of claim
The facts
alleged in the reamended statement of claim may, I think, be summarised as
follows. The house was situated on a slope which had been modified by cut and
fill. The subsoil was mainly London clay. The house had slab floors and there
were some retaining walls. In about October 1976, damage appeared in the house
and in September 1977 the first plaintiffs retained the fourth defendants to
advise them concerning it. On February 17 1978, the first plaintiffs made a
claim upon the second plaintiffs. On February 24 1978, the first defendants, as
a result of a request made to them by or on behalf of the first plaintiffs,
made an offer to carry out a remedial scheme. In September 1978, the second
plaintiffs retained the third defendants to advise them as to the cause of and
remedy for the damage; the third defendants knew that the house belonged to the
first plaintiffs.
In February
1980, the first plaintiffs entered into a contract with the second defendants
under which they were to carry out a site investigation. The second defendants
did so and, on May 20 1980, produced a report. On July 3 1980, the first
defendants submitted to the first plaintiffs an offer to carry out a revised
scheme presumably based on the second defendants’ report, involving partial
underpinning to the front and left-flank walls of the house and stating that
other underpinning and work to the foundations was not necessary. The third
defendants considered the revised scheme and produced a report to the second
plaintiffs dated May 20 supporting it, except that they stated that anti-heave
precautions should be included in the underpinning. The fourth defendants
considered the offer on behalf of the first plaintiffs and, although it is not
stated in the reamended statement of claim, presumably approved it.
On September 3
1980, the first plaintiffs entered into an agreement with the first defendants
to carry out the revised scheme with, I assume, anti-heave precautions added.
The first defendants duly carried out works, which were supervised by the third
defendants and by the fourth defendants respectively. The third defendants knew
that the first plaintiffs had not instructed structural engineers. The works
were completed in about 1981.
On or about
May 4 1983, further physical damage developed in the house and has continued,
so that the house has lost structural stability; the 1980-81 additions have not
themselves been affected. On May 31 1983, the fourth defendants informed the
first defendants of the new damage. Further remedial works are required
consisting of underpinning of the whole house, the creation of a suspended
ground floor and further anti-heave precautions.
Evidence
The evidence
which I received consisted of written statements and oral testimony by Mr
Hiron, one of the two first plaintiffs, and by Mr Haythorn, a chartered
engineer, who was managing director of the first defendants during a period
which included 1980-81, a statement by Mr Morgan, the present managing director
of the first defendants, and a small number of documents.
The documents
included an advertisement for ‘Pynford’ work, which mentioned a ’20 years
written guarantee’ and stated among other things:
Pynford’s
guarantee is an assurance of their confidence in diagnosing the cause of the
foundation problem and in providing a longterm remedy. It ensures the security
of your property, assures its value and safeguards you from further expense . .
. Most houses are mortgaged for 15-20 years and through Pynford the householder
has for the first time the protection of a guarantee for the duration of his
mortgage. Your peace of mind. It is a legal document issued by a financially
secure company . . .
Other
documents included what were doubtless the two offers referred to in the
statement of claim, although the first was dated February 24 and not 17. The
first offer was accompanied by a letter of the same date. Parts of it read:
If the scheme
and any subsequent recommendations are carried out Pynford London Ltd will
guarantee the underpinning for 20 years . . . We find that there is only a
slight risk of further underpinning being required in the future, but of
course, the future stability of the parts of the property that have not been
underpinned cannot be guaranteed.
The offer of
February 24 stated, among other things, that certain ‘documents shall be deemed
to form and be read and construed as part of this offer’. The documents
included the covering letter and a ‘specimen guarantee’. The offer went on to
refer to two schemes and in respect of each offered to ‘underpin and guarantee’
the particular work proposed and not the house generally. The specimen
guarantee included various details to be completed, recorded that work had been
carried out and then went on:
We guarantee
that the ‘strengthened and guaranteed foundations’ will be stable for 20 years
from the completion of the site works. If instability continues, the company,
on production of this guarantee, will arrange to inspect the strengthening and
repair without charge, providing that the cost of the repair work is less than
the payment received on the original contract and providing that the company
will not be responsible for damage caused by . . . . failures of retaining
walls, variation of load distribution, works performed outside the boundaries
of the property or damage caused by . . . effects of tree roots or shrinkable
clays.
The revised
offer of July 3 1980 was accompanied by a letter which gave Pynfords’ opinion
that ‘the cause of the structural damage affecting the building is the result
of variations in the moisture content of the shrinkable subsoil known to exist
beneath the foundations’. The words in the offer referring to a guarantee were
similar to those in the earlier offer and once again a specimen guarantee was
mentioned.
The substance
of Mr Hiron’s evidence was that Mr Leo Lewis [FRICS] of the fourth defendants
recommended employing Pynfords, from whom the various documents were received,
that Pynfords never stated that they would not give a guarantee and that he
believed that he had paid for one but did not receive it. Mr Haythorn said that
guarantees were normally issued by Pynfords, that he had been unable to find
any record of one being issued to the first plaintiffs and that he believed
that in this instance the issue of one had been overlooked. In Mr Morgan’s
statement he said that he had searched and had been unable to find any record
of a guarantee being issued for works carried out at 7 Pickwick Place.
The date when
the plaintiffs issued their writ was May 4 1989.
First issue
The law
The reamended
statement of claim alleges that the first, second and fourth defendants owed
contractual duties to the first plaintiffs and that the third defendants owed
contractual duties to the second plaintiffs. These duties are not disputed by
the respective defendants, who, however, assert that they are not material
because any causes of action for breach of them are statute-barred.
The reamended
statement of claim alleges that each of the defendants owed duties in tort, at
least to take reasonable care not to cause financial or economic loss to the
first and second plaintiffs. The first and second defendants have not disputed
these allegations before me, but they reserve the right to do so should the
case reach an appellate court. Issue (1) is therefore concerned solely with
whether the third and fourth defendants respectively owed to either or both
plaintiffs a duty in tort to take reasonable care to safeguard them against (or
avoid causing) damage to them.
Mr Adrian
Cooper, for the plaintiffs, and Mr Paul Rees, for the third defendants but as
to this issue, by arrangement with Mr Mark Cannon for the fourth defendants,
speaking for the fourth defendants also, have made detailed submissions to me
as to when a duty of care exists and they have referred me to many authorities.
I think that
in the light of the recent House of Lords decisions in D & F Estates Ltd
v Church Commissioners for England [1989] AC 177*, Smith v Eric
S Bush; Harris v Wyre Forest District Council [1990] 1 AC 831† , Caparo
Industries plc v Dickman [1990] 2 AC 605 and Murphy v Brentwood
District Council [1991] 1 AC 398 the law with regard to duties to take care
has become tolerably clear, although no doubt it can be expressed in different
ways. One way is, I think, to say that there are now two torts each consisting
of failures to take care. One tort, which could be named after Donoghue
v Stevenson [1932] AC 562, is concerned with lack of care which results
in damage to persons or property (other than the property from which the damage
arose) and the other, named after Hedley Byrne & Co Ltd v Heller
& Partners Ltd [1964] AC 465, is concerned with lack of care which
causes non-physical ‘economic’ loss.
*Editor’s
note: Also reported at [1988] 2 EGLR 263.
† Editor’s
note: Also reported at [1989] 1 EGLR 169.
The
requirements for the existence of a duty of care in a Donoghue v Stevenson
case are: first, that the defendant foresaw or ought reasonably to have
foreseen when he acted or omitted to act that if he failed to exercise
reasonable care the plaintiff would be likely to suffer personal injury or
damage to his property; second, that there was at the time a sufficient
relationship of ‘neighbourhood’ or ‘proximity’, not necessarily in a physical
sense, between the parties; and, third, that it was just and reasonable and
certainly not against public policy that a duty should exist. If a duty existed
and if the defendant acted in breach of it by failing to take reasonable care
and if, as the result, the plaintiff suffered injury or damage to his property
which was foreseeable, the plaintiff may recover damages to compensate him,
including damages for any economic loss consequent upon the injury or damage to
property.
The requisites
for a Donoghue v Stevenson duty of care are also required for a Hedley
Byrne one, but in addition the defendant must or should have known that the
plaintiff would rely upon him and the plaintiff must have so relied. If the
defendant then acted in breach of duty and as the result the plaintiff suffered
foreseeable economic loss, the plaintiff may recover it.
An alternative
way of stating the law might be that there is a single tort of negligence but
that in cases in which a plaintiff has suffered only economic loss for a duty
of care to exist the requirements of foresight of consequences and of proximity
can be fulfilled only by the defendant’s foreseeing that because of the
plaintiff’s reliance upon him the plaintiff would be liable to suffer loss and
that the relationship between them included knowledge of reliance and actual
reliance.
However
liability for breach of duty to take care is described, it is clear that it is
to be extended only on an incremental basis — case by case: Lord Roskill in Caparo
Industries plc v Dickman at p 628 and Punjab National Bank v De
Boinville unreported May 17 1991 CA, Staughton LJ at p 23 of the
transcript.
Mr Cooper and
Mr Cannon, speaking for the third as well as the fourth defendants, each made
submissions to me as to the effect of a contract between parties on the
existence of any duties of care in tort owed by one to the other. Mr Cannon
went so far as to submit that if there is a contract there cannot be any
liability in tort.
There are
certainly cases which support the view that contractual obligations exclude
tortious. In Groom v Crocker [1939] 1 KB 194, CA, Lord Greene MR
said that the relationship of solicitor and client was contractual; the
question had not, however, been argued and the other members of the court did
not express any views. In Bagot v Stevens Scanlan & Co Ltd
[1966] 1 QB 197 Diplock LJ held at first instance that the relationship between
an architect and his clients was governed by contract only. In Tai Hing
Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80, a customer
and banker case, Lord Scarman in giving the advice of the Privy Council said at
p 107 that they did ‘not believe that there was anything to the advantage of
the law’s development in searching for a liability in tort where the parties
are in a contractual relationship’ and quoted in support words of Lord
Radcliffe in his dissenting speech in Lister v Romford Ice & Cold
Storage Co Ltd [1957] AC 555 at p 587. In Norwich City Council v Harvey
[1989] 1 WLR 828 the Court of Appeal held that a defendant subcontractor’s duty
of care in tort to a plaintiff employer was qualified by the terms of the head
contract between the plaintiff and the main contractor, which was incorporated
into the subcontract between the main contractor and the defendant. In Pacific
Associates Inc v Baxter [1990] 1 QB 993, although there was no
contract between the plaintiff contractors and the defendant engineers, the
existence of contracts between each of them and their common employer was a
factor leading the Court of Appeal to decide that the defendants did not owe a
duty in tort to the plaintiffs.
In other cases
courts have either held or assumed that the existence of a contract does not
exclude liability in tort. In Esso Petroleum Co Ltd v Mardon
[1976] QB 801, CA, an oil company was held liable for breach of duty in tort to
one of its filling station tenants although there were contractual relations
between them. In Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp
[1979] Ch 384 Oliver J held, after reviewing many authorities, that solicitors
were liable to their clients in tort independently of any liability in
contract. In Smith v Eric S Bush; Harris v Wyre Forest
District Council [1990] 1 AC 831 surveyors were liable in tort to
mortgagees although they had prepared valuations pursuant to contracts with
mortgagors. In Caparo auditors under contract to a company were held
liable to individual shareholders.
In view of the
cases, while it may be that the courts are moving towards a more restrictive
view of duties in tort when there is a contract between parties, it seems clear
that at present the mere existence of a contract does not preclude liability in
tort.
I think that
the correct approach is that when there was a contract between plaintiffs and
defendants it should be treated as a very important consideration in deciding
whether there was sufficient proximity between them and whether it is just and
reasonable that the defendant should owe a duty in tort.
Whether
third defendants owed duties of care in tort
In the present
case, to decide whether the third and fourth defendants owed duties of care to
the first and second plaintiffs it is necessary to decide in respect of each
whether the requirements for a duty of care in Donoghue v Stevenson
and/or in Hedley Byrne v Heller were fulfilled.
Since it is to
be assumed that it would be proved at trial that the third defendants knew that
the first plaintiffs owned and resided in 7 Pickwick Place, I think that the
third defendants must or should have foreseen that if they gave wrong advice to
the second plaintiffs and in consequence inadequate underpinning was carried
out the first plaintiffs would suffer financially at least as a result of fresh
subsidence.
The third
defendants were engaged under contract by the second plaintiffs, whose
interests were not precisely the same as those of the first plaintiffs. The
first plaintiffs wanted their house to be made secure against subsidence and
doubtless they were not troubled as to the cost of doing so, so long as the
second plaintiffs were going to bear it. The second plaintiffs would not have
wished to pay more than was strictly necessary. There presumably was no direct
communication between the first plaintiffs and the third defendants. The first
plaintiffs had the fourth defendants to advise them and, although the fourth
defendants were not engineers, as building surveyors they would have
considerable knowledge and probably practical experience of subsidence. On
balance I do not think there was sufficient proximity between the first
plaintiffs and the third defendants. A fortiori I do not think that the
first plaintiffs relied upon the third defendants or that the third defendants
had reason to believe that they did so.
Since the
third defendants became involved in the problems relating to the house simply
as advisers to the second plaintiffs and the first plaintiffs already had and
continued to have their own advisers, I do not think it was just and reasonable
that the third defendants should owe to the first plaintiffs a duty of care.
In my opinion,
since only the first requirement for the existence of a duty of care in either Donoghue
v Stevenson or Hedley Byrne v Heller was fulfilled, the third
defendants did not owe any such duty to the first plaintiffs.
Since the
third defendants plainly knew that the second plaintiffs were insurers of the
house, I think that they must have foreseen that, if through lack of care they
advised in favour of an underpinning scheme which did not work, the second
plaintiffs would incur economic loss in having to finance a second scheme.
As the second
plaintiffs engaged the third defendants to advise them and the third defendants
were under a contractual obligation to do so, I think that there was sufficient
proximity between them and also sufficient reliance.
Since the
second plaintiffs and the third defendants had entered into an express contract
whereby the third defendants were to advise the second plaintiffs in return for
payment and a duty in tort to take care in giving advice would merely have
duplicated an implied term in contract, I do not think that it was just and
reasonable that the third defendants should have owed a duty in tort. The only
probable result of adding a tortious obligation would have been to have given
the second plaintiffs a longer period in which to sue the third defendants, but
if that had been the intention of the parties they could have provided for it
in their contract. The position would probably have been different if
contractual and tortious duties had not precisely coincided.
I conclude
that, since the last requirement for a duty in Donoghue v Stevenson
or in Hedley Byrne v Heller was not satisfied, the third
defendants did not owe a duty to the second plaintiffs either.
Whether
fourth defendants owed duties of care in tort
For similar
reasons to those which I have given for deciding that the third defendants did
not owe a duty in tort to the second plaintiffs, I hold that the fourth
defendants did not owe a duty in tort to the first plaintiffs.
I have not
been asked to make any assumption as to the fourth defendants’ relations with
the second plaintiffs and I am by no means certain that the fourth defendants
would have foreseen that if they advised the first plaintiffs to let the first
defendants’ scheme be implemented the second plaintiffs would suffer economic
loss. I think that the fourth defendants may well have thought, and thought
reasonably, that the second plaintiffs as insurers would not be influenced in
any way by advice given to the first plaintiffs by their personal advisers. In
any event, for similar reasons to those which I have given in relation to the
first plaintiffs and the third defendants, I do not think that there was
proximity or reliance between the second plaintiffs and the fourth defendants
and that it would not have been just and reasonable that the fourth defendants
should owe a duty in tort to the second plaintiffs.
Second issue
The second
issue concerns when a cause of action arises in tort for economic loss. The
plaintiffs by their reamended statement of claim allege simply that the causes
of action in this case arose in 1983; any date less than six years before May 4
1989 when they issued their writ is satisfactory to them. Mr Pitt, for the
first and second defendants, joined other counsel in making submissions to me
about this issue and citing cases to me.
Cartledge v E Jopling & Sons Ltd [1963] AC 758 and Pirelli
General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1
decided that causes of action relating to the human body and physical property
respectively arise when damage is first suffered and not when it is discovered.
In Pirelli counsel submitted that, on the analogy of Forster v Outred
& Co [1982] 1 WLR 86 and another, much earlier, solicitors’ case, a
cause of action might accrue when a plaintiff first acts on negligent advice;
Lord Fraser of Tullybelton said that ‘perhaps’ that might be so ‘where the
advice of an architect or consulting engineer leads to the erection of a
building which is so defective as to be doomed from the start’.
In Forster’s
case the Court of Appeal held that the plaintiff’s cause of action against her
solicitors arose when, with their approval, she executed a mortgage charging
her freehold property as security for a loan to her son and not when a demand
was made under the mortgage. In Secretary of State for the Environment v
Essex Goodman & Suggitt [1986] 1 WLR 1432* Judge Lewis Hawser QC,
official referee, held that the cause of action against a defendant surveyor in
respect of a negligent survey report arose when the plaintiff acts in reliance
upon it by purchasing property.
*Editor’s
note: Also reported at [1985] 2 EGLR 168.
In D W
Moore & Co Ltd v Ferrier [1988] 1 WLR 267 the Court of Appeal
held that in actions against solicitors for negligence it was always a question
of fact when the cause of action accrued and that in that case it arose when
insurance brokers received a covenant in restraint of trade which was
worthless. In Lee v Thompson, reported in the Journal of
Professional Negligence for May 1989, a solicitor who had been entrusted
with buying a house on behalf of two Chinese clients had failed to do so; the
Court of Appeal held that the clients’ cause of action accrued when the
solicitor failed to act. In Bell v Peter Browne & Co [1990] 2
QB 495 the Court of Appeal held that a client’s claim against solicitors, who
had failed to protect his interest in a house by deed of trust or registration
of a caution, accrued when he executed a transfer of his legal title.
In Iron
Trade Mutual Insurance Co Ltd v J K Buckenham Ltd [1990] 1 All ER
808 Mr Kenneth Rokison QC, sitting as a deputy High Court judge, held that
where an insurer entered into a contract of reinsurance as the result of
misrepresentation by a reinsurance broker his cause of action arose when the
contract was executed and not when he discovered the full extent of the risk. A
similar conclusion was reached by Evans J in Islander Trucking Ltd v Hogg
Robinson & Gardner Mountain (Marine) Ltd [1990] 1 All ER 826 in which a
person obtained an insurance policy which proved to be invalid because of
misstatement by a broker.
I think that
the main conclusions to be drawn from the cases is that whether a cause of
action is for personal or physical damage or for financial or other economic
loss it arises when damage is suffered and not when the damage is discovered.
When damage is suffered is always a question of fact.
In this case,
if the 1980-81 underpinning was, as I have to assume, completely useless and
did not even help to support part of the house, then I think that the
plaintiffs’ causes of action against the individual defendants must at the very
least have arisen when the second plaintiffs provided the first plaintiffs with
the money to pay for the works and the first plaintiffs paid the first and/or
second defendants for them. It is possible that the plaintiffs’ cause of action
accrued at an earlier date, when the first plaintiffs entered into a contract
with the first defendants for the works to be carried out, but probably changes
could have been arranged to the contract or improvements made in the design of
the works almost up to the time when the works were completed.
I do not know
the date when the second plaintiffs put the first plaintiffs in funds or when
the first plaintiffs paid the first defendants’ final invoice on February 13
1981, so that both dates were well before May 4 1983, so that the plaintiffs’
claims are all statute-barred.
Third issue
The
‘warranties’ alleged in paras 15 and 15A of the reamended statement of claim
are the so-called ‘guarantees’ which were advertised by Pynfords and mentioned
in the two offers made to the first plaintiffs.
I think it is
clear from the wording of the advertisement, the offer letters and the specimen
guarantees that what the first and second defendants meant by a ‘guarantee’ was
a specific piece of paper with details upon it of the first defendants’ work
and then bearing the words set out on the specimen. The scope of the guarantee
was to be limited, but its particular value to a customer was that it was to be
for a period of 20 years.
I think that
each of the offers offered a completed ‘guarantee’ which was to be provided
when the works were finished. The first offer was not accepted but the second
was. I think that the first plaintiffs thereby became entitled to receive the
‘guarantee’. Mr Hiron’s evidence to the effect that he was not sent the
guarantee is consistent with Mr Haythorn’s and Mr Morgan’s evidence that they
have been unable to find any record of it. No doubt the first and second
defendants acted in breach of contract by not supplying the guarantee, but
since their breach must have occurred in about 1981, it is too late for the
first plaintiffs to claim in respect of it.
Fourth issue
If a
‘guarantee’ had been given, then, under its terms, the ‘event’ upon which the
first plaintiffs would have had a cause of action under it was when the
‘strengthened foundations’ showed continuous ‘instability’. There would
probably have been some room for argument as to the meaning of ‘foundations’,
since the first and second defendants had been consulted in relation to the whole
house, although the offer letter of February 24 stated that ‘. . . of course
the future stability of the parts of the property that have not been
underpinned cannot be guaranteed’ and there were other letters to the same
effect.
Conclusions
In conclusion,
my short answers to the issues are:
(1) No
(2) Yes
(3) No
(4) When there was continuing instability in
foundations.