Implied term — Defective property — Repair covenant Failure of remedial scheme — Pure economic loss — Damages — Whether lease implying term as to quality of work — Whether defendant liable for economic loss — Claims dismissed
The claimant was the freehold owner of properties that had been built by the second defendant pursuant to a contract with the former freeholders of the site. The purchasers of leasehold interests in the individual properties (the lessees) entered into leases with the former freeholders, the claimant and the second defendant. The latter was under no express obligation as to the quality of the work undertaken in constructing the properties. The lessees accepted specified obligations in substitution for, and to the entire exclusion of, any implied obligations on the part of the second defendant.
Problems arose with the rendering on the external elevations. The fourth defendant commissioned and carried out a remedial scheme that, ultimately, proved unsuccessful. The sixth defendant became involved in the ongoing problems in 2002 because its parent company had acquired the parent of the second and fourth defendants. The claimant brought an action for damages against the second, fourth and sixth defendants.
The claimant contended, inter alia, that terms as to the quality of the construction work should be implied into the leases and that the fourth defendant was liable for economic loss resulting from the failed remedial scheme.
Held: The claims were dismissed.
There was no room within the overall contractual regime to imply a promise as to the quality or standard of construction work. Pursuant to the express provisions in the leases, the second defendant owed no obligations as to the quality of the work and there was no basis for implying such obligations into the leases.
The alleged implied terms did not meet the test of necessary implication, in that it could not be said that they would have been adopted by the parties as reasonable, had it been suggested. Nor could it be said that those alleged terms “went without saying” or that the leases were “inefficacious, futile and absurd” without them: Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601, Tai Hing Cotton Mill Ltd v Liu Chong Hong Bank (No 1) [1986] AC 80 and Liverpool County Council v Irwin [1976] 1 EGLR 53 referred to. Hancock v BW Brazier (Anerley) Ltd [1966] 1 WLR 1317 distinguished.
Since, on the facts, the second defendant had had no involvement in the first remedial scheme, it owed no duty of care of any kind in respect of its inception and performance. Other than in very exceptional circumstances, which did not arise here, a builder owed no duty of care in tort to subsequent owners to prevent economic loss arising out of its failure to complete the works to a reasonable standard: Murphy v Brentwood District Council [1991] AC 398 applied.
Furthermore, the fourth defendant was not liable for economic loss arising out of the remedial scheme. On the facts, it did not voluntarily assume a responsibility to the claimant to prevent economic loss. The law imposed no liability in negligence where the damage for compensation was claimed by a subsequent owner and where that damage resulted from a negligently constructed building. Such loss constituted irrecoverable economic loss: Bellefield Computer Services Ltd v E Turner & Sons Ltd [2000] BLR 97 applied. Tesco v Costain Construction Ltd [2003] EWHC 1487 (TCC) distinguished.
Darryl Royce (instructed by Graham Harvey) appeared for the claimant; Andrew Nicol (instructed by Masons) appeared for the second, fourth and sixth defendants.
Eileen O’Grady, barrister
