Ruling by House of Lords on important question, to which previous decisions had given conflicting answers, as to when time begins to run, for the purpose of the Limitation Acts, in an action for negligence in the design or construction of a
building — Whether cause of action accrues when physical damage occurred or when the damage was actually discovered or the date when it ought with reasonable diligence to have been discovered — Claim against consulting engineers based on tort of negligence in construction of a tall chimney, which proved defective and had subsequently to be replaced — The actual damage in the form of cracks near the top of the chimney occurred more than eight years before the issue of the writ and on this test the claim was statute-barred — The judge at first instance, Sir William Stabb (the circuit judge assigned to official referees’ business), took the view that the date when the cause of action accrued was the date of discoverability (ie the date of actual discovery or when discovery would have taken place with reasonable diligence) and that, as such date was not more than six years before the action was started, it was not statute-barred — Court of Appeal, considering themselves bound by their own decision in Sparham-Souter v Town and Country Developments (Essex) Ltd, despite its incompatibility with Cartledge v E Jopling & Sons Ltd, dismissed the consulting engineers’ appeal without going fully into the law — The consulting engineers now appealed to the House of Lords, claiming that the plaintiffs’ cause of action accrued more than six years before the issue of the writ — Held, allowing the appeal and disapproving the decision in the Sparham-Souter case, that the cause of action accrued when damage, in the form of the cracks near the top of the chimney came into existence — Hence the claim was statute-barred — This result was unreasonable and contrary to principle, but only Parliament could now alter the law — It was not a case where the House, by applying its 1966 Practice Statement, could put the matter right by departing from the decision in Cartledge v Jopling — Fortunately, reform might be expected from a report by the Law Reform Committee
This was an
appeal by Oscar Faber & Partners from a decision of the Court of Appeal
(reported at (1982) 262 EG 879, [1982] 1 EGLR 129) dismissing their appeal from
a decision of Sir William Stabb QC (circuit judge assigned to official
referees’ business) in favour of Pirelli General Cable Works Ltd, plaintiffs in
an action for negligence against Oscar Faber & Partners. The Court of
Appeal in giving leave to appeal said that, in view of the unclear state of the
law, the case was an ideal one for appeal to the House of Lords.
Desmond Wright
QC and Jeremy Storey (instructed by Beale & Co) appeared for the appellants
(defendants); Patrick Garland QC and John Dyson (instructed by Herbert
Oppenheimer, Nathan & Vandyk) represented the respondents (plaintiffs).
In his speech,
LORD FRASER OF TULLYBELTON said: This appeal raises once again the question of
whether time can begin to run, for the purpose of the Limitation Acts, in an
action founded on negligence in the design or workmanship of a building, at a
date before damage to the building has been discovered, or ought with
reasonable diligence to have been discovered, by the plaintiff. The writ in
this action was issued on October 17 1978. The appellants (defendants) are a
firm of consulting engineers. In or about March 1969 they were engaged by the
respondents (plaintiffs) to advise them in relation to the building of a new
services block at the respondents’ works at Southampton. The new block included
a chimney about 160 ft high. It was designed and supplied by a nominated
subcontractor, now in liquidation, but the judge found that the appellants had
accepted responsibility for the design and his finding is not now challenged.
The chimney was made of pre-cast concrete and had four flues. Unfortunately the
concrete used for the refractory inner lining was partly made of a relatively
new material, called lytag, which was unsuitable for the purpose. Cracks
developed and eventually the chimney had to be partly demolished and replaced.
The
respondents originally sued for damages both for breach of contract and for
tort, but they accepted that their claim for breach of contract was time barred
and their claim is now confined to tort. The judge held that the appellants had
been negligent in passing the design and his decision in that respect also is
not challenged. The chimney was built during June and July 1969. Damage, in the
form of cracks near the top of the chimney, must have occurred not later than
April 1970, more than eight years before the writ was issued. The damage was
not discovered by the plaintiffs until November 1977, and the judge found that
the defendants had not established that the plaintiffs ought, with reasonable
diligence, to have discovered the damage before October 1972, that is six years
before the writ was issued. I shall hereafter use the expression ‘date of
discoverability’ to mean the date on which the damage was actually discovered,
or the date on which it ought with reasonable diligence to have been
discovered, whichever is the earlier. For reasons which will appear, the judge
held that the date at which the respondents’ cause of action accrued was the
date of discoverability and, as that date was not more than six years before
the writ was issued, he held that the action was not time barred.
All the
judge’s findings of fact are now accepted by both parties and the sole issue
between them is on the question of law as to the date on which a cause of
action accrued. The respondents maintain that the judge came to the right
conclusion on that matter and that the action is not time barred. The
appellants maintain that the cause of action accrued more than six years before
the writ was issued. They suggest three possible dates as the date of accrual.
The earliest suggested date is that on which the plaintiffs acted in reliance
on the defendants’ advice to install the chimney, which was bound to be
defective and eventually to fall down unless previously demolished. They did
not fix this date precisely but it must have been between March and June 1969,
well outside the limitation period. The second suggested date is that on which
the building of the chimney was completed, namely July 1969. The third is that
on which cracks occurred, namely April 1970. These three dates are all more
than six years before the issue of the writ, which, as already mentioned, was
October 17 1978. If any of them is the correct date, the action is time barred.
The Act which
applies in this case is the Limitation Act 1939, as amended. It has been
repealed and replaced by the Limitation Act 1980 but the relevant provision
remains substantially unchanged. It is the following provision in section 2 of
the 1939 Act:
2. — (1) The
following actions shall not be brought after the expiration of six years from
the date on which the cause of action accrued, that is to say: — (a) actions
founded on simple contract or on tort; . . .
As already
mentioned, the findings of fact made by the learned judge (Sir William Stabb QC,
circuit judge assigned to official referees’ business) are now all accepted. He
held as a matter of law that he was bound by the decision of the Court of
Appeal in the case of Sparham-Souter v Town and Country Developments
(Essex) Ltd [1976] 1 QB 858 to decide that the action was not time barred.
He expressed his reason with admirable brevity and lucidity in the following
words:
I regard the
Court of Appeal in the case of Sparham-Souter as having laid down that
the cause of action, in negligence cases such as this, arises when the
plaintiff and not the building suffers damage, and that the plaintiff only
suffers damage when he discovers, or ought with reasonable diligence to have
discovered, damage to the building. This decision seems to have been applied by
the House of Lords in the case of Anns v Merton London Borough
Council [1978] AC 728, and I certainly regard it as binding upon me.
The Court of
Appeal also felt bound by its own decision in Sparham-Souter and by the
decision of this House in Anns and it gave leave to appeal to this House
without going fully into the law. Ormrod LJ in a short judgment, with which
Dunn LJ and Sir Sebag Shaw agreed, explained why the leapfrog procedure had not
been used.
My Lords, it
was decided by this House in Cartledge v E Jopling & Sons Ltd [1963]
AC 758 that, in the words of Lord Reid at p 771:
. . . a cause
of action accrues as soon as a wrongful act has caused personal injury beyond
what can be regarded as negligible, even when that injury is unknown to and
cannot be discovered by the sufferer, and that further injury arising from the
same act at a later date does not give rise to a further cause of action.
Lord Reid went
on, however, to say this:
It appears to
me to be unreasonable and unjustifiable in principle that a cause of action
should be held to accrue before it is possible to discover any injury and,
therefore, before it is possible to raise any action. If this were a matter
governed by the common law I would hold that a cause of action ought not to be
held to accrue until either the injured person has discovered the injury or it
would be possible for him to discover it if he took such steps as were
reasonable in the circumstances. The common law ought never to produce a wholly
unreasonable result, nor ought existing authorities to be read so
they were decided.
But the
present question depends on statute, the Limitation Act 1939, and section 26 of
that Act appears to me to make it impossible to reach the result which I have
indicated. That section makes special provisions where fraud or mistake is
involved: it provides that time shall not begin to run until the fraud has been
or could with reasonable diligence have been discovered. Fraud here has been
given a wide interpretation, but obviously it could not be extended to cover
this case. The necessary implication from that section is that, where fraud or
mistake is not involved, time begins to run whether or not the damage could be
discovered. So the mischief in the present case can only be prevented by
further legislation.
All the other
members of the House who took part in deciding that appeal expressed similar
reluctance or regret at being obliged to decide as they did. Thus Lord Pearce
at p 778 said that the argument of counsel for the plaintiff in that case
would produce
a result according with common sense and would avoid the harshness and
absurdity of a limitation that in many cases must bar a plaintiff’s cause of
action before he knows or ought to have known that he has one.
Although Cartledge
v Jopling was a case of personal injuries, the respondents did not
dispute that the principle of the decision was applicable in the present case.
In that respect the respondents were, in my opinion, exercising a wise
discretion because the decision in Cartledge depended mainly on the
necessary implication from section 26 of the 1939 Act, and section 26 is not
limited to claims for personal injuries. Indeed, fraud or mistake are much more
likely to be in issue where the plaintiff is claiming for damage to property
than for personal injuries. Moreover, Lord Pearce seems to have regarded the
two types of claim as being subject to the same rules. In the course of his
speech at p 780, he relied upon the observations of Lord Halsbury in Darley
Main Colliery Co v Mitchell (1886) 11 App Cas 127, 132, as follows:
No one will
think of disputing the proposition that for one cause of action you must
recover all damages incident to it by law once and for ever. A house that has
received a shock may not at once show all the damage done to it, but it is
damaged none the less then to the extent that it is damaged, and the fact that
the damage only manifests itself later on by stages does not alter the fact
that the damage is there; and so of the more complex mechanism of the human
frame, the damage is done in a railway accident, the whole machinery is
injured, though it may escape the eye or even the consciousness of the sufferer
at the time; the later stages of suffering are but the manifestations of the
original damage done, and consequent upon the injury originally sustained.
Cartledge v Jopling was decided by your Lordships’ House on January 16
1963. Later the same year Parliament passed the Limitation Act 1963, which
received the Royal Assent on July 31 1963, and was evidently passed to deal
with the mischief disclosed by Cartledge v Jopling. It extended the
time-limit for raising of actions for damages where material facts of a
decisive character were outside the knowledge of the plaintiff until after the
action would normally have been time barred, but it applied only to actions for
damages consisting of or including personal injuries. It must, therefore, be
taken that Parliament deliberately left the law unchanged so far as actions for
damages of other sorts were concerned. It is, therefore, not surprising that
until the decision in Sparham-Souter (supra) such authority as exists is
to the effect that in cases of latent defects to buildings, the cause of action
accrues and the damage occurs when the defective work is done, even if that was
before the date of discoverability. In Bagot v Stevens Scanlan &
Co [1966] 1 QB 197, 203, Diplock LJ, as he then was, said that damage from
breach of duty by an architect in failing to see that the drains for a new
house were properly built must have occurred when they were improperly built.
But that was obiter dictum and I mention it only because it was relied
on by Lord Denning MR in Dutton v Bognor Regis UDC [1972] 1 QB
373. Dutton was an action by the owner of a building against a local
authority for the negligence of one of their servants in inspecting the
foundations of the building. The question of limitation arose only as part of
an argument on behalf of the defendants, to the effect that if they were liable
they would be exposed to endless claims. Lord Denning MR at p 396 quoted from
the opinion of Diplock LJ in Bagot and said: ‘The damage was done when
the foundations were laid.’ That was, I
think, also obiter dictum. In any event, it would not necessarily
identify the beginning of the limitation period in the present action against
the architects, because Lord Denning went on to say that, although the local
authority would be protected by a six-year limitation, the builder might not be
because he might be guilty of concealed fraud by covering up his own bad work,
so that the period of limitation would not begin to run until the fraud was
discovered. Sachs LJ at p 405 distinguished Bagot (supra), and expressed
no concluded view as to when a cause of action in negligence would arise. Nor
did Stamp LJ, the third member of the court.
The obiter
dicta of Diplock LJ in Bagot and Lord Denning MR in Dutton were
applied by Mars-Jones J in Higgins v Arfon Borough Council [1975]
1 WLR 524, when he held an action against a local authority to be time barred.
But in Sparham-Souter
the Court of Appeal took a different view and said that, where a house is
built with inadequate foundations, the cause of action does not accrue until
such time as the plaintiff discovers that the bad work has done damage, or
ought with reasonable diligence to have discovered it. Lord Denning MR
expressly recanted his dictum in Dutton. The limitation question was
tried as a preliminary issue, on which the facts as pleaded had to be assumed
to be true. The latest act of negligence pleaded was less than six years before
the issue of the writ, so that, once again, the observations as to the date on
which the cause of action accrued were, strictly speaking, obiter. The
main reason for the view of the Court of Appeal was that, until the owner had
discovered the defective state of the property, he could resell it at a full
price, and if he did so, he would suffer no damage — see Roskill LJ at 875H and
Geoffrey Lane LJ at 880F-G. Geoffrey Lane LJ contrasted the position of the
building owner in Sparham-Souter with that of the injured person in Cartledge
v Jopling and said this at p 880F:
There is no
proper analogy between this situation
sc the situation
in Sparham-Souter
and the type
of situation exemplified in Cartledge v Jopling where a plaintiff
due to the negligence of the defendants suffers physical bodily injury which at
the outset and for many years thereafter may be clinically unobservable. In
those circumstances clearly damage is done to the plaintiff and the cause of
action accrues from the moment of the first injury albeit undetected and
undetectable. That is not so where the negligence has caused unobservable
damage not to the plaintiff’s body but to his house. He can get rid of his
house before any damage is suffered. Not so with his body.
My Lords, I
find myself with the utmost respect unable to agree with that argument. It
seems to me that there is a true analogy between a plaintiff whose body has,
unknown to him, suffered injury by inhaling particles of dust, and a plaintiff
whose house has unknown to him sustained injury because it was built with
inadequate foundations or of unsuitable materials. Just as the owner of the
house may sell the house before the damage is discovered, and may suffer no
financial loss, so the man with the injured body may die before pneumoconiosis
becomes apparent, and he also may suffer no financial loss. But in both cases
they have a damaged article when, but for the defendant’s negligence, they
would have had a sound one. Lord Pearce in Cartledge v Jopling at
pp 778-779 showed how absurd it would be to hold that the plaintiff’s knowledge
of the state of his lungs could be the decisive factor. He said:
It would be
impossible to hold that while the X-ray photographs are being taken he cannot
yet have suffered any damage to his body, but that immediately the result of
them is told to him, he has from that moment suffered damage. It is for the
judge or jury to decide whether a man has suffered any actionable harm and in
borderline cases it is a question of degree.
It seems to me
that exactly the same can rightly be said of damage to property.
I think, with
all respect to Geoffrey Lane LJ, that there is an element of confusion between damage
to the plaintiff’s body and latent defect in the foundations of a building.
Unless the defect is very gross, it may never lead to any damage at all to the
building. It would be analogous to a predisposition or natural weakness in the
human body which may never develop into disease or injury. The plaintiff’s
cause of action will not accrue until damage occurs, which will commonly
consist of cracks coming into existence as a result of the defect even though
the cracks or the defect may be undiscovered and undiscoverable. There may
perhaps be cases where the defect is so gross that the building is doomed from
the start, and where the owner’s 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.
For the
reasons I have tried to explain I do not find the distinction between personal
injuries and damage to property drawn in the case of Sparham-Souter convincing.
I observe that in Dennis v Charnwood BC [1982] 3 All ER 486,
Templeman LJ, as he then was,
LJ at p 495E found reconciling Sparham-Souter with the reasoning in Cartledge
as ‘difficult’. I agree.
Part of the
respondents’ argument in favour of the date of discoverability as the date when
the right of action accrued was that that date could be ascertained
objectively. In my opinion that is by no means necessarily correct. In the
present case, for instance, the judge held that the plaintiffs as owners of a
new chimney, built in 1969, had no duty to inspect the top of it for cracks in
spring 1970. But if they had happened to sell their works at that time, it is
quite possible that the purchaser might have had such a duty to inspect and, if
so, that would have been the date of discoverability. That appears to me to
show that the date of discoverability may depend upon events which have nothing
to do with the nature or extent of the damage.
Counsel for
the respondents argued that in Anns v Merton (supra), Lord
Wilberforce, and the other members of this House who agreed with his speech,
had approved of the observations in Sparham-Souter to the effect that
the discoverability date was the date when the cause of action accrued. But I
do not so read my noble and learned friend’s speech. At p 750 he simply
narrated the conflict between the cases of Dutton (supra) and Sparham-Souter
(supra) without indicating any preference. At p 760A he posed the question
‘When does the cause of action arise?’ and he answered it as follows:
In my
respectful opinion the Court of Appeal was right when, in Sparham-Souter, 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.
The only
express approval in that passage is to the Court of Appeal’s decision that the
cause of action did not arise immediately the defective house was
conveyed. His Lordship did not say, nor in my opinion did he imply, that the
date of discoverability was the date when the cause of action accrued. The date
which he regarded as material (when there is ‘present or imminent danger to . .
. health or safety’) was, of course, related to the particular duty resting
upon the defendants as the local authority, which was different from the duty
resting upon the builders or architects, but I see nothing to indicate that
Lord Wilberforce regarded the date of discoverability of the damage as having
any relevance. He was not considering the question of discoverability, no doubt
because the main issue in the appeal by the time it reached this House was
whether any duty at all was incumbent on the local authority — see p 751A.
Three other noble and learned Lords expressed agreement with Lord Wilberforce.
Only Lord Salmon delivered a separate reasoned speech and he clearly considered
that the cause of action could arise before damage was discovered or
discoverable, although he recognised that proof might be difficult. At p 771B
to C, he said this:
Whether it is
possible to prove that damage to the building had occurred four years before
it manifested itself is another matter, but it can only be decided by
evidence.
(My emphasis
added).
Neither Lord
Salmon nor the other Lords seems to have considered that he was dissenting from
the majority view on that matter. In these circumstances I do not think that
the majority in Anns are to be taken as having approved the
discoverability test applied in Sparham-Souter.
There is one
other matter on which I am, with the utmost respect, unable to agree with the
reasoning in Sparham-Souter. Both Roskill LJ at p 875 and Geoffrey Lane
LJ at p 880 held that the earliest moment at which time could begin to run
against each successive owner of the defective property was when he bought, or
agreed to buy, it. If that is right, it would mean that if the property
happened to be owned by several owners in quick succession, each owning it for
less than six years, the date when action would be time barred might be
postponed indefinitely. Indeed, Geoffrey Lane LJ, at p 881E, expressly
recognised that the period, of limitation might be postponed indefinitely, and
he accepted that result as ‘less obnoxious than the alternative, which is that
a house-owner may be deprived of his remedy against a negligent defendant by
the arbitrary imposition of a limitation period which started to run before the
damage caused by the defendant could even be detected’. While I see the force
of that view I cannot agree that it is one which is open to me to accept. I
think the true view is that the duty of the builder and of the local authority
is owed to owners of the property as a class, and that if time runs against one
owner, it also runs against all his successors in title. No owner in the chain can
have a better claim than his predecessor in title. The position of successive
owners of property is, in my opinion, to be contrasted with that of workers in
a case such as Davie v New Merton Board Mills [1959] AC 604,
where a separate duty of care is owed by the maker of a machine to each worker
who uses it, and a new worker is not a successor in title to a former holder of
his job.
Counsel for
the appellants submitted that the fault of his clients in advising on the
design of the chimney was analogous to that of a solicitor who gives negligent
advice on law, which results in the client suffering damage and a right of
action accruing when the client acts on the advice — see Howell v Young
(1826) 5 B & C 259 and Forster v Outred & Co [1982] 1
WLR 86. It is not necessary for the present purpose to decide whether that
submission is well founded, but as at present advised, I do not think it is. It
seems to me that, except perhaps 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, the cause of action accrues only when physical damage
occurs to the building. In the present case that was April 1970 when, as found
by the judge, cracks must have occurred at the top of the chimney, even though
that was before the date of discoverability. I am respectfully in agreement
with Lord Reid’s view expressed in Cartledge v Jopling that such
a result appears to be unreasonable and contrary to principle, but I think the
law is now so firmly established that only Parliament can alter it.
Postponement of the accrual of the cause of action until the date of
discoverability may involve the investigation of facts many years after their
occurrence — see, for example, Dennis v Charnwood (supra) — with
possible unfairness to the defendants, unless a final longstop date is
prescribed, as in sections 6 and 7 of the Prescription and Limitation
(Scotland) Act 1973. If there is any question of altering this branch of the
law, this is, in my opinion, a clear case where any alteration should be made
by legislation, and not by judicial decision, because this is, in the words of
Lord Simon of Glaisdale in Miliangos v Frank (Textiles) Ltd [1976]
AC 443, 480: ‘a decision which demands a far wider range of review than is
available to courts following our traditional and valuable adversary system —
the sort of review compassed by an interdepartmental committee’. I express the
hope that Parliament will soon take action to remedy the unsatisfactory state
of the law on this subject.
I would hold
that the cause of action accrued in spring 1970 when damage, in the form of
cracks near the top of the chimney, must have come into existence. I avoid
saying that cracks ‘appeared’ because that might seem to imply that they had
been observed at that time. The action is, therefore, time barred and I would
allow the appeal. We were told that parties had reached agreement as to costs,
and there should therefore be no order on that matter.
Agreeing that
the appeal should be allowed, LORD SCARMAN said: I agree that the law is now as
set out in the speech of my noble and learned friend, Lord Fraser of
Tullybelton. But it is no matter for pride. It must be, as Lord Reid said in Cartledge
v Jopling and quoted by my noble and learned friend in his speech,
unjustifiable in principle that a cause of action should be held to accrue
before it is possible to discover any injury (or damage). A law which produces
such a result, as Lord Pearce, also quoted by my noble and learned friend, said
in the same case, is harsh and absurd.
It is tempting
to suggest that in accordance with the Practice Statement, July 26 1966
[1966] 1 WLR 1234, the House might consider it right to depart from the
decision in Cartledge v Jopling. But the reform needed is not the
substitution of a new principle or rule of law for an existing one but a
detailed set of provisions to replace existing statute law. The true way
forward is not by departure from precedent but by amending legislation.
Fortunately reform may be expected since the Lord Chancellor has already
referred the problem of latent damage and date of accrual of cause of action to
his Law Reform Committee.
Accordingly,
for the reasons given by my noble and learned friend, I would allow the appeal.
LORDS BRIDGE,
BRANDON and TEMPLEMAN agreed that the appeal should be allowed for the reasons
given by Lord Fraser of Tullybelton, and did not add anything.
