Negligence — Preliminary issue as to liability — Whether a cause of action passed to a successor in a case where damage occurred during the period of ownership of predecessor — Judge’s review of authorities and statement of the law — Judgment in preliminary issue based on assumptions as to nature of damage and other facts — There were in fact two actions, but the preliminary issue related to the second action in which the plaintiffs were an American corporation, the parent of the English company which were the first plaintiffs in the first action — The litigation arose out of a defective perimeter wall which eventually collapsed and the allegation of negligence was made against a firm of chartered surveyors
owes a duty in tort not only to the original owner with whom he has contracted
but also to the owner’s successors in title — 2 If damage occurs a cause of
action arises in favour of the person who is the owner at that time, but if he
sells his property at full market value (ie without any allowance for the
defect) he will not suffer any loss and will have no claim under this head — 3
The position of a successor is more difficult — On the most favourable view he
could sue if he purchased at the full market value (as above) and did not know,
and could not by the exercise of reasonable care have known, of the existence
of the damage which had occurred during his predecessor’s ownership — It may
be, however, that in the absence of the assignment of a right of action he
would have no title to sue — 4 If a right of action were assigned to the
successor he would be able to sue — The objection against the assignment of a
right of action in tort could be met by treating the assignment as relating to
rights under the original contract with the predecessor — In the present case
there was no effective assignment of a right of action
emphasised that no evidence had been called before him and that his judgment
had necessarily to be based on assumptions and was subject to evidence and
additional argument if the matter proceeded further — Judgment for defendants
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] EGD 604; (1977) 243 EG 523 & 591, HL 1133
Bowen v Paramount Builders (Hamilton) Ltd [1977] NZLR 394
Donoghue v Stevenson [1932] AC 562, HL 1134
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
Mount
Albert Borough Council v Johnson [1979] 2
NZLR 234
Perry v Tendring District Council [1985] 1 EGLR 260; (1984) 30 BLR
118
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, HL
Sparham-Souter
v Town & Country Developments (Essex) Ltd
[1976] QB 858; [1976] 2 WLR 493; [1976] 2 All ER 65, CA
The present
proceedings dealt with only one preliminary issue arising in one of two actions
against the defendants, Edwin Hill & Partners, the first action being
brought by R L Polk & Co (GB) Ltd as first plaintiffs, the second
plaintiffs being the company’s American parent, R L Polk & Co, a
corporation. The second action was by R L Polk & Co against the same
defendants. The preliminary issue was raised in the second action. The land
which was the subject-matter of the litigation was at the Chiltern Industrial
Estate, Sudbury, Suffolk.
Jonathan Cole
(instructed by Blakes) appeared on behalf of the plaintiffs; P Boulding
(instructed by Ince & Co) represented the defendants.
Giving
judgment, JUDGE LEWIS HAWSER QC said: There are two preliminary issues, but I
am required to deal only with one, which reads as follows:
. . . whether
(i) in view of the fact that damage occurred to the perimeter wall in or about
August 1981 before the plaintiff owned or occupied the premises, the plaintiff
had any cause of action for negligence and/or breach of duty against the
defendant in respect of the said damage as at July 26 1983, the date of the
issue of the writ herein.
That is the
preliminary issue raised in the action between R L Polk & Co (Corporation),
plaintiff, and Edwin Hill & Partners (a firm), defendants.
R L Polk &
Co (GB) Ltd, the first plaintiff in the first action (hereinafter called the
‘English company’), was an English company which owned and developed certain
land at the Chiltern Industrial Estate, Sudbury, in the county of Suffolk. The
defendants were retained as the chartered surveyors and architects for this
development.
R L Polk &
Co (a corporation), the second plaintiff, was and is the American parent of the
English company (hereinafter called the ‘American company’) and acquired the
land and the development from the English company by a conveyance dated October
26 1981. The following day a liquidator was appointed to the English company.
The defendants are alleged to have been negligent and in breach of their duties
in respect of that development.
The works were
practically completed on May 8 1979. In or about August 1981 the perimeter wall
started to lean outwards, and by August 5 1982 the chief environmental officer
of the local authority served a dangerous structure notice. By that time, sections
of the wall had collapsed.
The American
company acquired the land and the development at full market price, no
allowance being made for the defective condition of the wall. The defendants
submit that August 1981 was the date when the damage occurred, and that seems
to be borne out by the correspondence and the decision in Pirelli General
Cable Works Ltd v Oscar Faber & Partners (a firm) reported in
[1983] 2 AC 1.
I should read
a little of the correspondence relating to this matter. The first relevant letter
is dated August 24 1981, written [by Edwin Hill & Partners] to the English
company:
Dear Bill,
re: Sudbury
I have just
returned from holiday and have learned from my Assistant, Brian Read, that
there is a problem with one of the boundary walls around the new development.
I do not
think that this is a matter to be referred direct to the builder in the first
instance and I am therefore arranging to visit Sudbury on Friday of this week
to see the problem for myself.
On September 2
1981 a further letter was written to the English company [by Edwin Hill &
Partners], and the last paragraph of that reads as follows:
Referring to
the retaining walls around the car park and vehicle yard, I am very surprised
to see the apparent movement in this large wall that does not appear to be
related to any collapse of the adjoining surfaced areas. I have yet to locate
the details of the construction of these walls but will pursue the problem
until I establish the cause.
The English
company wrote to Mr Julian J Bishopp of Edwin Hill & Partners:
Dear Mr
Bishop[p],
I would like
to confirm our telephone conversation of today’s date, with respect to the
perimeter wall.
The retaining
perimeter wall on the opposite side of the gate to the wall which you
inspected, is now showing signs of movement. This is shown by an approximate
1/2′ crack which has appeared in the tarmac surface, running parallel to the
retaining wall.
I trust that
we shall be seeing some action on this in the very near future.
At the time
of writing I have not heard anything from Mr Ellmore.
That was on
September 9 1981. The reply is dated September 11 1981, and the writer says:
Thank you for
your letter dated September 9, addressed to Mr Bishopp. We have passed a copy
of the letter to the contractors concerned, requesting
asking the consultant engineers for the contract, K A Lock & Partners, for
their view as to the cause.
As soon as we
have any further information we will be in contact with you again.
And on
September 11 1981 the defendants wrote to the builders:
Further to our
telephone conversation yesterday, I have received the enclosed letter from
Polk’s confirming further movement in the boundary wall.
As agreed, you
will contact Ken Lock with a view to him inspecting the wall and giving his
expert opinion, together with instructing a local builder to carry out the
necessary remedial work to make the wall safe.
We can only
assume that until the cause of the movement has been ascertained, R L Polk will
be responsible for meeting any expenses incurred.
On September
22 1981 the contractors, Deacon Contractors Ltd, wrote to Mr Bishopp:
I confirm our
telephone conversation, wherein I advised you that myself and Ken from K A Lock
& Partners would be visiting the above site as of September 24 1981,
together with our local contractor to open part of the work up for a thorough
inspection, with a view to advising yourself, and in turn, our Client as to the
reason why the fault has occurred, and as to how it is best considered to solve
the problem and budget costs for carrying out the necessary work.
On October 5
1981 there is a letter written by the defendants to Nigel Hamilton who
afterwards became the liquidator of the first-named plaintiffs.
Thus the
effect of the correspondence appears to be that damage in the strict sense in
which it has been used in the cases had occurred by October 26 1981, the
English company had acquired a cause of action in respect of the perimeter
wall. A writ was issued on July 26 1983, claiming the cost of repairs to the
wall, which were estimated to be about £30,000, a sum afterwards increased to
£45,000.
On February 12
1986 a deed of assignment took place between Nigel James Hamilton (the
liquidator), the English company and the American company, whereby the rights
in the action were specifically assigned to the American company. No further
reliance is placed on this and I need not consider it for the purpose of the
judgment.
It seems to me
to be clear that the damage for the purpose of the cause of action had occurred
prior to October 26 1981 and that (if it be material) the American company
knew, or ought to have known, of the fact of the matters giving rise to such
damage when it acquired the property. However, no evidence has been called
before me and accordingly I do not pronounce a definite decision on these two
matters. It may be subject to subsequent evidence and argument, but my judgment
proceeds on the assumption they are correct.
It is also
common ground that no specific assignment of a right of action took place prior
to October 26 1981.
The
defendant’s contention is that the person who owned the building at the time
when the damage occurred which gave rise to the action on the contract or in
law is the only person who can sue for such damage in the absence of any
assignment of that right of action to a subsequent owner. Until Pirelli
v Faber the law appeared to be that the date from which the period of
limitation ran was the date at which the damage was discovered or could have
been discovered by the exercise of reasonable care (discoverability). However, Pirelli
v Faber decided that the date was when the damage actually occurred,
irrespective of discoverability. It was not until the Latent Damage Act 1986 that
the law was altered so that, in broad terms, discoverability became the test.
This formulation of the effect of Pirelli v Faber appears to
negative the necessity for the vendor or the purchaser to know of the damage,
if in fact it had occurred before the purchaser obtained the property.
The defendants
rely upon the judgment of His Honour Judge Newey in the case reported in (1985)
30 BLR 118 called Perry v Tendring District Council*. The passage
relied upon begins at p 141 and the authorities are there in view. It should be
noted that the passage is obiter. It is summarised in the headnote at p 120. P
141 reads as follows, starting at the bottom of the page:
Whether an
owner or occupier may sue in respect of a cause of action relating to his
property which accrued before his ownership or occupation without assignment to
him of the right of action.
It is well
established that everyone concerned with the design and erection of a building
owes a duty of care, not merely to first owners or occupiers, but to their
successors: Dutton v Bognor Regis UDC [1972] 1 QB 373, (CA) and Anns
Case in the House of Lords. The cause of action does not arise at the date
of the design or construction but when an owner or occupier has suffered
damage.
The Court of
Appeal in Sparham-Souter v Town & Country Developments (Essex)
Ltd [1976] 1 QB 858 decided that damage was suffered when it was detected
or could have been with reasonable skill and diligence. Lord Denning MR at p
868 made it plain who was entitled to sue.
*Editor’s
note: Also reported at [1985] 1 EGLR 260.
And then he
quotes:
‘The only
person who has a cause of action is the owner in whose time the damage appears.
He alone can sue for it unless, of course, he sells the house with its defects
and assigns the cause of action to his purchaser.’
Counsel
submitted that an existing cause of action might ‘come with the property’ on
its conveyance from one owner to another, but Roskill LJ thought that this was
‘an impossible argument’. He said at p 873:
‘There is no
relevant estate contract here. There is no assignment of any pre-existing cause
of action in tort in the plaintiffs’ favour from their predecessors in title.
Nor do I understand how, as the arguments presupposed, there can be some
inchoate or floating cause of action in tort existing in vacuo which can
suddenly enure to the plaintiffs’ benefit upon their acquisition of a legal or
equitable title to the property in question . . . Furthermore, the present
plaintiffs have clearly not acquired such a benefit by contract or by statute.
I fail to see upon what principle they can be said to have acquired it by
operation of law.’
Roskill LJ at
p 875 and Geoffrey Lane LJ, at p 880, each held that the earliest moment at
which time would begin to run against each successive owner of defective
property was when he bought or agreed to buy it.
In Pirelli
v Oscar Faber in [1983] 2 AC 1; 21 BLR 99, the House of Lords
disapproved the decisions of the Court of Appeal in Sparham-Souter so
far as they concerned the date of accrual of a cause of action and date from
which time could run against a new owner. The House held that the date of
accrual was that on which the damage came into existence, regardless of whether
it was then known or could have been discovered. Lord Fraser of Tullybelton
said, at p 18:
‘I think the
true view is that the duty of the builder and of the local authority is owed to
the owners of the property as a class, and that if time runs against one owner,
it also runs against his successors in title. No owner in the chain can have a
better claim than his predecessor.’
I think it
follows from the words of Lord Denning and Roskill LJ in Sparham-Souter
which I have quoted, and which were not disapproved in Pirelli, and from
Lord Fraser’s words in Pirelli that when damage to a building occurs its
owner acquires a cause of action immediately, even though he is not aware of
it, and that unless he assigns that right of action, when agreeing to convey or
conveying the new building to a successor, or possibly transferring the
occupation of it to him, the successor has no right to sue.
I do not know
how an assignment could be effected. For assignment under section 136 of the
Law of Property Act 1925, notice to the ‘debtor’ is required, but an assignor
could not give notice to a tortfeasor if unaware of the existence of his cause
of action. Perhaps there could be an equitable assignment: the assignee then
suing in the name of the assignor. I am also uncertain as to what damages the assignee
could recover, since the assignor would not have expended money on the
remedying of undiscovered defects and would presumably have obtained market
price for his property.
If this
passage correctly states the law, then the plaintiff’s claim must fail. (I
should mention that section 3 of the Latent Damage Act 1986 deals with this
situation, which appears to have been created by the Perry v Tendring
decision.)
The defendants
also rely upon Sparham-Souter v Town & Country Developments
(Essex) Ltd and in particular the words of Lord Denning at p 167G to 186G,
and Lord Wilberforce’s words in Anns, reported in [1978] AC 728 under
the title of Anns v Merton London Borough Council. There Lord
Wilberforce on p 758 at D in his opinion says:
To whom
the duty is owed. There is, in my opinion, no
difficulty about this. A reasonable man in the position of the inspector must
realise that if the foundations are covered without adequate depth or strength
as required by the byelaws, injury to safety or health may be suffered by
owners or occupiers of the house. The duty is owed to them — not of course to a
negligent building owner, the source of his own loss. I would leave open the
case of users, who might themselves have a remedy against the occupier under
the Occupiers’ Liability Act 1957. A right of action can only be conferred upon
an owner or occupier, who is such when the damage occurs (see below).
Again at p
759G, he says:
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. The 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.
The
plaintiffs, the American company, argue that the passage in Perry v Tendring
was obiter, and it is based on words used in previous cases which are only
relevant to the situation in which the Public Health Act background, with its
requirement that the damage must be such as to affect health or safety, is the
governing factor. Mr Cole for the plaintiffs argued that the words do not apply
to the ordinary duty of care, the breach of which gives rise to a claim in
damages.
He also argued
that the question of assignment was really a red herring, that assignment
related to contract and it was applicable only in rare cases in tort which do
not arise in the present circumstances. Mr Cole’s submissions are helpfully set
out on pp 12 and 13 of his typed argument. He says that you cannot assign a
cause of action in tort. He cited a number of cases both before and after Sparham-Souter
v Town & Country Developments (Essex) Ltd in which the owner of a
property was held to be entitled to sue, even though the damage had occurred
before he occupied the property. In particular, he relied upon Dutton v Bognor
Regis Urban District Council [1972] 1 QB 373, a similar case. He contended
that the duty is owed to the class of people who may be affected, that is to
say, those owners who, subject to limitation, would include all the successors
in title. He relied upon the words of Lord Wilberforce in Anns at p
753H. The sentence reads:
And as the
building is intended to last, the class of owners and occupiers likely to be
affected cannot be limited to those who go in immediately after construction.
Of course I entirely
accept that statement, but it does not appear to me to be relevant in the
present case.
Mr Cole
summarised his submission in this way: a successor in title has a right to sue,
even when damage occurs during the predecessor’s ownership.
It seems to me
that the relevant law on the case can be summarised as follows.
1 We start with Donoghue v Stevenson
[1932] AC 562: that is the classic statement of the law and has been applied
subsequently in cases which affect property. The case is reported under the
heading of M’Alister (or Donoghue) (Pauper) and Stevenson. The relevant
passage begins in the opinion of Lord Atkin about two-thirds of the way down
the page on p 580. It is a passage which has been cited on many occasions and
at the moment I will simply refer specifically to a particular passage in that
section on p 582 about seven lines down, where Lord Atkin says:
I draw
particular attention to the fact that Lord Esher emphasises the necessity of
goods having to be ‘used immediately’ and ‘used at once before a reasonable
opportunity of inspection’. This is obviously to exclude the possibility of
goods having their condition altered by a lapse of time, and to call attention
to the proximate relationship, which may be too remote where inspection even of
the person using, certainly of an intermediate person, may reasonably be
interposed.
2 A person in the position of the defendants
owes a duty in tort to a class of persons, not merely to the person with whom
he contracts, the class being the original owner and his successors in title.
3 If and when damage occurs, a cause of action
arises under which the person in whose ownership the property then lies can
sue.
4 A successor to that person could sue only if
he purchased at the full market price and did not know, and could not by the
exercise of reasonable care have known, of the existence of the damage. That is
putting it as high as it possibly can be put against the defendants who may
well only be liable if the damage actually occurred during the successor’s
title, irrespective of discoverability.
5 Where damage occurs during a person’s title
he has a cause of action, though if he sells at the full market price he will
not sustain any actual loss.
6 Where the successor knows of his damage, then
under the principles laid down in Donoghue v Stevenson which I
have referred to above, he will not be able to sue. In my judgment, even if he
did not have that actual knowledge, but he knew or ought to have known of the
damage, he would still be unable to sue. He can sue if the cause of action has
been assigned to him by his predecessor. In my judgment, if there is a
conveyance which includes or accompanies an assignment of the right to sue,
then that right is not a right of the assigned cause of action in tort but is
an integral part of the conveyance and, further, is an assignment of the rights
under the original contract which are not open to the objection put forward by
Mr Cole.
I would also
mention that I have been assisted in the conclusions which I have come to by
the observations in the case of Bowen v Paramount Builders (Hamilton)
Ltd reported in [1977] NZLR 394, particularly at p 410, lines 35-45, p 413,
lines 30-45, and p 414, lines 12-25, and by the New Zealand decision in Mount
Albert Borough Council v Johnson reported in [1979] 2 NZLR 234 and
in particular the joint judgment of Messrs Cooke and Richardson at p 238, lines
35-40, and p 242, lines 5-25.
Therefore, as
the matter stands, and on the basis of the assumptions as to the facts which I
have made (relating to the nature of the damage and the American company’s
knowledge, actual or imputed), I would hold for the defendants. I would only
add that I have been greatly indebted to counsel for the clarity of their
submissions and their most useful written summaries.
The
defendants were awarded the costs of the preliminary issue and certain other
costs previously reserved. Leave to appeal was given.
[An appeal was
not proceeded with — Ed]
