by John Murdoch
It is now almost two years since the House of Lords handed down its decision in the case of D & F Estates Ltd v Church Commissioners for England [9] AC 177; [1988] 2 EGLR 263, laying the foundations for a new analysis of negligence claims against builders which was intended to demolish, and redevelop the site of, Anns v Merton LBC [1978] AC 728. Unfortunately, to judge by the subsequent decisions of lower courts, the new structure is as flawed as the old and, indeed, may be more of a conversion than a replacement. The purpose of this article is briefly to review the D & F Estates decision itself and its subsequent treatment by the courts, in an effort to give at least some sort of picture of the present state of the law.
It is relevant to remind ourselves at the outset why tort claims against builders and others are so important. Part of the reason at least must surely lie in the continued espousal by English law of the doctrine of caveat emptor, a legal principle which ensures that, when a purchaser finds that his fine new building is disintegrating around him, the natural target of his wrath (the vendor) will in most cases be immune from any form of liability. (Caveat lessee is not quite so strong, since a landlord may assume or have thrust upon him various repairing obligations, but many tenants are still caught.) As a result of this doctrine (which, having survived recent scrutiny by the Law Commission, now appears likely to remain with us for the foreseeable future) a disgruntled purchaser is forced to look elsewhere for redress — hence, perhaps, the enormous growth in the number of tort actions for negligence brought against builders, subcontractors, architects, structural engineers, surveyors and local authorities in their building inspection role.
Nor is it only purchasers and tenants who may seek to use the tort of negligence to protect their interest in the quality of a building; anyone who is not linked by contract to the “guilty” party will be forced to try this route. This would apply, for example, to those who fund developments and who are naturally averse to finding that their investment is secured on property which is defective and therefore less valuable. It also arose in the interesting case of Richard Roberts Holdings Ltd v Douglas Smith Stimson Partnership, CSW, December 1 1988, where a factory was designed and built for one company but used by another company in the same group. It was there held that the first company could sue its builders or architects in contract for the cost of remedial work — but the latter, which had lost profits while that remedial work was carried out, was restricted to claiming (unsuccessfully) in tort.
The availability of an action in tort for negligence is thus of great practical significance to a large number of people, and it is naturally important both to them and to their professional advisers that the boundaries within which such an action will be possible should be fairly clearly marked. This group of actual and potential litigants may with some justification regard themselves as having been extremely badly served during the past decade by the House of Lords, which has in that period handed down no fewer than five decisions in this area, all of which appear mutually inconsistent! (Space does not permit a development of this particular theme, but those readers who have solved and outgrown Rubik’s cube may like to see what patterns, if any, they can make out of Anns v Merton LBC [8] AC 728; IBA v EMI & BICC (1980) 14 Build LR 1; Junior Books Ltd v Veitchi Co Ltd [1983] AC 520; Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1; and finally D & F Estates v Church Commissioners for England [1988] 2 EGLR 263.)
The D & F Estates case
This litigation concerned a block of flats which was built by Wates Ltd in the early 1960s on land in west London owned by the Church Commissioners. The plastering work was subcontracted to a firm called R S Hitchens (subsequently described by the Court of Appeal as “not worth suing”). When the flats were completed, the Church Commissioners let one of them to the plaintiff company, whose controlling shareholders, a Mr and Mrs Tillman, went into occupation (technically as licensees of the company). In 1980, while the Tillmans were away on holiday and the flat was being redecorated, some plaster fell from certain ceilings and the decorators discovered that much of the plaster on both walls and ceilings was loose. All the loose plaster was accordingly hacked off and replaced at a cost of some £10,000 and, within a few months, the plaintiffs started legal proceedings to recover this loss. Before the action came to trial, expert investigation revealed further defective plaster in both walls and ceilings; the estimated cost of replacing this was more than £50,000 and so this figure, together with an amount to represent the prospective loss of rent while repairs were carried out, was added to the plaintiffs’ claim.
The plaintiffs succeeded in full before an official referee; the Court of Appeal confirmed their entitlement to the initial £10,000, but set aside the remainder of the award. On a further appeal, the House of Lords unanimously held that the plaintiffs were entitled to nothing at all, ruling that: (i) Wates Ltd could not be held responsible for the default of their subcontractors; and that in any case (ii) the tort of negligence did not permit recovery of the kind of losses which the plaintiffs had suffered.
These two bases of the decision require separate consideration.
Liability for subcontractors
The first ruling (which, though controversial enough in its own right, has tended to be overshadowed by the second) is at least relatively straightforward. Lord Bridge, with whose speech on this issue all their lordships agreed, approached the question by citing the general rule that a person is not liable in tort for the negligence of someone who is working for him as an independent contractor. Further, although that rule is subject to certain exceptions (cases in which the client is held to owe a “non-delegable duty” to the injured party), the present case did not correspond to any recognised example of this type. His lordship then appeared to make a jump in logic to the conclusion that an employer could not even be liable for his own negligence in failing properly to supervise the contractor’s work, as he would owe no duty of care to anybody in this respect.
It is important to recognise just how far this ruling extends. It means that a main contractor cannot be held liable in tort for the negligent work of a subcontractor, even if that work causes the kind of injury or damage which is still (ie after D & F Estates) actionable in tort, except where the main contractor has actually come to know that the work is being done in a defective and dangerous way and has done nothing about it. Thus, if a steelwork subcontractor’s defective workmanship or inadequate materials leads to the collapse of a building, this may put the main contractor in automatic breach of his contract with the client (Young & Marten Ltd v McManus Childs Ltd [9] 1 AC 454); however, he will not be liable to those killed or injured in the collapse, even for his own supervisory failures.
The result looks a little odd, to say the least, and it is not the only comment which may be made about this aspect of the decision. It may also be noted that:
(i) To impose a duty of care on the main contractor in these circumstances would not (as the House of Lords seems to have thought) mean that a private individual would become liable for the negligence of any building contractor whom he engaged to do a job. Not only is there is a basic conceptual distinction between creating a danger and merely commissioning work in the course of which a danger is created, there is the simple practical point that a “duty of reasonable supervision” can only have any real meaning when applied to those with the necessary expertise to carry it out, and a private client will seldom fall into this category.
(ii) The House of Lords appears to have assumed (rightly, it is suggested) that the main contractor’s “immunity” is dependent upon his having taken all reasonable care in selecting an apparently competent subcontractor in the first place. Why? If the justification for denying any duty of care in supervision is that Wates had not “assumed a personal duty to all the world to ensure that Chelwood House should be free of dangerous defects”, then what is the legal basis of the assumed duty of care in selection?
(iii) On a more general level, the ruling sits rather uncomfortably with recent decisions in which the courts have discovered new “non-delegable duties” and thus imposed strict liability in respect of a subcontractor’s negligence. If a non-delegable duty of care in tort is owed by a minicab firm to a passenger (Rogers v Night Riders [3] RTR 324); an employer to his employee (McDermid v Nash Dredging & Reclamation Co Ltd [1987] 2 All ER 878); a firm of auctioneers to a potential client (Luxmoore-May v Messenger May Baverstock [1990] 07 EG 61); and a local authority in its building inspection role (Murphy v Brentwood DC (unreported, 1989), what is so special about a building contractor that he should not owe even a personal duty of care to future owners of the property?
(iv) Lastly, there are other recent decisions in which, while not going so far as to impose a non-delegable duty, the courts have certainly recognised that one person may be under a legal duty to take reasonable care to check the work of another. Of particular relevance is the case of an architect who, in co-ordinating the work of specialist consultants into the project, must not simply rely blindly on the expert with no mind of his own (Investors in Industry Commercial Properties Ltd v South Bedfordshire DC [6] 1 All ER 787). Again one is left to wonder: if an architect, why not a builder?
The scope of liability in negligence
The question of responsibility for subcontractors is undoubtedly an important one, but it is the second limb of the House of Lords’ decision which has really caused a stir. Both Lord Bridge and Lord Oliver (who delivered the only reasoned judgments) were at pains to redefine the nature of losses for which a negligent builder could be held liable in tort. Unfortunately for those who have to live with these definitions and advise clients on the basis of them, the two judgments adopt rather different approaches, especially, as we shall see, over the present status of Anns v Merton LBC.
Lord Bridge, who regarded the position of a builder as directly analogous to that of a manufacturer of products, concentrated his attention on the branch of negligence liability which developed from Donoghue v Stevenson [2] AC 562. Not surprisingly, he concluded that a manufacturer or builder would only be liable in tort for negligence where his defective product or building caused either personal injury or damage to property other than the defective product itself. Damage to the product itself must, he said, be seen as pure financial loss (since its only effect would be to reduce the product’s value) and, in his lordship’s view, such losses are actionable only in contract and not in tort. (The problems involved in deciding where a “product” ends and “other property” begins are dealt with below.) Furthermore, he saw no reason to depart from this view merely because a property was dangerous; if the owner incurred expense in making it safe before it could harm persons or other property, his loss was again a purely financial one. (This last conclusion should surely have produced a head-on collision with Anns v Merton LBC — unfortunately, Lord Bridge did not “find it necessary for the purpose of deciding the present appeal to express any concluded view” as to how far that case departed from his view of the law.)
Lord Oliver’s judgment was rather more concerned with the decision in Anns and, indeed, it seems that he would have very much liked to overrule both Anns itself and all the defective building cases based on it. Indeed, at one point he put forward the “correct analysis” as being that “the builder of a house or other structure is liable at common law for negligence only where actual damage, either to person or property, results from carelessness on his part in the course of construction”. However, having confessed to the greatest difficulty in reconciling the Anns principle “with any conventional analysis of the underlying basis of liability in tort for negligence”, his lordship backed off and merely ruled that the case could not be treated as authority for anything more than making a builder liable for the cost of repairing a dangerous defect. And, since Anns never claimed to be authority for anything more than this, his lordship’s approach does not actually seem to have cut it down at all!
Damage to “other property”
What, then, is the combined effect of these two judgments? First and simplest, it is clear that a negligent builder may be liable in tort to anyone who suffers personal injury because of a defect in the building, or whose property (other than the building itself) is damaged. Thus, if a defective roof tile falls on the occupier’s car (or, for that matter, through the neighbour’s greenhouse), a straightforward application of Donoghue v Stevenson will permit the aggrieved party to recover damages. Second, and not simple at all, it seems that in the case of what Lord Bridge called a “complex structure” (a definition which would surely embrace most buildings), damage to one part of the structure caused by a hidden defect in another part may qualify to be treated as damage to “other property” and thus be recoverable. If so, then logic would dictate that the damages awarded should cover only the cost of repairing the “damaged” part and not the “damage-causing” part. However, as Lord Oliver pointed out, there may be cases in which it would be pointless to repair the damage without at the same time rectifying its cause, since it would otherwise soon recur. For example, damage to walls and ceilings caused by defective foundations can only be properly repaired if the foundations themselves are also repaired. If this is so, then his lordship thought that the plaintiff would be entitled to recover the whole cost.
The “complex structure” conundrum seems destined to haunt future courts, if only because of the examples used by their lordships. Foundations and walls are, it seems, sufficiently separate for the latter to qualify as “other property” when damaged by a defect in the former. By contrast, said Lord Bridge, it would not be right to treat defective plaster as causing damage to the wallpaper or paint placed on it, since describing the latter as other property would be “entirely artificial”. But is not wallcovering precisely the point at which “other property” frequently does begin? A house purchaser seldom puts his own walls on the builder’s foundations, but he may very well put his own wallpaper on the builder’s walls. If so, then falling plaster will indeed cause damage to “other property”.
What is especially ironic about all this is that Lord Bridge, having referred at some length to the Defective Premises Act 1972 (expressing strongly the view that judges should not rush in where Parliament had clearly chosen not to tread), made no mention of the way in which “other property” is treated under the statutory regime of product liability which was introduced by the Consumer Protection Act 1987. In short, a manufacturer’s liability under that Act categorically excludes any damage to the defective item itself or, where the item is a component, any damage to the product in which it is incorporated. Who knows, his lordship might have been sufficiently emboldened by this statutory support to have demolished “complex structures” altogether!
Liability for dangerous defects?
It is extremely unfortunate, to say the least, that the most important part of the decision in D & F Estates (judging by the number of cases which have arisen subsequently) is also its most obscure aspect. This concerns the effect, if any, of the House of Lords’ decision upon a builder’s liability for the cost of repairing those defects which, though dangerous, are discovered in time to prevent the potential damage from occuring. This form of liability, recognised by the House of Lords in Anns v Merton LBC [8] AC 728, was described by Lord Oliver as “an entirely new type of product liability, if not indeed an entirely novel concept of the tort of negligence”, since it arises not when the building suffers damage as such but when its condition creates a “risk of apprehended damage to the safety of person or property”. Much of his lordship’s judgment was given over to detailed criticism of this new doctrine, whose underlying logical basis he found unclear, and one might have expected him to conclude by pronouncing sentence of death upon it. However, as mentioned above, this final step was not taken — instead, his lordship merely ruled that if Anns remains good authority for making a builder liable in tort for defects in the building, that liability cannot extend beyond the cost of making the building safe.
Lord Bridge’s judgment on this issue is no less puzzling, partly because of the following example. “If I acquire a property with a dangerously defective garden wall which is attributable to the bad workmanship of the original builder, it is difficult to see any basis in principle on which I can sustain an action in tort against the builder for the cost of either repairing or demolishing the wall. No physical damage has occurred.” Surely this leads inexorably to the conclusion that Anns, in so far as it said anything about builders, was simply wrong. And yet, once again, the coup de grace was plainly not applied.
The confusion caused by their lordships’ failure to take the final step can be clearly seen in the subsequent case law. It seems that, at least among the official referees (before whom many cases of this type tend to be tried at first instance), the prevailing view is that the Anns principle survives. In at least two reported cases which have been decided in the light of D & F Estates, damages in tort for negligence to cover the cost of making a building safe have been successfully claimed. Thus in West Kent Cold Storage Co Ltd v C Hemmings & Co Ltd (1989) The Times, November 13, for example, the owners of a cold store recovered from the manufacturers of insulating panels the cost of making the cold store safe after those panels came apart.
The second case is especially interesting in demonstrating the limits of the surviving Anns principle. In Portsea Island Mutual Co-operative Society Ltd v Michael Brashier Associates (1989) 6 Professional Negligence 43, the tenants of a supermarket sued the architects when the brickslips with which the supermarket was faced began to fall off, thus endangering staff and customers.
It was held that, while the plaintiffs were entitled to recover the cost of removing the dangerous brickslips, they were not to be entitled to recover the cost of fixing new ones, since this was not an essential safety factor.
A third case (decided by an official referee before D & F Estates but subsequently taken to the Court of Appeal) reveals a somewhat less clear picture. The plaintiffs in Department of the Environment v Thomas Bates & Son Ltd [9] EGLR 139 made two separate complaints about an office building which they occupied as underlessees. As to the first of these (excessive water penetration of a flat roof), the official referee awarded the plaintiffs the cost of rectification, assessed on the cheapest practicable method, based on his finding that this constituted a danger to the health of their employees; this part of the decision was not appealed, and the Court of Appeal simply noted it without any apparent disapproval. Second, the plaintiffs complained that, because of defects in the pillars supporting an 11-storey office building, they were unable to use the building to its full design load. As to this, the Court of Appeal held that, since the building was quite safe to be used to its present extent, the plaintiffs’ complaint was merely that they had not received what they had bargained for and this was not something for which they could claim against the builders in tort. In reaching this conclusion, all three members of the court acknowledged the serious doubts as to whether there would in any event have been liability on the “dangerous defect” principle, but used the clear lack of any danger in the case before them to evade the issue.
Further implications
D & F Estates was concerned with the liability of a builder; the House of Lords was not asked to and did not consider whether its rulings would apply to others such as subcontractors or architects, negligence on whose part might equally result in a defective building. In principle, it seems that anyone concerned in the construction process should be subject to the same principles, but it is worth noting one possible line of argument to the contrary (if only because, sooner or later, some plaintiff is surely going to raise it). This is to the effect that, where the negligence in question is that of a designer rather than a constructor, it should be treated as negligent advice rather than as negligent conduct. If such an argument were to be accepted (and this writer at least does not believe that it will convince a court), it would of course reopen the door to claims for pure financial loss — in short, to claims for the very types of loss ruled out in the D & F Estates case itself.
In practical terms, the most spectacular result of D & F Estates has undoubtedly been the proliferation of collateral warranties throughout the construction industry, as builders, subcontractors, architects and others have been required on appointment to warrant the quality of their input for the benefit of future owners, tenants and funding institutions. The resulting network of legal relationships, by which people seek to secure for themselves in contract those benefits which they previously believed they had in tort, is a paperchase of enormous proportions which, because of the dearth of generally accepted standard forms of warranty, must add considerably in lawyers’ costs to the setting up of any major project.
This is not the place for a critique of collateral warranties, but it is perhaps worth pointing out that, quite apart from any legal difficulties which they create (for instance, whether the benefit of a warranty given to a freeholder can be split among a number of tenants), any such warranty is only as good as the solvency or the insurance backing of the person who gives it. And, since liability insurers may limit their cover in various ways, by excluding, for example, “any obligation which is voluntarily undertaken”, or “any obligation stricter than that of using reasonable care”, or even “any obligation greater than would be imposed by the law of tort”, it follows that a warranty may lose its practical value at precisely the point where its beneficiary needs to rely upon it! No doubt the industry and its supporting insurance market will eventually sort out the mess but, in the meantime, it would be foolish to believe that these pieces of paper effectively restore their recipient to his pre- D & F Estates position.
Conclusion
As an attempt to summarise the present position, it may be suggested that a negligent builder is liable in tort for the following consequences of his negligence (though not where that negligence consists of failing to check the work of a subcontractor):
(i) The injury or death of any person.
(ii) Damage to the property of any person (other than the building itself).
(iii) Damage to parts of the building other than the defective part. However, if it is impracticable to repair these “other parts” while leaving the defective part unrepaired, then the damages awarded should also cover the cost of repairing that part.
(iv) (Possibly) the cost of making safe a building which in its present defective condition constitutes a danger to health or safety or (again possibly) to other property. However, this heading (assuming it exists at all) cannot be stretched to accommodate further costs, such as those incurred in bringing the building up to its contractual specification or in enabling it to be fully used.
The ifs and buts in this list are all too obvious and are greatly to be regretted. However, the sad fact is that, after 10 years and at least six visits by various parties to the House of Lords, it is impossible to state the current legal position with any more certainty. Indeed, all that can be said is that the doubts, both as to law and fact, which are inherent in the last two categories appear likely to provide gainful employment for an army of lawyers and expert witnesses for a considerable time to come!
