Practical Law

It is unusual for a court of first instance to decline to follow obiter dicta of the appellate courts. This tendency is particularly marked where that appellate court is the House of Lords, and even more so when the obiter dictum in question is not in direct conflict with any other statement of the law on the point at the appellate level.

However, in his recent decision in Thomas v Taylor Wimpey Developments Ltd and others [2019] EWHC 1134 (TCC), HHJ Keyser QC departed from the norm by concluding that the second of Lord Bridge’s qualifications, in Murphy v Brentwood DC [1991] AC 398, to the general principle that a builder does not owe a duty in tort in respect of latent defects in a building absent an assumption of responsibility, “does not represent the law”. 

Murphy v Brentwood DC

Murphy is too well-known a decision in the construction field to require detailed factual exposition. In summary, a local council passed plans (under the predecessor of what is now the Building Control process) for the construction of foundations to a house, in reliance upon the advice of a firm of consulting engineers. The plans in fact contained calculation errors, with the result that when the house was built the foundations were defective. The homeowner sold the house, making a loss of £35,000 against the market value it would otherwise have had, and sued the council, alleging that it owed him a duty of care in tort in respect of that loss.

Lord Bridge said:

“If a manufacturer negligently puts into circulation a chattel containing a latent defect which renders it dangerous to persons or property, the manufacturer, on the well known principles established by Donoghue v Stevenson [1932] AC 562 , will be liable in tort for injury to persons or damage to property which the chattel causes. But if a manufacturer produces and sells a chattel which is merely defective in quality, even to the extent that it is valueless for the purpose for which it is intended, the manufacturer’s liability at common law arises only under and by reference to the terms of any contract to which he is a party in relation to the chattel; the common law does not impose on him any liability in tort to persons to whom he owes no duty in contract but who, having acquired the chattel, suffer economic loss because the chattel is defective in quality. If a dangerous defect in a chattel is discovered before it causes any personal injury or damage to property, because the danger is now known and the chattel cannot safely be used unless the defect is repaired, the defect becomes merely a defect in quality. The chattel is either capable of repair at economic cost or it is worthless and must be scrapped. In either case the loss sustained by the owner or hirer of the chattel is purely economic. It is recoverable against any party who owes the loser a relevant contractual duty. But it is not recoverable in tort in the absence of a special relationship of proximity imposing on the tortfeasor a duty of care to safeguard the plaintiff from economic loss.”

His Lordship then made what is still the defining statement of the law on the tortious liability of a builder in respect of defects in buildings:

“If a builder erects a structure containing a latent defect which renders it dangerous to persons or property, he will be liable in tort for injury to persons or damage to property resulting from that dangerous defect. But if the defect becomes apparent before any injury or damage has been caused, the loss sustained by the building owner is purely economic. If the defect can be repaired at economic cost, that is the measure of the loss. If the building cannot be repaired, it may have to be abandoned as unfit for occupation and therefore valueless. These economic losses are recoverable if they flow from breach of a relevant contractual duty, but, here again, in the absence of a special relationship of proximity they are not recoverable in tort.”

(The reference to a “special relationship of proximity” is, of course, to a relationship apt to give rise to liability on Hedley Byrne principles, of which the legally orthodox characterisation is now an “assumption of responsibility”: see Robinson v PE Jones).

His Lordship then proposed this exception to the general rule set out above:

“The only qualification I would make to this is that, if a building stands so close to the boundary of the building owner’s land that after discovery of the dangerous defect it remains a potential source of injury to persons or property on neighbouring land or on the highway, the building owner ought, in principle, to be entitled to recover in tort from the negligent builder the cost of obviating the danger, whether by repair or by demolition, so far as that cost is necessarily incurred in order to protect himself from potential liability to third parties.”

It is fair to say that this exception has never met with universal acclaim. The other Law Lords in Murphy did not directly address the point. Lord Oliver did say that whilst he would prefer to reserve his opinion until the right case arose, he was not “at the moment convinced of the basis of making such a distinction”. The dictum was applied in Morse v Barratt (Leeds) Ltd (1993) 9 Const LJ 158 by HHJ O’Donoghue, but not applied by HHJ Hicks QC in George Fischer Holding Ltd v Multi Design Consultants Ltd (1998) 61 Con LR 85 on the basis that it was “properly to be regarded as a minority obiter dictum, contrary to the ratio of the decision of the House”.

It is this dictum which HHJ Keyser QC considered, and ultimately rejected, in Thomas v Taylor Wimpey Developments Ltd.

Thomas v Taylor Wimpey Developments Ltd and others

In Thomas, homeowners of new-build properties purchased in 2007 brought a claim concerning defects to log retaining walls built in the rear of the back gardens of the properties against the builder, alleging, among other things, that the builder owed them a duty of care in tort in respect of the defects. The builder denied the existence of such a duty, and the court ordered the point to be tried as one of several preliminary issues. The homeowners relied, at the hearing, on Lord Bridge’s exception in Murphy in support of their position that a duty was owed.

In giving judgment on the preliminary issues, HHJ Keyser QC referred to the authorities identified above, and concluded that “Lord Bridge’s qualification in Murphy does not represent the law.” His reasoning was, in summary, as follows:

• The qualification was set out in a single obiter dictum; was unsupported by authority save for the decision in Morse; and was not supported by the ratio or reasoning of the Law Lords in Murphy. Indeed, even Lord Bridge did not support it with any specific reasons.
• Inasmuch as it would create a non-contractual common law basis for tortious liability for economic loss on grounds other than assumption of responsibility it is contrary to the Court of Appeal’s analysis in Robinson, which recognised no other basis for recovery of such loss.
• It would create inconsistency, since:

“The argument that recovery ought to be permitted because expenditure would be required to obviate the risk to third parties would, logically, imply that, where the risk of injury was only to persons on the premises, the owner ought to be able to recover the cost of moving from the premises. However, such recovery does not appear to be permitted on the current state of the law and in accordance with the analysis in Murphy and in Robinson.”

• There was no compelling policy justification for recognising the existence of the qualification in circumstances where builders have potential liabilities in contract and the Defective Premises Act 1972 in respect of defective work, and in tort in respect of injury to persons and property.

Discussion

In addition to the reasons given in the judgment, the learned judge’s decision can be justified in the result on the following grounds.

First, it is not obvious why a building owner’s interest in avoiding liability to third parties should require special protection. What makes the loss which eventuates on the total collapse of a building less worthy of protection (on forensic or policy-based grounds) than the loss which a builder owner sustains in carrying out work to obviate the danger of collapse? If the building collapses anyway and injures someone, why should the building owner recover the cost of the (unsuccessful) safety measures but not the cost of rebuilding afterwards? This difficulty seems particularly acute given that, in the latter situation, the building owner ought in principle to have a good claim for contribution pursuant to the Civil Liability (Contribution) Act 1978 against the builder in respect of his liability to the injured party, and so would not be without a remedy as Lord Bridge appears to have contemplated.

Second, one of the criticisms which Lord Bridge made in Murphy of the judgment in Anns v Merton [1977] 2 WLR 1024 was of a supposed requirement that, in order to give rise to a duty of care, the relevant defect must cause a present or imminent danger to health and safety (see the judgment of Lord Wilberforce at 760). Thus, he said:

“…there are, as it appears to me, two insuperable difficulties arising from the requirement of imminent danger to health or safety as an ingredient of the cause of action which lead to quite irrational and capricious consequences in the application of the Anns doctrine. The first difficulty will arise where the relevant defect in the building, when it is first discovered, is not a present or imminent danger to health or safety. What is the owner to do if he is advised that the building will gradually deteriorate, if not repaired, and will in due course become a danger to health and safety, but that the longer he waits to effect repairs the greater the cost will be? Must he spend £1,000 now on the necessary repairs with no redress against the local authority? Or is he entitled to wait until the building has so far deteriorated that he has a cause of action and then to recover from the local authority the £5,000 which the necessary repairs are now going to cost? I can find no answer to this conundrum. A second difficulty will arise where the latent defect is not discovered until it causes the sudden and total collapse of the building, which occurs when the building is temporarily unoccupied and causes no damage to property except to the building itself. The building is now no longer capable of occupation and hence cannot be a danger to health or safety. It seems a very strange result that the building owner should be without remedy in this situation if he would have been able to recover from the local authority the full cost of repairing the building if only the defect had been discovered before the building fell down.”

The problem with this is that the “two insuperable difficulties” which Lord Bridge identifies with Anns (and which do, indeed, seem insuperable) apply with equal force to his own proposed exception to the general rule in Murphy.

Third, there is no equivalent exception as regards dangerous chattels, in respect of which a cause of action will only arise in tort, on Donoghue v Stevenson principles, once damage has actually occurred; nor did Lord Bridge propose in Murphy that there should be any equivalent exception made. Indeed, he said the opposite:

“…in equating the damage sustained in repairing the chattel to make it safe with the damage which would have been suffered if the latent defect had never been discovered and the chattel had injured somebody in use, the judgment ignores the circumstance that once a chattel is known to be dangerous it is simply unusable. If I buy a second-hand car and find it to be faulty, it can make no difference to the manufacturer’s liability in tort whether the fault is in the brakes or in the engine, i.e. whether the car will not stop or will not start. In either case the car is useless until repaired. The manufacturer is no more liable in tort for the cost of the repairs in the one case than in the other.”

Again, it is difficult to see why these observations do not apply with equal force to defects in buildings.

It remains to be seen whether there is any life left in Lord Bridge’s qualification. While it is unreasoned, it was the considered view of a very senior and well-respected Law Lord, and comes in the course of a judgment which remains one of the foundational statements of liability in tort. However, for the reasons given above, I would respectfully suggest that the decision of HHJ Keyser QC to burn this particular bridge was the right one.