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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Payne & Ors v John Setchell Ltd [2001] EWHC 457 (TCC) (16 March 2001)
URL: http://www.bailii.org/ew/cases/EWHC/TCC/2001/457.html
Cite as: [2002] PNLR 7, (2001) 3 TCLR 26, [2001] EWHC 457 (TCC), [2002] BLR 489, 3 TCLR 26
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
B e f o r e :
____________________
| (1) SAMUEL HENRY PAYNE (2) JILLIAN SCOTNEY (3) GARY MARK PAYNE |
Claimants |
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| AND |
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| JOHN SETCHELL LIMITED |
Defendant |
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Neutral Citation Number: [2001] EWHC 457 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Date: 16 March 2001
Before:
HIS HONOUR JUDGE HUMPHREY LLOYD QC
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BETWEEN:
(1) SAMUEL HENRY PAYNE
(2) JILLIAN SCOTNEY
(3) GARY MARK PAYNE
Claimants
AND
JOHN SETCHELL LIMITED
Defendant
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Nicola Shaldon appeared for the claimants, instructed by Kenneth Bush, King's Lynn.
Owain Thomas appeared for the defendant, instructed by Hill Dickinson.
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JUDGMENT
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Crown Copyright ©
- Ten Mile Bank is a village near Downham Market, Norfolk. Not far away lived Mrs Teana Muriel Gotobed. She met Mr Roger Wright and became Mrs Gotobed Wright. In 1988 she acquired Fair View Cottage in Engine Road, Ten Mile Bank. She and her husband decided to improve it. Since it was intended to extend the building Mr Wright asked Mr John Setchell, of the defendant, Chartered Civil and Structural Engineers, of King's Lynn, to carry out a ground investigation of the site and of the existing foundation, Mr Setchell confirmed his company's instructions in a letter of 14 June 1988:-
- On 23 June 1988 Mr Setchell wrote to Mr Wright as follows:-
- Mr Wright accepted that advice and decided to demolish the existing building and to replace it with two semi-detached cottages. He agreed the terms of the defendant's letter of 29 June 1988:-
- Mr Setchell duly prepared a drawing 3731/01 and supporting calculation sheets 3731/01-08 for Mr Wright to use. (The drawing and a calculation sheet were subsequently revised.) An employee of the defendant, Mr Richard Morton, inspected the formation on 15 September 1988 in the presence of the first claimant, Mr Samuel Payne. The defendant reported to Mr Wright on 16 September 1988:-
- On 11 October 1988 Mr Morton again visited the site and inspected the reinforcement that was being placed. Mr Samuel Payne made it clear in evidence that he had certainly assisted Mr Wright in the selection and fixing of the reinforcement, as required by the defendant's drawing, as he understood what was required, eg the coding of the steel. He said that he was a builder of 20 years' experience. On 20 October 1988 Mr Setchell wrote to Mr Wright as follows:-
- In October 1988 Mrs Gotobed Wright bought land at the rear of the cottages (over which Mr Samuel Payne had a right of way). At that stage Mr and Mrs Wright were still married but they later divorced. Mr Wright got in touch with Mr Setchell about the possibility of building a further set of cottages next to the new ones, which would be identical to them, and sought his views about re-using the raft foundation which had been shown on the drawings for the first two cottages. Mr Setchell suggested that it would be prudent to carry out a further borehole ground investigation and quoted his fee for doing so. Thereafter Mrs Gotobed Wright obtained planning permission for the cottages. Mr Mike Hastings, acting on her behalf, contacted the defendant for copies of the existing drawings and structural calculations. The defendant wrote to Mrs Gotobed Wright on 21 February 1989 sending her copies but repeating the advice that further ground investigation was desirable. Apparently nothing happened for another year, perhaps because of the break up of the Wright marriage. On 2 April 1990 Mrs Gotobed transferred to Mr Wright the site for the additional cottages. Mr Wright evidently engaged Mr Payne to build the cottages since the latter got in touch with the defendant and asked for a drawing and a bar bending schedule. These were submitted on 12 April 1990 together with the advice that "should you wish to proceed with the project a Ground Investigation will be required, as although we expect similar conditions to the adjacent property nevertheless local variations can occur".
- Nevertheless Mr Payne (or Mr Wright) decided not to have any ground investigation and accordingly on 9 July 1990 asked the defendant to proceed to carry out engineering services without a ground investigation. A fee of £100 was thereby saved. The services to be carried out by the defendant were described in its letter of 31 July 1990:-
- Although Mr Payne was engaged by Mr Wright to build Nos. 3 and 4 Fair View Cottages, Mr Wright did not have the money to finance the construction. It was therefore agreed between Mr Wright and Mr Payne that on completion of construction Mr Wright would transfer No 3 to Mr Payne. Thus the agreement between Mr Wright and Mr Payne of 26 July 1990 stated that the contract price would be £20,000 and the transfer of No 3 Fair View Cottage dated 17 June 1991 specified the consideration to be the same amount. The building contract contained the following provisions:-
- Mr Samuel Payne had however no intention of living in No 3 so in April 1991 he put it on the market through estate agents for £59,950. It seems that it was not snapped up so Mr Samuel Payne suggested to his son, Mr Gary Payne, the third claimant, that he might buy it. Mr Gary Payne is an accountant. Although his evidence in cross-examination was at variance with his witness statement as regard the timing of the discussions that he had with his father I do not consider this detracts from the substance of his evidence. The events took place some 10 years ago. Mr Gary Payne appeared to me to be credible. Mr Gary Payne said that he wanted to be sure that there was documentation equivalent to that of an NHBC insurance guarantee and accordingly was given and, according to him, relied on the letter of 21 August 1990 in which the defendant had said that the work on the foundations had been completed before deciding what further steps should be taken. Mr Gary Payne also obtained a mortgage from the Bradford and Bingley Building Society. The surveyor's report stated "yes" in answer to the question "if [there is no NHBC certificate] are architect's certificates available?". It is clear that the surveyor did not carry out any structural survey and it may be inferred that reliance was placed upon Mr Setchell's letter. Mr Gary Payne proceeded to buy the house for £54,000. It is now let.
- Mrs Gotobed Wright did not make the payments due under the mortgages for each of the cottages. They were accordingly repossessed by the mortgagees and put on the market. Mr Samuel Payne bought No. 1 in May or June 1992 for £25,000 with the assistance of a mortgage from Midland Bank plc. For the purposes of that transaction, surveyors, Russen & Turner, were instructed by Mr Payne to inspect the property. They obtained the defendant's letter of 20 October 1988 and also a further letter of 2 April 1992 concerning the waste pipe details through the toe edge of the raft. As a result the surveyors were able to confirm that the property was reasonably sound to enable Mr Payne to buy it and to obtain a mortgage from the Midland Bank. He has not lived in the house permanently but uses it as a weekend cottage principally for friends and relatives.
- Mr Payne then suggested to his daughter, the second defendant, then Miss Jillian Payne, that she might buy No 2 Fair View Cottages as an investment. As she explained in cross-examination she had never bought a house before and accordingly, like her brother, was concerned that it would be marketable if as and when she sold it. Her father produced the Setchell letter of October 1988 upon which she said she relied in lieu of NHBC documentation. She obtained a mortgage from the Leeds Building Society so as to buy No 2 for £34,000 on 12 July 1993.
- Mr Wright found that No 4 Fair View Cottages had cracks so in May 1997 he commenced proceedings in the King's Lynn County Court against three defendants: the builder, Mr Samuel Payne, John Setchell Limited and a chartered surveyor who had supervised and inspected the construction of No. 4. This action has been settled.
- In his witness statement Mr Samuel Payne said that about the time of the settlement of the action the tenant of No 2 approached him as she wished to buy No 1 and convert the two properties into a single dwelling. However a survey carried out for the tenant revealed that Nos 1 and 2 had tilted in a similar manner to Nos 3 and 4. Mr Payne said that that was the first time that he had had any indication at all that there had been any tilting or damage to No 1 or No 2. In October 1999 he obtained a structural engineer's report which confirmed what he had been told by the tenant. Thus both sets of cottages require to be underpinned. The work has not been carried out. In the light of that report Mr Payne, his daughter and his son commenced these proceedings on 29 December 1999.
- The particulars of claim, as amended, contain the following:-
- In essence therefore the complaint against the defendant is that the ground investigation of Nos 1 and 2 was inaccurate and that piled or concrete or reinforced concrete beam foundations should have been used. As a result the decision to have a raft foundation was inappropriate. I relation to N0 3 a similar complaint must be taken to be made even though the defendant was specifically asked not to carry out a ground investigation, although it had strongly advised that one should be carried out. The allegations made in paragraphs 15(c) and 16(b) of the particulars of claim is baseless, as regards No 3. (Indeed Mr Setchell voluntarily carried out a confirmatory investigation.) Again in relation to No 3 the complaint must be that the decision to have a raft foundation was wrong. The claimants, no doubt aware of the limitation and other difficulties which attend a case based upon those decisions, present their main case in reliance upon letters of 1998 and 1990 in which Mr Setchell certified the construction of the foundations. Accordingly a long list of draft issues have been agreed as follows:-
- There are two main threads in these issues: first, a case that the claimants each had a fresh cause of action under the Latent Damage Act, based on pre-existing causes of action in negligence (which in turn derive from the contractual setting) and, secondly, a case that the claimants were each owed a duty of care by the defendant which is actionable even though the cause of action accrued more than six years before the start of these proceedings. The claims of all the claimants are virtually identical. None of the houses are the true homes of any of the claimants, although the first claimant may make use of No 1 occasionally. Each claimant in respect of the property which he or she owns claims damages measured either as the cost of the remedial work to the property, together with a claim to be indemnified against liability to the next door neighbour. I shall deal with each pair of the properties in turn and in so doing will cover the agreed preliminary issues. In Warner v Basildon Corporation (1990) 6 Const LJ 146 (to which I shall be referring) the Court of Appeal had to consider a similar situation: subsequent purchasers of a house built by the defendant claimed in respect of the damage to the property caused by defective foundations. In the course of his judgment Ralph Gibson LJ said:
- The first preliminary issue requires consideration of the defendant's retainer or retainers. It is clear that the defendant was first retained by Mr Wright, probably on behalf of Mrs Gotobed Wright, to advise him, or her, as to whether Fair View Cottage could be extended. For this purpose the defendant investigated the ground, made a report adverse to the extension but suggested that a new building could be constructed with a reinforced concrete raft foundation, provided that it was properly designed and built. In carrying out the ground investigation and in advising the owner of the property in the report, the defendant owed Mr or Mrs Wright a duty to take reasonable professional skill and care in those respects. That was the defendant's first retainer or engagement. It is the most important.
- The defendant was then asked by Mr Wright (presumably again on behalf of his wife) to design the foundation of the building in accordance with Mr Wright's own design for it. As set out in the letter of 29 June 1988 the defendant also undertook (a) to inspect the ground ready for raft foundation; and (b) to inspect the steel reinforcement that was to be fixed prior to concreting. The defendant did not then undertake to issue a certificate. The defendant's third engagement or retainer was in October 1988 when he agreed (apparently without consideration) to issue a certificate for the foundations which he did on 20 October 1988. The defendant owed a duty to take reasonable professional skill and care in the performance of these duties, as set out in clause 4 of its conditions (which state what would have been implied).
- The defendant's first retainer was thus both for services, investigation and advice, and for a product, a report. The defendant's second retainer was also both for a product (the design) and for services (inspection), and the defendant's third retainer was also for a product, namely a certificate.
- The claimants' case in respect of the third retainer - for the certificate - was that the defendant had certified the fitness of the foundation for its purpose. In my judgment the defendant did not undertake to issue such certificate nor is the certificate to be read as certifying the foundation's 'fitness for purpose'. The defendant was not the supervisor of the work being carried out for Mr Wright, apparently by Mr Payne, and had only undertaken to examine the ground and the reinforcement.
- A certificate expresses the judgment, opinion or skill of the person issuing it, usually, but not always, in relation to a matter called for by a construction contract (where the certifier is sometimes also acting in a "quasi-arbitral" capacity). That is not of course the case in relation to numbers 1 and 2. It is not normally a warranty nor is it to be read as tantamount to a warranty, particularly if issued by a professional person, although it may amount to a warranty. If issued by a contractor who has undertaken full and complete performance of the contract it may be taken as its formal confirmation that it has duly fulfilled all the obligations undertaken under the contract which will probably include obligations of an absolute nature. To that extent it might be or be equivalent to a warranty especially if given to or intended for a third party. The other contracting party will not normally need such a document as it will have its rights under the contract. A professional person however does not normally undertake obligations of an absolute nature but only undertakes to exercise reasonable professional skill and care in performance of the relevant service or in the production of the product. Thus the certificate of 20 October 1988, particularly since it refers to the two visits to the site, can only be read as an expression of the opinion of the defendant that the result of such inspections the defendant had reasonable grounds for believing that the construction of the foundation had been satisfactorily carried out to its design and, by implication, that there were no circumstances known to the defendant as a result of those inspections which cast doubt on the defendant's original judgment in the production of that design. In turn since the design was based upon the ground conditions found on the investigation carried out in June 1988 it follows that the certificate is also an expression of opinion by the defendant that nothing had been seen on the inspections (particularly the first inspection) that cast doubt on the principle of a raft foundation. However the issue of this certificate, especially since it had not been contracted for, did not confer on Mr or Mrs Wright any additional contractual rights they did not have at that date since it did no more than state or restate the defendant's belief that he had discharged his duties properly. Although the background to and terms of the later certificate differ a similar interpretation should be given to it. It is certainly not to be read as if it were the certificate required by clause (12) of the building contract since the defendant did not issue it as such (although fortuitously it satisfied or was accepted as satisfying the requirements of that clause).
- It was suggested that since the designer is under a continuing duty to review the design, the defendant would be under a new duty of care in relation to the design during inspections and on being asked to issue a certificate. I disagree. It is now in my view well established that a designer's continuing duty of care only requires a reconsideration of the design if the designer becomes aware or should have been aware of the need to reconsider the design. It is not pleaded as part of the claimant's case that Mr Morton or Mr Setchell had on the inspection of the formation seen or should have seen that the ground conditions varied from those assumed for the purposes of the design drawing. Accordingly the defendant owed no such duty to Mr or Mrs Wright. The case advanced by the claimants is that the defendant should not have used a raft foundation but piles or reinforced concrete beams. Thus the complaint which Mr or Mrs Gotobed Wright would have had against the defendant would have stemmed from the defendant's original inspection of the site in June 1988 and the decision that Mr Wright's requirements would be met by a raft foundation which was subsequently set out on drawing 3731/01 together with the calculation sheets 3731/01-08. Accordingly in my judgment the cause of action which Mr and Mrs Wright may have had against the defendant accrued in July 1988 when the defendant prepared those documents, the use of which gave rise to the damage.
- The issues are concerned with duties of care other than in contract, albeit arising out of contract. Henderson -v- Merrett Syndicates Limited [1995] 2 AC 146 makes it plain that in addition to any duty of care assumed by contract a party to a contract might be under a duty of care imposed by the general law and actionable as the tort of negligence, provided that the liability in tort was not materially wider than that in contract: see in particular the speech of Lord Goff at pages 193H-194D where he said:
- It is now settled that a professional person who has assumed a contractual duty of care may also owe a duty of care to the other contracting party, breach of which is actionable in negligence. However in negligence the duty is to take care to avoid causing damage to the claimant and it is thus not necessarily co-extensive with the contractual duty. The duty may arise in the course of producing something which the defendant has contracted to provide but it is not a duty of care to avoid creating a defective product, as such, for otherwise it would be in the nature of a tortious warranty. So in this case the defendant in carrying out the site investigation and in reporting on it would have owed a duty to take reasonable professional skill and care not to cause damage to Mr or Mrs Wright if they acted upon the advice given. Any claim that they might have had for negligence against the defendant appears, in principle, to be that described by Lord Keith in Murphy -v- Brentwood District Council [1991] AC 398 at page 466F, when he was considering the earlier decision of the House of Lords in Pirelli General Cable Works Limited -v- Oscar Faber & Partners [1983] 2 AC 1:-
- In inspecting the work being carried out the defendant was under a duty to take care that damage would not result to its client as a result of failing to detect defective work or in reporting on the result of the inspection in the certificate of 20 October 1988. Again no damage appears to have been suffered by either client as a result of any lack of care in providing those services or that product. Similarly any damage which Mr Wright or Mrs Gotobed Wright might have suffered could only have arisen from the use of the defendant's design of a raft foundation. It was suggested in this case that the defendant's liability was not akin to that of a builder.
- In Murphy the House of Lords held that a local authority did not owe a duty of care when approving the plans for a defective raft foundation for the plaintiff's house since the damage suffered by the plaintiff was not material physical damage but the purely economic loss of the expenditure incurred in remedying the defect in the foundations to avert the danger or of abandoning the property as unfit for habitation. The defect had not caused any physical injury to the plaintiff. As part of their reasoning the House of Lords had to consider the position of a builder since in the earlier case of Anns -v- Merton London Borough Council [1978] AC 728, which was overruled by Murphy, it had been held that a builder did owe a duty of care to the owner or occupier. Thus, by parity of reasoning, there was no objection to the local authority being held liable. However as part of this reasoning the House of Lords also decided that a builder owed a duty of care only to avoid causing a claimant physical injury or damage to "other property" of the claimant, not being the work constructed. Lord Oliver in particular made it clear that the word "builder" was a term of art. He said at page 488B:
- The decision in Murphy was immediately applied by the House of Lords in Department of the Environment -v- Thomas Bates & Son [1991] 1 AC 499. In that case the plaintiff was the lessee of part of a tower block who sought to recover from the contractors who had built it the cost of strengthening pillars supporting the floors of a tower block (in which it had its offices) which had been constructed with a mix containing an excess of aggregate and a deficiency of cement. There was no contract between the plaintiff and the defendant builder so the claim was for negligence. The plaintiff's appeal was dismissed. Lord Keith said at page 519:-
- Thus, despite the fact that the position of the builder was central to the reasoning in Murphy, if it were thought that that reasoning need not be followed on the artificial and erroneous grounds that it was not part of the ratio decidendi of Murphy, the decision in DOE v Bates (which was given at the same time), read with Murphy (see for example Lord Oliver in Murphy at page 489B) establishes that, as a matter of policy, although a builder must be taken to have foreseen the possibility of loss or damage arising from inherently defective work for which it was responsible, it did not owe a duty of care to anybody (including the person who engaged the builder) to avoid causing such loss or damage unless it was physical injury to persons or damage to property other than the building itself. Foreseeability of damage and proximity are not in themselves enough; in addition it must be reasonable in all the circumstances to recognise a duty of care to avoid causing the relevant loss (see, for example, Saville LJ in Marc Rich & Co v Bishop Rock Ltd [1994] 1 WLR 1071 at page 1077). The common law of England and Wales as stated in Murphy and in DOE v Bates is now not the same as in other common law jurisdictions. I was referred to Bryan v Maloney (1995) 69 ALJR 379 and Invercargill CC v Hamlin [1996] AC 624 (Canadian National Railways v Norsk Pacific Steamship Co. (1992) 91 DLR (4th) 289 and Winnipeg Condominium v Bird Construction (1995) 121 DLR (4th) 193 are well-known examples from Canada and there are others from elsewhere such as Malaysia, Singapore and Hong Kong) and to critical commentaries by Mr I.N. Duncan Wallace QC and others. (Not surprisingly the same divergence of policy within Commonwealth jurisdictions is also to be found within the United States.)
- However Miss Shaldon for the claimants relied on the reasoning of His Honour Judge Hicks QC in Storey -v- Charles Church Developments Limited (1997) 13 Const.LJ 206. In that case the defendant had built a house for the plaintiffs. Eight years after its completion structural faults appeared and the plaintiffs had to carry out remedial works. The plaintiff claimed damages for anxiety and inconvenience in addition to any damages awarded in respect of defects in the property. Judge Hicks held that the plaintiffs could recover all the costs of the remedial work. He said:-
- As I have already indicated I agree with Judge Hicks that a person who has undertaken to provide a design may owe a duty, concurrently with any contractual duty, to use due care and skill not to cause economic loss (although in my view in the absence of special circumstances the economic loss will be limited in extent to that in Murphy). However whilst I also agree that there should be no distinction turning not on the content of the duty but on the trade or profession of the person undertaking it, when one takes into account the policy considerations that led to Murphy and DOE v Bates such an approach points in the opposite direction to that endorsed by Judge Hicks. As the passage which I quoted from the speech of Lord Oliver shows, the House of Lords was throughout considering the position of whoever was primarily responsible for the defect and the application of the general principle that in this country there is no liability in negligence for the "economic" loss of having to put right a defect in property (whether a chattel or a building) which has not caused other injury or damage. In Murphy Lord Bridge at pages 480H-481B compared section 1 of the Defective Premises Act 1972 which applies to whoever undertakes work in the provision of dwellings and said:
- First, the skills of a designer and a builder create a product: the designer produces drawings, specifications etc; the builder produces the works, either in following through and completing the design of others for whom it is not responsible or in devising a design and completing it (as has always happened in very many cases - especially in those sectors where the employer looks to the contractor for such a complete service - and as continues to be so today, since the trend towards design and build which began many years ago shows no signs of slackening.) Although a designer may decide what is to be done and, sometimes, how it is to be done, a builder has also to take decisions where the contract or the designer has left them to him. Matters of detailing and fixing call for the exercise of proper care and skill which must be provided to the standard expected of a builder holding himself out as competent to build the structure or work in question, which in the majority of cases will be no loss than professional standards, and may indeed be higher where the work is specialised. Since many contractors have always been responsible for design as well as construction, there is in law an implied warranty of suitability for purpose (ie the core of every design obligation) as well of quality unless displaced by the terms of circumstances of the contract: Young & Marten v McManus Childs [1969] 1 AC 454. For the purposes of liability in negligence in particular the relevant question is not who should be responsible but, rather, who took the relevant decision and thus failed to exercise the requisite care? Whoever took the decision is in law likely to owe some duty of care to avoid causing loss. In my judgment Murphy and DOE v Bates establish that, as a matter of policy, any person undertaking work or services in the course of a construction process is ordinarily liable only for physical injury or for property damage other than to the building itself but is not liable for other losses - ie economic loss. If any liability for such economic loss is to arise it must be for other reasons, e.g. as a result of advice or statements made upon which reliance is placed in circumstances which create a relationship where there is in law to be an assumption of the responsibility for loss - ie within the principle of Hedley Byrne -v- Heller (see Lord Keith's speech in Murphy which I have quoted above). In my judgment a designer is not liable in negligence to the client or to a subsequent purchaser for the cost of putting right a flaw in a design that the designer has produced that has not caused physical injury or damage, just as a contractor is not liable. Each is in the eyes of the law "a builder" as each is responsible for part of the process that leads to completion of a building or other works. Plainly the liability of such a builder in negligence cannot extend to becoming the equivalent of contractual liability for this would be the beginning of the "transmissible warranty" (see Lord Bridge's speech) and would run counter to the policy that there is no liability in negligence for defects in the product, be it a building or a chattel. Because concurrent liability in tort cannot exceed the liability in contract it does not follow that in some way that concurrent liability must be elevated to the level of the contractual liability.
- The effect and ambit of Murphy was recently considered by the Court of Appeal in Bellefield Computer Services Ltd -v- E Turner & Sons Ltd [2000] BLR 97 to which I was referred. The claim was in respect of negligence by a design and build contractor in the construction of the building whereby, when a fire began, it spread from the storage area to the rest of the building causing not only damage to the building itself but also to the contents. The claim was made by the subsequent owners of the building. Bell J decided that the contractor owed a duty of care to them to safeguard against damage to the property other than the dairy building itself but was not liable for damage caused by the fire to the structure of the building on the site of the insufficiently high compartment wall which was remote from the seat of the fire. The contractor appealed not on the grounds that it was not liable for the contents but on the grounds that there had been an omission on its part. Its appeal was dismissed. The owner also appealed. Schiemann LJ said in the course of his judgment (at page 102):
- All the judges concluded that Murphy had been correctly applied and could not be departed from. Tuckey LJ referred to Lord Steyn's discussion in Marc Rich (at page 236) of the apparent anomalies created by Murphy and said (at page 106):
- Issues (a), (b) and (d) will therefore be answered in relation to Nos 1 and 2 as follows:
- Sub-issue (c) concerns the nature of the loss and damage that might be recoverable. It follows from my earlier conclusions that the claimant's losses summarised in paragraphs (i) (iii) and (iv) could be recoverable for breach of the duty set out in (a)(i) but would be irrecoverable in law for breach of any of the duties set out in (a) (ii)-(iv) since the duty did not extend to causing those losses. There is no evidence that either claimant would suffer physical discomfort or material inconvenience as a result of any remedial work. Even if there were such evidence if the duty does not extend to avoiding the cost of remedial works it cannot extend to such loss or damage which is consequent only on the remedial works.
- It was submitted that there was a liability to indemnify on the grounds that the other half of the cottages represented "other property" or were covered by the "complex structure" theory. The two cottages share a common foundation which serves both halves. The building was built as a single entity. In my judgment it would be artificial to regard the other half as "other property". That refers both to property that belongs to another but property which is materially separate from the building in question. Hence in Bellefield the claimants were able to recover for damage to contents as they were "other property" but the Court of Appeal regarded dividing the building into parts based on differences in function as "a thoroughly undesirable approach" (See Schiemann LJ at page 105 and see also Wall J at page 106). In my judgment it would not be consistent with the policy established by the House of Lords to try to find ways round it. The House of Lords has grappled with the policy considerations on at least four occasions (Anns, D&F, Murphy and DOE v. Bates) and although there remain well-founded reservations about the consequences of permitting those who make culpable errors to escape liability to their neighbours (in law) for reasonably foreseeable loss and damage suffered by those who must have been in contemplation as likely to be affected by the errors, that is the law of this country.
- It was suggested that the foundations fell within the "complex structure" exception propounded by Lord Bridge in D & F Estates Limited -v- Church Commissioners for England [1989] 1 AC 177, in which the House of Lords had to consider Anns and departed from it. The claim was for defective plaster work in a flat which the first defendants had let to the first plaintiff. The block of flats had been constructed by the third defendants, the main contractors, for the first defendants. The plaintiff flat owner was a company controlled by the plaintiffs. The plaintiffs claimed damages for negligence namely the cost of the remedial work, the cost of cleaning carpets and other possessions damaged or dirtied by falling plaster, loss of rent while the remedial work was carried out and damages for disturbance to the second and third plaintiffs. The third defendants, the main contractors, were held liable but the Court of Appeal allowed its appeal.
- On the appeal by the plaintiffs the House of Lords held that the loss sustained by the first plaintiff in renewing the plaster work in the flat had been purely economic loss, which was not recoverable in tort under the principle in Donoghue -v- Stevenson nor were the occupiers of the flat entitled to damages for disturbance. The House of Lords therefore moved company from the decision in Anns in holding that a main contractor or builder did not in general assume a duty of care to a person who might suffer loss as a result of defect in the building work. In the course of his speech Lord Bridge said at pages 206 - 207:
- In Murphy and Bates the House of Lords effectively reaffirmed its earlier decision in D & F Estates Limited. Lord Bridge said (at page 475E):-
- Lord Bridge then re-examined the "complex structure theory" that he had outlined in D & F Estates. He was persuaded that it did not actually have validity. At page 479B he said:-
- In the light of these speeches not only is the "complex structure" exception no longer tenable but it is also clear that in approaching the question of "another part of the property" it is necessary to avoid any artificiality and to be realistic. To treat the part of the foundation slab under No 1 as if it were separate from that the part under No 2 would be completely unrealistic, quite apart from looking at the role of the first claimant or how the claimants acquired their titles. Mr Thomas referred to Warner v Basildon Corporation (1990) 6 Const LJ 146. The Court of Appeal decided that the there was no liability for damage to other parts of structure affected by a defective foundations. It reached its decision mindful of but not persuaded by the "complex structure" exception. I have no doubt that it would reach the same decision today. Warner was followed by Mr Recorder Susman QC in Tunnel Refineries Ltd v Bryan Donkin Company briefly noted in [1998] CILL 1392, also relied on by Mr Thomas. Mr Recorder Susman however did not agree with Mr Recorder Jackson QC who in Jacobs v Morton & Partners (1994) 72 BLR 92 read Murphy as preserving the "complex structure" theory "as a modest exception to the general principles laid down in Murphy that defects in a building should generally be characterised as economic loss suffered by the building owner" (page 102H ). By inference primarily from what Lord Keith and Lord Jauncey had said (pages 470 and 497, respectively) since I cannot think that anything useful can be inferred from the clear, candid and firm repudiation by Lord Bridge and Lord Oliver of their earlier flirtation with the notion of complex structures, Mr Recorder Jackson thought the relevant considerations would be that the offending work was done by someone other than the main contractor; that it had "retained its identity", that it had "positively" inflicted damage on the building, and perhaps the time of its execution. In my view these considerations are really no more than indications of circumstances which might make it unreasonable not to afford a claimant a remedy for what the editors of the Building Law Reports describe as "catastrophic damage caused by defective building work". It would otherwise be absurd if a sub-contractor were held liable in negligence for defects in works completed under a head contract when the head contractor was not liable under Murphy and DOE v Bates. For present purposes the simple facts of this case in my judgment do not justify any exception to the general principle. I do not consider that Jacobs would have been decided differently had Warner been cited since I am sure that Mr Recorder Jackson would have thought that Warner would have to be reconsidered in the light of Murphy and DOE v Bates. In Tunnel Refineries it was conceded by Mr ter Haar QC for the claimant that there was no complex structure exception, and like Mr Recorder Susman, I believe that the concession was right.
- That there may still be circumstances in which a builder may be liable for damages to others or other property may be seen from Morse v Barratt (Leeds) Ltd (1992) 9 Const LJ 158. The plaintiffs were owners of houses built by the defendant who found themselves liable to repair a wall adjoining a highway, following service of a dangerous structure notice. The wall which had stood for 150 years had been destabilised by the defendant which had negligently altered the level of the ground next to it. The raft foundation in this case is not "a potential source of injury to persons or property on neighbouring land" and is thus not within Lord Bridge's qualification. The answer to sub-issue (c) (iii) will also be: No. So the answer to sub-issue (c) will be: No, except in relation to the duty set out in answer to issue 1(a)(i).
- I turn now to sub-issue (e): Did fresh causes of action against the defendant accrue to each of the claimants on the date of that acquisition of interest in the properties pursuant to section 3(1) of the Latent Damage Act? Section 3 of the Latent Damage Act 1986 states:-
- Miss Shaldon described the effect of this section as a statutory assignment in favour of the purchaser. That does less than justice to section 3 since the effect of sub-section (1) is that the purchaser (the person acquiring an interest in the property) obtains a fresh cause of action and is not merely the assignee of an existing cause of action.
- The Act was of course passed in order to prevent a mischief which does not or may not now exist. In approaching the interpretation of this Act it is necessary to treat the law as that which it is now declared to be. In D & F Estates Lord Bridge said at page 193 in relation to the Defective Premises Act 1972:-
- At the heart of this sub-issue is whether Mr or Mrs Wright had a cause of action "in respect of any negligence to which damage to any property... is attributable", ie would the claim have been in respect of "damage to any property"? (In section 4(3) the term used is "damaged property".) I have set out in answer to sub-issues (a) (b) and (c) the possible claims which either Mr or Mrs Wright might have been able to pursue, ie only if there had been damage to other property. In my judgement it does not follow that if the cause of action is for economic loss then it is by itself excluded by the ambit of section 3(1). There may be circumstances in which a duty of care may arise to avoid causing economic loss. However the words of section 3(1)(a) refer to "any negligence to which damage to any property .... is attributable". The word "negligence" here does not mean breach of a contractual duty to exercise reasonable skill and care (see Jackson & Powell cited above, para 1-154). Paragraph (b) presupposes that "the material facts about the damage" have not become known. A person who has accepted the design of an architect or engineer and has relied upon it to have building work carried out will not know or will not necessarily know that the design was inadequate and that the property will be of less value than it would have been until there is reason to know the true position. If the design is inadequate the symptoms of its inadequacy will or may not manifest themselves in any material manner for some time.
- Nevertheless the question to which the sub-issue is directed turns on a preposition: was there a cause of action in negligence to which damage to any property is attributable or was it in respect of a cause of action for negligence to which damage in any property is attributable? In my judgment it is now clear that where the cause of action is in negligence and relates to damaged property a distinction is made between damages to property - such as that suffered by the subsequent owners in Bellefield for which they were able to recover, namely the contents - and damage in the property, because it is defective and thus damaged. In my judgment any cause of action in respect of which a claim might have been made by Mr or Mrs Gotobed Wright against the defendant in negligence would have been about damage in the cottages arising from the decision to build them or from the use of the defendant's design and not damage to them in the sense of damage caused to the building which is now the only damage recoverable in law. The cottages were inherently unsound as a result of the inadequacy of the foundation design (as it is supposed). The damage in the cottages made them less valuable or created some economic loss in that repair is needed. For reasons given earlier either there is no cause of action for such loss or damage or it is not damage to property which may be recoverable. Accordingly in my judgment the answer to question sub-issue (e) is: No. Thus the claimants cannot succeed via the Latent Damage Act.
- Sub-issue 1(f) is: "Did the defendant owe a duty of care to the claimants as alleged in paragraph 15 of the amended particulars of claim". Sub-issue 1(g) concerns the scope of such a duty. The first and second claimant search said that they relied upon Mr Setchell's certificate before buying the relevant cottage (Nos 1 and 2). I am satisfied that the second claimant did so (although she and brother also relied their father, the builder) and that without the certificate the first claimant would not have been able to buy No 1 and obtain a mortgage on it. Nowadays money will not be advanced to finance a new house unless the lender is satisfied (amongst many other matters) that it has been built to NHBC standards or their equivalent. (I do not consider that the first claimant being involved in the construction of the foundations otherwise relied on the certificate). In my judgment it is clear from the letter of 29 June 1988 that the purpose of providing a "letter certifying that this work had been carried out to our satisfaction" was to provide Mr Wright (or Mrs Gotobed Wright) with a document which could be used to satisfy a prospective purchaser that the foundations could be treated as having been soundly built to a satisfactory design, even though NHBC cover was not available. Mr Setchell accepted this in his evidence. In my judgment it must follow that the document was intended to be seen and relied upon by a prospective purchaser and, furthermore, that prospective purchaser might come on the scene at any time after 1988. A prospective purchaser necessarily includes those to whom the purchaser may turn for finance. I therefore conclude that the defendant in writing the letter and in sending it to Mr Wright owed in law a duty not only to Mr Wright (as I have held) but also a subsequent purchaser (and any person likely to lend money secured on the house) to take care that the statements made in it or which ought to be inferred from it were reliable. In particular the letter was to be regarded as a statement that the design had been prepared with reasonable care and, in so far as the designer had investigated the ground conditions, that reasonable care had been taken in the investigation and that the design was reasonably based on it.
- I do not however consider that the duty was indefinite in time. That would not be reasonable. The potential liability to which the letter or certificate gave rise is not to be regarded as open-ended. Since for all practical purposes the letter certificate was to be treated as tantamount to NHBC cover I consider that it was foreseeable only that it would have validity for a period of 10 years from the completion of the building. This is, of course, irrelevant to the present proceedings since the dates of acquisition of all three properties were well within that period. Mr Thomas submitted, with some reason, that in formulating the duty of care it was necessary to ensure that the case fell well within Hedley Byrne and drew attention to Wells v First National Bank [1998] PNLR 552 and to the factors as summarised in the judgment of Neill LJ in James McNaughton Paper Group Ltd -v- Hicks Anderson & Co [1991] 2 QB 113 at page 125. These were
- In Machin -v- Adams (1997) 84 BLR 83 Sir Brian Neill (since he had by then retired) reconsidered his judgment in James McNaughton Paper Group Ltd -v- Hicks Anderson & Co since he thought that Lord Hoffman's speech in Banque Bruxelles SA -v- Eagle Star [1997] AC 191 required it, although his views are the same as those expressed by Lord Oliver in Caparo Industries plc v Dickman [1990] 2 AC 605 at 638. Machin was about whether an architect was liable in damages for the loss occasioned by the use of a letter which he had written to the builder's wife who was the owner of the property and had relied upon the letter. Sir Brian Neill said at page 99:-
- The facts of Machin are not comparable but in my judgment the exercises and analyses carried out by Sir Brian Neill (and the principles extracted by Lord Oliver from Hedley Byrne) should be applied to the facts of this case. Mr Wright did not need the statement for his own purposes. It was obvious that at least one of the houses would not be lived in by Mr Wright or Mrs Wright, as it would be sold, so that the letter would be needed for that purpose. In the nature of things if the advisee (Mr Wright or Mrs Wright) wished to sell the retained property at some later stage then use would again be made of the letter. This is not a case in which a document is put into circulation to an indeterminate class. The class of people interested was to be confined to the early prospective purchasers of two small cottages who have no reason not to rely on the letter. It is clear that from the correspondence that the relationship between Mr Wright or Mrs Wright and the defendant was such that the former would rely on the latter and would not seek independent advice. Mr Setchell knew Mr Wright's intentions and the purposes for which the letter would be used, namely by Mr Wright to induce a third party to buy either of the cottages and by that third party to induce another prospective purchaser to buy the cottage. Accordingly, as Mr Setchell effectively accepted in evidence, the defendant in fact assumed a responsibility towards that third party, the purchaser. In my view in law in these circumstances it came under a duty of care to prospective purchasers, for the purposes of Hedley Byrne and for the purposes of Lord Goff's approach in Henderson -v- Merrett Syndicates Ltd. In addition the defendant came clearly within the ambit of Defective Premises Act as regards the duties undertaken by it under its retainers.
- In my view the letter certificate is directly equivalent to a valuer's report commissioned by a prospective mortgagee but likely to be used by a prospective purchaser, as exemplified by Smith -v- Bush [1990] 1 AC 831. A valuation of a different sort was the subject of Banque Bruxelles SA -v- Eagle Star [1997] AC 191. The answers to sub-issues (f) and (g) are:
- For the purposes of sub-issue (h) certain of the losses claimed are foreseeable and not too remote, namely the loss in value of the property measured by reference to the costs of the remedial work to the property or otherwise and assessed, of course, at the date when the property was bought. But for the assumptions which underlying the preliminary issues since neither Mr Payne nor his daughter live in the cottages they would not be able in my view to recover damages in respect of any physical discomfort or inconvenience suffered as a result of remedial work. Similarly there is no evidence that Mr Samuel Payne has lost any sale or that his daughter has been unable to sell the property and accordingly no damage in respect of abortive sales appear to have arisen. Even if such evidence were available such loss or damage would only be recoverable if the inadequacies in the foundations had been discovered by the prospective purchaser who had then withdrawn, leaving either of the claimants with some loss.
- The claim for an indemnity in respect of any contingent liability to make the property safe appears to me to be entirely academic in the present circumstances since both Nos 1 and 2 are owned by the claimants and there is no prospect that the remedial work will not be carried out. The foundation is common to both and on the assumptions which I am asked to make it is artificial to consider that if there is a failure on one side which deprives the other side (of the cottage) of support there would be any claim by one owner against the other as neither is refusing to do the work. Clearly it is in the interests of both to have a foundation which is sound for both cottages. In addition since the duty is owed to the "neighbour" and its scope to avoid loss in value, the grant of an indemnity would in effect enable the full cost of remedial work to be recovered once it had been carried out. Whilst in theory a claim in nuisance might be made for loss of support and damages might then be recoverable (see Morse if Lord Bridge's further exception is right) it could not arise on the assumptions that I have to make as either claimant must in law be treated as being sufficiently (if not perhaps fully) compensated by the primary award of damages in this action. Nor do I consider that the other cottage (whichever it is) could be regarded as an "other part" for the purposes of what remains of the "complex structure" theory. In any event an indemnity is only to be granted if a party had incurred expenditure. That is not the case here. Sub-issue (h)(ii) and sub-issue (c)(ii) refer to a contingent liability but no such liability to indemnify should exist for the reasons that I have already given. Based on the assumptions and bearing in mind my reservations about the true answers to (iii) and (iv) the answer to sub-issue (h) has to be: Yes, but only as regards (i) and then in respect only of the loss in value of the property measured by reference to the costs of the remedial work to the property or otherwise and assessed at the date when the property was bought, (iii) and (iv).
- I now turn to sub-issue (i): Are the causes of action of the claimants referred to above time barred? This action was commenced on 29 December 1999. The first claimant and the third claimant had acquired their respective cottages more than 6 years before that date so each suffered damage when the house was bought. The second claimant relied on the certificate; the second claimant made use of it to obtain a mortgage without which the property could not have been bought. The answer to (i) is: Yes. However unless it were established that Mr Samuel Payne knew of the problems with the design of the foundation as a result of his involvement in the erection of any of the cottages (including Nos 3 & 4), it is clear that neither Mr Samuel Payne nor his daughter knew of the material facts about the damage in respect of which damages are currently claimed until about 1997, ie within three years of the commencement of the proceedings. Accordingly each claimant falls within section 14(A) of the Act (although I did not understand this to be questioned). The answer to sub-issue (j) is: Yes.
- It is accepted that there can be no claim under the Defective Premises Act unless section 14(A) of the Limitation Act 1980 or section 3 of the Latent Damage Act 1986 applies to it. Section 1 of the Defective Premises Act 1972 reads as follows:-
- There is no authority directly in point. Mr Thomas referred me to an observation of Ralph Gibson LJ in Warner -v- Basildon Development Corporation at page 145 who said (in the course of reciting the submissions of counsel):
- In my view this decision establishes that section 14A can only apply to actions for negligence at common law. Moreover even though the words "negligence" in section 14(A) might conceivably cover actions for a breach of a duty imposed by statute, the ingredients of which require proof of negligence, as is required by section1 of the Defective Premises Act 1972, section 11 and the scheme of the Limitation Act 1980, as amended, precludes such an interpretation. In my judgment Mr Thomas was correct in his submissions that a distinction is made in the Act, principally in section 11, between actions for breach of duty imposed by statute and actions for negligence. He also referred to section 9 which deals with actions to recover sums recoverable by statute. In my judgment section 14(A) applies only to actions for negligence and in my judgment does not cover breach of the duty created by section 1 of the 1972 Act. Furthermore if Parliament had intended that the specific time limits set out in section 1(5) of the 1972 Act should be capable of being modified by section 14A it would have been very easy to have included an express reference in the Latent Damage Act 1986, particularly since the subject matter of both the 1972 Act and the likely subject matter of section 3 of the 1986 Act coincide. Perhaps it was thought that section 3 would effectively provide all the remedies envisaged by section 1 of the 1972 Act and accordingly it was not necessary to extend section 1(5) of the 1972 Act. Whatever may be the reason, as a matter of statutory interpretation there is nothing in section 14(A) of the Limitation Act 1980 which justifies its application to section 1 of the Defective Premises Act 1972. The same reasoning precludes the application of section 3 of the Latent Damage Act 1986, in addition to the other reasons which I have set out. The conclusions that I have reached are supported by the views of commentators: see for example para 2-22(vii) (and para 1-159) of Jackson & Powell on Professional Negligence, 4th ed (which regards the point as settled by ERAS); and Mr I.N. Duncan Wallace QC in Hudson's Building Contracts, 11th ed, para 1-363. Issue 2 will be answered: Yes.
- I now consider the issues again in relation to the claim of the third claimant, Mr Gary Payne, as there are some differences of fact. Thus, in relation to sub-issue 1(a) although the defendant was retained in relation to Nos 3 and 4, was he retained by Mr Wright? I have already set out the arrangements and contract between Mr Wright and Mr Payne for the construction of the two additional cottages. The case of the third claimant was that the first defendant was retained by Mr Wright based on, for example, the original enquiries made, such as those referred to in the letter of 11 November 1988. However these took place long before the actual arrangements were made in 1990 for the work to be carried out. By that time Mr Samuel Payne was the person responsible for instructing the first defendant - see, for example, the defendant's letter of 12 April 1990 which referred to the submission of a drawing 3731/01B "to allow you to prepare costing for the project". In my judgment the defendant's retainer was from Mr Samuel Payne. First, Mr Payne was obliged to retain the defendant. Mr Payne had entered into an agreement with Mr Wright for the construction of the cottages. I have set out its terms at some length since it is a typical house-builder's contract where the builder undertakes design, construction and compliance with all statutory and all other requirements. Clause (12) of that agreement contains a specific undertaking by Mr Payne to see that the structural foundations were supervised by a structural engineer and that the structural engineer would issue an appropriate certificate of completion. Contrary to Mr Thomas' submission the reference in clause (12) to completion not taking place until the certificates are handed over is a purely contractual and temporal requirement and does not preclude the actual certificate having extra-contractual effect. Mr Setchell was not aware of this contract and so the defendant's certificate was not issued to comply with it. Secondly, the defendant sent its letter of 31 July 1990 (stating the reduced fee of £200) to Mr Payne. By that time the building contract had been made so it is clear that the duties which the defendant was required to assume were duties to enable Mr Payne to comply with his contract with Mr Wright. There is no evidence that Mr Payne was Mr Wright's agent in retaining Mr Setchell. It is clear from the building contract that Mr Payne was to build the houses for Mr Wright and Mr Wright left him to it. Otherwise the defendant's relationship with Mr Payne gave rise to contractual duties identical to those under the 1988 retainers with the exception of (i).
- Whilst there might be a liability to Mr Wright for lack of support of No 4, the proceedings taken by him (which have been settled) indicate that there will be no liability to indemnify for the purposes of sub-issue (c)(ii). Thus the answers to sub-issues (b) and (c) are, with all the qualifications that I have set out, the same as those given in relation to Nos 1 and 2 Fair View Cottages. It follows therefore that sub-issue (d) strictly does not arise. Mr Samuel Payne has or had only a contractual cause of action against the defendant on the assumptions which I have to make, namely in providing him with an inadequate design for the two houses. If sub-issue (d) were to relate to him then the answers would be July or August 1990, depending on the duty.
- As regards sub-issue (e) the third claimant did not acquire any fresh cause of action under the Latent Damage Act against the defendant. Mr Wright had none. He had agreed to sell No3 to Mr Payne and therefore had no interest in the property for the purposes of section 1 of the Act. In addition for the same reason the defendant did not in my view owe him any duty of care in relation to No 3 (although there were duties in relation to No 4). As a result of the arrangements made with Mr Wright Mr Samuel Payne became the owner of number 3. He was the first purchaser, and not the subsequent purchaser. The defendant owed a concurrent duty of care to Mr Payne in relation to the preparation of the design but for the reasons that I have already given for the purposes of the Act that did not give rise to a cause of action to which damage to any property is attributable. Accordingly since Mr Samuel Payne had no cause of action Mr Gary Payne could not and did not obtain a fresh cause of action for the purposes of section 3(1) of the Latent Damage Act. The answer to sub-issue (e) is: No. Mr Samuel Payne as the builder of No 3 would have had no liability in negligence to Mr Gary Payne in respect of the defects in the foundations. In my judgment Murphy and DOE v Bates also confer the same immunity on sub-contractors, such as the defendant. It would be absurd if Murphy could be circumvented by identifying the sub-contractor, or operative or agent responsible for the defect and making that person liable for the self-same defect. In Henderson v Merrett Lord Goff said at page 196B:
- On the other hand, as I have already set out, the defendant owed a duty of care to a prospective purchaser of No 3 (and others) when he issued his letter certificate of 21 August 1990 which had the same effect as the letter in respect of Nos 1 and 2. Even if Mr Gary Payne's cause of action against the defendant might have been statute barred he is entitled to the benefit of section 14(A) of the Limitation Act and therefore has a good cause of action against Mr Setchell for the diminution in the value of the property measured in 1991 terms. However any cause of action that he might have had under the Defective Premises Act against his father or the defendant is now time barred.
- The preliminary issues will therefore be answered as follows:
"Ground Investigation at Fair View Cottage, Engine Road, Ten Mile Bank, Downham Market
Thank you for your Instruction of 14 June 1988, to carry out the above.
We hope to visit the site week ending 17 June 1988 and carry out ground investigation consisting of hand augured 150mm diameter borehole in vicinity of extension and inspection of formation level of existing foundations.
Further to our telephone conversation today we have spoken with your Designer, Mike Hastings, and arranged for copies of his drawings to be forwarded to us direct.
On the basis of this, we shall prepare a report of the findings, together with recommendations for proposed foundations. Should you require more comprehensive site investigation, we would be pleased to offer names of Firms who specialise in this type of work.
Whilst the report and recommendations are intended for your advice and use. Copyright will be retained by John Setchell Limited and these should not be relied upon by any third party.
Fees will be related to the number of engineer hours occupied on the investigation, interpretations and preparation of report, however we estimate that our invoice will be in the order of £100.00 plus travelling at £0.25 per mile, laboratory analysis charges and VAT."
"Thank you for your instruction to carry out Ground Investigation at the above.
As you are aware we visited the site on Tuesday 21 June 1988 and excavated a hand augured 150mm diameter borehole.
For reference the plot fronts eastwards onto Engine Road.
Borehole was excavated by ourselves central to rear footing of proposed extension and revealed the following soil series:-
Topsoil and fill to 0.6 metres, over
Medium grey silt containing fragments indicating made ground to 1.7 metres, over
Organic peat material containing bog oak and fibrous material to 2.8 metres, over
Soft grey sand to borehole end at 3.0 metres
Water table stood at 2.2 metres below ground level.
Inspection of surrounding excavated trenches revealed brown silt layer which suggested that borehole had been excavated in old cesspit or soak-away.
From the findings of this investigation we conclude that ground at this site consists of silty soils overlying peat at 1.7 metres. Organic peat continues to 2.8 metres overlying soft running sand of unknown thickness.
The existing cottage is constructed at the foot of the bank of the River Ouse and is in a poor structural condition.
Building tilts westwards and walls are approximately 150mm out of plumb in this direction. Rear wall is propped by large buttress and front wall is severely bowed. Additionally water washing down bank has removed soil to front wall leaving voids under footings.
Trial pits to front of dwelling and new excavations to rear revealed that cottage has no footings and is constructed directly off silt material with walls approximately 3 courses below ground level.
Although a full survey was not carried out to the existing building, it clearly is in a poor state of disrepair.
In our opinion, traditional unreinforced concrete strip footings founded at approximate depth 0.9 metres at this site could not be depended upon to provide satisfactory long-term support for the proposed extension, as peat layer beneath may experience compaction due to increased load on foundations and additionally any seasonal variations in water table may cause shrinking and dwelling of peat resulting in unacceptable distortion and cracking of superstructure.
These recommendations are based on the findings of our site investigation. We point out that other conditions may exist elsewhere on the site of which we have no knowledge, and accept no responsibility.
We recommend that any extension to building should be constructed on independent raft foundation capable of distributing load over entire raft area with movement joints between new and existing structure.
However, due to leaning of building and position of buttress to rear wall we do not envisage that construction of raft foundation could be undertaken to extension without undermining existing structure.
Formation under raft would require excavation of approximately 700mm topsoil adjacent existing wall and removal of buttress. This would severely undermine existing foundation and may cause collapse or further distortion of wall.
In our opinion, construction of extension as shown on Mike Hastings drawing is not feasible for the following reasons:-
1. That new foundations unless piled, would undermine existing.
2. Plans show no provisions for existing buttress to rear wall and its removal is likely to cause damage to existing structure.
3. New internal party wall is required to existing structure which presents foundation problems.
4. Although a full survey was not undertaken the existing building is clearly in a poor state of disrepair and no guarantee that future movement will occur can be given. Due to peat layer beneath and high water table, underpinning of walls is impracticable.
Whilst not strictly in accordance with our Brief, it is our opinion that long-term structural stability of the existing structure could not be guaranteed without strengthening of existing foundations. This would involve costly underpinning works and we recommend that you give serious consideration to demolishing the structure.
We recommend that new dwelling on this site be provided with reinforced concrete raft foundation, capable of distributing superstructure load over the entire ground floor area, thus reducing imposed ground pressure, and additionally giving structural stiffness. We would recommend that such a foundation be designed by a Chartered Structural Engineer, and that construction of the foundation be carried out by a Contractor having proven experience of this type of work.
I trust that this is satisfactory, however, should you have any queries please do not hesitate to contact me."
"Thank you for your recent telephone message, following which we understand that the original cottage is to be demolished, with a new dwelling to be constructed at the site.
We would be pleased to design structural raft foundation for the new dwelling as recommended in our letter of 23 June 1988 and in order that we may proceed, will you please arrange for a copy of the Architectural drawings to be forwarded to us.
We would also visit the site during construction to inspect excavated ground ready for raft formation, and fixed steel reinforcement prior to concreting. Upon successful completion of these items we would provide a letter Certifying that this work had been carried out to our satisfaction.
Regarding our Fees, I suggest that these be calculated as outlined on the enclosed Conditions, and to assist your budgeting, I estimate that Fees will amount to approximately £500.00 plus expenses and VAT. Should it become apparent that this is going to vary significantly we will let you know.
In the past there have been some instances of misunderstanding regarding Instructions and we have adopted a policy of confirming Instructions in writing. Would you therefore be good enough to countersign the enclosed copy of this letter and return it in the envelope provided signifying that you find these Conditions acceptable and are responsible for settlement of our account.
The Conditions referred to in that letter included: -
"4. OWNERSHIP OF DOCUMENTS, COPYRIGHT AND RESPONSIBILITIES:
The Copyright in all drawings, reports, specifications, bills of quantities, calculations and other documents provided by the Consultant in connection with the Project shall remain vested in the Consultant, the Client having licence to copy and use such documents and to reproduce the designs contained in them for any purpose related to the Project.
The Consultant is responsible to carry out work as Briefed by the Client, exercising reasonable skill and care expected from a competent Engineer.
5. THIRD-PARTY APPROVALS:
When Applications is made to the Local Authority, N.H.B.C. etc., for Approvals to carry out works, any works commenced, materials ordered or abortive designs carried out prior to Approval shall be entirely at the Client's risk.
6. SUPERVISION AND CONSTRUCTION:
Civil and Structural work designed by the Firm, by its necessity often dictates a departure from traditional building practice. The Clients should therefore satisfy themselves that those who carry out constructions are competent and familiar with the type of work required.
Those carrying out construction are responsible for checking all dimensions prior to setting out or ordering materials. Any anomalies should be brought to the attention of the Engineers.
We recommend that a firm of Chartered Civil or Structural Engineers be engaged to inspect and advice at stages during constructions.
We accept no responsibility for items of construction not supervised by ourselves."
"As you are aware we visited site on Thursday 15th September 1988 to discuss and inspect raft formation with your Builder, Mr Payne.
Please find enclosed two copies of sketch SK1 showing increase in depth of hoggin where trench footings had previously been excavated for extension to existing building.
All back-fill material in trench should be removed and replaced with imported hoggin compacted in minimum 150mm layers. Sides from trench should be graded at 45o.
Elsewhere site has been stripped of topsoil revealing medium brown silts which will be satisfactory for raft formation.
We confirm that you will forward copy of sketch to your Builder.
Should any further problems arise on site we will be pleased to advise but in the meantime our next visit will be scheduled for inspection of fixed reinforcement to raft."
In that letter Mr Payne was described as Mr Wright's builder. When Mr Payne came to give evidence he was somewhat reticent about his involvement but his daughter, the second claimant, said that he was the builder and I have little doubt that for all practical purposes he should be regarded as the builder of the foundations, at least.
"I confirm that we visited the site during construction on 15 September and 11 October 1988 to inspect site stripped ready for construction, and fixed steel reinforcement ready for casting concrete.
I hereby certify that construction has been satisfactorily carried out to our design and as shown on drawing no. 3731/01A.
I trust that this is satisfactory. However, should you have any queries please do not hesitate to contact me."
"As discussed, you intend to construct a pair of dwellings as shown on Mike Hasting's building design services drawing 3259, foundation being shown on our drawing 3731/01A.
I confirm that we are happy with this arrangement, and that we will visit the site to inspect stripped ground, prior to placing hoggin fill, and also to inspect the fixed reinforcement prior to concrete casting. On satisfactory completion of this we will provide a Letter of Certification."
Mr Setchell duly inspected the site on 30 July and 16 August to examine the ground and the reinforcement respectively. For his own comfort Mr Setchell also investigated the ground with a hand auger which revealed silt and clay overlying peat at 1.2m adjacent to the foundation. He recorded this in his letter of 21 August 1990 in which he also said:-
"I hereby certify that the foundation constructed is as shown on our design drawing 3731/01A is to our satisfaction, and we believe is suitable for support of dwelling on ground conditions at the above site".
An identical letter was issued in respect of both Nos. 3 and 4 Fair View Cottages (as they have become).
"W H E R E A S
(1) The owner is desirous of building a semi-detached dwelling house on certain land situate at Engine Road, Ten Mile bank, Downham Market, in the County of Norfolk, and has caused drawings and specification setting forth the work to be done to be prepared.
(2) The builder has agreed to execute and carry out the said works in accordance with the said drawings and specifications for the sum of £20,000.00.
N O W I T I S H E R E B Y A G R E E D as follows:-
(1) The builder for the consideration of £20,000.00 (twenty thousand pounds) shall at his own proper costs and charges forthwith erect and build in a substantial and workmanlike manner upon the land of the owner outlined blue on the plan annexed hereto one semi detached dwelling house with outbuildings according to the several plans, elevations and specifications agreed by both parties, a copy of the plan being hereto annexed and subject to the directions of the said owner. The specification shall be as near as possible the same as for 1 and 2 Fair View Cottages, Engine Road, aforesaid excepting internal decoration and the supply of the storage heaters themselves.
(2) The plans detail drawings and specification shall be and remain the property of the owner but during the progress of the work the same shall be in the custody of the builder who shall deliver them to the owner when the contract shall have been performed. Should there be any discrepancy between the plans detail drawings and specification the specification shall prevail and be deemed to be correct and binding notwithstanding the drawings, subject however to any deviation, if any, stipulated by the owner.
(3) The owner shall give to the builder vacant possession of the site on or before the end of April 1991 and the builder shall complete the said dwelling houses with outbuildings so as to be fit for occupation and remove all surplus material, plant and rubbish from the site on or before that date. The builder will pay to the owner the sum of £200.00 per week for each week or part thereof that elapses from 30 April 1991 without the said buildings and works having been completed. In the event of monies being payable to the owner hereunder they shall be payable on completion of the said works and shall carry interest thereafter at 17% per annum.
(4) The builder shall provide all materials and scaffolding plant tools and tackle necessary for the purpose of completing the said dwelling houses and outbuildings. All such materials shall be the best of their respective kinds and shall be approved by the owner.
...
(6) The builder shall conform to the provisions of every Act of Parliament statutory instrument by-law or regulation for the time being in force affecting the said building or buildings and will give all necessary notices and obtain every requisite sanction in respect of the said works under every such statute instrument by-law or regulation and will keep the owner indemnified against all fines, penalties and loss incurred by reason of any breach of any such statute instrument by-law or regulation.
(7) If the owner shall require any deviation from the said plans, drawings and specification or any additional or other work to be done the builder will carry out the work according to such requirement and do the additional or other work in a substantial and workmanlike manner within the time prescribed by and to the satisfaction of any architect employed by the owner. No variation or deviation shall vitiate this agreement.
(8) In any of the following cases namely where delay is caused by (i) strike or lock-out of workmen (ii) accident to the works for which the builder is not responsible (iii) extras or variations or other reasonable cause the owner shall grant such extension of time for completion of the works as shall appear to him to be reasonable (and shall grant such an extension even though the date specified in clause 3 hereof has passed or the works have in fact been completed if in the circumstances of the case it shall appear reasonable to him to do so).
...
(10) The builder shall indemnify the owner against any liability, loss, claim or proceedings whatsoever whether arising by common law or by statute in respect of personal injury to or to the death of any person whom so ever arising out of or in the course of or caused by the execution of work unless due to any act or default of the owner or for any person for whom the owner is responsible under this contract and against all actions, claims and demands whatsoever to any third person arising out of or occasioned by the negligent, imperfect or improper performance of this contract by the builder, his workmen, servants or agents.
(11) In case of any dispute or difference shall arise between the parties hereto touching or relating either to the said buildings or works or to any other matter or thing arising under this contract the same shall be referred to an arbitrator to be nominated on the request of either parties or failing agreement between the parties by the President or the Vice-President for the time being of the Fellows of the Royal Institute of Chartered Surveyors whose aware shall be final and binding upon both the said parties. Such reference shall be deemed to be an arbitration pursuant to the Arbitration Act 1950 and or any statutory modification or re-enactment thereof for the time being in force.
(12) The Builder will cause the said works to be supervised by a qualified architect or chartered surveyor and any structural foundations by a structural engineer and will comply with their requirements and will provide with them that they shall issue appropriate certificates of completion and supervision and these certificates will be handed over to the owner and completion shall not be deemed to take place until these certificates are handed over to the owner.
The decision to buy No 3 preceded this contract so I do not accept that Mr Payne relied on the defendant's letter certificate of 21 August 1990 when deciding to buy, nor do I accept that in some way the prospect of obtaining such a certificate was influential since Mr Payne undertook in clause (12) that it would be obtained by him as a condition of his contract with Mr Wright, for the latter's benefit. The defendant was unaware of the terms of the contract, including clause (12). (I shall return to the terms of the building contract.)
"11A. At all material times Mr Wright and/or Mrs Gotobed relied upon the advice, drawings and certification of the Defendant as to the type of foundations, the design of the foundations, and adequacy of their construction and their suitability to provide adequate support for numbers 1, 2, 3 and 4.
12. At all material times, the Defendant knew or ought to have known that the foundations were to be for dwelling houses for occupation. When certifying that the concrete raft foundations were suitable for use as set out at Paragraphs 7 and 11 above, the Defendant thereby assumed responsibility for the suitability of the foundations to Mr Wright and/or Mrs Gotobed and to future owners of numbers 1, 2, 3 and 4.
12A. At all material times when acquiring the freeholds of numbers 1, 2 and 3 the claimants relied upon the said certification provided by the Defendant.
13. The Defendant owed a duty pursuant to Section 1 of the Defective Premises Act 1972 to all those thereafter acquiring an interest in the properties, which includes the claimants, to ensure that the work which they took on was done in a professional manner, and so that, as regards that work the dwellings would be fit for habitation when completed.
14. Further or alternatively, the Defendant owed the claimants a common law duty of care to act with reasonable care and skill and/or the claimants will rely on Section 3 of the Latent Damage Act 1986 in support of the contention that the claimants' causes of action against the Defendant (accrued under Section 3(1) of the 1986 Act) shall be treated as if based on a breach of a duty of care at common law owed by the Defendant to the claimants.
15. In the circumstances, the Defendant owed, and/or is to be taken to have owed, a duty at common law and/or under the Defective Premises Act to:-
(a) Ensure that the foundations would be good and sufficient to support the house without subsidence;
(b) Undertake sufficient investigations of the first site, and in particular, of the soil conditions, to enable them to make a proper informed decision as to the best form of foundations:
(c) Undertake sufficient investigations of the second site, and in particular, of the soil conditions, to ensure that the design used in the first construction was appropriate.
(d) Adequately supervise the construction of the foundation in order to ensure both that the structure was built in accordance with the design, and that the design was in fact appropriate.
(e) Exercise reasonable skill and care when certifying the adequacy of the foundations.
16. The Defendant was in breach of its statutory duty and/or duty of care in that the foundations were not designed/supervised in a professional manner and/or the dwelling houses were not fit for human habitation.
PARTICULARS
(a) Failing to make adequate enquiry; failing to carry out adequate borehole investigations of the first site: the Defendant carried out only one borehole investigation; this was contrary to good practice, particularly when it was in an area suspected to be a cesspit or soakaway;
(b) Failing to carry out adequate borehole investigation of the second site: the Defendant carried out two borehole investigations, but both were after the site had been stripped and neither established the thickness of the peat;
(c) Failing to realise the implications of the presence of peat in close proximity to the underside of the rafts - namely the risk of the peat compacting and consequent subsidence; the Defendant failed to heed the very poor bearing strata of the fibrous peat which existed immediately beneath the rafts;
(d) Failing to consider the removal of the peat and its replacement with compact hoggin;
(e) Failing to consider the use of pile and reinforced concrete beams;
(f) Failing to act in accordance with good practice and, in particular, Codes of Practice BS 8004 (Foundation), BS 6031 (Earthworks) and CP 2001 (Site Investigation);
(g) Failing to design a foundation adequate for its purpose; the raft foundations designed by the Defendant were not suitable and sufficient for their purposes, namely to support the properties without subsidence;
(h) Failing to observe or heed the inadequacy of the designs proposed for both the first and second sites.
(i) Certifying that the foundations were satisfactorily constructed and suitable for use when they were not.
17. By reason of the aforesaid the claimants have suffered loss and damage.
18. The claimants also claim interest pursuant to Section 35(A) of the Supreme Court Act 1981.
THE CLAIMANTS THEREFORE CLAIM AS FOLLOWS:-
(i) But for the Defendant's breach of statutory duty and/or negligence, the 1st claimant would have owned the freehold in a property worth £50,000. In the event, because of the tilting of the raft, number 1 requires piling. The remedial work required will also extend to the costs of making good the property by, inter alia, repairing the floor screeds and plaster work disturbed by the remedial work, and repairing damage to brickwork and external drains, plus the costing of gaining co-operation of the owners of the adjoining properties. In consequence of the above, the 1st claimant has suffered a diminution in value of number 1 of £25,000. Further and/or alternatively, the full cost of implementing the remedial works is likely to be in or about £25,000.
(ii) The loss to the 2nd claimant, calculated on the basis stated in paragraph (i) above, is £25,000
(iii) The loss caused to the 3rd claimant calculated on the basis stated in paragraph (i) above, is £25,000
(iv) Further each of numbers 1, 2 and 3 constitutes a risk of danger to its adjacent property, numbers 2, 3 and 4 respectively, and the claimants are entitled to an indemnity from the Defendant in respect of their liabilities to the owners of each adjacent property for the cost of rendering their properties safe:
(v) Further the 1st and 3rd claimants have suffered loss by reason of abortive attempts to sell their houses. Both sales fell through as a result of the tilting caused by the defendant's negligence.
(vi) Further, such of the claimants as are residing in the properties will suffer physical discomfort and inconvenience arising from the remedial works and claim damages in respect thereof.
(vii) Further the claimants are entitled to claim interest on the sum found to be due to him pursuant to S.35A of the Supreme Court Act 1981 for such period and at such rate as the Court deems fit."
"On the facts found in relation to the issues arising out of the matters pleaded at Paragraphs 1 to 15 of the Amended Particulars of Claim, the preliminary issues shall be as follows:-
1. Assuming that the defendant acted or did not act in the respects pleaded in the particulars in Paragraph 16 of the Amended Particulars of Claim and that the claimants suffered the losses claimed in Paragraph 17 of the Amended Particulars of Claim and the prayer, did the defendant owe a duty of care in negligence to any of the claimants in respect of his performance of the retainer[s] (including certification) described in the Amended Particulars of Claim? This issue is to include the following sub-issues:
(a) Did the defendant owe a duty of care to Mr Wright and/or Mrs Gotobed as alleged at Paragraph 15 of the Amended Particulars of Claim?
(b) If so, what were the nature and scope of the duties owed?
(c) Were the duties such as to ground causes of action for the losses set out at Paragraph 17 of the Amended Particulars of Claim and paragraphs (i) to (iii), (iv), (v) and (vi) of the prayer, namely
(i) damages in respect of the cost of the remedial work at, and/or diminution in value of, the properties of the claimants;
(ii) an indemnity from the defendant in respect of any contingent liability (to make the properties safe) owed to their neighbour(s);
(iii) damages in respect of the abortives sales;
(iv) damages in respect of any physical discomfort and/or inconvenience suffered as a result of any remedial works to the properties.
(d) When did the causes of action of Mr Wright and/or Mrs Gotobed against the defendant accrue?
(e) Did fresh causes of action against the defendant accrue to each of the claimants on the date of their acquisition of interests in the properties pursuant to section 3(1) of the Latent Damages Act?
(f) Did the defendant owe a duty of care to the claimants as alleged at Paragraph 15 of the Amended Particulars of Claim?
(g) If so, what were the nature and scope of the duties owed?
(h) Were the duties such as to ground causes of action for the losses set out at Paragraph 17 of the Amended Particulars of Claim and paragraphs (i) to (iii), (iv), (v) and (vi) of the prayer, namely
(i) damages in respect of the cost of the remedial work at, and/or diminution in value of, the properties of the claimants;
(ii) an indemnity from the defendant in respect of any contingent liability (to make the properties safe) owed to their neighbour(s);
(iii) damages in respect of the abortive sales;
(iv) damages in respect of any physical discomfort and/or inconvenience suffered as a result of any remedial works to the properties.
(i) Are the causes of action of the claimants referred to above time barred?
(j) Do the claimants fall within section 14A of the Limitation Act 1980 and/or section 3 of the Latent Damage Act 1986?
2. Are the claimants' causes of action under the Defective Premises Act time barred?"
"The issues raised in this case are difficult. The difficulties have been recognised for many years and, despite the efforts of the Law Commission, of the legislature and of the appellate courts, the difficulties have not been resolved. The complaint was made in Mr Duncan Wallace's article of January 1989 in the Law Quarterly Review, mentioned above, that:
"it is an astonishing and disturbing fact that litigants and their advisers still do not know in 1988 whether, in a typical foundations claim in tort brought against a negligent builder by a subsequent owner, there is, as a matter of law, liability for anticipatory repairs where the damage, as in both Dutton and Anns, is superficial and limited to the building itself".
The complaint seems to me justified and calls for urgent action."
Faced with such a formidable list of issues I echo the feelings of both Mr I.N.Duncan Wallace QC and Ralph Gibson LJ. Ironically Mr Duncan Wallace wrote in the year when the first two cottages were built. Over ten years later and despite at least two further decisions of the House of Lords about liability in such situations the answers to the issues raised by these typical claims are still not clear (or not as clear as they should be).
Nos 1 and 2 Fair View Cottages
Duty of care concurrent with duty in contract
"My own belief is that, in the present context, the common law is not antipathetic to concurrent liability, and that there is no sound basis for a rule which automatically restricts the claimant to either a tortious or a contractual remedy. The result may be untidy; but, given that the tortious duty is imposed by the general law, and the contractual duty is attributable to the will of the parties, I do not find it objectionable that the claimant may be entitled to take advantage of the remedy which is the most advantageous to him, subject only to ascertaining whether the tortious remedy is so inconsistent with the applicable contract that, in accordance with ordinary principle, the parties must be taken to have agreed that the tortious remedy is to be limited or excluded."
...
"But, for the present purposes more important, in the present case liability can, and in my opinion should, be founded squarely on the principle established in Hedley Byrne itself, from which it follows that an assumption of responsibility coupled with the concomitant reliance may give rise to a tortious duty of care irrespective of whether there is a contractual relationship between the parties, and in consequence, unless his contract precludes him from doing so, the plaintiff, who has available to him concurrent remedies in contract and tort, may choose that remedy which appears to him to be the most advantageous."
"The defendants there had in relation to the design been in contractual relations with the plaintiffs, but it was common ground that a claim in contract was time barred. If the plaintiffs happen to discover the defect before any damage had occurred there would seem to be no good reason for holding that they would not have had a cause of action in tort at that stage, without having to wait until some damage had occurred. They would have suffered economic loss through having a defective chimney upon which they required to expend money for the purpose of removing the defects. It would seem that in a case such as Pirelli, where the tortious liability arose out of a contractual relationship with professional people, the duty extended to take reasonable care not to cause economic loss to the client by the advice given. The plaintiffs built the chimney as they did on reliance on that advice. The case would accordingly fall within the principle of Hedley Byrne -v- Heller & Partners Ltd [1964] AC 465. I regard Junior Books Ltd v Veitchi Co. Ltd [1983] 1 AC 520 as being an application of that principle."
Many find great difficulty in accepting this analysis (as there are difficulties in seeing how on its facts Junior Books v The Veitchi Co [1983] 1 AC 520 can be justified by Hedley Byrne v Heller). Clerk & Lindsell on Torts, para 33-11, say that the observations are mysterious (see also Jackson & Powell on Professional Negligence, 4th ed., para 2-61). Liability for a negligent mis-statement stems from a voluntary assumption of responsibility towards the claimant which creates the special relationship. It is thus generally not found when the parties' relationship is governed by contract, especially if there is anything other than the simplest arrangement. That is not the case here, as the defendant's conditions show, although I do not accept Mr Thomas's argument that they exclude liability towards third parties. The provisions relied on (see paragraph 3 above) are standard provisions designed to define and to limit the use to be made of the defendant's products and services. The effect of Hedley Byrne has been re-stated on numerous occasions. For present purposes it is convenient to refer to part of the speech of Lord Browne-Wilkinson in White v Jones [1995] AC 207 at page 274:
"Let me now seek to bring together these various strands so far as is necessary for the purposes of this case: I am not purporting to give any comprehensive statement of this aspect of the law. The law of England does not impose any general duty of care to avoid negligent misstatements or to avoid causing pure economic loss even if economic damage to the plaintiff was foreseeable. However, such a duty of care will arise if there is a special relationship between the parties. Although the categories of cases in which such a special relationship can be held to exist are not closed, as yet only two categories have been identified, viz (1) where there is a fiduciary relationship and (2) where the defendant has voluntarily answered a question or tenders skilled advice or services in circumstances where he knows or ought to know that an identified plaintiff will rely on his answers or advice. In both these categories the special relationship is created by the defendant voluntarily assuming to act in the matter by involving himself in the plaintiff's affairs or by choosing to speak. If he does so assume to act or speak he is said to have assumed responsibility for carrying through the matter he has entered upon. In the words of Lord Reid in Hedley Byrne v Heller [1964] AC 465 at 486, he has 'accepted a relationship... which requires him to exercise such care as the circumstances require,' ie although the extent of the duty will vary from category to category, some duty of care arises from the special relationship. Such relationship can arise even though the defendant has acted in the plaintiff's affairs pursuant to a contract with a third party."
On the other hand there are a number of decisions where a liability akin to Hedley Byrne (perhaps justified by Donoghue v Stevenson) has been held to exist in circumstances comparable to those in Pirelli so Lord Keith's opinion about Pirelli may be valid, even though the facts do not obviously attract Hedley Byrne. The point is not academic although it might only have assisted the defendant's clients to avoid the period of limitation applicable to the primary case for breach of contract, as it is a necessary prelude to the consideration of the claimants' position. There is much less doubt about Pirelli as authority that the cause of action will arise at the date when the client decided to go ahead with the project in reliance on the advice and not when the damage was discovered. Neither Mr Wright nor Mrs Gotobed Wright appear to have suffered any damage in relation to Nos 1 and 2 at any date as a result of acting on that advice and would therefore have had no cause of action. (Mr Wright may have suffered damage in relation to No 4 but that is not directly the subject of this action; I deal later with his position in the context of No 3.)
"He who was responsible for the defect - and it will be convenient to refer to him compendiously as "the builder" - is, by the reasonable foreseeability of that injury, in a proximate neighbour relationship with the injured person on ordinary Donoghue v Stevenson principles".
"The foundation of the plaintiff's case is Anns -v- Merton London Borough Council [1978] AC 728. That decision was concerned directly only with the liability in negligence of a local authority in respect of its functions in regard to securing compliance with building bylaws and regulations. The position of the builder as regards liability towards a remote purchaser of a building which suffered from defects due to carelessness in construction was touched on very briefly. However, it has since been generally accepted that similar principles govern the liability both of the local authority and of the builder.
It has been held by this House in Murphy -v- Brentwood District Council [1991] 1 AC 398 that Anns was wrongly decided and should be departed from, by reason of the erroneous views there expressed as to the scope of any duty of care owed to purchasers of houses by local authorities when exercising the powers conferred upon them for the purpose of securing compliance with building regulations. The process of reasoning by which the House reached its conclusion necessarily included close examination of the position of the builder who was primarily responsible, through lack of care in the construction process, for the presence of defects in the building. It was the unanimous view that, while the builder would be liable under the principle of Donoghue -v- Stevenson [1932] AC 562 in the event of the defect, before it had been discovered, causing physical injury to persons or damage to property other than the building itself, there was no sound basis in principle for holding him liable for the pure economic loss suffered by a purchaser who discovered the defect, however such discovery might come about, and required to expend money in order to make the building safe and suitable for its intended purpose.
In the present case it is clear that the loss suffered by the Plaintiffs is pure economic loss. At the time the Plaintiffs carried out the remedial work on the concrete pillars the building was not unsafe by reason of the defective construction of these pillars. It did, however, suffer from a defect of quality which made the Plaintiffs' lease less valuable than it would otherwise have been, in respect that the building could not be loaded up to its design capacity unless any occupier who wished so to load it had incurred the expenditure necessary for the strengthening of the pillars. It was wholly uncertain whether during the currency of their lease the Plaintiffs themselves would ever be likely to require to load the building up to its design capacity, but a purchaser from them might well have wanted to do so. Such a purchaser, faced with the need to strengthen the pillars, would obviously have paid less for the lease than if they had been sound. This underlines the purely economic character of the Plaintiffs' loss. To hold in favour of the Plaintiffs would involve a very significant extension of the doctrine of Anns so as to cover the situation where there existed no damage to the building and no imminent danger to personal safety or health. If Anns were correctly decided, such an extension could reasonably be replaced as entirely logical. The undesirability of such an extension, for the reasons stated in Murphy -v- Brentwood District Council, formed an important part of the grounds which led to the conclusion that Anns was not correctly decided. That conclusion must lead inevitably to the result that Plaintiffs' claim fails."
"23. On this point Mr Wilkinson relies on Lancashire and Cheshire Association of Baptist Churches -v- Howard and Seddon Partnership [1993] All ER 467. In that case, the Defendant architects designed a new sanctuary for the Defendants' church and then, as the judge held, became 'for all practical purposes the contractor' under a special temporary employment programme operated by the Manpower Services Commission. There was a trial of two preliminary issues: (i) was the Plaintiffs' claim in contract statute-barred, and (ii) did the defendants owe to the Plaintiffs a concurrent duty in tort? At that trial, it was accepted that the claim in contract was barred.
In his judgment on the second issue Judge Michael Kershaw QC, sitting in the Queen's Bench Division at Manchester on official referees' business, held that, although there could be a concurrent duty in tort, the Defendant owed no duty of care to the Plaintiffs to prevent purely economic loss. His reasons can, I think, be summarised in the following propositions:
1. As a general rule, there is no liability in tort for economic loss (p.478c).
2. The relationship between the parties was not of the 'unique' or 'exceptional' kind exemplified in Junior Books Limited -v- Veitchi Company Limited [1982] 1 AC 520, which provides an exception to that general rule (p.479j).
3. What was said by Lord Keith in Murphy in the passage quoted in paragraph 22 above should be understood as providing an explanation for the result in the Junior Books case, rather than as stating doctrines of law to be derived from or supported by the Junior Books case (p.480h).
24. The difficulty which I have about that reasoning is that it treats the contractual relationship between the parties as irrelevant to the scope of the tort duty. Thus, proposition (1), however accurate a statement of the position when there is no contract between the parties, does not seem to me to be adequate when there is. As to (2), Junior Books was a non-contractual case, and indeed one of the ways in which it was 'unique' or 'exceptional' is commonly explained in later cases as lying precisely in the fact that the relationship between the parties was 'sufficiently akin' to contract to introduce the element of reliance (for example by Lord Bridge in Murphy at page 481D). As to (3), I do not understand Lord Keith to be concerned primarily with Junior Books, to which he devotes only a passing reference, and there is certainly no need to ascribe to him the intention of stating any doctrine of law as derived from or supported by it. What is clear, I think, is that he regarded Pirelli as a case in which a duty in tort to take reasonable care not to cause economic loss to the client arose out of a contractual relationship.
25. I do not, therefore, find myself able to follow the Lancashire and Cheshire Association case on this point. On the basis of the considerations and authorities canvassed in paragraphs 21 and 22 above I consider that, where there are concurrent duties in contract and tort to use due care and skill, the scope of the duty in tort is normally coterminous with that in contract. Whether or not I am right in believing that there is such a general principle, I conclude in particular that a designer's concurrent duty in tort to use due care and skill extends to taking care not to cause economic loss unless the contractual duty is more limited.
26. That being the responsibility of a professional designer, question (iv) asks whether the position of a builder who also designs is different. Mr Wilkinson submits that the effect of Murphy is that builders are in no circumstances under any non-contractual duty to safeguard against economic loss. It is therefore necessary to consider what were the facts and decision in that case. It was an action against a local authority for negligence in approving badly designed foundations, but the decision of the House of Lords proceeds on the basis that there cannot be a duty on the part of the local authority in such circumstances, unless the builder has a similar duty (see, for example, Lord Keith at page 469A, Lord Bridge at page 479C-F and Lord Oliver at page 483G). So far, therefore, there is no material distinction between the situations in that case and this. Moreover, the decision of the House of Lords was that there was no such duty in that instance.
27. In three respects, however, the facts were different from those in this case. In the first place, the builder in Murphy was not the designer of the defective foundations (see page 458B). Secondly, Mr Murphy had no contract with the designers, who, although defendants to the writ, were never served (see page 405B). Thirdly, although he bought his house from the builder, he bought it as a completed house and was not a party to a building contract (see page 404D). In the face of those distinctions, I do not see how Murphy can be a binding authority on the presence or absence of a concurrent common law duty on the part of a contractor designer-builder to use due care and skill to prevent economic loss from defective design.
28. Nor, apart from the question of direct authority, do I find anything in the reasoning which suggests the denial of such a duty. Both Lord Keity, at page 469A, and Lord Bridge, at page 475A, compare the position of a builder with that of the manufacturer of a chattel. In both cases (implicitly in that of Lord Keith, explicitly in that of Lord Bridge), it is clear that the obligations of the manufacturer are being considered in relation to an ultimate user with whom there is no contractual relationship. Lord Bridge, at page 480F, summarises the earlier decision of the House in D & F Estates Limited -v- Church Commissioners [1989] 1 AC 177 as being that a builder 'in the absence of any contractual duty or of a special relationship of proximity' owes no duty of care in tort in respect of the quality of his work. Lord Oliver, at page 489B, says that he is 'able to see no circumstances from which there can be deduced a relationship of proximity such as to render the builder liable in tort for pure pecuniary damage sustained by a derivative owner with whom he has no contractual or other relationship'. These passages all leave issues as to the existence and extent of any concurrent liability on the part of a contractor untouched.
29. There remains the question whether in principle a distinction should be drawn between the duty of a designer who is an independent professional and that of one who also builds. I can see no reason for such a distinction, which would introduce unnecessary and unacceptable anomalies between the position of employers who engaged architects and that of those who relied on builders who produced their own designs. It is true that a line must be drawn somewhere if builders are not to be concurrently liable in tort for all their contractual obligations, including workmanship as well as design, and including those which amount to warranties as well as those which can be expressed in terms of a duty of care, and that there may be apparent anomalies between cases on each side of that line, but that is inherent in the recognition of concurrent duties in tort matching some, but not all, contractual obligations. What is neither inherent nor justified is to create distinctions turning not on the content of the duty, but on the trade or profession of the person undertaking it.
30. I reach that conclusion on principle, because no authority bearing directly on this particular point was cited to me. I observe, however, that it is in accord with the judgment of Megaw LJ in Batty -v- Metropolitan Property Realisations [1978] 2 All ER 445, at page 453d-j, with which the other members of the Court of Appeal agreed, and which does not seem to be affected by the doubts cast on other aspects of that case in D & F Estates and Murphy; on the contrary, it is referred to by Lord Goff in Henderson (page 783B) without any suggestion of disapproval as one of the cases illustrating the development of concurrent liability.
31. I conclude that the concurrent duty in tort of a contractual designer to use due care and skill not to use economic loss is not displaced by the fact that the design is created by the builder.
32. Mr Wilkinson finally submitted that the decision as to the depth of the foundations was not a design decision. His reason was that it was one taken, not in the design department of the defendant, which apparently specified merely 'size and depth of foundation to suit site conditions', but by the site agent. There is nothing in this point. Specification of the type, size and depth of foundations is clearly a design decision and the design responsibility was that of the defendant company, regardless of its internal arrangements for the discharge of that responsibility..... .
"it would be remarkable to find that a similar obligation in the nature of a transmissible warranty of quality, applicable to buildings of every kind and subject to no such limitations or exclusions as are imposed by the Act of 1972 could be derived from the builder's common law duty of care...".
There is therefore in my judgment nothing in the speeches in either case which on their Lordships' reasoning justifies a distinction being made between the "designer" and the "builder", nor is there any operational, practical or social reason to do so.
"Although the judge held that the builders owed a duty to subsequent owners to take reasonable care to safeguard them from damage to the contents of the dairy, he held that they did not owe any duty to take reasonable care to safeguard them from damage to the dairy itself. I confess my instinctive reaction to that finding was one of unease and a desire to discover what policy considerations could lead to such a result. It seemed odd to exempt a builder for damage to the building which he had seen but fix him with liability for damage for the contents which he had not seen."
Schiemann LJ continued at page 102:
"In substance the judge applied a control device so as to achieve the result that the builders were not liable to subsequent owners for damage to the building itself. There being no evidence of any contractual exclusion cause which sought to exclude liability in tort, the case has proceeded on the basis that, had there been no change in ownership, the builders would have been liable to the original owners both in contract and in tort (Henderson -v- Merrett Syndicates Ltd [1995] 2 AC 145). Contract is irrelevant for present purposes but it is significant that the builders are assumed liable to the original owners in tort for damage to the building. The result of the judge's holding is that, although the builders were under a duty owed to the original owners to build the wall in such a way that it contained any fire for a certain period and although they broke that duty, the original owners cannot sue because they have suffered no damage and the subsequent owners cannot sue because the duty owed to them only extends to chattels in the building and not to the building itself. Whatever the justification is for coming to that result it cannot be either a desire not to increase the degree of care which the builders would need to exercise when building the wall or a desire not to increase the exposure of the builders to damages greater than those to which they would have been exposed had there been no change in ownership. As I have already indicated, had there been no change of ownership the builders would have been liable in tort for the damage to the building. Mr Stow was not in a position to indicate any consideration of policy which argued in favour of the judge's conclusion but submitted that that conclusion was one to which the judge rightly recognised that he was compelled to come by reason of the speeches in Murphy -v- Brentwood".
Schiemann LJ examined all the leading authorities. In the course of doing so he said (at page 104):-
"7. The whole of the discussion in the speeches about complex structures is premised on the assumption that it matters in cases where actual damage has been caused whether that damage is to the very defective article or building or whether it is to something or someone else - see especially the speech [in Murphy] of Lord Bridge between pages 476 and 479 and that of Lord Jauncey between pages 496B and 497D."
"It is these difficulties which I think justify the policy which prevents recovery in tort against the builder in this case for defects in the building which have caused damage to it. I do not think it is an answer to say that the original contracting party may be owed a concurrent duty in tort and so why should the same duty not be owed to his successor in title? This is still an undeveloped area of the law and in practice the builder may well be able to exclude such liability by his contract."
Schiemann LJ concluded his judgment:-
"However in the present case the whole of the dairy was built at the same time by the builders, marketed as a unit, bought as a unit to be used as a unit and was used as a unit. I have no doubt that any holding either that (1) the rooms on one side of the wall should be treated for present purposes as constituting a different building from the rooms on the other side of the wall or that (2) the walls should be treated as constituting a different building from the rooms on one side of it, would be a thoroughly undesirable approach to the issues before us".
In my judgment Bellefield provides a useful and powerful illustration of the effect of Murphy in that a builder (in the sense that I have used) although responsible for a matter of design was not liable for defects in the building itself.
(a) No; the defendant owed Mr Wright or Mrs Gotobed Wright a duty at common law to exercise reasonable professional skill and care and judgment:
(i) in carrying out in June 1988 the site investigation and in reporting on the proposal to extend Fair View Cottage; such a duty was to avoid causing loss and damage to either resulting from reliance on that investigation and report;
(ii) in designing in July 1988 a foundation which would be reasonably suitable for Mr Wright's proposed design for two new cottages on the site of Fair View Cottages;
(iii) in inspecting in September and October 1988 the excavated ground ready for the raft foundation and the fixed steel reinforcement prior to concreting;
(iv) on completion of the formation and the fixing of reinforcement, in issuing the letter of 20 October 1988 certifying that such work had been carried out to the defendant's satisfaction;
but the duties in (ii) to (iv) were to avoid causing physical injury or loss and damage to other property that might result from failure to carry out the duty properly.
(b) See above.
(d) On the assumptions to be made, and if there had been a cause of action: (i) and (ii) in July 1988, (iii) in September or October 1988; (iv) October 1988.
"If the same principle applies in this field of real property to the liability of the builder of a permanent structure which is dangerously defective, that liability can only arise if the defect remains hidden until the defective structure causes personal injury or damage to property other than the structure itself. If the defect is discovered before any damage is done, the loss sustained by the owner of the structure, who has to repair or demolish it to avoid a potential source of danger to third parties, would seem to be purely economic. Thus, 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 been caused. All that has happened is that the defect in the wall has been discovered in time to prevent damage occurring. I do not find it necessary for the purpose of deciding the present appeal to express my concluded view as to how far, if at all, the ratio decidendi of Anns -v- Merton London Borough Council [1978] AC 728 involves a departure from this principle establishing a new cause of action in negligence against a builder when the only damage alleged to have been suffered by the Plaintiff is the discovery of a defect in the very structure which the builder erected.
My example of the garden wall, however, is that of a very simple structure. I can see that more difficult questions may arise in relation to a more complex structure like a dwelling-house. One view would be that such a structure should be treated in law as a single indivisible unit. On this basis, if the unit becomes a potential source of danger when a hitherto hidden defect in construction manifests itself, the builder, as in the case of the garden wall, should not in principle be liable for the cost of remedying the defect. It is for this reason that I now question the result, as against the builder, of the decision in Batty -v- Metropolitan Property Realisations Ltd [1978] QB 554.
However, I can see that it may well be arguable that in the case of complex structures, as indeed possibly in the case of complex chattels, one element of the structure should be regarded for the purpose of the application of the principles under discussion as distinct from another element, so that 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 whether the argument should prevail may depend on the circumstances of the case. It would be unwise and it is unnecessary for the purpose of deciding the present appeal to attempt to offer authoritative solutions to these difficult problems in the abstract. I should wish to hear fuller argument before reaching any conclusion as to how far the decision of the New Zealand Court of Appeal in Bowen -v- Paramount Builders (Hamilton) Ltd should be followed as a matter of English law. I do not regard Anns -v- Merton London Borough Council as resolving that issue".
Lord Oliver in his speech agreed that that was the possible basis upon which a builder might be liable at common law for negligence which caused damage to personal property (see page 214 B-D). In Warner v Basildon Corporation (1990) 6 Const LJ 146 Ralph Gibson LJ (who gave the leading judgment) said:
"Guided by the sense of the speeches in D & F Estates, as I understand them, I would apply the first principles there explained by Lord Bridge. The theory of complex structures - and, I would add, of complex chattels - as a general concept forms, in my judgment, no part of those principles".
"If a builder erects a structure containing a latent defect which renders it dangerous to persons or properties, 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 an 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 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 or proximity they are not recoverable in tort. 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 demolition, so far as the cost is necessarily incurred in order to protect himself from potential liability to third parties."
"For these reasons, the complex structure theory offers no escape from the conclusion that damage to a house itself which is attributable to a defect in the structure of the house is not recoverable in tort on Donoghue -v- Stevenson principles, but represents purely economic loss which is only recoverable in contract or in tort by reason of some special relationship of proximity which imposes on the tort feasor a duty of care to protect against the economic loss."
Lord Oliver also disavowed the complex structure theory - see page 484D-485B. Later in his speech Lord Oliver said (at page 490E):
"Take the simple case of the builder who built a house within adequate foundations and presents it to his son and daughter-in-law as a wedding present. It would be manifestly absurd, if the son spends money on rectifying the defect which has come to light, to hold him entitled to recover the expenditure from his father because the gift turns out to be less advantageous than he at first supposed."
However Lord Keith, Lord Bridge, and Lord Jauncey left open the possibility of liability for "another part" of the building. For example Lord Jauncey said at page 497:-
"My Lords, I agree with the views of my noble and learned friend, Lord Bridge of Harwich, in this appeal that to apply the complex structure theory to a house so that each part of the entire structure is treated as a separate piece of property is quite unrealistic. A builder who builds a house from foundations upwards is creating a single integrated unit of which the individual components are interdependent. To treat the foundations as a piece of property separate from the walls or the floors is a wholly artificial exercise. If the foundations are inadequate the whole house is affected. Furthermore, if the complex structure theory is tenable there is no reason in principle why it should not also be applied to chattels consisting of integrated parts such as a ship or a piece of machinery. The consequences of such application would be far reaching. It seems to me that the only context for the complex structure theory in the case of the building would be where one integral component of the structure was built by a separate contractor and where a defect in such a component had caused damage to other parts of the structure, eg, a steel frame erected by a specialist contractor which failed to give adequate support to floors or walls. Defects in such ancillary equipment - such as central heating boilers or electrical installations would be subject to the normal Donoghue and Stevenson principle if such defects gave rise to the damage in other parts of the building."
Latent Damage Act
Accrual of cause of action to successive owners in respect of latent damage to property.
3. (1) Subject to the following provisions of this section, where -
(a) a cause of action ("the original cause of action") has accrued to any person in respect of any negligence to which damage to any property in which he has an interest is attributable (in whole or in part); and
(b) another person acquires an interest in that property after the date on which the original cause of action accrued but before the material facts about the damage have become known to any person who, at the time when he first has knowledge of those facts, has any interest in the property;
a fresh cause of action in respect of that negligence shall accrue to that other person on the date on which he acquires his interest in the property.
(2) A cause of action accruing to any person by virtue of subsection (1) above-
(a) shall be treated as if based on a duty of care at common law owed to the person to whom it accrues; and
(b) shall be treated for the purposes of section 14A of the 1980 Act (special time limit for negligence actions where facts relevant to cause of action are not known at date of accrual) as having accrued on the date on which the original cause of action accrued.
(3) Section 28 of the 1980 Act (extension of limitation period in case of disability) shall not apply in relation to any such cause of action.
(4) Subsection (1) above shall not apply in any case where the person acquiring an interest in the damage property is either -
(a) a person in whom the original cause of action vests by operation of law; or
(b) a person in whom the interest in that property vest by virtue of any order made by a court under section 538 of the Companies Act 1985 (vesting of company property in liquidator).
(5) For the purposes of subsection (1)(b) above, the material facts about the damage as would lead a reasonable person who has an interest in the damaged property at the time when those facts become known to him to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.
(6) For the purpose of this section a person's knowledge includes knowledge which he might reasonably have been expected to acquire-
(a) from facts observable or ascertainable by him; or
(b) from facts ascertained by him with the help of appropriate expert advice which
but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable by him only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.
...."
"The statutory development enacted by the Defective Premises Act 1972 effected clear and precise changes in the law imposing certain specific statutory duties subject to carefully defined limitations and exceptions. This change did not, of course, operate retrospectively. The common law developments have effected changes in the law which inevitably lack the kind of precision attainable by statute though limits have had to be and are still being worked out by decisions of the courts in a spate of ensuing litigation, including the instant case, and since our jurisprudence knows nothing of the American doctrine of "prospective overruling" and the law once pronounced authoritatively by the courts here is deemed always to have been the law, the changes have full retrospective operation".
Direct Duty of Care
(1) The purpose for which the statement was made;
(2) The purpose for which the statement was communicated;
(3) The advisee and any relevant third party;
(4) The size of any class to which the advisee belongs;
(5) The state and knowledge of the advisor;
(6) Reliance by the advisee.
In my view these factors are important but do not adversely affect the claimant's case. In the case of (1) Neill LJ pointed out that "in many cases, however, the statement will have been prepared or made, or primarily prepared or made, for a different purpose and for the benefit of someone other than the advisee. In such cases it will be necessary to look carefully at the precise purpose for which the statement was communicated to the advisee."
"I see the force of the argument that Mrs Adams was likely to show the letter to a third person. If she had wanted to know about the progress of the works only for her own information she could have asked her husband. But in my judgment it does not follow, even if one postulates that the classes of person to whom the letter might be shown included the purchaser and the purchaser's advisers as well as the bank or other institution which was supplying funds to Mrs Adam, that Mr Bannister had "undertaken a responsibility" towards the purchaser in the sense in which that phrase was used by Lord Goff in Henderson -v- Merrett Syndicates Ltd [1995] 2 AC 145 at page 180. It is to be remembered that Mr Bannister knew nothing of the reference to him in the supplemental contract of 30 December 1992.
I would start with the general proposition that if an adviser to one party to a transaction gives advice to that party his duty is prima facie to that party alone. But this general proposition has to be considered in the light of the recent authorities. First, it is clear that if the adviser to one party to a transaction makes a careless misrepresentation which that party communicates to the other party in circumstances which would make the first party liable for its accuracy to the other party, the adviser may be liable as well as his principal: cf Hobhouse LJ in McCullagh -v- Lane Fox [1996] 1 EGLR 35 at page 44. Secondly, the words "assumption of responsibility" must be understood in the sense of a conscious assumption of responsibility for the task rather than a conscious assumption of legal liability to the plaintiff for the careful performance of the task: see Lord Browne-Wilkinson in White -v- Jones [1995] 2 AC 207 at page 273. The court must therefore examine all the circumstances of the case. Thus, in my judgment, in order to establish liability against the adviser in a case such as the present the advisee must show some connecting thread between the task the adviser has undertaken to perform and the course of action upon which the advisee can be foreseen to be likely to embark.
Of course in some cases an adviser will provide information to his client in the knowledge that a third party will learn of and rely on that advice and in reliance on it will take an anticipated course of action. The adviser knows the purpose of the advice and the purpose for which it will be used by the third party. The knowledge may be actual or inferential. The mortgage cases fall into this category. But in order for the adviser to be liable to the advisee it seems to me that, if one applies Lord Oliver's criteria, he must have actual or inferential knowledge not only that the advice will be communicated to the advisee but also knowledge of the purpose for which the information is required by the advisee. It is only such circumstances that there is room for a finding that the adviser has undertaken responsibility to the advisee in respect of some foreseeable loss.
In the present case Mr Bannister was not giving advice as to whether a particular course of action should be taken. At its highest his duty was to supply information for the purpose of enabling someone else to decide upon a course of action. Accordingly, in order to determine the scope, and indeed the existence, of any duty owed by him to Mrs Machin, it is necessary to look closely at the consequences for which in the circumstances Mr Bannister could properly be held responsible if the information provided by him proved to be inaccurate.
By 13 January Mr Bannister knew that the property was to be sold. Let it be assumed that he also knew or should have foreseen that the letter might be shown to the purchaser. But against what harm was Mr Bannister to be regarded as having undertaken to guard Mrs Machin? Was the letter a signal on which she could rely to go ahead with the purchase without any further enquiry? The fact that Mr Bannister was due to carry out another inspection with a view to providing a final certificate puts the answer to the second question beyond doubt. But even without the additional and overwhelming factor of the impending final certificate I would hold that on the facts of this case Mr Bannister owed no duty of care to Mrs Machin in relation to the letter of 13 January 1993".
(f) The defendant owed a duty of care to the claimants (and any person likely to lend money secured on the house) as described under (g) below. The defendant also owed a duty of care under the Defective Premises Act 1972 in respect of the duties undertaken by him as set out in answer to (a) above.
(g) A duty to take care that the statements made in the letter certificate were reliable; that the design had been prepared with reasonable care and, in so far as the designer had investigated the ground conditions, that reasonable care had been taken in the investigation and that the design was reasonably based on it.
Limitation
Issue 2: The Defective Premises Act 1972
"Duty to build dwellings properly
(1) A person taking on work for or in connection with the provision of a dwelling (whether the dwelling is provided by the erection or by the conversion or enlargement of a building) owes a duty -
(a) if the dwelling is provided to the order of any person, to that person;
and
(b) without prejudice to paragraph (a) above, to every person who acquires an interest (whether legal or equitable) in the dwelling;
to see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that as regards that work the dwelling will be fit for habitation when completed.
(2) A person who takes on any such work for another on terms that he is to do it in accordance with instructions given by or on behalf of that other shall, to the extent to which he does it properly in accordance with those instructions, be treated for the purposes of this section as discharging the duty imposed on him by subsection (1) above except where he owes a duty to that other to warn him of any defects in the instructions and fails to discharge that duty.
(3) A person shall not be treated for the purposes of subsection (2) above as having given instructions for the doing of work merely because he has agreed to the work being done in a specified manner, with specified materials or to a specified design.
(4) A person who -
(a) in the course of a business which consists of or includes providing or arranging for the provision of dwellings or installations in dwellings;
or
(b) in the exercise of a power of making such provision or arrangements conferred by or by virtue of any enactment;
arranges for another to take on work for or in connection with the provision of a dwelling shall be treated for the purposes of this section as included among the persons who have taken on the work.
(5) Any cause of action in respect of a breach of the duty imposed by this section shall be deemed, for the purposes of the Limitation Act 1939, the Law Reform (Limitation of Actions, &c) Act 1954 and the Limitation Act 1963, to have accrued at the time when the dwelling was completed, but if after that time a person who has done work for or in connection with the provision of the dwelling does further work to rectify the work he has already done, any such cause of action in respect of that further work shall be deemed for those purposes to have accrued at the time when the further work was finished".
"It was submitted - and it seems to be correct although surprising - that the time is not extended by section 14(A) of the 1980 Act (inserted by the Latent Damage Act 1986) because the claim under the Defective Premises Act 1972 is not an "action for damages for negligence"."
In Société Commerciale de Réassurance v ERAS (International) and Others [1992] 2 All ER 82 the Court of Appeal had to consider the ambit of section 14A. Mustill LJ said at page 85:-
"This question whether s14A applies to contractual claims is by no means straightforward. The different treatment for limitation purposes of claims in contract and in tort is already unsatisfactory because: (1) whatever the legal logic, the fact that claims in contract and in tort between the same parties arising out of the same facts become time-barred on dates which may well be years apart offends common sense; (2) the existence of different rules for what may really be the same claims forces the law into unnatural complications. Whatever the historical justification for holding that there are concurrent rights of action in contract and tort, nobody we believe would trouble nowadays to insist on the difference, but for the fact that one form of claim (usually the one in tort) offers procedural advantages. This is not a sound basis for the development of a practical and self-consistent law of negligence; (3) so far as limitation is concerned, the rules regarding the accrual of the cause of action tend to push the evolution of substantive law in the wrong direction. In most if not all cases a plaintiff will be better off by framing his action in tort, whereas, in our judgment, if a contract is in existence this is the natural vehicle for recourse.
Whilst these features are firmly embedded in the law, at least so far as this court is concerned, we have no enthusiasm for attributing to s14A a meaning which, if the respondents are right, will enhance the practical attraction of a claim in tort. Nevertheless, we find it impossible to resist the conclusion, in company with the learned judge and also with Mr Kenneth Rokison QC, sitting as a deputy judge of the High Court in Iron Trade Mutual Insurance Co Ltd v J.K. Buckenham Ltd [1990] 1 All ER 808, that as a matter of language s14A cannot be applied to actions in contract. Even when the section is read in isolation, the words 'any action for damages in negligence' denote to our minds an action asserting that the defendant has committed the tort of negligence, and are not wide enough to comprise what is often (albeit inaccurately) called 'contractual negligence'. This reading is reinforced by the express overriding of the ordinary provision for tort claims in s2, coupled with the absence of any overriding of the provision for the contractual claim in s5.
The position becomes even clearer when reference is made to s11 of the 1980 Act. The special regime thereby created for personal injury claims is expressed to apply -
'(1) .... to any action for damages for negligence, nuisance or breach of duty (whatever the duty exists by virtue of a contract or of provision made by or under a statute or independently of any contract or any such provision)....'
We find it impossible to accept that, when the draftsman of the 1986 Act came to prepare the new s14A for insertion in the 1980 Act, he ignored the precedent supplied by s11, and assumed that the naked word 'negligence' would suffice to denote a breach of contractual duty, of a kind which in s11 had been thought worthy of special mention. The contrast in language must, as it seems to us, reflect a distinction in the kinds of claim to which the different methods of enlarging time are to apply.
This conclusion was resisted by Clarksons principally on the ground that it is based too narrowly on the words of the statute, and pays insufficient regard to the mischief which s14A was designed to correct, namely the barring of claims before the injured party knows that he has a claim to assert. We cannot agree, for Clarkson's proposition states the mischief in terms which are too wide. The insertion of s14A stemmed from the Law Reform Committee's 24th Report (Latent Damage) (Cmnd 9390), which took up again the question of latent damage which had been left unresolved in the committee's 21st Report of 1977 (Final report on Limitation of Actions) (Cmnd 6923). Whilst this work was in progress there were a number of important decisions in this field, notably Pirelli General Cable Works Ltd v Oscar Faber & Partners (a firm) [1983] 2 AC 1, and this led to the canvassing of various possible solutions. It is quite plain, on reading the report as a whole (and in particular para 4.4) that with the exception of one solution considered and rejected at para 3.17(b) the committee was occupied solely with claims arising in tort. We do not find this surprising. In latent damage claims, the claim in tort will either be equal or superior to that in contract from a limitation point of view. If faced with a time bar, the plaintiff will concentrate on his cause of action in tort, and will have nothing to gain by deploying a claim in contract as well (if indeed he has a contract with the defendant, which he often will not); so that it would be natural for the committee to focus its attention accordingly.
Thus, if the words of the section had been sufficiently ambiguous to require recourse to its origins, we should have held that such recourse did not assist the appellants. In the event however we are content to rest on the words themselves, which are quite clear."
Nos 3 Fair View Cottages
58,. The nature and scope of the duties owed by the defendant to Mr Payne were thus essentially the same as those which the defendant had undertaken for Mr Wright or Mrs Gotobed Wright except that, of course, the defendant was specifically required not to carry out a site investigation (although he did so for his own purposes) and therefore was to assume, vis a vis Mr Payne, that the site conditions were those which had been discovered originally. There was therefore no reliance on the defendant, no assumption of responsibility, and no liability to Mr Payne (or Mr Wright) of the kind previously described in answer to issue 1(a). The defendant's liability under the Defective Premises Act 1972 is thus not as extensive in relation to No 3 as it is or may be in relation to Nos 1 and 2. The defendant's duty to take care in the preparation of the design may, thus be attenuated if it were to appear that had the additional fee been paid the defendant would have carried out a more extensive site investigation than was ultimately done, voluntarily, and that such a site investigation would have revealed conditions which would have led a prudent engineer not to continue with the proposal to use the same raft foundation design. The defendant's contractual duties towards Mr Payne in relation to the inspection of the ground and of the reinforcement and in providing a certificate were however identical to those undertaken for Nos 1 and 2. The answer to sub-issue (a) in relation to No 3 Fair View Cottage is: No, but the defendant owed Mr Payne the duties set out in (a)(ii)-(iv).
"But if the sub-contracted work or materials do not in the result conform to the required standard, it will not ordinarily be open to the building owner to sue the sub-contractor or supplier direct under the Hedley Byrne principle. Claiming damages from him on the basis that he has been negligent in relation to the performance of his functions. For there is generally no assumption of responsibility by the sub-contractor or supplier direct to the building owner, the parties having so structured their relationship that it is inconsistent with any such assumption of responsibility."
Answers to Issues
1. The defendant owed a duty of care to each claimant in respect of the performance of his retainer to issue a certificate on completion of the foundations as set out in (g) below.
The answers to the sub-issues are:
In relation to Nos 1 and 2 and the claims of the first and second claimant:
(a) No; the defendant owed Mr Wright or Mrs Gotobed Wright a duty at common law to exercise reasonable professional skill and care and judgment:
(i) in carrying out in June 1988 the site investigation and in reporting on the proposal to extend Fair View Cottage; such a duty was to avoid causing loss and damage to either resulting from reliance on that investigation and report;
(ii) in designing in July 1988 a foundation which would be reasonably suitable for Mr Wright's proposed design for two new cottages on the site of Fair View Cottages;
(iii) in inspecting in September and October 1988 the excavated ground ready for the raft foundation and the fixed steel reinforcement prior to concreting;
(iv) on completion of the formation and the fixing of reinforcement, in issuing the letter of 20 October 1988 certifying that such work had been carried out to the defendant's satisfaction;
but the duties in (ii) to (iv) were to avoid causing physical injury or loss and damage to other property that might result from failure to carry out the duty properly.
In relation to No 3 and the claim of the third claimant:
(a) No, but the defendant owed Mr Payne the duties set out in (a)(ii)-(iv).
(b) See above.
(c) No, except in relation to the duty set out in answer to issue 1(a)(i).
(d) In relation to Nos 1 and 2: On the assumptions to be made, and if there had been a cause of action: (a)(i) and (ii) in July 1988, (iii) in September or October 1988; (iv) October 1988.
(e) No.
(f) The defendant owed a duty of care to the claimants (and any person likely to lend money secured on the house) as described under (g) below. The defendant also owed a duty of care under the Defective Premises Act 1972 in respect of the duties undertaken by him as set out in answer to (a) above.
(g) A duty to take care that the statements made in the letter certificate were reliable; that the design had been prepared with reasonable care and, in so far as the designer had investigated the ground conditions, that reasonable care had been taken in the investigation and that the design was reasonably based on it.
(h) Yes, but only as regards (i) and then in respect only of the loss in value of the property measured by reference to the costs of the remedial work to the property or otherwise and assessed at the date when the property was bought, (iii) and (iv).
(i) Yes, but subject to (j):
(j) Each claimant falls within section 14(A) of the Act.
2. Yes.