The Murphy v Brentwood Case

In what circumstances, despite Murphy v Brentwood, may construction professionals, contractors and sub-contractors who were involved in a construction project still owe liability in tort-long after completion – to those now affected by defects in the completed project? Is the present English law adequately clear predictable in operation and supported by principle?’

Introduction to the Murphy v Brentwood Principle

The subject of a construction professionals, a builder owe a duty of care in negligence to the subsequent purchaser of a property constructed with latent defects is an area of law courts have found a difficult one. Over the years conflicting judgements pull in different directions, as was illustrated by the reversal of the decisions in Anns v Merton [1] by the House of Lords in Murphy v Brentwood DC. [2]

Following Murphy, the chances of a subsequent purchasers succeeding in negligence have been perceived as non-existent. It emerged one of the limitations faced by the plaintiff; he cannot recover in tort the cost of replacing a defective chattel or building, or any consequential loss, when only the chattel or the building itself is damaged as a result of the defect.

Lord Bridge expressed it this way (at page 475A):

‘’ If a manufacturer negligently puts into circulation a chattel containing a latent defect which renders it dangerous to persons or property, the manufacturer, on the well-known principles established by Donoghue v. Stevenson…will be liable in tort for injury to persons or damage to property which the chattel causes. But if a manufacturer produces and sells a chattel which is merely defective in quality, even to the extent that it is valueless for the purpose for which it is intended, the manufacturer’s liability at common law arises only under and by reference to the terms of any contract to which he is a party in relation to the chattel; the common law does not impose on him any liability in tort to person to whom he owes no duty in contract but who, having acquired the chattel, suffer economic loss because the chattel is defective in quality….the loss sustained by the owner or hirer of the chattel is purely economic. It is recoverable against any party who owes the loser a relevant contractual duty. …it is not recoverable in tort in the absence of a special relationship between the manufacturer of a chattel and a remote owner or hirer.

I believe that these principles are equally applicable to buildings…’’

Murphy v Brentwood had stressed as a matter of policy the unacceptability of imposing such liability on builders, local authorities or manufactures. The fear is the courts would be flooded with the same negligent act, where both court administration and financial burden on the defendant uncontrollable and become out of control.

Lord Keith justified it in Murphy v Brentwood (at page 409B) on the grounds that contrary approach:

‘’… would open up an exceedingly wide field of claims, involving the introduction of something in the nature of a transmissible warranty of quality’’.

Haven discussed the principles established in Murphy v Brentwood, the essay will seek to identify in which circumstances construction professionals and builders still can owe duty of care to those affected by the defect long after the completion of a construction project. It was reported in *const. L.J 381, more often than not, the claimant will not be privity with the builder or architect, having purchased from an intermediately. The purchaser will most likely not be privity with any government authority responsible for the inspection and certifications of building under construction. In such cases, most likely the remedy, against the construction professional or any certifying authority would have to be in the tort of negligence.

Post Murphy v Brentwood

*const. L.J 05 It is trite law that an action for negligence will lie, where there has been a breach of a duty of care, for personal injury or physical damage to other property. [3] A purchaser of a defective property fortunate in finding defect at early stage of time may have an action in contract against the builder and architect, if he is in privity with them. However, if the damage is latent and not discovered until a late stage, the contract may become statute barred. [4] The purchaser will therefore will look for a remedy in the tort of negligence. Nevertheless even an action in negligence will be limited by time. [5] Depending on when the defect comes to light the construction professional and builder may escape liability.

The way defects are classified can make a difference in the outcome of the case. This is demonstrated in the case of Baxall Securities Ltd v Sheard Walshaw Partnership. [6] A firm of architects where engaged to make improvements to a building, Baxall were tenants in the building, the roof drainage failed to work and caused the the warehouse to flood. Baxall claimed damages for the goods stored in the warehouse. The case turned on the fact that the defective gutter was a patent defect not a latent defect. The problem of the lack of overflow could have been discovered on inspection. It was held that any reasonable inspection by Baxall would have revealed the problem. Mr Justice David Steel : (para 53)

‘’…surveyor would have discovered a defect, that defect is patent whether or not a surveyor is in fact engaged…’’

This view was supported by Murphy v Brentwood DC:

‘’But there can be no doubt, whatever the rationale, a person who is injured through consuming or using product of the defective nature of which he is well aware, has no remedy against the manufacturer’’.

Accordingly, the chain of causation between the architect’s error in regard to the provision of overflows and the loss suffered by Baxall was broken. In this particular case, Murphy applied and the architect were not found liable allowing the architects to escape liability.

However, if the nature of the relationship such that in law of duty of care not to cause economic loss can be founded between the parties, [7] this type of loss becomes, in principle, recoverable. [8] Exception to the general rule about irrecoverable economic loss has been held to encompass advice given or statements made, * Const. L.J. 96 even in the form of drawings, by designers of building. Architects have been held to owe a duty of care to building owners to use reasonable skill and care not to cause economic loss. [9]

Conversely, in the case of Samuel Payne v John Setchell Ltd, three subsequent purchasers of houses were held to be owed duties of care by the defendant structural engineers who had been instructed to certify the construction of foundations which they had also designed and inspected. The trial was of preliminary issues as to whether a duty was owed to the claimant as subsequent purchasers and, if so, of what scope. The claimants had limitation issues as would be common in latent damages cases.

The claimants succeeded in their claim on the basis of reliance on the two certificates issued by the structural engineer. The duty of care was found in Hedley Byrne v Heller principle. In the course of his judgement, Judge Lloyd (paragraph 46) said:

‘’ …the document was intended to be seen and relied upon by a prospective purchaser and… 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.’’

However, (para. 47)

‘’ 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.’’

The claimants tried to bring the causes of action under the Defective Premises Act 1972, [10] however, the statutory duty applied but the cause of action created accrued when the dwelling is completed and the limitation period is six years from that date. Thus, this made the claimants outside this period. The claimants then relied on 3 year extension period from the date of their knowledge of the damage, Judge Lloyd commented: (para 56)

‘’…that section 14A can only apply to actions for negligence at common law…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 section 1 of the Defective Premises Act 1972, section 11 and the scheme of the Limitation Act 1980, as amended, precludes such an interpretation.

.. a distinction is made in the Act, principally in section 11, between actions for breach of duty imposed by statute and actions for negligence…. 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…’

It can be seen here, Judge Lloyd holds s 14A only applies to action in negligence at common law and not to the statutory right of action. The decision based on this point illustrates the shortcoming in the assistance of the Act to the claimant. The Jude goes on to reject further argument by the claimant which was based on s 3 of the Latent Damage Act 1986:

‘’…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…’’

Thus, the judge holds that the ‘negligence’ referred to in the Act meant tortuous liability negligence only and not breach of a contractual duty of skill and care. Therefore, no cause of action had accrued to the original owner because either they had suffered no loss or, if they had; it was going to be pure economic loss and it is irrecoverable following Murphy.

Therefore, on the basis of the Judge reasoning, subsequent purchasers cannot rely on the Latent Damage Act (s3) for their benefit. Without the certificates, the claimant in Payne would not have succeeded.

The English Law operation post Murphy

*Const. L.J 95 despite having the benefit of a series of decisions by the House of Lords on the subject of accrual of a duty of care to prevent economic loss, the subject is far from being conclusively resolved.

This can be illustrated from the two opposed judgements at first instance. The two judgements are Samuel Payne v John Setchell Ltd and Tesco Stores Ltd v Costain Construction Ltd. In both cases, the judges looked at the development of the law of negligence, and considered the extent to which builders and designers in construction cases should be liable for economic loss.

In the case of Tesco Stores v Costain Construction Ltd and others, Tesco sought to recover for losses due to the fire. In the course of giving his judgement, Judge Seymour Q.C. stated:

‘’…anyone who undertakes by contract to perform a service for another upon terms, express or implied, that the service will be performed with reasonable skill and care, owes a duty of care to like effect to the other contracting party… which extends to not causing economic loss…’’. the builder was therefore held to owe Tesco a duty of care in respect of the work which it carried out (as opposed to the work carried out by its subcontractor) which the duty included not to cause economic loss’’.

However, in the case discussed above Samuel Payne and John Setchell Ltd, the judge relied on Murphy and DOE v Bates, 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.’’

He further conclude that a ‘builder’ for these purposes encompasses ‘’ whoever was primarily responsible for the defect’’ and therefore covers the engineer in this case.

*Cons. L.J 05, thus we are faced with two different steers from first instance judgements. Thus, this raises the question, the mere existence of reasonable skill and care obligation in a contract will amount to a voluntary assumption of responsibility, enabling a duty of care in respect of economic loss to be founded? If this is the case, what is the affect on the policy argument set out in Murphy regarding the dangers of extending Donoghue v Stevenson and thus, creating ‘’liability in an indeterminate amount for an indeterminate time to indeterminate class’’ [11] ?

In the course of Lord Keith speech, he looked at Pirelli General Cable Works Ltd v Oscar Faber Partners, where it was held that consulting engineers who negligently approved a defective design for a chimney were held liable for the losses suffered by the claimant. The loss was economic; however the distinguishing point was that the tortious duty arose out of the contractual relationship with the claimant and, therefore attracting Hedley Byrne principles, where the wrong advice gave rise to negligent misstatement.

Despite the clear statement of Policy by Lord Keith that a local authority, and by analogy, a builder, would not be liable in tort for economic loss, an exception within Murphy begins to appear. The service that can be provided may be classified advice and therefore attracting Hedley Byrne liability. Lord Keith explanation for Perilli left a gap in policy that Lord Keith had clearly wanted to be watertight. Therefore, analysing Lord Keith interpretation of Perilli, does that mean anyone entering into a contract promising to exercise reasonable skill and care could be responsible for economic loss if a breach of that duty occurs?

It can be seen here, there is no general rule that the courts have followed. There seem to be a need for some judicial guidance on what position the policy guidance set out by Murphy v Brentwood by the House of Lords and the dangers of extending the Donoghue and Stevenson has in construction cases. The position still remains uncertain and there doesn’t appear to be a clear rule that is followed as demonstrated in the cases above.

Conclusion

There are many views in which parties on a construction project will be liable in tort. The cases above tried to illustrate some of the effects of the decision in Murphy to those subsequently acquiring an interest in property constructed with latent defect. If a claimant can show some reliance on a certificate can succeed even where the limitation period can sometimes prove to be problematic. It would appear the negligent statement of the defendant puts him in a worse situation than his negligent act.

It would seem, if damage is to be judged recoverable, there must have been some particular, specific, quasi- contractual relationship between the claimant and the tortfeasor. But if the recovery would mean opening of the floodgates, then the claim will not be successful following Murphy.

English law does not appear to follow a single test in recognising duties of care in negligence. The House of Lords seem to be deciding these cases in what it feels ‘fair, just and reasonable’. The lower courts appear to struggling with the the variety of tests that have accumulated over the years and seem to have a combined approach in deciding each case.