Then, in Murphy vs Brentwood (1991, 1 AC 398), we were told that the law of negligence was much more circumscribed than we had been led to believe; Dutton was overruled and Anns was departed from. The Liberal Club fell quiet and parties looked to their contracts to fix liability rather than to any duty of care. It was thought there would be only a few limited circumstances in which negligence actions could now succeed.
A reaction against the "counter-revolution", as the Murphy ruling was called, is now developing and the days of multi-party actions may return.
Anns gave a right of action in negligence, in certain circumstances, against a local authority and a builder in respect of damage to the building inspected by the local authority or constructed by the builder. This is economic loss, rather than physical damage, because once the defect is discovered no such damage results – at most it can be said that the building is less valuable. Such a duty of care arose where there was sufficient proximity between the claimant and the defendant and where there were no circumstances to negate or limit such a duty. This was a problem because it appeared to give a right of action against a remote wrongdoer for mere diminution in value of goods or property, and was not limited to cases where goods or property caused damage to someone or something else.
Murphy established when a duty of care to prevent economic loss did not arise, but did not clearly identify the circumstances in which such a duty could arise. This was left to litigation arising out of the Lloyd's insurance disaster.
In Henderson vs Merrett (1995, 2 AC 145), a duty of care was held to exist to prevent economic loss where the wrongdoer had assumed responsibility to provide the claimant with the services in question. This statement of principle arose in the context of cases concerning negligent misstatement, but in Barclays Bank plc vs Fairclough Building Ltd (1995, 44 Con LR 35), the Court of Appeal had no difficulty in applying that principle to specialists engaged to clean an asbestos cement roof. They did so using power hosing but without taking the recommended precautions, and the impact of the water created a slurry containing asbestos, which entered the building. It was held that the specialist owed a duty of care to the contractor in respect of the economic loss suffered by it.
In Storey vs Charles Church Developments Ltd (1996, 12 Con LJ 206), Charles Church designed and built a house for Mr and Mrs Storey. Structural damage was discovered, which, it was accepted, was economic in nature. The judge held that Charles Church owed a duty of care to the Storeys in respect of such loss, because there had been sufficient "assumption of responsibility coupled with the concomitant reliance".
Ten years ago, multi-party actions for negligence were common The Murphy ruling stemmed the flow, apparently reducing greatly the scope for such claims Establishing a duty of care to prevent economic loss became difficult and complex
Whatever vicissitudes the law has undergone in relation to economic loss, it was never thought that any particular problems arose in seeking to establish a duty of care where the loss was not economic but physical – at least where the wrongdoer was a builder. It shows the extent of the retreat how few negligence cases there have been in construction in the past 10 years.
In Baxall Securities Ltd vs Sheard Walshaw Partnership (30 October 2000), His Honour Judge Bowsher QC had to consider whether an architect, engaged by a developer, owed a duty of care to the subsequent occupier of an industrial unit (see Tony Bingham, 8 December, page 85). The capacity of the drains had been underdesigned and no overflow was incorporated in the valley gutters. Although the roof drainage system had been designed by a specialist subcontractor, it was held that the architect was negligent in failing to specify sufficient capacity for the system and in failing to ensure that overflows, which it had specified, were installed.
Two floods occurred; the first caused partly by the absence of overflows and the second by the absence of overflows and the inadequate capacity of the drainage system. Significant damage was caused to goods owned by the claimant and the claim was for this loss, not the cost of remedial work to the building.
The judge observed that in Murphy the House of Lords had held that a duty of care could be owed by a builder to a subsequent occupier, but the question, in this case, was whether such a duty should be imposed on an architect. He decided the architect could have foreseen that a future occupier might suffer damage to its goods if there were defects in the drainage. Therefore the architect did owe the occupier a duty of care in respect of the type of harm suffered.
However, closely linked with this question was whether the occupier had had a reasonable opportunity to inspect the drainage system before occupation. Where the occupier could reasonably have been expected to have discovered the problems, then it could be said that the chain of causation between the negligent act and the loss had been broken, or, alternatively, it could be argued that the loss in question was economic in nature once the defects should have been discovered.
The judge held that the occupier could reasonably have discovered the absence of overflows but not the incapacity of the drainage system, and so the architect was liable for the second flood but not for the first.
Stephen Furst QC is a barrister specialising in construction law and joint editor of the seventh edition of Keating on Building Contracts.