Robinson v PE Jones (Contractors) Ltd

Building – Defect — Economic loss — Appellant purchasing house built by respondent builder – Latent defect coming to light more than 12 years later – House requiring costly remedial works — Appellant claiming damages in negligence and breach of contract — Whether respondent liable for pure economic loss – Appeal dismissedBy an agreement made in December 1991, the appellant agreed to purchase from the respondent builder a house that was then under construction. Completion took place in April 1992. In September 2004, a surveyor discovered a latent defect, namely the chimney flues had not been constructed in accordance with good building practice or with the building regulations that were in force when the house was being constructed.Since the flues would have to be rebuilt, the appellant looked to the respondent to meet the substantial costs of the remedial works. However, the claim could not be resolved through correspondence and the appellant claimed damages for breach of contract and negligence. His claim for breach of contract was statute-barred under the Limitation Act 1980, so the appellant sought to recover damages in tort for economic loss. Preliminary issues arose, inter alia, as to whether: (i) a builder could owe its client a concurrent duty of care in tort in respect of economic loss; and (ii) the respondent in the instant case owed a duty of care to the appellant. The judge held that although in principle a builder could owe a duty of care in tort to its client concurrent with its duty in contract, the respondent did not owe such a duty to the appellant in respect of economic loss. He found that the contract between the parties, which limited, in express terms, the respondent’s liability to that set out in the National House-Building Council (NHBC) standard form of agreement, satisfied the requirement of reasonableness under the Unfair Contract Terms Act 1977 and excluded concurrent liability in tort. The appellant appealed. Held: The appeal was dismissed. (1) On the issue of reasonableness under the 1977 Act, the judge’s decision carried great weight and the court could not say that he had erred or had been wrong on that issue: George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] 2 AC 803 applied.Under the NHBC agreement, a builder was liable to the houseowner for defects during the first two years after completion. Furthermore, performance of those obligations was underwritten by the NHBC. During the following eight years, the NHBC would meet the cost of correcting major damage as defined in the NHBC agreement. Although that protection was not total, it was substantial and it could not be said that contractual terms limiting a house purchaser’s rights to those conferred by the NHBC agreement were unreasonable.(2) The relationship between a builder and its immediate client was primarily governed by the contract between them. Absent any assumption of responsibility, there did not exist as between the parties any duty of care co-extensive with their contractual obligations. The law of tort imposed a more limited duty on the builder to take reasonable care to protect the client against suffering personal injury or causing damage to other property. It imposed that duty, not only towards the first person to acquire the building but also towards others who might foreseeably own or use it. Beyond that, it was also necessary to look at the relationship and dealings between the parties in order to ascertain whether a contractor or subcontractor assumed responsibility to its counter-parties, so as to give rise to duties identified in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465. In the instant case, there was nothing to suggest that the respondent had assumed responsibility to the appellant in the Hedley Byrne sense. The parties had entered into a normal contract, whereby the respondent would complete the construction of a house for the appellant to an agreed specification and the latter would pay the purchase price. (3) The respondent’s warranties of quality and the appellant’s remedies in the event of a breach of warranty were set out in the contract. The parties were not in a professional relationship, whereby, for example, the appellant was paying the respondent for advice or to prepare reports or plans on which he would act. It would be inconsistent with the scheme of the contract if the law were to impose on the respondent duties of care in tort far exceeding its contractual liabilities. The parties had expressly agreed to exclude any liability in negligence that might otherwise arise. If a defect in the house were to cause personal injury, section 2(1) of the 1977 Act would prevent any exclusion of tortious liability. However, if such a defect generated only economic loss, namely the cost of repair, there was no reason why a clause of the building conditions should not exclude any tortious liability for that loss.Per Stanley Burnton LJ: It was now to be regarded as settled law that the builder/vendor of a building did not, by reason of its contract to construct or complete the building, assume any liability in the tort of negligence in respect of defects in the building giving rise to purely economic loss: D&F Estates Ltd v Church Commissioners for England [1988] 2 EGLR 263 followed.Lucy Wilson-Barnes (instructed by Irwin Mitchell LLP, of Sheffield) appeared for the appellant; Martin Budworth (instructed by Freeth Cartwright LLP, of Manchester) appeared for the respondent.Eileen O’Grady, barrister