Murphy v Brentwood District Council [1991] 1 AC 398 (HL)

Facts

• Mr. Murphy purchased a semi-detached house later found to have defective foundations.
• The faulty foundations had been approved by Brentwood District Council after inspection.
• The defect led to the cracking of the foundations and caused significant damage to the walls and pipes of the house.
• Mr. Murphy, unable to pay for repairs, sold the property at a loss.
• He brought an action against Brentwood District Council, alleging negligent inspection and approval of the faulty foundations.
• The claim was for pure economic loss, as there was no personal injury or damage to property other than the house itself.
• The court held that Brentwood District Council did not owe a duty of care to Mr. Murphy for pure economic loss.

Issues

1. Whether a local authority owes a duty of care in tort for pure economic loss resulting from defects in inspected property.
2. Whether the precedent set in Anns v Merton London Borough Council regarding local authority liability for defective premises should be maintained.
3. Whether the 'complex structure' theory allows separate recovery for damage to parts of a building caused by defects in other parts.

Decision

• The House of Lords held that damages for pure economic loss arising from a defect in a building are not generally recoverable in tort.
• The previous decision in Anns v Merton, which had permitted claims for such loss against local authorities, was expressly overruled.
• The court rejected the 'complex structure' theory, finding that a building is a single, indivisible unit and internal damage does not constitute damage to 'other property.'
• It was affirmed that only damage to property other than the defectively constructed building itself, or to persons, is actionable.
• The court recognized exceptions where a defect causes damage to separate, incorporated items or poses imminent danger to people or property outside the building.

Legal Principles

• Pure economic loss—financial loss not consequent upon damage to person or other property—is not recoverable in negligence for defective property.
• Tort law does not provide a non-contractual warranty of quality for property.
• The 'complex structure' theory, which treats sections of a building as distinct for purposes of liability, was rejected, except where the damaged item is truly separate from the defective part.
• Distinction between economic loss recoverable in contract and the more limited recovery allowed in tort is maintained.
• The case emphasizes the limitation on the scope of negligence liability for local authorities, builders, and developers in defective construction.
• The possibility of recovery for costs to prevent imminent danger was acknowledged.

Conclusion

Murphy v Brentwood District Council established that pure economic loss from property defects is not recoverable in tort, overruling Anns v Merton and narrowing the circumstances under which claimants may recover for negligent inspection of buildings. The ruling rejected the 'complex structure' theory, emphasizing the distinction between contractual and tortious remedies, and clarified that loss from defective properties is generally not actionable in negligence unless it results in physical injury or damage to other property.