Murphy v Brentwood DC [1991] UKHL 2

A homeowner discovered defective foundations in his house, the plans for which a council had approved. He sold it at a loss and sued the council. The House of Lords held the loss was purely economic and therefore irrecoverable, famously overruling Anns v Merton LBC.

Facts

The plaintiff, Mr Murphy, purchased a house in a new development in 1981. The foundations of the house had been constructed according to a design approved by the defendant, Brentwood District Council. In 1984, significant cracking appeared in the walls of the house, caused by defects in the design of the concrete raft foundations. The defects led to differential settlement of the building. Mr Murphy was unable to afford the estimated £45,000 cost of repairs. Consequently, he sold the house in its defective state for £35,000 less than its market value had it been sound. He brought an action in negligence against the council for approving the inadequate foundation plans, seeking to recover this financial loss.

Issues

The primary legal issue was whether a local authority, in exercising its statutory power to approve building plans, owed a common law duty of care to a subsequent owner of a building to avoid the kind of loss suffered by the plaintiff. This required the House of Lords to determine whether the plaintiff’s loss was properly categorised as physical damage or pure economic loss. A central part of this inquiry was whether the House should reconsider and depart from its own previous decision in Anns v. Merton London Borough Council [1978] A.C. 728, which had established such a duty.

Judgment

The House of Lords unanimously allowed the council’s appeal, holding that the council was not liable to the plaintiff. The loss suffered by Mr Murphy was characterised as pure economic loss, not physical damage, and as such was not recoverable in the tort of negligence. The court reasoned that the defect was in the building itself; it had not caused damage to any ‘other property’ or personal injury. The financial loss arose because the plaintiff had paid for a defective article that was worth less than he had thought. To allow recovery would, in effect, introduce a warranty of quality transmissible to subsequent owners, which is the province of contract law, not tort.

In a momentous step, the House of Lords formally overruled its previous decision in Anns v. Merton LBC, which had founded the duty of care in such circumstances on the ‘neighbour principle’ and a two-stage test. Lord Keith of Kinkel stated:

I am of opinion that the case for departing from Anns in accordance with the Practice Statement (Judicial Precedent) [1966] 1 W.L.R. 1234 is made out. I would hold that Anns was wrongly decided as regards the scope of any private law duty of care resting upon a local authority in relation to its function of taking steps to secure compliance with building byelaws or regulations and should be departed from.

Lord Bridge of Harwich, who had been a party to the Anns decision, famously recanted his previous position:

My Lords, I have come to the conclusion that it is incumbent on your Lordships to resolve the doubts and reservations to which I have referred by holding that Anns was wrongly decided and should be overruled.

The ‘complex structure’ theory, a potential exception which might allow recovery if one part of a defective building caused damage to another, was considered but held not to apply on these facts. The whole house was seen as a single, defective product.

Implications

Murphy v. Brentwood DC is a landmark decision that significantly curtailed the scope of the duty of care in negligence. It marked a decisive retreat from the expansive approach of Anns v Merton LBC and re-established a more restrictive view on liability, particularly for public authorities. The judgment powerfully reasserted the traditional common law distinction between material physical damage and pure economic loss, confirming that the latter is generally not recoverable in tort. This provided greater certainty in the law but limited the avenues for redress available to subsequent purchasers of defective properties who do not have a contractual remedy against the builder or professional advisers. The case remains a cornerstone of the modern law of negligence concerning economic loss.

Verdict: The appeal was allowed. The House of Lords held that the Brentwood District Council was not liable for the pure economic loss suffered by the homeowner.

Source: Murphy v Brentwood DC [1991] UKHL 2