D & F Estates v Church Commissioners for England [1988] UKHL 4 (14 July 1988)

Lessees of a flat discovered defective plasterwork installed by subcontractors years earlier. They sued for the cost of repairs. The House of Lords held that the builder was not liable in negligence for this pure economic loss, distinguishing it from physical damage.

Facts

The first defendants, the Church Commissioners, commissioned the building of a block of flats, employing a main contractor. The main contractor engaged subcontractors to carry out the plastering work. The plaintiffs were the lessees of one of the flats. Some years after taking possession, the plaintiffs discovered that the plaster on the walls and ceilings was loose and falling away. This was found to be due to the negligence of the subcontractors. The defective plaster had not caused any personal injury or damage to any ‘other property’. The plaintiffs undertook the necessary repairs and sued the main contractors in negligence for the cost of the re-plastering and for the consequential economic loss of cleaning and alternative accommodation during the works. There was no contractual relationship between the plaintiffs and the contractors.

Issues

The primary legal issue before the House of Lords was whether a builder is liable in the tort of negligence to a subsequent lessee for the cost of remedying a dangerous defect in the building which has not yet caused any personal injury or damage to other property. This questioned whether the loss claimed, being the cost of repair, constituted recoverable damage in tort or was irrecoverable ‘pure economic loss’. A secondary issue was whether the ‘complex structure’ theory could be applied, treating the plaster as a separate item from the building, so that its failure caused damage to ‘other property’ (i.e., the flat itself).

Judgment

The House of Lords unanimously allowed the appeal, overturning the Court of Appeal’s decision and holding that the main contractor was not liable. Lord Bridge of Harwich delivered the leading speech.

Pure Economic Loss vs. Physical Damage

Lord Bridge clarified the fundamental distinction between a dangerous article which causes damage and a defective article which is simply of poor quality. He held that liability in negligence under the principle of Donoghue v Stevenson arises when a hidden defect causes personal injury or damage to property other than the defective item itself. If the defect is discovered before it causes such harm, the loss is purely economic, relating to the reduced value of the item or the cost of repairing it. This type of loss, he reasoned, is the proper subject of contract law and warranties, not the tort of negligence.

If the hidden defect in the chattel is the cause of personal injury or of damage to property other than the chattel itself, the manufacturer is liable. But if the hidden defect is discovered before any such damage is caused, there is no longer any room for the application of the Donoghue v. Stevenson principle. The chattel is now defective in quality, but is no longer dangerous. It may be valueless or it may be worth less than it would have been if it had not been defective. The only loss sustained by the owner is economic loss.

The ‘Complex Structure’ Theory

The court considered and largely rejected the ‘complex structure’ argument in this context. While Lord Bridge acknowledged that in certain cases, a distinct component of a building (like a faulty boiler) could cause damage to the rest of the structure, he found the theory inapplicable to defective plaster. The plaster was not a separate piece of property distinct from the building, but was an integral part of its finish. Its failure was a latent defect in the quality of the building itself, not an event causing damage to separate property.

For my part, I find it difficult to accept that this reasoning could be applied to a defect in the construction of the building such as a failure to provide adequate support for a roof, still less to a defect of the kind complained of in the instant case, the defective plastering of the walls and ceilings.

Reasoning

The court’s rationale was to maintain a clear boundary between the law of contract and the law of tort. To permit a claim in tort for the cost of repairing a defective item would be to impose on the manufacturer or builder a warranty of quality that is transferable to all future owners, a role properly fulfilled by contractual agreements. The decision represented a significant retreat from the wider liability suggested in Anns v Merton London Borough Council, which had allowed recovery for the cost of averting imminent danger to health and safety.

Implications

The judgment in D & F Estates marked a pivotal moment in English tort law, significantly narrowing the scope of a builder’s duty of care for latent defects. It reasserted the traditional principle that pure economic loss is generally irrecoverable in negligence. The decision heavily influenced subsequent case law, creating a clear precedent that the cost of repairing or replacing a defective product or building element is a non-recoverable economic loss in tort, unless and until that defect causes physical harm to a person or to other, separate property. This case was a critical step leading to the eventual overruling of Anns v Merton by the House of Lords in Murphy v Brentwood District Council [1991] 1 A.C. 398.

Verdict: The appeal by the contractors was allowed; they were held not liable for the cost of the repair.

Source: D & F Estates v Church Commissioners for England [1988] UKHL 4 (14 July 1988)