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

Lessees of a flat discovered defective plaster caused by negligent sub-contractors employed by the main building contractor. The House of Lords held that the cost of repairing defective work which had not caused personal injury or damage to other property was pure economic loss and not recoverable in tort against the builder.

Facts

D. & F. Estates Limited held a lease of flat 37 in Chelwood House, London, which was occupied by Mr. and Mrs. Tillman. The building was constructed between 1963 and 1965 by Wates Limited as main contractors. The plastering work was sub-contracted to R. S. Hitchens. In August 1980, decorators discovered that plaster on ceilings and one wall was loose and falling. The defect was caused by the sub-contractors’ failure to follow the manufacturer’s instructions when applying the plaster. Remedial work was undertaken at a cost of £10,676.70, and further defective plaster was later discovered requiring additional repairs.

Issues

Primary Issues

1. Whether Wates, as main contractor, was liable in tort for the negligence of their plastering sub-contractors in circumstances where they had employed competent sub-contractors.

2. Whether the cost of repairing defective plaster, which had not caused personal injury or damage to other property, was recoverable as damages in tort or constituted irrecoverable pure economic loss.

Judgment

The House of Lords unanimously dismissed the appeal, affirming the Court of Appeal’s decision.

Sub-contractor Liability

Lord Bridge held that an employer of an independent contractor is generally not liable for the negligence of that contractor. Wates had properly employed competent sub-contractors and owed no personal duty to future lessees to ensure that sub-contracted work was performed without negligence. Unless Wates had actual knowledge that defective work was being done and condoned it, they could not be liable as joint tortfeasors. The judge’s finding that Wates ‘ought to have known’ was vitiated by his earlier misdirection regarding the existence of a duty of care.

Economic Loss

Lord Bridge examined the principle from Donoghue v. Stevenson and its application to defective buildings. He concluded that if a hidden defect in a chattel or building is discovered before it causes personal injury or damage to other property, the loss sustained is purely economic. The defective item is no longer dangerous but merely defective in quality. Such economic loss is recoverable in contract but not in tort by those without a contractual relationship with the manufacturer or builder.

Lord Bridge stated that treating the plaster as causing damage to ‘other property’ would be entirely artificial. The only function of plaster is to serve as a smooth surface for decoration. Once the loose plaster was discovered, any danger could be avoided by timely removal.

Lord Oliver agreed, noting that Anns v. Merton London Borough Council introduced an entirely new type of product liability in relation to building construction. However, he emphasised that liability should be limited to cases where actual damage to person or property other than the defective structure itself has occurred. Individual parts of a complex structure may be treated as separate items of property, but damage to plaster caused by defective fixing of the plaster itself would not ground an action apart from contract or statute.

Implications

This decision clarified significant limitations on tortious liability in construction cases:

1. Main contractors are not vicariously liable for the negligence of competent independent sub-contractors unless they have actual knowledge of and condone defective work.

2. The cost of repairing defects in a building which have not caused personal injury or damage to other property is pure economic loss and irrecoverable in tort.

3. The ‘complex structure’ theory may allow recovery where one defective element of a building causes damage to another distinct element, but not where a defective component causes damage only to itself.

4. The decision expressed reservations about extending common law liability beyond the statutory protections provided by the Defective Premises Act 1972, which was limited to dwellings and defects appearing within six years.

Verdict: Appeal dismissed. The House of Lords affirmed the Court of Appeal's decision that Wates Limited was not liable to the appellants for the cost of remedial works to defective plaster. The appellants were ordered to pay the respondent's costs.

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