Guest Post: Builders and Economic Loss

(This post is provided by UK colleague Nadia Lucherini with CMS/Cameron McKenna in Bristol.)

Does a building contractor owe his client a concurrent duty of care in tort and in contract in relation to economic loss? This age-old question was recently addressed by the Manchester TCC in Robinson v P.E. Jones (Contractors). The decision is likely to be of interest to builders as it clarifies the extent of their exposure to claims.

In 1991, P E Jones entered into an agreement with Mr Robinson whereby P E Jones would build and sell him a house. The house featured gas fires in two rooms which were served by chimney flues that P E Jones constructed. In 2006, two years after the gas fires failed a safety test, Mr Robinson started proceedings against P E Jones, claiming that the chimney flues had not been constructed properly.

The claim was well outside the limitation period for a claim in contract. So Mr Robinson was forced to argue that the building company owed him a duty of care in tort.

P E Jones argued that there was no duty of care and that it was an economic loss. The building company argued, relying upon the House of Lords case of Murphy v Brentwood, that a builder did not owe a duty of care in tort to an owner or an occupier where the loss was an economic loss.

In his judgement, Judge Davies sought to reconcile the case law. He stated that the general rule, on which P E Jones sought to rely, that a builder does not owe a duty of care to owners or occupiers is not intended to exclude circumstances where there was a “special relationship of proximity” for example, when the builder is also in a contractual relationship with a client.

In general terms, therefore, the Judge held that, in principle, a builder will owe a tortious duty of care to his client, concurrent with his duty in contract, in relation to economic loss. Practically, this ruling means that claimants are able to take advantage of the remedy, either under contract or tort, which is most favourable to them, making it easier for them to recover economic loss.

However, unfortunately for Mr Robinson, Judge Davies held that P E Jones had, through its Building Conditions, successfully excluded any duty in respect of any defect, error or omission in the execution or completion of the works save for the ten-year period covered by the National House Building Council’s agreement (which was, by that point, time-barred). Judge Davies held that Mr Robinson could not challenge the efficacy of the clause in the Building Conditions as it operated precisely to prevent a duty in tort arising. Mr Robinson’s assertion that the clause fell foul of the Unfair Contract Terms Act 1977 also failed as P E Jones pointed to an exception which states that the Act does not apply to “any contract so far as it relates to…an interest in land.”

This decision acts as a useful reminder that a builder will owe a concurrent duty of care to its client in relation to economic loss. This means that they can be liable in tort long after the expiry of the contractual limitation period in circumstances where discovery of damage happens years down the line. However, the case also shows that a builder can reduce this risk by incorporating a contractual term that limits the tortious duty.

Explore posts in the same categories: General Liability, Property

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