The Court of Appeal, in the case of Robinson v. PE Jones (Contractors) Ltd [2011] EWCA Civ 9, were faced with this question in the context of a claim by a house owner for damages in respect of a latent defect caused by the builder of the house.

Background

In 1991 PE Jones agreed to build a house for Mr and Mrs Robinson. Whilst the house was under construction PE Jones agreed to construct to gas flues in the lounge and family room and in order to do so constructed a second chimney flue. Construction was completed in 1992. In 2004 a British Gas service engineer attended to test the gas fires and recorded that there was a 'poor flue run' . A surveyor then inspected the flues and found that they were not constructed in accordance with good building practice or in accordance with Building Regulations. The cost of remedial works was in excess of £30,000.

Mr Robinson issued a claim to recover this sum from PE Jones in Decembe4 2006 claiming breach of contract and/or negligence. The claim was struck out because (a) it was too late to bring a claim based on contract (6 years from date of the breach) and (b) PE Jones did not owe MR Robinson a duty of care for pure economic loss. Mr Robinson appealed to the Court of Appeal.

The decision

In an masterly judgment Jackson LJ reviewed the authorities and held that:

  1. Contractual obligations arise from the consent of the parties and the principle that contracts should be enforced is vital to the functioning of society. Tortious duties are imposed by law (without the need for agreement of the party) because society demands certain standards of conduct.
  2. Generally contractual obligations and duties of care in tort are not co-extensive. The law of tort imposes a more limited duty upon the manufacturer and/or builder. That more limited duty is to take reasonable care to protect the client against suffering personal injury or damage to other property. In other words pure economic loss is not ordinarily recoverable.
  3. However, pure economic loss may be recoverable if manufacturer or builder by his words and deeds has assumed responsibility so as to give rise to such a duty. It will be necessary to look at the relationship and dealings between the parties.
  4. In the present case the defective flues did not cause personal injury nor did they cause damage to other property. Mr Robinson's claim was for economic loss consequent upon the defects. Further there was nothing to suggest that the defendant assumed responsibility.

Analysis

This is a welcome decision. From a practical perspective a number of lessons can be learnt from this case:

  1. The starting point is the contract between the parties. This sets out the party's rights and obligations and hopefully you will need not look beyond the express and implied terms.
  2. However, if you have to because of exclusion clauses or limitation then consider what damage has been done. Remember the crucial distinction is between a person who supplies something which is defective in itself and a person who supplies something which because of its defects, causes loss or damage to something else.
  3. If the defect has not caused damage this will be a claim for pure economic loss and will not be recoverable unless the other party has assumed a responsibility, which will probably be rare in a manufacture/building case.
  4. However, if the other party has assumed a responsibility (quite often in a professional context – solicitor's advice for example) then pure economic loss may be recoverable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.