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The Judicial Committee of the Privy Council Decisions |
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You are here: BAILII >> Databases >> The Judicial Committee of the Privy Council Decisions >> Invercargill City Council v. Hamlin (New Zealand) [1996] UKPC 56 (12 February 1996) URL: http://www.bailii.org/uk/cases/UKPC/1996/56.html Cite as: [1996] AC 624, [1996] 1 All ER 756, [1996] 1 NZLR 513, 50 Con LR 105, 78 BLR 78, [1996] UKPC 56 |
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JISCBAILII_CASE_TORT
Invercargill City Council Appellant
v. Hamlin RespondentFROM
THE COURT OF APPEAL OF THE
NEW ZEALAND
---------------
JUDGMENT OF THE LORDS OF THE JUDICIAL
COMMITTEE OF THE PRIVY COUNCIL, Delivered the 12th Feburary 1996 ------------------Present at the hearing:-
Lord Browne-WilkinsonLord Keith of Kinkel
Lord Browne-Wilkinson
Lord Mustill
Lord Lloyd of Berwick
Sir Michael Hardie Boys
[Delivered by Lord Lloyd of Berwick] ------------------"Having had these powers in relation to the construction of buildings conferred on it, the reasonable local authority would no doubt have accepted that they were intended to be exercised for the protection of those members of the public concerned with those buildings, whether as owners, occupiers or users. No doubt it would also have appeared to such an authority that many of them would have no opportunity or expectation of checking or controlling hidden details in its construction to ensure that appropriate standards had been complied with, relating to its physical soundness, its ability to withstand earthquake shocks, and the safety and health of its occupants. Conversely, those members of the public would have been aware that local bodies exercised this kind of control over buildings constructed in their districts; this has been a known fact of at least New Zealand urban life for several generations. The statement by Mrs. Williams that her knowledge of the Mount Eden Borough Council as 'the toughest' and her assumption that everything would be all right, reflects what I am sure all these plaintiffs and most of the community at large would have felt. Work essential to the structural integrity of a building and its earthquake resistance is almost invariably covered in, and in the usual house buying situation, purchasers have to rely on the council doing its job properly under the building controls conferred on it. I am also satisfied that the latter and its officers would have been well aware that such reliance was placed upon it by the community at large, especially in this case where they must have realised the builder was likely to sell the units; and that there was no feasible way any purchaser could have discovered hidden structural defects."
"The lineaments of the contemporary New Zealand law of negligence in this and related fields are now, I think, reasonably firmly established by a series of cases; but in the main it is law of comparatively recent growth, largely though by no means exclusively evolved since the appeal in Bowen was allowed in this court. . . ."
"As in Anns v. Merton London Borough Council [1978] AC 728, the cause of action was related not to damage actually caused by the negligent act but to the creation of the danger of damage, and the case is therefore direct authority for the recovery of damages in negligence for pure economic loss - a proposition now firmly established in New Zealand: see Mount Albert Borough Council v. Johnson [1979] 2 N.Z.L.R 234.'Lord Bridge of Harwich said, at p. 207:
"I should wish to hear fuller argument before reaching any conclusion as to how far the decision of the New Zealand Court of Appeal in Bowen v. Paramount Builders (Hamilton) Ltd. should be followed as a matter of English law. I do not regard Anns v. Merton London Borough Council as resolving that issue."
"There is no direct evidence that the plaintiff relied upon the flat having been built in accordance with the byelaws and regulations. She did not say that she did. But she did say that she saw the plans and specification before she agreed to purchase the flat. . . . I would be prepared to draw the inference as a matter of common sense that the average prudent purchaser of a new residential flat expects that the byelaws and regulations will have been complied with. I would classify this plaintiff as an average purchaser. In our cities there would be few citizens who would be unaware of the necessity for buildings to comply with the byelaws and health regulations and unaware of the control which city councils exercise over building works."The same point was made by Casey J. 10 years later in Williams v. Mount Eden Borough Council [1986] 1 N.Z.B.L.R. 102,544, 102,551, in a passage which has already been quoted, and by Cooke P. in the South Pacific Manufacturing Co. case [1992] 2 N.Z.L.R. 282, 297. So there was nothing new in the concept of reliance by house buyers generally as an element in the imposition of a duty of care. Cooke P. drew attention in that connection to Housing in New Zealand: Report of the Commission of Inquiry (1971), over which he presided. He made the following comment [1994] 3 N.Z.L.R. 513, 519:
"whatever may be the position in the United Kingdom, homeowners in New Zealand do traditionally rely on local authorities to exercise reasonable care not to allow unstable houses to be built in breach of the byelaws."
"Other supreme appellate tribunals exercise a similar function in other countries which have inherited the English common law at various times in the past. Despite the unifying effect of that inheritance upon the concept of man's legal duty to his neighbour, it does not follow that the development of the social norms in each of the inheritor countries has been identical or will become so. I do not think that your Lordships should be deflected from your function of developing the common law of England and discarding judge-made rules which have outlived their purpose and are contrary to contemporary concepts of penal justice in England, by the consideration that other courts in other countries do not yet regard an identical development as appropriate to the particular society in which they perform a corresponding function."By the same token, the Court of Appeal of New Zealand should not be deflected from developing the common law of New Zealand (nor the Board from affirming their decisions) by the consideration that the House of Lords in D. & F. Estates Ltd. v. Church Commissioners for England [1989] AC 177 and Murphy v. Brentwood District Council [1991] 1 AC 398 have not regarded an identical development as appropriate in the English setting.
"The fact is that situations arise, other than those falling within the old exclusionary rule, where it is manifestly fair and just that recovery of economic loss be permitted. Faced with these situations, courts will strain to allow recovery, provided they are satisfied that the case will not open the door to a plethora of undeserving claims. They will refuse to accept injustice merely for the sake of the doctrinal tidiness which is the motivating spirit of Murphy. This is in the best tradition of the law of negligence, the history of which exhibits a sturdy refusal to be confined by arbitrary forms and rules where justice indicates otherwise. It is the tradition to which this court has adhered in suggesting in Kamloops that the search should not be for a universal rule but for the elaboration of categories where recovery of economic loss is justifiable on a case-by-case basis."A little later she said, at p. 371:
"I conclude that, from a doctrinal point of view, this court should continue on the course chartered in Kamloops rather than reverting to the narrow exclusionary rule as the House of Lords did in Murphy."The same approach was reaffirmed unanimously in a recent decision of the Supreme Court: see Winnipeg Condominium Corporation No. 36 v. Bird Construction Co. (1995) 121 D.L.R. (4th) 193.
"It is, however, apparent that, in each case, their Lordships considered that a negligent builder's liability under the law of negligence did not extend to compensating either the first or a subsequent owner for economic loss sustained when the inadequacy of the footings of a building first becomes manifest by reason of consequent damage to the fabric of the building. Their Lordships' view in that regard seems to us, however, to have rested upon a narrower view of the scope of the modern law of negligence and a more rigid compartmentalisation of contract and tort than is acceptable under the law of this country."
"Inevitably, the policy considerations which are legitimately taken into account in determining whether sufficient proximity exists in a novel category will be influenced by the court's assessment of community standards and demands."
"Faced with the choice I am of the opinion that it is relevant to take into account that Parliament has made provisions in the Defective Premises Act 1972 imposing on builders and others undertaking work in the provision of dwellings obligations relating to the quality of their work and the fitness for habitation of the dwelling. For this House in its judicial capacity to create a large new area of responsibility on local authorities in respect of defective buildings would in my opinion not be a proper exercise of judicial power."See also per Lord Keith of Kinkel, at p. 472, Lord Oliver of Aylmerton, at p. 491, and Lord Jauncey of Tullichettle, at p. 498.
"Civil proceedings against building certifiers. Civil proceedings against a building certifier in respect of the exercise by the building certifier of the building certifier's statutory function in issuing a building certificate or a code compliance certificate are to be brought in tort and not in contract."Similarly section 91 provides:
"Limitation defences. (1) Except to the extent provided in subsection (2) of this section, the provisions of the Limitation Act 1950 apply to civil proceedings against any person where those proceedings arise from - (a) the construction, alteration, demolition, or removal of any building; or (b) the exercise of any function under this Act or any previous enactment relating to the construction, alteration, demolition, or removal of that building. (2) Civil proceedings may not be brought against any person 10 years or more after the date of the act or omission on which the proceedings are based. (3) For the purposes of subsection (2) of this section if - (a) civil proceedings are brought against a territorial authority, a building certifier, or the authority; and (b) the proceedings arise out of the issue of a building consent, a building certificate, a code compliance certificate, or an authority determination - the date of the act or omission is the date of issue of the consent or certificate or determination. . . ."
"Such a cause of action must arise, we think, either when the damage occurs or when the defect becomes apparent or manifest. The latter appears to be the more reasonable solution. It is powerfully supported by what Lord Reid said about the common law in Cartledge v. E. Jopling & Sons Ltd. [1963] A.C. 758, 772 . . ."
"it does not follow that the reasoning in Pirelli will be irresistible. It might still be possible to maintain the approach that a cause of action arises when the defect becomes apparent or ought to have been discovered, that being the time when the effect of the negligence (whether classified as physical or economic) is suffered or experienced by the owner of the building."He went on to urge Parliament to consider introducing a 'longstop' limitation period such as the absolute limit of 15 years from the date of the negligent act or omission contained in the (English) Latent Damage Act 1986. Parliament acted swiftly on this suggestion: see the Building Act 1991, section 91(2), already cited.
"the view that in building negligence cases any cause of action must accrue on the occurrence of damage to the building itself has been either wholly or largely abandoned in England by judicial decision, quite apart from the limitation changes made by the Latent Damage Act. To introduce now the outmoded English position into New Zealand law would seem a paradoxical and peculiarly unsatisfactory step."Richardson J. agreed with the majority on the limitation point.
"There is no proper analogy between this situation' - i.e. the situation in Sparham-Souter's case - 'and the type of situation exemplified in Cartledge v. E. Jopling & Sons Ltd. where a plaintiff due to the negligence of the defendants suffers physical bodily injury which at the outset and for many years thereafter may be clinically unobservable. In those circumstances clearly damage is done to the plaintiff and the cause of action accrues from the moment of the first injury albeit undetected and undetectable. That is not so where the negligence has caused unobservable damage not to the plaintiff's body but to his house. He can get rid of his house before any damage is suffered. Not so with his body."
'There is undoubtedly a superficial attraction in the argument which found favour with all five Lords of Appeal in Pirelli's case. If the nature of the damage suffered is regarded as a physical loss, it does indeed look as if the principle in Cartledge v. E. Jopling & Sons Ltd. should apply, on the basis that the damage is there but is unknown and, it may be, unknowable. But if the damage is recognised as economic the whole picture changes. It is thought that a failure to appreciate this point undermines the whole thrust of the argument in Pirelli's case:' Stephen Todd, 'Latent Defects in Property and the Limitation Act: A Defence of the 'Discoverability' Test' (1983) 10 N.Z.U.L.R. 311, 316.This passage is a remarkable anticipation of the reasoning of the House of Lords in Murphy's case [1991] 1 AC 398.
'Nor is the respondents' claim in the present case for ordinary physical damage to themselves or their property. Their claim, as now crystallised, is not in respect of damage to the fabric of the house or to other property caused by collapse or subsidence of the house as a result of the inadequate foundations. It is for the loss or damage represented by the actual inadequacy of the foundations, that is to say, it is for the cost of remedying a structural defect in their property which already existed at the time when they acquired it . . . It is arguable that any such loss or injury should be seen as being sustained at the time of acquisition when, because of ignorance of the inadequacy of the foundations, a higher price is paid (or a higher rent is agreed to be paid) than is warranted by the intrinsic worth of the freehold or leasehold estate that is being acquired. Militating against that approach is the consideration that, for so long as the inadequacy of the foundations is neither known nor manifest, no identifiable loss has come home: if the purchaser or tenant sells the freehold or leasehold estate within that time, he or she will sustain no loss by reason of the inadequacy of the foundations. The alternative, and in my view preferable, approach is that any loss or injury involved in the actual inadequacy of the foundations is sustained only at the time when that inadequacy is first known or manifest. It is only then that the actual diminution in the market value of the premises occurs. On either approach, however, any loss involved in the actual inadequacy of the foundations by a person who acquires an interest in the premises after the building has been completed is merely economic in its nature."Once it is appreciated that the loss in respect of which the plaintiff in the present case is suing is loss to his pocket, and not for physical damage to the house or foundations, then most, if not all the difficulties surrounding the limitation question fall away. The plaintiff's loss occurs when the market value of the house is depreciated by reason of the defective foundations, and not before. If he resells the house at full value before the defect is discovered, he has suffered no loss. Thus in the common case the occurrence of the loss and the discovery of the loss will coincide.
"if the building suffers damage or an event occurs which reveals the breach of duty by the local authority or which would cause a prudent owner-occupier to make investigations which, if properly carried out, would reveal the breach of duty by that local authority."In other words, the cause of action accrues when the cracks become so bad, or the defects so obvious, that any reasonable homeowner would call in an expert. Since the defects would then be obvious to a potential buyer, or his expert, that marks the moment when the market value of the building is depreciated, and therefore the moment when the economic loss occurs. Their Lordships do not think it is possible to define the moment more accurately. The measure of the loss will then be the cost of repairs, if it is reasonable to repair, or the depreciation in the market value if it is not: see Ruxley Electronics and Construction Ltd. v. Forsyth [1996] 1 A.C. 344.
