Murphy v Brentwood District Council [1991] 1 AC 398

House of Lords 

Facts: C purchased a house with defective foundations approved by engineers contracted by the council. After 15 years, the house developed severe structural issues, and C had to sell it at a loss. 

Issue: To what extent can you recover for economic loss due to negligent construction by a third party to whom you have no contract? 

Held : D was not liable as C suffered pure economic loss. Liability for defective property only occurs where the defect was latent and caused damage to persons or other property

• Lord Keith of Kinkel : Damage categorized as property damage in Anns v Merton was, in reality, economic loss. Once a defect becomes apparent, it no longer poses a danger; the loss is purely economic. Allowing claims for rectifying defects before they cause damage would open a broad field of claims, imposing extensive liability on manufacturers and builders. Liability for economic loss is confined to contractual relationships or special relationships of proximity between the claimant and defendant. The council could only be liable if they breached a statutory duty, which they did not in this case.