Abbott and Another v Will Gannon and Smith Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE TUCKEY,Lord Justice Clarke,Lord Justice Mummery |
| Judgment Date | 02 March 2005 |
| Neutral Citation | [2005] EWCA Civ 198 |
| Docket Number | Case No: B2/2004/1768 |
| Court | Court of Appeal (Civil Division) |
| Date | 02 March 2005 |
[2005] EWCA Civ 198
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM DEPUTY DISTRICT JUDGE CHILDS
EXETER COUNTY COURT
LS 357742
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lord Justice Tuckey and
Lord Justice Clarke
Case No: B2/2004/1768
Derek HOLWILL (instructed by Messrs. Bond Pearce) for the Appellant
Ian PENNOCK (instructed by Messrs. Richmond & Co.) for the Respondent
In Pirelli General Cable Works Ltd. v Oscar Faber & Partners [1983] 2 AC 1 the House of Lords decided that a building owner's cause of action against his consulting engineer for negligent design accrued for limitation purposes when physical damage to the building first occurred. The question on this appeal is whether Pirelli is still good law. It arises on appeal (transferred to this court under CPR 52.14) from a decision of Deputy District Judge Childs in the Exeter County Court who applied Pirelli to the facts of this case which are indistinguishable from those in Pirelli.
The appellant engineers say that the later decision of the House in Murphy v Brentwood D.C [1991] AC 398 is inconsistent with Pirelli which should no longer be followed. They submit that Murphy decides that the cause of action accrues when the building owner suffers economic loss. This occurs when work to the negligent design has been completed leaving the owner with a defective building in need of remedial work.
The Facts
The judge tried the limitation point as a preliminary issue on agreed facts. The claimants were the owners of a hotel in Torquay. In May 1995 they retained the defendant consulting structural and civil engineers to design the work necessary to remedy structural defects in a large bay window of the hotel. The contract to do this work was made orally and contained the usual implied term that it would be carried out with reasonable care and skill. Remedial work to the engineers' design was completed by a local builder in March 1997. In late 1999 the claimants first noticed that the lintel over the window had moved and cracked the surrounding structure. The agreed statement of facts upon which the preliminary issue was tried said that:
… the works did not prevent the lintel over the bay window …. from deflecting further and causing more damage. As a result the claimants were in possession of a property which was flawed and defective.
Further remedial works costing approximately £20,000 had to be carried out.
The claim against the engineers, put both in contract and tort, was not issued until 15 September 2003. The particulars of claim simply alleged that the breach of contract/duty had caused the defects which appeared in 1999 and claimed the cost of remedying them and consequential losses.
It was common ground that the contract claim was time barred. The concurrent claim in tort was time barred if it accrued more than six years before the issue of the claim: (s. 2 Limitation Act 1980), but of course it did not accrue until damage had occurred. S. 14A of the 1980 Act extended the primary limitation period for a further three years from the claimants' "date of knowledge" but as this was late 1999 and the claim was not issued until 2003 this extension of time did not help them. If, as the engineers contended, the cause of action accrued when the work was completed in March 1997 the claim was time barred; if it accrued when physical damage to the building first occurred it was probably not time barred. The claimants contended that such damage occurred when or shortly before they first noticed cracking in 1999. The judge did not make any finding about this but simply made a declaration that "if cracks first appeared within six years of the issue of proceedings [the claim] is not statute barred".
Respondents Notice
Before considering the main point on this appeal it is necessary to dispose of a preliminary objection to our hearing the appeal raised by the claimants in their respondents notice. What they say is that before the claim was issued the engineers admitted liability. Therefore, before proceeding with their defence, the engineers needed to withdraw this admission under CPR 14.1 (5) and as they did not do so their defence is an abuse of process and should be struck out. This point was apparently raised in the court below but there was no time to deal with it.
There are probably a number of answers to this point but the short answer is that the two letters relied on by the claimants do not contain any admission of liability. They emanate from loss adjusters instructed on behalf of the engineers' insurers and simply say that insurers will insist on proper proof of any losses attributable to the inadequate design alleged. That is not an admission of liability; it is the sort of letter insurers and loss adjusters write in order to evaluate the claims they face.
The Cases
As I have said the facts in Pirelli are on all fours with the facts in the present case. Engineers had negligently designed a chimney for the plaintiff's factory which was built by July 1969. Not later than April 1970 cracks developed at the top of the chimney which were not discovered until November 1977. Extensive remedial work had to be carried out and in October 1978 proceedings were issued which included a claim for negligence. The defendants suggested three possible dates for the accrual of the cause of action: when the plaintiffs relied on the negligent advice, when building of the chimney was completed and when cracks first occurred. The plaintiff argued for the date when the damage was or ought with reasonable diligence to have been discovered.
Lord Fraser gave the leading judgment, with which Lords Scarman, Bridge, Brandon and Templeman agreed. Much of the judgment was devoted to consideration and disapproval of an earlier decision of this court to the effect that in cases involving latent defects in buildings the cause of action did not accrue until the date of discoverability. At p. 16 Lord Fraser pointed out that a latent defect in the foundations of a building might never lead to any damage to the building. He said that in such a case a plaintiff's cause of action would not accrue until damage occurred which would commonly consist of cracks coming into existence as a result of the defect, even though the cracks or the defect might be undiscovered and undiscoverable. At p. 17 he recorded the submission that the case of a negligent engineer was analogous to that of a solicitor who gives negligent advice where, following the Forster v Outred [1982] 1 WLR 86 line of authority, the cause of action accrues when the client acts on the advice. He continued:
It is not necessary for the present purpose to decide whether that submission is well founded, but as at present advised, I do not think it is. It seems to me that, except perhaps where the advice of an architect or consulting engineer leads to the erection of a building which is so defective as to be doomed from the start, the cause of action accrues only when physical damage occurs to the building.
and a little later he said:
I would hold that the cause of action accrued in Spring 1970 when damage in the form of cracks near the top of the chimney must have come into existence.
This meant that the plaintiff's claim was time barred – a result which was acknowledged to be unjust and led to the passing of what became S.14A of the 1980 Act.
Lord Fraser's possible exception of a building which was so defective as to be doomed from the start was one of the issues considered by the House in Ketteman v Hansel Properties [1987] AC 189. That was a case in which purchasers of houses built on defective foundations sued the builders and later the architects who designed them. It was argued on behalf of the defendants that the houses were doomed from the start so the cause of action accrued, not when the physical damage to the houses occurred, but when the plaintiffs became the owners of the houses with defective foundations, at which time they suffered economic loss because the houses were less valuable than they would have been if the foundations had been sound. In rejecting this argument Lord Keith said (p.205):
The proposition that a cause of action in tort accrued out of negligence resulting in pure economic loss was thought to be vouched by reference to Junior Books Ltd. v Veitchi Co. Ltd. 1983 1 AC 520. That case was cited in Pirelli in support of the argument that, since in that case there was economic loss when the chimney was built, the cause of action arose then. The argument was clearly rejected in the speech of Lord Fraser concurred in by all the others of their Lordships who participated in the decision. At p.16, he expressed the opinion that a latent defect in the building does not give rise to a cause of action until damage occurs. In the present case there can be no doubt that the defects in the houses were latent. No-one knew of their existence until damage occurred … this branch of the argument for the architects is in my opinion inconsistent with the decision in Pirelli and must be rejected.
Of the doomed from the start argument he said:
Whatever Lord Fraser may have had in mind in uttering the dicta in question, it cannot, in my opinion have been a building with a latent defect which must inevitably result in damage at some stage. That is precisely the kind of building that Pirelli was concerned with, and in relation to which it was held that the cause of action accrued when the damage occurred. This case is indistinguishable from Pirelli and must be decided...
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