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Who bears responsibility when cracks appear in your building?

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Case law can only develop in response to the cases that are brought before the courts, writes Sue Lindsey. There are many issues waiting for the right set of facts to come along and provide a vehicle for the law to be reviewed. One such question revolves around when a claim against a construction professional for negligent design arises. Usually, the losses involved have been styled by the courts as economic. Your building might be about to crack, or have cracked, but as far as the legal interpretation goes, what has actually happened is that as a result of negligence your building is worth less, or needs repair. The real damage is to your pocket. The question is: does that loss arise when the building is finished, or when there is physical damage that needs repair?

It matters because a claimant can find their claim time-barred if they start proceedings too long after their right to claim arose. Difficulties about when the right to claim negligence arises are not uncommon. It is precisely when time problems loom that claimants who had a contract with their construction professional find themselves out of time for a contract claim, which accrues upon breach of contract. They then look to the potentially longer time periods afforded by the tort of negligence.

Back in 1983 the House of Lords decided in Pirelli v Oscar Faber that a right to claim arises when a building suffers physical damage. Since then the law of tort has moved on. So is Pirelli still right? Step forward Abbott v Will Gannon & Smith, (Court of Appeal, 2 March 2005), which provided a set of facts almost indistinguishable in legal terms from Pirelli (and which, incidentally, might call to mind a popular television series of the 1970s).

In 1995, the owners of a hotel in Torquay carried out works to a large bay window. They had instructed an engineer. Following the original works in 1995, remedial works were needed in 1997, but the lintel over the window moved in 1999 and caused cracking. A second lot of remedial works were carried out, which were the subject of a claim started in 2003. The owners argued that the damage occurred when the cracks appeared in 1999, so they were in time. The engineer said that the limitation period should date back to 1997 when the remedial works were finished, which would make the claim too late. The Deputy District Judge in Exeter who heard the matter decided, in accordance with Pirelli, that time ran from the cracks appearing.

To decide whether the judge had got it right, the Court of Appeal looked at Pirelli, two other House of Lords decisions (including Murphy v Brentwood) and the decision of the Privy Council in Invercargill. (The Privy Council includes members of the House of Lords sitting as an appeal court for another jurisdiction; in Invercargill it was New Zealand).

Murphy was the case in which seven law lords (instead of the usual five) decided that a local authority was not liable to a householder for having approved defective foundations that diminished the value of his house.

In reaching his conclusion, Lord Keith referred to Pirelli. He did not say he disagreed with it, but he did say that a claimant would not have to wait until damage occurred in order to have a cause of action. As soon as they knew they had a defective building, they had suffered an economic loss because they had to carry out repairs.

Lord Lloyd in Invercargill described the decision in Pirelli as unfortunate. He concluded that it was not for the Privy Council to say whether it remained good law in England. (They decided it was not good law in New Zealand. ) After reviewing these high authorities, Lord Justice Tuckey in Abbott posed himself the question of what is the present state of the law in England. He concluded with regret that he was unable to give a clear answer with any confidence. Invercargill had left open the question of whether Pirelli was still right, and Murphy had not disapproved it. The Court of Appeal concluded that only the House of Lords can review whether Pirelli is still the law or not.

Until that happens - for which we will have to wait until these or another suitable set of facts work their way up the court system - Pirelli remains with us.

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