(New Zealand) Seventeen years earlier the plaintiff had asked a builder to construct a house for him, but it now appeared that the foundations had been inadequate. The building company no longer being in existence, he sought damages from the local authority which had supervised the construction.
Held: A Local Authority was liable for economic losses for a negligent inspection of a house during construction. Murphy had not been followed in New Zealand and the Privy Council accepted that this was justified. The Pirelli date of physical damage had also been discarded in favour of the date of discoverability. The decision in Pirelli was unfortunate: 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 suffers no loss. Thus in the common case the occurrence of the loss and the discovery of the loss will coincide . . But the plaintiff cannot postpone the start of the limitation period by shutting his eyes to the obvious . . . In other words the cause of action accrues when the cracks become so bad and all the defects so obvious, that any reasonable home-owner 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 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 . . . This approach avoids almost all the practical and theoretical difficulties to which the academic commentators have drawn attention and which led to the rejection of Pirelli by the Supreme Court of Canada . . . The approach is consistent with the underlying principle that a cause of action accrues when, but not before, all the elements necessary to support the plaintiff’s claim are in existence. For in the case of a latent defect in a building the element of loss or damage which is necessary to support a claim for economic loss in tort does not exist so long as the market value of the house is unaffected. Whether or not it is right to describe an undiscoverable crack as damage, it clearly cannot affect the value of the building on the market. The existence of such a crack is thus irrelevant to the cause of action . . . Whether Pirelli should still be regarded as good law in England is not for their Lordships to say. What is clear is that it is not good law in New Zealand.
Lord Browne-Wilkinson, Lord Keith of Kinkel, Lord Browne-Wilkinson, Lord Mustill, Lord Lloyd of Berwick, Sir Michael Hardie Boys
Times 15-Feb-1996, 50 Con LR 105,  AC 624,  UKPC 56, 78 BLR 78,  1 NZLR 513,  1 All ER 756
Cited – Murphy v Brentwood District Council HL 26-Jul-1990
Anns v Merton Overruled
The claimant appellant was a house owner. He had bought the house from its builders. Those builders had employed civil engineers to design the foundations. That design was negligent. They had submitted the plans to the defendant Council for approval . .
Cited – Pirelli General Cable Works v Oscar Faber and Partners HL 2-Jan-1983
The plaintiff asked the defendant consulting engineer to design an extension to their factory in 1969. Not later than in April 1970, cracks developed in the chimney. In 1977 the cause of the damage was discovered. It arose from design faults in the . .
Cited – Abbott and Another v Will Gannon and Smith Ltd CA 2-Mar-2005
The claimant had employed the defendants to design refurbishment works for their hotel. The work was said to be negligent, and the claimant sought damages. The defendant argued as a preliminary point that the claim was time barred. The question was . .
Cited – W v W; J v Raewyn Bell PC 19-Jan-1999
PC (New Zealand) The claimants sught to recover exemplary damages from defendants convicted of criminal offences against them.
Held: There were differences in the system between New Zealand and the English . .
Lists of cited by and citing cases may be incomplete.
Commonwealth, Construction, Local Government, Negligence
Updated: 19 May 2022; Ref: scu.82411