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A local authority building inspector negligently approved plans for the foundation of a house that subsequently subsided. The homeowner, Richard, could not pay £45,000 for repairs and sold the house for £35,000, £10,000 less than he would have obtained for it had the foundations been designed properly. Richard now wants to sue the council in respect of this damage.
How would you advise him?
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The damage incurred by Richard was purely economic, as opposed to physical damage. According to the ruling in Murphy v Brentwood District Council [1991], the local authority is not liable for pure economic loss resulting from negligent approval of building plans. The court held that there must be a special relationship of proximity to impose liability for economic losses, which did not exist in this case. The loss Richard suffered by selling the house at a lower price does not constitute physical damage but rather a financial loss due to the defects.
Key Point: The Murphy v Brentwood District Council case establishes that local authorities are not liable for pure economic losses arising from their negligence unless there is a special relationship of proximity. This distinction between economic and physical loss is crucial in determining the scope of liability in negligence claims against public authorities.
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