Bryan v Maloney

[1995] HCA 17

HIGH COURT OF AUSTRALIA

MASON CJ, BRENNAN, DEANE, TOOHEY AND GAUDRON JJ

BRYAN v MALONEY

(1995) 182 CLR 609

23 March 1995

Negligence—Duty of care—Proximity—Economic loss—Defective construction of dwelling house—Liability of builder to subsequent purchaser—Damages—Diminution in value of house.

Headnote

A professional builder constructed a dwelling house for a landowner under a contract which contained no relevant exclusion or limitation of liability. After a subsequent purchaser had taken possession, cracks began to appear in the walls of the house caused by the fact that it had been built with inadequate footings. The purchaser sued the builder in negligence.


Held, by Mason CJ, Deane, Toohey and Gaudron JJ., Brennan J. dissenting, that the builder owed the purchaser a duty to take reasonable care in the construction of the house and was liable to her in damages for an amount equal to the decrease in its value resulting from the inadequacy of the footings and its consequences.


Bowen v. Paramount Builders, (1977) 1 NZLR 394; Mt Albeit Borough Council v. Johnson, (1979) 2 NZLR 234; Askin v. Knox, (1989) 1 NZLR 248; Miell v. Hatjopoulos (1987), 4 BCL 226; Lowden v. Lewis, (1989) Tas R 254; National Mutual Life Association of Australasia Ltd. v. Coffey and Partners Pty. Ltd., (1991) 2 Qd R 401; Brumby v. Pearton (1991), 10 BCL 291; Opat v. National Mutual Life Association of Australasia Ltd., (1992) 1 VR 283; and Winnipeg Condominium Corporation No. 36 v. Bird Construction Co. Ltd. (unreported; Supreme Court of Canada; 26 January 1995), approved.


D. and F Estates Ltd. v. Church Commissioners for England, (1989) AC 177, and Murphy v. Brentwood District Council, (1991) 1 AC 398, not followed.


Per Mason CT, Deane, Toohey and Gaudron JJ. (1) The relationship between builder and subsequent owner as regards the particular kind of economic loss suffered, namely the diminution in value of a house when the inadequacy of its footings first becomes manifest by reason of consequent damage to the fabric of the house, should be accepted as possessing a comparable degree of proximity to that possessed by the relationship between the builder and first owner and as giving rise to a duty to take reasonable care on the part of the builder to avoid such loss.


(2) Whether a relationship of proximity can exist, in some circumstances, between the manufacturer and the purchaser or subsequent owner of a chattel in respect of the diminution in the value of the chattel sustained when a latent defect in it first becomes manifest, was not determined by the decision in the present case.


Per Brennan J. (dissenting) (1) A builder owes no duty of care to a remote purchaser in respect of defects in the quality of the building. (2) In novel cases in which the question is whether a tortious duty of care should be expanded, the proper approach is to attempt to identify the content of the criteria or rules which might thereafter be applied in determining cases failing within the category then under consideration. If proximity in the broader sense be invoked as a criterion of liability in particular cases without an a priori definition of its content, the certainty which analysis of the different elements of tortious liability in different categories of case can produce will be lost, and the definition of elements which might constitute and distinguish a new category of case will give way to a mere evaluation of the circumstances favouring or not favouring recovery.


Decision of the Supreme Court of Tasmania (Full Court) affirmed.

Hearing

HOBART, 1994, March 23, 24; CANBERRA, 1995, March 23
#DATE 23:3:1995

APPEAL from the Supreme Court of Tasmania.

In 1986 Judith Anne Maloney purchased a house in Launceston from Mr. and Mrs. Quittenden. About six months after the purchase cracks began to appear in the walls. This was due to the fact that the house had been built with footings which were inadequate to withstand the seasonal changes in the clay soil. Mrs. Maloney sued the builder of the house, Allan Bryan, in the Supreme Court of Tasmania, for negligence. He had built it in 1979 for Mrs. Manion who had sold it to the Quittendens. Wright J. found in the plaintiff's favour and awarded her damages of $34,464.68, that being the cost of remedying the inadequate footings and consequential damage to the fabric of the house. An appeal by the defendant to the Full Court (Cox, Underwood and Crawford JJ.) was dismissed. He then appealed to the High Court by special leave.


S. P. Charles QC (with him G. J. Digby QC) for the appellant. It was common ground in the Supreme Court that the damage suffered was pure economic loss (1). It was not open to the trial judge or the Full Court to find that the owner relied on the builder, or to infer reliance. There was no evidence that she knew the identity of the builder before deciding to purchase. Nor was there evidence that she inquired whether the house had been built by a qualified builder or

(1) Sutherland Shire Council v. Heyman (1985), 157 CLR 424, at pp. 503-505; Murphy v. Brentwood District Council, (1991)1 AC 398, at pp. 466-468.

as to his skill or reputation. It is however conceded that the absence of reliance is not necessarily fatal to the claim. The owner can recover damages for pure economic loss only if she establishes a sufficient relationship of proximity between the builder and the owner so as to give rise to a duty of care on the part of the builder not to cause such economic loss (2). It is conceded that it was reasonably foreseeable to the builder that damage would, at some unknown future time, be caused to the owner or occupier of the house in consequence of the discovery or manifestation of the defective state of the foundations. For the requirement of proximity to be established in the present case there must be either causal proximity or the assumption of a responsibility to take care to avoid or prevent damage (3). There was neither physical nor circumstantial proximity. Circumstantial proximity involves some special relationship between the parties, such as the holding out of particular skill or specialty. The builder had no particular skill. His only qualification was a carpentry apprenticeship. A builder assumes a contractual responsibility to the owner which is limited by the terms of the building contract, any exceptions or exclusions of liability in it, and the relevant limitation period, which will usually prevent the taking of proceedings by the proprietor once six years have elapsed after the appearance of damage in the structure. In the absence of any special relationship between the builder and the owner, and in the absence of reliance by the owner on the builder, no sound reasons exist for fixing the builder with a duty of care to prevent economic loss to a subsequent owner, or to fix the builder with liability in the present case. To impose liability on the builder to a subsequent purchaser means that the builder is subjected to a duty of care which is comparable to an additional warranty (4). The nature and extent of that warranty would be affected by the terms of the building contract in some respects only. In so far as the entitlement of the first purchaser to take proceedings was limited by certificates of practical completion, final certificates, or otherwise, subsequent purchasers will have greater rights than the first purchaser had by contract. To the extent that the duty of care found in favour of the subsequent purchaser enlarges rights given under a

(2) Jaensch v. Coffey (1984), 155 CLR 549, at pp. 553-554, 583-585; Sutherland Shire Council v. Heyman (1985), 157 CLR, at pp. 441, 495, 497-498; Murphy v. Brentwood District Council, (1991) 1 AC, at pp. 475-480, 485, 487-488, 489.

(3) Sutherland Shire Council v. Heyman (1985), 157 CLR, at pp. 497-498.

(4) Junior Books Ltd. v. Veitchi Co. Ltd., (1983) 1 AC 520, at p. 551; Murphy v. Brentwood District Council, (1991) 1 AC, at p. 480; D. and F. Estates Ltd. v. Church Commissioners for England, (1989) 1 AC, at pp. 207-208.

statutory warranty, there will be inconsistency between rights granted by the relevant Parliament and those found to exist by an extension of the common law (5). (He referred to Housing Indemnity Act 1992 (Tas.), ss. 7-9, 22 and Trade Practices Act 1974 (Cth), S. 75AG.) The duty of care owed by the builder will attract liability for indeterminate periods, with a limitation period commencing to run only upon the occurrence of damage and knowledge of that damage, causing in turn economic loss in the form of the cost of repairs or a reduction in value of the house. Claims will be capable of being made many years after the completion of construction and at a time when the assessment by a court of what was reasonable conduct for a builder at the time of construction is difficult. Builders may be subjected to repeated claims in relation to the same damage, in circumstances where a proprietor claims the cost of repairs and, having received compensation, sells the property without applying the proceeds in repairs to the structure, and without any reduction in the price. Builders may also be subjected to repeated claims in circumstances where a property is deteriorating and the degree of deterioration reaches the critical stage which is seen to be fresh damage (6). The imposition of such an extended obligation would seriously affect the ability of builders to determine the future conduct of their business and to assess their financial situation, and add significantly to the cost of insurance, a cost that would inevitably be passed on to consumers. The imposition of an extended obligation on the original builder may tend to discourage purchasers from seeking expert assistance when inspecting the property they propose to purchase. The tortious liability imposed on a builder will substantially exceed that imposed on the manufacturer of a chattel to subsequent purchasers of the chattel. The negligent manufacturer of a chattel has no responsibility to a third party into whose hands it has come for the cost of putting it into a state in which it can be used (7). (He also referred to Miell v. Hatjopoulos (8); Brumby v. Pearton (9); and Opat v. National Mutual Life Association of Australasia Ltd. (10).) National Mutual Life Association of Australasia Ltd. v.

(5) Murphy v. Brentwood District Council, (1991) AC, at pp. 480-481; D. and F. Estates Ltd. v. Church Commissioners for England, (1989) 1 AC, at pp. 207-208.

(6) Sutherland Shire Council v. Heyman (1985),157 CLR, at pp. 491-492.

(7) Murphy v. Brentwood District Council, (1991) 1 AC, at pp. 468-471, 475-479, 487-488; East River Steamship Corporation v. Transamerica Delaval Inc. (1986), 106 S. Ct. 2295; Minchillo v. Ford Motor Co. (unreported; Supreme Court of Victoria; 10 February 1994).

(8) (1987) 4 BCL 226.

(9) (1991) 10 BCL 291.

(10) (1992) 1 VR 283.

Coffey and Partners Pty. Ltd. (11) involved a professional, and thus proximity existed on established grounds. Lowden v. Lewis (12), Carosella v. Ginos and Gilbert Pty. Ltd. (13), Dutton v. Jalopen Pty. Ltd. (14), and C.A.I. Fences Pty. Ltd. v. Ravi (Builder) Pty. Ltd. (15) do not cover the present case. In the first case there was a contract of sale between the plaintiff and the defendant. In the second, the plaintiff was the first purchaser. In the third, there was a close relationship between the parties and direct contact between them in the process of sale. In the fourth, there was a close relationship between all the parties, and there was the assumption of a special relationship as was the case with the architect in Voli v. Inglewood Shire Council (16).


P. W. Tree (with him S. B. McElwaine and A. P. F. Ryan), for the respondent. Proximity is necessary to found liability in all negligence actions in the sense that it is the general determinant of the categories of case where the courts recognize the existence of a duty of care where loss of the kind suffered was reasonably foreseeable (17). Characterization of loss as physical damage, purely economic loss or economic loss consequential upon physical damage, is not finally determinative (18). Rather the inquiry is whether proximity exists with respect of the allegedly negligent class of act and the particular kind of damage which the plaintiff has actually sustained (19). Proximity may be found not just in the relationship between the parties but in a review of all the factors connecting the negligent act with the loss (20). The identity and relative importance of the factors which are determinative of the existence of proximity vary in different categories of case (21). There was proximity in the present case. There was causal proximity in the sense of closeness and directness between the allegedly negligent act and the loss and

(11) (1991) 2 Qd R 401.

(12) (1989) Tas R 254.

(13) (1981) 27 SASR 515; (1982) 57 ALJR 315.

(14) Unreported; Supreme Court (Q.); 14 March 1991.

(15) Unreported; Supreme Court (W.A.); 1988.

(16) (1963) 110 CLR 74.

(17) Gala v. Preston (1991), 172 CLR 243, at p. 253; San Sebastian Pty. Ltd v. The Minister (1986), 162 CLR 340, at p. 355.

(18) Caltex Oil (Australia) Pty. Ltd v. The Dredge "Willemstad" (1977), 136 CLR 529, at p. 591; Sutherland Shire Council v. Heyman (1985), 157 CLR, at pp. 466, 493, 502.

(19) Hawkins v. Clayton (1988),164 CLR 539, at p. 576.

(20) Sutherland Shire Council v. Heyman (1985), 157 CLR, at pp. 441, 497-498; Canadian National Railway Co. v. Norsk Pacific Steamship Co. Ltd., (1992) 1 SCR 1022, at pp. 1153-1154; (1992) 91 DLR (4th) 289, at pp. 370-371.

(21) Hawkins v. Clayton (1988), 164 CLR, at p. 577.

injuries sustained (22). There can only be one plaintiff and one recovery (23). (He referred to Lempke v. Dagenais (24); Huang v. Garner (25); and Aris Helicopters v. Allison Gas Turbine (26).) Justice requires that loss be borne by the person who failed to exercise reasonable care rather than by an innocent subsequent purchaser (27). The owner reasonably relied on the builder's competence, and it was foreseeable that she would (28). There was a high probability that economic loss would result if reasonable care was not taken (29). In the United States a subsequent purchaser can recover against a builder in tort for economic loss (30), and upon a transmissible warranty as to habitability (31). (He referred to Lieder, "Constructing a New Action for Negligent Infliction of Economic Loss: Building on Cardozo and Coase" (32).) In Canada recovery has been denied in Winnipeg Condominium Corporation No. 36 v. Bird Construction Co. Ltd. (33). Leave to appeal to the Supreme Court has been granted, and the appeal is to be heard in June or October 1994. Recovery has been allowed in New Zealand (34), though the loss was characterized as physical. (He referred to Cooke, "An Impossible Distinction" (35).) D. and F. Estates Ltd. v. Church Commissioners for England (36) and Murphy v. Brentwood District Council (37) should not be followed. The latter case is based largely upon the statutory position in the United Kingdom and the Court's role vis-a-vis Parliament. The House of Lords was not referred to any Australian authority later than Sutherland Shire Council v. Heyman (38). The reliance on East River Steamship

(22) Sutherland Shire Council v. Heyman (1985), 157 CLR, at p. 424.

(23) ibid., at p. 465; Grubb, "A Case for Recognizing Economic Loss in Defective Building Cases" (1984) Cambridge Law Journal 111, at p. 118.

(24) (1988) 547 A. 2d 290.

(25) (1984) 203 Cal Rep 800.

(26) (1991) 932 F 2d 825.

(27) Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (1977), 136 CLR, at p. 575.

(28) Sutherland Shire Council v. Heyman (1985),157 CLR, at p. 498.

(29) Christopher v. Motor Vessel "Fiji Gas" (1993), Aust. Torts Rep. 61,960, at pp. 61,964-61,965.

(30) Huang v. Garner (1984), 157 Cal App 3d 763; Terlinde v. Neely (1980), 271 S.E. 2d 768.

(31) Lempke v. Dagenais (1988), 547 A 2d 290.

(32) (1991) Washington Law Review 937.

(33) (1993) 101 DLR (4th) 699.

(34) Bowen v. Paramount Builders, (1977) 1 NZLR 394.

(35) Law Quarterly Review, vol. 107 (1991) 46, at p. 48.

(36) (1989) 1 AC 177.

(37) (1991) 1 AC 398.

(38) (1985) 157 CLR 424.

Corporation v. Transamerica Delaval Inc. (39) was misleading. The Supreme Court does not bind State courts in matters of tort. (He referred to Nitrigin Eireann Teoranta v. Inco Alloys Ltd. (40) and O'Dair, "Murphy v. Brentwood District Council: A House with Firm Foundations" (41).)


S. P. Charles QC, in reply. Miell v. Hatjopoulos (42) shows that the assertion that there can be only one plaintiff and one recovery is incorrect. The matters referred to in Lempke v. Dagenais (43) are appropriate for a legislature to take into account in repairing perceived deficiencies in the common law. They are not matters for an Australian court to consider as a basis for constructing or developing a cause of action. (He referred to Aloe Coal Co. v. Clark Equipment (44) and Louisiana v. M. V. "Testbank" (45).) Bowen v. Paramount Builders (46) was doubted in Murphy v. Brentwood District Council (47) and D. and F. Estates Ltd. v. Church Com-missioners for England (48).

(39) (1986) 106 S. Ct. 2295.

(40) (1992) WLR 498; (1992) 1 All ER 854.

(41) Modern Law Review, vol. 54 (1991), 561.

(42) (1988) 4 BCL 226.

(43) (1988) 547 A. 2d 290.

(44) (1987) 816 F. 2d 110.

(45) (1985) 752 F. 2d 1016.

(46) (1977) 1 NZLR 394.

(47) (1991) 1 AC, at pp. 469, 478, 496.

(48) (1989) 1 AC, at pp. 205, 207, 214-215.
Cur. adv. vult.


Counsel for the Appellant: S. P. Charles QC and D. J. Digby QC


Solicitors for the Appellant: Sly and Weigall


Counsel for the Respondent: P. W. Tree, S. B. McElwaine and
A. P. F. Ryan



Solicitors for the Respondent: Zeeman Kable and Page

Orders

Appeal dismissed with costs

Decisions

MASON CJ, DEANE AND GAUDRON JJ The appellant, Mr Bryan, is a professional builder. In 1979, he built a house for a Mrs Manion on land in Launceston which Mrs Manion owned. Subsequently, Mrs Manion sold the land and the house to a Mr and Mrs Quittenden. In 1986, Mr and Mrs Quittenden sold the land and house to the respondent, Mrs Maloney.


2. Mrs Maloney inspected the house three times before purchasing it. She noticed no cracks or other defects. She said that she specifically looked for cracks on the outside walls and found none. Apparently, she neither knew nor inquired about the identity of the builder. Her evidence was that the house suited her needs, that she thought "it was a good solid house", that she "couldn't find anything wrong with it" and that she "thought it would be built properly ... so I bought it". About six months after the purchase, cracks began to appear in the walls of the house. The damage to the fabric of the house became extensive. The reason for the cracks and subsequent damage was that the house had been built by Mr Bryan with footings which were inadequate to withstand the seasonal changes in the clay soil.


3. Mrs Maloney instituted proceedings in negligence against Mr Bryan in the Supreme Court of Tasmania. The learned trial judge (Wright J) found in Mrs Maloney's favour and awarded damages of $34,464.68, that being the amount which his Honour found would necessarily be expended in remedying the inadequate footings and the consequential damage to the fabric of the house. Mr Bryan appealed to the Full Court of the Supreme Court of Tasmania. His appeal was unanimously dismissed. He now appeals to this Court from the judgment and order of the Full Court. It is appropriate at the outset to acknowledge the assistance we have received from the carefully researched and reasoned judgments of the trial judge and of Underwood J and of Crawford J (with whom Cox J agreed) in the Full Court.


4. Both in this Court and in the Full Court, the case has been argued on the basis that, in accordance with the findings and conclusions of the trial judge, a number of matters are now common ground, namely, that Mr Bryan was negligent in building the house with inadequate footings; that the damage sustained by Mrs Maloney was the loss involved in the decrease in the value of the house resulting from the inadequacy of the footings and its consequences; that that damage was sustained by Mrs Maloney when the inadequacy of the footings first became manifest by reason of the cracks appearing in the walls of the house after she had purchased it; and, that that damage was a foreseeable consequence of Mr Bryan's negligence. Moreover, it is not in issue that, in the circumstances of this case, the economic loss involved is the amount which would necessarily be expended in remedying the inadequate footing and their consequences as assessed by the trial judge. In the result, the sole remaining issue is whether Mr Bryan owed Mrs Maloney, as a subsequent purchaser of the house, a relevant duty of care under the law of negligence.

5. The evidence disclosed that Mrs Manion, for whom the house was originally built on what was described in argument as a "cost plus a margin (of profit)" basis, was Mr Bryan's sister-in-law. It is not, however, suggested that the relationship between them was other than an ordinary business relationship between a professional builder and his client or that the contract between them contained any relevant exclusion or limitation of liability. Nor is it now argued that there was any competing or intervening negligence by any other person or entity such as an architect or the local council. That being so, the case falls to be decided on the basis that it gives rise to a question which can be stated in abstract terms, namely, whether, under the law of negligence, a professional builder who constructs a house for the then owner of the land owes a prima facie duty to a subsequent owner of the house to exercise reasonable care to avoid the kind of foreseeable damage which Mrs Maloney sustained in the present case, that is to say, the diminution in value of the house when a latent and previously unknown defect in its footings or structure first becomes manifest. As the trial judge recognized, that damage, which was the only damage sustained by Mrs Maloney, was mere economic loss in the sense that it was distinct from, and not consequent upon, ordinary physical injury to person or property (1). In that regard, damage to the fabric of the house could not properly be treated as ordinary physical injury to property by reference to a "complex structure theory" of the kind adverted to by Lord Bridge of Harwich in D. and F. Estates Ltd. v. Church Commissioners (2). At least in a case such as the present where the whole building has been erected by the one builder, "the complex structure theory offers no escape from the conclusion that damage to a house itself which is attributable to a defect in the structure of the house ... represents purely economic loss" (3).


6. The cases in this Court establish that a duty of care arises under the common law of negligence of this country only where there exists a relationship of proximity between the parties with respect to both the relevant class of act or omission and the relevant kind of damage. In more settled areas of the law of negligence concerned with ordinary physical injury to the person or property of a plaintiff caused by some act of the defendant, reasonable foreseeability of such injury will commonly suffice to establish that the facts fall into a category which has already been recognized as involving a relationship of proximity between the parties with respect to such an act and such damage and as "attracting a duty of care, the scope of which is settled" (4). In contrast, the field of liability for mere economic loss is a comparatively new and developing area of the law of negligence. In that area, the question whether the requisite relationship of proximity exists in a particular category of case is more likely to be unresolved by previous binding authority with the consequence that the "notion of proximity ... is of vital importance" (5). As Stephen J indicated in Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (6), it is the "articulation", in the different categories of case, "of circumstances which denote sufficient proximity" with respect to mere economic loss, including "policy considerations", which will gradually provide "a body of precedent productive of the necessary certainty". Inevitably, the policy considerations which are legitimately taken into account in determining whether sufficient proximity exists in a novel category will be influenced by the courts' assessment of community standards and demands (7).


7. One policy consideration which may militate against recognition of a relationship of proximity in a category of case involving mere economic loss is the law's concern to avoid the imposition of liability "in an indeterminate amount for an indeterminate time to an indeterminate class" (8). Another consideration is the perception that, in a competitive world where one person's economic gain is commonly another's loss, a duty to take reasonable care to avoid causing mere economic loss to another, as distinct from physical injury to another's person or property, may be inconsistent with community standards in relation to what is ordinarily legitimate in the pursuit of personal advantage (9). The combined effect of those two distinct policy considerations is that the categories of case in which the requisite relationship of proximity with respect to mere economic loss is to be found are properly to be seen as special. Commonly, but not necessarily, they will involve an identified element of known reliance (or dependence) or the assumption of responsibility or a combination of the two (10).


8. As was pointed out in the recent majority judgment in Burnie Port Authority v. General Jones Pty. Ltd. (11), the overriding requirement of a relationship of proximity represents the conceptual determinant and the unifying theme of the categories of case in which the common law of negligence recognizes the existence of a duty to take reasonable care to avoid a reasonably foreseeable risk of injury to another. There is no decision of the Court which directly determines the question whether the relationship between Mr Bryan, as the builder of the house, and Mrs Maloney, as a subsequent owner of it, possessed the requisite degree of proximity to give rise to a duty, on the part of Mr Bryan, to take reasonable care to avoid the kind of economic loss sustained by Mrs Maloney. Necessarily, as has been indicated, the resolution of that question requires the articulation of both the factual components of the relevant category of relationship and the identification of any applicable policy considerations. Ultimately, however, it is a question of law which must be resolved by the ordinary processes of legal reasoning in the context of the existence or absence of the requisite element of proximity in comparable relationships or with respect to comparable acts and/or damage. Accordingly, it is appropriate to approach the question through a consideration of some related situations.


9. Mr Bryan and Mrs Manion were the parties to a contract in relation to the building of the house. Whatever may have been the position in earlier times (12), the existence of such a contractual relationship between builder and client did not preclude the existence either of a relationship of proximity between them in relation to that work or of a consequent duty of care under the ordinary law of negligence (13). That was made clear by Windeyer J, with the concurrence of the other members of the Court (Dixon CJ and Owen J), in Voli v. Inglewood Shire Council (14) when explaining the liabilities of an architect to his or her client:

"He is bound to exercise due care, skill and diligence. He is not required to have an extraordinary degree of skill or the highest professional attainments. But he must bring to the task he undertakes the competence and skill that is usual among architects practising their profession. And he must use due care. If he fails in these matters and the person who employed him thereby suffers damage, he is liable to that person. This liability can be said to arise either from a breach of his contract or in tort."

Subsequently, when dealing with the question of liability to a third party, Windeyer J commented (15):

"Whatever might have been thought to be the position before the broad principles of the law of negligence were stated in modern form in Donoghue v. Stevenson (16), it is now beyond doubt that, for the reasonably foreseeable consequences of careless or unskilful conduct, an architect is liable to anyone whom it could reasonably have been expected might be injured as a result of his negligence. To such a person he owes a duty of care quite independently of his contract of employment."

Those passages were quoted by Deane J in Hawkins v. Clayton (17), in a part of his judgment with which Mason CJ and Wilson J expressed their agreement (18), as support for the proposition that there are no acceptable grounds for refusing to recognize the liability of a solicitor in tort for negligence in the performance of professional work for a client. As Windeyer J himself recognized in Voli v. Inglewood Shire Council (19), they are applicable to define "the ordinary liabilities of any man who follows a skilled calling".


10. The fact that the law recognizes the existence of concurrent duties in contract and tort does not mean that the existence of a contractual relationship is irrelevant to either the existence of a relationship of proximity or the content of a duty of care under the ordinary law of negligence. In some circumstances, the existence of a contract will provide the occasion for, and constitute a factor favouring the recognition of, a relationship of proximity either between the parties to the contract or between one or both of those parties and a third person. In other circumstances, the contents of a contract may militate against recognition of a relationship of proximity under the ordinary law of negligence or confine, or even exclude the existence of, a relevant duty of care. The position in those regards was helpfully and correctly explained in the following extracts from the judgment of Le Dain J, speaking for a unanimous Supreme Court of Canada, in Central Trust Co. v. Rafuse (20):
"1. The common law duty of care that is created by a relationship of sufficient proximity ... is not confined to relationships that arise apart from contract. Although the relationships in Donoghue v. Stevenson, Hedley Byrne and Anns (21) were all of a non-contractual nature and there was necessarily reference in the judgments to a duty of care that exists apart from or independently of contract, I find nothing in the statements of general principle in those cases to suggest that the principle was intended to be confined to relationships that arise apart from contract. Indeed, the dictum of Lord Macmillan in Donoghue v. Stevenson concerning concurrent liability ... would clearly suggest the contrary. ... Junior Books Ltd. v. Veitchi Co. Ltd. (22), in which an owner sued flooring subcontractors directly in tort, is authority for the proposition that a common law duty of care may be created by a relationship of proximity that would not have arisen but for a contract.

2. What is undertaken by the contract will indicate the nature of the relationship that gives rise to the common law duty of care, but the nature and scope of the duty of care that is asserted as the foundation of the tortious liability must not depend on specific obligations or duties created by the express terms of the contract. It is in that sense that the common law duty of care must be independent of the contract. The distinction, in so far as the terms of the contract are concerned, is, broadly speaking, between what is to be done and how it is to be done. A claim cannot be said to be in tort if it depends for the nature and scope of the asserted duty of care on the manner in which an obligation or duty has been expressly and specifically defined by a contract. Where the common law duty of care is co-extensive with that which arises as an implied term of the contract it obviously does not depend on the terms of the contract, and there is nothing flowing from contractual intention which should preclude reliance on a concurrent or alternative liability in tort. The same is also true of reliance on a common law duty of care that falls short of a specific obligation or duty imposed by the express terms of a contract.
3. A concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort. Subject to this qualification, where concurrent liability in tort and contract exists the plaintiff has the right to assert the cause of action that appears to be most advantageous to him in respect of any particular legal consequence." The dictum of Lord Macmillan in Donoghue v. Stevenson to which Le Dain J referred in the first paragraph of the above extract reads as follows (23):

"The fact that there is a contractual relationship between the parties which may give rise to an action for breach of contract, does not exclude the co-existence of a right of action founded on negligence as between the same parties, independently of the contract, though arising out of the relationship in fact brought about by the contract. Of this the best illustration is the right of the injured railway passenger to sue the railway company either for breach of the contract of safe carriage or for negligence in carrying him."

Lord Macmillan went on to add (24):

"And there is no reason why the same set of facts should not give one person a right of action in contract and another person a right of action in tort."

It follows that, in the circumstances of this case where the contract between Mr Bryan and Mrs Manion was non-detailed and contained no exclusion or limitation of liability, neither the existence nor the content of the contract precluded the existence of liability to Mrs Manion or Mrs Maloney under the ordinary law of negligence. To the contrary, the case was of the kind referred to by Le Dain J at the end of the first paragraph of the above extract, namely, a case where the relationship of proximity arises by virtue of the contract and the work to be performed under it.


11. Clearly enough, a relationship of proximity existed between Mr Bryan and Mrs Manion with respect to ordinary physical injury to Mrs Manion or her property with the consequence that Mr Bryan was under a duty to exercise reasonable care in relation to the building work, including the footings, to avoid a foreseeable risk of such injury. A more difficult question is whether that relationship of proximity and consequent duty of care with respect to the building work extended to mere economic loss by Mrs Manion of the kind ultimately sustained by Mrs Maloney when the inadequacy of the footings became manifest. In our view, it did.


12. While the relationship between Mr Bryan and Mrs Manion with respect to physical injury to Mrs Manion's person or property must be distinguished from the relationship between them with respect to mere economic loss, the significance of such a distinction varies according to the particular kind of economic loss which is involved in the relevant category of case. Here, the distinction is between ordinary physical damage to a house by some external cause and mere economic loss in the form of diminution in value of a house when the inadequacy of its footings first becomes manifest by consequent damage to its fabric. Obviously, that distinction, which has only recently attained general acceptance25, is an essentially technical one. Indeed, even now, it is arguably inapplicable in circumstances where a latent defect in the work of one builder or contractor causes damage to a part of the building constructed by a different builder or contractor (26).


13. Moreover, the policy considerations underlying the reluctance of the courts to recognize a relationship of proximity and a consequent duty of care in cases of mere economic loss are inapplicable to a relationship of the kind which existed between Mr Bryan and Mrs Manion as regards the kind of economic loss sustained by Mrs Maloney. Thus, there is no basis for thinking that recognition of a relationship of proximity between builder and first owner with respect to that particular kind of economic loss would give rise to the type of liability "in an indeterminate amount for an indeterminate time to an indeterminate class" which the courts are reluctant to recognize. Again, in circumstances where the builder is, in any event, under a duty of care to the first owner to avoid physical injury to that owner's person or property by reason of inadequacy of the footings, there can be no real question of inconsistency between the existence of a relationship of proximity with respect to that particular kind of economic loss and the legitimate pursuit by the builder of his or her own financial interests. Nor, as has been seen, is it legitimate to assert that, as a matter of policy, the sanctity of contract or the compartmentalization of the law dictates that liability under the ordinary principles of negligence in respect of either damages generally or a particular kind of damage must be excluded as between parties in a contractual relationship notwithstanding the absence of any actual agreement between the parties to that effect. Whatever may have been or may be the position in other times or in other places, the law of this country knows no such policy.


14. On the other hand, there are strong reasons for acknowledging the existence of a relevant relationship of proximity between a builder such as Mr Bryan and a first owner such as Mrs Manion with respect to the kind of economic loss sustained by Mrs Maloney. In particular, the ordinary relationship between a builder of a house and the first owner with respect to that kind of economic loss is characterized by the kind of assumption of responsibility on the one part (i.e. the builder) and known reliance on the other (i.e. the building owner) which commonly exists in the special categories of case in which a relationship of proximity and a consequent duty of care exists in respect of pure economic loss. There is nothing to suggest that the relationship between Mr Bryan and Mrs Manion was not characterized by such an assumption of responsibility and such reliance.


15. At least prima facie, a relationship of proximity also existed between Mr Bryan and persons other than Mrs Manion, including Mrs Maloney, who might sustain physical injury to person or property as a consequence of a collapse, as a result of inadequate footings, of part of the house while they or their property were lawfully in the house or in its vicinity (27). The relationship between Mr Bryan and such persons corresponded with the relationship between the architect and the injured plaintiff in Voli v. Inglewood Shire Council (28). It is unnecessary, for the purposes of the present case, to consider whether such a relationship of proximity or any consequent duty of care can be excluded or modified by the terms of the contract between the builder and the first owner. As has been mentioned, it is not suggested that there was any special feature of the contract or agreement between Mr Bryan and Mrs Manion that had that effect in the present case. There is, however, obvious force in the conclusion expressed by Windeyer J in Voli v. Inglewood Shire Council (29) to the effect that, while such a contractual exclusion would be relevant to identifying the task upon which the architect had entered, it could not directly operate to discharge the architect from a duty of care which would otherwise exist "to persons who are strangers" to the contract.


16. It is in the context of the above-mentioned relationships of proximity that one must determine whether the relationship which exists between a professional builder of a house, such as Mr Bryan, and a subsequent owner, such as Mrs Maloney, possesses the requisite degree of proximity to give rise to a duty to take reasonable care on the part of the builder to avoid the kind of economic loss sustained by Mrs Maloney in the present case. It is likely that the only connection between such a builder and such a subsequent owner will be the house itself. Nonetheless, the relationship between them is marked by proximity in a number of important respects. The connecting link of the house is itself a substantial one. It is a permanent structure to be used indefinitely and, in this country, is likely to represent one of the most significant, and possibly the most significant, investment which the subsequent owner will make during his or her lifetime. It is obviously foreseeable by such a builder that the negligent construction of the house with inadequate footings is likely to cause economic loss, of the kind sustained by Mrs Maloney, to the owner of the house at the time when the inadequacy of the footings first becomes manifest. When such economic loss is eventually sustained and there is no intervening negligence or other causative event, the causal proximity between the loss and the builder's lack of reasonable care is unextinguished by either lapse of time or change of ownership.

17. The only factor which arguably precludes the recognition of a relevant relationship of proximity between builder and subsequent owner for the purposes of the present case is the kind of damage involved, namely, mere economic loss. As has been seen, a relevant relationship of proximity would have existed between the builder and Mrs Maloney with respect to ordinary physical injury to her person or other property caused by a partial collapse of the house due to its inadequate footings even if she had not been the owner. Here again, it is important to bear in mind the particular kind of economic loss involved. As has been said, the distinction between that kind of economic loss and ordinary physical damage to property is an essentially technical one. Indeed, the economic loss sustained by the owner of a house by reason of diminution in value when the inadequacy of the footings first becomes manifest by consequent damage to the fabric of the house is, at least arguably, less remote and more readily foreseeable than ordinary physical damage to other property of the owner which might be caused by an actual collapse of part of the house as a result of the inadequacy of those footings. Again, the policy considerations underlying the reluctance of the courts to recognize a relationship of proximity and a consequential duty of care in cases of mere economic loss are largely inapplicable to the relationship between builder and subsequent owner as regards that particular kind of economic loss. There can be no question of inconsistency with the builder's legitimate pursuit of his or her own financial interests since, as has been seen, the builder owed a duty of care to the first owner with respect to such loss. In circumstances where the particular kind of economic loss is that sustained by an owner of the house on the occasion when the inadequacy of the footings first becomes manifest, there is no basis for thinking that recognition of a relevant relationship of proximity between builder and that owner would be more likely to give rise to liability "in an indeterminate amount ... to an indeterminate class" than does recognition of such an element of proximity in the relationship between builder and first owner. It is true that, in so far as "an indeterminate time" is concerned, the time span in which liability to a subsequent owner might arise could be greater than if liability were restricted to the first owner. Nonetheless, the extent of that time span would be limited by the element of reasonableness both in the requirement that damage be foreseeable and in the content of the duty of care (30). In any event, it would prima facie correspond with that applicable to the relationship of proximity which clearly exists as regards physical injury to person or other property. Moreover, any difference in duration between liability to the first owner and liability to a subsequent owner is likely to do no more than reflect the chance element of whether and when the first owner disposes of the house.


18. Upon analysis, the relationship between builder and subsequent owner with respect to the particular kind of economic loss is, like that between the builder and first owner, marked by the kind of assumption of responsibility and known reliance which is commonly present in the categories of case in which a relationship of proximity exists with respect to pure economic loss. In ordinary circumstances, the builder of a house undertakes the responsibility of erecting a structure on the basis that its footings are adequate to support it for a period during which it is likely that there will be one or more subsequent owners. Such a subsequent owner will ordinarily have no greater, and will often have less, opportunity to inspect and test the footings of the house than the first owner. Such a subsequent owner is likely to be unskilled in building matters and inexperienced in the niceties of real property investment. Any builder should be aware that such a subsequent owner will be likely, if inadequacy of the footings has not become manifest, to assume that the house has been competently built and that the footings are in fact adequate.


19. Ultimately, it seems to us that, from the point of view of proximity, the similarities between the relationship between builder and first owner and the relationship between builder and subsequent owner as regards the particular kind of economic loss are of much greater significance than the differences to which attention has been drawn, namely, the absence of direct contact or dealing and the possibly extended time in which liability might arise. Both relationships are characterized, to a comparable extent, by assumption of responsibility on the part of the builder and likely reliance on the part of the owner. No distinction can be drawn between the two relationships in so far as the foreseeability of the particular kind of economic loss is concerned: it is obviously foreseeable that that loss will be sustained by whichever of the first or subsequent owners happens to be the owner at the time when the inadequacy of the footings becomes manifest. In the absence of competing or intervening negligence or other causative event, the causal proximity between negligence on the part of the builder in constructing the footings and consequent economic loss on the part of the owner when the inadequacy of the footings becomes manifest is the same regardless of whether the owner in question is the first owner or a subsequent owner. In the case of both relationships, the policy considerations which ordinarily militate against the recognition of a relationship of proximity and a consequent duty of care with respect to pure economic loss are insignificant. Moreover, there are persuasive policy reasons supporting the recognition of a relationship of proximity between the builder and a subsequent owner of an ordinary dwelling house with respect to the particular kind of economic loss. As Wright J pointed out, at first instance, a number of those policy considerations were identified in the judgment of the Supreme Court of New Hampshire, delivered by Thayer J, in Lempke v. Dagenais (31). They include the consideration that, by virtue of superior knowledge, skill and experience in the construction of houses, it is likely that a builder will be better qualified and positioned to avoid, evaluate and guard against the financial risk posed by latent defect in the structure of a house (32). In all the circumstances, the relationship between builder and subsequent owner as regards the particular kind of economic loss should be accepted as possessing a comparable degree of proximity to that possessed by the relationship between builder and first owner and as giving rise to a duty to take reasonable care on the part of the builder to avoid such loss.


20. The conclusion that a relationship of proximity existed between Mr Bryan, as the builder, and Mrs Maloney, as subsequent owner, with respect to the particular kind of economic loss is also supported by analogy with the relationship which would have existed between Mr Bryan, as the builder, and any person who suffered physical injury to person or property in the event that the house or part of the house had collapsed at the time when the inadequacy of the foundations first became manifest (33). It is difficult to see why, as a matter of principle, policy or common sense, a negligent builder should be liable for ordinary physical injury caused to any person or to other property by reason of the collapse of a building by reason of the inadequacy of the foundations but be not liable to the owner of the building for the cost of remedial work necessary to remedy that inadequacy and to avert such damage. Indeed, there is obvious force in the view expressed by Lord Denning M.R. in Dutton v. Bognor Regis Urban District Council (34) that, as a rational basis for differentiating between circumstances of liability and circumstances of no liability, such a distinction is an "impossible" one.


21. One cannot but be conscious of the fact that the conclusion that Mr Bryan is liable in damages to Mrs Maloney in the present case is contrary to the views expressed by the members of the House of Lords in D and F Estates Ltd. v. Church Commissioners (35) and Murphy v. Brentwood District Council (36). The D and F Estates Ltd. Case was concerned with the liability of a building contractor to a subsequent leaseholder (37) of a flat. Murphy v. Brentwood District Council was concerned with the liability of a local council. It is, however, apparent that, in each case, their Lordships considered that a negligent builder's liability under the law of negligence did not extend to compensating either the first or a subsequent owner for economic loss sustained when the inadequacy of the footings of a building first becomes manifest by reason of consequent damage to the fabric of the building (38). Their Lordships' view in that regard seems to us, however, to have rested upon a narrower view of the scope of the modern law of negligence and a more rigid compartmentalization of contract and tort than is acceptable under the law of this country.


22. On the other hand, the conclusion that such a duty of care existed is supported by persuasive Canadian (39) and New Zealand (40) authority and by the weight of recent decisions in the Supreme Courts of this country (41). It is also supported by some United States cases (42). The United States courts have not, however, spoken with concordant voices and the trend in that country would seem to be to recognize liability to a subsequent purchaser but to base it upon a transferable warranty of habitability (not requiring privity) rather than on ordinary negligence (43).


23. It should be apparent from what has been written above that the decision in this case turns, to no small extent, on the particular kind of economic loss involved, namely, the diminution in value of a house when the inadequacy of its footings first becomes manifest by reason of consequent damage to the fabric of the house. In particular, the nature of the property involved, namely a building which was erected to be used as a permanent dwelling house, constitutes an important consideration supporting the conclusion that a relevant relationship of proximity existed between Mr Bryan, as the builder, and Mrs Maloney, as a subsequent owner. That being so, the decision in this case is not directly decisive of the question whether a relevant relationship of proximity exists in other categories of case or as regards other kinds of damage. In particular, the decision in this case should not be seen as determinative of the question whether a relationship of proximity can, in some circumstances, exist between the manufacturer and the purchaser or subsequent owner of a chattel in respect of the diminution in the value of the chattel which is sustained when a latent defect in it first becomes manifest (44).


24. The appeal should be dismissed.

BRENNAN J Mrs Manion engaged her brother-in-law Mr Bryan, a builder, to build a house for her at 2 Wintercole Court, Launceston. She had a set of plans for the house, but there were no specifications other than what was written on the plans. Mr Bryan undertook to build the house on a "do and charge" basis, that is, he was paid for the work he actually did and for the materials he actually supplied. The house was built between August and December 1979. Subsequently Mrs Manion sold 2 Wintercole Court to Mr and Mrs Quittenden. In May 1986, they sold to Mrs Maloney, the plaintiff respondent.


2. Mrs Maloney made three cursory inspections of the house before she bought it. She did not notice any cracks at that time. She bought the house thinking "that it was properly built". About six months later, Mrs Maloney noticed a crack in the concrete slab in the carport. Later, other cracks appeared in the house. Wintercole Court is in an area containing reactive clays which require special precautions to be taken against failure of building footings. The cracks were caused by failure of the footings. Mrs Maloney sued Mr Bryan, the defendant appellant, for damages for negligence and recovered a judgment in the Supreme Court of Tasmania. Although the building inspector of the Local Authority had inspected and passed the trenches and reinforcing for the footings before the concrete was poured, Wright J found that the footings were not fabricated to a standard to be expected of a reasonably competent builder in 1979. An appeal to the Full Court was dismissed. Mr Bryan submits that he owed no relevant duty of care to Mrs Maloney and that, in substance, is the ground of his appeal to this Court.



Mrs Maloney's damage
3. An architect, Mr Newman, furnished an estimate in March 1989 of the cost of underpinning the footings and repairing the defects that had appeared in 2 Wintercole Court. By the time of the trial, that estimate had increased by $3,780 to $35,280.68. Wright J disallowed two of the items in Mr Newman's list and assessed Mrs Maloney's damages at $34,440.68. There was no evidence as to the price which Mrs Maloney had paid for 2 Wintercole Court, nor as to the effect of the appearance of cracking on its value. Her damages were assessed as being the cost at the time of trial of making the footings sound and repairing the physical defects caused by the inadequacy of the footings.


4. The facts which attracted the award and in respect of which damages were assessed were the physical defects of the house at 2 Wintercole Court. The damages assessed represent a pecuniary outlay which Mrs Maloney would have to make to have those defects rectified and in that sense she can be said to have suffered economic loss. It is not suggested that Mrs Maloney was bound to expend the amount recovered or, indeed, any amount on rectifying the inadequate footings and the physical defects caused thereby. Although it was conceded on appeal that the damage suffered by Mrs Maloney was pure economic loss, that concession cannot conceal the facts by reference to which this case must be decided. Pure economic loss means economic loss that is not consequent on physical damage to a person or to property. Mrs Maloney's damage consisted of the defects in her house and the measure of the damages awarded for those defects was the cost of their rectification. As the duty of care that is in issue is a duty to avoid or prevent the damage for which the damages were awarded (45), the question is whether Mr Bryan owed Mrs Maloney as a future owner of the house a duty of care to prevent the existence of the inadequate footings and the occurrence of the physical defects caused by the inadequacy of the footings.


5. The cases dealing with an architect's or builder's liability in negligence for carelessly designing or constructing a building have been concerned to distinguish between two general categories of damage. The first category consists of physical damage to person or property for which a defendant is, and always has been, liable under the paradigm application of Donoghue v. Stevenson (46); the second category consists of pure economic loss for which a defendant may be liable in negligence under principles that have been developed from Lord Atkin's original conception in that case, especially since Hedley Byrne and Co. Ltd. v. Heller and Partners Ltd. (47) It is not the pecuniary character of damages or even the manner of their calculation which is significant but the kind of loss or damage suffered by the plaintiff in respect of which an award of damages is sought. The distinction between the two categories of damage has served to distinguish cases where, in the absence of any contrary factor (48), reasonable foreseeability of the kind of damage actually suffered is sufficient to give rise to the defendant's duty of care from cases where reasonable foreseeability alone does not give rise to such a duty (49). The distinction is important. The tort of negligence imposes liability on a defendant for doing something which causes loss to another even though the thing done is otherwise lawful. If liability were to be imposed for the doing of anything which caused pure economic loss that was foreseeable, the tort of negligence would destroy commercial competition (50), sterilize many contracts and, in the well-known dictum of Cardozo CJ (51), expose defendants to potential liability "in an indeterminate amount for an indeterminate time to an indeterminate class". For those reasons, the tort of negligence has not offered a remedy for the recovery of pure economic loss from a defendant against whom no more is proved than that his or her actions caused that loss and the loss was reasonably foreseeable. In Murphy v. Brentwood District Council (52), Lord Oliver of Aylmerton said:

"The infliction of physical injury to the person or property of another universally requires to be justified. The causing of economic loss does not. If it is to be categorised as wrongful it is necessary to find some factor beyond the mere occurrence of the loss and the fact that its occurrence could be foreseen. Thus the categorisation of damage as economic serves at least the useful purpose of indicating that something more is required and it is one of the unfortunate features of Anns that it resulted initially in this essential distinction being lost sight of."


6. Personal injury is the primary example of damage which a defendant is under a duty to take reasonable care to avoid where it is reasonably foreseeable that the defendant might cause damage of that kind if reasonable care be not exercised. Thus, in Voli v. Inglewood Shire Council (53), an architect was held liable in negligence when, in designing a building, he failed to use the competence and skill in design usual among architects practising their profession and, as a reasonably foreseeable result, the building collapsed and injured a plaintiff. In that case, Windeyer J said (54):

"Whatever might have been thought to be the position before the broad principles of the law of negligence were stated in modern form in Donoghue v. Stevenson, it is now beyond doubt that, for the reasonably foreseeable consequences of careless or unskilful conduct, an architect is liable to anyone whom it could reasonably have been expected might be injured as a result of his negligence. To such a person he owes a duty of care quite independently of his contract of employment."

Similarly, damage to property is damage which a defendant is under a duty to take reasonable care to avoid where it is reasonably foreseeable that the defendant might cause damage of that kind if reasonable care be not used (55). Although a plaintiff who is entitled to recover damages in negligence for personal injury or for damage to property is entitled to compensation for the economic sequelae of the personal injury or the damage to property (56), mere foreseeability of pure economic loss has been rejected as a sufficient criterion of the existence of a duty of care to avoid it (57).


7. In the present case, we may put to one side for the moment consideration of the circumstances in which a duty of care to avoid pure economic loss arises and examine Mr Bryan's duty to prevent the physical defects in the house at 2 Wintercole Court for which Mrs Maloney's damages were awarded. The question is whether, by the law of negligence, a builder of a building (or an architect who designs the building) is under a duty of care to avoid the creation or development of defects in the building, the rectification of which would involve the incurring of expenditure. A similar question is whether the manufacturer of a chattel is under a duty of care to avoid the creation or development of defects in the chattel, the remedying or repair of which would involve the incurring of expenditure. The question is not whether the builder or manufacturer might be liable for personal injury or damage to property resulting from the defect produced by negligent building or manufacture, but whether the builder or manufacturer might be liable for defects in the building or chattel itself. It is the defective quality of the building or chattel, not the results external to the building or chattel, that is postulated as the damage in respect of which the question of the builder's or manufacturer's duty of care arises.

16. It is unnecessary to canvass the United States authorities. In any case the plenitude of jurisdictions makes such an exercise unprofitable. In Canadian National Railway McLachlin J classified the cases in the United States where damages have been awarded for economic loss as: those where the economic loss is closely related to physical damage; pollution cases where, on grounds of public policy, economic loss has been awarded to commercial fisherman and others; and certain products liability cases, at least where the defective product creates an unreasonable risk of harm to persons or property and such harm materialises (168). I gladly accept McLachlin J's analysis and do not elaborate upon it. Its relevance, for present purposes, is to indicate that at least in some jurisdictions in the United States there is no absolute prohibition against the recovery of economic loss. However, many American decisions are concerned with warranty claims and do not provide direct assistance in the area with which this appeal is concerned. In any event, the problem remains of arriving at a legal formulation which will allow recovery of economic loss in appropriate cases, while rejecting it in the case of loss which is too distant.



Definitive or incremental approach?
17. The dilemma is posed by McLachlin J by reference to the decision of the House of Lords in Murphy, where the search was for a definitive rule, and the decision of the Supreme Court of Canada in City of Kamloops v. Nielsen (169) where the Court was content to hold that, in the case in hand (170), recovery for economic loss should be allowed. The former approach is likely to prove unavailing; the latter necessarily leads to some uncertainty in the evolving process. I respectfully agree with McLachlin J when she says (171):

"(T)he incremental approach of Kamloops is to be preferred to the insistence on the logical precision of Murphy. It is more consistent with the incremental character of the common law. It permits relief to be granted in new situations where it is merited. Finally, it is sensitive to dangers of unlimited liability."


18. Nevertheless, acceptance of the incremental approach does not of itself provide an answer to the question of liability in the present case. Indeed the very term "incremental" invites inquiry because what is incremental is to an extent in the eye of the beholder. To answer the question, it is necessary to look more closely at the circumstances in which the appellant was held liable to the respondent.



Relevant circumstances
19. The appellant built a house for Mrs Manion in 1979. The respondent is the third owner of the house. Although some emphasis was placed by the appellant on his relative lack of experience as a builder, the trial judge saying that he "was a comparatively inexperienced builder at the time", the fact is that he was a member of the Northern Tasmanian Master Builders Association. Mrs Manion was the appellant's sister-in-law but the house was built under what was accepted by the parties to this appeal as an ordinary commercial transaction. Importantly, there was no suggestion made by the appellant that he was to build other than in accordance with standard building practice; in that regard it may be noted that the contract was on a cost plus basis. The appellant accepted that he had to conform to the standard of a reasonably competent builder. In particular, it was not denied that he agreed to build a house with footings that were adequate. The fact that any inadequacy in the footings might not manifest itself for some years is significant because, in effect, the appellant was responsible for a structure, the defects of which might not readily be ascertained by a subsequent purchaser of the house.


20. If a subsequent purchaser of a house seeks to recover damages from the builder by reason of inadequacies in the building work, other considerations may intrude, such as the terms of the contract between the builder and the building owner, and the terms of the contract between building owner and purchaser. It may be important to determine, one day, the implications for liability had a building owner agreed that, as a cost saver, the house should be built in some respects that did not conform to accepted building practice. For instance he or she may have required the builder to build according to unusual specifications. The terms of the builder's contract are, to use Windeyer J's words in Voli v. Inglewood Shire Council (172), "not an irrelevant circumstance" in that they may help to determine the task upon which the builder entered. These matters are not directly material in the present case but they serve to identify the principles to be applied in determining the liability of the builder.


21. Since reference has been made to the contract between the appellant and Mrs Manion, it is as well to emphasise that the obligation on the appellant to exercise due care, skill and diligence in the building of the house arose not only in contract but in tort. The approach taken in Voli that the liability of an architect for failure to exercise due care, skill and diligence may arise either from a breach of contract or in tort and that liability to a third person may exist independently of the contract of employment applies equally in the case of a builder. Clearly, the existence of a contract between the appellant and Mrs Manion is of itself no barrier to an action in tort by the respondent based upon the failure to build according to reasonable standards (173), though the duty of care must not depend upon specific obligations arising from the express terms of the contract (174).



Policy considerations
22. Whether the appellant is in law liable to the respondent must depend upon whether the necessary relationship of proximity exists, recognising however that there was no direct association between the parties. In this regard guidance may be had from the judgment of Thayer J of the Supreme Court of New Hampshire in Lempke v. Dagenais (175). The case concerned an action by subsequent purchasers of property against the builder of a garage. The Court rejected the claim in negligence as involving economic loss but upheld the claim for breach of implied warranty of workmanlike quality. Thayer J identified as relevant the following policy considerations (176): that latent defects will not manifest themselves for a considerable time, often after the property has been sold to an unsuspecting purchaser; that in a mobile society a builder must expect that the house will be sold within a relatively short time; that a subsequent purchaser has little opportunity to inspect and little experience and knowledge about construction; that the builder already owes a duty to the building owner to build in a workmanlike manner; and that confining recovery to the first purchaser might encourage sham first sales as a means of insulating builders from liability.


23. These considerations are equally applicable in the present case even though the action is one in negligence, not for breach of warranty. I would add to them the importance of a house to any buyer, something which is well recognised and would certainly be understood by a builder. Furthermore, there is a very direct relationship between the negligence of the appellant and the loss sustained by the respondent. It is only a matter of timing that the cracks in the wall appeared while the respondent was the owner rather than Mrs Manion.


24. This approach accords with the very recent decision of the Supreme Court of Canada in Winnipeg Condominium Corporation No.36 v. Bird Construction Co. Ltd. (177) where the builder of an apartment building was held liable to a subsequent owner of the land and building for the cost of replacing cladding that was defective. La Forest J, delivering the judgment of the Court, rejected the reasoning in D. and F. Estates Ltd.; held that the builder owed a concurrent contractual and tortious duty to the subsequent owner; was satisfied that the losses claimed satisfied the two-part test for recoverability of economic loss established in Anns and Kamloops; and concluded that there was a strong underlying policy justification for allowing recovery.


25. Two features of Winnipeg Condominium should be noted. The first is that the judgment emphasises that the duty in tort arises if there is a danger to the health and safety of the occupants which is foreseeable. However, in that respect the judgment emphasises the relationship between the negligent act and the damage sustained. Secondly, liability was imposed in a situation where the defect "poses a real and substantial danger to the inhabitants of the building". La Forest J said: "I do not find it necessary to consider whether contractors should also in principle be held to owe a duty to subsequent purchasers for the cost of repairing non-dangerous defects in buildings." In that significant respect the decision is distinguishable from the present case where the trial judge, in referring to another decision of the Supreme Court of Tasmania, said:

"His Honour concluded that the water was a danger to inhabitants of a home unit unless repaired (a feature not necessarily established in the present case)."


26. However, La Forest J made reference to several decisions, including that of the Full Court in the present case, where a more general duty owed by builders to subsequent purchasers was recognised. While his Honour was at pains to confine his remarks to dangerous defects, he referred with approval to the policy considerations identified in Lempke. In that sense the judgment is supportive of the conclusion reached by the Full Court in the present case.



Conclusion
27. The various considerations to which reference has been made give rise to sufficient proximity between the parties to render the appellant liable to the respondent. That conclusion is based on the findings of the trial judge mentioned earlier. It relates to the building of a house that is a non-commercial building. It is uncomplicated by anything arising from the contract between the appellant and Mrs Manion. It is also uncomplicated by any question of when the cause of action vested in the respondent or any issue of limitation of actions arising therefrom. The appellant does not rely upon these considerations as an answer to the respondent's claim. The view of the trial judge was that no further cause of action would vest in owners following the respondent because, at the time of purchase, a reasonable examination would disclose the defect in the footings. While this seems an appropriate approach, it is unnecessary to express any concluded view on this aspect.


28. One thing to be said, particularly in the area of non-dangerous defects, is that as time goes on it may be more difficult to show that the defect was the result of negligence and not of wear and tear or factors not associated with the standard of construction. Another is that clearly there is a range of situations, including liability for defective products, with which this judgment does not purport to deal.


29. It follows from what has been said that the appeal should be dismissed.

Footnotes
1 See Sutherland Shire Council v. Heyman (1985) 157 CLR 424 at 503-505; D and F Estates Ltd. v. Church Commissioners (1989) AC 177 at 206, 213, 216; Murphy v. Brentwood District Council (1991) 1 AC 398 at 466-468, 475, 484-485, 492-493; Department of the Environment v. T. Bates Ltd. (1991) 1 AC 499 at 519.
2 (1989) AC at 207.
3 Murphy v. Brentwood District Council (1991) 1 AC at 479 per Lord Bridge of Harwich; and see also at 470, 484, 497; Sutherland Shire Council v. Heyman (1985) 157 CLR at 512.
4 Sutherland Shire Council v. Heyman (1985) 157 CLR at 441 per Gibbs CJ and see also at 495, 501; Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (1976) 136 CLR 529 at 572-574; Jaensch v. Coffey (1984) 155 CLR 549 at 581-582.
5 San Sebastian Pty. Ltd. v. The Minister (1986) 162 CLR 340 at 355 per Gibbs CJ, Mason, Wilson and Dawson JJ
6 (1976) 136 CLR at 575.
7 See, e.g., Hedley Byrne and Co. Ltd. v. Heller and Partners Ltd. (1964) AC 465 at 536; Dorset Yacht Co. v. Home Office (1970) AC 1004 at 1038-1039, 1058; Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (1976) 136 CLR at 575; Sutherland Shire Council v. Heyman (1985) 157 CLR at 497.
8 Ultramares Corporation v. Touche (1931) 174 NE 441 at 444 per Cardozo CJ; Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (1976) 136 CLR at 568, 591; Hedley Byrne and Co. Ltd. v. Heller and Partners Ltd. (1964) AC at 537; and see also Sutherland Shire Council v. Heyman (1985) 157 CLR at 465.
9 Jaensch v. Coffey (1984) 155 CLR at 578; Sutherland Shire Council v. Heyman (1985) 157 CLR at 503.
10 See, generally, Sutherland Shire Council v. Heyman (1985) 157 CLR at 466-468, 501-502; Hawkins v. Clayton (1988) 164 CLR 539 at 545, 576, 593.
11 (1994) 179 CLR 520 at 543 per Mason CJ, Deane, Dawson, Toohey and Gaudron JJ; and see also Stevens v. Brodribb Sawmilling Co. Pty. Ltd. (1986) 160 CLR 16 at 53.
12 See, generally, Midland Bank v. Hett, Stubbs and Kemp (1979) Ch 384 at 405-411; Central Trust Co. v. Rafuse (1986) 31 DLR (4th) 481 at 489-499; Hawkins v. Clayton (1988) 164 CLR at 574-575.
13 See, e.g., National Mutual Life Association of Australasia Ltd. v. Coffey and Partners Pty. Ltd. (1991) 2 Qd R 401 at 406; Opat v. National Mutual Life (1992) 1 VR 283 at 291-295; Lowden v. Lewis (1989) Tas R 254 at 266-267; Brumby v. Pearton (1991) 10 BCL 291 at 294-295 (Supreme Court of Tasmania); Dutton v. Jalapen Pty. Ltd. (unreported, Supreme Court of Queensland, 14 March 1991); Miell v. Hatjopoulos (1987) 4 BCL 226 (Supreme Court of South Australia); Bowen v. Paramount Builders (1977) 1 NZLR 394.
14 (1963) 110 CLR 74 at 84.
15 ibid.
16 (1932) AC 562.
17 (1988) 164 CLR at 575.
18 ibid. at 543.
19 (1963) 110 CLR at 84.
20 (1986) 31 DLR (4th) at 521-522. And see Winnipeg Condominium Corp. No.36 v. Bird Construction Co. Ltd. (unreported, Supreme Court of Canada, 26 January 1995).
21 Anns v. Merton London Borough Council (1978) AC 728.
22 (1983) 1 AC 520.
23 (1932) AC at 610.
24 ibid.
25 cf. Lord Wilberforce's comment in Anns v. Merton London Borough Council (1978) AC at 759 to the effect that the correct classification of the damage in a case such as the present was not economic loss but "material, physical damage".
26 See Murphy v. Brentwood District Council (1991) 1 AC at 470, 497.
27 The qualification "lawfully" is added merely for greater caution; cf. Benning v. Wong (1969) 122 CLR 249 at 320; Burnie Port Authority v. General Jones (1994) 179 CLR at 546.
28 (1963) 110 CLR 74. And see also Hawkins v. Clayton (1988) 164 CLR at 578; AC Billings and Sons Ltd. v. Riden (1958) AC 240; Gallagher v. N. McDowell Ltd. (1961) NI 26; Clay v. A J Crump and Sons Ltd. (1964) 1 QB 533; Sharpe v. E T Sweeting and Son Ltd. (1963) 1 WLR 665; Rimmer v. Liverpool City Council (1984) 1 All ER 930; Pantalone v. Alaouie (1989) 18 NSWLR 119; Murphy v. Brentwood District Council (1991) 1 AC at 475; Department of the Environment v. T. Bates Ltd. (1991) 1 AC at 519.
29 (1963) 110 CLR at 85. And see also Bowen v. Paramount Builders (1977) 1 NZLR at 407.
30 cf. Askin v. Knox (1989) 1 NZLR 248.
31 (1988) 547 A 2d 290 at 294-295; see, also, Sir Robin Cooke, "An Impossible Distinction", (1991) 107 Law Quarterly Review 46 at 61-63.
32 Lempke v. Dagenais (1988) 547 A 2d at 295, quoting Whichard J in George v. Veach (1984) 313 SE 2d 920 at 923.
33 See note 28.
34 (1972) 1 QB 373 at 396.
35 (1989) AC 177.
36 (1991) 1 AC 398.
37 Under a 98 year lease.
38 See D and F Estates Ltd. v. Church Commissioners (1989) AC at 210, 216-217; Murphy v. Brentwood District Council (1991) 1 AC at 475, 480, 488-489, 494-498; Department of the Environment v. T. Bates Ltd. (1991) 1 AC at 519.
39 See Winnipeg Condominium Corp. No.36 v. Bird Construction Co. Ltd., an unreported decision of the Supreme Court of Canada. There, the Supreme Court, in a judgment delivered by La Forest J, did not accept the approach to the relationship between contract and tort adopted by the House of Lords in D. and F. Estates and Murphy but adopted a similar approach to that accepted in this country. La Forest J referred to the decision of the Full Court of the Supreme Court of Tasmania in this case with approval.
40 See, in particular, Bowen v. Paramount Builders (1977) 1 NZLR 394; Mt Albert Borough Council v. Johnson (1979) 2 NZLR 234; Askin v. Knox (1989) 1 NZLR 248.
41 See National Mutual Life Association of Australasia Ltd. v. Coffey and Partners Pty. Ltd. (1991) 2 Qd R 401; Opat v. National Mutual Life (1992) 1 VR 283; Lowden v. Lewis (1989) Tas R 254; Brumby v. Pearton (1991) 10 BCL 291 (Supreme Court of Tasmania); Miell v. Hatjopoulos (1987) 4 BCL 226.
42 See, e.g., Coburn v. Lenox Homes Inc. (1977) 378 A 2d 599; Brown v. Fowler (1979) 279 NW 2d 907; Terlinde v. Neely (1980) 271 SE 2d 768 at 770; Drexel Properties Inc. v. Bay Colony (1981) 406 So 2d 515; Cosmopolitan Homes Inc. v. Weller (1983) 663 P 2d 1041; McMillan v. Brune-Harpenau-Torbeck Builders (1983) 455 NE 2d 1276; Huang v. Garner (1984) 203 Cal Rptr 800.
43 See, e.g., Barnes v. Mac Brown and Company Inc. (1976) 342 NE 2d 619; Moxley v. Laramie Builders Inc. (1979) 600 P 2d 733; Terlinde v. Neely (1980) 271 SE 2d at 768-769; Blagg v. Fred Hunt Co. Inc. (1981) 612 SW 2d 321; Redarowicz v. Ohlendorf (1982) 441 NE 2d 324; Gupta v. Ritter Homes Inc. (1983) 646 SW 2d 168; Lempke v. Dagenais (1988) 547 A 2d 290.
44 cf. Rivtow Marine Ltd. v. Washington Iron Works (1973) 40 DLR (3d) 530.
45 Overseas Tankship (U.K.) Ltd. v. Morts Dock and Engineering Co. Ltd. (The Wagon Mound (No.1)) (1961) AC 388 at 425; Sutherland Shire Council v. Heyman (1985) 157 CLR 424 at 487; Murphy v. Brentwood District Council (1991) 1 AC 398 at 485-486.
46 (1932) AC 562.
47 (1964) AC 465.
48 See, for example, Gala v. Preston (1991) 172 CLR 243.
49 San Sebastian Pty. Ltd. v. The Minister (1986) 162 CLR 340 at 367.
50 See per Lord Reid in Dorset Yacht Co. v. Home Office (1970) AC 1004 at 1027.
51 Ultramares Corporation v. Touche (1931) 255 NY 170 (174 NE 441 at 444).
52 (1991) 1 AC 398 at 487. Lord Oliver described the "something more" as "that elusive element comprehended in the expression 'proximity'". I prefer a more definitive statement of "some special principle" (to use the words of Robert Goff LJ in Leigh and Sillivan Ltd. v. Aliakmon Ltd. (1985) QB 350 at 396) to warrant recovery of pure economic loss. See the discussion of "proximity" below.
53 (1963) 110 CLR 74.
54 ibid. at 84.
55 See, for example, Vaughan v. Webb (1902) 2 SR(NSW) 293.
56 Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (1976) 136 CLR 529 at 544.
57 ibid. at 555, 572-574, 590-592; cf. Leigh and Sillavan Ltd. v. Aliakmon Ltd. (1986) AC 785 at 813-820 and the dissenting judgment of Robert Goff LJ in (1985) QB at 392-394, 396.
58 (1972) 1 QB 373 at 396.
59 ibid.
60 (1977) 1 NZLR 394.
61 ibid. at 410, 417-418, 425.
62 (1973) 40 DLR (3d) 530 at 549-552.
63 ibid. at 551.
64 (1978) AC 728 at 759-760.
65 ibid. at 759.
66 ibid. at 751-752.
67 (1991) 1 AC at 487.
68 (1983) 1 AC 520.
69 ibid. at 545.
70 ibid. at 542.
71 ibid. at 546.
72 (1964) AC 465.
73 (1983) 1 AC at 546.
74 ibid. at 533.
75 ibid. at 536.
76 ibid. at 549.
77 (1932) AC at 581-582.
78 (1883) 11 QBD 503 at 509.
79 Noted by May J in his judgment in Nitrigin Eireann Teoranta v. Inco Alloys Ltd. (1992) 1 WLR 498 at 504; (1992) 1 All ER 854 at 860.
80 D and F Estates Ltd. v. Church Commissioners (1989) AC 177 at 202-204, 215; Murphy v. Brentwood District Council (1991) 1 AC at 469.
81 D and F Estates (1989) AC at 215; Murphy v. Brentwood District Council (1991) 1 AC at 466, 481; Nitrigin Eireann Teoranta v. Inco Alloys Ltd. (1992) 1 WLR at 504-505; (1992) 1 All ER at 860.
82 Simaan Contracting Co. v. Pilkington Ltd. (No.2) (1988) QB 758 at 784.
83 (1983) 1 AC at 551-552.
84 (1989) AC 177 at 204.
85 (1986) 476 US 858 at 870, referred to also by Lord Keith in Murphy v. Brentwood District Council (1991) 1 AC at 469.

86 (1986) 476 US at 871.
87 Voli v. Inglewood Shire Council (1963) 110 CLR at 85.
88 See Simaan Contracting Co. v. Pilkington Ltd. (No.2) (1988) QB at 782-783.
89 Murphy v. Brentwood District Council (1991) 1 AC 398; Department of the Environment v. T. Bates Ltd. (1991) 1 AC 499.
90 (1989) AC 177. The complex structure theory which was provisionally advanced (at 207, 214) to account for the recovery of damages for structural defects in Anns v. Merton London Borough Council was abandoned in Murphy v. Brentwood District Council (1991) 1 AC at 470, 478-479, 484 and 497.
91 (1989) AC at 206.
92 (1985) 157 CLR 424.
93 ibid. at 504; see also at 490 and cf. at 446-447, 466, 471.
94 (1991) 1 AC at 466-468.
95 See Sutherland Shire Council v. Heyman (1985) 157 CLR at 490-491.
96 (1991) 1 AC at 457, 464, 475, 480, 489, 498.
97 ibid. at 484.
98 But cf. Fleming, "Tort in a Contractual Matrix", (1993) 5 Canterbury Law Review 269.
99 See Tai Hing Ltd. v. Liu Chong Hing Bank (1986) AC 80 at 107.
100 (1963) 110 CLR at 84.
101 See Winnipeg Condominium Corp. No.36 v. Bird Construction Co. Ltd. (1993) 101 DLR (4th) 699 at 711. The observation of Huband JA with reference to "caveat emptor" is apposite to a remote purchaser's rights in respect of mere defects in a building. The decision of the Manitoba Court of Appeal was reversed by the Supreme Court which considered the defects to be a substantial danger to the health and safety of the occupants: see below.
102 (1964) AC 465.
103 (1968) 122 CLR 556 (HC); (1970) 122 CLR 628 (PC); (1971) AC 793 (PC).
104 As discussed in Mutual Life and Citizens' Assurance Co. Ltd. v. Evatt (1968) 122 CLR at 571; Shaddock and Associates Pty. Ltd. v. Parramatta City Council (No.1) (1981) 150 CLR 225 at 251; San Sebastian Pty. Ltd. v. The Minister (1986) 162 CLR at 371-372.
105 San Sebastian Pty. Ltd. v. The Minister (1986) 162 CLR at 356- 357; cf. Hawkins v. Clayton (1988) 164 CLR 539 at 576.
106 See National Mutual Life Association of Australasia Limited v. Coffey and Partners Pty. Ltd. (1991) 2 Qd R 401 at 406.
107 (1985) 157 CLR at 504-505, cited in Murphy v. Brentwood District Council (1991) 1 AC at 467-468.
108 (1985) 157 CLR at 490-493; see also the judgment of Deane J first cited above.
109 (1983) 1 AC at 551-552.
110 (1986) 476 US at 870.
111 (1973) 40 DLR (3d) 530.
112 ibid. at 541-542.
113 ibid. at 552.
114 City of Kamloops v. Nielsen (1984) 10 DLR (4th) 641 at 662-663; Canadian National Railway Co. v. Norsk Pacific Steamship Co. (1992) 91 DLR (4th) 289 at 371, 387.
115 Unreported, Supreme Court of Canada, 26 January 1995.
116 ibid. at 15.
117 ibid. at 43-44.
118 Sedleigh-Denfield v. O'Callaghan (1940) AC 880 at 894-895, 899, 904-905, 913, 920; Overseas Tankship (U.K.) Ltd. v. The Miller Steamship Co. Pty. (The Wagon Mound (No.2)) (1967) 1 AC 617 at 639; Cartwright v. McLaine and Long Pty. Ltd. (1979) 143 CLR 549 at 553, 568; Montana Hotels v. Fasson (1986) 69 ALR 258 at 262.
119 Voli v. Inglewood Shire Council was such a case.
120 The order in Voli v. Inglewood Shire Council ((1963) 110 CLR at 101) apportioned liability equally between the Council and the architect.
121 The position of Dr Cherry in Chapman v. Hearse (1961) 106 CLR 112; the police officer in Haynes v. Harwood (1934) 2 KB 240; or the station master in Videan v. British Transport Commission (1963) 2 QB 650.
122 Murphy v. Brentwood District Council (1991) 1 AC at 488.
123 Unreported, Supreme Court of Canada, 26 January 1995 at 9.
124 Council of Co-owners v. Whiting-Turner (1986) 517 A 2d 336.
125 Cosmopolitan Homes, Inc. v. Weller (1983) 663 P 2d 1041; Oates v. Jag, Inc. (1985) 333 SE 2d 222; McMillan v. Brune-Harpenau-Torbeck Builders (1983) 455 NE 2d 1276.
126 Barnes v. Mac Brown and Company, Inc. (1976) 342 NE 2d 619; Terlinde v. Neely (1980) 271 SE 2d 768; Richards v. Powercraft Homes, Inc. (1984) 678 P 2d 427.
127 See Trident General Insurance Co. Ltd. v. McNiece Bros. Pty. Ltd. (1988) 165 CLR 107.
128 (1991) 172 CLR 243 at 252-253.
129 San Sebastian Pty. Ltd. v. The Minister (1986) 162 CLR at 355.
130 Sutherland Shire Council v. Heyman (1985) 157 CLR at 481.
131 (1991) 1 AC at 487.
132 Leigh and Sillivan Ltd. v. Aliakmon Ltd. (1985) QB at 395.
133 San Sebastian Pty. Ltd. v. The Minister (1986) 162 CLR at 368; see also Hawkins v. Clayton (1988) 164 CLR at 555-556; Gala v. Preston (1991) 172 CLR at 260-263.
134 Jaensch v. Coffey (1984) 155 CLR 549 at 585.
135 (1983) 1 AC at 546-547.
136 (1994) 179 CLR 520 at 543.
137 Caparo Plc v. Dickman (1990) 2 AC 605 at 617, 618; Barker, "Are We up to Expectations? Solicitors, Beneficiaries and the Tort/Contract Divide", (1994) 14 Oxford Journal of Legal Studies 137 at 147.
138 (1991) 172 CLR at 276.
139 ibid. at 277.
140 (1984) 155 CLR 549 at 585.
141 ibid. at 592-593.
142 Cook v. Cook (1986) 162 CLR 376 at 381-382; Gala v. Preston (1991) 172 CLR at 252-254; San Sebastian Pty. Ltd. v. The Minister (1986) 162 CLR at 355; Hawkins v. Clayton (1988) 164 CLR at 545, 576.
143 Thus in the present case Underwood J, noting "the emergence of a separate test of proximity additional to that of foreseeability, satisfaction of which will give rise to a duty of care not to expose the other party to the risk of economic loss alone", encountered the difficulty "that the content of, or test for ascertaining the requisite proximity is unclear". See Christopher v. The Motor Vessel "Fiji Gas" (1993) Aust Torts Rep 81-202 at 61,964-61,965.
144 Jaensch v. Coffey (1984) 155 CLR at 585, 590; Sutherland Shire Council v. Heyman (1985) 157 CLR at 498; Gala v. Preston (1991) 172 CLR at 253; cf. Cook v. Cook (1986) 162 CLR at 385-386.
145 (1994) 179 CLR 520 at 543.
146 Jaensch v. Coffey (1984) 155 CLR 549 at 581-582; Hawkins v. Clayton (1988) 164 CLR 539 at 576.
147 (1985) 157 CLR 424 at 441.
148 ibid.
149 See Feldthusen, Economic Negligence, 2nd ed. (1989) at 1.
150 Cooke, "An Impossible Distinction", (1991) 107 Law Quarterly Review 46.
151 Duncan Wallace, "Negligence and Defective Buildings: Confusion Confounded?", (1989) 105 Law Quarterly Review 46 at 57.
152 ibid. at 58.
153 Wright J appears to have treated this cost as the measure of the decrease in the value of the house.
154 (1978) AC 728 at 759.
155 (1989) AC 177.
156 (1991) 1 AC 398.
157 See generally Markesinis and Deakin, "The Random Element of Their Lordships' Infallible Judgment: An Economic and Comparative Analysis of the Tort of Negligence from Anns to Murphy", (1992) 55 Modern Law Review 619.
158 Cattle v. Stockton Waterworks Co. (1875) LR 10 QB 453.
159 (1964) AC 465.
160 (1991) 1 AC 499.
161 San Sebastian Pty. Ltd. v. The Minister (1986) 162 CLR 340 at 355.


162 (1976) 136 CLR 529.
163 cf. Opat v. National Mutual Life (1992) 1 VR 283.
164 (1976) 136 CLR at 591. See also Sutherland Shire Council (1985) 157 CLR at 466, 493, 502.
165 ibid. at 574.
166 ibid. at 575.
167 (1992) 91 DLR (4th) 289.
168 ibid. at 362-363.
169 (1984) 10 DLR (4th) 641.
170 The action was one against the City by the purchaser of a house for the cost of repairs resulting from subsidence where the City, though aware through its building inspector of the defective foundations, failed to prevent the construction of the house.
171 (1992) 91 DLR (4th) at 367. See also Sutherland Shire Council (1985) 157 CLR at 481 per Brennan J
172 (1963) 110 CLR 74 at 85.
173 Central Trust Co. v. Rafuse (1986) 31 DLR (4th) 481 at 522; Winnipeg Condominium Corporation No.36 v. Bird Construction Co. Ltd. (unreported, Supreme Court of Canada, 26 January 1995).
174 Hawkins v. Clayton (1988) 164 CLR at 544 per Mason CJ and Wilson J; Central Trust Co. (1986) 31 DLR (4th) at 521-522.
175 (1988) 547 A 2d 290.
176 ibid. at 295.
177 Unreported, Supreme Court of Canada, 26 January 1995.