Luxury Flats Limited Case Study

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The legal issues which Luxury Flats Ltd are facing relate to pure economic loss. The loss incurred has resulted from their being unable to sub-let flats which they have leased from Opportunity Developers Ltd on a long term basis, who constructed the development,. The building plans were approved by Melchester District Council. However, since completion the building has subsided as a result of the foundations being of insufficient depth. Luxury Flats Ltd have, therefore, suffered a substantial loss of rental income and are seeking to recover by bringing a claim against Melchester District Council for negligently approving the plans. Previously decided cases and relevant legislation will be used to identify any claim that can be made and…show more content…
That is to say that, in this category of economic loss there is a fault which has not been caused by damage but by poor construction or design and it is, therefore, a breach of contract. In Anns v Merton London Borough Council [1978] AC 728 the defendant local authority was held to be liable for the losses who were suffered due to the negligent inspection of building foundations. However, this was subsequently overturned. In a later case Murphy v Brentwood District Council [1991] 1 AC 398 which was a very similar case the House of Lords held that there was no claim in negligence where the loss had been caused by a defective product. Lord Bridge applied the same principle to the purchase of defective property and stated that. "If there is a latent defect that then causes injury to a person or damage to property there would be a claim in negligence. However, if the defect becomes apparent before any damage was caused the loss would be purely economic and would therefore not be recoverable in tort. Furthermore, their Lordships also referred to policy considerations which influenced the decision in Murphy and noted that the vast majority of cases involving local authorities and defective properties were fought between insurance companies Steele (2014) p. 356. There is, therefore, currently a reluctance to allow…show more content…
However, they are the legal owners of the property on which the required remedial work has been completed and therefore have sufficient assets with which to compensate Luxury Flats Ltd for their loss of rental income which was caused by the defective building work which had been carried out by them. As there is a contractual agreement between the parties any claim made by Luxury Flats Ltd would be a contract case rather than a tort case. The statutory limitation period of six years has not yet expired for a claim to be brought in respect of the defective building work carried out by Opportunity Developers Ltd. Therefore, it is still possible for Luxury Flats Ltd to bring a claim to recover the loss of rental income for the period that they have been unable to sub-let the property. In Robinson v P E Jones (Contractors) Ltd [2011] EWCA Civ 9, [1012] QB 44 the claimant brought a claim against the building contractor in tort. The reason for this was that the limitation period had been exceeded for a contract claim to succeed. In other words a contract case would have been statute barred due to the fact that the building work had been complete twelve years earlier. However, the court decided that where the party owed a duty of care in a contractual setting there was no automatic equivalent duty of care to be assumed in tort. The claim failed and was dismissed on appeal, the court held that there was not
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