1. See Winnipeg Condominium Corporation No 36 v Bird Construction Co (1995) 121 DLR (4th) 193 [hereinafter Winnipeg Condominium]; Bryan v Maloney (1995) 128 ALR 163. In this article, I also consider a closely related judgment delivered by the New Zealand Court of Appeal: Invercargill City Council v Hamlin [1994] 3 NZLR 513, affd [1996] 1 All ER 756 (PC) [hereinafter Invercargill]. In that case, a majority of the Court held that public authorities could be liable for the negligent inspection of building foundations. For a detailed analysis of the Court of Appeal decision in Invercargill, see Duncan Wallace ‘No Somersault After Murphy: New Zealand Follows Canada’ (1995) 111 LQR 285. See also Martin ‘Defective Premises - the Empire Strikes Back’ (1996) 59 MLR 116.

2. Kamloops (City) v Nielsen (1984) 10 DLR (4th) 641 [hereinafter Kamloops.]

3. See Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465[hereinafter Hedley Byrne]; for a Canadian application see eg Haig v Bamford [1976] 3 WWR 331 (SCC).

4. Canadian National Railway Co v Norsk Pacific Steamship Co Ltd (1992) 91 DLR (4th) 289 [hereinafter Norsk.] For a discussion of Norsk, see Stychin “‘Principled Flexibility”: An Analysis of Relational Economic Loss in Negligence’ (1996) 25 Anglo-Am L Rev 318.

5. (1973) 40 DLR (3d) 530 [hereinafter Rivtow Marine].

6. See Feldthusen ‘Economic Loss in the Supreme Court of Canada: Yesterday and Tomorrow’ (1991) 17 Can Bus L J 356 at 370.

7. (1992) 84 Man R (2d) 23.

8. (1993) 101 DLR (4th) 699.

9. [1988] 2 All ER 992 [hereinafter D & F Estates].

10. (1995) 121 DLR (4th) at 199. La Forest J explicitly adopts the categorisation of economic loss propounded by Feldthusen op cit at 357–8.

11. (1995) 121 DLR (4th) at 200.

12. Ibid at 212.

13. Ibid.

14. Ibid.

15. Ibid at 213, citing Dutton v Bognor Regis Urban District Council [1972] 1 QB 373 [hereinafter Dutton v Bognor Regis] per Lord Denning MR.

16. (1995) 121 DLR (4th) at 214.

17. Ibid at 217–8.

18. Ibid at 218–9.

19. Ibid at 219.

20. Ibid.

21. Ibid at 220.

22. Jaensch v Coffey (1984) 155 CLR 549; Sutherland Shire Council v Heyman (1985) 157 CLR 424 [hereinafter Sutherland Shire]. On the Australian use of ‘proximity’ in negligence, see generally Hogg ‘Negligence and Economic Loss in England, Australia, Canada and New Zealand’ (1994) 43 ICLQ 116 at 122–7.

23. Sutherland Shire above at 497–8 per Deane J.

24. Ibid.

25. (1995) 128 ALR at 164.

26. Ibid.

27. Ibid at 165.

28. Ibid at 166.

29. Ibid.

30. Ibid at 167.

31. Ibid at 168.

32. Ibid at 168–9.

33. Ibid at 169.

34. Ibid.

35. Ibid at 171.

36. Ibid.

37. Ibid at 172.

38. Ibid. A separate concurring judgment was delivered by Toohey J, which emphasised the policy considerations that demanded the imposition of liability; see Ibid at 193.

39. Ibid at 175.

40. Ibid.

41. Ibid at 175–6.

42. Ibid at 181.

43. Ibid at 185.

44. Ibid at 186.

45. [1983] 1 AC 520.

46. (1986) 476 US 858 [hereinafter East River Steamship].

47. (1995) 128 ALR at 189.

48. Ibid at 190.

49. Ibid at 191.

50. Ibid at 192.

51. Ibid at 193.

52. Invercargill (CA) above at 523 per Cooke P.

53. [1990] 2 All ER 908 [hereinafter Murphy v Brentwood].

54. But see also Tan ‘Pure Economic Loss in Malaysia: Following English Law By Default?’ (1995) 44ICLQ 192 [describing how the High Court of Malaysia has recently followed the English approach to economic loss for defective premises]. The Privy Council in Invercargill recognised the divergence of views, but applauded the ‘ability of the common law to adapt itself to the differing circumstances of the countries in which it has taken root’ (above at 764).

55. [1977] 2 All ER 492 [hereinafter Anns].

56. In Invercargill, the Privy Council endorsed the approach taken by the New Zealand Court of Appeal as reflecting ‘community standards and expectations’ in New Zealand (above at 766).

57. See eg Kamloops above at 679 per Wilson J; Norsk above at 375 per McLachlin J.

58. Bowen v Paramount Builders Ltd [1977] 1 NZLR 394 [hereinafter Bowen].

59. Cooke ‘An Impossible Distinction’ (1991) 107 LQR 46.

60. [1932] AC 562.

61. [1990] 2 All ER at 919–20.

62. (1995) 128 ALR at 192. Brennan J is alone amongst members of the High Court in not accepting the proximity approach to liability in novel cases; see Hogg op cit at 123, n 44.

63. (1995) 128 ALR at 192–3.

64. See Norsk above at 368 per McLachlin J; Scott Group v McFarlane [1978] 1 NZLR 553; Brown v Heathcote County Council [1986] 1 NZLR 76 at 79 per Cooke J. See generally Hogg op cit.

65. Mt Albert Borough Council v Johnson [1979] 2 NZLR 234; Stieller v Porirua City Council [1986] NZLR 84.

66. [1977] 2 All ER at 505.

67. See eg Murphy v Brentwood above at 940 per Lord Jauncey.

68. Ibid at 942 per Lord Jauncey. See also Junior Books above at 549 per Lord Brandon dissenting.

69. Duncan Wallace ‘Negligence and Defective Buildings’ (1989) 105 LQR 46 at 53.

70. See Cooke op cit at 57.

71. Hogg op cit at 118.

72. Donoghue v Stevenson above at 580–2.

73. [1990] 2 All ER at 935.

74. (1992) 91 DLR (4th) at 367 per McLachlin J.

75. Sutherland Shire above at 481 per Brennan J. See generally Hoyano ‘Dangerous Defects Revisited by Bold Spirits’ (1995) 58 MLR 887 at 893.

76. For a defense of this position, see Giles and Szyszczak ‘Negligence and Defective Buildings’ (1991) 11 Leg Stud 85.

77. Cooke op cit.

78. See eg Dutton v Bogner Regis above at 474 per Lord Denning MR; Cooke op cit; Giles and Szyszczak op cit.

79. (1973) 40 DLR (3d) at 549.

80. (1995) 128 ALR at 173. However, the majority goes further in this case by finding the defendant liable for non-dangerous but serious defects. I consider this point in more detail below.

81. (1995) 121 DLR (4th) at 213.

82. Ibid at 214.

83. Of course, that disincentive must be qualified by the possibility of the owner incurring liability under the statutory obligations imposed in Britain by the Occupiers' Liability Act 1957.

84. See Murphy v Brentwood above at 917 per Lord Keith.

85. See eg Turgett v Torfaen Borough Council [1992] 3 All ER 27 (CA) [knowledge of a defect does not necessarily extinguish the duty of care or break the chain of causation].

86. D & F Estates above at 1007 per Lord Bridge.

87. Murphy v Brentwood above at 926–7 per Lord Bridge. However, Lord Bridge presents an unrealistic view of the economic relationship of a homeowner to his or her dwelling house. See below.

88. Ibid at 929.

89. Ibid. But see Giles and Szyszczak op cit at 100, where they argue that it is not the imminence of danger, but its inevitability that should be central to recovery for repair costs.

90. Murphy v Brentwood above at 929 per Lord Bridge; and at 942 per Lord Jauncey. But see Giles and Szyszczak op cit at 100 (‘there are certain illogicalities involved in drawing the line here but no more so than allowing a claim to repair an item if it is damaged by the building collapsing’); Cane Tort Law and Economic Interests (Oxford: Clarendon Press, 1991) pp 514–5.

91. Hoyano op cit at 893.

92. See Duncan Wallace ‘Negligence in Defective Buildings’ op cit at 76.

93. On ‘constraint’ as a basis for determining liability, see Duncan Wallace ‘Anns Beyond Repair’ (1991) 107 LQR 228 at 234–5.

94. See Feldthusen op cit at 368–9.

95. See Cane op cit at 518; 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 MLR 619 at 624.

96. [1972] 1 All ER at 475.

97. (1973) 40 DLR (3d) at 552.

98. Stychin op cit at 334–6.

99. Cane op cit at 518.

100. Markesinis and Deakin op cit at 630.

101. Ibid at 631–2.

102. Stapleton ‘Tort, Insurance and Ideology’ (1995) 58 MLR 820 at 831.

103. I consider this point in detail below.

104. See Stapleton ‘Duty of Care and Economic Loss: A Wider Agenda’ (1991) 107 LQR 249 at 271. On the centrality of ‘fault’ see eg Norsk above at 374 per McLachlin J. For an excellent elaboration of the problems of using first party insurance as a consideration in determining liability in tort, see Stapleton ‘Tort, Insurance’ op cit at 829–32.

105. See eg D & F Estates above at 1007 per Lord Bridge. But see also Cooke op cit at 59, wherein he notes the historical specificity of understanding warranties as necessarily contractual in character.

106. See eg D & F Estates above at 1004–6.

107. (1995) 128 ALR at 182.

108. (1985) 476 US at 868.

109. Ibid at 872–3.

110. See Grubb and Mullis ‘An Unfair Law for Dangerous Products: The Fall of Anns’ [1991] Conv 225 at 239. It should also be noted that many American jurisdictions do allow recovery in negligence for dangerous and, in some cases, non-dangerous defects. See ibid at 240; Cooke op cit at 58–62.

111. See generally Jones Textbook on Torts (London: Blackstone Press, 4th edn, 1993) pp 14–24.

112. Grubb and Mullis op cit at 241.

113. See Central Trust v Rafuse (1986) 31 DLR(4th)481; Voli v Inglewood Shire Council (1963) 110 CLR 74 at 84; Bowen above.

114. ‘Duty of Care and Economic Loss’ op cit at 269–70.

115. Central Trust v Rafuse above at 521.

116. (1995) 121 DLR (4th) at 205. This point raises the issue of the sustainability of the distinction between dangerous and shoddy goods, which I consider below.

117. Henderson et a1 v Merrett Syndicates et a1 [1995] 2 AC 145.

118. See Waddams ‘Further Reflections on Economic Loss: A Canadian Perspective’ (1994) 2 Tort L Rev 116 at 121.

119. (1995) 128 ALR at 187–90.

120. Ibid at 182.

121. Ibid at 187–90.

122. An argument advanced in Stapleton ‘Duty of Care and Economic Loss’ op cit at 275.

123. An argument advanced in Fleming ‘Tort in a Contractual Matrix’ (1995) 3 Tort L Rev 12 at 23. For an opposing view, see Feldthusen and Palmer ‘Economic Loss and the Supreme Court of Canada: An Economic Critique of Norsk Steamship and Bird Construction’ (1995) 74 Can Bar Rev 427 at 433: ‘The plaintiff in Bird Construction wants the court to change for its purely private benefit the (presumably efficient) bargain it already had made’. My argument is that bargains over dangerous defects should neither be presumed nor upheld.

124. See Stapleton ‘Duty of Care: Peripheral Parties and Alternative Opportunities for Deterrence’ (1995) 111 LQR 301 at 336.

125. (1995) 128 ALR at 170.

126. [1977] 1 NZLR at 419.

127. Fleming op cit at 23.

128. Ibid at 22.

129. This point also raises the question of who is the most appropriate defendant in such an action. Stapleton argues that in the United Kingdom the professional advisor is ‘causally central’; see Stapleton ‘Duty of Care: Peripheral Parties’ op cit at 336–7.

130. Duncan Wallace ‘Anns Beyond Repair’ op cit at 230–1.

131. [1990] 2 All ER at 925. See also ibid at 921 per Lord Keith; East River Steamship above at 870.

132. (1995) 121 DLR (4th) at 215.

133. See Giles and Szysznak op cit at 98-102; Grubb and Mullis op cit at 240–3.

134. [1983] 1 AC at 549.

135. Op cit at 235–6.

136. Ibid at 236–7.

137. See Winnipeg Condominium above at 214; Cane op cit at 517.

138. (1995) 121 DLR (4th) at 218–9.

139. Waddams op cit at 120.

140. See Duncan Wallace ‘Murphy Rejected: Three Commonwealth Landmarks’ (1995) 11 Construction L J 249 at 253.

141. Ibid at 252–3.

142. Ibid.

143. Pursuant to this regime, simply put, builders and others are strictly liable to a standard of fitness for habitation of houses. In addition, the NHBC assumes responsibility for defects which present an imminent danger to the health or safety of occupants, provided the defects are a result of a failure to comply with building regulations and the NHBC has assumed the role of a building inspector. While a significant advance, the Defective Premises Act 1972 and the NHBC scheme also have limitations, the most obvious being their restriction to dwellings. Moreover, under the DPA, the limitation period runs from the time the dwelling was completed. Under the NHBC scheme, the warranty and insurance role undertaken by the Council is limited to a total period of ten years, and the vendor's liability is subject to normal contractual rules on limitation periods.

144. See especially Department of the Environment v Thomas Bates & Son [1990] 2 All ER 943 (HL) [structural weakness in the pillars of a building meant that if building loaded to capacity a danger was created. Held: this amounted to a quality defect only because building need not be fully loaded].

145. (1995) 121 DLR (4th) at 216.

146. See Anns above at 505 per Lord Wilberforce.

147. [1990] 2 All ER 269 at 294 per Ralph Gibson LJ.

148. But see also Watts v Morrow [1991] 4 All ER 937 (CA). On the categorisation of property interests along a personal/fungible spectrum, see Radin ‘Property and Person-hood’ (1982) 34 Stan L Rev 957.

149. [1977] 1 NZLR at 411, per Richmond P.

150. Thus, the reasoning in Ruxley Electronics v Forsyth [1995] 3 All ER 268 (HL) is clearly distinguishable. In that case, the House of Lords refused to award damages for the cost of rebuilding a swimming pool which had not been constructed according to contractual specifications. Because there was no diminution in value to the property as a result of the way in which the pool had been misconstructed, the owner could well have kept any damages awarded for rebuilding, and would have suffered no loss (other than loss of amenity). In the dangerous defect case in tort, the owner is constrained to repair by virtue of the presence of danger.

151. [1990] 2 All ER at 922 per Lord Keith.

152. Op cit at 97. This confusion continues to appear in the case law, most recently in the dissenting judgment of McKay J in Invercargill (CA) above at 536.

153. (1995) 121 DLR (4th) at 200–1.

154. Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1.

155. See Kamloops above at 685 per Wilson J, adopting the reasoning in Sparham-Souter v Town & Country Developments (Essex) Ltd [1976] QB 858 (CA); Invercargill (CA) above. The Privy Council in Invercargill also questioned the logic of Pirelli and concluded enigmatically that ‘[w]hether Pirelli should still be regarded as good law in England is not for their Lordships to say’ (above at 773).

156. Feldthusen op cit at 370.

157. Kamloops above.

158. (1985) 157 CLR 424.

159. [1994] 3 NZLR at 519.

160. Ibid at 525.

161. Ibid at 530.

162. Bowen above.

163. Stapleton ‘Duty of Care: Peripheral Parties’ op cit at 336–7. See Smith v Eric S Bush [1990] 1 AC 831 (HL).

164. See [1994] 3 NZLR at 530 per Casey J.

165. Duncan Wallace ‘No Somersault’ op cit at 299–300.

166. See also Hoyano op cit at 892.

167. Cooke op cit at 67.

168. Duncan Wallace ‘Anns Beyond Repair’ op cit at 232–3.

169. Ibid at 234–5.

170. On the possibility of a change in direction emanating from the House of Lords, see the comments of Lord Lloyd in Invercargill above at 766: ‘Their Lordships cite these judgments in other common law jurisdictions not to cast any doubt on Murphy's case, but rather to illustrate the point that in this branch of the law more than one view is possible: there is no single correct answer … it cannot be said that the decision of the Court of Appeal in the present case … was reached by a process of faulty reasoning, or that the decision was based on some misconception.’

171. [1990] 2 All ER at 926 [emphasis added]. Lord Oliver explicitly left the question open, remarking, however, that he was not convinced of the merits of such an exception; see ibid at 936.

172. See eg Cane op cit at 517.

173. See Grubb and Mullis op cit at 238.

174. Cooke op cit at 52.

175. Cane op cit at 517.

176. One argument that I have not answered is that made by the House of Lords in Murphy v Brentwood that the Defective Premises Act 1972 now covers the field and further reform is best left to the legislature; see [1990] 2 All ER at 938 per Lord Oliver. Given my focus on Commonwealth developments, I have not reiterated the criticisms made by others of this argument. See eg Stapleton ‘Duty of Care and Economic Loss’ op cit at 268-9; Cooke op cit at 67–8.

177. On the use of principle and policy in Norsk, see Stychin op cit at 330–8.