Areas of applicable law: Tort law – Pure economic loss

Main arguments in this case: Can structural defects and pre-existing defects in a property be considered as pure economic loss?

The case of Anns v. Merton London Borough Council (1978) should be used as a reference in the development of the principle of pure economic loss.  The verdict was considered as controversial and the decision taken in Murphy v. Brentwood DC (1991) now overrules the decision taken in Anns v Merton LBC.

The fact of the case: The claimants were the leaseholders of a block of maisonettes. The properties were newly built but had structural defects which later caused various defects in the properties ranging from cracks on the wall, slopping of floors and subsidence. The claimants sued the Merton London Borough Council instead of suing the builder as they saw the council having more financial resources in terms of paying out the damages.

The claimants based their claim on two reasons: (1) the council had been negligent in approving the plans for the properties, and secondly, that the council failed to inspect the properties at the time of construction.

The claimants remarkably won the lawsuit as the House of Lords allowed the claim and categorised the damage as ‘material damage to property’. The decision was given despite the fact that there was no contract between the claimants and the council. Moreover the decision also contradicted with the traditional view of property damage which was until now held that such damage could only arise if it the damage was caused to someone’s existing property. Here the property was already defective at the time of purchase.

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