Builders and Liability to 3rd Parties

FreudianSlippers

Disclaimer: This is a purely academic question and in no way is asking for advice on a specific and/or real-world issue.

Scenario:
1) Mr. X purchases a home from Builder Y
2) Mr. X sells that house to Mr. Z
3) Extensive damage arises to the house due to negligent/substandard workmanship and/or products used by Builder Y

How does Mr. Z go about rectifying the situation?
It would appear there is no privity between Builder Y and Mr. Z so claiming under breach of contract and/or under Sale of Good and Supply of Services Act, 1980 wouldn't work.

Clearly there is negligence present in carrying out the work, and we have Ward v McMaster which seems to endorse Junior Books Ltd. v Veitchi Co. Ltd.
But does this mean that a third party (such as Mr. Z) becomes a member of a class to which the Builder owes a duty of care? If so, is this acceptable to claim for economic loss, or is the duty only in regard to negligence from which a dangerous defect arises (like in the UK)?

I also have no access to westlaw.ie at the moment, so does anyone know off hand if there is an Irish case citing Winnipeg Condominium Corporation No. 36 v. Bird Construction Co. [1995] 1 S.C.R. 85, especially:
"By placing this product into the stream of commerce, the builder owes a duty of care to those who will use his product, so as to render him accountable for negligent workmanship."

Also, if negligence is present and accepted, can Mr. Z claim for depreciation in value of his property against Builder Y, or is this still one of the areas that is very 'caveat emptor' in Irish Law?

Finally is there any redress for Mr. Z under contract (perhaps with Mr. X?) or under the Sale of Goods... Act 1980?

dats_right

The reality is that you would praying that there is an effective Homebond or Premier scheme in place, and in fairness most developments over the recent years would have so been. Such schemes provide a guarantee for major structural defects for ten years from date of construction, which is longer than would be permitted under the Statute of Limitations i.e. 6 years.

FreudianSlippers

Thanks.

Assuming there is no Homebond or Premier scheme in place, effectively there is no claim under contract unless Mr. X was aware of the defect at the time of selling it to Mr. Z.
There is no claim under the 1980 Act.

But there would seem to be a claim in negligence?

Reloc8

Likely to be no claim whatsoever, reason being :-

The contract is between builder and purchaser and will contain clauses to build a house in substantial good repair to workmanlike standard or similar. Only the purchaser can rely on this. The purchaser can also claim for negligent work - there will be considerable overlap - or claim in negligence only.

As regards negligence and the next purchaser, the question is whether the builder owes a duty of care to successive purchasers to ensure the house is to a particular standard. I would generally advise that the answer is no, unless the house is in fact dangerous to propery or person in which case there may be a liability. The fact is that in general caveat emptor applies to a purchase of a building - and the moral of the story is that purchasers would be well advised to have a proper survey done before signing contracts when buying second hand homes.

In the event that you were advised a house was 'sound' and it turns out you were sold a pup you would at least then probably have a remedy against the person you commissioned to survey it. Yes it is more expensive this way...but better safe than sorry etc.

There is no claim under the 1980 Sale of Goods/Supply of Services legislation not least because both parties are consumers, excluding the application of the implied warranty as to being fit for purpose etc. as this only applies where the seller is selling in the course of a business. I am not convinced in any event that a dwelling/building is a 'good' within the legislation. In fact subject to correction, it is not.

It does not matter whether Mr. X was aware of the defect or not unless he made distinct representations that the house was sound and free of defect - which no seller ever would/should. If he did this and it turns out its not and Mr X knew (or perhaps ought to have known) that there were problems he might be exposed to liability.

Victor

dats_right wrote: »

which is longer than would be permitted under the Statute of Limitations i.e. 6 years.

A contract under seal would have a limit of 12 years for latent defects.

I understand there have been recent changes to the rules about contracts under seal.

FreudianSlippers

Reloc8 wrote: »

Likely to be no claim whatsoever, reason being :-

The contract is between builder and purchaser and will contain clauses to build a house in substantial good repair to workmanlike standard or similar. Only the purchaser can rely on this. The purchaser can also claim for negligent work - there will be considerable overlap - or claim in negligence only.

As regards negligence and the next purchaser, the question is whether the builder owes a duty of care to successive purchasers to ensure the house is to a particular standard. I would generally advise that the answer is no, unless the house is in fact dangerous to propery or person in which case there may be a liability. The fact is that in general caveat emptor applies to a purchase of a building - and the moral of the story is that purchasers would be well advised to have a proper survey done before signing contracts when buying second hand homes.

In the event that you were advised a house was 'sound' and it turns out you were sold a pup you would at least then probably have a remedy against the person you commissioned to survey it. Yes it is more expensive this way...but better safe than sorry etc.

There is no claim under the 1980 Sale of Goods/Supply of Services legislation not least because both parties are consumers, excluding the application of the implied warranty as to being fit for purpose etc. as this only applies where the seller is selling in the course of a business. I am not convinced in any event that a dwelling/building is a 'good' within the legislation. In fact subject to correction, it is not.

It does not matter whether Mr. X was aware of the defect or not unless he made distinct representations that the house was sound and free of defect - which no seller ever would/should. If he did this and it turns out its not and Mr X knew (or perhaps ought to have known) that there were problems he might be exposed to liability.

That seems to be what I've found myself too.

The difficulty in this jurisdiction is that we have unclear case law on whether or not one can ground a claim in negligence for pure economic loss. Healy says that Ward v McMaster implies that the courts ought to follow Junior Books Case and allow recovery in tort for pure economic loss - but since no one has expressly said this yet, it is probably unwise to stumble into that sort of minefield.

Clearly, though, if the defect is dangerous and/or potentially dangerous, all material persons involved with design and construction of a building owe a duty to the entire class of persons who may use the product.

I am not convinced in any event that a dwelling/building is a 'good' within the legislation. In fact subject to correction, it is not.

I'm almost positive a building is a good within the legislation once the builder or vendor is acting at all material times in the course of business.
Certainly builders doing renovations and repairs fall under the Act (source:http://www.onlinetradesmen.com/PropertyOwners/ConsumerRights/tabid/401/Default.aspx)

Reloc8

OisinT wrote: »

The difficulty in this jurisdiction is that we have unclear case law on whether or not one can ground a claim in negligence for pure economic loss. Healy says that Ward v McMaster implies that the courts ought to follow Junior Books Case and allow recovery in tort for pure economic loss - but since no one has expressly said this yet, it is probably unwise to stumble into that sort of minefield.

Actually, the real and fundamental difficulty is simply that there is no duty of care identified (yet or whatever) as being owed by a builder to a successive purchaser presuming that the defects are not dangerous to person or property. The next issue might well be whether one can recover damages for negligence for pure economic loss (yes, if you ask me).

The website you provide is good in a basic general sense as regards advice when dealing with professional builders and the like. It does not establish that a house is 'goods' but that builders can be liable under Sale of Goods Legislation if they provide goods to a consumer in the course of their trade which they frequently do. 'builders/tradesman fall under the act' - yes absolutely - for goods and services...that doesn't determine whether a house is a good or not.

Now, is a dwelling house or a building a 'good' ?

The classic definition of "goods" is a chattel which is generally subject to sale. There are contrary older cases as to whether a house is a chattel. The modern interpretation of goods would exclude stuff like eh houses which are fixed to the soil http://duhaime.org/LegalDictionary/G/Goods.aspx (few general definitions there). I think it would be hard in fact impossible to argue that structural defects in a building are defects in a 'good' within the meaning of the legislation.

Secondly, this has no application to law of negligence as its a matter of implied warranties/terms in a contract, and no application to the situation which pertains where the seller is not acting in the course of his business - as the Act would not apply to anything sold in those circumstances.

Finally, whether a a person is acting in the course of a trade or profession has no relevance at all to whether they are dealing with a 'good' or not - that (acting in course of business) just determines whether certain aspects of the Sale of Goods legislation applies in favour of a consumer dealing with such a person, not whether the subject of the deal is a 'good' in the first place.

Fey!

Another side to this.

Most banks insist on engineers reports when they issue mortgages (at least they did when I got my mortgage!).

Therefore, as per the OPs example, if Buyer Z got Engineer A to assess the building and stated in his report nothing about a serious fault, and there was a problem found later, then could Engineer A be held liable for any costs arising from repairs to the problem or economic loss?

Reloc8

Fey! wrote: »

Another side to this.

Most banks insist on engineers reports when they issue mortgages (at least they did when I got my mortgage!).

Therefore, as per the OPs example, if Buyer Z got Engineer A to assess the building and stated in his report nothing about a serious fault, and there was a problem found later, then could Engineer A be held liable for any costs arising from repairs to the problem or economic loss?

Yes, subject to his terms of engagement and the content of the conclusions in his/her report, as per above.

dats_right

Victor wrote: »

A contract under seal would have a limit of 12 years for latent defects.

But that has no application to a subsequent purchaser who wasn't a party to the contract.

So 6 years applies to negligence, but it isn't really going to be a realistic runner in most cases such as this anyway. Homebond or premier is better bet.

picorette

dats_right wrote: »

But that has no application to a subsequent purchaser who wasn't a party to the contract.

So 6 years applies to negligence, but it isn't really going to be a realistic runner in most cases such as this anyway. Homebond or premier is better bet.

Is it not six (or twelve if under seal) years from the date that the cause of action accrues?

jblack

FreudianSlippers wrote: »

Disclaimer: This is a purely academic question and in no way is asking for advice on a specific and/or real-world issue.

Scenario:
1) Mr. X purchases a home from Builder Y
2) Mr. X sells that house to Mr. Z
3) Extensive damage arises to the house due to negligent/substandard workmanship and/or products used by Builder Y

How does Mr. Z go about rectifying the situation?
It would appear there is no privity between Builder Y and Mr. Z so claiming under breach of contract and/or under Sale of Good and Supply of Services Act, 1980 wouldn't work.

Clearly there is negligence present in carrying out the work, and we have Ward v McMaster which seems to endorse Junior Books Ltd. v Veitchi Co. Ltd.
But does this mean that a third party (such as Mr. Z) becomes a member of a class to which the Builder owes a duty of care? If so, is this acceptable to claim for economic loss, or is the duty only in regard to negligence from which a dangerous defect arises (like in the UK)?

I also have no access to westlaw.ie at the moment, so does anyone know off hand if there is an Irish case citing Winnipeg Condominium Corporation No. 36 v. Bird Construction Co. [1995] 1 S.C.R. 85, especially:
"By placing this product into the stream of commerce, the builder owes a duty of care to those who will use his product, so as to render him accountable for negligent workmanship."

Also, if negligence is present and accepted, can Mr. Z claim for depreciation in value of his property against Builder Y, or is this still one of the areas that is very 'caveat emptor' in Irish Law?

Finally is there any redress for Mr. Z under contract (perhaps with Mr. X?) or under the Sale of Goods... Act 1980?

Just some recent (ish) developments.

http://www.bailii.org/ew/cases/EWCA/Civ/2011/9.html

The English law is a lot more rigid here, a legacy of Thatcherite Britain. Complex structure and voluntary assumption are very difficult to prove in UK but there is a move to try to impose liability for builder.

See also Henderson v Merrett and recent applications of same in Tesco v Costain [2003] EWHC 1487 (TCC)

Good recent case http://www.bailii.org/ew/cases/EWHC/TCC/2011/1722.html gives nice summary of the current position in UK.

MagicSean

I thought homebond was mandatory.

Marcusm

Would the builder not have warranted the adequate construction of the property? Do the standard contract or subsequent sale not include an assignment of such warranties? This is what I have seen in practice for long life movable assets (ships, planes, trains). Could a similar approach not work with a construction contract?

jblack

Marcusm wrote: »

Would the builder not have warranted the adequate construction of the property? Do the standard contract or subsequent sale not include an assignment of such warranties? This is what I have seen in practice for long life movable assets (ships, planes, trains). Could a similar approach not work with a construction contract?

Adequate construction? No, well not in UK anyway. The Hancock v Brazier implied terms of

a - proper workmanship
b - suitable materials
c - fit for human habitation

are incorporated into the Defective Premises Act 1972. These cannot be contracted out of. Contractual liability will be for 6/12 years generally unless prescribed differently in the contract.

Tortious liability is also for 6 years but the Latent Damage Act 1986 inserts a longer limitation period with respect to defects in Section 14A of the Limitation Act 1980, namely 3 years from the date of knowledge or ought to have knowledge of the defect. There is a longstop period of 15 years. These statutory protections are afforded to subsequent purchasers but don't forget Murphy makes recovery nearly impossible for anything other than damage to other property or physical injury.

Brought about due to the harshness of Pirelli v Oscar Faber.

However the Robinson v PE Jones decision has now, maybe, set a precedent that a contractual term for reasonable skill and care is a voluntary assumption of risk in tort and therefore economic loss is recoverable.

It represents a huge change, the biggest since Murphy v Brentwood tried to stop the flow of litigation due to the low threshold established in the now defunct Anns v Merton.

FreudianSlippers

I found a simple answer to my question... unfortunately I can't remember it
Damn you piss poor memory! (in fairness, the OP is 2 years old :P)

jblack

FreudianSlippers wrote: »

I found a simple answer to my question... unfortunately I can't remember it
Damn you piss poor memory! (in fairness, the OP is 2 years old :P)

Ha! - I was looking (and by looking I mean being lazy and googling) into how Ireland differs from the UK in terms of liability for defects/damages/recoverability of pure economic loss etc and this thread came up. Specifically Ward v McMaster and Colgan v Connolly Const.

Seeing as it is Christmas I thought what better way to participate in religion than by raising the dead.