Abbott & Anor. v Will Gannon & Smith Ltd.

For limitation purposes, a negligence claim against a professional designer for latent defects in a building accrues when physical damage occurs, even if the damage is undiscovered. The rule in Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1 remained binding. Murphy v Brentwood D.C [1991] AC 398 did not expressly or impliedly displace it. A Court of Appeal cannot resolve that question itself. Alternatively, if economic loss governed, loss would arise when the defect manifested so as to affect the building’s value, rather than merely when remedial work was completed. The appeal was dismissed.

The claimants owned a hotel and retained the respondent consulting engineers to design remedial works to a defective bay window. The works were completed in March 1997, but further movement and cracking were first noticed in late 1999. Proceedings issued on 15 September 2003 alleged negligent design in contract and tort.

The contract claim was accepted to be time barred. Deputy District Judge Childs applied Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1 to facts regarded as indistinguishable from that case and declared that the tort claim would not be statute barred if the cracks first appeared within six years of issue. The appeal concerned whether Murphy v Brentwood D.C [1991] AC 398 had displaced Pirelli, or whether economic loss accrued when the remedial works were completed.

Lord Justice Tuckey delivered the judgment. Lord Justice Clarke and Lord Justice Mummery agreed.

1. The respondents’ notice failed. The letters from loss adjusters instructed by the engineers’ insurers stated only that proper proof of losses attributable to the alleged inadequate design would be required. They were not admissions of liability. There was therefore no admission requiring withdrawal under rule 14.1(5) of the Civil Procedure Rules 1998, and no abuse of process.
2. The contract claim was common ground to be time barred. The concurrent tort claim was subject to the six-year period in section 2 of the Limitation Act 1980. The extended period under section 14A of that Act did not assist because the claimants had knowledge by late 1999 and proceedings were not issued until 2003.
3. Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1 was directly on point. Ketteman v Hansel Properties [1987] AC 189 had approved and applied the physical-damage approach. Murphy v Brentwood D.C [1991] AC 398 had not expressly overruled Pirelli, and the court was not persuaded that it had done so by implication. The Court of Appeal was bound by Pirelli and Ketteman. Only the House of Lords could determine whether Pirelli remained good law in England.
4. Alternatively, if the court had been free to adopt an economic-loss analysis, completion of the defective works in 1997 would not itself have caused loss. Loss would arise when the defect manifested in a way affecting the building’s value, measured by reasonable repair costs or diminution in market value. On that approach, the cause of action accrued in 1999.
5. It was unnecessary to decide whether the claim involved more than one cause of action for limitation purposes. The appeal was dismissed. Leave to appeal was to be decided on paper.

• Court of Appeal (Civil Division): dismissed the appeal, holding that the Court of Appeal was bound by Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1. The appeal had been transferred under rule 52.14 of the Civil Procedure Rules 1998.
• Exeter County Court: Deputy District Judge Childs tried limitation as a preliminary issue and applied Pirelli to the agreed facts, making a conditional declaration that the claim would not be statute barred if the cracks appeared within six years before proceedings.