Areas of applicable law: Tort law – Pure economic loss
Main arguments in this case: A pre-existing defect in a property does not give rise to a duty of care and therefore cannot be compensated.
The fact of the case: The claimant had his house built on a concrete raft which had design issues but nevertheless was approved negligently by the defendant council. Once the rest of the property was built on it, the walls started to crack due to subsidence. The claimant sold the house but the price he sold for was significantly lower than what he would have received had there been no structural issues in the property. The claimant later sued the defendant for the difference in value of the property. The court however disagreed and said that the loss was pure economic loss. The court said that if an item is bought with a defect already in it then it either has to be repaired or replaced. And in both situations the loss (the cost of replacing or buying a new one) is pure economic loss.
The decision taken in Murphy is quite important as it not only overrules the decision taken in Anns v Merton London Borough Council (1978), a case with very similar circumstances, but it also confirms that a loss arising from similar situations would not give rise to a duty of care.