P bought a house that turned out to be faulty. Since they couldn’t afford the repairs, they had to sell it at a price considerably less than that which they paid to a person who was living in the house unrepaired at the time of the case. They sued D (the local authority who authorised the building of the houses) for negligence. HL refused their claim. HL explicitly overruled the outcome in Anns (that a public inspector had a duty of care to purchasers of a property to see that it was built properly). It also rejected the complex structures theory.
Lord Keith: There was no duty to take reasonable care to avoid causing pure economic loss. The only instance where economic loss is compensable is in the Hedley Byrne line of cases. Anns was a bad decision since it has opened the floodgates. Also to allow the builder/person who authorised the works to be liable for economic loss is inconsistent with the general rule that the manufacturer of chattels is not liable for economic loss (which is a good rule for avoiding floods of claims).
Lord Bridge: If the defect in a chattel causes economic loss (rather than physical problems as in Donoghue) a manufacturer cannot be held liable, even if the thing is defective to the point of being worthless. Liability here is for contract to determine. This is because there is no proximity between P and manufacturer regarding loss (HE is confusing proximity and remoteness i.e. that the type of harm is reasonably foreseeable. However the point about inconsistency is true and perhaps manufacturers should also be liable for economic loss). The principle is equally applicable to buildings. He also says, regarding Junior Books: “there is a special relationship of proximity between builder and building owner which is sufficiently akin to contract to introduce the element of reliance so that the scope of the duty of care owed by the builder to the owner is wide enough to embrace purely economic loss. The decision in Junior Books Ltd v. Veitchi Co. Ltd. can…only be understood on this basis.” I.e. he confines it by saying that it basically comes within the Hedley Byrne principle but with negligent misperformance, not misstatement. This prevents it having general effect.
Weir argues that this conclusion is correct for a number of reasons: (1) no proximity between authority and plaintiff; (2) inconsistency regarding manufacturers; (3) floodgates.