P was making a building for X and sub contracted the acquisition of some objects for the building to Y. Y purchased defective objects (they turned the wrong colour) from D. X refused to pay P for the objects since they were defective and P sued D for causing it economic loss. CA rejected P’s claim since: (1) to allow a claim for pure economic loss there has to be a special relationship between P and D, and that (2) P relied on D and that (3) there had been an assumption of responsibility towards P on the part of D (none of these were satisfied). That (4) although there was physical damage to the objects, P could not sue on this non-economic front because it had no proprietary interest in the objects. Therefore there was no reason to go round the ordinary liability on contract.
Bingham LJ: (1) Junior Books only allows economic loss claims in cases of actual physical damage (See Lord Bridge in Murphy)e.g. the damaged floor in that case, but not here where, although the blocks were the wrong colour, they were not damaged. Even if they were damaged, this happened while they were still the property of D and claims for non-economic loss (i.e. normal tort claims) require P to have a proprietary or possessory title to the thing damaged. (2) Therefore the only way of claiming economic loss would be through the Hedley Byrne principle, which doesn’t apply here since the reliance was on Y, not D + D never undertook any responsibility towards P.