Brandley v Deane (Part 2): Defect v Damage
Whilst the "manifest" test in Brandley v Deane was hailed as a hero and is quotably sexy, this article seeks to demonstrate that insofar as Malaysian construction litigators are concerned, the focus ought to lie in the judgment's examination of the distinction between "defect" and "damage" as actionable damages in the context of latent defects. This examination is important, and indeed more applicable and referable in our present Malaysian context than merely that of the "manifest" test.
On 15.11.2017, the Supreme Court of Ireland delivered its judgment in the case of Brandley & Anor v Deane & Anor. The judgment was celebrated for clarifying the law on latent defects limitation and for its adoption of the "manifest" test. I have in Part 1 attempted to explore the possible application of the Brandley v Deane "manifest" test in Malaysian construction latent defects, and how despite the new Section 6A of our Malaysian Limitation Act 1953, the case may have significant ramifications in pending legal proceedings.
Whilst I do think that the "manifest" test was helpful and timely, I however believe that our focus in Brandley v Deane arguably ought to be in its more important or referable (in our present Malaysian context at least) legal analysis and conclusion on the distinction between "defect" and "damage" in the context of actionable damages in latent defects, which underpinned and informed the Supreme Court's adoption of the "manifest" test. Unlike the "manifest" test which is only applicable to Malaysian cases commenced before the coming into force of Section 6A of our Limitation Act 1953, the legal analysis and conclusion viz. "defect" and "damage" does not suffer from such infirmity and provides a more attractive focus in developing the law in this area. I hope that I will succeed in convincing you of this, below.
First, it must be recalled that in Brandley v Deane, the issue involved the determination of when the cause of action for negligence accrued (and therefore limitation begin to run), in particular:- (a) on the date when the foundations were completed and certified fit, i.e. when the defect crystallized; or (b) when the cracks first appeared on the walls, i.e. when the physical damage manifests.
The Irish Supreme Court held that the cause of action accrued in scenario (b). In doing so, it had cause to examine and analyse the law on what constitutes actionable damage in negligence in the context of construction latent defects (see paragraphs [111] to [136] of the judgment).
It is trite that one of the elements required to sustain a cause of action founded on negligence is the existence of an actionable damage. The Supreme Court in Brandley v Deane held that mere latent defects alone are not actionable. It was necessary that there first be a physical manifestation of damages arising from or caused by the defect. I do not think that this legal proposition is by any stretch radical or new, but merely a restatement of common law principles.
The legal basis for this, as explored in Brandley v Deane, is that mere defects only result in a purely economic loss, in that a buyer had paid an agreed amount for a building, when its actual intrinsic value is in fact much lower due to a latent defect or inadequacy which has as yet not resulted in any actual damage or loss, if ever. The building still functions, for all intents and purposes, wholly for what it has been intended to. Should it be sold in the duration that the defect or inadequacy remain latent and unknown, the seller will sustain no loss by reason of the defect or inadequacy. Any loss or injury involved in the actual inadequacy is sustained (and therefore becoming actionable) only at the time when that inadequacy is first known or manifest, in which event the actual diminution of the market value of the property occurs. The actual loss and damage, and therefore the actionable damage, is said to occur when the physical damage becomes so bad or the defect so obvious that the market value of the property depreciates, but not before.
Brandley v Deane examined the authorities that stood for the above proposition, and effectively applied the principle without much further exposition. Nevertheless, the examination of these authorities is most helpful. This is particularly so as while I have in the past come across a number of academic discussions dealing with actionable damage, there are very few local case law which examines the principle in much detail, particularly in the context of a distinction between "latent defect" and "damage".
Hence, while the idea of the "manifest" test is very quotably sexy, the decision in Brandley v Deane in reality lies in an understanding of what constitutes actionable damage. Indeed, once one has a grasp of this, there is really no need for the "manifest" test and its ilks. Quite simply, once an actionable damage can be said to occur, the cause of action accrues, and time begins to run.
This discussion is important and very much referable in legal arguments in Malaysia, even with the advent of our new Section 6A. Very much more so, I think, than the "manifest" test.