Mr. Murphy purchased a house that had been built on a concrete raft foundation. The foundation had been designed by consulting engineers and approved by Brentwood District Council under their building control powers. The council had relied on the engineers' calculations when approving the foundation design.

Eleven years after construction, cracks appeared in the house due to differential settlement caused by the inadequate foundation design. The house became dangerous and unsaleable. Murphy was forced to sell the property at a significantly reduced price to a builder who demolished the house and rebuilt it with proper foundations.

Murphy sued the council for negligence, claiming that their failure to ensure the foundation design was adequate caused him to suffer pure economic loss in the form of the reduced sale price and the cost of making the house safe.

The House of Lords provided several reasons for overruling Anns and restricting economic loss recovery:

• Nature of Damage: Building defects that make property less valuable or require repair constitute economic loss, not physical damage to other property
• Policy Concerns: Allowing recovery for pure economic loss in building cases would create excessive liability for public authorities and professionals
• Contractual Allocation: Building defects are typically matters for contractual remedies between parties in the construction chain, not tort law
• Floodgates Problem: The Anns principle had led to extensive litigation and uncertainty about the boundaries of liability
• Complex Economic Loss: Pure economic loss should generally be dealt with through contract law, which provides clearer boundaries and expectations

The court distinguished between cases involving immediate danger to health and safety (where physical damage might be recoverable) and cases involving defects that merely affect the value or usability of property (pure economic loss).

The decision represented a significant retreat from the expansive approach to negligence liability that had developed since Anns, emphasizing the need for clear boundaries in tort law.

Murphy v. Brentwood District Council had major impact on tort law:

• Overruling Anns: Explicitly overruled the expansive approach to duty of care established in Anns v. Merton
• Economic Loss Restriction: Significantly restricted the circumstances in which pure economic loss can be recovered in negligence
• Public Authority Protection: Reduced the liability exposure of local authorities and other public bodies in building control functions
• Conservative Shift: Marked a shift toward more restrictive approaches to negligence liability
• Contractual Emphasis: Reinforced the principle that economic relationships should primarily be governed by contract rather than tort

The case, along with Caparo Industries v. Dickman, represents the modern restrictive approach to duty of care and economic loss. It demonstrates how tort law can contract as well as expand, responding to concerns about excessive liability and legal uncertainty.