Legal Principles and Key Points:
- In the case of Junior Books Ltd v Veitchi Co Ltd  1 AC 520, it was established that where there is a sufficiently close relationship between the parties, the duty of care extended to avoid causing pure economic loss arising from the defective property.
Facts of Junior Books Ltd v Veitchi Co Ltd  1 AC 520
- D sub-contractors Veitchi laid a floor in the C’s factory
- There was no contractual relationship between the two parties
- When the D laid down the floor defectively, the C sued them directly in tort rather than breach of contract
- C sought to recover the loss of from the flooring, which included replacement costs
Issues in Junior Books Ltd v Veitchi Co Ltd  1 AC 520
- Was the D liable for negligence in respect of the economic loss suffered from the C?
Held by the House of Lords
- Appeal dismissed. C’s claim succeeded – the D was liable for negligent economic loss.
Citing Wilberforce L in Anns v. Merton London Borough Council , Roskill L believed the test to apply in the current case [541-2]
- “The appellants, though not in direct contractual relationship with the respondents, were as nominated subcontractors in almost as close a commercial relationship with the respondents as it is possible to envisage short of privity of contract. Why then should the appellants not be under a duty to the respondents not to expose the respondents to a possible liability to financial loss for repairing the flooring should it prove that that flooring had been negligently constructed?”
He believed there was a requisite degree of proximity between the parties for the C to sue for pure economic loss, citing Hedley v Byrne too :
- They were sub-contractors who specialised in flooring, knowing what products were needed
- They were alone responsible for the flooring, with the presumed knowledge that C relied upon their expertise
- “The relationship between the parties was as close as it could be short of actual privity of contract”
- Ds must have known their work was negligent, which would then result in defects for which the Cs would have to spend money to rectify
This reliance would not be so easily found in consumer goods cases where “it is obvious that in truth the real reliance was upon the immediate vendor and not upon the manufacturer” 
Lord Brandon Dissenting
“it appears to me clear beyond doubt that, there being no contractual relationship between the respondents and the appellants in the present case, the foundation, and the only foundation, for the existence of a duty of care owed by the defenders to the pursuers, is the principle laid down in the decision of your Lordships’ House in Donoghue v. Stevenson” 
As for the proximity of relationship, Brand on L believed it to be difficult “to imagine a greater degree of proximity, in the absence of a direct contractual relationship, than that which, under the modern type of building contract, exists between a building owner and a sub-contractor nominated by him or his architect.” 
This case undermines the common law doctrine of privity of contract by allowing the C to sue the D despite not being a party to a contract between them; this was not really addressed by the Lords.
This precedent was overruled in the case of Robinson v PE Jones Ltd  3 WLR 815.