3 DESIGN DISPUTES AND LIABILITY

The design professional: architect/engineer’s duty – tort versus contract

Design professionals may be liable to their clients and third parties for damage and loss caused by breach of contract and/or negligence. Also, to the extent that any individual, such as a contractor, acts in a “design capacity”, it too will be held liable under the same rules as set out herein. The first area to review is whether or not any claimed damages resulting from alleged negligence are recoverable in contract. Unfortunately, there are occasions where resort to a claim of breach of contract is unavailable to a damaged party, e.g. where there is no direct contractual relationship between the parties, or if the guilty party has become insolvent, the limitation period has lapsed, etc. Under these circumstances, a claim for negligence should be additionally reviewed. As is discussed in more detail in Chapter 12, to establish a claim for negligence it is necessary to show that the defendant owed the claimant a duty of care, that the conduct of the defendant fell below the standard of care thus resulting in a breach of the duty owed, and that there was a causal connection between the defendant’s conduct and the damage suffered by the claimant.

But what exactly is the duty of care that is needed? While this topic is covered in more detail in Chapter 12 it is important to point out here that in the case of actual physical injury all that is needed is the reasonable foreseeability of harm occurring from one’s actions. In a construction setting claims can arise for both physical and economic losses and this is where the courts have attempted, over the years, to reach a balance. In Anns v Merton LBC,⁷ the House of Lords provided a two-stage test setting forth when a duty of care, including a duty not to cause economic loss, is owed in tort. Lord Wilberforce expressed the test as follows:

“… in order to establish that a duty of care arises in a particular situation, it is not necessary to bring the facts of that situation within those of previous situations in which a duty of care has been held to exist. Rather the question has to be approached in two stages. First one has to ask whether, as between the alleged wrongdoer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter in which case a prima facie duty of care arises. Secondly, if the first question is answered affirmatively, it is necessary to consider whether there are any considerations which ought to negative or reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach of it may give rise.”

This was the “rule” for almost 12 years, but in 1990 the House of Lords changed its view in two cases: Murphy v Brentwood District Council⁸ and Department of the Environment v Thomas Bates and Sons Ltd and others.⁹ Both cases concerned claims for economic losses arising from negligence, and the House of Lords denied them both. It is interesting to note what Lord Oliver in Murphy wrote:

“I have found it impossible to reconcile the liability of the builder propounded in Anns with any previously accepted principles of the tort of negligence and I am able to see no circumstances from which there can be deduced a relationship of proximity such as to render the builder liable in tort for pure pecuniary damage sustained by a derivative owner with whom he has no contractual or other relationship.”

He then went on to explain that economic loss would not be recoverable in negligence where the loss was too remote or where it would be impossible to acceptably contain liability:¹⁰

“The critical question … is not the nature of the damage in itself, whether physical or pecuniary, but whether the scope of the duty of care in the circumstances of the case is such as to embrace damage of the kind which the plaintiff claims to have sustained … The essential question which has to be asked in every case, given that damage which is the essential ingredient of the action has occurred, is whether the relationship between the plaintiff and the defendant is such – or, to use the favoured expression, whether it is of sufficient “proximity” – that it imposes upon the latter a duty to take care to avoid or prevent that loss which has in fact been sustained.”

As will be discussed later, economic losses were not recoverable in tort¹¹ unless the claim arose out of “negligent misstatement” as per the ruling in Hedley Byrne v Heller & Partners.¹²

Fitness for purpose liability

In general, a professional designer’s contractual obligation to the client extends only to agreeing to conduct the designated services with reasonable skill and care. In certain circumstances the standard of care to be expected from specialist engineers may be more onerous than general practice engineers. Thus, in Gloucestershire Health Authority v Torpy,¹³ the Health Authority commissioned a waste management study and accepted the recommendation that a new incinerator be built at its hospital. Unfortunately, the plant installed never met the performance criteria and was eventually shut down as it was uneconomic. The court found against Torpy in both contract and tort and held that it was obliged to exercise that degree of skill and care ordinarily exercised by reasonably competent general mechanical and electrical building service consulting engineers, having not held themselves out as possessing any higher skill. The court further found that Torpy had failed to discharge its obligation, as it was reasonably foreseeable that the incinerator would never achieve the level of throughput required, and that it had put the project in the hands of someone who was not competent to handle it and who had not provided any appropriate level of supervision or support.

In trying to further increase the designer’s liability beyond reasonable skill and care the implication of a term of “fitness for purpose” in a designer’s retainer is highly unusual if all that the designer is supplying is professional advice or designs. In Greaves & Co v Baynham Meikle & Partners,¹⁴ the Court of Appeal held that the fitness for purpose test may apply but is dependent upon the facts of the case. In that case Greaves entered into a design and build contract with a client to build a warehouse. They subcontracted the design for the warehouse to Baynham Meikle, a firm of structural engineers who were made fully aware of the purpose of the warehouse, which included the storage on the first floor of oil drums, to be moved and stacked by forklift trucks. Baynham Meikle’s design of the warehouse, however, did not take into account the vibrations caused by the forklift trucks with the result being that the vibrations caused the failure of the concrete floor. Greaves were found to be liable to their client for this failure and in turn sued Baynham Meikle for the cost of replacement of the floor.

The court held that Baynham Meikle were negligent and therefore liable, but went on to state that even without negligence on the part of the consultants, they would have been liable, as a fitness for purpose obligation could be implied into their contract with Greaves. The requirement of the client, which was accepted by Baynham Meikle, was for the design of a warehouse for a particular purpose and it was thus implied that the design would be fit for the intended purpose – a warehouse within which forklift trucks would operate. The court stressed, however, that the question of whether a consultant’s design is subject to the fitness for purpose test will always depend upon the facts of the case.

It should be noted here that an express term in a consultant’s contract would override the position, which may otherwise be implied by law. An express “reasonable skill and care” clause should, therefore, be a pre-requisite for any consultant. If the parties expressly agree to a clause where the consultant warrants that the design will be fit for its purpose, this will be binding. However, such a clause is likely to be of little use to a client. Professional indemnity insurance policies for consultants undertaking design protect the consultant only against a failure to exercise reasonable skill and care. Any fitness for purpose obligation upon the consultants will not traditionally be covered by the policy.

It is often assumed that design work undertaken by a consultant will be subject only to the test of reasonable skill and care. This is usually correct and the leading case authority is George Hawkins v Chrysler (UK) Ltd and Burne Associates.¹⁵ In that case it was held that, in the absence of special circumstances, it was not open to the court to extend the normal obligations of a professional beyond the obligation to take reasonable care. Here, the Court of Appeal rejected the attempt to make the engineer liable on a “fitness for purpose” basis and made it clear that the significance of the decision in Greaves¹⁶ should be confined to its special facts.¹⁷

The rule is that a design professional is under no higher obligation than a duty to take reasonable skill and care in the provision of its services and an attempt to impose any warranty for fitness for purpose, as an implied term of the contract, requires special factual circumstances.¹⁸

Reasonable skill and care

What is “reasonable skill and care” is often referred to as the “Bolam test” after the name of the case, Bolam v Friern Hospital Management Committee¹⁹ where the court stated:

“Where you get a situation which involves the use of some special skill or competence, then the test as to whether there has been negligence or not is … the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill at the risk of being found negligent. It is well-established law that it is sufficient if he exercises the ordinary skills of an ordinary competent man exercising that particular art.”

Bingham LJ stated this in a slightly different way in Eckersley vs. Binnie & Partners:²⁰

“a professional man … must bring to any professional task he undertakes no less expertise, skill and care than other ordinarily competent members would bring but need bring no more. The law does not require of a professional man that he be a paragon combining the qualities of polymath and prophet.”

From this we find that the liability of professional designers arises only if the defective design was due to negligence. Remember that this does not cover the concept of strict liability where professional designers may have strict design liability even if they were not negligent.

When an employer specifically engages an architect desiring greater skills than the norm²¹ it must do so by means of an express term in this regard. Further, the standard to apply is the professional standard at the time the design was carried out²² or, where there is a continuing obligation to review the design, the professional standard at the time of the review.²³ In making the determination of whether the design professional has met the appropriate standard the test to be applied is:

“… he is not guilty of negligence if he has acted in accordance with a practice accepted as proper by a responsible body … skilled in that particular art … Putting it the other way round, a man is not negligent, if he is acting in accordance with such a practice, merely because there is a body of opinion who would take the contrary view.”²⁴

It should be noted, however, that this test is not the only method of deciding whether a professional has been negligent. There are instances in which a court is entitled to judge for itself what the appropriate standard of care is rather than defer to the standard of care set by a responsible body of opinion within the profession (or the lowest of any such standards).²⁵ In JD Williams & Co Ltd v Michael Hyde & Associates Ltd,²⁶ the Court of Appeal stated that the test is subject to three qualifications:

“First, where the professional practice relied on by the architect cannot withstand logical scrutiny;

Second, where the judge is entitled to conclude that the evidence called by the architect does not establish the existence of a practice accepted as proper by a responsible body of architects; and

Third, where the task entrusted to the architect did not call for the exercise by him of any particular architectural expertise.”

A design professional, like any other professional, owes a duty to exercise reasonable care and skill in the performance of its work. In practice, for example, the architect’s contract often contains express terms regarding this duty, e.g. the RIBA Architect’s Appointment, Condition 3.1 or the ACE Conditions of Engagement 1995, Condition 2.4.

An interesting recent case dealing with a design professional giving advice is Kellie v Wheatley & Lloyd Architects Ltd,²⁷ where the court considered whether an architect was negligent in relation to advice given about potential designs and his supervision of the Works. The defendant architect advised the claimants not to build an aspect of their preferred design due to planning permission requirements. The claimants asserted the architect had been negligent as the development rights attached to the property meant that it could have permitted the building resulting in loss due to decrease in value to their house and it would have cost less to build in accordance with their preferred design. The court rejected the claimants’ allegations finding that they did not purport to make any stipulation or give a firm instruction in relation to their preferred design and the architect was entitled and required to exercise his professional judgment in respect of design and that his approach was consistent with that of the planning officer with whom he had preliminary discussions. The court found that the architect was entitled to express his opinion as he was providing practical rather than theoretical advice and, therefore, was not negligent.

It would thus appear that, in some situations, designers may be under a duty to ensure that their design is fit for the intended purpose, whereas, in others, designers are obliged simply to use reasonable care and skill in carrying out the design. In the recent case of MT Højgaard A/S (MTH) v E.ON Climate & Renewables UK Robin Rigg East Limited,²⁸ MTH was contracted to design, fabricate and install foundation structures for two offshore windfarms in the Solway Firth. Clause 8.1 of the contract provided that MTH should carry out the works so that it shall be “fit for its purpose as determined in accordance with the Specification using Good Industry Practice”; and that the designs shall be “wholly in accordance with this Agreement and any performance specifications or requirements of the Employer as set out in this Agreement”.

Those Employer’s Requirements further referred to certain technical requirements, including J101 – an international standard for the design of offshore wind turbines, published by Det Norske Veritas, an independent classification agency based in Norway, aimed at providing “an internationally acceptable level of safety by defining minimum requirements for structures and structural components” – and to a requirement that the design of the foundation structures should “ensure a lifetime of 20 years in every aspect without planned replacement”.

MTH duly proceeded with the design and construction of the foundation structures, which were installed in the Solway Firth between 2007 and 2009. However, serious problems developed and they were found to be defective. Further, an equation included in the J101 standard turned out to be incorrect by a factor of about ten, meaning that the capacity of the grouted connections in the foundation structures had been substantially overestimated.

In order to ascertain who should bear the cost of the remedial works, estimated at around €20 million, the parties embarked upon court proceedings. In summary, MTH contended that it had exercised reasonable skill and care, and complied with all its contractual obligations, and so should have no liability. E.ON, however, argued that MTH had been negligent and was responsible for numerous breaches of contract, claiming declarations to the effect that MTH was indeed liable for the cost of the remedial works.

At first instance, Mr Justice Edwards-Stuart rejected the suggestion that MTH had been negligent, and dismissed a number of E.ON’s allegations of breach of contract. However, he found for E.ON, chiefly on the grounds that: (i) clause 8.1 of the contract required the foundations to be fit for purpose; (ii) fitness for purpose was to be determined by reference to the technical requirements; and (iii) those requirements demanded that the foundation structures be designed so that they would have a lifetime of 20 years.

The Court of Appeal, though, allowed MTH’s appeal. It accepted that, if one was confined to the technical requirements, there appeared to be a warranty on MTH’s part that the foundations would function for 20 years. However, the Court concluded that this was “too slender a thread upon which to hang a finding that MTH gave a warranty of 20 years life for the foundations”, and that the other contractual provisions, some of which were inconsistent with this 20-year obligation, should prevail.

The Supreme Court – after consideration of other cases in which the courts have been called on to consider contracts which include two terms; one requiring the contractor to provide an article produced in accordance with a specified design, the other requiring the article to satisfy specified performance criteria (which could not be achieved by complying with the design) – unanimously allowed E.ON’s appeal, and restored the order made at first instance by Mr Justice Edwards-Stuart.

The Supreme Court found that MTH was indeed bound by the warranty, even though its design was carried out with reasonable skill and care. In the circumstances, MTH as the contractor was expected to take that risk. Moreover, the technical requirements provided only a minimum standard to be taken into account in the design, and stated that it was MTH’s responsibility to identify any areas in which the work needed to be designed to any additional or more rigorous requirements. It was that more rigorous or demanding standard, the Court held, which must prevail.

Further, the Supreme Court rejected the contention that the relevant provision of the technical requirements was too weak a basis on which to rest a contention that MTH gave a warranty of 20 years life for the foundations. The Court was not persuaded that that was an “improbable or unbusinesslike” interpretation, or that the fact that the obligation was found only in a paragraph of the technical requirements, rather than spelled out in the contract itself, and was somewhat “tucked way” in those requirements, was of any relevance.

“The contract in this case was a strange beast,” as Lord Justice Jackson put it, in the Court of Appeal, the contractual documentation was “of multiple authorship” and “containing much loose wording”. One has to be careful, then, in looking to the Supreme Court’s judgment for more general guidance. That said, however, the lesson for contractors appears to be relatively clear: sometimes, mere compliance with standards and design specifications, and the exercising of reasonable skill and care, will be insufficient.

These and similar issues of designer liability are dealt with in the sections that follow.

Concurrent negligence and contract duty

As discussed previously, professional designers owe a dual duty to their clients – one in contract and one in tort. In this regard Henderson v Merrett Syndicates Ltd²⁹ was the landmark House of Lords case establishing the possibility of concurrent liability in both tort and contract.³⁰ But this concurrent duty in tort is only a general rule as the duty itself does not arise out of the contractual relationship between the parties, but rather arises from what the design professional actually does in relationship to its client and whether it assumes (or should assume) responsibility for what occurs. Thus, design professionals (and this can be not just the architect/engineer but anyone who acts in that capacity such as a contractor designer in a design-build situation) ordinarily owe both their clients, and third parties, a duty of care in tort to take reasonable care to avoid causing the client/third party personal injury or damage to property other than the property that is the subject matter of their contract.

A distinction must be drawn between the duty of care owed in respect of defects in the quality of the property that is itself the subject of the work and/or services provided by an ordinary design professional and/or contractor on the one hand and a construction professional on the other. As per Henderson vs. Merrett, design professionals ordinarily owe their clients a concurrent duty of care in tort in respect of the quality of their work to the property which is the subject matter of their contract.

As previously mentioned, in relation to economic loss, in Murphy v Brentwood,³¹ the defendant local authority failed to inspect the foundations of a building adequately, with the result that that building became dangerously unstable. The claimant, being unable to raise the money for repairs, had to sell that house at a considerable loss, which he sought to recover from the local authority. His action failed, thus bringing to an end the explosion in liability for pure economic loss experienced over the preceding 20 years. As a result, contractors have not usually been considered to owe a duty in tort in respect of the quality of their work. A comparison should be drawn, however, to the case of Barclays Bank v Fairclough Building Ltd (No. 2),³² where a specialist subcontractor, hired to clean asbestos cement off a roof, was found to owe a duty of care to the main contractor not to cause it economic loss by way of remedial works needed as a result of an asbestos slurry seeping into the building being worked upon. This was because, absent damage to another building or to a person, the loss caused as a result of defective building work is purely economic and the previous test for the existence of a duty of care in respect of such losses was no longer considered a sufficient basis for the existence of such a duty. As a result of Murphy, it was generally thought that the scope for the imposition of a duty of care in respect of pure economic loss was severely restricted.³³

This seemingly contradictory situation was discussed in Samuel Payne v John Setchell Ltd,³⁴ where the court concluded that both a contractor and an engineer should ordinarily owe a tortious duty only to take reasonable care against causing their contractual client personal injury or damage to property other than to the building or construction work that is itself the subject of their work and/or services. This upheld the view taken in Murphy that no general duty of care is owed in tort in respect of defective construction work as it represents pure economic loss, not physical damage to property. The court went on to resolve this in Henderson v Merrett, where it recognised a rather limited concurrent duty of care in tort finding that, in certain circumstances, the professional as well as the contractor may assume responsibility, in a Hedley Byrne sense, for specific statements or advice provided to the client.

In Payne v John Setchell Limited,³⁵ the claimants were subsequent owners of properties that suffered damage as a result of defective foundation design, which had been prepared by the defendant structural engineer. The claimants took the view that the engineer owed them a duty of care since the original owners had the benefit of a claim in tort against the engineer for breach of his concurrent duty of care in tort in designing the foundations and in certifying their suitability. As subsequent purchasers, the claimants argued that they acquired an identical cause of action when they purchased the properties under section 3 of the Latent Damage Act 1986. Here, the claimants needed to show that the structural engineer owed them a duty of care in tort and that this extended to economic loss. The court chose not to follow Storey v Charles Church Developments Limited³⁶ and HHJ Humphrey LLoyd QC stated:

“In my judgment Murphy and DOE v Bates establish that, as a matter of policy, any person undertaking work or services in the course of a construction process is ordinarily liable only for physical injury or for property damage other than to the building itself but is not liable for other losses, ie economic loss. If any liability for such economic loss is to arise it must be for other reasons, e.g., as a result of advice or statements made upon which reliance is placed in circumstances which create a relationship where there is in law to be an assumption of the responsibility for loss, ie within the principle of Hedley Byrne v Heller… In my judgment a designer is not liable in negligence to the client or to a subsequent purchaser for the cost of putting right a flaw in a design that the designer has produced that has not caused physical injury or damage, just as a contractor is not liable.”

There has been much discussion as to whether or not Payne v John Setchell Limited³⁷ was correct law as it had proceeded based upon an incorrect construction of an earlier case, i.e. Murphy v Brentwood District Council;³⁸ this, however, was corrected in Tesco Stores Limited v Costain Construction Limited.³⁹ In that case Costain was the design-build contractor for a Tesco superstore. The design of the fire-stopping/inhibitors was subcontracted out. When a fire broke out the lack of fire-stops caused more extensive damage than would have occurred had they been present. Tesco maintained that Costain was responsible to Tesco for the design and, thus, owed a duty of care comparable to its contractual obligations. The judge stated:

“I differ from the analysis of Judge Lloyd with great hesitation, but I have to say that it does not seem to me that Murphy v Brentwood District Council and the other authorities to which he referred do establish the proposition that a builder never owes a duty of care which extends to not causing economic loss, only that he does not do so in the absence of ‘a special relationship’… If the position now is, as I consider that it is, that anyone who undertakes by contract to perform a service for another upon terms, express or implied, that the service will be performed with reasonable skill and care, owes a duty of care to like effect to the other contracting party or parties which extends to not causing economic loss, there seems to be no logical justification for making an exception in the case of a builder or the designer of a building. My reading of the authorities does not require or permit the making of such exception …”

However, following this in Mirant Asia-Pacific v Ove Arup,⁴⁰ the court declined to follow the reasoning in Payne v Setchell and instead found that the Henderson principles applied in the case of an engineer’s concurrent duty of care to his client in respect of economic losses referable to design errors.⁴¹

A recent restatement of the law regarding claims in tort for pure economic loss can be found in Robinson v PE Jones (Contractors) Ltd,⁴² where the court held that although a builder can, in principle, owe concurrent duties in tort and contract, in the case before it, however, the tortious duty had been excluded by the terms of the contract. It would appear that this case clarifies the court’s position as to the circumstances in which a builder might be liable in tort for pure economic loss suffered by the owner of a property in instances where there is a defect in the property. The majority finding that the law of tort imposes a limited duty of care on builders [at 68] states:

“Absent any assumption of responsibility, there do not spring up between the parties duties of care co-extensive with their contractual obligations. The law of tort imposes a different and more limited duty upon the manufacturer or builder. That more limited duty is to take reasonable care to protect the client against suffering personal injury or damage to other property. The law of tort imposes this duty, not only towards the first person to acquire the chattel or the building, but also towards others who foreseeably own or use it.”

In this case a builder (PE Jones) agreed to build off-plan and sell a house to Robinson in 1991. Completion and transfer took place in 1992. In 2004, it was revealed that the flues to the fireplaces had not been constructed in accordance with the building regulations in place at the time the property was built and, thus, one fireplace had to be disconnected. Robinson commenced proceedings against the builder in both contract and tort for the cost of remedial works. The claim in contract was found to be time-barred and only the claim in tort could proceed. In the first instance the TCC held “in principle a builder can owe a duty of care in tort to his client, concurrent with his duty in contract, in relation to economic loss”, but, in the instant case, no duty of care was owed because the conditions of contract successfully excluded liability in tort. On appeal, the court reviewed authorities (in particular Murphy v Brentwood, Henderson v Merrett Syndicates and Hedley Byrne) and concluded that the relationship between the builder/manufacturer and the immediate client was primarily governed by the contract between the parties and, subject to the Unfair Contract Terms Act 1977, the parties were free to allocate risk under that contract as they saw fit. Further, provided there was no assumption of responsibility, tort imposes the different and more limited duty on the manufacturer or builder to take reasonable care to protect the client against suffering personal injury or damage to other property. This duty extends from the first owner to others who may foreseeably own or use it. In this case, the court found that there was no assumption of responsibility and the defendant’s warranties and the claimant’s remedies were contained within the contract. The contractual limitation of liability put the question of liability in tort beyond doubt as the parties had contracted to limit liability to the defendant to two years. The court found that to impose a duty of care in tort in excess of that which had been expressly agreed between the parties would be inconsistent with the contract.

“This crucial distinction also limits and defines the scope of the Hedley Byrne duty of care for economic loss and that claims for the cost of repairing defects in the quality or state of the very thing supplied, or the diminished value of the thing supplied, cannot be brought within the principle of reliance established by the Hedley Byrne case because there has to be damage to something other than the thing supplied before there can be said to be ‘reliance’ on that thing.

Lord Justice Jackson explained the difference between the responsibilities assumed by builders and professionals on the basis of their different relationships with their client and considered it understandable that professional persons are taken to assume responsibility for economic loss to their clients in the Hedley Byrne sense because they expect their clients and possibly others to act in reliance upon their work product (their advice, reports, accounts, plans and so forth) often with financial or economic consequences. Lord Justice Jackson said that builders, on the other hand, do not normally assume responsibility to their clients in the Hedley Byrne sense, although quite why this was the case is not made clear in the judgment.”

Lord Justice Stanley Burnton went further and suggested that architects, who would normally be taken to have assumed responsibility to their clients in the Hedley Byrne sense, are also not liable to their clients in respect of defects in their work giving rise to purely economic loss:

“93. Thus the crucial distinction is between a person who supplies something which is defective and a person who supplies something (whether a building, goods or a service) which, because of its defects, causes loss or damage to something else. An architect owes a duty of care not in respect of the value of his drawings or specification, but in respect of the building that is to be constructed with them. The person who contracts with an architect cannot sue him in the tort of negligence simply because the plans turn out to be defective and therefore of no value or less value than they should be. The architect will be liable to his client in contract if his plans are worthless. The client can sue in tort (at common law, and apart from the duty imposed by the Defective Premises Act 1972) if he uses the plans and the building constructed with them is defective or causes him injury. The managing agents in Henderson v Merrett Syndicates Ltd owed a duty of care to their Names because they were managing the Names’ assets.

94. It is important to note that a person who assumes a contractual duty of care does not thereby assume an identical duty of care in tort to the other contracting party. The duty of care in contract extends to any defect in the building, goods or service supplied under the contract, as well as to loss or damage caused by such a defect to another building or goods. The duty of care in tort, although said to arise from an assumption of liability, is imposed by the law. In cases of purely financial loss, assumption of liability is used both as a means of imposing liability in tort and as a restriction on the persons to whom the duty is owed. The duty of care in tort applies to damage to other property than that supplied, or to personal injury or death, caused by a defect in the property supplied. The provider of a service, such as an accountant or solicitor, owes a duty of care in tort to his client because his negligence may cause loss of the client’s assets. I do not think that a client has a cause of action in tort against his negligent accountant or solicitor simply because the accountant’s or solicitor’s advice is incorrect (and therefore worth less than the fee paid by the client). The client does have a cause of action in tort if the advice is relied upon by the client with the result that his assets are diminished.

95. It follows in my judgment that the first instance decisions to which Jackson LJ refers in paragraph 52 of his judgment in which building contractors were held to have assumed a duty of care in tort in relation to financial loss resulting from defects in the building they constructed, in the absence of damage to other property, were wrongly decided.”

It would appear that Lord Justice Stanley Burnton seems to have ruled out the possibility of a builder or professional being liable under a Hedley Byrne duty of care for economic loss arising from defects in the property or advice supplied and seems to say that a Hedley Byrne duty of care in tort applies only to damage to property other than that supplied.

A more recent case dealing with the dual duty owed by professional designers is Wellesley Partnership LLP v Withers,⁴³ where Wellesley brought proceedings against Withers, its legal advisers, for economic loss arising out of negligent advice in drafting a partnership agreement. Wellesley Partners (“WP”), a headhunting firm in the investment banking sector, instructed Withers, its solicitors, to draft a new partnership agreement to admit new investors, including a Bahraini bank known as Addax Bank BSC (“Addax”). WP agreed that Addax should have the option to withdraw half of its capital after 42 months. However, the agreement as drafted by Withers and as executed gave Addax that option at any time within the first 41 months. Addax duly exercised the withdrawal option, and the drafting error emerged. WP brought proceedings against Withers, seeking damages for profits it would have made by opening an office in the US (arguing that it would have relied on the investment to achieve as much).

At first instance, Mr Justice Nugee held that Withers was indeed negligent in drafting the agreement, and awarded damages for the US loss of profits claim. Before the Court of Appeal, Withers argued that the judge had incorrectly adopted the less restrictive tortious test for remoteness of damages and ought to have applied the more onerous contractual test. WP contended, inter alia, that Mr Justice Nugee had erroneously characterised its claim as one for loss of a chance.

The Court of Appeal, reviewing the authorities, observed that the “reasonable contemplation” test for remoteness, applicable in the law of contract, was indeed more restrictive than the “reasonable foreseeability” test in tort. Where contractual and tortious duties to take care in carrying out instructions existed alongside each other, as was the case here, the remoteness test should be the same, the Court concluded; namely, the contractual test.

The Court of Appeal reasoned that the basis for the contractual test for remoteness of damages was that the parties, by entering into a contractual relationship, had the opportunity to alert each other to certain circumstances; accordingly, they were regarded to be contracting on the understanding that any liability would be limited to damage of a kind that was within their reasonable contemplation. There was no justification, the Court found, for allowing the concurrent duty in tort to upset that understanding; it could not be right, as Lord Justice Longmore put it, that a claimant could opt to recover the contractual measure of damages but then apply the more generous tortious rules of remoteness, by a sort of “pick and mix” arrangement.

That said, Withers’ appeal was not ultimately allowed. The Court of Appeal held that the damages awarded had been of a kind that was within the reasonable contemplation of the parties, at the time of contracting. Withers, after all, had known that WP wanted to expand in the US, and that was a way in which the investment was to be used to make profits. This suggests, then, that the courts will consider similar cases on their individual facts, and not allow meritorious claims, such as WP’s in this instance, to fail on remoteness grounds alone.

Duty to warn of retrospective danger

This represents a potential extension of the duty to warn of preventable disaster. In Eckersley v Binnie & Partners,⁶⁸ engineers were held liable for the consequences of a methane explosion in a pumping station some years after its completion, where the design had failed to take into account the possibility of methane build-up in a transfer tunnel. On appeal, the majority of the Court of Appeal held that Binnie was liable on the basis that the trial judge had been entitled to find on the evidence that there was a risk of methane being present which should have been taken into account in the design. In a strong dissenting judgment, Bingham LJ held that the evidence did not support any finding of negligence against Binnie. It should be noted that the trial judge had suggested that the designer might be under a continuing duty, after completion of the project, to advise on new information that might indicate a danger. In this regard Bingham LJ wrote:

What is plain is that if any such duty at all is to be imposed, the nature, scope and limits of such a duty require to be very carefully and cautiously defined. The development of the law on this point, if it ever occurs, will be gradual and analogical. But this is not a suitable case in which to launch or embark on the process of development, because no facts have been found to support a conclusion that ordinarily competent engineers in the position of the first defendants would, by May 1984, have been alerted to any risk of which they were reasonably unaware at the time of handover. There was, in my view, no evidence to support such a conclusion. That being so, I prefer to express no opinion on this potentially important legal question.”

In EDAC v Moss⁶⁹ a defective curtain wall was designed, supplied and fixed by the nominated subcontractors, Alpine. The court held that Alpine’s design and workmanship were defective, and then went on to consider the duty owed by the main contractors, Moss, to the developers, EDAC, i.e. was it a duty to warn of design defects and whether Moss was in breach of any and, if so, what were the contractual duties in respect of curtain wall defects. Interestingly, the court held that Moss was not responsible for the design and, as a result, their obligations were only to carry out the Works in accordance with the drawings and bills of quantities and to comply with the architect’s instructions.

Despite this somewhat favourable position, the court did hold that a term should be implied into the contract between Moss and EDAC such that Moss should report design defects known to them and Moss owed a duty of care in the same terms to both EDAC and EDAC’s architect, Morgans. The judge went on to find that during the course of the work it must have become apparent to Moss that the design of the curtain wall was not buildable and they should have reported this; indeed, the judge used the expression “must have known”, and found as a matter of fact that Moss’s employees did know of the defects but “pressed on regardless”. The court wrote:

“I think that if on examining the drawings or as a result of experience on site Moss formed the opinion that in some respect the design would not work, or would not work satisfactorily, it would have been absurd for them to have carried on implementing it just the same. In my view, if the directors of EDAC and of Moss had been asked at the time when the contract was made what Moss should do in those circumstances, they would have agreed at once that Moss should communicate their opinion to Morgan. I think, therefore, that in order to give efficacy to the contract the term requiring Moss to warn of design defects as soon as they came to believe that they existed was to be implied in the contract.”

The distinction here is whether the obligation to warn arises when the opinion that a “design would not work” is formed rather than an obligation to warn when the designer “should” have formed such an opinion. Put another way, the contractor’s obligation is limited to warn of defects of which it had actual knowledge when the contractor “forms” an opinion that the design will not work (to a satisfactory standard) and, as such, goes beyond designs which the contractor knows are patently defective thus falling into the realm of designs where the contractor has an opinion or belief rather than actual knowledge.

This chain was amplified in University of Glasgow v William Whitfield and John Laing (Third Party),⁷⁰ where Whitfield, as architects, designed an art gallery for the University, which leaked and suffered from condensation. As a result the University commenced proceedings against them. They in turn issued third-party proceedings on the basis that Laing (the contractor) owed both the University and Whitfield a duty of care in tort to warn them of any defects in the design. The court held that Laing owed no duty of care to the architects, Whitfield, to guard against damage as a result of being found liable to the University for defective design since the damage was pure economic loss and the case was not one of those exceptional Hedley Byrne⁷¹ cases where a duty to avoid pure economic loss existed. The court took the position that the decisions in both EDAC⁷² and Victoria University⁷³ were based on implied duties in contract between the employer and contractor and, therefore, did not support a duty of care in tort between the contractor and architect. Despite this, as they sought to impose any duty of care in tort, they could only stand insofar as they were cases where there was a special relationship between the parties.

The court further held that Laing owed no duty of care to the University because a duty in tort is limited to a duty of care to avoid acts or omissions which are liable to cause damage to persons, or to some property, other than the defective building being created. As to whether an implied term existed, the court held that an implied term that the contractor would warn the employer of defects in the design existed only where the employer relied on the contractor in the matter of design was correct – but in this case it had not done so.

Following in this realm of a “duty to warn” is the case of Oxford University Press v John Steadman Design Group.⁷⁴ This judgment was thought to be the case that ended the issue of a “duty to warn” in both contract and in tort. The court considered the earlier cases and held:

“In the present case, OUP had a design prepared by architects. They were not relying on the judgement of NH as to the quality of the design. I cannot see any basis for the implication of a duty owed in tort by NH to warn of design defects unless it was a defect which might give rise to danger to the safety of persons or damage to some property other than that which was the subject matter of the design defect. Equally, there was a detailed building contract between OUP and NH. Again, I cannot see any room in that contract for the implication of a term that NH would warn OUP of design defects of which they became aware. I should add that, in matters of design, whether a design is sound or otherwise is very much a matter of skilled judgement and there is room for differences of opinion about the suitability of a design or a particular aspect of it. In my view, it would be undesirable, as it would give rise to practical difficulties, if builders were obliged to raise with their employer matters of design for which they had no express contractual responsibility where the employer has commissioned the design from an expert. I have dealt briefly with this matter as I respectfully adopt the reasoning of Judge Bowsher in University of Glasgow. I reject therefore the allegation that NH was in breach of a duty to warn OUP of design deficiencies.”

Unfortunately, the logic of this decision overlooked the earlier EDAC⁷⁵ decision in which it was clear that the contractual aspect did not depend on any reliance by the employer on the contractor but instead was based on the logical principle that a contractor had to warn the employer of defects in the design which it had discovered and particularly on the presumed intention of the parties. Thus, where the employer did rely on the contractor for this, a “duty to warn” could be implied into the contract, which seems to be acknowledged in the Oxford University Press v John Steadman Design Group⁷⁶ case. Logically, it would also appear that this duty applies even if the employer hires another professional to supervise the Works if the employer is still relying on the contractor to point out any defects in the design, which the contractor believes to exist, i.e. the contractor could not just “look away” from such defects. As a result of this, a court could imply a term – duty to warn – into the building contract.

This is carried further in Lindenberg v Canning.⁷⁷ The defendant, who was a builder, entered into an oral agreement to carry out preliminary demolition works in a block of flats. He was given a plan prepared by the plaintiff developer’s surveyor which was incorrect in that it showed nine-inch internal walls, including a chimney breast as non-load-bearing. The builder started to demolish these walls without propping the ceiling but the work was stopped and litigation eventually ensued. The developer contended that the builder was in breach of an implied contractual term in the agreement that he would do the work with skill and care and in a good and workmanlike manner and that it was negligent to demolish obviously load-bearing walls without propping. The court, in reviewing the facts, held that it was an implied term of the contract between the builder and the developer that, in carrying out his work, the builder should exercise the care to be expected of an ordinary competent builder. The fact that an obviously important structural feature, such as the chimney breast wall, was indicated as non-load-bearing should have caused the builder to have grave doubts about the plan. The builder should have realised that the nine-inch walls were load-bearing and ought to have proceeded with the greatest of caution. At the very least he should have raised doubts with the developer’s surveyor. Even if the surveyor had given assurances, the builder would have been prudent to put up temporary propping, but in the absence of such assurance he should undoubtedly have done so. The judge, accordingly, held that the builder behaved with much less care than was to be expected of the ordinary competent builder and was in breach of contract. The judge held that the surveyor was 75 per cent responsible and the builder 25 per cent.⁷⁸

This was finally resolved by the Court of Appeal in Plant Construction plc v Clive Adams Associates & another (No. 2).⁷⁹ Plant Construction were the main contractors engaged by Ford for the installation of two engine mount rigs in pits at Ford’s research station at Laingdon, Essex. JMH were subcontractors engaged by Plant Construction for various substructure works, including the installation of temporary propping, which subsequently failed. It was found that JMH were not contractually responsible to Plant Construction for the design of the temporary propping because JMH had been directed by the employer’s engineer, who had the contractual authority to prop the roof at the positions and by the methods actually adopted by JMH, despite the fact that JMH and the main contractor recognised that the propping was inadequate. The judge at first instance found that JMH was under a contractual duty to warn the main contractor that the propping was inadequate and did not do enough to discharge that duty, albeit that the main contractor was contributorily liable to the extent of 80 per cent. The Court of Appeal held that the temporary works were, to the knowledge of JMH, obviously dangerous and there was an implied contractual obligation to warn of the danger.

Also, in Aurum Investments Ltd v Avonforce Ltd,⁸⁰ the court held that the duty to warn might be owed by a subcontractor to his contractor “client”.

Thus, the state of the law can be summarised in the following cases:

• 
  

  Where a contractor knows or believes that the design is defective in respects which may give rise to a danger to personal safety, it will normally be under an implied contractual duty to warn the employer of the danger (also note that an implied contractual duty to warn may be owed by a subcontractor to a contractor);

  
  
• 
  

  This implied contractual duty arises out of the implied term that the contractor will carry out the Works in a good and workmanlike manner and/or with reasonable care and skill;

  
  
• 
  

  Alternatively, it may be the subject of a specific term which is implied in order to give effect to the presumed intentions of the parties in the particular case or where the defect is one which may endanger personal safety in the absence of some factor clearly negating the implication of the duty;

  
  
• 
  

  This implied contractual duty does not depend on the employer’s reliance on the contractor and can be owed to the employer, even where the employer’s architect or engineer supervises the construction of the Works.⁸¹ However, whether this duty to warn arises in circumstances where the contractor did not know, but should have known, that the design was dangerous, will depend on all the circumstances, in particular, whether the employer has retained an architect or engineer for advice. It is unclear, however, whether a contractor is under an implied contractual duty to warn where there is a design defect, of which the contractor knows or ought to know, but which is not dangerous;

  
  
• 
  

  The implied contractual duty is implied, not in law, but in the light of the facts of the particular case and whether or not such a duty will be found to exist in any particular case depends on all the circumstances. Relevant circumstances will include the nature of the Works, the experience of the contractor, the relationship between the employer and the contractor and the other parties in the construction process, including any architect or engineer retained by the employer and the nature of the defect;⁸²

  
  
• 
  

  The overriding issue is whether it is reasonable to impose a duty to warn on the contractor. It should be remembered, however, that it remains unclear in what circumstances (if any), and to whom, a contractor may owe a duty to warn in tort. The answer depends on the nature of the risk, the nature of the damage suffered by the claimant and whether there was an assumption of responsibility.⁸³

Duty to others

When dealing with any duty that may be owed to third parties one must clearly determine the difference between purely economic losses and physical damage/personal injury sustained by a non-client third party. Purely economic losses are not recoverable in tort in the absence of a special relationship arising out of either proximity and/or the assumption of responsibility, which has been relied upon by the third party.⁸⁴

Purely economic losses

Thus, in Jarvis & Sons Ltd v Castle Wharf Developments Ltd,⁸⁵ the court held that a quantity surveyor could owe a duty of care to potential contractors who relied upon their representations. In other situations a duty of care in respect of pure economic loss owed by an architect/construction professionals to a third party outside of any contractual relationship will depend upon the application of the familiar assumption of responsibility/special relationship/reliance tests.

An example of this is the case of Riyad Bank v Ahli United Bank,⁸⁶ which involved the negligent valuation of operating leases of equipment. The claimant bank invested in a Sharia-compliant investment fund set up by the defendant bank as an intermediary to avoid the Saudi Arabian claimant having an obvious direct link, for political reasons, with the Kuwaiti defendant. The defendant provided the investment advice to be relied upon. The question arose as to whether the existence of a contractual chain between the claimant and the fund and the fund and the defendant (but in particular the deliberate decision of the parties to the action not to enter into contractual relations directly) prevented the imposition of a duty of care between the claimant and defendant.

The court considered that even where there is a direct contract between the parties, the imposition of a concurrent duty of care may not be appropriate. Where there is a chain of contracts between the parties, which may generally negate the existence of a duty of care in tort, would be just one circumstance relevant to the overall question whether the circumstances disclose the required assumption of responsibility. The court went on to note that the conscious refusal to enter contractual relations was neutral to the resolution of the legal question as to the occurrence of an assumption of responsibility sufficient to crystallise a tortious duty of care in respect of economic losses incurred.

Instead, what must be looked at are the terms of the relevant contracts, why the parties chose to structure their relationships in the way they did (and, in particular, why no contract was concluded between the claimant and alleged tortfeasor and what contact, communications and advice were provided or existed between the relevant parties). Further, the court noted that the suggestion of a two-stage approach to the question of the existence of a duty of care in such circumstances (i.e. first to consider whether a duty of care would exist apart from contractual considerations; and then secondly, whether the contract adopted by the parties obviated the initial conclusion) was acceptable and that the distinction between this two-stage test and a single overall test (i.e. one that simply asks “in all the circumstances, including the contractual context, should a duty of care be imposed?”) was considered as merely a terminological dispute – the real issue was whether, on the facts, the judge at first instance was right to conclude that a duty of care did exist between the parties. Thus, it can be expected that normal building contract relationships will tend to work against the existence of a duty of care crossing over contractual lines.

The court concluded that the decision was probably not significant as signalling any relaxation in the tests to be applied in determining whether or not a duty of care is owed in respect of pure economic losses outside of contractual relationships (especially in building cases) – thus emphasising the need to examine the facts of any particular case to arrive at the answer to the question.

Further, in Commissioners of Customs and Excise v Barclays Bank Plc,⁸⁷ the House of Lords considered the three accepted tests for the imposition of a duty of care in cases of pure economics to be: (1) voluntary assumption of responsibility; (2) the “threefold test” of (a) foreseeability, (b) proximity and (c) whether the imposition of a duty would be “fair, just and reasonable”; and (3) the incremental test.

Of these Lord Bingham concluded that: (1) the assumption of responsibility test was a sufficient precondition of the existence of a duty, but not a necessary one; (2) it was a test to be applied objectively (i.e. it does not require a conscious or knowing assumption of responsibility to a third party); (3) only if that test is answered negatively will further enquiry of the facts be required; (4) in novel cases there is no simple formula that can be applied; (5) the incremental test is of little use of itself; and (6) ultimately, a close examination of the facts of a case is always required (and, in particular, the nature of the relationship between the relevant parties).

Miscellaneous matters: personal injury, latent defects and subsequent occupiers

When dealing with other than purely economic losses, i.e. personal injury, a designer of a building, or part of a building, ordinarily owes a duty of care to avoid personal injury to such a party or physical damage to such a party’s “other” property. These losses go to the person directly affected by the design and, except for Clay v Crump,⁸⁸ where an architect who negligently permitted a dangerous wall to remain standing was held liable to an injured labourer employed by building contractors who subsequently came on site when the wall collapsed, there are no reported cases in which a remote purchaser has brought an action against a negligent designer for damages for personal injury caused by a design defect.

As to subsequent occupiers in Baxall v Sheard Walshaw Partnership,⁸⁹ the architects Sheard Walshaw had designed industrial units for a developer. The tenants of one of the units commenced proceedings against the architects alleging breach of a duty of care owed to them as subsequent occupiers, following flooding of the unit caused by a negligently designed drainage system. However, it was held that the defect was not a latent one, because it was reasonably discoverable by Baxall’s surveyor prior to their taking an interest in the property and, therefore, that the architect did not owe a duty of care to the subsequent occupier of the building in respect of the incompetent design of the drainage system. The opportunity for intermediate inspection by the lessee’s surveyor was crucial to the reasoning supporting the absence of a duty of care. Thus, a limited duty to subsequent purchasers in respect of damage to “other” property caused by a latent design defects resulted. This decision was further applied in Sahib Foods Ltd v Paskin Kyriakides Sands,⁹⁰ where the court found that, in the absence of evidence from a subsequent owner of property, the relevant defect would not have been spotted by a surveyor when it purchased the property in question, no duty of care had been established on the facts of the case against the defendant architects.

All of this aside, in Pearson Education Limited v The Charter Partnership Limited,⁹¹ five years after its decision in Baxall, the Court of Appeal encountered roughly similar facts. Here, the claimant was the lessee of a warehouse. A heavy rainstorm led to the flooding of the warehouse, causing substantial damage to a stock of books stored there by the claimant. The flooding was due to an inadequate drainage system designed by the defendant architects. The claimant had not been aware of the inadequate design. No pre-occupation survey had been carried out, but there was no suggestion that a survey should have taken place or that it would have revealed the defect.

Prior to the claimant’s occupation of the warehouse there had been a similar incident of flooding, causing substantial damage to the lessee at that time. Loss adjusters instructed by the lessee’s insurer discovered that the drainage system of the warehouse was inadequate, but they did not convey this information to the lessee nor were they under a duty to do so. The defendants in Pearson argued that the discovery of the defect in the aftermath of the first flood rendered the defect patent and, thus, excluded their liability for any damage subsequently caused by the defect. The Court of Appeal rejected this argument and held the defendants liable for the damage caused by the second flood.⁹²

Lord Phillips CJ, who delivered the judgment of the court, started by rejecting the argument made by the defendants, and indeed by the same court in Baxall, that Donoghue v Stevenson⁹³ supported the proposition that liability for creating a dangerous defect in a chattel or realty ceases as soon as there is a possibility of discovering the defect. That case, he said, “predated the statutory interventions that made provision for contributory negligence and joint tortfeasors”, and instead relied upon three cases decided after Donoghue v Stevenson which suggest that the possibility of discovering the defect prior to the accident did not automatically lead to a complete exoneration of the person creating the defect. Lord Phillips wrote:

“The decision in Baxall supports the following two principles, either of which can explain the result in that case:

1. 
   

   Where it is reasonable to expect that an occupier will inspect a property before entering into occupation, no duty of care will be owed in respect of any defect that such an inspection should disclose.

   
   
2. 
   

   Where an occupier could reasonably have been expected in his own interests to carry out an inspection that would have revealed the defect, failure to carry out such an inspection, or to carry it out with reasonable skill and care, will break the chain of causation.”

Lord Phillips went on to explain that neither principle exonerated the defendants in the case at hand. The first principle did not, he said, because the defendants, when designing the inadequate drainage system, could not expect that the defect would be revealed by an inspection. The second principle did not exonerate the defendants, because the claimant had not known of the first flood and had thus had no reason to investigate the adequacy of the drainage system. He added: “[w]e can see no basis of principle or authority why the fact that a third party becomes aware of a latent defect should be deemed to make the defect patent to others who neither know, nor ought to know, of the discovery.”

Additionally, Lord Phillips noted the court’s dissatisfaction with the principles laid down in Baxall. He wrote that:

“if an architect who has the primary responsibility for producing a safe design produces a defective design, it is not obviously fair, just and reasonable that he should be absolved from any liability in tort in respect of its consequences on the ground that another professional could reasonably be expected to discover his shortcoming.”

He then went on to state that

“it is not obvious why a failure of a person, put at risk by a defective design, to take due care for his own safety or that of his property should break the chain of causation, rather than amount to contributory negligence.”

Other issues

Beyond the “special relationship duty” to not cause economic loss, the duty of the professional designer to third parties is generally non-existent in respect of economic loss. In Architype Properties Limited v Dewhurst Macfarlane & Partners (a firm),⁹⁴ Architype was retained by Arbco as the lead consultant for the design and construction of a group of associated buildings. Dewhurst was retained by Architype to act as its sub-consultant civil and structural engineers. During the construction, serious defects were discovered and as a result remedial works were carried out which were claimed to have delayed the project. Arbco assigned its claims against Dewhurst to Architype and, thus, Architype claimed damages both in its own right and as an assignee of Arbco’s claims against Dewhurst.

Here, Dewhurst denied a duty of care to Arbco but accepted that it had a special skill in civil and structural engineering and was aware that its engineering designs were done for the benefit of Arbco and that Arbco was relying on its skill as engineers. Despite its concessions, Dewhurst took the position that the matter was not in tort but rather a “straight chain of contracts case” and, as such, there was no privity of contract between Arbco and Architype and, therefore, no responsibility on the part of Dewhurst to Arbco.

Architype took the view that it was at least arguable that Dewhurst owed Arbco a duty of care as it held itself out as possessing a special skill and it was reasonably foreseeable that Arbco would rely on its special skill, in turn giving rise to a duty of care in accordance with the principles set out in Hedley Byrne v Heller⁹⁵ and Junior Books.⁹⁶

After reviewing the situation the court held that Architype’s position was unarguable in that Junior Books had to be confined to its own particular unique facts and, given that the facts of the present case were not identical to the facts in Junior Books (the present case concerned services not products, participation in the design team rather than a self-contained part of the work, and the engineers were not nominated by the employer), he was not obliged to follow Junior Books.

The court further held that in any event, the parties had structured their contractual relationship in such a way that was inconsistent with an assumption of responsibility between Dewhurst and Arbco. Also, the fact that the question of a collateral warranty was raised at the time of the formation of the subcontract but was not pursued was not essential to the argument but was an additional point in favour of his conclusion that there was no duty of care owed by Dewhurst to Arbco.

Following this view, in Mirant Asia,⁹⁷ the same judge, HHJ Toulmin CMG QC, also rejected a claim that the engineers owed a duty to prevent economic loss to a company (“SCC”) which was part of the same group of companies as the CEPAS (the company that had the contract with Arup) even though he held that SCC had, in fact, relied upon the engineers’ skill and care in the performance of their contract with CEPAS. The particular, intricate contractual chain was deliberately structured in this way (for tax reasons) and was, therefore, inconsistent with an assumption of responsibility. That point was not appealed.

Then, finally, in Bellefield Computer Services v E Turner & Sons Limited,⁹⁸ the contractor brought Part 20 proceedings against the architect to whom the contractor had subcontracted some of the design of a dairy, which caught fire causing loss to the subsequent owners. The builders were statute-barred from bringing a claim for damages pursuant to their contract with the architect. Accordingly, the contractor brought a claim for a contribution under the Civil Liability (Contribution) Act 1978. In order to succeed, the contractor had to show that the architect owed a duty of care to the subsequent owners of the dairy.

Here, the Court of Appeal, Lord Justice Potter writing the leading judgment, held that there were four principles governing the existence and scope of an architect’s duty to a subsequent owner or occupier:

1. 
   

   “An architect may in appropriate circumstances owe a duty of care in tort and be liable to a subsequent occupier of the building which the architect has designed and/ or the construction of which he has supervised in respect of latent defects in the building of which there is no possibility of inspection.

   
   
2. 
   

   The question whether a particular defect comes within the scope of an architect’s duty of care to a subsequent occupier will depend upon the original design and/or supervisory obligations of the architect in question. The architect will not owe a duty of care in respect of defects for which he never had any design or supervisory responsibility in the first place.

   
   
3. 
   

   If a dangerous defect arises as the result of a negligent omission on the part of the architect, he cannot excuse himself from liability on the grounds that he delegated the duty of design of the relevant part of the building works, unless he obtains the permission of his employer to do so.

   
   
4. 
   

   The detailed duties of an architect in relation to his design function depend upon the application of the general principles above stated to the particular facts of the case, including any special terms agreed. The precise ambit of such duties will usually depend upon expert evidence from members of the profession as to what a competent, experienced architect would do in the circumstances.”

In this case the Court of Appeal applied the second and fourth principles on the facts with the result that the architects escaped liability because their duty was limited by the terms of their engagement by the design and build contractor. It was found that they had no obligation to provide a detailed design for the critical fire-resisting features and they had not agreed to supervise/inspect the Works during construction. It should be noted here that May LJ expressly reserved for future consideration the question whether, or to what extent, the scope of an architect’s duty of care to a subsequent owner could extend to loss not associated with physical damage.⁹⁹

While there may be no duty to prevent economic loss, this situation must be compared to the situation where the designer has either some special circumstance that would create a “special” relationship, as in Storey v Charles Church Developments Limited,¹⁰⁰ where damages in contract and tort were claimed from a D&B contractor for the cost of underpinning required to correct structural defects which had occurred as a result of the defective design of the foundations.¹⁰¹ Here, HHJ Hicks QC applied Henderson v Merrett,¹⁰² finding that by contracting with the claimant the contractor assumed responsibility to exercise reasonable skill and care in design and the owner had relied upon it to do so. As a result, the Hedley Byrne principle applied, which meant that the claimant could recover for economic loss. The judge concluded that such duty was not affected because the designer in the case was also the builder.

The knowledge of others

A defence that has arisen is one in which the designer claims that it should not be held responsible for losses because of the knowledge or skill of another participant in the project. The basis for this defence is that the particular design professional has not breached its duty. Another variation of this is that the other participant’s failures have broken the chain of causation between the professional’s breach and losses suffered. It should be noted, however, that in each of these cases the defence has been unsuccessful. In the Sahib case cited earlier, the experts were agreed that not all reasonably competent architects would have been aware of the risk of fire spreading as a result of the use of the combustible panels. The defendants were, nevertheless, held to be in breach of duty because they, in fact, knew of that risk. The defendant sought to deny/avoid liability on the basis that the claimant had all the information that was available to the defendants and, therefore, also knew of the risk. HHJ Bowsher held that this provided no defence to the allegation of breach and wrote:

“A competent architect does not present a design that he knows to be deficient in an important respect and then discuss with the client whether the deficiency should be removed. Still less does he present such a design and say, I did not need to tell the client about that deficiency because the client already knew that such a feature was not required.

Take a simple example. An architect designs a house as a residence for a client who happens to be a surveyor and forgets to require a damp-proof course under a parapet wall. If after construction the client complains, it is no answer for the architect to say ‘well you knew about the need for the damp proof course as well as I did.’ The architect is employed to use his own skill and judgment. There is no duty on the client who happens to have a particular skill to examine the architect’s designs and tell the architect where he has gone wrong. If I, as a lawyer, go to a solicitor for advice and pay him for it, I do not see why I should be criticised if I fail to do that solicitor’s work all over again and check whether he has got it right.”

The principal point here is that if a professional designer deals with any possibility of serious danger, and the designer is aware of such possible danger in her design, the designer must consider all the ways in which the danger may occur, including the carelessness of the client. If the designer is to avoid liability she has to bring the risks of the cost-cutting design clearly to the attention of the client, making sure that the client explicitly accepts such risks.

This principle is evident in Six Continents Retail Limited v Carford Catering Limited,¹⁰³ where a project manager had been retained to design and install kitchen equipment at a restaurant and the fixing of a rotisserie grill to a combustible wall caused fire damage. The project manager had warned the owner that the method of installation might create a fire risk. The claimant owner took no steps to respond to that letter. The Court of Appeal held that the warning given by the project manager was insufficient. It went on to hold that even if the project manager had given a sufficient warning of a risk of fire it would still not have discharged its duty because the outcome was one which the project manager should have prevented from happening.

Thus, merely notifying the owners that a risk of fire existed did not discharge the duty of care owed by the project manager. It should also be noted here that the argument that the owner’s failure to respond to the warning had broken the chain of causation between breach and loss was also rejected.

Then, in Linden Homes South East Limited v LBH Wembley Limited,¹⁰⁴ a claim was made against geotechnical and engineering consultants retained to investigate a site and to come up with an appropriate foundation design. A design was chosen, work began and only then was it determined that the chosen design was unsuitable. The consultants took the position that, although they had recommended the design, the final say on the foundation design lay with the client’s specialist contractor and it was the choice of design by the specialist contractor that was the effective cause of loss. Mr Recorder Aylen QC disagreed with that line of argument and held that the specialist contractor had been entitled to rely upon the consultants’ site investigation report in choosing the foundation design. The report had negligently failed to disclose matters, which meant that the design ultimately chosen would be ineffective.

Matters other than design

The duty owed by design professionals encompasses not just design but also the timely manner in which the design is carried out. In Consarc Design Ltd v Hutch Investments Ltd,¹⁰⁵ the court held that:

“Consarc’s duty was to supply drawings and information within a reasonable time. In a fast track programme that is ‘just in time’; Neodox Ltd v Swinton and Pendlebury BC (1958) 5 BLR 34 applied. ‘Just in time’ means that information is given to the contractor as and when he needs it on site. If there was no other evidence available it would be inferred that the dates for supply of information in the contractor’s programme were reasonable. But as a matter of fact the dates were not reasonable, although it was reasonable of Consarc at the time to believe that they were reasonable. Under those circumstances Consarc could only be held to those dates if they had guaranteed them, which they had not.”

The duty the architect owes extends to the architect’s design work as it does to any other work the architect carries out under the terms of his retainer. Such a term has long been implied as a matter of law into a professional’s contract of retainer; however, the existence of the implied contractual duty is now confirmed by the Supply of Goods and Services Act 1982, section 13.

The standard of care the architect must display in order to discharge this duty is the same standard demanded of other professionals in the discharge of their professional obligations, i.e. the standard of the ordinary skilled man exercising and professing to have that special skill. It is established law that it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art.