Catching a stray bullet
23 March 2010
Laurence Cobb discusses what can go wrong when professionals take on responsibilities for design and create a duty of care to others, and offers some practical tips as to how to stay out of trouble
Within the construction industry, especially in the current economic climate, if something goes wrong on a project, a party which has lost money (or, just as importantly, believes it has) will not hesitate to point its guns at all or any of the other parties involved who have strayed into the firing line of potential liability.
The starting point in establishing the responsibilities of any party to a construction project is to read the contracts entered into by them. Parties enter into standard form contracts forgetting the importance of reading and understanding them, and often neglect to check for amendments and references to other documents, such as bills and drawings expressly incorporated into the contract.
Where there are gaps, the law (through statute and/or common law implied terms) may assist in establishing the terms of agreement between the parties. The law of tort may place duties upon a party whether or not such duties are included within contract terms.
The duty to spot the problem or error
One of the main reasons to employ a professional, at risk of stating the obvious, is because of the skills that person brings to the project. The role of quantity surveyor or project manager brings with it knowledge and experience to perform duties involving expertise, both to carry out pre-agreed tasks and to contribute where advice and opinions are needed.
The duty to warn, if not dealt with expressly in a written contract, can be by way of implied contractual duty, or in tort to third parties.
The foundation for the standard of skill and care to be achieved will be the same level for the specific profession, regardless of the level of experience or knowledge of the individuals concerned. Not being up to date with the latest practices or technology is unlikely to be a valid excuse.
Declarations of specialist or extra knowledge in a particular field of activity are likely to increase the expectation as to the level of skill and care to be achieved. And if there is a design issue which may give rise to a threat to personal safety, it is very likely that there will be a duty to warn an employer of the risk.
Implied duties will depend on the facts of a particular case and will differ depending on the circumstances. However, typical factors to be taken into account include the:
- type of work
- type of risk
- experience of the parties
- role of other parties and overlap/demarcation of responsibility
- nature of the defect/error.
The problem is that it is often difficult to see how these principles apply in practice. A practical way to do so is to look at some of the cases in this area. Some of these are older than others and should be reviewed in the context of today's world and its expectations.
In the case of London School Board v Northcroft (1889) 2 Hudson's BC (4th Edn) 147, (10th Edn) 174, 192, a clerk employed by quantity surveyors made clerical errors leading to overpayments of £118 and £15 15s in relation to works worth £12,000. The claim for negligence was rejected and the court said that the blunder was, under the circumstances, "not remarkable". In contrast, in the case of Tyrer v District Auditor of Monmouthshire (1973) 230 Estates Gazette 973, a mathematical error was made in issuing an interim certificate. Albeit acknowledged to be an error that could happen at any time, the error was found to be negligent.
Bearing in mind the age of these cases and the availability of modern technology to assist in calculations, unless relatively minor in the context of the overall project, it is likely that any numeracy errors that occur during the review of tenders, analysis of accounts and the interim certification process will make the surveyor vulnerable to a claim in circumstances where repayment cannot be received from another of the parties.
A claim against the quantity surveyor is more likely to occur where the other parties are unable to pay. For example, it is not unknown when contractors or sub-contractors are in financial difficulty for interim valuations to be as large as possible. If an interim certificate is then issued, and the particular contractor or sub-contractor becomes insolvent, the surveyor is clearly exposed to risk of an action if over-certification is found to have occurred.
Another illustrative case is that of Pride Valley Foods Ltd v Hall & Partners (Contract Management) Ltd (2001) 76 Con L.R. 1. Here, it was held that the project managers engaged for the design and construction of a bread making factory had acted negligently in failing to warn the client that expanded polystyrene panels to be used in order to keep costs down were highly combustible and an extreme fire hazard. Interestingly, it was the defendant's case that they had given advice during the course of several conversations with the client but it was found on the facts that they had not.
This case illustrates the need to give written confirmation of any important advice given to the client as to the risk of the design. It also supports the view that all recorded information, such as site minutes, should be read carefully to ensure that responsibilities or comments are not shared between parties where some had not participated in the conversation or expressed a view.
The case of HOK Sports Ltd (formerly Lobb Partnership Ltd) v Aintree Racecourse Co Ltd  EWHC 3094 (TCC) refers to an arbitrator's decision where it was found that HOK owed a duty to Aintree to advise that the designs that they had produced for the stand would lead to a reduction of 685 standing spaces for spectators in that stand, taking capacity below the specified number.
HOK's liability was based on its particular skill set in the area of racecourse stand design and its prior knowledge as a matter of fact that the purpose of the new stand and the scheme was to achieve the maximum capacity possible. This is a good illustration as to where a duty can increase based on the declared level of specialisim and knowledge of the provider.
Of course, if it is intended to pass on responsibilities it is important to ensure that the contractual relationship is 'back to back', i.e. any liabilities placed upon both the delegator and the delegatee match
As to delegation of responsibility, the case of City of Brantford v Kemp & Wallace-Carruthers & Associates Ltd (1960) 23 DLR (2d) 640 is an example where a firm of architects had concerns in relation to a project regarding the nature of the soil as the site had unusual ground conditions due to its location. The architect advised the employer to obtain advice from a structural engineer, who then failed to advise as to risks of the design.
A claim succeeded against the engineers but failed against the architect on the basis that the architect had openly stated that further advice was needed and was entitled to rely upon the recommendations of the engineer. In delegation situations, each case will turn on its facts and simple delegation will not always be enough.
Of course, if it is intended to pass on any responsibilities it is important to ensure that the contractual relationship is 'back to back', i.e. any liabilities placed upon both the delegator and the delegatee match. Stating, "I can do that" needs to be an accurate statement.
Design on the hoof
Two common areas where difficulties can arise in the area of building services relate to what might be generally described as 'design on the hoof' and projects in delay.
Designs change and evolve as a project progresses and also as clients review and change their demands during the course of the works. The scope of these works may have been generally specified, and the contractual responsibility for such works placed on the contracting team, but the reality is that the redesign becomes a collective effort between the professional team, including the services professionals. If thereafter something goes wrong or causes delay, the unhappy party may search the horizon for the potential liabilty of the members of the ad hoc committee involved in the design. Hopefully, the range of responsibilities match the professional's expertise, and it is advisable not to stray outside such boundaries and risk acquiring additional liabilities.
It is not unknown for services to be installed only for commissioning to then be delayed. If a gap between installation and commissioning grows due to other problems on site, this can lead to trouble when it is eventually time to commission system which has sat for months - or even years - exposed to the elements. It may not be wise in practical terms to take the view that if a project is delayed significantly you can forget about it until it is time for commissioning.
If there is any doubt as to who is responsible, this may be a risky approach unless all reasonable measures have been taken to protect the system and warn of additional risk.
On the structural engineering side, as the recent case of Bole & Another v Huntsbuild Limited  EWCA Civ 1146 showed, legislation (in this case The Defective Premises Act 1972) can come to the rescue of a residential occupier and find liability against an engineer. In this case, purchasers discovered cracks in their walls subsequently found to have been caused by heave. As it was found that the problem could have been avoided had the foundations been dug to a greater depth, the engineer was held liable as opposed to the contractor. This was on the basis that it was not the contractor's responsibility to examine excavated soil to discover the appropriate depth for the foundations.
If one is to look ahead and identify areas of potential development of risk then sustainability/green issues, where matters are developing at a pace, are certainly ones to watch out for. The obligation to advise on environmental, energy efficiency and other green issues, given their increasing importance in the construction industry, may form a future ground of a 'duty to warn' for a professional where it should be within the knowledge of an experienced member of their profession, irrespective of whether such services are expressly stated in their appointment.
Industry organisations have also embraced the issues of sustainable development and increasingly reflect them in contractual drafting. For example, the Better Buildings Partnership has published a Green Lease toolkit which includes a model memorandum of understanding, and the JCT has published a sustainability guidance note with draft clauses for inclusion in building contracts. The legislative impetus of the CRC Energy Efficiency Scheme, due to come into force in April, will have real financial impact for UK businesses and will affect further how they view their leases and building contracts, whether the property in question be a new build or refurbishment.
The obligation to advise on environmental, energy efficiency an d other green issues... may form a future ground of a 'duty to warn'
The combined aspects of greater industry awareness and legislative incentives raise the argument that professional advisors should, as a minimum, be making their clients aware of these issues and advising them accordingly.
Having set the scene and scratched the surface of the case law in this area, the reader may be concerned that simply getting out of bed in the morning is too risky. However, there are some practical common sense tips that can be derived from the law to help the reader avoid some of the pitfalls of 'accidental responsibility':
- carefully check and read all contract documents, which include not only the actual contract itself but appendices that have been, or should be, completed and any documentation connected to the contract itself
- if you give advice, confirm it in writing. If other parties record your advice, whether at meetings or in correspondence, then check that the recording of that information is correct
- however tempting it may be to assist in moving the project forward, do not stray away from your area of expertise to the extent that you give advice
- where responsibilities are shared and/or delegated, check that your contract documents reflect that allocation of responsibility and make sure that it is clear on paper that the apportionment of responsibility is accurately reflected.
While accidents do sometimes happen, if you adhere to the above principles you are much less likely to catch the stray bullet of liability.
Laurence Cobb is a Partner in the Construction and Engineering Group at international law firm Taylor Wessing