Construction professionals: when will a duty of care arise to third parties?
Two recent cases illustrate the approach taken by the English and Scottish courts when considering these issues.
The circumstances in which a duty of care arises for construction professionals and the ability of the contracting parties to limit and/or exclude their liability have been the subject of a number of decisions over the past couple of years.
Franks v Peter Inglis  5 WLUK 531
In this Scottish case, the court considered the circumstances in which an architect will owe a duty of care to third parties for professional services rendered. The defender architect was engaged to provide architectural services to the developers of apartments. The pursuers were the owners of those apartments who alleged that the defender had issued professional consultants certificates (PCCs) certifying that the flats had been generally constructed to a satisfactory standard.
The pursuers argued that the defender misrepresented the position on the construction of the properties when he issued the PCCs and that the pursuers had relied on that misrepresentation when they bought the flats, arguing that the defender was liable for the loss they suffered as a result of the alleged misstatement in the PCCs.
The judge, Sherriff Lorna Drummond QC, set out the foundation for a professional’s liability in tort for negligent misstatement, namely an assumption of responsibility by the representor to the representee. She explained that the representee needed to reasonably rely on the representation and the representor must reasonably have been able to foresee that reliance.
Drummond QC held that the PCCs certified the buildings had been constructed to a certain standard and it was not clear that the defects fell outside of that warranty. Nonetheless, the pursuers were unsuccessful as they could not demonstrate reliance on the PCCs when acquiring their interests in the flats.
Multiplex Construction v Bathgate Realisations Civil Engineering Ltd  EWHC 590 (TCC)
In this case, the court also considered the circumstances in which a duty of care would arise where the parties did not have a direct contractual relationship. Multiplex, the main contractor, sub-contracted the design and construction of certain works including a ‘slipform rig’ to Bathgate/Dunne, who in turn sub-contracted the design to BRM. Bathgate then engaged RNP to act as a consultant to check BRM’s design, as BS 5975 requires an independent third party to check and approve the design.
Multiplex argued firstly that RNP owed it a duty of care in respect of checking the rig design and issuing the certificates and secondly that RNP had provided warranties directly to Multiplex by way of the certificates.
The court held that when determining whether the consultant owed the duty of care to the contractor, the question to ask was whether the consultant owed a duty sufficient to encompass the kind of economic loss that the contractor was seeking to recover — in this case economic loss — rather than asking about a more general duty. In doing so, the court continued a consistent trend of considering the intersection of the loss and the duty, applying Galliford Try Infrastructure v Mott MacDonald  EWHC 1570 (TCC) and following the decisions in SAAMCO  AC 191 and in Caparo v Dickman  2 AC 605. The court indicated that in determining whether RNP owed a duty of care to Multiplex, the court had to consider three tests, namely:
- Whether there had been an assumption of responsibility by RNP;
- Whether the threefold test of liability had been satisfied, namely (i) reasonable foreseeability of loss, (ii) proximity, and (iii) whether it was fair, just and reasonable to impose a duty of care; and
- Whether there had been reliance by Multiplex on a representation made by RNP.
The judge decided that, on the evidence, RNP had not assumed a responsibility as alleged by Multiplex as there was no direct contractual relationship between the parties. The parties had consciously created a contractual framework that set out detailed liabilities and remedies. Multiplex had not been involved in RNP’s appointment and RNP had not provided any advice directly to Multiplex. RNP had been engaged to provide design checks for, and advice to, Bathgate/Dunne on discrete design issues.
Further, the court considered the structure governing the contractual relationships between Multiplex, Bathgate/Dunne and RNP, and held that a finding that RNP had assumed responsibility to Multiplex in spite of this contractual arrangement would go against the expectations of construction professionals.
In considering the second test (i.e. the threefold test), the court considered that it would not be fair just and reasonable to impose a duty of care having regard to the contractual matrix.
Applying the third test, the court held that there had been no reliance by Multiplex on the advice given by RNP.
This was not a case where there was a liability gap. Multiplex had a remedy against Bathgate/Dunne. The fact that Bathgate/Dunne were impecunious did not affect the application of the tests that needed to be considered as to whether a duty of care arose.
The same considerations were cited as the reason for refusing Multiplex’s argument that RNP had given warranties to Multiplex directly in providing the certificates.
This demonstrates clear regard for the complexity of the structure of contractual relationships in construction projects and should reassure construction professionals and their insurers that the court gives appropriate weight to the way in which the professionals have chosen to contract, increasing certainty.
The above cases demonstrate the caution with which the court imposes duties of care on construction professionals for economic loss in circumstances where a contractual relationship between the parties does not exist. The absence of a contractual relationship between a construction professional and a third party in circumstances where sophisticated contractual relationships have been created may militate against an assumption of responsibility by a professional and persuade a court that it is not fair, just and reasonable to impose a duty of care for such loss. The impecuniosity of a party who has a contractual relationship with the party suffering the loss is not relevant, will not create a liability gap and will not influence the court to impose a duty where they would not otherwise do so.
The courts’ decisions in these cases are to be welcomed by construction professionals and their insurers. Parties to construction projects who wish to impose duties on parties with whom they would not ordinarily be in contract would need to consider the use of collateral warranties and/or the use of the Contracts (Rights of Third Parties) Act 1999 as a means of creating remedies.