A step too far?
- Third party consultants, and duty of care in tort.
- No duty of care owed in tort by a third party design consultant to a contractor with no direct contractual nexus.
Large infrastructure projects are often subject to intricate contractual relationships between the relevant stakeholders, and this will also include collateral warranties to cover any potential gaps in liability to mitigate potential effects of one of the participants in the contractual matrix becoming insolvent. Parties lower down the contractual chain may engage their own designers or consultants to discharge their obligations up the contractual chain. An interesting scenario arose in the recent case Multiplex Construction Europe Ltd v Bathgate Realisations Civil Engineering Ltd (Formerly Dunne building & Civil Engineering Ltd (In administration) (2) BRM Construction LLC (3) Argo Global Syndicate 1200 (2021) , and the two issues that were heard by way of preliminary issue.
- The main contractor sub-contracted certain design works to the sub-contractor.
- In turn the sub-contractor sub-contracted certain design work to the designer (Second Defendant).
- There was a requirement pursuant to BS 5975 for certain independent design checks and approvals to be done by an independent third party. For that reason, and to discharge its contractual obligations to the main contractor, the sub-contractor engaged a firm of consulting engineers to do this, and issue the relevant certificates.
- The contractor alleged that defects issues arose because of design issues.
- The contractor issued proceedings against the sub-contractor and the designer.
- Judgment in default was obtained against both.
- The sub-contractor was in administration. The designer was uninsured. The consultant had gone into liquidation.
- The contractor pursued the consultants insurers.
- There were two preliminary issues that were dealt with by His Honour Judge Fraser, sitting in the TCC:
- Did the Consultant owe the Contractor a duty of care in respect of checking the design and issuing the certificates; Answer No
- Did the Consultant provide warranties directly to the contractor by way of the certificates. Answer No.
Duty of care:
The sub-contractor had a direct contractual nexus with the contractor. However, the consultant was engaged directly by the sub-contractor. In relation to the design check, there was no direct contractual relationship between the consultant and the contractor, and nor did the consultant provide direct services to the contractor.
The loss sought by the contractor was economic in nature. The court did not find that the consultant had assumed responsibility to the contractor.
The parties had an intricate framework of carefully organised contractual obligations. Indeed the contractor and sub-contractor had entered into a JCT Design and Build Sub-Contract 2005 Edition, Rev 2, 2009, incorporating as you would expect various bespoke amendments. In such circumstances who was responsible to who was clear. Professionals can expect to rely on the fact that the contractual matrix of obligations and responsibilities are clear. Furthermore, it would be unjust, unreasonable or unfair to impose a duty on the consultant. The court took the view that “It was inconceivable that a reasonable businessman would consider that the consultant was voluntarily assuming an unlimited responsibility to the main contractor, or indeed to any party with whom it was not a direct contractual relationship”
Again, the approach of the court was that the contractual relationships were clear. There was no direct contract between the consultant and the contractor. The certificates given by the consultant could not be construed as warranties to the contractor.
This is an instant case where the parties have been meticulous with setting out the various contractual relationships. Nothing unusual. However, the spanner in the works happened when problems arose, and the relevant parties had become insolvent or were uninsured. Given the uncertain and potentially volatile economy as we pull out of the covid recession, perhaps further consideration needs to be given by contracting parties to ensure that the relevant participants have insurance/ adequate cover where there may be a potential reliance, and also have in place direct collateral warranties to cover liability gaps. Hindsight is a wonderful thing, and I dare say that the contractor should have insisted on a direct collateral warranty with the consultants. Absent this, understandably a duty of care in tort was relied upon. The court was reluctant to find such a duty or to construe the consultants certificates as warranties. Harsh?
Consultants engaged in such circumstances will inevitably appreciate that their design check is being relied upon, as will their certificates confirming conformity with the relevant BS, by others who may not have a direct contractual link. As such they will appreciate, albeit they may not have a direct contractual nexus with others in the contractual matrix, there will be reliance on what they are doing. That is not an unreasonable assumption, and commercially that is reality. Its perhaps artificial to look at their scope and contribution in isolation. Similarly, where certificates have been issued, the designers would be aware that they will be relied upon by others.
The type of loss here in relation to the duty of care sought was economic. Had the duty of care had health and safety connotations, would the courts approach have been any different? Potentially .
Perhaps on the present facts the court was not keen on finding a duty of care. However, it’s conceivable that on another set of facts the result may well be different. As such is it really a step too far?