Stuart Pemble addresses a dispute that highlights important principles of the tort of negligence.
Key point
- The courts remain reluctant to hold construction professionals liable to third parties in the tort of negligence.
Any student faced with a tort exam later this year could do worse by way of revision than read Fraser J’s judgment in Multiplex Construction Europe Ltd v Bathgate Realisations Civil Engineering Ltd (in administration) and others [2021] EWHC 590 (TCC).
The dispute, which arose out of the construction of 100 Bishopsgate, EC2, in the City of London, required the judge to refer to (and follow) some of the most important appellate decisions regarding the tort of negligence of recent times. The claimant, Multiplex, was the main contractor for the project. The first defendant (referred to in the judgment by its previous name, Dunne) was the design and build sub-contractor responsible for the concrete package. The building’s concrete core was constructed using a slipform rig, which enabled the core to be constructed one level at a time. Dunne employed the second defendant, engineering consultancy BRM, to design the rig. This element of the project was covered by British Standard 5975, which requires that the design of the rig is assessed by an independent design check. That was carried out by another consultancy, RNP. Multiplex claimed that RNP performed this check negligently, requiring the initial rig to be replaced and causing it more than £12m in loss.
Unfortunately for Multiplex, Dunne had gone into administration in 2016 and, for the purposes of this claim, was uninsured. BRM – which is based in Dubai – did not seem to have any insurance. And RNP had gone into liquidation. However, it did still have valid insurance cover, provided by the third defendant, Argo. Multiplex looked to Argo to meet its damages claim against RNP under the terms of the Third Parties (Rights against Insurers) Act 2010. If the Act applied, it would transfer the benefit of RNP’s insurance cover – and the right to be indemnified by Argo – to Multiplex.
The basis of Multiplex’s claim
Multiplex raised two arguments. The second of these – issuing certificates approving the design as required by the British Standard meant that RNP had provided a warranty in relation to its services directly to Mulitplex – was dismissed easily by Fraser J. There was no contract between Multiplex and RNP and nothing in the arrangements actually agreed for the project could get around that fundamental fact.
The majority of the judgment deals with Multiplex’s main argument: that RNP owed it a duty of care in the tort of negligence. And it is Fraser J’s judgment on this issue which should prove to be beneficial to law students’ revision.
Multiplex faced a big challenge. Its claim was for what the law categorises as pure economic loss because it had effectively paid too much for a rig that was defective. And, ever since the House of Lord’s landmark decision in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (as expanded on and considered in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 and White v Jones [1995] 2 AC 207), there has to be a special relationship of proximity between the claimant and the defendant for pure economic loss to be recoverable. This would normally require (i) RPN to have provided advice, statements or information to Multiplex for a particular purpose; (ii) RPN to have known of that purpose; and (iii) the court to accept that it was justifiable that Multiplex rely on that information. Common legal shorthand is for the party owing the alleged duty to have assumed responsibility in some way to the claimant.
The decision
It was a challenge too far for Multiplex. Fraser J stressed, following Galliford Try Infrastructure Ltd v Mott MacDonald Ltd [2008] EWHC 1570 (TCC), that the court had to decide not whether RNP owed any duty to Multiplex, but whether it owed a duty of care sufficient to enable Multiplex to recover the pure economic loss it claimed.
Multiplex argued a sufficient duty arose because RNP had assumed responsibility in relation to the design check – that is, that RNP knew that Multiplex would rely on its report. The judge disagreed: there was no evidence to support that argument. While there was a direct contractual relationship between Dunne and Multiplex, there was none between RNP and Multiplex. RNP did not provide any services directly to Multiplex. Rather, its services were needed to enable Dunne to meet its contractual obligations to Multiplex under BS 5975. Multiplex played no role in the selection of RNP and did not know what documents RNP had reviewed when performing the checks.
The judge was also influenced by dicta in Henderson and White that the existence of complicated contractual relationships as existed in the development of 100 Bishopsgate often counts against the existence of a duty of care. To create a duty of care would short-circuit the very contractual relationships that the parties had put in place.
Another argument used to establish the existence of a duty of care is where the relationships between the parties are effectively analogous to a contractual one, save for the absence of consideration. Fraser J rejected that too. There were contracts in place, just not one between Multiplex and RNP.
Nor was there any gap in potential liability that had to be rescued by imposing a duty of care. Multiplex had a cause of action against Dunne, albeit one that would not result in damages being paid to Multiplex. It was inconceivable that an objective observer would conclude that RNP was voluntarily assuming potentially an unlimited liability towards Multiplex on a complicated project when there was no contract between them.
Stuart Pemble is a partner at Mills & Reeve
