Given the
way in which the UK construction industry organises its contracts (especially
where large scale projects are involved), the function of an architect in
certifying whether or not work has been satisfactorily done is of paramount
importance to all parties. Payment on certification is the order of the day
and, while there are certain grounds on which certificates so issued can be
attacked, the practical realities of the situation mean that this will not
usually be done. In consequence, large amounts of money change hands on the
basis of the architect’s decision — the question is, what rights, if any, do
the parties have if he is negligent in reaching it?
Once upon a
time it was accepted by the English courts that an architect could not be sued
by his client for negligence in issuing certificates. This was because the
architect, in holding the scales fairly between the employer and the
contractor, was to be regarded as a ‘quasi-arbitrator’ and was thus entitled to
the immunity which protects judges, magistrates and arbitrators. However, this
view was decisively rejected by the House of Lords in Sutcliffe v Thackrah
[1974] AC 727 on the basis that an architect’s duty towards a building
contractor to act fairly is not incompatible with a duty to his client
to act carefully. As a result, an architect was there held liable to the
employer for negligent over-certification, which led to substantial losses when
the contractor went into liquidation and the money overpaid became
irrecoverable.
A vital
question which Sutcliffe left unanswered was whether the employer’s
rights against a negligent architect were matched by equal and opposite rights
on the part of a contractor In other
words, could a contractor sue an architect who, by negligently under–certifying,
kept him out of money to which he was entitled?
Lord Salmon in Sutcliffe thought that such a claim would lie and,
while other members of the House of Lords preferred to leave the point open,
the Salmon view was subsequently endorsed by trial judges in both England (FG
Minter Ltd v WHTSO (1979) 11 BLR 1 and Salliss & Co v Calil
(1988) 4 Const LJ 125) and Hong Kong (Shui On Construction Ltd v Shui
Kay Co Ltd (1985) 4 Const LJ 305). However, a recent decision of the Court
of Appeal, adopting the restrictive approach towards negligence cases shown by
the English courts in the last few years (Smith v Eric S Bush (a
firm) [1987] 1 EGLR 157 excepted!), has now cast grave doubts upon this
fairly slender line of authority.
Pacific
Associates Inc v Baxter [1989] 2 All ER 159
concerned dredging work undertaken by the plaintiffs for the ruler of Dubai.
The work was carried out under a standard-form contract (FIDIC 2nd ed) which
provided for extra payment if the contractor encountered hard material which
could not have been reasonably foreseen by an experienced contractor (this to
be certified by the defendant engineer). The contract also contained an
arbitration clause and a condition that the engineer should not incur personal
liability for ‘acts or obligations under the contract’. When work began, the
contractor met a great deal of hard material, but the engineer repeatedly
rejected his claims (amounting to £31m!). The contractor settled his
arbitration against the employer for £10m and sued the engineer in negligence for
the shortfall (£45m including interest).
It was held
by the Court of Appeal that, although an engineer in this situation could
undoubtedly foresee that negligence on his part might cause loss to a
contractor (if only by being kept out of his money until he could pursue his
remedies at arbitration), it would not be ‘just and reasonable’ to impose a
duty of care upon him. Given the contractual background, it could not be said
that he had ‘voluntarily assumed responsibility’ to the contractor, nor that
the contractor had ‘relied’ on him. If any extra responsibilities were
to be undertaken, this could have been done by means of a collateral agreement
when the contract was negotiated. In the absence of any such agreement, and
given that the contractor was fully aware of the contract provisions when he
tendered for the job, the law of tort should not be allowed to import
additional obligations into a carefully structured contractual environment.
The court
was clearly in general terms not in favour of tort claims in circumstances of
this kind, but it is worth noting that all three judges stressed the importance
of both the arbitration clause and the exemption condition. If one or both of
these were missing in a future case, it is by no means unthinkable that a contrary
decision might be reached.
(and non-negligent) surveys yet again
Claims for
professional negligence against chartered surveyors continue to occupy the
courts (to say nothing of the insurance companies which field many of them
before they get that far). Most of these cases contain little which is of legal
significance; the fundamental question which they address is simply whether or
not a reasonably competent and skilful surveyor could have made the error which
the defendant is now found to have made, and this is something which will be
determined in the light of the expert evidence presented. However, this is not
to say that such cases are altogether lacking in interest — practising
surveyors will often find something which, if tucked away in the back of the
mind, will trigger alarm bells on a future occasion. And, of course, many of
them will be found to have a certain air of ‘there but for the grace of God . .
. ‘!
Eley v King & Chasemore [1989] 22 EG 109 is the first of two
recent cases of mainly factual interest but with the odd legal nugget. It
concerned a full building survey carried out by the defendants on a house,
dating from about 1850, which the plaintiffs were interested in purchasing. In
the course of a fairly lengthy report, the partner who actually surveyed the
property mentioned numerous cracks in its external rendering and noted that the
house stood on a shrinkable clay subsoil which might be affected by seasonal
changes in moisture; this fact, coupled with the shallowness of the footings
and the closeness of a large fir tree (which he advised the plaintiffs to
fell), led him to suggest that the plaintiffs should try to obtain insurance
cover against subsidence, something which they duly did.
Having
purchased the house, the plaintiffs found that the cracks soon became wider,
were advised that underpinning was required, and carried this out with the aid
of a contribution of some £15,000 from the insurance company. They then sued
the defendants in negligence, but their claim was rejected by the Court of
Appeal, which held that the plaintiffs had in fact been given perfectly sound
advice. They had been warned of the possibility of subsidence and advised to
insure against it — what more could they expect? The court’s ruling emphasises that, for a
survey to lead to liability in negligence, the question is not just: ‘What was
missed?’ but also ‘What was the client told?’.
A second
feature of the house noted by the surveyor in the Eley case was the fact
that it had been reroofed (probably as a result of bomb damage) and that the
felt had unusually been laid over rather than under the battens. However,
having found no signs of dampness in the roof space, he did not feel it
necessary to obtain long ladders and make a closer inspection of the roof. This
part of the report, too, led to complaints when the plaintiffs found that many
slates were rotten and some were missing — only the felt had kept the water
out.
On this
point also, the Court of Appeal absolved the defendants of negligence. Had the
roof space been damp, then there would have been a trail to follow. However, as
things were there was no reason for a competent surveyor to undertake any more
extensive investigation.
The second
case, Cross v David Martin & Mortimer [1989] 10 EG 110, is of
interest mainly as being the first reported action to have arisen out of an
RICS House Buyers Report and Valuation. Noting that ‘no reported case yet gives
guidance as to the nature and extent of the duty of a surveyor who carries out
such a survey’, Phillips J referred to the 1984 report of an RICS working
party, which had concluded that an HBRV required the same level of expertise as
a full structural survey, and expressed his agreement with that conclusion.
(Indeed, the judge thought that even those limitations on the extent of the
inspection which are specifically mentioned on the HBRV form would equally
apply by implication to a structural survey.)
Having thus
set the standard, the judge came somewhat regretfully to the conclusion that
the partner in the defendant firm who had inspected a house for the plaintiffs
had fallen below it in three respects. He should have observed and reported on
what were clear signs of subsidence of the ground-floor slab; he should
likewise have noticed and commented on the fact that several first-floor doors
were substantially misaligned; and he should have warned his clients that a
loft conversion carried out by a previous owner might well have significantly
reduced the strength of the roof, and that it was in any event probably unsafe
to use it as a room, because of the extra loading which this would involve.
