Negligence – Architect – Certificates – Respondents purchasing flats in new development – Appellant architects engaged by developer to inspect building works and provide certificates in respect of satisfactory construction of flats – Those certificates issued and provided to respondents after completion of their purchases – Building works providing to be defective – Appellants held to be liable to respondents by reason of contents of certificates – Whether such liability arising on grounds of negligent misstatement, breach of collateral warranty or negligent inspection – Appeal allowed
The appellants, a firm of architects and one of the members of that firm, were engaged by a developer in connection with the construction of two blocks of flats on a site in Peterborough. The appellants were instructed to carry out inspections of the building in the course of development and to produce architect’s certificates in respect of the flats for the benefit of purchasers and their lenders. Purchasers, including the respondents, were informed before contracting that they would receive such certificates on completion.
The development was carried out between September 2002 and December 2003. The appellants undertook 10 inspections during the course of the works and provided certificates for the purchasers attesting to the satisfactory construction of the flats. However, eight of the purchasers later succeeded in claims for damages against the appellants on the grounds that the building works were defective and the inspections had been carried out negligently. The judge held that the appellants owed a duty of care to the purchasers, who, to the appellant’s knowledge, had been intended to rely on the certificates and who had in fact relied on them, or on the fact that they were to be provided, in proceeding with their purchases.
The appellants appealed. They did not challenge the finding that they were liable in respect of one of the certificates, which had been executed before the date of the sale agreement between the relevant purchasers and the developer. However, they contended that they were not liable to the respondents, whose certificates had not been provided until after the exchange of contracts and the execution of the lease of the flats in question.
The respondents framed their case in three ways, namely: (i) negligent misstatement; (ii) breach of collateral warranty; or (iii) breach of a duty, additional and prior to the duty to take care in compiling the certificates, to take care in the inspection of the building works. In respect of the last of those, the respondents contended that, had the appellant complied with its duty regarding the inspection of the building, the defects would have been spotted and remedied.
Held: The appeal was allowed.
(1) The respondents had no claim against the appellants’ for negligent misstatement in respect of certificates that post-dated exchange and completion on their purchases of the flats. In order to recover for the tort of negligent misstatement, the respondents had to show that they had relied on the statement in question. It had to operate on their minds in such a way that they suffered loss on account of their reliance by doing something that they would not otherwise have done. In committing themselves to the agreements to purchase the flats, the respondents could not have relied on the statements contained in the signed certificates eventually provided to them since those statements were not then in existence. Reliance had to follow representation and could not be retrospective. If the representation was the signed certificate, then it could not be relied on before it came into existence: Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, James McNaughton Paper Group Ltd v Hicks Anderson & Co [1991] 2 QB 113 and Smith v Chadwick (1884) 9 App Cas 187 applied.
The respondents had not advanced a claim in negligent misstatement relying on anything other than the signed certificates themselves. The judge had been entitled to find that the second appellant knew a draft of the certificate was likely to be sent to the purchaser’s solicitors at some stage before contract and that the purchasers were going to purchase at a time when no signed certificate existed. However, it did not follow that the appellants had assumed a responsibility, to purchasers with whom they had had no direct contact, as to the accuracy of statements made in a draft certificate which was as yet unsigned and unissued and which was therefore capable of being amended or not issued at all. Further, any such claim was a different case from that advanced before the judge and would require to be distinctly pleaded so that the issues could be ventilated in evidence.
(2) An architect’s certificate in the form provided differed from an NHBC certificate since it did not act as a guarantee of the quality of the building or an undertaking to repair defects but was simply a statement of the matters contained in it. The signed certificates provided to the respondents could not be construed as a form of collateral warranty since that would require an intention to create contractual relations. The terms of the certificate were the product of negotiation between professionals in the field, who should know the distinction between a warranty and a representation. It had to be read from the perspective of a reasonable person whose knowledge, given that the respondents had legal assistance, should be taken to include knowledge of the distinction between a certificate and a warranty. The certificate simply certified that various things had happened and set out various conclusions as to the state of completion of the property and the standard of its construction. It was not described as a promise, warranty or representation, it contained no reference to any consideration and, although it was to be relied on by subsequent purchasers and their lenders, there was no reference to any possible assignment of obligations. The language of the certificate was such as would be expected of a document that the maker intended to be relied on so as to give rise to a potential liability in negligent misstatement, which would be unnecessary if there was a contractual liability in any event. The wording of the certificate, taken as a whole, did not amount to a warranty.
(3) Any liability arising from the certificate should be governed by the law relating to negligent misstatement and no separate duty arose in respect of the work of inspection that had led to the provision of those certificates. In order to show that a negligent misstatement had been made, it would usually be necessary to show a failure to take proper care in the work that led to the making of the statement, but the cause of action remained that for negligent misstatement. Any liability in respect of inspection, owed to purchasers who received certificates after their purchase, stemmed from the statements in the certificate itself, which was designed to be relied on by purchasers in entering into their contracts, and by their mortgagees in making advances, so as to give rise to liability when they did so. That was not what had happened in the instant case, but that did not mean that a tortious duty of inspection arose independent of any reliance on the certificate for the purpose of entering into the transaction: Candler v Crane Christmas & Co [1951] 2 KB 164 and Smith v Eric S Bush [1990] 1 AC 831; [1989] 1 EGLR 169; [1989] 17 EG 68 and [1989] 18 EG 99 considered. The appellants owed a duty to the developer in respect of inspection but did not owe a similar duty to future certificate holders, which would involve imposing on them a duty to inspect arising out of statements that, when the duty arose, they had not yet made.
Ben Patten QC and Katie Powell (instructed by Simmons & Simmons LLP) appeared for the appellants; William Webb (instructed by Birketts LLP, of Ipswich) appeared for the respondents.
Sally Dobson, barrister
