PROFESSIONAL NEGLIGENCE CLAIMS AGAINST CONSULTANTS GENERALLY RECURRING PITFALLS AND HOW TO ADDRESS THEM

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1 Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy PROFESSIONAL NEGLIGENCE CLAIMS AGAINST CONSULTANTS GENERALLY RECURRING PITFALLS AND HOW TO ADDRESS THEM

2 Basis of Claim Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy

3 Construction Contracts Negotiation, Drafting and Agreement of Construction Contracts

4 Construction Contracts Contract v Tort Contract = obligation derived from agreement, so from parties themselves Tort = obligation imposed by law (common law or statute) Primary distinction: Duties in tort are generally imposed by law Duties which arise in contract are generally agreed voluntarily between the parties themselves (although the law will sometimes imply duties to certain contracts)

5 Construction Contracts Contract Law Definition of a Contract: an agreement giving rise to obligations which are enforced or recognised by law (Treitel, the Law of Contract) Offer + acceptance = agreement + consideration = contract

6 Construction Contracts Contract Law Battle of the Forms One party makes an offer subject to its own terms and conditions; The other party purports to accept the offer but qualifies the acceptance as subject to its own terms and conditions, thus creating a counter-offer.

7 Construction Contracts Contract Law Battle of the Forms Butler Machine Tool Co v Ex-cell-O Corp. (England) Ltd [1979] 1 All ER 965 B submitted a quotation to supply a machine for 75,535 with standard conditions on the reverse of the quotation form. E s order stipulated certain variations to the quotation. The order form also had E s standard conditions. E s order form provided a tear-off slip which stated We accept your order on the Terms and Conditions stated thereon. B returned the slip duly completed but with a covering letter which stated We accept your order. This is being entered in accordance with our quotation... Court held that E s order amounted to a counter-offer which killed B s original offer.

8 Construction Contracts Contract Law Battle of the Forms Chichester Joinery v John Mowlem (1987) 42 BLR 100, C submitted a quotation subject to its standard conditions. JM responded with an order subject to its own conditions with a requirement for C to sign. Instead C sent an acknowledgement of the order subject to conditions on the acknowledgement form. Court held: the contract was eventually formed by JM s acceptance of delivery of the goods, so the conditions on C s acknowledgement form prevailed.

9 Contract: Battle of the Forms Client signs and returns a copy ACCEPTANCE Client sends his own Contract COUNTER OFFER Engineer submits Conditions of Engagement OFFER CONTRACT formed on the terms of the Conditions of Engagement Engineer starts work ACCEPTANCE CONTRACT formed on the terms of the Client s Contract

10 The Professional s Duty of Care Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy

11 The Professional s Duty of Care Construction Professional Standard - Reasonable skill and care Bolam v Friern Hospital Management Committee [1957] 1 WLR 582 HL: the standard of the ordinary skilled man exercising and professing to have that special skill. Flanagan v Griffith 1981 No P 25/01/85 at 113 Barrington J - architect couldn t be criticised / found to be negligent for forming a judgment: which conforms with the considered judgment of men prominent in his profession

12 The Professional s Duty of Care Exposure to Fitness for Purpose Obligations The fitness for purpose obligation is not as a rule implied into a construction professional s terms of appointment. George Hawkins v Chrysler (UK) Ltd and Burne Associates (1986) 38 BL 36 Court of Appeal - for the court to imply a term of fitness for purpose by fact there must be: "...something more... than his mere engagement as a professional person to advise..." (Dillon LJ) or "...special facts; where... the professional man has undertaken... special responsibilities..." (Neill LJ)

13 The Professional s Duty of Care Exposure to Fitness for Purpose Obligations Orbit Pty Ltd v JF&P Consulting Engineering Pty Ltd (1995) 11 BCL 260. (Australian decision - Supreme Court of Queensland) - the mere knowledge of the client's intended purpose was not sufficient to imply a term of fitness for purpose. Platform Funding Ltd v Bank of Scotland Plc [2008] EWCA Civ 930, - special facts or clear language are required to impose an obligation stricter than that of reasonable care. Contrast this with the position of the Contractor: Basildon District Council v J.E. Lesser (Properties) Ltd [1985] All ER 20 - a contractor's breach of its "fitness for purpose" obligation did not depend on whether the deficiency in question resulted from a failure in design, materials or workmanship.

14 The Professional s Duty of Care However Has the Consulatant inadvertently taken on fitness for purpose obligation? Example: Has the Consultant confirmed that the construction of the property is in compliance with the Building Regulations and Planning Permission, for example in the mortgage draw down certificates?

15 The Professional in negotiations Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy

16 The Professional in negotiations Marlan Homes Limited v Mark Walshand Gary Wedick [2009] IEHC 576 [2012] IESC 23 Supreme Court McKechnie J: In the context of commercial agreements, McKechnie J. drew particular attention to the following: It is important however to note that where the parties have committed their responsibilities to written form, in a particular manner, it must be assumed that they have intended to give affect to their obligations in that way. Such must be recognised as their right both commercially and under contract law. Accordingly it is important that, when faced with a construction issue, the court should focus its mind on the language adopted by the parties being that which they have chosen to best reflect their intentions. It is not for the court either by means of giving business or commercial efficacy or otherwise, to import into such arrangement a meaning that might also be available from an understanding of the more general context in which the document came to exist, but is one not deducible by the use of the interpretive rules as mentioned.

17 The Professional in negotiations McKechnie J. expressly agreed with the findings of Lord Mustill in Charter Reinsurance v Fagan [1997] A.C. 313 P. 385 There comes a point at which the court should remind itself that the task is to discover what the parties meant from what they have said, and that to force upon the words meaning which they cannot fairly bear is to substitute for the bargain actually made one which the court believes could better have been made. This is an illegitimate role for court. Particularly in the field of commerce, where the parties need to know what they must do and what they can insist on not doing, it is essential for them to be confident that they can rely on the court to enforce the contact according to its terms.

18 The Professional in negotiations Marlan Homes Limited v Mark Walshand Gary Wedick [2009] IEHC 576 [2012] IESC 23 Supreme Court McKechnie J: Proper, even basic practices, commercial assessment, legal appraisal and risk evaluation, were stood down. As is readily apparent therefore, there were several aspects of the parties relationship which were not tied down as well as perhaps they could have been. It may be that the parties were so advised and were satisfied to assume the risk of their commitments: in any event such therefore is the context in which their respective obligations must be determined. It is not now possible to seek to exploit the terms of an agreement which simply do not exist.

19 The Professional in negotiations The end result is and can be considered as unattractive, when one considers the respective positions of the parties following this judgment. However such inadvisable and inescapable consequences, of this court having to apply the appropriate legal principles, to the structure of the arrangements put in place by the parties to regulate their affairs. See also Photo Production Ltd and Securicor Transport Ltd. [1980] A.C. 827 where Lord Diplock held: In commercial contracts negotiated between businessmen capable of looking after their own interests and of deciding how risks inherent in the performance of various kinds of contract can be most economically borne (generally by insurance), it is in my view wrong to place a strange construction upon words in an exclusion clause which are clearly and fairly susceptible of one meaning only... (at 851)

20 Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLm Public Procurement Law and Policy In comparison to the consumer client

21 The Consumer Client The Sale of Goods and Supply of Services Act, 1980 as amended. The European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 (SI 1995/27), the Regulations contain in its list of terms that may be regarded as unfair a term irrevocably binding the consumer to terms with which he had no real opportunity of becoming acquainted with before the conclusion of the contract (SI 1995/27, Schedule 3 paragraph (i)).

22 Letters of Appointment LETTERS OF APPOINTMENT Remember the construction professional standard reasonable skill and care Make sure the express terms of your letters of appointment do not inadvertently include fitness for purpose obligations - I warrant, I will ensure, wording such as will be constructed in accordance with as-builts, references to complete compliance, accuracy. Scope of service: Be extremely careful not just with the wording of the terms of your appointment but also with the wording of your scope of service.

23 Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy Construction Areas of vulnerability for the Engineer and Architect

24 Inspection Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy

25 Inspection Pre-BCAR - On duty to inspect: McMahon J in Curley and Dowley v Mulcahy High Court 21 December 1977: In my opinion negligence cannot be imputed to an architect merely because he fails to discover a defect as soon as it has happened. In Eastham BC v Sunley [1965] 3 All ER 619 Lord Upjohn at page 636 points out that an architect is not permanently on site and when he arrives a reasonable order of priorities may involve not inspecting at all some of the work. On shared delegated design: McGlinn [2007] EWHC149(TCC) the Court noted that it would not appropriate to impose upon the architect the same inspection obligation in respect of a detailed element of the work designed the engineer, as for an element of the work which they themselves designed. [i]t is clear that in the former case, their inspection obligation must have been much less onerous.

26 Inspection Now BCAR Assigned / Designer / Ancillary Certifiers inspection roles set out in Code However: Key under BCAR: The Code of Conduct: The role of Assigned Certifier does not include responsibility for the supervision of any builder

27 Inspection Jackson & Powell, at para 8-238: Periodic inspection The law 213 The classic statement of the architect's obligations to his client once the works have started on site is set out in the judgment of Judge Stabb QC, the former Senior Official Referee, in Sutcliffe v Chippendale & Edmondson (1971) 18 BLR 149. Although this case went to the Court of Appeal and the House of Lords on a different point, Judge Stabb's analysis of an architect's site-based duties is the appropriate starting point for any consideration of what supervision and inspection might actually involve. The relevant passages of his judgment are, at p 162:..

28 Inspection Old RIBA to new RIBA supervision to inspection 215 A number of points need to be made about these passages. First, they are concerned with an architect's obligation to supervise and inspect, which is what the old RIBA terms required. The obligation to supervise has now gone; there is now only an obligation to make periodic inspections. That is a potentially important reduction in the scope of an architect's services. RIAI the architect will visit the site at intervals s/he considers appropriate to the stage of construction to inspect the progress and quality of the work and to determine that the work is being carried out generally in accordance with the contract documents. Frequent or constant inspection does not form part of the standard services.... It is the contractor s responsibility to supervise the building work.

29 Inspection Old RIBA to new RIBA supervision to inspection Brown & Brown v Gilbert Scott & Payne Con LR 120 the judge stated: As was said in evidence by one of the experts, supervision was the word which used to appear in the RIBA Form of Engagement but in more recent editions this is replaced by the obligation to inspect... Inspection involves looking and noting, and possibly carrying out tests. Supervision, however, not only covers inspection, but also the issuing of detailed directions regarding the execution of the Works. Supervision can be carried out only by someone with the requisite authority to ensure that the work is undertaken in a particular way. That is the prerogative of the contractor. Key under BCAR: The Code of Conduct: The role of Assigned Certifier does not include responsibility for the supervision of any builder

30 Inspection On duty to inspect: Sutcliffe v Chippendale & Edmondson (1971) 18 BLR In Consarc Design Ltd v Hutch Investments Ltd (2002) 84 Con LR 36, Judge Bowsher QC indicated that the obligation to inspect was somewhat vague and it was difficult to know in real terms what was required, although, as he put it, at para 91, what is absolutely clear is that the architect does not guarantee that his inspection will reveal or prevent all defective work. I respectfully agree with that statement. I also respectfully agree with Judge Bowsher QC's adoption and approval of the relevant passages concerned with inspection in Jackson & Powell on Professional Negligence, 5th ed (2002), paras to

31 Inspection However Has the Consultant inadvertently taken on a supervisory role? Has the Consultant confirmed that supervision of construction has taken place, for example in the mortgage draw down certificates?

32 Certification Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy

33 Certification Liability of the Certifier Sutcliffe v Thackrah [1974] AC 727 / 4 BLR 16 - established that an engineer/architect can be liable to his own client in contract even when acting as certifier. In Sutcliffe, the architect when issuing an interim certificate failed to allow for the cost of rectifying the defects of which he was aware. The contractor became insolvent and as a result of having paid on foot of the architect s certificate the employer overpaid the contractor. The House of Lords held that the architect was liable to his own client for negligence in certifying.

34 Certification Moran v Duleek Developments High Court (Murphy J) 7 June 1991 [1991] PNLR 342, High Crt. (Irl) - the engineer designed a house so that it would be above the flood level. The engineer accepted the builder s word that the house was built to the correct level and issued a certificate for planning purposes on that basis. When it subsequently transpired that the property had not been built to the correct level, Murphy J held that the engineer was liable due to his failure to check the levels himself. Henry v Foxrock Construction unreported judgment of Lardner J 11 July 1985, - a certificate of compliance was issued to a developer / builder in circumstances where the architect was aware that it would be relied on by a builder in order to satisfy the purchaser. The architect was held liable for the errors in the certificate.

35 Certification Reliance on Third Party Representations / Certificates McKenzie v Potts (1995) 50 ConLR 40, CA - architect relied on the builder s assurance that proper hardcore had been used in the underfloor fill and did not inspect the filling himself. Defective filing caused severe cracking in the concrete floor of the house and the builder and architect were both found to be negligent. Quinn v Quality Homes [1976/77] ILRM 314, High Ct (Irl). - builders carried out underpinning works to a pair of houses on foot of a written consent agreement pursuant to which it was agreed that all remedial works to the premises the subject matter of the proceedings would be carried out as were necessary to ensure the structural stability of the premises and that such works would be carried out under the supervision of the defendant architect and completed to the satisfaction of the defendant structural engineers.

36 Certification Quinn v Quality Homes [1976/77] ILRM 314, High Ct (Irl). On completion of the work the structural engineers issued a certificate confirming that the structural underpinning had been carried out under their supervision and to their satisfaction. The certificate stated that the engineers were satisfied as to the structural stability of the buildings. Six months later the architect issued a certificate also stating that they were satisfied as to the structural stability of these premises. When the structural stability of the premises was duly called into question, the architects contended that they had been entitled to rely on the engineers certificate when they themselves were certifying the works. However, Finlay J disagreed and held that the architect was liable in that they should not have relied blindly on the engineers certificates.

37 Certification Quinn v Quality Homes [1976/77] ILRM 314, High Ct (Irl). In relation to the architect, Finlay J stated: I am satisfied that he was negligent in issuing the certificate without having ascertained in a very definite and clear cut fashion from Rooney and McLoughlin the reasons for and justification of the change in their original recommendations with regard to the works necessary for the underpinning and stabilisation of site No. 20 and without having checked back with them as to the real meaning of the certificate issued by them in pursuance of the consent in the action between Treacy and Quality Homes Ltd. before issuing a general certificate as to the stability of site No. 20. I am therefore satisfied that the plaintiffs are entitled to succeed against Mr. Harney for damages in negligence in the issue of this certificate.

38 Reliance on Specialist Advice However compare with recent UK decision in: Cooperative Group v John Allen Associates [2010] EWHC 2300 (TCC) Supermarket development on site at Sandwich expected to be good ground. Discovered during purchase negotiations that site was underlain by soft to very soft deposits. The main structure was designed with piled foundations. However to save money, the use of vibro-replacement to support the floor slab was proposed, rather than a suspended slab on piles. Expected to limit settlement to 30 to 50mm, however actual settlement exceeded 110mm. Intended saving of 90,000, finished up as claim for 3.5 million.

39 Reliance on Specialist Advice Cooperative Group v John Allen Associates [2010] EWHC 2300 (TCC) 10 years later, client had done nothing by way of remedial measures, but commenced action claiming the cost of closing the store, taking up the floor and installing suspended slab on piles. Ramsey J had to consider whether JAA were in breach of their duty of care in: Allowing the vibro-replacement system to be used Relying on specialist sub-consultant advice in relation to the use of the system

40 Reliance on Specialist Advice Cooperative Group v John Allen Associates [2010] EWHC 2300 (TCC) Reliance on Specialist Advice Ramsey J considered JAA s reliance on specialists and started his analysis with a passage from the judgment of HHJ Newey QC in EDAC v Moss: Modern developments in materials and technologies in the construction industry have been so numerous and so rapid as to exceed the ability of even the most talented and assiduous professional men to master them all. Architects and others must of necessity seek the assistance of specialists when they reach the limits of their knowledge.

41 Reliance on Specialist Advice Cooperative Group v John Allen Associates [2010] EWHC 2300 (TCC) Reliance on Specialist Advice On the issue of whether JAA could rely on the advice of a specialist sub-contractor Ramsey J concluded: As I have set out above, this is not a question of JAA delegating their duty to a third party but a question of whether JAA acted with reasonable skill and care in seeking and relying on advice from Keller instead of carrying on their own evaluation or obtaining independent advice. I find that JAA were entitled to and did reasonably rely on the advice of Keller Limited as a contractor with specialist techniques in vibro replacement techniques and were not under a duty to undertake an independent evaluation of the feasibility and risks of vibro replacement nor to recommend that geotechnical advice should be sought from a consultant other than a specialist sub-contractor.

42 Reliance on Specialist Advice Cooperative Group v John Allen Associates [2010] EWHC 2300 (TCC) Reliance on Specialist Advice Ramsey J concluded: 1) That construction professionals do not by the mere act of obtaining advice or a design from another party thereby divest themselves of their duties in respect of that advice or design. (2) That construction professionals can discharge their duty to take reasonable care by relying on the advice or design of a specialist provided that they act reasonably in doing so

43 Reliance on Specialist Advice Cooperative Group v John Allen Associates [2010] EWHC 2300 (TCC) (3) That in determining whether construction professionals act reasonably in seeking the assistance of specialists to discharge their duty to the client, the court has to consider all the circumstances which include: (a) Whether the assistance is taken from an appropriate specialist; (b) Whether it was reasonable to seek assistance from other professionals, research or other associations or other sources; (c) Whether there was information which should have led the professional to give a warning; (d) Whether and to what extent the client might have a remedy in respect of the advice from the other specialist; (e) Whether the construction professional should have advised the client to seek advice elsewhere or should themselves have taken professional advice under a separate retainer

44 Negligent Misstatement Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy

45 Negligent Misstatement Lord Morris in Hedley, Byrne & Co Ltd v Heller & Partners Ltd. [1964] AC 465 (HL, Eng), note 9, pages It should now be regarded as settled that if someone possess of a special skill undertakes, quite irrespective of contact, to apply that skill for the assistance of another person who relies upon that skill, a duty of care will arise Further, if in a sphere in which a person so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise.

46 Negligent Misstatement The position in Ireland Securities Trust Ltd v Hugh Moore & Alexander Ltd. [1964] IR 417 (HC) at p. 421, Davitt P following Hedley Byrne: Circumstances may create a relationship between two parties in which, if one seeks information from the other and is given it, that other is under a duty to take reasonable care to ensure that the information is correct. Walsh v Jones Lang Lasalle Ltd. [2009] 4 IR 401 at 410, the plaintiff had purchased property for investment purposes, relying on incorrect floor area measurements contained in a brochure produced by the defendant auctioneer. Quirke J - It was to be expected that the potential purchasers would rely upon the information contained within the brochure when deciding whether or not to offer to purchase.

47 Negligent Misstatement Walsh v South Tipperary County Council - the original vendor had through their solicitors made enquiry of the County Council as to whether a particular laneway was in the charge of the County Council and was informed, by letter or certificate, that it was. The vendor s successors in title sold the property to the plaintiffs. Clarke J was satisfied that it had been foreseeable at the time the statement was made that it would be relied on not just by the original vendor relied but by others who in the future might purchase the property with the benefit of the letter or certificate: While the fact that the [plaintiffs] might become members of that class was not ascertained at the time when the negligent misstatement was made, the class itself was capable of easy and rigorous definition. In the circumstances I am satisfied that South Tipperary Council owed a duty of care to persons within that class (being persons who might purchase the property in question with the benefit of their letter) and that the plaintiffs fall into that class.

48 Negligent Misstatement The professional as certifier liability for negligent misstatement As stated in Robinson v PE Jones (Contractors) Ltd. [2010] EWHC 102 (TCC) at para. 75: It is perhaps understandable that professional persons are taken to assume responsibility for economic loss to their clients. Typically they give advice, prepare reports, draw up accounts, produce plans and so forth. They expect their clients and possibly others to act in reliance upon their work product, often with financial or economic consequences. Remember: Duty of care may not just extend to person to whom statement was made (i.e. developer) but may also extend to the person who placed reliance on the statement (i.e. purchaser)

49 Negligent Misstatement Remember: CERTIFICATION Duty of care may not just extend to person to whom statement was made (i.e. developer) but may also extend to the person who placed reliance upon the statement. By all means use disclaimers where possible - be aware of potential issues arising with (i) consumers and (ii) reliance on third party representations

50 Joint and Several Liability Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy

51 Joint and Several Liability Concurrent wrongdoers Section 11 of the Civil Liability Act, 1961 provides that: "Two or more persons are concurrent wrongdoers when both or all wrongdoers and are responsible to a third person [the plaintiff] for the same damage, whether or not judgment has been recovered against some or all of them."

52 Joint and Several Liability Concurrent wrongdoers Section 12(1) of the Civil Liability Act, 1961 provides that: Subject to the provisions of sections 14, 38 and 46, concurrent wrongdoers are each liable for the whole of the damage in respect of which they are concurrent wrongdoers."

53 Joint and Several Liability Lynch v Beale unreported, Hamilton J., High Court, November Hotel premises collapsed due to (i) subsidence of the foundations in a corner of the building and (ii) inadequate design in the first floor of the building. The building owner sued his architect, main contractor and nominated subcontractor for negligence and/or breach of contract. The nominated subcontractor and architect argued that, as these were two separate and distinct causes for the structural defects, the Defendants were not "concurrent wrongdoers", and that if there was any liability an behalf of any of the Defendants, such liability should be limited to the actual loss resulting from the particular wrong committed by each Defendant. Hamilton J:

54 Joint and Several Liability "The damage claimed in this case against all the Defendants is the same damage, viz: the loss sustained by him as a result of the internal collapse of the hotel and the subsidence thereof and the Court is satisfied that the Defendants herein are "concurrent wrongdoers" as defined in the Civil Liability Act 1961." This aligns with the statement by Kerr in The Civil Liability Acts: It is clear, therefore, that in determining whether parties are to be regarded as concurrent wrongdoers, primary emphasis is to be placed on the damage caused and not on the role played by each of the Defendants, provided each contributed to causation. Where there are two tortfeasors responsible for the same damage, one could have a claim for contribution against the other but that does not absolve an original tortfeasor from his or her liability to the injured party: per Lewison J. in Vision Golf Limited v Weightmans, the Times, September 1, 2005 Kerr, The Civil Liability Acts (4th Edition) (2011) page 14

55 Limitation and Exclusions of Liability Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy

56 Limitation and Exclusions of Liability Limitation and Exclusions of Liability Henderson v Merrett Syndicates Ltd (No 1) [1995] 2 AC 145 (HL); page 193 Lord Goff on the possibility of contractual arrangements limiting or excluding a duty of care in the context of a professional agreement I do not find it objectionable that the claimant may be entitled to take advantage of the remedy which is most advantageous to him, subject only to ascertaining whether the tortious duty is so inconsistent with the applicable contract that, in accordance with ordinary principle, the parties must be taken to have agreed that the tortious remedy is to be limited or excluded. Ramsey J in Biffa Waste Services Ltd v Maschinenfabrik Ernst Hese GmbH [2008] EWHC 6 (TCC) - the terms of any relevant contract between the parties or authorised by a party will be relevant to the existence, scope and extent of a duty of care.

57 Limitation and Exclusions of Liability The net contribution clause severs joint and several liability Architect only held liable for the consequence of its own breach of duty and not for the breaches of duty by other contractors and consultants. The net contribution clause has been found to be valid in a non-consumer context in other jurisdictions notably in Scotland in Langstane Housing Association Limited v Riverside Construction (Aberdeen) Ltd. [2009] COSH 52 - during building works, the floors of the property suffered a partial collapse and Langstane brought a claim for breach of contract and negligence against the architect, the engineer and the contractor jointly and severally, or severally. Engineer successfully relied upon its net contribution clause to restrict liability exposure to damage arising of the consequence of its own breach of duty and not for the breaches of duty of the architect or contractor.

58 Limitation and Exclusions of Liability The liability cap In James Moores v Yakeley Associates Limited (1998) CILL architect had inserted a liability cap of 250,000 into the contract. The client argued that this was unreasonable and ineffective under the (UK) Unfair Contract Terms Act. The Judge considered the value of the job - itself also in the region of 250,000, the architect's fee, the bargaining position of the parties and the client's opportunity to negotiate the amount of the cap and upheld the limit. Limitation and Exclusions of Liability Difficulty for consultant is that purchaser claimant is often not party to the consultant s appointment (which is often between the architect and the developer) and so is not subject to the clause also consumer claimant may place reliance on the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 (SI 1995/27),

59 The Liability Cap Limitations and Exclusions of Liability Margaret Brennan v Thomas & Catherine Flannery, T&C Developments Limited, The National House Building Guarantee Company Limited ( HomeBond ) Court of Appeal 23 February 2015: Upheld the limit of liability contained in clause 3.6(b) of the Terms and Conditions of the HomeBond Agreement and reduced the judgment against HomeBond to this limit of liability ( 38,000)

60 Professional Liability Exclusion Clauses Limitation and Exclusions of Liability The Liability Cap: Limiting liability by reference to a monetary amount. Example Clause 8.9 EI Conditions of Engagement Agreement RA 9101 for report and advisory work. The Net Contribution Clause: Ensures that the contracting party only has to pay that proportion of damages for which it is responsible. Defeats joint and several liability. Example Clause 8.6 EI Conditions of Engagement Agreement RA 9101 for report and advisory work. The Restriction on Consequential Losses: Limiting the indirect damages that may be awarded to the Claimant such as loss of business or profit. Consequential losses may often far exceed direct losses such as the direct costs of repair. Example Clause 8.4 EI Conditions of Engagement Agreement RA 9101 for report and advisory work. The Restriction on time within which claims can be made: The agreement should have a finite time limit (preferably six years) from a date such as practical completion within which claims can be brought under the agreement. Example Clause 8.10 EI Conditions of Engagement Agreement RA 9101 for report and advisory work.

61 Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy The Statute of Limitations in Irish Building Claims

62 The Statute of Limitations Irish Building Claims How long does a client have to bring a building claim in Ireland? (The Statute of Limitations)

63 The Statute of Limitations Irish Building Claims Building Claims When Is A Building Claim Statute Barred? Contract: Accrual of a cause of action Contractor On the issue of the limitation period in contract, Keating On Construction Contracts 9 th Edn (page ) states Where a contractor is liable under an entire contract to complete the works, the limitation period runs, it is submitted, from the date of completion or purported completion

64 The Statute of Limitations Irish Building Claims Building Claims When Is A Building Claim Statute Barred? Contract: Accrual of a cause of action Designer On the issue of the limitation period in contract, Keating On Construction Contracts 9 th Edn (page ) states In the usual case a cause of action in contract against a designer arises when the design is first prepared or when product information is first issued to the contractor although a fresh cause of action may accrue if the designer is required to review the design at a later stage during the works. where defective work has been carried out by the contractor, a cause of action will arise against an architect at the point in time when they ought to but failed to, identify the defects in question. Consultants Danger Zone Monitoring and Supervision

65 The Statute of Limitations Irish Building Claims Building Claims When Is A Claim Statute Barred? Recent case law little deviation from these principles in Ireland In Murphy & Murphy v McInerney Construction Ltd. & Griffin [2008] IEHC 323. Ms Justice Dunne followed Hegarty and O Loughran. The Plaintiffs claimed damage against the Defendant builder arising out ofthe construction of and repair to a dwelling house in in 1996 and repairs and remedial works were then carried out to the property. The proceedings were commenced in 2004, more than 6 years after the defects in the structure of the property had been identified. The Plaintiff sought to contend that the Statute did not run until the date of discovery of the alleged defects. The Defendants relied upon the Supreme Court decision in Hegarty v O Loughran.

66 The Statute of Limitations Irish Building Claims On the facts of the case before her, Dunne J held that the statute period had expired as the damage had occurred considerably before the issue of the proceedings. Dunne J: It is quite clear from the authorities that a discoverability test does not avail a Plaintiff when dealing with a plea that a claim is statute barred under Irish law.

67 The Statute of Limitations Irish Building Claims Building Claims When Is A Claim Statute Barred? Coincides with the Supreme Court s view that any issue with the wording of the statute of limitations is a matter firmly for the legislators. The fundamental principle is that words in a statute must be given their ordinary meaning and for myself, I am unable to conclude that a cause of action accrues on the date of discovery of its existence rather than on the date which, if it had been discovered, proceedings could lawfully have been instituted. I recognise the unfairness, the harshness, the obscurantism that underlies this rule but it is there and will remain there unless qualified by the legislature or invalidated root and branch by this Court. Mr. Justice McCarty in Hegarty and O Loughlan

68 The Statute of Limitations Irish Building Claims IRISH POSITION IS DIFFERENT TO THAT IN THE UK English case of Pirelli General Cable Works Limited v- Oscar Faber and Partners [1983] 2 WLR 6 The House of Lords held that the accrual of a right of action in actions for negligence in the construction or design of a building was the date the damage came into existence and not the date when the damage was discovered or should with reasonable diligence have been discovered.

69 The Statute of Limitations Irish Building Claims IRISH POSITION IS DIFFERENT TO THAT IN THE UK Pirelli General Cable Works Limited v- Oscar Faber and Partners [1983] 2 WLR Design work completed 1970 Cracking occurs internally 1977 Internal cracking discovered action commenced The Pirelli decision described as harsh and absurd Plaintiff may find themselves statute barred from taking their claim regardless of the fact they had only just discovered the defects/damage complained of.

70 The Statute of Limitations Irish Building Claims IRISH POSITION IS DIFFERENT TO THAT IN THE UK Effect of Pirelli in the UK: Led to introduction of the Latent Damage Act 1986 in the UK S14A(4) Latent Damage Act 1986 The period is either: Six years from the date on which the cause of action accrued or; Three years from the starting date the earliest date on which the claimant had both the knowledge required for brining an action for damages in respect of the relevant damage and the right to bring such an action. Introduced allowance for the date of discovery which we do not have in Ireland

71 The Statute of Limitations Irish Building Claims IRISH POSITION IS DIFFERENT TO THAT IN THE UK Effect of Pirelli in the UK: The Long Stop date S 14B(1) An action for damages for negligence shall not be brought after the expiration of fifteen years from the date (or of more than one, from the last of the dates) on which there occurred any act or omission: (a) which is alleged to constitute negligence; and (b) to which the damage in respect of which damages are claimed is alleged to be attributable.

72 The Statute of Limitations Irish Building Claims IRISH POSITION IS DIFFERENT TO THAT IN THE UK However in Ireland there is no equivalent of the Latent Damage Act 1986 Therefore there is no allowance for the date of discovery. In Hegarty and O Loughran, Chief Justice Finlay commented on the issue as follows: It is quite clear that what is sometimes classified as the harshness and injustice of the person failing to bring a cause of action to trial by reason of exceeding a time limit not due to his or her own particular fault, may well be counterbalanced by the harshness and injustice of a defendant called upon to defend himself at a time when by the passage of years his recollection, the availability of his witnesses and even documentary evidence relevant to a claim in contract or tort have disappeared.

73 The Statute of Limitations Irish Building Claims Date of Discovery: Fennelly J on the English provision allowing for date of discovery (S14A(4) Latent Damage Act 1986): no corresponding provision exists in our law, except in cases of personal injury and liability for defective products.

74 The Statute of Limitations Irish Building Claims Recent Court of Appeal decision: Liam Brandley and WJB Developments Limited v Hubert Deane T/A Hubert Deane & Associates and John Lohan T/A John Lohan Ground Works Contractors Court of Appeal 2 March 2016 unreported [2016] IECA 54 which addressed the issue of when the tort of negligence was complete in a construction claim. The plenary summons had issued on 30 November The Defendants submitted that the foundations of the premises were laid in March 2004 and that is the date from which the Statute of Limitations began to run. The foundations were defective from the outset and those defects were obvious and discernible and that condition would have been discovered by Mr. Deane had he inspected at that time. The Defendant s case was that the Plaintiffs should have commenced proceedings at the point where the foundations had been laid in March 2004.

75 The Statute of Limitations Irish Building Claims However, the Court of Appeal accepted the Plaintiffs case that the tort of negligence is not complete until damage has been caused. The Plaintiff must have suffered loss or damage as a result of the negligence in question. He cites Hegarty v. O'Loughran [1990] 1 I.R. 148 at 153 per Finlay C.J. as follows: A tort is not completed until such time as damage has been caused by a wrong, a wrong which does not cause damage not being actionable in the context with which we are dealing. It must necessarily follow that a cause of action in tort has not accrued until at least such time as the two necessary component parts of the tort have occurred, namely, the wrong and the damage.

76 The Statute of Limitations Irish Building Claims The President stated: 15. It seems to me that the learned President was in error in this case. It is clear that negligence by itself without the accompaniment of damage or loss is not actionable. The plaintiffs did not suffer damage at the time when the defective foundations were installed. When the defective foundation was put in, the only complaint that the plaintiffs could have had was that the foundation was defective. They had not suffered any damage at that point there was merely a defective foundation but that is not damage of a kind that is actionable in tort. Indeed, it seems to me to be very questionable whether there was an action in breach of contract at that time, but I do not have to consider that on this appeal.

77 The Statute of Limitations Irish Building Claims 18. It seems to me to be clear that no damage resulted to the plaintiffs in March 2004 when the foundations were installed. I do not agree that the plaintiffs had any right of action at that point. They could not prove any loss. Moreover, it seems to me that it would have been quite open to the second defendant, Mr. Lohan, or the first defendant, as the consulting engineer, to have subsequently discovered or decided to investigate the condition of the foundations. They would have been entitled to put right any defects that they identified and the plaintiffs would have had no right of action as a result. There could have been some delay in the completion of the project, but that would have given rise to entirely different considerations. In respect of the specific acts of negligence, the fact that the defendants might have identified the defects and remedied them is an illustration of the absence of loss at that point and the unavailability to the plaintiffs of any right of action there and then.

78 The Statute of Limitations Irish Building Claims 19. It is true that a plaintiff might consider, in appropriate circumstances, an action for anticipatory breach of contract or might consider repudiating the agreement, but we are not concerned with that question here, but merely with the right of action in negligence. In that respect, these various observations that I have made are no more than an expatiation upon the proposition outlined in Hegarty v. O'Loughlan, namely, that the cause of action does not arise until loss or damage have been sustained by the plaintiff. 20. In the circumstances, it seems to me that the situation here is clear and that the defendants have pitched the beginning of the period of limitation at too early a point that does not take account of the requirement that damage be actually suffered by the plaintiff in order to complete the cause of action.

79 The Statute of Limitations Irish Building Claims Gallagher v ACC Bank [2012] IESC 35 (7 th June 2012) Fennelly J on accrual: 52. The House drew a distinction between a defect which might give rise to damages and the actual damage caused by the defect. Lord Fraser of Tullbelton, in a passage referred to by McCarthy J in Hegarty (at page 161) said at page 14. It seems to me that, except perhaps where the advice of an architect or consulting engineer leads to the erection of a building which is so defective as to be doomed from the start, the cause of the action accrues only when physical damage occurs to the building. In the present case that was April 1970 when, as found by the judge, cracks must have occurred at the top of the chimney, even though that was before the date of discoverability.

80 The Statute of Limitations Irish Building Claims Why is the Statute of Limitations so important? If successfully pleaded by the Defendant it is a FULL DEFENCE to the Plaintiff s claim

81 Conclusion Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy

82 Letters of Appointment LETTERS OF APPOINTMENT Remember the construction professional standard reasonable skill and care Make sure the express terms of your letters of appointment do not inadvertently include fitness for purpose obligations - I warrant, I will ensure, wording such as will be constructed in accordance with as-builts, references to complete compliance, accuracy. Scope of service: Be extremely careful not just with the wording of the terms of your appointment but also with the wording of your scope of service.

83 Certification Remember: CERTIFICATION Duty of care may not just extend to person to whom statement was given (i.e. developer) but may also extend to the person who places reliance upon it (i.e. purchaser) By all means use disclaimers where possible - be aware of potential issues arising with (i) consumers and (ii) reliance on third party representations

84 Limitation and Exclusions of Liability Remember: LIMITATION AND EXCLUSIONS OF LIABILITY Limitation and exclusions of liability in terms of appointment The best way to limit exposure to liability is through a carefully drafted letter of appointment and scope of service. Remember: INSURANCE Notify Insurer promptly in relation to any potential claim and keep the insurer updated as to any developments

85 Fiona Forde B.L. The Law Library B.A. B.A.I. Mechanical & Manufacturing Engineering MSc.Construction Law and Dispute Resolution Postgrad. Dip. Construction Law & Contract Administration LLM Public Procurement Law and Policy PROFESSIONAL NEGLIGENCE CLAIMS AGAINST CONSULTANTS GENERALLY RECURRING PITFALLS AND HOW TO A DDRESS THEM THANK YOU

86 No liability is accepted in respect of the materials contained in these slides. They are intended for discussion purposes only and do not contain legal advice or assistance. 86