PROFESSIONAL NEGLIGENCE CLAIMS AGAINST ENGINEERS

Transcription

1 PROFESSIONAL NEGLIGENCE CLAIMS AGAINST ENGINEERS AN OVERVIEW BY JOHN GLEESON SC Monday July 16, 2012 INTRODUCTION 1. In this short presentation, I intend to address in outline a number of the issues that are faced by practitioners who have to deal with professional negligence claims of this kind. These include: (1) The retainer; (2) Concurrent remedies; (3) Expert evidence; (4) Damages. 2. There is a dearth of case law in Ireland relating to negligence claims against engineers - less than one page is devoted to professional negligence against engineers, architects and surveyors in the last edition of McMahon & Binchy. This does not reflect the number of cases in professional negligence against engineers in recent times, particularly following the construction boom. Generally claims against engineers fall within one of the following categories:! -inadequate or defective structural surveys;! -inadequate site investigation leading to foundation problems;! -failure to supervise building work;! -failure to correctly assess a fire safety risk as part of a design;! -carelessly issuing certificates of compliance with planning permission and/or building regulations. Claims arising out of the negligent design of a building have also featured in practice, though to a much lesser extent. Page -1-

2 1. RETAINER 1.1. The retainer is self evidently the starting point for any claim against an engineer. Whereas the professional institutes have written forms of engagement, frequently the retainer is not so detailed. On occasion, the retainer has to be extrapolated from an invoice (or worse, from minutes of site meetings). An engineer without documented certainty as to the terms of his retainer is in a vulnerable position in the event that a problem arises and a claim is made. This is evident, inter alia, from Leahy -v- Rawson 1 where a conflict of oral evidence as to the scope of the engineer s retainer was resolved in favour of the Plaintiff/client. 1.2 A frequent source of controversy is whether or not an engineer has been retained to supervise or merely inspect a building in the course of construction. 2 There are of course cases where even with a properly documented retainer, additional items of work are undertaken, e.g. advice in response to a specific problem or, as the case may be, a failure to advise when a specific or urgent problem arises. A duty of care may be imposed if an engineer assumes responsibility for advice given and it is clear that his client or some other party relies upon it. This may lead to a liability in tort and underlines the importance of concurrent remedies in claims of this nature. 1 [2004] 3 IR 1 2 In major projects, site meetings are normally held on a fortnightly basis with an inspection but it is rare that the minutes of such meetings ever record problems with the quality of work; rather is the focus on completion of the building. Page -2-

3 2. CONCURRENT REMEDIES 2.1 Claims in professional negligence against engineers are generally pleaded in both contract and tort and often involve other Defendants such as the building contractor and the architect. The dual remedy is especially relevant in the context of the Statute of Limitations. Time begins to run in respect of a claim in contract as of the date of breach whereas damage must be established before a claim arises in tort. This may have significant practical consequences - in the absence of a discoverability rule - where there has been delay in the detection of damage to property. 2.2 It is established in this jurisdiction that there can be concurrent liability under contract and in tort provided that a party claiming only in tort doesn t have a more advantageous remedy than the party suing in contract. 3 A recent decision by the Court of Appeal confirms that in the UK, contractual provisions may be relied upon in order to limit the duty of care in tort, as otherwise the contract ceases to control the legal relationship This however does not appear to impinge upon the right of a Plaintiff to sue in tort where a contract claim is statute barred. In Murphy -v- McInerney Construction & Madden 5 the High Court had to deal with a claim that the Statute of Limitation barred a remedy in tort against a builder and an engineer in circumstances where the Plaintiff had already conceded that the breach of contract claim was already statute barred. No argument was addressed to the Court in that case to the effect that a later period of limitation in tort went beyond the parameters of the contractual relations between the parties. 2.4 As regards the imposition of a duty of care on an engineer, the decision of O Sullivan J. in Leahy -v- Rawson 6 confirms that this will be decided by reference to the principles laid down in the Supreme Court in Glencar Exploration -v- Mayo County Council 7 namely, the foreseeability of loss or damage, the proximity of the relationship between the parties and whether it is just and reasonable in all the circumstances to impose such a duty of care. 2.5 Mention may be made briefly of statutory duties which may be imposed on an engineer acting as project supervisor of the design stage, which may require important information (especially from a health and safety perspective) to be provided to the construction team. 2.6 There is some doubt as to whether economic loss can be claimed against professional advisors in relation to property defects causing loss. In Glencar 3 O Donnell -v- Truck & Machinery Sales [1998] 4 IR Robinson -v- PE Jones [2011] EWCA Civ 9 5 Unreported judgment of Dunne J. 22 nd October [2004] 3 IR 1 7 [2002] 1 IR 84 Page -3-

4 Exploration Plc -v- Mayo County Council, 8 Keane C.J. was not prepared to extend the categories of cases in which economic loss could be claimed beyond negligent mis-statement and the Ward -v- McMaster and Siney -v- Dublin Corporation line of authority. 2.7 In ACC Bank -v- Fairlee Properties, 9 Finlay Geoghegan J. found that a bank liable in negligence to a developer for having lost title deeds and thereby having delayed a development by a period of time, was liable for economic loss, namely, the resulting loss of profit. There was no discussion in that judgment of the restrictions relating to economic loss suggested in Glencar. The High Court did analyse the claim in terms of whether it was reasonably foreseeable that damage of the type suffered would be suffered. Finlay Geoghegan J. was satisfied that it was foreseeable by the bank that failure to produce the title deeds might result in damage of the type actually sustained and in addition, that it was fair and just that the Court would impose liability for that damage. 2.8 English authority is firmly to the effect that a construction professional sued in negligence may be liable for economic loss. In Robinson -v- PE Jones, 10 the Court of Appeal decided that there was no reason in principle why that should not be so 11 and added that the conceptual basis for concurrent liability of professional persons in tort to their client was the assumption of responsibility. The Court went on to explain at paragraph 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. 12 The Court also stated that it was clear from as far back as Henderson -v- Merrett 13 that in contracts of professional retainer, there is commonly an assumption of responsibility which generates a duty of care to protect the client against economic loss. It is suggested that in the event of a full argument on this issue in the context of a professional negligence claim against an engineer, that 8 [2002] 1 IR 84 at [2009] IEHC [2011] EWCA 9 11 Ove Arup -v- Mirant Asian Pacific [2004] EW HC This decision has been criticised as drawing an unnecessary distinction between building contractors - who were held not to be liable or economic loss - and those providing professional services such as engineers on the ground that there is no rational basis for such a distinction and therefore that builders also should be liable for economic loss. See Professional Negligence volume 27 No at pp [1994] 3 AER 506 Page -4-

5 damages for economic loss would be recoverable. Page -5-

6 3. EXPERT EVIDENCE 3.1 In professional negligence claims against engineers, the sine qua non for instituting proceedings is an expert report from a relevant professional sufficient to sustain the allegations of wrongdoing made in the statement of claim. It is clear from Cooke - v- Cronin 14 and Connolly -v- Casey 15 that the Supreme Court deprecates the institution of professional negligence claims without an appropriate basis. Although those decisions don t expressly state what is meant by an appropriate basis, it may be inferred that this means a suitable expert report to support the claims made In Pantelli Associates -v- Corporate City Developments 17 the English High Court stated that not only was an appropriate expert report necessary to plead a case but it was also essential in order to adduce evidence of negligence at the trial. The Court went on to suggest that for a barrister to sign pleadings and institute professional negligence proceedings without such expert evidence was wholly inappropriate and would probably result in a breach of the English Code of Conduct (whereby a barrister may only sign a pleading if it is supported by evidence from his lay client or his instructions, the latter taken to mean expert evidence in a professional negligence context) The status of expert evidence is also a matter of some importance. In Moran -v- Duleek, 19 Murphy J. stated that it was a matter for the Court to decide whether an engineer had met the appropriate standard of care, although in that particular case the Court had already heard evidence from engineers as to what they believed to the 14 Unreported judgment of the Supreme Court 14 th July [2000] 1 IR See also to the same effect the judgment of McMahon J. in Robins -v- Coleman [2010] 2 IR 180 at pp Pantelli Associates -v- Corporate City Developments [2010] EWHC 3189 at paragraphs 16 to The relevant provisions of our Code of Conduct states at paragraph 5.16 : Barristers shall not settle a pleading claiming fraud or professional negligence without express instructions. Save in a case of alleged professional negligence on the part of a barrister or solicitor, barristers ought not to settle a pleading claiming professional negligence unless they have satisfied themselves that expert evidence is or will be available to support such claim. In certain circumstances such as when the time for issuing proceedings is in danger of expiring, barristers may settle pleadings without such expert evidence, but should advise that proceedings should issue without being served until the required expert evidence is available. 19 [1985] Prof Neg LR 342 at 349 Page -6-

7 appropriate standard of care. It seems unlikely that the reservations expressed in O Carroll -v- Diamond by Hardiman J. in relation to expert evidence by solicitors in negligence claims against solicitors, would apply in this context. In that case, the Court expressed reservations because the expert solicitor ended up discussing propositions of law which Hardiman J. considered were only appropriate by way of submission and not by evidence In any event, Pantelli 21 itself distinguishes between solicitors negligence cases and other negligence cases in this particular context (as our Code of Conduct also does) and assumes that the UK equivalent of the O Carroll -v- Diamond reservations would not apply to non-solicitor cases. The position in both jurisdictions therefore appears to be that evidence of appropriate professional standards does assist the Court but is not determinative, as stated by Jackson Powell 22 as follows: Although evidence of general practice may materially assist a court, it is not decisive of what is required to discharge the standard of reasonable care. That is for the court to decide having regard to the circumstances of the particular case. 3.5 It is also important to ensure that when an independent expert is being retained, he or she is the relevant type of expert. In Investors in Industry -v- South Bedfordshire 23 the English Court of Appeal disapproved of the evidence called from independent engineers as to whether or not a firm of architects who were the Defendants in the case had complied with the relevant standard of care. The Court held that little reliance could be placed on their evidence which related to a profession other than their own The rules relating to personal injury claims and the rules of the Commercial Court provide for the mandatory pre-trial exchange of expert reports. That no such rule exists in relation to non-jury or Chancery cases is anomalous and ought to be rectified. Generally, the Court will be prepared to make an order, in a non-jury case, directing the exchange of expert reports in an appropriate case. 20 That would not prevent evidence as to the appropriate standard in relation to legal practice being adduced. 21 Op. Cit 22 Jackson Powell on Professional Liability 7 th edition at paragraph [1986] 1 AER 787 at In a recent case before the Commercial Court involving, inter alia, a claim against a firm of engineers, expert evidence adduced on behalf of the Plaintiff by an architect critical of the performance of the engineers was strongly challenged and the Court appeared to agree with the basis of that challenge. The case ultimately settled. Page -7-

8 4. DECISIONS ON THE STANDARD OF CARE 4.1 The conventional approach to the standard of care applicable to an engineer or a construction professional is set out in the judgment of Barrington J. in Flanagan -v- Griffith 25 where he stated that an architect couldn t be criticised in negligence for forming a judgment which conforms with the considered judgment of men prominent in his profession. That decision related to an inspection made by an architect without discovering that the roof was structurally unsound. 4.2 Refinements of this principle that had been adopted in other fields of professional negligence (especially medical negligence), will apply mutatis mutandis to engineers, e.g. the fact that a practice is standard practice within a profession doesn t necessarily mean that this does not constitute negligence. 4.3 Amongst the few Irish reported cases involving claims in negligence against engineers are the following: - where a surveyor missed alarm signals when surveying a property which should have put him on notice that it was structurally unsound, 26 he was under a duty to advise his principal that a more detailed inspection should have been made and in that case, the Plaintiffs wouldn t have purchased the property had they been told there was any doubt about the stability of the building. - Where there was an error in a certificate issued by an engineer which was within his particular area of expertise, he was found negligent; 27 -by way of contrast, an architect was held not negligent because on inspection, there were no physical signs which should have alerted him to a serious problem 28. -where 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 errors in the certificate [1985] Prof Neg 95 at Bedford -v- Lane [1985] Prof Neg Moran -v- Duleek Op. Cit 28 Sunderland -v- McGreevy [1987] IR 372 at Henry -v- Foxrock Construction Co - unreported judgment of Lardner J. 11 th July 1985 Page -8-

9 5. DAMAGES (i)the date for the measurement of damages 5.1 Firstly, in a claim for damages for breach of contract, it is not necessarily the case that damages must be measured as of the date of the breach. In Hickey -v- HSE, Finlay Geoghegan J. held that the Court could have regard to limiting events subsequent to the breach of contract for the purposes of measuring damages. Similarly in Duffy -v- Ridley 30, the Supreme Court held that the date for the assessment of damages for breach of contract was not necessarily the date of the breach but could where justice required, be some other date. This is consistent with English authority whereby the date of assessment could be the date of trial or some other date where, to adopt the traditional rule of the date for measurement of damages as the date of the breach might not properly compensate the Plaintiff. 31 The position has now been made clear in ACC -v- Johnston 32 in which Clarke J. stated that whereas such damages are ordinarily assessed as of the date of the wrong, the Court retained a wide discretion to choose another date if that was necessary in order to provide the Plaintiff with fully compensation. That statement was made from the perspective of a Plaintiff suffering unduly from a rigid application of the date of breach rule in respect of the measurement of damages. These decisions give some flexibility to a Court in deciding what the appropriate date is for the assessment of damages in a breach of contract case in order to prevent either unjust enrichment or an unfairly low award of damages to a Plaintiff. (ii) Windfall Damages 5.2 A topical question that arises in relation to property related claims against engineers (and also other professional advisors especially solicitors), is the extent to which an award of damages should be adjusted to take account of the drop in property values. Take the example of a negligent survey by an engineer, where the purchaser claims that the house would not have been purchased had he/she been informed of defects in the property ( a no transaction case). The Plaintiff claims for the entire reduction in the capital value of the property over a period of say 5 years from 2007 to However, the Saamco 33 principle suggests that the engineer may only be liable for the amount by which the survey overestimated the value of the house at the date of the purchase, and not perhaps for the full decline in the capital value of the property over the entire period. The rationale of that principle is that the engineer is not the guarantor of the wisdom of the purchase, nor is the engineer underwriting the continuing value of the property over time This principle has been recognised in this jurisdiction. 34 Clarke J. considered its 30 Unreported judgment of the Supreme Court 30 th April Alcoa -v- Broderick [2002] 1 AC [2010] IEHC 236 at paragraph Banque Bruxelles S.A. -v- Eagle Star [1997] AC See ACC Bank -v- Fairlee Properties, unreported judgment of Finlay Geoghegan J.4 th February 2009 at paragraph and KBC Bank -v- BCM Hanby Wallace, unreported Page -9-

10 application in detail in the case of ACC -v- Johnston 35 in the context of a decision on the damages to be awarded against the negligent solicitor in that case. Clarke J. concluded that at a level of principle, not all losses which may arise from a transaction going ahead should be recoverable from a negligent professional: There is, as a further refinement, a line of authorities in the United Kingdom, following the decision (commonly called Saamco) of Banque Bruxelles -v- Eagle Star [1997] AC 191 and including in particular Bristol & West BC -v- Fancy & Jackson [1997] 4 AER 582. These decisions provide that where a professional, who is under a duty to take reasonable care to provide information on which someone else would decide upon a course of action, was negligent in the provision of that information, he was not responsible for all of the consequences of that course of action. Instead he was only responsible for the consequences of that information being wrong. Accordingly, the correct measure of damages is the loss attributable to the inaccuracy of the information suffered by the Plaintiff through embarking on the course of action on the assumption that the information is correct. 5.4 The two principles laid down in the earlier Supreme Court decision in Munnelly -v- Calcon Ltd 36 in relation to property related damages claims should also be recalled in this context, namely: (1) Damages in tort or contract should put the Plaintiff in the same position as he would have been had the tort or breach of contract not occurred; and (2) The damages are to be reasonable as between the Plaintiff and the Defendant. In that case, reinstatement damages would have unreasonably enriched the Plaintiff and punished the Defendant, whereas diminution in value damages were assessed as being the appropriate and reasonable approach. In other words, there is no prima facie entitlement to either a diminution value or reinstatement damages and it is suggested that any award of damages which, in effect, immunises an injured Plaintiff from a general decline in property values, would arguably be inconsistent with ACC -v- Johnston and Munnelly -v- Calcon. (iii) General Damages 5.5 As regards general damages, it is clear from the reported decisions that general damages in claims against engineers or building professionals have been be modest. In Leahy -v- Rawson 37 a woman and her daughter who were obliged to live in judgment of McGovern J. 16 th March 2012 at paragraph [2011] IEHC 376; this is one of several judgments delivered by Clarke J. In the ACC -v- Johnston litigation. 36 [1978] IR Op. Cit Page -10-

11 makeshift accommodation at the rear of her family home while works were continuing, was only allowed 5, a year for a 6 year period of disruption. That decision was cited approvingly by Laffoy J. in Murnaghan -v- Markland Holdings 38 ENDS 38 Unreported judgment of Laffoy J. 1 st December 2004 Page -11-

12 Page -12-