Fit for purpose? A cautionary tale about a contract

This recent case may pave the way for a change of approach to the duty of care obligations for construction professionals.

Background

Williams Tarr Construction Ltd (WTC) was the main contractor on a housing development project. A slope on the site meant a retaining wall was required.

WTC engaged a sub-contractor, CSS, who installed a stone-filled gabion-basket retaining wall. During construction, CSS encountered unexpectedly high water flow causing problems with the wall. WTC therefore sought civil engineering input from Anthony Roylance to design a land drain behind the wall. The engagement comprised a series of email exchanges, in what WTC described as “a bit of a rushed job”, and the parties never signed a formal agreement.

The wall was completed and the drain installed. The drain was not defective, but the wall as constructed was defective and required remedial works.

The parties disagreed regarding the scope of the engineer’s duty. To complicate matters, the parties also disagreed as to which defendant contracted with WTC.

Decision

Which of the defendants was party to the appointment?

WTC said that the majority of documents received from Mr Roylance indicated he was acting in his personal capacity:

• He sent emails from his personal account
• His invoices stated fees were payable to “Anthony Roylance”
• “Anthony Roylance” was the insured named on the professional indemnity insurance certificate.

Anthony Roylance argued that he worked through his company, Anthony Roylance Ltd (ARL):

• WTC’s cheques were paid into ARL’s bank account
• A draft collateral warranty included ARL’s company number and address, and not his correspondence address.

Unfortunately for Mr Roylance, he never mentioned his arrangement with ARL to WTC. The Judge noted “At no time before the engagement was there any express indication to the Claimant that the Second Defendant operated his professional activities through the First Defendant. The exchange of e-mails which constituted the engagement not only made no reference to the First Defendant but rather appeared to be from the Second Defendant in his personal capacity”.

The court decided that, objectively construed, the documents showed Anthony Roylance acted as an individual and that he had contracted on that basis.

What was the engineer’s obligation under the appointment?

WTC contended that the obligation comprised the design and provision of a solution to the wall problem, ensuring that it would be fit for purpose.

Mr Roylance disagreed, saying only a design for the drain was required. His contemporaneous email to WTC recorded “I was requested to undertake design and production of working drawings for the surface water drainage system at the rear of the gabion wall… for it to be incorporated into the design…”.

The Judge emphasised that the wall operated as a system - “For the system to work as a retaining wall it was necessary not only for there to be properly constructed and designed gabions but also appropriate backfill was needed and the wall composed of gabions had to be built at the correct angle” - and went on to hold that:

• CSS’s sub-contractors designed the wall
• Mr Roylance:
  • was obliged only to design a drain using reasonable skill and care, to address the drainage problem
  • had not been engaged to amend the design of the wall
  • did not warrant that the wall would be fit for purpose.

However, the Judge said obiter that, if he had found Mr Roylance subject to an obligation to amend the wall design, he would also have found him subject to a fitness for purpose warranty.

Comment

This decision raises interesting considerations regarding the duty of care and insurance:

• A professional’s default obligation is the exercise of reasonable skill and care. Courts have been reluctant to find construction professionals subject to the higher duty of fitness for purpose, unless it arises from the parties’ common intention or agreement, objectively construed.
• They have been more willing to impose a fitness for purpose obligation upon design and build contractors, comparable to a seller of goods providing a finished product, rather than consultants who only provide a service.
• The Judge’s comments in this case may pave the way for a change of approach.
• Designers and insurers should be alert to the potential for an implied fitness for purpose warranty where the design is for a structure requiring multiple elements working successfully together.
• Professional indemnity policies generally cover third party claims arising from negligence, but not liabilities assumed under contract. Designers thus risk incurring additional liabilities for which they are uninsured, and other parties risk being unable to achieve satisfaction for claims against the design team.
• Parties should therefore ensure:
  • they record terms clearly in a formal agreement
  • the agreement expressly identifies the required standard of care
  • they check the insurance position before agreeing an obligation to ensure fitness for purpose.