Construction: Can a Sub-Contractor be Liable for Ecomomic Loss?

A recent decision of the Technology & Construction Court opens the way for the court to decide when a sub-contractor owes a duty of care in tort to the main contractor's employer. The case is likely to involve a re-examination of 'complex structure' theory as it applies to sub-contractors and clarification of the circumstances in which a sub-contractor can be liable for economic loss. In this case a sub-sub-contractor applied to strike out a claim for a contribution against it by a sub-contractor on the basis that it was clear law that it did not owe a duty of care to the employer. The court turned down that application and, therefore, the claim will proceed.

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A recent decision of the Technology & Construction Court opens the way for the court to decide when a sub-contractor owes a duty of care in tort to the main contractor's employer. The case is likely to involve a re-examination of 'complex structure' theory as it applies to sub-contractors and clarification of the circumstances in which a sub-contractor can be liable for economic loss. In this case a sub-sub-contractor applied to strike out a claim for a contribution against it by a sub-contractor on the basis that it was clear law that it did not owe a duty of care to the employer. The court turned down that application and, therefore, the claim will proceed.

The claimant leaseholder of a building, Linklaters Business Services (LBS), is suing the main contractor, Sir Robert McAlpine Limited, for negligence. The case is being brought in tort because the limitation period for a breach of contract claim has expired. LBS alleges that it suffered a loss of around £3.5m in replacing pipework that had rusted and leaked, attributing the damage to the negligent provision of insulation. The main contractor has added two sub-contractors to the proceedings, seeking a contribution. Those sub-contractors in turn brought proceedings for a contribution against the specialist M&E sub-sub-contractor, Southern Insulation (Medway) ("Southern"), alleging that Southern owed LBS a duty of care. Southern had no contractual relationship with LBS.

Southern applied to strike out the claim against it, arguing that it owed no duty of care to LBS in relation to careless workmanship on its part (if any), since any loss suffered was purely economic loss in respect of which no such duty applied. On hearing the application, Mr Justice Akenhead had cause to...