Professional Negligence In The Construction Field
Construction professionals, as with other professionals, may be
liable to their clients and third parties for damage and loss
caused by the professional's negligence. The starting point in
any professional negligence claim is to consider whether the losses
are recoverable in contract. However, liability in tort becomes
important where the contractual route is unavailable: where the
arrangement of commercial transactions results in no direct
contractual relationship between the parties, where one of the
parties has become insolvent or where the limitation period in
contract has expired.
Not every careless act or fault on the part of a professional
gives rise to liability in negligence, even where damage is
sustained by another as a result.1 In order to establish
a claim in negligence, it is necessary for a claimant to satisfy
the following requirements:
The existence in law of a duty of care
Behaviour that falls below the standard of care imposed by
law
A causal connection between the defendant's conduct and the
damage
Damage falling within the scope of the duty
This paper examines the circumstances in which a duty of care in
tort will arise, the basis on which damages are recoverable in the
event of a breach of such duty and the impact of recent
developments in this area on construction claims.
1. The Circumstances In Which A Duty Of Care Will Arise
In the case of personal or physical injury, reasonable
foreseeability of harm is usually sufficient to give rise to a duty
of care in accordance with the "neighbour" principle
established in Donoghue v Stevenson2. However,
many construction cases involve claims for economic loss and in
such circumstances the test is less straightforward because of
limitations driven by policy considerations. An additional
complicating factor in construction cases is the contractual matrix
which has a significant effect on the scope of any tortious duty of
care.
1.1 The Fall Of Anns
The high point for lawyers seeking to establish a duty of care
in tort was reached in 1978 with the decision of the House of Lords
in Anns v. Merton3, setting out a simple, two
stage test as to when a duty of care, including a duty not to cause
economic loss, would be owed in tort. Lord Wilberforce expressed
the test as follows4:
...in order to establish that a duty of care arises in
a particular situation, it is not necessary to bring the facts of
that situation within those of previous situations in which a duty
of care has been held to exist. Rather the question has to
be approached in two stages.
First one has to ask whether, as between the
alleged wrongdoer and the person who has suffered damage there is a
sufficient relationship of proximity or
neighbourhood such that, in the reasonable
contemplation of the former, carelessness on his part may
be likely to cause damage to the latter in which case a prima facie
duty of care arises. Secondly, if the first
question is answered affirmatively, it is necessary to consider
whether there are any considerations which ought to
negative or reduce or limit the scope of the duty or the class of
person to whom it is owed or the damages to which a breach
of it may give rise.
However, following a flood of claims throughout the 1980s, the
tide turned and in 1990 seven members of the House of Lords swept
away over ten years of legal authority by departing from
Anns in Murphy v. Brentwood5 and
Department of Environment v. Thomas Bates6,
giving judgment in both on the same day.
Both Murphy (claim by subsequent purchaser against local
authority for negligent approval of plans for foundations) and
Bates (claim by lessees against builder for negligent
construction of load-bearing pillars) involved claims for economic
loss in negligence and both claims failed. In Murphy Lord
Oliver stated7:
"I have found it impossible to reconcile the liability
of the builder propounded in Anns with any previously accepted
principles of the tort of negligence and I am able to see no
circumstances from which there can be deduced a relationship of
proximity such as to render the builder liable in tort for pure
pecuniary damage sustained by a derivative owner with whom he has
no contractual or other relationship."
Since the builder owed no such duty, there was no basis on which
the local authority could owe a duty.
These landmark rulings did not affect the ability of a future
occupier of a building to recover damages against a construction
professional where the professional's negligence caused
personal injury or damage to other property8. However,
in cases of economic loss, damages were generally irrecoverable in
tort against a professional unless the claim could be brought
within the concept of negligent misstatement set out in Hedley
Byrne v Heller & Partners9. In Murphy
Lord Oliver explained that economic loss would not be recoverable
in negligence where the loss was too remote or where it would be
impossible to contain liability in other cases within acceptable
bounds (the "floodgates" argument) but10:
"The critical question ... is not the nature of
the damage in itself, whether physical or pecuniary, but whether
the scope of the duty of care in the circumstances of the case is
such as to embrace damage of the kind which the plaintiff claims to
have sustained...The essential question which has to be asked
in every case, given that damage which is the essential ingredient
of the action has occurred, is whether the relationship between the
plaintiff and the defendant is such – or, to use the
favoured expression, whether it is of sufficient
"proximity" - that it imposes upon the latter a duty to
take care to avoid or prevent that loss which has in fact been
sustained."
Beyond British shores, in the jurisprudential Commonwealth,
however, things were different. The two stage test in
Annscontinued to find favour and the reasoning in
Murphywas not followed:
In Australia, in Bryan v. Maloney11,the High
Court held that a builder of a house owed a duty of care to a
subsequent purchaser of the house which extended to a duty not to
cause economic loss (the diminution in value of the property built
on inadequate foundations). Policy dictated that domestic dwelling
owners should have protection against the negligence of the
builder12 and the relevant proximity was held to be the
house itself.
In Invercargill City Council v.
Hamlin13, the New Zealand Court of Appeal
declined to follow Murphy, finding a local council liable
for the cost of repairs to the foundations of a house for which it
had approved the plans. The decision was upheld in the Privy
Council14, their Lordships accepting that New Zealand
was entitled to develop the common law in its own way and for its
own circumstances.
In Winnipeg Condominium Corp v. Bird Construction
Co15, the Supreme Court of Canada also declined to
follow Murphy, holding that a contractor could be liable in
tort to a future owner in respect of the cost of remedying a defect
which posed a real and substantial danger to the occupants of the
building.
In Singapore, in RSP Architects Planners and Engineers v.
Ocean Front Pte Ltd16, the Court of Appeal also
declined to followMurphyand held that developers owed a duty
of care not to cause economic loss to the management corporation
which had taken over the management and administration of a
condominium.
Malaysia initially appeared to follow
Murphy17but in Dr Abdul Hamid Abdul Rashid v
Jurusan Malaysia Consultants18 and then again in
Steven Phoa Cheng Loon v. Highland Properties19,
James Foong J. held that architects, engineers etc. could owe a
duty not to cause economic loss. In the former case20 he
stated:
To adopt the decisions in Murphy and D&F Estates
which are based on a foreign policy of no application here would
leave the entire group of subsequent purchasers in this country
without relief against errant builders, architects, engineers and
related personnel who are found to have erred.
More recently, there have been indications that some common law
jurisdictions are moving away from the Anns
test.21 However, the Anns test has been confirmed
in New Zealand as the appropriate test to determine whether or not
a duty of care should be found in new cases22 and in
Spandeck Engineering (S) Pty Ltd v Defence Science &
Technology Agency23 the Singaporean Court of Appeal
has proposed a single test comprising legal proximity and policy
considerations together with factual foreseeability.
1.2 The Tide Turns Again - Assumption Of
Responsibility
The decision in Murphy expressly preserved the principle
that economic loss could be recovered for negligent misstatement,
explained by Lord Morris in Hedley Byrne v Heller &
Partners24:
...it should now be regarded as settled that if
someone possessed of a special skill undertakes, quite irrespective
of contract, to apply that skill for the assistance of another
person who relies upon such skill, a duty of care will
arise.
See also Lord Reid25:
There must be something more than the mere
misstatement ... The most natural requirement would be that
expressly or by implication from the circumstances the speaker or
writer has undertaken some responsibility.
And Lord Devlin26:
...the categories of special relationships which may
give rise to a duty to take care...include ... relationships which
...are 'equivalent to contract', that is where there is an
assumption of responsibility in circumstances in which, but for the
absence of consideration, there would be a contract.
In Henderson v Merrett27it was held that a
duty of care in tort was owed by managing agents to Lloyd's
names to avoid economic loss regardless whether there was any
direct contractual arrangement between them. Lord Goff28
considered the ambit of Hedley Byrne and the test to be
applied to determine the circumstances in which such a duty of care
would arise:
"We can see that it rests upon a relationship between
the parties, which may be general or specific to the particular
transaction, and which may...
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