Does a Sub-Contractor’s Design Consultant Owe a Duty of Care to the Main Contractor?

The matter concerned the design and construction of temporary works, namely the slipform rig that was to be used to install the concrete structure for a new City of London skyscraper at 100 Bishopsgate.

Multiplex was the main contractor for this substantial construction project. Multiplex subcontracted the design and construction of the concrete package works to Bathgate, incorporating the JCT Design and Build Sub-Contract 2005 Edition, Revision 2, 2009, subject to certain modifications.

Bathgate, in turn, sub-subcontracted the design of the slipform rig to BRM, a specialist designer based in Dubai. The slipform rig is a specialist piece of equipment that permits the concrete core to be constructed incrementally.

British Standard 5975 required that the slipform design be checked and approved by an independent third party. Bathgate engaged RNP, a UK based firm of consulting engineers, to provide a Category 3 design check of the slipform rig and issue the requisite certificates.

RNP’s fee for the Category 3 design check was £3,978. Although its appointment did not incorporate any exclusion of third party rights, RNP had no direct contractual link with the main contractor, Multiplex.

Bathgate became insolvent in mid-2016 after having built 7 out of the 37 storeys of the concrete core. The replacement subcontractor subsequently engaged by Multiplex found that the slipform rig was unsafe and required complete replacement.

Multiplex’s claim was pleaded at more than £12 million, comprising remedial works, delay, disruption and consequential losses. Multiplex succeeded in obtaining judgments in default against the insolvent Bathgate and the Dubai-based BRM because both had failed to file a defence. However, these judgments in default were of little value to Multiplex as these parties were uninsured.

Although RNP had also gone into liquidation, Multiplex nevertheless attempted to pursue its claim against RNP’s professional indemnity insurer, Argo, for the maximum value of RNP’s insurance policy of £5 million.

The Preliminary Issues

Notwithstanding the fact that there was no contractual link between Multiplex and RNP, Multiplex alleged the following:

1. RNP owed Multiplex a duty of care in respect of checking the slipform rig design and issuing of the certificates
2. Warranties had been created when RNP issued the compliance certificate to Bathgate, which Bathgate had then passed on to Multiplex.

At the preliminary hearing dealing with the above issues, Judge Peter Fraser rejected Multiplex’ claim against RNP and its insurers.

Preliminary Issue 1: Duty of Care

Firstly, dealing with the issue of the duty of care, Judge Fraser concluded the following:

In line with the authority in South Australia Asset Management Corp v York Montague Ltd [1996] UKHL 10 a claimant who sues for breach of a duty imposed by the law (whether in contract or tort or under statute) must do more than prove that the defendant has failed to comply. The claimant must also show that the duty was owed to them and that it was a duty in respect of the kind of loss which they have suffered.

The Judge also referred to Galliford Try Infrastructure Ltd (Formerly Morrison Construction Ltd and Morrison Construction Services Ltd) v Mott MacDonald Ltd [2008] EWHC 1570 (TCC) which provides a summary of the applicable principles in determining whether a duty of care is owed in a construction context. It is necessary for the party seeking to establish a duty of care to establish that the duty relates to the kind of loss which it has suffered and the scope of any duty of care must be determined.

Multiplex claimed that a duty of care arose because of an assumption of responsibility on the part of RNP, however, on the evidence, RNP had not assumed a responsibility to Multiplex. Bathgate had a direct contractual responsibility to Multiplex for the works subcontracted to it and there was no direct contractual link between RNP and Multiplex in respect of the design check. RNP, as consultant, had not provided services directly to Multiplex.

The purpose of RNP’s Category 3 check was to ensure compliance with the requirements of BS 5975 so that Bathgate might comply with its own contractual obligations to Multiplex. It was not to ensure that Multiplex complied with its own contractual obligations. Multiplex was not aware nor involved with the documents that had been provided to RNP in order for the Category 3 check to be carried out. Multiplex also had no involvement with the appointment of RNP as the independent design checker. There had been no direct contact whatsoever between RNP and Multiplex prior to the issue of the certificate of compliance.

Judge Fraser also noted that where there is a framework of carefully organised contractual obligations, that framework should govern their legal obligations with one another. Multiplex chose to contract with the subcontractor, Bathgate, on highly detailed terms. Furthermore, Multiplex had a cause of action against Bathgate and there was no liability gap so it would not be left without a remedy absent any duty of care on the part of RNP. In light of this Judge Fraser considered it would not be just, reasonable or fair to impose on the design consultant a duty of care of the type alleged by Multiplex.

The modest fee of £3,978 which RNP had received for checking the design for Bathgate was also taken into consideration. Had RNP been told that they would assume unlimited liability to the main contractor Judge Fraser considered it unlikely that RNP would have carried out the work for such a small fee.

It was held inconceivable that a reasonable businessman would consider that the design consultant was voluntarily assuming an unlimited responsibility to the main contractor, or to any party with which it was not in a direct contractual relationship, following Arrowhead Capital Finance Ltd v KPMG LLP [2012] EWHC 1801.

Preliminary Issue 2: Warranties

Judge Fraser found that the basis of Multiplex claim on the issue of warranties was weak and there was no evidence called by either party relating to any direct contract between RNP and Multiplex. He was not convinced that the certificates issued by RNP to Bathgate, which were in turn passed on to Multiplex were sufficient by themselves to constitute warranties to Multiplex. To construe the certificates as warranties given directly by RNP to Multiplex would go entirely outside the detailed contractual framework established between Multiplex and Bathgate.

Under the terms of the subcontract between Bathgate and Multiplex, Bathgate assumed full design responsibility to Multiplex in respect of the slipform rig, including a warranty that it would exercise "all the reasonable skill, care, and diligence to be expected of a properly qualified and competent architect or other appropriate designer experienced in designing work of a similar size, scope, nature and complexity" (this is an extract from clause 2.13.1 of the JCT form). Bathgate also contracted with Multiplex to ensure that all "temporary works and structural work method statements and temporary works design submissions should as a minimum receive a complete and independent third party check" (this is from paragraph 21.16.18; Part 1 of the Contractor's Requirements). Bathgate, therefore, expressly contracted to take full responsibility for obtaining the checks required including the Category 3 check of the slipform rig.

Counsel for Multiplex, Alexander Nissan QC, argued that a contractual relationship had arisen due to the fact that the Multiplex had paid Bathgate for RNP's design checking services. Judge Fraser rejected this analysis. He did not consider that payments made by Multiplex to Bathgate under the subcontract, to which Bathgate was contractually entitled in its own right as subcontractor, could properly be construed as consideration for a separate contract between Multiplex and RNP.

Summary

The case is a salutary reminder of the importance of obtaining collateral warranties and/or the granting of rights under the Contracts (Rights of Third Parties) Act 1999 at the procurement stage of a project. Additionally, parties should ensure that the parties they are in contract with have the appropriate level of insurance cover in place for works being carried out.