UK: Common Legal Myths: "Snagging"

Last Updated: 9 April 2010
Article by Simon Tolson

Building works, like the arrow of Eleatic paradox, have a propensity to get closer and closer to completion but never quite to arrive. The building industry accordingly has evolved the concept of practical completion. The term is widely understood in the industry as meaning the stage at which the works are reasonably ready for their intended use, notwithstanding that there may be outstanding "snagging" items.

There is a fairly widespread misconception that the defects liability period (now the defects "rectification period" since JCT 05) is intended as a time when the contractor attends to snagging items outstanding as at the date of practical completion and obtains release of the final moiety of retention having done so. In fact, the scheme of the JCT contract is that there should not be any outstanding items at practical completion, and the defects liability period / rectification period is the period in which the parties "wait and see" as to what defects emerge. If we stop here, that is all you really need to know in my opinion!

The approach JCT has taken historically is that the defects liability period / defects rectification is akin to a guarantee period and the contractor usually has the obligation, and indeed the right, to remedy defects appearing within this time. The contractor is usually required to remedy these defects free of charge but the practice is to the benefit of both parties since the contractor would otherwise be liable for the greater cost of another contractor remedying the defects.

The term "snagging" is more commonly used to describe unsatisfactory work or small items of work still to be completed which are discussed/discovered during final site inspections. It has given birth to a small industry of contractors that specialise in making good, particularly to the order of national house builders! Snagging lists are also termed Schedules of Outstanding Works.

As to definition, Peter E.D. Love and Heng Li in Construction Management and Economics describe snagging as "an act of rework; the unnecessary effort of re-doing a process or activity that was incorrectly implemented the first time". In house construction it is the process by which an item is made to conform to the original requirement by completion or correction." They go on to refer to a "Snagging Survey" as a detailed inspection report of a newly completed building providing a defect assessment focused on industry-established finishing standards.

Architects' duties to inspect the works and snagging

In the Ian McGlinn v Waltham Contractors Limited and others case, the judge observed that the architect's inspection role has been the subject of surprisingly few cases despite the "snagging industry". This case is therefore of particular interest.

The employer was a multi-millionaire who engaged a contractor and professional team to design and construct a house in Jersey. Preferring to keep things "informal and fluid", no formal contract was ever entered into by the employer with either the contractor or the architect. Delays occurred in the construction of the house and the construction cost soared over the original budget. The contractor walked off site and subsequently went into administration. The employer chose to demolish the property in view of the alleged defects and then brought proceedings against various parties, including the architect.

The terms of engagement of the architect and, in particular, the scope of services which the architect had agreed to provide, were fiercely disputed. Whilst the employer and architect agreed that the engagement of the architect incorporated the "Architect's Appointment" document published by the RIBA in 1982 (sometimes known as the Blue Book), the extent to which this document was incorporated was disputed.

One of the breaches of contract claimed against the architect related to its failure to inspect the works. Under the "Architect's Appointment" document, the architect's obligation was to visit the site as appropriate to inspect generally the progress and quality of the work.

Before considering whether the architect had complied with its contractual obligation to carry out inspections to identify non-compliant work, the judge reviewed the authorities and set out the following legal principles applicable to the "inspecting professional" (for convenience, I refer below to the "inspecting professional" as "the architect"):

Legal principles in relation to an architect's duty to inspect

The legal principles derived by the judge from the authorities were:

  • The frequency and duration of inspections should be tailored to the nature of the works going on at the site from time to time.
  • It was not enough for the architect to carry out inspections on the date of each site meeting (whether fortnightly or monthly) but not otherwise. The dates of such site meetings might have been arranged some time in advance, without any reference to the particular elements of the works being progressed on site at the time. Moreover, if the contractor knew that inspections were confined to the dates of the site meetings, it would know that, at all other times, its works would be safe from inspection.
  • Although the architect could instruct the contractor not to cover up important elements/stages of the works until they had been inspected, this situation was unlikely to arise in most cases. This was because an architect carrying out inspections tailored to the nature of the works proceeding on site would have timed its inspections so as to avoid such inspections affecting the progress of the works.
  • In any claim against an architect for an alleged failure by it to carry out the proper inspections, the mere fact that defective work had been carried out and covered up between inspections would not automatically give an architect a defence.
  • Matters such as the architect's reasonable contemplation of what was being carried out at the site at the time, the importance of the element of work in question, and the architect's confidence in the contractor's overall competence would determine whether or not such defence would apply.
  • If an element of work was important because it was going to be repeated throughout one significant part of the building, then the architect should ensure that it saw that element of the works in the early course of construction/assembly, so as to form a view as to the contractor's ability to carry out that particular task.
  • Reasonable examination of the works did not require the architect to go into every matter in detail: it was almost inevitable that some defects would escape its notice.
  • It was misconceived to assume that, because the employer had a claim for bad workmanship against the contractor, the architect must have been negligent or in breach of contract for missing the defect during construction. The architect did not guarantee that its inspection would reveal or prevent all defective work.

Were monthly inspections, on the days of site visits, adequate?

During the critical period of construction - of the main structure of the house - the inspections were carried out monthly, on the same day as the monthly site meeting, and not otherwise. There was no evidence to suggest that the inspections were arranged at a time that was suitable for the particular progress of the works on site.

The judge held that such monthly visits, telegraphed in advance, were too rigid and too inflexible. The architect had not performed its inspection function adequately. The judge also criticised the complete absence of any records generated by the architect of the defects seen during the inspection and the remedial action required by the architect.

Is an architect entitled to wait until handover before undertaking a detailed inspection and producing a snagging list?

This issue was relevant for the following reason. Defects observed needed to be accounted for in the interim payment certificates. If defects had not (but should have) been accounted for in interim certificates, then if (as here) the construction contract came to a premature end, it would be difficult for the architect to avoid responsibility for any consequent overpayment where (as here) this could not be recovered from the contractor.

The judge's view was that the answer to the question - as to whether an architect was entitled to wait until the contractor's handover of the building before undertaking a careful inspection and producing a detailed snagging list of incomplete/defective work - depended upon the nature of the defect in question.

Two different categories of defects

The judge described two different categories of defects which may be revealed during an inspection prior to handover:

  • Defects which must sensibly be remedied at the time, rather than at the end of the project. If the architect identified such defective work, then the architect was obliged to point this out to the contractor and to require the defective work to be rectified.
  • Defects in work that was still in the process of being carried out (referred to as "temporary disconformities"). If the architect identified such defects, it was not obliged to point these out. In other words, the architect should only condemn a defect: if the work was not yet finished, it could not fairly be said to be defective.

To determine whether the architect was liable for any overpayment to the contractor resulting from payment for defective work (which it was impossible to recover from the contractor, who was in administration), the judge analysed the defects alleged and decided into which of these two categories of defects each alleged defect fell.

How should the employer's losses be quantified?

Was the employer entitled to recover damages by reference to:

  • the diminution in value of the property;
  • the costs of repair; or
  • the cost of demolition and rebuilding of the building?

The judge accepted that this was unquestionably a case where the correct measure of loss was reinstatement: the critical question was whether the reinstatement costs should be calculated by reference to the costs of demolition and rebuilding (the employer's case); or the lower costs of reinstating the individual defects for which the architect was found liable (together with appropriate additions for on-costs and the like (the architect's case).

The employer's argument: the "Great Ormond Street principle"

The employer argued that:

  • the decision to demolish the property was taken on expert advice;
  • it was not suggested that such advice was negligent; and
  • the employer was therefore entitled to the costs, or a proportion of the costs of demolition and rebuilding from the architect (and other defendants) in accordance with the "Great Ormond Street principle".

The "Great Ormond Street principle" came from a passage in The Board of Governors of the Hospitals for Sick Children & Anor v McLaughlin & Harvey plc and Ors, in which Judge Newey said:

  • A claimant who carries out either repair or reinstatement of his property must act reasonably.
  • A claimant can only recover as damages the cost which the defendant ought reasonably to have foreseen that he would incur. The defendant would not have foreseen unreasonable expenditure.
  • Reasonable costs do not, however, mean the minimum amount which, with hindsight, it could be held would have sufficed.
  • When the nature of the repairs is such that the claimant can only make them with the assistance of expert advice the defendant should have foreseen that he would take such advice and be influenced by it.

Did the Great Ormond Street principle apply in this case?

In the Great Ormond Street case, engineer's modifications to the piling design of the new wing of the hospital were negligent and, as a result, the foundations as constructed were inadequate. Remedial works were required: the only issue was whether the engineer could criticise the particular remedial scheme that had been carried out. The circumstances in the McGlinn case were significantly different:

  • The property was structurally sound - the defects essentially related to aesthetic matters.
  • The expert advice in relation to demolition was dependent upon the comparative costs of (i) repair (since the building was structurally sound), and (ii) demolition and rebuilding. Although the expert advice was that the quantum of such figures was reasonably comparable, there was a clear risk that the cost of demolishing and rebuilding (which involved so much more physical work) might increase.
  • The expert advice (on which the employer sought to rely) in this case was not only wrong (since the demolition/rebuilding cost turned out to be far greater than the agreed repair cost). It was also based on a risk assumption (ignoring the risk that demolition/rebuilding costs might increase) that was (in the judge's words) open to considerable debate.
  • The employer had a very real difficulty. Essentially, he relied upon/assumed complete success on, a large number of contentious defects, in claims against four separate defendants. If one significant item was removed from the equation (e.g. because it was not a defect at all), where did that leave the expert's advice to demolish or rebuild? It might not make the advice negligent, but it did fundamentally weaken its evidential value.

The judge's conclusion

The judge found that, on the facts of this case, the appropriate measure of damages to be awarded against the architect was the (largely agreed) cost of the repair work necessitated by the individual defects for which the architect was liable.

Comments

As the judge observed, to knock down a completed building where the majority of the alleged defects were aesthetic only was, on any view, an extreme course. The so called "Great Ormond Street principle" would not apply in the vastly different circumstances of this - somewhat bizarre - case. Overall, some very sound judicial guidance on the subjects of inspection, snagging, defects and damages, which we can all learn from.

This an extract of an article entitled RICS: legal issues in construction which can be found at www.fenwickelliott.co.uk/articles/contract-issues.

To see further articles on matters relating to construction, engineering and energy projects, please visit www.fenwickelliott.co.uk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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