In complex construction projects, an owner will often engage a prime consultant to design and construct the entire project. The prime consultant, in turn, then often engages sub-consultants who contract with the prime consultant to provide design and construction services associated with specific components of the project. If defects are found in the specific components of the project within the work scope of a sub-consultant, how is the liability divided between the prime consultant and the sub-consultant?
Where Prime Consultant Is Negligent
In Surrey (District) v Carroll-Hatch & Associates Ltd1, the Owner hired an architect (the "Prime Consultant") to design a new police station. The Prime Consultant engaged an engineering firm (the "Sub-consultant") to perform services in relation to the structural design of the building. Although the soil in the construction area was known to be unstable, the Prime Consultant refused to authorize a proper soil test and persuaded the Sub-consultant to provide the Owner with a soil report based on a superficial examination. After the completion of the project, the building suffered extensive structural change due to uneven settlement.
The British Columbia Court of Appeal ruled that the Prime Consultant was liable to the Owner for breach of contract and that the Sub-consultant was liable to the Owner in negligence. In addition, the Court also found that the Prime Consultant was negligent in failing to warn the Owner of the risk of proceeding with construction based on the incomplete soil report prepared by the Sub-consultant. As both the Prime Consultant and the Sub-consultant were responsible for the Owner's losses, the Court concluded that both parties were jointly and severally liable to the Owner for damages.
The Court's decision in Surrey shows that a prime consultant and a sub-consultant can be found jointly and severally liable to the owner for their respective negligence. However, where there is no negligence on the part of the prime consultant, can the prime consultant still be liable to an owner for damages?
Where Prime Consultant Is Not Negligent
In Swift v Eleven Eleven Architecture Inc2, a couple (the "Owners") hired an architecture firm (the "Prime Consultant") to build a home on land they purchased. The Prime Consultant subcontracted the structural engineering aspect of the design to an engineering company (the "Sub-consultant"). Later, serious deficiencies in the seismic design of the home were found, and the Owners filed claims against both the Prime Consultant and the Sub-consultant.
The Alberta Court of Appeal found that the Sub-consultant had been negligent in the performance of its obligation to provide a suitable structural design for the residence, and that this failure created a real and substantial danger to the Owners. With respect to the Prime Consultant, the Court held that although it had not been negligent it was nevertheless responsible for the structural engineering work performed by the Sub-consultant as it had contractually agreed to provided these services to the Owners.
Regarding the apportionment of liability as between the Prime Consultant and the Sub-consultant, the Court held that the parties should be required to contribute towards the judgement in proportion to their fault. As the Sub-contractor was entirely responsible for the losses, the court concluded that the Prime Consultant should be indemnified by the Sub-consultant in full.
A prime consultant and a sub-consultant hired by the prime consultant can each be found liable to the owner of a construction project for losses for which they are responsible. Where there is no negligence on the part of the prime consultant, the prime consultant can still be found liable to the owner for breach of contract if the work done by their sub-consultant is deficient. Unless the parties have agreed otherwise, the prime consultant is then entitled to seek indemnification from the sub-consultant in proportion to the sub-consultant's responsibility for the loss.
1. Surrey (District) v Carroll-Hatch & Associates Ltd, 1979 CarswellBC 235 [Surrey].
2. Swift v Eleven Eleven Architecture Inc, 2014 ABCA 49 [Swift]
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.