In the recent case of Multiplex Construction Europe Ltd v Bathgate Realisations Civil Engineering Ltd , the Technology and Construction Court (TCC) considered the contention that a professional design checking consultancy RNP Associates Ltd (RNP) appointed by a sub-contractor owed a duty of care to the main contractor (Multiplex), and/or that RNP had also provided warranties to Multiplex, despite the fact that there was no contract between them.
We review the TCC's approach to these allegations in a judgment which highlights the importance of the contractual framework on a complex construction project, and the position of each party within that framework.
- Multiplex was the design and build main contractor for the construction of 100 Bishopsgate in London, which was to comprise three main buildings around an open public area.
- Bathgate, formerly known as Dunne Building and Civil Engineering Ltd (Dunne), was appointed as sub-contractor for the design and construction of the concrete package of works to Building 1. The sub-contract was based on the standard form JCT Design and Build Sub-Contract 2005, Revision 2 of 2009, with amendments.
- Dunne appointed BRM Construction LLC (BRM) as specialist design and engineering consultants to design the slipform rig, which is a constantly moving piece of equipment that permits the concrete core to be constructed incrementally.
- RNP was appointed by Dunne as the independent third party design checker to provide (what is called) a Category 3 design check of the design of the slipform rig, as required by British Standard 5975. RNP provided two Category 3 check certificates to Dunne; the second was a revision to take account of additional information.
- Dunne provided an "adulterated" version of RNP's first certificate to Multiplex. The second certificate was provided by Dunne to Multiplex, but only after the slipform rig had already been in use by Dunne for some months, over three months after that certificate had been issued by RNP.
- After Dunne went into administration, Multiplex alleged that the partially completed concrete core works were defective and that the slipform rig was unsafe, resulting in losses of over £12 million, to include remedial works, delay and consequential loss. These losses were alleged to have been caused by breaches by Dunne, BRM and RNP.
- By the time of the hearing of these preliminary issues, Multiplex had default judgments against Dunne and BRM. As RNP had also gone into liquidation, Multiplex was now seeking to recover direct from Argo, RNP's insurers.
The preliminary issues were limited to Argo's potential liability to Multiplex, which depended on Multiplex succeeding on one or both of the issues as set out below.
- Did RNP owe any duties and/or obligations to Multiplex in respect of the Category 3 Design Check Certificates provided by RNP to Dunne?
- Did RNP provide warranties to Multiplex?
Consideration by the TCC
1. Was there a "liability gap" in the contractual structure?
Given the insolvency and/or lack of insurance of Dunne and BRM, Multiplex pursues a claim against RNP's insurers (Argo) as this probably represents its most realistic chance of recovery. Part of Argo's defence to the claim is that "Multiplex has constructed an artificial claim against Argo in respect of the work carried out by RNP".
It is in this context that the issue of "gap filling" potentially arises, meaning that where there is a gap in terms of contractual relations, that gap may arguably be filled by the law of tort. The obvious counter to this is that the parties have consciously and intentionally set up a contractual framework which avoids a contractual duty owed by RNP to Multiplex; therefore, it should not be for the courts to infer a tortious duty to fill the gap, if such a gap exists.
There will be circumstances where the finding of a duty in tort will be considered justified by the courts, but even then, in the words of Mr Justice Fraser, "... a "gap" is not essential, but whether there is a gap or not is a relevant consideration ......in this case there is no gap" [emphasis added]. Dunne had direct contractual obligations to Multiplex in respect of the design, including the Category 3 check in issue.
2. Duty of care
The three tests
Mr Justice Fraser summarised the principles to be considered: "[i]t is not sufficient for Multiplex simply to demonstrate that RNP did owe a duty of care, or some ill-defined duty of care. Multiplex must demonstrate that any duty that was owed to it by RNP is sufficient to encompass the kind of losses [economic loss] which it claims in these proceedings. ... It cannot be considered in the abstract".
Mr Justice Fraser referred to three different tests for the finding of a duty of care in such a case: the assumption of responsibility test, the three-part test; and the incremental test.
The first step is to ask if there has been an assumption of responsibility by RNP (as contended by Multiplex) – if the answer is "no", then the other tests fall to be considered. Whilst opinions differ, in Mr Justice Fraser's view, application of any of the three tests will lead to the same result in the majority of cases, but not in every case – this scenario was not likely to be one of those exceptions.
In these proceedings, Multiplex did not rely on the incremental test which therefore did not form part of the TCC's detailed consideration.
Assumption of responsibility
The assumption of responsibility test is applied objectively and is not dependent on the intentions of the defendant, here RNP. The factors focused on by the TCC in terms of this test include the following:
- On this project, "there was ... a consciously created framework of contractual relationships". Were there any exchanges between RNP and Multiplex that "crossed the line" i.e. had RNP stepped beyond the contractual matrix and thereby assumed a direct duty of care?
- It was key that RNP had not been asked to give advice to Multiplex and did not provide advice to Multiplex. RNP only provided the Category 3 check certificates to Dunne, in accordance with the contractual obligations RNP owed to Dunne.
- There was no direct contact between RNP and Multiplex prior to the issue of the first certificate, and Multiplex had no involvement in selecting or appointing RNP, nor the provision of documents to RNP.
- As is standard practice, Dunne provided RNP with "a very limited set of design information" to enable RNP to check the calculations.
- Although not determinative, the fact that RNP's fee was "very modest" in the context of the whole project (£3,978) was indicative that RNP was, as described by Mr Justice Fraser, a player with a lesser role.
- Denial of a duty of care owed by RNP to Multiplex would not leave Multiplex without a remedy – Multiplex had a claim against Dunne and Dunne's financial position would not be taken into account when considering matters of justness and fairness.
The TCC held that RNP did not assume responsibility to Multiplex for the statements in the certificates.
The three-fold test would require Multiplex to prove reasonable foreseeability of the economic loss by RNP, proximity in relationship and that the finding of a duty of care by RNP was required for reasons of fairness, justice and reasonableness.
In certain cases, the courts will find there is a duty of care, but Mr Justice Fraser stated "[i]t is not likely to be the case where the third party [Multiplex] is a main contractor, with detailed contractual provisions governing all of its relationship with others (such as the employer, sub-contractors, its own professionals if it has engaged any) that do not include [RNP]".
Multiplex did not succeed on the three-fold test – the TCC held that, putting aside the issues of foreseeability and proximity, "it would not be just, reasonable, or fair to impose a duty of care of the type contended for by Multiplex upon RNP".
Factual reliance on RNP's certificates by Multiplex did not form part of the preliminary issues. Legal reliance was to be considered as part of the first issue, in the context of how certificates such as this are used. In terms of proving a duty of care, reliance must link the damage suffered to the breach of duty.
Additionally, an allegation of negligent misstatement by RNP in its certificates formed part of Multiplex's case for the preliminary issues. In order to recover on this basis, Multiplex would have to prove (amongst other things) that it relied on RNP's statements, and that it suffered the economic loss on account of that reliance.
On this issue, Argo relied on the fact that Multiplex never actually received the first certificate, but only a doctored version. Multiplex's response was that it only relied on the specific statements made by RNP in each certificate as follows: "we certify that reasonable skill and care has been used in the preparation of this design/check to ensure that the calculations accord with the design brief, current industry practice and design codes" i.e. not the entirety of the certificates.
Mr Justice Fraser held that the "statement" by RNP is the entirety of the certificate; it would be "wholly artificial ...to focus on one statement or sentence within the certificate, extract it and consider it separately from the other text". He also confirmed that, even if he had accepted Multiplex's contention on this point, it would make no difference to the answers to the preliminary issues – the TCC's findings would be the same.
Multiplex did not succeed in proving legal reliance – the TCC held that Multiplex had not proven reliance on RNP's certificates that caused the economic loss suffered. In view of that, it was irrelevant that RNP's first certificate was never provided to Multiplex in its original form, and that the second certificate did not reach Multiplex until the temporary works were well underway (although factually, this demonstrates that Multiplex did not in actuality rely on the certificates).
The basis of Multiplex's claim on the second preliminary issue was described by Mr Justice Fraser as "weak". Whilst in its pleading, Multiplex accepted that it had no contractual relationship with RNP, it still sought to maintain a claim that RNP provided a warranty to Multiplex.
Mr Justice Fraser found that RNP did not provide any warranties to Multiplex in its certificates. In the context of a complex construction project, "[i]t would go entirely outside [the] detailed contractual framework to construe statements by RNP within the certificates, or the certificates themselves, as constituting warranties given directly by RNP to Multiplex".
It was not sustainable to argue that RNP provided any warranties direct to Multiplex either contractually, or in the absence of a contractual relationship. If Multiplex had a route of recovery against RNP, it would be on the basis of establishing a duty of care i.e. as reflected in the first preliminary issue – a contention rejected by the TCC in its answer to the first issue.
The TCC's clear findings in this judgment will be a significant relief both to independent third party design checkers and their insurers. As Mr Justice Fraser stated, imposing a duty of care from a Category 3 checker to a main contractor would have "potentially serious consequences", including substantial increases in professional indemnity insurance premiums to be paid by the checker.
In terms of assessing potential risks and liabilities at the outset of a complex project, focus on the contractual relationships that will be in place. Again and again, this judgment highlights the pivotal significance of the complex and intentional contractual framework – establishing a duty of care in that context, where there is no contract in place, will always prove formidable.
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.