In the recent consolidated cases of Paul and another v Royal Wolverhampton NHS Trust, Polmear and another v Royal Cornwall Hospitals NHS Trust and Purchase v Ahmed, the Supreme Court of the UK has held that a Contractor owes a duty of care to an Employer in relation to building defects-arising from design, construction or both. This type of duty is usually parallel to a contractual duty that the contractor will perform its works with due skill and care. The existence of this parallel duty of care may be vital in cases where limitation periods are concerned. As such, even when defects occur almost six years after the completion date which would ordinarily be statute barred under claims in contract in the UK and in Uganda, claims in tort can be brought forward. This was established in the case of Dutton v Bognor Regis UDC where claims that were previously time barred by limitation were allowed.
However, it should be noted that claims in tort for negligence, negligent advice or negligent misrepresentation are open for some standard forms of contract, for instance the FIDIC forms of contract where Sub-clause 20.4 of the 1999 FIDIC forms of contract allows for disputes in connection with or arising out of the Contract or the execution of the Works. Ashville Investments v Elmer Contractors Ltd is authority for the proposition that a clause which covers disputes arising under the contract but also includes the words ‘in connection with’ should be given a wide interpretation and will cover related claims for rectification, negligent misstatement, and the like.
The Negligence Equation
For a successful claim in the tort of negligence, the claimant-often the Employer, must show: (1) that the Contractor owed them a duty of care; (2) that there was a breach of that duty; and (3) this breach resulted in recoverable damage. It is important for all these components of this negligence equation to be satisfied in order for such a claim to succeed.
While considering the first limb of this negligence equation, we consider the leading case of Donoghue v Stevenson where it was held that a manufacturer of goods owed a duty of care to their final consumer. This case established the ‘neighbour principle’ which determines whether a duty of care is owed by the defendant in any given situation. In his obiter, Lord Atkin defined a neighbour in the law as a “person who is so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.” Consequently, the requirements of foreseeability and proximity set out in the neighbour principle form the basis of finding duty of care. The fundamental concept of the neighbour principle underwent reformulation in Caparo Industries v Dickman. In this case, there was introduction of the consideration of whether the existence of a duty would be fair, just and reasonable. With this, Caparo introduced a third requirement that extended beyond the two earlier criteria that were set by Donoghue.
In the appraisal of negligence, it is important to examine both negligent actions and negligent advice. Appraising negligent advice has particular application on design and build projects. When determining the duty of care for negligent misstatements, reference is made to the case of Hedley Byrne v Heller where it was held that a duty of care could exist concerning a statement leading to pure economic loss, if the parties were in a ‘special relationship’. Such a special relationship arises, in part, when one party exercises skill and judgement and the other party acts in reliance of this skill and judgement.
Given that the Contractor is a neighbor to the Employer, the Contractor often owes the Employer a duty of care for both negligent acts and negligent advice in some cases.
Breach of Duty
After confirming the existence of a duty of care, the next step in proving negligence involves demonstrating a breach of that duty. To ascertain breach of duty of care, it is necessary first to identify the standard of care and then determine if this standard was met in the given circumstances. The standard of care, as established in Blyth v Birmingham Waterworks, is that of the ‘reasonable man’. This is a legal abstraction which represents an average person who was further described by Greer LJ in Hall v Brooklands Auto-Racing Club as ‘a man on the Clapham omnibus.’
However, if the defendant presents themselves as possessing specific professional skills, the applicable standard of care must be determined by comparing them with others in the same profession. In Bolam v Friern Hospital Management Committee, it was held that the ‘test is the standard of the ordinary skilled man exercising and professing to have that special skill. For the context of a Contractor on a project, the Contractor holds themselves out to the Employer as possessing particular professional skills to execute a design and build project or simply a build project and therefore this is the standard of care to which they must adhere.
The legal burden to prove breach of duty is on the Employer in this case and this must be established on the balance of probabilities. The Employer can rely on the maxim of res ipsa loquitur. With this, in the absence of convincing evidence to the contrary, the court will give the Employer the benefit of doubt by inferring negligence from what is known. This was shown in Scott v London & St. Katherine Docks where it was held that a claimant will be assisted by res ipsa loquitur if the thing causing damage is under the control of the defendant or someone for whose negligence the defendant is responsible, and that the accident is such as would not normally occur without negligence.
When examining a Contractor’s liability to the Employer, further reference is made to Gee v Metropolitan Railway Co where the train doors were presumed to have been the sole responsibility of the train company and therefore it was liable. Where structural failure/defects are due to design and construction solely done by Contractor, and without any evidence to the contrary, the Employer can be assisted by the maxim of res ipsa loquitur. As such, where the standard of care is not reached in the respective duty stations, it can be said that there is a breach of duty.
Did the breach of Duty result in loss?
After establishing that there was breach of duty, the next key question would be whether or not the breach of duty resulted in loss. The general test used by the courts to determine the factual causation is the “but for” test, where the key question is whether, but for the defendant’s breach of duty, the loss or damage would have occurred. For instance, Lord Denning stated in Cork v Kirby Maclean Ltd that “…if the damage would not have happened but for a particular fault, then that fault is the cause of the damage; if it would have happened just the same, fault or no fault, the fault is not the cause of the damage.”
The two types of damage under consideration are physical damage and pure economic loss. In Spartan Steel v Martin, it was held that financial loss not directly stemming from physical damage is too remote to be compensable in negligence. As such, the law of negligence concerns actual damage, usually in the form of physical injury to persons or property.
The courts have adopted different approaches to pure economic loss resulting from a negligent action and pure economic loss caused by negligent advice. This can be shown in Murphy v Brentwood where it was held that the loss described as physical damage due to the negligent act was in fact pure economic loss and was not recoverable. As such, pure economic loss arising from a negligent act is not recoverable. As such, Employers cannot claim for pure economic loss resulting from Contractor’s negligent acts.
In the case of Henderson v Merrett, it was held that when one party undertakes to provide professional or quasi- professional services for another, this commitment, if relied upon by the person on whose behalf these services are performed, may be adequate to establish a duty of care in tort, irrespective of the contractual relationship between the parties. According to Henderson, the existence of contractual relationships between the parties did not exclude the possibility of a duty of care in negligence. Moreover, the special relationship extended beyond advice to also include the provision of services.
In Hedley Byrne, it was held that a duty of care could exist concerning a statement leading to pure economic loss if the parties were in a special relationship such as that one discussed above in Henderson. In contrast to pure economic loss arising from a negligent act, pure economic loss arising from negligent advice is recoverable. Consider a design and build project where the Contractor recommends the use of a wall of contiguous piles which is later discovered to have been under-designed for their length and load bearing requirements. It can be considered that the Contractor provided negligent advice to the Employer thereby entitling the Employer to claim for pure economic loss resulting from this negligent advice.
The final limb of the negligence equation involves determining the extent of the damage suffered by the claimant which should be attributable to the defendant. In the Wagon Mound (No.1) case, it was held that the appropriate test for remoteness is reasonable foreseeability of the kind or type of damage suffered by the claimant. Applying the Wagon Mound test in Hughes v Lord Advocate, it was held that it is only the type of damage which must be reasonably foreseeable and not the manner in which it occurs or its extent. Where there is physical damage due to a breach of duty of care and it is reasonably foreseeable that the Employer would suffer this loss as a result of the Contractor’s negligence, this limb which is essential in proving negligence is satisfied.
In conclusion, Contractors can be liable to Employers for negligent acts and negligent advice. As such, Contractors have to be aware of these liabilities which may not necessarily be “under the contract” and with which claims can be forwarded beyond the limitation period.