Is a duty of care owed by parties where there is no direct contractual relationship?

15 April 2021

Author: John Dugdale
Practice Area: Construction Law

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In the case of Multiplex Construction Europe Ltd v Bathgate Realisations Civil Engineering Ltd and others, the Technology and Construction Court in England had to consider whether an independent professional consultant, which was appointed by a sub-contractor, owed a duty of care to the main contractor.

Background

Multiplex Construction Europe Ltd (Multiplex) was the main contractor for the construction of 100 Bishopsgate London, a 40 storey office block. Multiplex engaged Bathgate Realisations Civil Engineering Ltd (Bathgate) as a sub-contractor for the design and construction of the concrete frame of the office block. Bathgate later engaged BRM Construction LLC (BRM) to carry out part of the design works and RNP Associates Ltd (RNP), to provide a Category 3 design check, as required by the British Standard and under the terms of Bathgate’s sub-contract with Multiplex.

Bathgate went into administration and an alternative sub-contractor was engaged. This sub-contractor subsequently discovered defects in the works, despite the checks which RNP had completed. Multiplex commenced a claim for over £12 million against Bathgate, BRM and RNP’s insurer, Argo, as RNP had gone into liquidation.

The Claim

Despite there being no direct contractual relationship between Multiplex and RNP, Multiplex alleged that RNP owed it certain duties of care and obligations in respect of the Category 3 check and certificates issued by RNP. Multiplex’s case against RNP centred on the argument that RNP owed a duty of care arising from an ‘assumption of responsibility’. It also claimed that the certificates contained warranties, which had been breached.

Trial of Preliminary Issues

The court heard a trial of the preliminary issues which concerned the legal relationship between Multiplex and RNP. Multiplex had to prove that RNP did owe such duties, or provide warranties, directly to Multiplex. If it was unable to prove this, then the claim against Argo would fail.

As such, the issues which had to be determined by the court were:

  1. Did RNP owe any duties and/or obligations to Multiplex in respect of the Category 3 check and design certificates, provided by RNP to Bathgate?; and
  2. Did RNP provide warranties to Multiplex?

Decision

After hearing submissions from all parties, Fraser J came to the conclusion that RNP did not owe any duties or obligations to Multiplex in respect of the check design certificates nor did it provide warranties to Multiplex.

Fraser J gave careful consideration to the facts of the case when making his decision and held that RNP did not assume responsibility to Multiplex for the statements contained within the certificates for a number of reasons, including:

  • Bathgate had full design responsibility for the sub-contract works, under the sub-contact with Multiplex. This included responsibility for the design of the works which were found to be defective.
  • There was no direct contractual link between RNP and Multiplex in relation to the check, or at all. The purpose of the check was so that Bathgate could comply with its own contractual obligations under the sub-contract.
  • Multiplex was not involved in the instruction of RNP. It did not know what documents had been provided to RNP and did not know under what terms RNP had been engaged. No services were provided directly to Multiplex by RNP.
  • This project had a large number of parties and a detailed contractual structure, including the main contract and various sub-contracts. The relationship between Bathgate and RNP was entirely separate from this. The Judge stated that “to find that there was an assumption of responsibility on the part of RNP direct to Multiplex would indeed “short circuit the contractual relations”.”

In addition, Fraser J held that “there is nothing on the face of the certificates to constitute a warranty to Multiplex” and contended that it would be difficult to see, on the facts of the case, how RNP had given any warranty to Multiplex at all.

Carson McDowell View

Large construction projects, such as this, invariably involve a large number of parties and oftentimes a complex contractual structure. This judgment highlights that the courts are reluctant to impose a duty of care in circumstances where the parties have chosen not to establish a contractual relationship with each other.

If a main contractor intends to be able to pursue a sub-sub-contractor for defective design or workmanship, then appropriate mechanisms should be put in place to allow it do so. That may include specific provisions being included in a subcontract that require sub-contractors to procure collateral warranties or third party rights in favour of the main contractor.

The judgment also provides valuable reassurance to independent design checkers / third parties (and their insurers), that they will not necessarily assume responsibility to parties with whom they do not have a direct contractual link to prevent economic loss.

Although the judgment was given by an English court, it is likely to be persuasive to a court in Northern Ireland tasked with determining the same issue.

If you have any queries, the Construction team at Carson McDowell would be happy to help.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.

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