Don’t be too helpful! – Beware Assumption of Responsibility
March 2021The recent case of Multiplex Construction Europe Ltd v Bathgate Realisations Civil Engineering Ltd & Ors, saw the TCC consider whether a professional appointed by a sub-contractor owed a duty of care to the main contractor.
Construction professionals will note that, as is often the case in large scale projects involving several parties and a complex contractual matrices, issues such as these can sometimes be unclear from the contracts themselves. The TCC in this case has provided useful guidance as to when responsibility is (or is not) assumed in tort, irrespective of the contractual position.
Background
The Claimant, Multiplex, was the Main Contractor tasked with the construction of a 40-storey tower in London. Multiplex appointed Dunne, the First Defendant, as its Design and Build Sub-Contractor. The terms of Dunne’s sub-contract with Multiplex required them to provide a “Category 3” check in relation to the design to comply with British Standards.
Dunne had entered into its own sub-contract with the Second Defendant, BRM, as to the design. BRM could not complete the “Category 3” check. Therefore, RNP (the Third Defendant) a firm of Consulting Engineers, entered into a contract with Dunne, to carry this out.
Subsequently, Multiplex alleged that the design was defective, failing in use and causing it to suffer losses in excess of £12 million. In order to recover the losses, Multiplex brought a claim against three parties:
- Dunne pursuant to the sub-contract;
- BRM in tort and for breach of warranty; and
- Argo (RNP’s Professional Indemnity Insurer) under the Third Parties (Rights Against Insurers) Act 2010.
The Claim, the Law and the Findings
There was no direct contractual link between Multiplex and RNP. However, Multiplex argued that RNP assumed a tortious responsibility and so owed Multiplex a duty of care in carrying out the “Category 3” check and in relation to the certificates it issued for the design.
A preliminary issues trial was ordered. The Judge found in favour of RNP, saying it did not assume a responsibility to Multiplex for the Category 3 design check or indeed any statements contained within the certificates produced after this check.
In addressing Multiplex’s claim, the Judge noted this is one of those rare cases where comprehensive citation of previous authority was warranted. In providing its analysis of the authorities, the TCC refers to three different tests for the finding of a duty of care absent a contract – they are 1) assumption of responsibility test; 2) the three-part test; 3) the ‘liability gap’.
The Assumption of Responsibility Test
Multiplex’s case was that it satisfied the assumption of responsibility test. In considering this the Court noted that the starting point was the case of Hedley Byrne, which set out an approach to liability in such cases. In that case, Lord Reid stated:
“… in questions of negligence we … apply the objective standard of what the reasonable man would have done. A reasonable man, … I think, [would] have three courses open to him…
- He could keep silent or decline to give the information or advice sought: or
- He could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or inquiry which a careful answer would require: or
- He could simply answer without any such qualification.
If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer being given carefully, or … accepted a relationship with the inquirer which requires him to exercise such care as the circumstances require.”
Multiplex argued that RNP chose to answer, and knew that Multiplex would rely on, the statement contained in the certificate. Given Multiplex’s role and the use to which the certificate was to be put, RNP thereby assumed responsibility to Multiplex to exercise reasonable skill and care in ensuring the answer – the statement in the certificate – was correct. However, the Judge did not agree with this, noting that RNP was not “choosing to answer” in the same way as in Hedley Byrne.
Rather, it was specifically contracted by Dunne to answer. The certificate was quite obviously a statement, but due to different circumstances was not enough for Multiplex to rely upon the dicta in Hedley Byrne.
The next issue the Court placed a great deal of importance on was the lack of contractual relationship between Multiplex and RNP. The Court noted that whilst it is not ‘make or break’ – the existence of a contract can be pivotal. It referred to Lord Goff’s words in the case of Henderson v Merrett – where he states “in… cases in which a contractual chain… is constructed it may… prove to be inconsistent with an assumption of responsibility”.
Turning to the facts in this case, the Court noted Multiplex subcontracted its design responsibilities to the First Defendant, Dunne (including the element checked by RNP). This sat entirely separate from the contract between Multiplex and Dunne, and so to “find an assumption of responsibility by RNP… would have the effect of, so to speak, short circuiting the contractual structure so put in place by the parties”.
The Court then turned to consider the case of Williams v Natural Life Health Foods. In that case the House of Lords allowed an appeal by a director / principal shareholder of a company who had been found personally liable due to an assumption of responsibility under Hedley Byrne principles. Lord Steyn allowed the appeal stating:
“The touchstone of liability is not the state of mind of the defendant. An objective test means that the primary focus must be on things said or done by the defendant or on his behalf in dealings with the plaintiff… the primary focus must be on exchanges (in which term I include statements and conduct) which cross the line between the defendant and the plaintiff”.
Applying this to Multiplex’s claim, the Court noted that RNP did not enter into any direct exchanges with Multiplex and/or do anything which “crossed the line” of the contractual matrix. RNP’s role was seen as limited to carrying out a check in accordance with its own contractual obligations it owed to Dunne, and in turn helping Dunne comply with its obligations under its own contract with Multiplex. Therefore, it did not assume responsibility to Multiplex (and the relevant legal test was not satisfied).
Three Part Test
The three-part test looks at whether it would be fair, just and reasonable to impose a duty of care. In considering this test, the Court made note of Lord Bingham’s observations in Customs and Excise v Barclays Bank:
“First, there are cases in which one party can accurately be said to have assumed responsibility for what is said or done to another, the paradigm situation being a relationship having all the indicia of contract save consideration…
Secondly, however, it is clear that the assumption of responsibility test is to be applied objectively … and is not answered by consideration of what the defendant thought or intended.
Thirdly, the threefold test itself provides no straightforward answer to the vexed question whether or not, in a novel situation, a party owes a duty of care. In Caparo v Dickman, Lord Bridge, having set out the ingredients of the three-fold test, acknowledged as much: “… the concepts of proximity and fairness … are not susceptible of any such precise definition as would be necessary to give them utility as practical tests, but amount in effect to little more than convenient labels to attach to the features of different specific situations which, on a detailed examination of all the circumstances, the law recognises … as giving rise to a duty of care”.
In applying Lord Bingham’s observations to Multiplex’s claim, the Court made the following findings:
- Firstly, this is not a situation where the parties have a relationship with all the indicia of a contract, save consideration. The relationship between “the parties” (that term applying to RNP and Multiplex) does not have the indicia of a contract. This is a situation where the parties do indeed have an actual contract; however, neither of those parties is Multiplex, as the contract is between RNP and Dunne;
- Secondly, application of the objective test does not assist Multiplex. Objectively, construction professionals would expect the framework of carefully organised contractual obligations to govern their legal relations with one another.
- Thirdly, this is a novel situation, and the three-fold test is accepted by Lord Bingham as providing no straightforward answer. Proximity and fairness are merely convenient labels to attach to the different circumstances which require detailed examination. Even if the three-fold test is adopted, and considering each and every one of the convenient labels, it would not be just, reasonable, or fair to impose a duty of care of the type contended for by Multiplex upon RNP
For these reasons the Court found that RNP did not assume responsibility (and so owe a duty of care) to Multiplex.
The “Liability Gap”
An additional (and/or alternative) argument advanced by Multiplex was that this was not a contractual chain case and there was a “liability gap”.
Effectively, this is an argument which suggests that where there is a gap in contractual relations – that gap may be filled by the law of tort. The Court rejected the assertion, as there was a direct contractual relationship between Multiplex and Dunne.
Responsibility for the design was allocated to Dunne in this contract and Multiplex had a valid and, moreover, complete cause of action against Dunne. The financial status of Dunne and Multiplex’s concern in this regard was deemed largely irrelevant – the law was not seen as being influenced by the enforceability of any remedy.
Comment
The decision in this case is not ‘new’ law but instead reaffirms the position that, where there is a clear and defined contractual chain created by the parties entering into a series of contractual relationships, the Courts are reticent to impose additional tortious duties. This will be welcome news to construction professionals and their professional indemnity insurers who may be faced with such claims.
The case also serves as a timely warning to professionals to not ‘offer up’ additional services beyond their contractual obligations in the interests of goodwill. Going beyond express contractual duties established can backfire. In this case, we note that had RNP stepped in at any point to advise and/or assist Multiplex directly, the judgment may have made for very different reading! Professionals should be mindful of the Hedley Byrne principles and either remain silent, decline to provide another party (with whom it does not have a direct contractual relationship) information or, if that proves challenging, provide this with a strict qualification that no legal responsibility is being assumed.
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