Building Contracts - Court of Appeal Clarifies Law on Dual Liability

In its recent decision in Robinson v P E Jones (Contractors) Ltd, the Court of Appeal has provided welcome clarification of the law on dual, or concurrent, liability as it relates to building contracts.

When a deal is being negotiated, there will often be hard bargaining over the extent of the liability and risk to be undertaken by each party under the contract. On numerous occasions, the courts have been asked to rule whether a claimant should be allowed to sidestep the contract completely by suing the defendant in negligence. In general, the Courts have given the green light to such claims in the case of professional advisers – e.g. architects, surveyors, accountants and lawyers. Until now, there has been some uncertainty as to the position regarding building contracts.

In the Robinson case, in 1991 R and his wife agreed to purchase a house from PEJC which was then under construction. PEJC’s liability under the contract was limited to its liability under the NHBC guarantee – i.e. for defects during the two years following completion. The house was duly completed and transferred to R and his wife. In 2004, R arranged for the two gas fires in the property to be serviced. One of the fires failed a spillage test designed to check that the fires were effectively drawing combustion products from the room in which it was located. Both fires were disconnected for safety reasons.

Seeking to recover the cost of the proposed remedial works, R sued PEJC in negligence. He alleged that the flues for the fires had not been constructed: (i) in accordance with good building practice; or (ii) in accordance with the building regulations in force at the relevant time. The County Court Judge dismissed R’s claim, ruling that any claim which R might have had for breach of contract was out of time, and that PEJC did not owe R a separate duty of care under the law of negligence.

Dismissing R’s appeal, the Court of Appeal ruled that:
• The relationship between the builder of a building and the immediate client is primarily governed by the contract between them.
• In general, the law does not automatically impose upon every contractor or sub-contractor a duty of care creating liability in negligence for economic loss.
• In the present case, there was nothing to suggest that PEJC had assumed some special responsibility to R not to cause him economic loss.
• The contract had expressly excluded any liability in negligence which might otherwise arise. This had represented a perfectly sensible allocation of risk between the parties that satisfied the test of reasonableness laid down by the Unfair Contract Terms 1977 Act.

Many in the building industry will welcome the Court of Appeal’s decision in this case. It may well be going too far to say that a builder will never be liable to the client in negligence. There has been some discussion of the implications of this case for Design and Build Contracts, where there may be a stronger case for saying that the designer / builder assumes a liability in negligence not to cause the client economic loss. However, it now seems that, in the absence of exceptional circumstances, in the case of most run-of-the mill building contracts the builder will not have a liability to the client in negligence over and above his liability under the building contract.

For shrewd commercial advice on construction contracts, contact Caroline Wilton. For help with a construction dispute contact Simon Daw.

Filed: 09/03/2011 10:09:18