Duties in contract and tort
Concurrent duties in contract and tort
This case note considers Mr JA Robinson v PE Jones (Contractors) Ltd in which the judge attempted to reconcile the case law to determine whether a builder owes his client a concurrent duty of care in tort and in contract for economic loss.
It was held that while, in principle, a builder could owe concurrent duties in contract and tort, on the facts in this case the duty had been excluded by terms of the contract. Useful obiter guidance was also provided on the application of the Limitation Act 1980.
2. Facts
In December 1991, Mr. Robinson (the owner) entered into an agreement with P.E. Jones (Contractors) Limited (the builder) who agreed to build and sell a new house to him. The house was transferred to the owner in April 1992.
In September 2004, a service by British Gas found that one of the gas fires was defective. A surveyor’s report then revealed that the house’s flues had not been constructed in accordance with applicable building regulations.
3. Court proceedings
The owner commenced an action against the builder in December 2006 claiming the costs of the remedial works (£35,000) and contending that the builder was in breach of contract, in breach of a duty of care in tort and guilty of misrepresentation.
The owner alleged that he had no knowledge of the defects until the service in 2004, and sought to rely on s.14A of the Limitation Act 1980, which provides that the time limit for bringing an action is three years from the earliest date the claimant had the knowledge required for bringing an action.
The builder denied the existence of a duty of care in tort and denied breach or misrepresentation. He also pleaded that the claim was statute-barred both in contract and tort under the Limitation Act 1980, asserting that that owner had constructive knowledge of the defects long before September 2004 and therefore the claim was not within the requisite three year time limit.
The claim was transferred to the Technology and Construction Court in September 2009 where His Honour Judge Stephen Davies considered the following issues:
• Whether a builder can owe a duty of care in tort to his client, concurrent with his duty in contract, in respect of economic loss;
• If so, whether or not on the facts of this case, the builder owed such a duty to the owner;
• Whether the owner’s claim was statute barred in contract or in tort under the Limitation Act 1980.
4. Decision
4.1 Can a builder owe a concurrent duty of care in contract and tort?
Having thoroughly considered the case law, Judge Davies held that a contractor can owe a concurrent liability in tort and contract, and in particular, a builder can owe a home owner a concurrent duty of care in tort.
The builder had sought to rely on the principle that a builder does not owe a duty of care to owners or occupiers citing Murphy v Brentwood DC as binding authority for this.
Judge Davies rejected this argument, holding that this general rule was not intended to exclude circumstances where there was a “special relationship of proximity” between the parties, for example where there was a contractual relationship.
He proceeded to consider Henderson and others v Merrett Syndicates Ltd and determined that the mere existence of a contractual relationship in which there is an express or implied obligation to exercise reasonable care and skill may in itself be sufficient to justify an assumption of responsibility in pure economic loss cases.
Further, he held that this principle is capable of applying to cases involving the provisions of all services, and not just professional services by professional men.
He agreed with Judge Seymour’s ruling in Tesco Stores v Costain & Others that anyone who undertakes by contract to perform a service with reasonable care and skill would owe such a duty and that there was “no logical justification for making an exception in the case of a builder or the designer of a building”.
The court therefore held that, in principle, a contractor can owe a concurrent duty of care in contract and in tort in respect of economic loss.
Judge Davies also made it clear that there was no authority requiring the court to distinguish between the case of a professional designer and a non-professional builder, especially if a company offered a full design and build service.
He also found that there was no basis for distinguishing between the design services and building work provided by a builder. Judge Davies concluded his ruling on this issue by rejecting the argument that the Defective Premises Act 1972 should prevent a builder from owing a concurrent duty in tort.
4.2 On the facts in this case, did the builder owe concurrent duties in contract and tort?
Despite his ruling that a builder could in principle owe concurrent duties in contract and in tort, Judge Davies held that, in this case, the builder had successfully excluded this tortious duty by virtue of the contract.
Judge Davies did not agree with the builder’s first submission that the agreement was in form and substance a contract for the sale of land and that therefore there was no basis for importing a concurrent duty of care.
He held that there was a distinction between cases where a builder builds a house and then sells it and cases where a builder agrees to sell a house and then builds and sells it. He found that in the latter case, as the purchaser is buying a house which the builder is promising to build, the builder will have a duty of care to build the house with reasonable care and skill.
Judge Davies was more enamoured with the Defendant’s second submission, that the existence of a concurrent duty of care was inconsistent with the terms of the sales agreement.
The parties’ sales agreement incorporated Building Conditions. Condition 1(a) stated that the builder would complete the work in an efficient and worklike manner.
Condition 10 stated that the parties would enter into the National House-Building Council’s standard form of agreement (“the NHBC Agreement”) and that the builder would not be liable to the owner “in respect of any defect error or omission in the execution and completion of the work save as to the extent and for the period that it is liable under the provisions of the NHBC Agreement”.
The NHBC Agreement included a number of builder’s warranties. The Buildmark Insurance Policy included two guarantee periods: the first was the initial guarantee period ending on 28 April 1994 (two years from the date of the 10 year notice) during which the builder was liable to put right any defects at its own cost; the second was the structural guarantee period, ending on 28 April 2002 (ten years after the date of the 10 year notice) during which the NHBC was obliged to put right any structural damage.
The Buildmark Insurance Policy was “in addition to any contractual, statutory or common law rights.”
Judge Davies held that Condition 10 of the sales agreement expressly excluded the builder from any liability for defects in the house other than as provided for the NHBC agreement. He ruled that this was not overridden by the general provision in the sales agreement that the NHBC Agreement was in addition to any contractual, statutory or common law rights.
Judge Davies further held that there was no basis for challenging the efficacy of Condition 10 at common law.
Moreover, he did not believe that there was any basis for contending that Condition 10 was unfair under UCTA as the NHBC warranty was wider than the contractual warranty in Clause 1(a) of the Building Conditions and was more extensive than any concurrent liability in tort. It therefore followed that the action must fail.
4.3 Was the claim statute-barred by the Limitation Act?
Given his finding that the builder had successfully excluded the concurrent duty of care, the issue of whether the claim was statute-barred by the Limitation Act 1980 was now academic.
However, Judge Davies provided obiter comments on the issue since it had been fully explored at trial and in case his ruling was reversed by a higher court.
It was the builder’s case that the owner had not commenced his claim within the requisite three year time limit from acquiring the knowledge of the defects as required by s.14A Limitation Act.
While he did not dispute that the owner had first become aware of the defects in September 2004 when the gas fires were serviced, he asserted that the owner had constructive knowledge of the defects before this.
The builder sought to rely on 14(A)10 of the Limitation Act 1980 which states that a person’s knowledge includes knowledge which he might reasonably have been expected to acquire from facts observable or ascertainable by him (s.14(A)(10)(a)) or from facts ascertainable by him with the help of expert advice (s.14A(10)(b)).
Judge Davies held that despite the owner’s evidence that he had been aware of the dangers of carbon monoxide prior to 2004 and had read the instruction manuals which recommended annual servicing of the gas fires, it had been reasonable for the owner not to have the gas fires inspected during the 12-year period prior to 2004.
Moreover the “triggering event” required by Abbey National plc v Sayer Moore, to give rise to constructive knowledge was not present in this case as the owner was reasonably unaware of the defects.
Having reviewed Henderson v Temple Pier Co Ltd the court concluded that the British gas engineer who informed the owner of the defects was not providing “expert advice” within the meaning of S.14(A)(b) and so this could not be relied upon.
Therefore it was held that, had the duty of care in tort not been excluded, the claim would not have been statute-barred because the owner did not have constructive knowledge of the defect for more than three years before he commenced proceedings.
5. Comment
This case clarifies the extent of a builder’s exposure to claims by confirming that a builder can, in principle, owe a concurrent duty of care to its client in relation to economic loss. The repercussions of this decision will be significant for builders as it will enable claimants to employ the remedy, whether in contract or tort, which is most likely to bring them victory in court.
Moreover, builders will remain liable in tort after the expiry of a contractual limitation period which will be especially significant in cases such as this one in which defects are discovered many years down the line.
However, the decision also provides useful guidance to builders on how they can limit their liability. It demonstrates that it is possible to include contractual provisions to exclude a concurrent tortuous liability, and builders should be advised to ensure that such a provision is included in their contracts.
Catherine McKee is a trainee solicitor and Jane Hughes is partner at Collyer Bristow LLP
