Helen Stuart and Wrisque Cline explore a case addressing issues relating to a consultant’s liability for design defects, including the extent of its continuing duty to review the design.
This follows an earlier case between the project company and Lendlease in which Lendlease was held to be in breach of its contractual obligations under the project agreement in respect of the same fire safety defects at the centre.
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The relevant timeline was:
- Aecom’s design was provided to Lendlease in July 2005.
- The construction of the central electrical and mechanical hub for the oncology centre (Plant Room 2) was finished before the end of August 2006.
- Practical completion (PC) of the project was certified on 14 December 2007.
- Concerns about the fire safety and M&E design of Plant Room 2 were raised with Lendlease in November 2017 and subsequently notified to Aecom in 2018.
- Lendlease finally issued its claim against Aecom on 30 May 2019, in which it sought to pass down liability to Aecom for alleged breaches of its obligations under the Appointment.
Contract v deed
There was a dispute between the parties as to whether the Appointment was a deed or a contract and therefore what the applicable time period for bringing a claim was.
The Appointment was entered into on 15 October 2004 and, despite some issues, the court found it was executed as a deed. As such, a 12-year limitation period for claims applied. An argument was rejected that, if the Appointment was a simple contract, a term extended the limitation period to 12 years. The Appointment did not contain sufficient express words to disapply the statutory six-year limitation period for claims under a contract.
Aecom’s contractual obligations
The Appointment attempted to pass down Lendlease’s obligations and responsibility to Aecom. The Appointment recorded that Aecom would observe the Employer’s Requirements and upstream agreements and must not cause or contribute to any breach by Lendlease of any of its obligations.
Pertinent to this claim was the requirement that the adopted design approach comply with the recommendations of HTM 81. However, rather than creating an absolute obligation, it was held that on a proper reading of the Appointment, these obligations were qualified by the further express warranty that Aecom exercise reasonable skill and care.
Whether or not a designer has a continuing duty to review the design, and at what point that obligation ends, will be determined by the terms of the contract. If the contract simply stipulates that a design is to be provided, then there is no obligation on the designer to review the design after it has been supplied. Where the designer’s duties go further, for instance to design and supervise construction, the designer may have an ongoing obligation to review the design up to the time it is incorporated in the construction, or potentially as late as PC. This has important implications for the date when a claim can be brought.
Aecom’s limitation defence
A claim in negligence for defective design arises when the negligence first causes damage, which is when the defective design is incorporated into the construction. A claim in contract arises at the date of breach of contract, which is when the design is provided for construction, even though the construction will not be completed until later. Lendlease commenced its claim more than 12 years after Aecom delivered the designs, the designs were incorporated into the construction and PC. Therefore, the claim was statute-barred.
Additionally, on the evidence, it was found that most of the defects were, or ought to have been, known about in September 2012 and were therefore compromised by a settlement agreement between the parties at that time. The court dismissed Lendlease’s claim even in relation to the defects not covered by the settlement agreement, and for which Aecom accepted it had failed to exercise reasonable care and skill, because the proceedings were commenced more than 12 years after the cause of action accrued.
Key takeaways
This case illustrates how the extent of design liability can impact on the period for bringing a claim. Furthermore, there is a limit when that period will expire and then a defendant will have a complete defence to an otherwise successful claim, notwithstanding an admission of liability.
This case touched on numerous issues and the key points to take away are:
- If you have a claim down the chain, consider the limitation issue from the outset and, if necessary, take steps to protect your position.
- In your contract, if you want to:
- extend or curtail the usual limitation periods for claims clear wording is required.
- flow down obligations from a contract above be aware of other clauses/ obligations which may qualify such obligations.
- If you enter into a settlement agreement, be careful not to compromise claims that have not yet been fully investigated.
- If a dispute concerns works carried out many years ago try and locate all relevant documents and witnesses as soon as possible before memories fade and documents are lost.
Helen Stuart is a partner and Wrisque Cline is an associate in the construction disputes team at Trowers and Hamlins LLP.
