So here s to you, Mr Robinson: clarification or confusion on builders duties in tort?

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1 So here s to you, Mr Robinson: clarification or confusion on builders duties in tort? Fiona Sinclair, Four New Square 1 Introduction 1. The standard textbooks on building contract law contain relatively sparse discussion of builders duties in tort. This is perhaps not surprising: the construction industry has made an art form of contract, reducing builders obligations to ever more detailed written formulations and generating endless disputes as to the meaning of those formulations in different fact situations. But in some cases, the contract isn t enough. In particular, where defects appear after the limitation period applying to claims in contract has expired, only tort will do The difficulty is that a claim for the cost of rectifying defects in the building which the builder contracted to provide is a claim to recover economic loss. While it has never seriously been doubted that a building contractor owes a duty in tort to avoid carelessly causing damage to the person or other property of his client the ordinary Donaghue v Stevenson duty of care - there has been real dispute as to whether a contractor s concurrent duty of care in tort extends to economic loss. 3. By the end of last year, there were signs that the controversy was subsiding. Although there were notable exceptions, the majority view among the TCC judges seemed to be that a building contractor would normally owe a concurrent duty of 1 With thanks to Sian Mirchandani of Four New Square, for her assistance in the preparation and the presentation of this talk. 2 There are other advantages to a claim in tort. The rules of remoteness may allow a wider recovery; a cause of action in tort may be assigned notwithstanding a prohibition on assignment of the contract; and a claim in negligence will found a fresh action in each successive owner under s.3 of the Latent Damage Act 1986.

2 care to avoid causing economic loss. There was no distinction, in principle, between builders and construction professionals in that regard. 4. Then, in January 2011, the precarious apple-cart was firmly upset by the decision of the Court of Appeal in Robinson v PE Jones (Contractors) Ltd. 3 It was held that a builder does not normally owe a concurrent duty of care to avoid causing economic loss to his employer; or rather, that the mere existence of the building contract does not mean that he does owe such a duty. By contrast, it was reaffirmed that a contract with a construction professional is itself sufficient to activate such a duty. 5. The ingenuity of litigators could normally be trusted to prevent Robinson being the last word on the subject of building contractors duties. However, there are particular reasons to suggest that it will not be. This talk looks at some aspects of the decision which point to future controversy. First, it is not the only Court of Appeal decision on the issue and the status of other prior authority has been rendered unclear. Secondly, it allowed that a contractor will sometimes owe a concurrent duty to avoid economic loss, but offered little or no guidance as to when that might be. How did we get here? 6. To put Robinson in context, let s remind ourselves how the controversy arose. The starting point is the seminal decision of the House of Lords in Murphy v Brentwood. 4 In the heady days of negligence under Anns v Merton LBC 5, all that was needed for a duty of care in tort was a proximate relationship and an absence of factors which suggested that there should not be a duty of care. In Murphy, that was substituted by a broad exclusionary rule: the cost of rectifying defects in the thing provided is economic loss and the law does not recognise a general duty of care in tort to prevent such loss. 3 [2011] EWCA Civ 9. 4 [1991] 1 AC [1978] AC

3 7. So, as was held in Murphy, a building contractor owes no duty of care to a subsequent owner of a building he has constructed to see that the building is free of defects. As Lord Oliver put it, 6 I have found it impossible to reconcile the liability of the builder propounded in Anns with any previously accepted principles of the tort of negligence and I am able to see no circumstances from which there can be deduced a relationship of proximity such as to render the builder liable in tort for pure pecuniary damage sustained by a derivative owner with whom he has no contractual or other relationship. 8. The major inroad upon this exclusionary rule came from an unexpected quarter: the doctrine of negligent misstatement. In Henderson v Merrett, 7 the House of Lords extended the decision in Hedley Byrne v Heller 8 so as to hold that where one party assumes a responsibility to another in respect of the performance of certain services and that other relies upon the assumption of responsibility, there is no reason why the first party should not be liable in tort for the economic loss which flows from the negligent performance of those services. That was the case, regardless of whether there was a contract between the parties; although a concurrent liability in tort could not be admitted to circumvent or avoid a contractual exclusion or limitation of liability or, indeed, to widen the scope of the obligations described by the contract. 9. Thus construction professionals found that Murphy offered no refuge for them. In fact, it had already been established before Murphy that a professional building designer owed concurrent duties in contract and tort to his client. That was the effect of the decision concerning the liability of designing engineers in Pirelli v Oscar Faber, 9 which Lord Keith in Murphy explained on Hedley Byrne principles. 10 It 6 At 489B. 7 [1995] 2 AC [1964] AC [1983] 2 AC It would seem that in a case such as Pirelli, where the tortious liability arose out of a contractual relationship with professional people, the duty extended to take reasonable care not 3

4 became generally accepted that construction professionals, like other professionals, owed concurrent duties of care in tort to their clients. 10. It seemed a small step, therefore, to the decision in Storey v Charles Church Developments Ltd 11 where HHJ Hicks QC rejected the argument that the effect of Murphy was that a building contractor could never owe a non-contractual duty to safeguard against economic loss. He could see no reason for a distinction between the duty in tort of a designer who is an independent professional and that of a designer who also builds. He held that the defendant design and build contractor did owe a duty of care to prevent economic loss caused by the careless performance of his design work. 11. However, in Payne v Setchell, 12 HHJ Humphrey LLoyd QC took a diametrically opposite view. An engineer had contracted with the original owner of a house to design the foundations. The claimants purchased the house. When cracking appeared which they attributed to the engineer s negligent design, they alleged that he owed them a duty of care in respect of the economic loss caused by the defect. Like HHJ Hicks QC in Storey, Judge LLoyd saw no reason to distinguish between the position in tort of a professional and a contractor, but with the opposite effect. He held that the effect of Murphy was that not only did the engineer owe no such duty to the claimants, he did not even owe such a duty to the original owners, his clients. He said, 13 In my judgement Murphy and Bates established that, as a matter of policy, any person undertaking work or services in the course of a construction process is ordinarily liable only for physical injury or for property damage other than to the building itself but is not liable for other losses i.e. economic loss. If any liability for such economic losses to cause economic loss to the client by the advice given. The plaintiffs built the chimney as they did in reliance on that advice. The case would accordingly fall within the principle of Hedley Byrne & Co Ltd v Heller & Partners Ltd. (466E) 11 (1995) 73 Con LR [2002] BLR At [30]. 4

5 is to arise it must be for other reasons, e.g. as a result of advice or statements made upon which reliance is placed in circumstances which create a relationship where there is in law to be an assumption of the responsibility for the loss i.e. within the principle of Hedley Byrne v Heller (see Lord Keith's speech in Murphy which I have quoted above). In my judgment a designer is not liable in negligence to the client or to a subsequent purchaser for the cost of putting right a flaw in a design that the designer has produced that has not caused physical injury or damage, just as a contractor is not liable. (emphasis added) 12. So far as the construction professional s concurrent duty of care was concerned, Judge LLoyd s analysis did not commend itself to HHJ Toulmin CMG QC in Ove Arup & Partners International Ltd v Mirant Asia-Pacific Construction (Hong Kong) No The defendant engineers were alleged to have prepared a defective foundations design for an offshore power station. When sued by their client in negligence, they argued (relying upon Payne) that their concurrent duty of care in tort did not extend to economic loss. Judge Toulmin disagreed. He pointed out that Murphy was not dealing with professionals duties, nor with duties owed as between parties to a contract. Moreover, he considered that there was no reason not to apply Henderson to construction professionals in the same way that it applied to other professionals. As we shall see, so far as it concerns the application of Henderson to professionals, Judge Toulmin s analysis is vindicated by the decision of the Court of Appeal in Robinson. 13. The position of the building contractor was considerably more uncertain. In Nitrigin v Inco Alloys Ltd, 15 May J held that a specialist manufacturer did not owe a concurrent duty of care in respect of defects in pipes supplied to the plaintiff, even although it knew the purpose for which the pipes were required. He explained, simply, that the relationship between the parties was neither a professional relationship in the sense in which the law treats professional negligence nor a Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 relationship [2004] EWHC 1750 (TCC). 15 [1992] 1 WLR At

6 14. Similarly, in Payne v Setchell, Judge LLoyd plainly thought that the rule in Murphy precluded a building contractor s concurrent duty of care to prevent economic loss, regardless of whether or not there was a contract between the contractor and the claimant. 15. However, in Tesco v Costain Construction Ltd, 17 HHJ Seymour QC disagreed. That was a claim for the cost of rebuilding a supermarket destroyed by fire. The claim was brought in contract and (for limitation reasons) in tort by the supermarket owner against a design and build contractor. The complaint was that Costain had failed to design or to construct adequate fire stopping, with the result that fire had spread unchecked through the supermarket. 16. Judge Seymour held that Murphy did not preclude a builder owing a concurrent duty of care to avoid economic loss; it merely restricted such a duty to circumstances in which there was a special relationship between the parties, as had been clarified in Henderson. Noting that Judge LLoyd in Payne had not referred to Henderson, Judge Seymour declined to follow the approach in Payne. He concluded that, 18 If the position now is, as I consider that it is, that anyone who undertakes by contract to perform a service for another upon terms, express or implied, that the service will be performed with reasonable skill and care, owes a duty of care to like effect to the other contracting party or parties, which extends to not causing economic loss, there seems to be no logical justification for making an exception in the case of a builder or the designer of a building. 17. It should be noted that Judge Seymour considered that the existence of a building contract containing an express or implied term that reasonable skill and care would be exercised was, of itself, sufficient to justify the imposition of a concurrent duty of care to safeguard against economic loss. That represents an extension of Henderson, which decided merely that, of itself, the existence of a contract was not 17 [2003] EWHC 1487 (TCC). 18 At [230]. 6

7 sufficient to preclude a duty of care. It is tolerably clear, however, that Lord Goff in Henderson regarded a contract for services as at least capable of amounting to an assumption of responsibility. He quoted with approval the following words of Oliver J in Midland Bank v Hett Stubbs & Kemp, holding that a solicitor owed concurrent and coextensive duties to his client in contract and in tort, 19 The matter becomes, in my judgment, even clearer when one looks at the speech of Lord Devlin in the Hedley Byrne case [1964] A.C. 465, for he treats the existence of a contractual relationship as very good evidence of the general tortious duty which he is there discussing. He said, at pp : 'I think, therefore, that there is ample authority to justify your Lordships in saying now that the categories of special relationships which may give rise to a duty to take care in word as well as in deed are not limited to contractual relationships or to relationships of fiduciary duty, but include also relationships which in the words of Lord Shaw in Nocton v.lord Ashburton [1914] A.C. 932, 972, are "equivalent to contract," that is, where there is an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract.' " Thus a contract between the parties was expressly regarded as, in some circumstances, creating an assumption of responsibility for the purposes of a Hedley Byrne concurrent duty in tort. Lord Goff continued, 20 the law of tort is the general law, out of which the parties can, if they wish, contract; and, as Oliver J. demonstrated, the same assumption of responsibility may, and frequently does, occur in a contractual context. Approached as a matter of principle, therefore, it is right to attribute to that assumption of responsibility, together with its concomitant reliance, a tortious liability, and then to inquire whether or not that liability is excluded by the contract because the latter is inconsistent with it. This is the reasoning which Oliver J., as I understand it, found implicit, where not explicit, in the speeches in Hedley Byrne. With his conclusion I respectfully agree. But even if I am wrong in this, I am of the opinion that this House should now, if necessary, develop the principle of assumption of responsibility as stated in Hedley Byrne to its logical 19 [1979] Ch 384, [1995] 2 AC 145,

8 conclusion so as to make it clear that a tortious duty of care may arise not only in cases where the relevant services are rendered gratuitously, but also where they are rendered under a contract. This indeed is the view expressed by my noble and learned friend, Lord Keith of Kinkel, in Murphy v. Brentwood District Council [1991] 1 A.C. 398, 466, in a speech with which all the other members of the Appellate Committee agreed. 18. Judge Seymour s approach was also consistent with that of the Court of Appeal in Barclays Bank v Fairclough Building Ltd (No.2) 21. The issue there was whether a maintenance sub-contractor (C) was entitled to claim damages in tort from the roof cleaning sub-sub-contractor (T) to which it had passed on some of its obligations under the sub-contract with Fairclough. T s careless performance of the cleaning work led to C being liable in damages to Fairclough for breach of the sub-contract. The claim was undoubtedly for economic loss, and it was a claim for breach of a concurrent duty of care alleged to be owed by a contractor in respect of skilled but non-professional work. C denied that it owed such a duty of care, but the claim succeeded. Beldam LJ (with whom the other members of the Court agreed) cited Henderson and put it this way, 22 [T] had contracted with [C] to carry out work which it was aware [C] had agreed to peform under its contract with Fairclough, thus providing a foundation for the existence of a duty to avoid causing economic loss. A skilled contractor undertaking maintenance work to a building assumes a responsibility which invites reliance no less than the financial or other professional adviser does in undertaking his work. The nature of the responsibility is the same though it will differ in extent. 19. There matters rested until January 2010, when HHJ Stephen Davies gave his first instance decision in Robinson v Jones. 23 The case concerned a claim for economic loss consequential upon defects in a house which the defendant building contractor had built and which the claimant had bought from it in It was alleged that flues for gas fires had not been constructed in accordance with good building 21 (1995) 76 BLR At 53 and [2010] EWHC 102 (TCC). 8

9 practice or the applicable building regulations. The claimant only became aware of the defects in 2004, and sought to rely on section 14A of the Limitation Act Judge Davies decided preliminary issues as to (1) whether the claimant had a cause of action in tort and (2) whether his claims were statute barred. 20. To reach his decision on the first preliminary issue, Judge Davies undertook a lengthy and detailed exposition of the authorities. He concluded, with Judge Seymour in Tesco, that Henderson allowed the possibility that a contractual requirement to exercise reasonable skill and care would be sufficient to constitute an assumption of responsibility by a building contractor to its employer. He said, 24 For all practical purposes, therefore, it seems to me that there is no need to look for anything more than the contractual relationship. He went on to emphasise that it is the fact that the contract includes at least an implied duty of care that gives rise to the concurrent duty in tort: 25 I observe that in such cases it is not merely the fact that there is a contract which gives rise to the duty of care. the contractual context will include, in the typical building contract case, the fact that the client, considered objectively, must believe that the builder is both willing and able to undertake the works with reasonable care and skill. If that were not so then undoubtedly the client would not contract with that particular builder. Again the builder must, considered objectively, be aware that the client holds that belief, because again the builder must be taken to know that a client who did not hold that belief would not contract with him to do the building works. Of course it may be that, before the contract was entered into, the builder made some statement as to the quality of his workmanship upon which the client relied. But it seems to me that even in the absence of an express statement of that kind there will still in the typical case be an implicit representation to the same effect upon which the client, whether consciously or unconsciously, can be taken to have relied. Therefore, and in the absence of circumstances pointing to a different conclusion, all the necessary ingredients to establish a tortious duty of care are present. 24 At [57]. 25 At [57]. 9

10 21. Judge Davies regarded as more difficult the question whether there should be a distinction between the design services provided by a builder and the building work which he carried out. He concluded that there should not be. He took the view that building contractors possessed a skill which their clients relied upon them to exercise carefully, whether in carrying out their design, or their construction work. There was no sensible reason for different results to be achieved depending upon whether, in that case, the flues were defective due to the builder's negligent design as opposed to its negligent construction. The duty extends just as much to the physical workmanship itself The real distinction, for Judge Davies, was between those contractual obligations which involved the exercise of reasonable skill and care (for which there would ordinarily be a concurrent liability in tort) and other contractual obligations which had no equivalent in tort, such as a strict obligation to provide work which was fit for purpose (for which there would be no concurrent liability in tort). 23. Mr Robinson s contract for purchase imposed an express obligation upon the contractor in an efficient and workmanlike manner to complete the work shown on the drawings and specification. Judge Davies plainly regarded this obligation as tantamount to a duty to exercise reasonable care and skill in carrying out the construction work. Without more, therefore, the building contractor would have owed a concurrent duty of care in tort to safeguard against economic loss. However, the contract also incorporated conditions which provided that the contractor s liability for breach was limited to that set out in the then-current NHBC Agreement. Judge Davies held that the effect of those conditions, which survived a challenge under the Unfair Contract Terms Act 1977, was to prevent a concurrent duty of care arising. Thus Mr Robinson s victory on the issue of whether a building contractor could owe a concurrent duty of care in respect of defects ultimately did not avail him. 26 At [60]. 10

11 24. When Akenhead J s decision in How Engineering Services v Southern Insulation (Medway) Ltd 27 was published in July 2010, it seemed clear that the weight of authority favoured a building contractor s concurrent duty of care to avoid causing economic loss. An M&E sub-contractor (How) brought a claim in negligence against its installation sub-sub-contractor (Southern). How alleged that Southern had failed to carry out its installation work with due skill and care, and that as a result, How had incurred liabilities in damages to others above it in the contractual chain. On the basis of Henderson, he concluded, 28 a concurrent duty of care in tort can exist as between the two parties to a contract for services or for the supply of goods and services. That duty of care will be definable by reference to the contractual responsibilities and liabilities assumed by the parties to the contract and, if for instance, certain types of loss are, on the proper interpretation of the contract, excluded or otherwise irrecoverable, the duty of care is similarly circumscribed. 25. Adopting the scope of duty analysis made popular in SAAMCO, 29 Akenhead J held that if a type of loss was recoverable under the contract, it would likewise be recoverable in tort unless there was any supervening rule in tort which prevented recovery. He plainly considered that no such rule prevented the recovery of damages for economic loss from a builder with whom the claimant had a contract, since he held that Southern did owe a concurrent duty of care in tort to carry out its work with reasonable skill and care so as to avoid causing economic loss to How: 30 There can be no doubt from the authorities that there can be a concurrent duty of care in tort, that is a duty of care which is concurrent with a contractual duty, in particular a contractual duty to exercise reasonable care and skill. The Court of Appeal in Robinson 27 [2010] EWHC 1878 (TCC). 28 At [14]. 29 South Australia Asset Management Corp v York Montague Ltd [1997] AC At [20]. 11

12 26. The Court of Appeal upheld Judge Davies decision that, on the facts, the exclusion clauses in the parties contract prevented any concurrent duty of care arising in tort (and that those clauses survived scrutiny under UCTA). That is the ratio of the decision and it is a narrow one. 27. However, the decision was plainly intended to have a wider import. The leading judgment was delivered by Jackson LJ, a past judge-in-charge of the TCC. He expressly quoted and was responding to a call in Keating on Construction Contracts 31 for an answer at appellate level to the question whether, and if so when, the making of a building contract can itself constitute an assumption of responsibility within the meaning of Henderson. 28. The cases mentioned above in which it was held that a contractor does owe a Henderson concurrent duty have all recognised that, for there to be the requisite assumption of responsibility, it is necessary that the contractor undertakes a contractual obligation to exercise reasonable skill and care (or similar, eg. an obligation to carry out the works in a good and workmanlike manner). It was made clear in Henderson that no concurrent duty of care will arise when the contractor s obligation is more onerous, such as a strict obligation to provide building which is fit for purpose. The reason is that such an obligation is a creature of contract only; it has no equivalent in tort. It is important to note that there was no such strict obligation in Robinson: the contract described the builder s primary obligation as follows: The vendor will in an efficient and workmanlike manner complete the work shown on the drawings and specification relative thereto already produced and made available for inspection by the Purchaser. 29. The question for the Court of Appeal was, therefore, whether (as the judge found) a contractual undertaking to exercise reasonable skill and care in workmanship would give rise to a concurrent duty of care in tort to prevent economic loss in the form of defective workmanship. It could do so, following Henderson, only if that undertaking amounted to a Hedley Byrne assumption of responsibility th edn (2006), para

13 30. It is not entirely easy to identify the point at which the Court of Appeal parted company with the reasoning of HHJ Davies, not least because the judgments do not refer to his reasoning in any detail. Jackson LJ reviewed some of the case law referred to by HHJ Davies and concluded that, 32 [67/68] my conclusion is that the relationship between (a) the manufacturer of a product or the builder of a building and (b) the immediate client is primarily governed by the contract between those two parties. Long established principles of freedom of contract enable those parties to allocate risk between themselves as they see fit. Absent any assumption of responsibility, there do not spring up between the parties duties of care co-extensive with their contractual obligations. The law of tort imposes a different and more limited duty upon the manufacturer or builder. That more limited duty is to take reasonable care to protect the client against suffering personal injury or damage to other property. The law of tort imposes this duty, not only towards the first person to acquire the chattel or the building, but also towards others who foreseeably own or use it. 31. That was uncontroversial: nothing in Judge Davies decision suggested otherwise. Where the Court of Appeal and the judge differed was, rather, in deciding how and in what circumstances the Henderson duty arises: what would amount to an assumption of responsibility sufficient to justify a duty to avoid economic loss? 32. Jackson LJ made plain that, in the absence of authority, he would hold that a builder s concurrent duty of care was limited to a duty to avoid causing physical damage to other property and personal injury. 33 In the light of Henderson, however, he accepted that this conclusion was not open to him. It remained necessary to look at the relationship and the dealings between the parties, so as to decide whether the contractor assumed responsibility to Mr Robinson to safeguard him from economic loss caused by defective workmanship. 32 At [67]/[68]. 33 At [82]. 13

14 33. To that question, the Court of Appeal s answer was a firm, No. However, their reasoning offers limited explanation of that conclusion and, in consequence, limited guidance as to the circumstances necessary for a different conclusion to be reached. 34. The Court did make plain that a professional normally would be regarded as having made an assumption of responsibility. Jackson LJ said, 34 It is perhaps understandable that professional persons are taken to assume responsibility for economic loss to their clients. Typically, they give advice, prepare reports, draw up accounts, produce plans and so forth. They expect their clients and possibly others to act in reliance upon their work product, often with financial or economic consequences. but he went on to say that it would be nonsensical to conclude that, 35 When one moves beyond the realm of professional retainers, it by no means follows that every contracting party assumes responsibilities (in the Hedley Byrne sense) to the other parties co-extensive with the contractual obligations. That would be nonsensical, he explained, because the law of tort and the law of contract are distinct: 36 Contractual and tortious duties have different origins and different functions. Contractual obligations spring from the consent of the parties and the common law principle that contracts should be enforced. Tortious duties are imposed by law, as a matter of policy, in specific situations. Sometimes a particular set of facts may give rise to identical contractual and tortious duties, but self-evidently that is not always the case. 35. Beyond pointing out that professionals (a term he did not attempt to define) expected their clients to rely upon their work products, Jackson LJ did not explain what it is about professionals or their work which means that their contractual 34 At [75]. 35 At [76]. 36 Ibid. 14

15 obligations to exercise reasonable skill and care give rise to concurrent duties of care to safeguard against economic loss. An expectation that the client will rely upon the work product seems to offer little basis to distinguish professionals from others, such as building contractors, who hold themselves out as possessing special skills. It could well be argued that when an employer moves his employees into a building constructed for him by a building contractor, he relies upon the contractor s work product (the building) to be free of construction defects, and the contractor expects him so to rely. Similarly, the defendant contractor which built Mr Robinson s gas flues expected him to rely upon the flues having been constructed with skill and care, and he did. 36. Jackson LJ was adamant, however, that such a contractor would not be held to have assumed responsibility in the Henderson sense. Whatever might amount to an assumption of responsibility in respect of workmanship, there had not been such an assumption on the facts of Robinson. He said, 37 In the present case I see nothing to suggest that the defendant assumed responsibility to the claimant in the Hedley Byrne sense. The parties entered into a normal contract whereby the defendant would complete the construction of a house for the claimant to an agreed specification and the claimant would pay the purchase price. The defendant's warranties of quality were set out and the claimant's remedies in the event of breach of warranty were also set out. The parties were not in a professional relationship whereby, for example, the claimant was paying the defendant to give advice or to prepare reports or plans upon which the claimant would act. 37. Thus, the builder s express contractual obligation to carry out the works in accordance with the design and in a workmanlike manner was not sufficient to amount to an assumption of responsibility. It might be thought that it was the countervailing effect of the clauses excluding any remedy outside the NHBC Agreement which led Jackson LJ to this conclusion. Clearly those clauses were significant; but if that were the only reason, it is difficult to see why Jackson LJ 37 At [83]. 15

16 drew the contrast between the building contract and a professional relationship in this context. 38. Jackson LJ did not say that a builder s contractual undertaking to exercise reasonable care and skill would never be enough to create an assumption of responsibility, or that it would be irrelevant. But plainly significantly more is needed. What that more might be, is difficult to tell from Jackson LJ s judgment. 39. Stanley Burton LJ agreed with Jackson LJ but was more categorical: 38 In my judgment, it must now be regarded as settled law that the builder/vendor of a building does not by reason of his contract to construct or to complete the building assume any liability in the tort of negligence in relation to defects in the building giving rise to purely economic loss. The same applies to a builder who is not the vendor, and to the seller or manufacturer of a chattel. For him, the important distinction was between the product, for defects in which there could be no liability outside contract, and damage to other property caused by defects in the product, for which Donaghue v Stevenson liability in tort would attach. It is difficult to avoid the conclusion that he rationalised the professional s concurrent duty of care not as a duty of care to avoid causing economic loss which arose because of a Hedley Byrne assumption of responsibility, but as a duty to avoid causing damage to other property. He said, At [92]. Thus the crucial distinction is between a person who supplies something which is defective and a person who supplies something (whether a building, goods or a service) which, because of its defects, causes loss or damage to something else. An architect owes a duty of care not in respect of the value of his drawings or specification, but in respect of the building that is to be constructed with them. The person who contracts with an architect cannot sue him in the tort of negligence simply because the plans turn out to be defective and therefore of no value or less value than they should be. The architect will be liable to his client in contract if his plans are worthless. The client can sue in tort 39 At [93]-[94]. 16

17 if he uses the plans and the building constructed with them is defective or causes him injury. The managing agents in Henderson v Merrett Syndicates Ltd owed a duty of care to their Names because they were managing the Names' assets. It is important to note that a person who assumes a contractual duty of care does not thereby assume an identical duty of care in tort to the other contracting party. The duty of care in contract extends to any defect in the building, goods or service supplied under the contract, as well as to loss or damage caused by such a defect to another building or goods. The duty of care in tort, although said to arise from an assumption of liability, is imposed by the law. In cases of purely financial loss, assumption of liability is used both as a means of imposing liability in tort and as a restriction on the persons to whom the duty is owed. The duty of care in tort applies to damage to other property than that supplied, or to personal injury or death, caused by a defect in the property supplied. The provider of a service, such as an accountant or solicitor, owes a duty of care in tort to his client because his negligence may cause loss of the client's assets. 40. That is a novel analysis. It may be noted that Kay LJ, the third member of the Court, expressly agreed with Jackson LJ only. Where we are now 41. Although the ratio of the decision in Robinson is narrow, it is clear that the Court of Appeal was of the view that : (1) building contractors will normally not owe a concurrent duty of care extending to economic loss because their work is not of a kind which gives rise to an assumption of responsibility; (2) a building contractor s contractual obligation to exercise reasonable skill and care will not suffice to create such a duty of care in tort because, of itself, it does not amount to an assumption of responsibility. 17

18 42. However, viewed in that wide sense (as it was surely intended to be viewed) the decision leaves numerous questions unanswered: (1) the Court did not directly address Judge Davies s argument that a builder has a specialised skill, he knows his employer relies upon him to apply that skill with reasonable care so as to provide a defect-free work product and he knows that failure to do so will cause the employer to suffer economic loss. It is not easy to apply a distinction between a professional skill and the skill of a mere artisan to the modern construction industry. The range of skills which might be regarded as professional is ever-expanding and the advance of technology means that highly specialist contractors proliferate. For example, is there really a principled distinction between the work of the generalist M&E engineer (traditionally regarded as a professional) and that of the specialist lighting contractor? Each may prepare a lighting design, and it may well be that the specialist contractor s designs are far more sophisticated than those of the generalist engineer. Indeed, generalist construction professionals commonly defer to specialist contractors these days. To take another example, what is the position of a management contractor? Although such a contractor enters into building contracts, its function is really project management, which these days is recognised as a professional service. It is unclear whether a management contractor would be regarded as owing a concurrent duty of care (because of their professional function) or as not owing a duty of care (because they contract to provide a finished building); (2) the Court did not refer to its own decision in Barclays v Fairclough (No.1), although it had been dealt with in detail by HHJ Davies. As authority for the imposition of a concurrent duty of care to avoid economic loss upon a cleaning contractor, that authority would appear to be in direct conflict with the decision in Robinson. The resolution might be thought to lie in the fact that the contract in Barclays was purely to provide (roof cleaning) services, whereas a building contractor agrees to provide materials as well as services. However, this is not entirely satisfactory. It was the building contractor s obligation to build in a workmanlike manner or (pursuant to s.13 of the Supply of Goods 18

19 and Services Act 1982) with reasonable skill and care, which Judge Davies regarded as giving rise to the concurrent duty of care in tort in respect of that part of the contractor s work. The builder s obligation to provide materials of satisfactory quality is a strict obligation which would not on any view give rise to a concurrent duty in tort; (3) nor did the Court address its prior decision in Batty v Metropolitan Realisations Ltd, 40 which was also cited by the judge. That decision was to the effect that a developer which contracted to build a house to agreed plans in an efficient and workmanlike manner owed a concurrent duty of care to avoid economic loss to the purchaser. 41 It will be noted that this was exactly the same obligation that the contractor in Robinson undertook (leaving aside the effect of the exclusion clauses); (4) Stanley Burton LJ said that the first instance decisions to which Jackson LJ referred 42 were wrong insofar as they decided that a building contractor owed a duty of care in respect of economic loss caused by defects in the building they constructed. Those cases included Storey v Charles Church Developments, in which HHJ Hicks QC had held that a design and build contractor owed a duty in respect of his design work (only). Stanley Burnton LJ s distinction between those who provide a finished product (contractors) and those who provide a means to a finished product (professionals) suggests that he did intend to say that Storey was wrong. But it is not clear how this is to be reconciled with the view of Jackson and Kay LJJ that a (professional) designer would owe a concurrent duty of care. Certainly, there is force in Judge Hicks view that the distinction between a professional designer and a designer who also builds offers no satisfactory basis for treating them differently. It would be odd if a designer were to assume responsibility when 40 [1978] QB That aspect of the decision in Batty was referred to without disapproval by the House of Lords in D&F Estates v Church Commissioners [1989] 1 AC 177; and it was not the subject of criticism in Murphy. 42 All of those mentioned above, apart from How Engineering Services v Southern Insulation (Medway) Ltd (Akenhead J), which was apparently not cited. 19

20 he contracts directly with the employer but not when he agrees to build as well. The difference is that his designs do not pass through the hands of the employer before they are built. But it is unreal to say that the employer places any less reliance upon their having been prepared with due care and skill; (5) at best, since Stanley Burton LJ s view was the minority view, it is unclear whether Storey is to be regarded as wrongly decided. The result is that there is no clear authority as to whether a design and build contractor owes a concurrent duty of care in respect of his design work. Since design and build continues to be the single most popular form of procurement in the UK, this is unsatisfactory; (6) the Court of Appeal was concerned to avoid allowing that a manufacturer or supplier could owe a concurrent duty of care to avoid economic loss, but it is not clear why that should be a concern. A supplier s obligations under the contract of sale will be strict obligatuions, eg. the statutory implied warranties of satisfactory quality and fitness of purpose. It was quite clear before Robinson that such obligations, which are not equivalent to the tortious duty of care, would not constitute an assumption of responsibility in any event. 43. But perhaps the single most unsatisfactory aspect of the decision is that minimal guidance was offered as to what will constitute an assumption of responsibility by a building contractor. We know that professionals (somehow) assume responsibility for economic loss when they contract to provide their services, but whether they do so simply by being professionals or by accepting obligations to exercise reasonable skill and care in performing their services or because the outcome of their services is a product which the employer relies upon when he engages a contractor to build in the light of the professional advice, remains unclear. We also know that a building contractor with a simple contract to build does not assume responsibility, even although he warrants that he will exercise reasonable care and skill. However, what more he might need do so as to create an assumption of responsibility in respect of defective workmanship is difficult to imagine. 20

21 44. The lack of such guidance is particularly unhelpful because the concept of assumption of responsibility is itself a broad and general one, which is inherently unpredictable in its application. As Arden LJ has put it, 43 It is, however, apparent from the foregoing that the precise limits of the concept of assumption of responsibility are still in a state of development. A difficulty which the court faces is that there is no comprehensive list of guiding principles to help the courts determine when an assumption of responsibility can be said to arise...the courts have, therefore, to look at all the relevant circumstances, and...determine whether the circumstances fall within the situations in which an assumption of responsibility has previously been held to exist or whether the circumstances are closely analogous to and consistent with the situations in which liability has been imposed in previous cases. But, as I have attempted to show, the current state of the law on builders concurrent duties means that recourse to previous decisions to identify when a contractor may be said to have assumed a responsibility for the economic consequences of defective workmanship is unlikely to be helpful. 45. The distinction recognised in Storey - between the professional elements of a building contractor s contractual obligations and the ordinary construction elements would be a workable basis for distinguishing those obligations in respect of which there is a concurrent duty and care, and those in respect of which there is not. Although the lines between design and construction are not always easy to draw, the distinction is one with which the construction industry (and construction lawyers) is familiar. Thus, for example, the standard form JCT contracts include an express professional warranty of skill and care in respect of the design element of the contractor s design portion, and require the contractor to take out professional indemnity insurance in respect of it. To regard such obligations as creating an assumption of responsibility would be consistent with the majority line in Robinson, if not with Stanley Burnton LJ s alternative analysis. But it remains unclear why the 43 Precis Plc v William M Mercer Ltd [2004] EWCA Civ 114 at [24]. 21

22 contractor s warranty to exercise reasonable skill and care in workmanship should not, likewise, amount to an assumption of responsibility. Conclusion 46. Regrettably, Robinson offers little to assist those of us who have to advise contractors and employers whether the cost of remediating defects can be recovered in tort. We now know that the existence of the building contract, of itself, is not enough. But that is almost all that we do know. 47. Unless the contract contains effective provisions excluding any right of recovery in tort, or until the Law Commission s proposals to harmonise the limitation regime in contract and tort are made effective, 44 advisers will have to grapple with the questions such as, How much of a professional was this contractor? and/or Did this contractor otherwise assume a responsibility to take care to prevent economic loss? 48. In short, it s fair to say that in Robinson we have only limited clarification and plenty of scope for future confusion. So here s to you, Mr Robinson: lawyers love you more than you can know! 44 Law Commission Report on Limitation of Actions (Law Com. 270; 2001). 22