The Law of Professional Negligence and Construction Professionals 6 December 2017 Jamie Ritchie, Solicitor: Projects, Construction & Energy

Who are Construction Professionals? Engineers (ICE / Engineers Ireland): Surveyors (RICS) Quantity Surveyors Civil Engineers Building Surveyors Mechanical Engineers Hydrographic Surveyors Electrical Engineers Topographical Surveyors Structural Engineers Project Managers Architects (RIAI) Planning Consultants Residential Architect Town Planners Commercial Architect CDM Coordinators Landscape Architect Health & Safety Professionals Industrial Architect Other design professionals Geospatial Modellers BIM Coordinators The Law of Professional Negligence and Construction Professionals, CMG Irish Construction Law Conference 6 December 2017

What is negligence? “Negligence is the omission to do something which a reasonable person, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do or doing something which a prudent and reasonable person would not do.” Blyth v Birmingham Waterworks Co (1856) The Law of Professional Negligence and Construction Professionals, CMG Irish Construction Law Conference 6 December 2017

What can amount to negligence? Negligent certification Obvious and sustained lack of any diligence Inadequate examination of sites Disregard of professional duties by, for example issuing incomplete design documents or inaccurate designs Errors in design Errors in preparation of bill of quantities Failing to take reasonable steps in selecting contractors Ignoring specific instructions Disregard of contractual obligations to manage the project properly, by failing to supply qualified personnel for the project Non-compliance with Building Regs legislation, planning and building control requirements and codes of practice Inadequate inspections or supervision Failing to assign personnel to carry out critical tasks and refusing to allocate enough resource to the project. Failure to ensure that the quality of work matches the standard contemplated. Poor Contract Administration

Elements of Negligence in Ireland A duty of care must exist Glencar Explorations plc v Mayo County Council [2002] 1 IR 84 That there was a failure to conform to the required standard of care Actual loss or damage which was reasonably foreseeable by the defendant (ie. Not too remote) A sufficiently close causal connection (or ‘proximity’) between the conduct and resulting injury to the plaintiff McKenna v Best Travel Ltd [1998] 3 IR 57

Dunne –v- National Maternity Hospital [1989] IR 91 The Five Dunne Principles: They must use ordinary care of an equivalent professional They must not take a course of action which an equivalent professional would not take They cannot escape liability from negligent conduct by following an approved practice if it can be shown to be risky or defective in the circumstances An honest difference of opinion between professionals does not mean negligence It is not for a Judge to decide which of two alternative methods is in his or her opinion preferable. A Judge’s function is merely to decide whether the method followed, on the evidence, complied with the careful conduct of a construction professional of like specialisation and skill to that professed by the Defendant.

Brandley & anor –v- Deane & anor [2016] IECA 54 The Irish Supreme Court recently considered at what juncture time began to run for the purposes of the Statute of Limitations Case involved defectively installed foundations, which later caused cracks and damage to the external walls of houses. The defendants (a ground works contractor and a supervising consulting engineer) pleaded that the developers’ claim was “statute-barred” under the Statute of Limitations 1957, meaning that the time limit of six years for the developers to initiate proceedings had already passed by the time proceedings began. 

Supreme Court 2017 "... I accept that there is a definite distinction between a “defect” and the subsequent damage which it causes.  Time runs from the manifestation of damage, rather than of the underlying defect.  Thus it is not the latent defect which needs to be capable of discovery: it is the subsequent damage caused by that latent defect.” “it is not so easy to pin down precisely what is meant by “manifest”, and especially how one might differentiate it from the “discoverability test” as it appears in [case law].  From a reading of the case law, I understand “manifest” to mean the date on which damage is capable of being discovered by a plaintiff…” Mr Justice McKechnie

Lessons to take away from Brandley A cause of action in damages, for a non-personal-injury claim, accrues only at the time that “damage” becomes “manifest”. Damage is “manifest” when it is capable of being discovered (irrespective of whether it has or has not been discovered or ought to have been discovered). In a construction context, there may be a distinction between defective work, such as the installation of defective foundations, and actual damage occurring or becoming manifest. A “discoverability” test does not apply in respect of non-personal-injury claims in tort/negligence. Causes of action in contract and in tort/negligence may accrue at different points in time.

Cantrell v. AIB [2017] IEHC 254 The plaintiffs invested in property investment schemes. The claims were mainly that the defendants did not follow through with what was promised in the prospectus. The High Court determined by way of preliminary issue that the claims in breach of contract were statute barred because the cause of action accrued when the investments were entered whereas most of the claims in tort survived because the cause of action accrued when the actual loss was suffered. Note also S.71 Fraudulent Concealment

MT Højgaard A/S (Respondent) v E MT Højgaard A/S (Respondent) v E.On Climate & Renewables UK Robin Rigg East Limited and another (Appellants) [2017] UKSC 59 E.On engaged Højgaard to design fabricate and install 60 off shore wind turbines at Robin Rigg Shore Wind Farm in the Solway Firth. The foundations were designed according to J101 standards, an internationally recognised design standard used in the industry at the time. A technical document in the Employer’s Requirements noted that the turbine foundation should have a service life of 20 years. Højgaard was liable for the remedial works.

McGee v. Alcorn [2016] IEHC 59 An architectural technician issued a Certificate of Supervision confirming that the foundations were satisfactory. In fact the foundations were unusually defective and had been laid in unsuitable ground. Cracks began to appear in the house and ultimately substantial works were required to be carried out to underpin the foundations, notwithstanding which, although the house was left with a permanent tilt. The court held that the case involved the plaintiff purchasing a new house, not a purchaser down the line and it was a certificate as to the foundations, a matter hard to check on visual inspection by a purchaser or a purchaser’s surveyor who must therefore rely on the assigned certifier’s certificates.

James Elliot Construction v Irish Asphalt and others [2014] IEHC 208 Court applied the test for consolidation laid down in Duffy v News Group Newspapers [1992] namely: Is there a common question of law or fact? Will there be a substantial saving? Is there a likelihood of a miscarriage of justice? “While it can be said that the nature of the causes of action are different […] and that the nature of the loss and damage in each case is different […] the underlying factual matrix that gives rise to the whole action is precisely the same, that is the supply of hardcore allegedly containing pyrite which then allegedly caused severe damage to the buildings.”

Bank of Ireland (UK) Plc v Watts Group Plc [2017] EWHC 1667 (TCC) TCC was asked to considered the duty of care of a quantity surveyor providing a report to a bank as part of its lending decision for a property development in York. The bank argued that the QS firm’s Initial Appraisal Report was negligent and that, if it had been properly prepared, it would not have permitted drawdown of the loan. When the Developer went insolvent building work ceased. Despite the property being sold, the bank suffered a loss of £750,000. The firm denied negligence and argued that it was the bank’s negligent decision to lend that caused the loss. Ultimately, the bank’s claim failed.

Bank of Ireland case cont. Court held that even if negligence had been established, there would still be no damages awarded as: The case failed on causation; and The claimed loss was not recoverable as the role of the surveyor amounted to providing information rather than advice. This case demonstrates that claims against bank monitoring surveyors are far from clear cut and that many hurdles are needed to be overcome in order to succeed in such a claim.

Persimmon Homes Ltd and Anor v Ove Arup & Partners Ltd and Anor EWCA Civ 373 [2017] Arup was engaged by Persimmon for engineering services Asbestos was encountered and the claimants maintained that its quantity was substantially more than expected and claimed for damages Arup’s contract contained a term stating: “Liability for any claim in relation to asbestos is excluded” Persimmon claimed that the clause did not exclude liability for negligence and cited the contra proferentem rule Ordinarily to exclude negligence the exclusion must be express The court pointed out that the contra proferentem rule required ambiguity for application Court held in favour of Arup to the extent that the clause excluded all claims in respect of asbestos and that the language was sufficiently clear

Walsh -v- Jones Lang Lasalle Ltd [2017] IESC 38. The Supreme Court analysed the law of negligent misstatement and considered to what extent that a disclaimer of responsibility absolved a supplier of information from liability for economic loss incurred by a recipient of that information The court held that the language used was “clear and unambiguous” and signalled an obvious intent to absolve JLL of any duty of care in relation to the accuracy of the information which had been provided. Consider the implications for site information, Employer’s Requirements in the NEC context or the Works Information in a JCT context. Such contracts often contain bespoke clauses stating that the accuracy of the info must be verified independently by the Contractor or relevant design team consultants. Additionally, in the context of drafting contracts, it is extremely common practice for lawyers to head up technical schedules during the drafting process (TBC at a commercial and technical level by the Contractor). This could have implications for future apportionment of liabilities when parties seek to rely on said information in future Irish construction disputes.

The Default - Litigation Negatives Positives Quality of Judges Long track history Excellent for multi party disputes Costs recovery Exposure and Publicity Duration Cost Subject to appeal

Courts will now disallow unnecessary expert evidence New rules of court took effect from October 2016 which gave the High Court power, amongst other things, to exclude expert evidence where the court considers it is now “reasonably required to enable the court to determine the proceedings” O36, r58(1), RSC “No longer are parties free to call expert witnesses willy nilly” O’Brien v Clerk of Dáil Éireann The judgment shows the courts willingness to exclude on an ex ante basis expert evidence proffered in litigation which the court believes does properly address or relate to the issues in dispute.

There is very little to lose and much to gain. Mediation Empirical evidence from CIArb shows that up to 90% of mediations are settled on the day. There is very little to lose and much to gain. Mediation can substantially reduce the costs of a dispute. Mediation can potentially provide a solution to the problem of the client in six weeks rather than six months or even years.

A solicitor is obliged to advise their client Mediation Act 2017 The Mediation Act 2017 was signed into law on 2 October 2017 and the commencement date is anticipated as 1 January 2018. A solicitor is obliged to advise their client The Act encourages Mediation The Act does not compel parties Court may have regard to a party’s refusal when awarding costs in the proceedings. 

Mediation Act contin. Section 18 of the Act sets out that the clock can be stopped on the limitation period Parties need to enter in to an agreement to mediate compliant with Section 7 of the Act. The Agreement to Mediate will set out formalities of the mediation including the manner in which it will be conducted. It contains details relating to fees and costs, place and time of the mediation, confidentiality and termination.

What not to do as a Defendant Panic! Admit liability and offer to make good. Ignore

What you should do as a Defendant Be Proactive (note – even a claimant is under a duty to mitigate its loss) Get out your PI policy (note to Liquidators – this might apply to you too!) Notify your insurer Collate your documents (Records, Records, Records…) Prepare a background, running narrative and ensure contemporaneous records are kept.

What happens next? Insurers investigate and if insurance policy answers insurers appoint solicitors Insured professional cedes control of the defence to the Insurance Company The Insured has a duty to co-operate with the insurer in defending the claim – if they don’t there may be sanctions on cover Solicitors investigate and engage in pre action correspondence with the other side Claimant issues / serves proceedings

Can you minimise the risk of the claim? Do what you were engaged to do Certify only when you should Keep within agreed scope of services Only provide services that are within your competence Work with competent, solvent and insured team members (a minimum insurance requirement should always be in the terms of appointment of other team members as a condition precedent) The insured professional has very little control over what happens

Limiting your liability at the contract negotiation stage Standard form clauses having the authority of being tried and tested Bespoke Clauses: Risk clauses Indemnity clauses Exclusion clauses Regardless of any limitations on liability it still doesn’t stop the plaintiff from suing everyone.

The Implications of Grenfell in an Irish context The Oireachtas held an emergency debate in June 2017 in relation to Building Standards, Regulations and Homeowner Protection.   During the debate it was acknowledged that “thousands of people in Ireland have been affected by poor quality housing following the building boom of the past 20 years."  It is now more relevant than ever for designers, builders, owners and managers to ensure that they are fully informed and compliant with their legal obligations in relation to Building Control Regs, Fire Safety Acts and European Union (Construction Products) Regulations 2013

What to take away from Grenfell? Increased need to focus on enforcement and improvement of the existing fire safety regulatory framework.  Closer interaction between negligence and breach of statutory duty (with emphasis on BCAR). In a professional negligence context, Grenfell will undoubtedly focus the attention of the courts on fire safety and the applicable standards of care. Recent focus on schools projects. Earlier in 2017 an audit was ordered of 30 school building projects overseen by one Northern Ireland company during the past 14 years.

Builders will soon be forced to join a register to prove they are competent The Construction Industry Register Ireland (CIRI) was launched by the CIF three years ago with the promise that it would “try to distinguish legitimate construction companies / sole traders from those who have given the industry a bad name.” This is now due to be put on a statutory basis and the government has approved the drafting and publication of the Building Control (Construction Industry Register Ireland) Bill 2017 Builders will now be required to demonstrate practical experience of working in construction within the last three years and show knowledge of the industry’s laws and regulations.

Further noticeable trends in 2017 Removal of the height cap on buildings in Dublin Planning Permission obligations are on the increase in a design and build context Significant increase in the use of UK standard forms in Ireland New contracts = new reporting obligations = new standards to be observed by those administering the contract Contractors are still pricing and executing works proportionately to the funds available which is also a problem. As the sector becomes more digitised, standards of care continue to evolve

Questions Thank you Jamie Ritchie T: 086 130 4258 E: jritchie@lkshields.ie www.lkshields.ie Thank you