Aren’t you contracted to fix that?
Cathrine Ripley gives a summary of a recent High Court (Technology and Construction Court) judgement which emphasises the importance of clarifying the scope of remedial work in the construction industry.
Some of the difficulties with engaging a sub-contractor to carry out remedial works were demonstrated in the recent case of Williams Tarr Construction Ltd v Anthony Roylance Ltd and Anthony Roylance.
There were two key issues in this case:
- What was the scope of the engagement?
- Was the defendant engaged in his personal capacity or through his company?
What was the scope of the engagement?
The claimant was the main contractor for a housing development project which ran into difficulties when constructing a retaining wall because the water flow behind the retaining wall was greater than anticipated. The claimant engaged the defendant, a civil engineer, who designed a drain behind the retaining wall. After construction, the retaining wall was found to be defective and the claimant had to carry out further works.
The claimant argued that the defendant had been engaged to provide a solution to the retaining wall and brought a breach of contract claim to recover his losses. The defendant argued that he had only been engaged to design the drain behind the retaining wall, and as there was no suggestion that there were any problems with the drain, there was no breach of contract.
The extent of the scope of works was important because it determined which term would be implied into the contract.
The Judge reasoned that if the defendant was engaged to provide a solution to the retaining wall, then he would be subject to the implied term of ensuring that the retaining wall would be fit for purpose because of the remedial context of the engagement.
However, if the defendant was only engaged to design the drain then he would be subject to the implied term to act with reasonable care and skill. This is a less onerous obligation because the defendant would only need to ensure that the drain itself was designed with reasonable care and skill to avoid liability regardless of whether it resolved the problems with the retaining wall.
After undertaking an in-depth analysis of the correspondence between the parties dating back to 2010, the Judge held that the scope of works was limited to designing the drain and did not extend, either expressly or impliedly, to designing or re-designing the retaining wall nor did it include a warranty that the wall would be fit for its purpose following the drainage works.
This decision was very specific to its particular facts and it highlights the importance of ensuring that any contract for the provision of services accurately describes what the services include (and, just as importantly, what they don’t include).
In this case, if the scope of works had extended to designing a solution to resolve the retaining wall problems the defendant could have been liable for the cost of the additional works carried out, and any losses caused by the delay. There is also a risk that a contractor who is subject to a fitness for purpose obligation may have difficulty in claiming under its professional indemnity insurance policy.
Status of the contractor
The Judge also considered whether the claimant had contracted with the civil engineer in his personal capacity or with his limited liability company.
On the facts, it was held that the defendant had acted in his personal capacity. The Judge took a number of factors into account including: the defendant had not used company letterheads, most of the email correspondence had been from a personal email account and the invoice was addressed to the defendant in his personal capacity.
Therefore, if the Judge had found in that the defendant was in breach of contract he would have been personally liable.
Incorporating a company in order to provide services may not be enough to protect yourself against personal liability. Clients who wish to provide contracting services through a limited liability company should seek advice to ensure that their conduct is consistent with their intentions.
If you have any questions about the issues raised in this article please contact our commercial & technology team.