Introduction
Earlier this year the court handed down its decision in a case which, unfortunately, reflects a concern we previously highlighted in relation to the Building Safety Act and its effects on the liability landscape for construction professionals.
As long ago as August 2022 we provided our clients with an overview of some of the likely impacts of the Building Safety Act, a number of which flowed from the amendments made by the Act to the 1972 Defective Premises Act (“DPA”). That previous article can be found here.
One of the points we made was that it is not possible to limit or exclude by agreement liability for claims under DPA – rendering ineffective the usual protection afforded by liability caps and/or net contribution clauses in our clients’ agreements and warranties, notwithstanding (controversially) that the agreement may have been formed many years prior to the amendments being made to the DPA.
The Case
Vainker v Marbank was a case relating to the construction of a new house which suffered from a long list of defects, some more serious than others, but which in the court’s view rendered it unfit for habitation, particularly in relation to glass balustrades which were found to be unsafe because the wrong type of glass had been used (merely toughened glass, rather than toughened and laminated as would normally be required under Building Regulations where the balustrade has no handrail).
Section 1 of DPA creates a duty on those undertaking work on a new dwelling or conversion “to see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that as regards that work the dwelling will be fit for habitation when completed”. The claimants in Vainker relied on this provision as the grounds for their claim against the architect under the DPA. They also sued the architect in contract and in tort but the court found that both rights of action were time barred. The DPA route, where longer limitation periods apply, was therefore the claimants’ only means of recovery.
- The Net Contribution Clause
The architect’s appointment incorporated the RIBA Standard Conditions which contain a net contribution clause, limiting the architect’s liability to its equitable proportion of any damages where other parties are also responsible for the loss in question. The architect’s responsibility in relation to the glass balustrade arose out of the court’s conclusion that he ought to have noticed use of the wrong glass when discharging its inspection obligations. On this basis the architect argued that his share of any damages ought to be no more than around 20%, primary responsibility resting with the contractor who had failed to install a product matching the specification.
However, the court noted that DPA Section 6(3) states that: “Any term of an agreement which purports to exclude or restrict, or has the effect of excluding or restricting, the operation of any of the provisions of this Act, or any liability arising by virtue of any such provision, shall be void“. On this basis the court found that the net contribution clause fell foul of section 6(3) of DPA. It was unenforceable and could not operate to limit the architect’s exposure.
- The Measure of Recoverable Loss
Among the other issues before the court was the question of whether the claimants were entitled to recover the cost of having replaced the glass balustrades altogether, as opposed to merely installing a handrail which would have rendered it compliant with Building Regulations and (in the language of DPA) fit for habitation.
The court found that “there is nothing in the statute to limit the damages recoverable…..to the minimum necessary to put the dwelling into a habitable condition. The damages should more naturally reflect the failure to see that the work was done in a professional manner”. The court went on to find that this involved considering whether or not the specification had been met. Installing a handrail would not be sufficient to satisfy the wider design intent in this instance and the court therefore rejected the architect’s argument that wholesale replacement of the balustrades with toughened laminated glass was disproportionate.
Comment
The decision in relation to the net contribution clause will be an unpopular one with construction professionals and their insurers, but it comes as no surprise since the court simply applied a section of wording from the new DPA which was deliberately widely worded and which left little room for ambiguity. The outcome is unjust nonetheless from the perspective of the architect who agreed a fee for his services based on terms which are now deemed unenforceable in certain circumstances – so the liability terms were, in effect, amended by statute but with no retroactive uplift in fee for the additional risk transferred back onto him.
The decision around what measure of loss is recoverable in damages under DPA is more nuanced. It is more closely aligned to the higher measure of damages normally recoverable in contract than in negligence, but with the crucial difference that other terms in the agreement limiting or excluding liability cannot be taken into account.
The combination of these two factors presents professionals and their insurers with the worst of both worlds at a time when the insurance market is still anticipating the development of fire safety claims that have been notified but not yet been pursued. Vainker v Marbank had nothing to do with fire safety and the sums at stake were relatively modest in comparison with other disputes that are undoubtedly in the pipeline. As in Vainker, many of those claims relate to old projects for which any action in contract and tort will be time barred and for which DPA will, where applicable, provide the claimants with a single powerful trump card.
