The Court of Appeal’s recent decision in Robinson v Jones considered the extent of a contractor’s duty of care in tort not to cause economic loss. Specifically, it considered the extent, if any, to which the making of a contract in itself gives rise to an assumption of responsibility (in the Hedley Byrne v Heller sense) that justifies imposing a tortious liability for economic loss.
In short, the court decided that a “simple” building contract does not in itself give rise to the requisite assumption of liability, but that the same does not apply to professional appointments. However, the court did not express a view as to which side of the line design and build contracts fall, and I thought this was one of the most interesting aspects of this case.
Design and build is probably still the most popular construction procurement option in the UK. The extent to which there are concurrent duties in contract and tort is as relevant to these contracts as it is to “simple” building contracts in a traditional procurement structure. So, following Robinson v Jones does a design and build contractor owe a duty of care in tort to its client (that is, its contractual counterparty) not to cause pure economic loss?
Case-law prior to Robinson v Jones
Prior to Robinson v Jones, there were a number of conflicting decisions on this issue. The TCC held variously that:
- A design and build contractor owed a duty of care to its client not to cause economic loss arising out of its negligent design concurrent with its contractual duties (Storey v Charles Church Developments plc  73 Con LR 1).
- An engineer did not owe a duty of care to its client, concurrent with its contractual duties, not to cause economic loss in respect of the negligent design of foundations (Payne v John Setchell Ltd  BLR 489).
- A contractor or a designer may owe a duty of care not to cause economic loss to those with whom they have a contractual relationship (Tesco v Costain and others).
- Engineers owed concurrent duties of care in contract and tort to protect their clients from economic loss, but contractors might not (Mirant-Asia Pacific Ltd v OAPIL).
Despite the lack of unanimity in these cases, a line of authority was developing which suggested that a design and build contractor owed a duty of care not to cause economic loss to its client (concurrent with its contractual duties). This equated to the duty of care other professionals owed to their clients in respect of their services.
Robinson v Jones
In the leading judgment in Robinson v Jones, Jackson LJ decided that, where there is no specific assumption of responsibility for economic loss, a contractor’s duty of care in tort is limited to taking reasonable care to protect the client, and others who own or use the building, against personal injury or damage to other property. This duty applies equally to all contractors regardless of their responsibilities.
The question then arises, to what extent can a contractor assume responsibility for its employer’s economic losses?
When considering this question, Jackson LJ drew a distinction between “professional persons” and others (including contractors). He suggested that only professional persons give advice or produce reports and plans on which their clients will rely with resultant financial and other consequences. He described as nonsensical a situation in which every contracting party assumed responsibilities co-extensive with their contractual obligations.
No doubt many employers, and some contractors, will disagree with Jackson LJ’s distinction on the ground that it fails to reflect the reality of the UK’s sophisticated construction and property development industries. However, as Jackson LJ makes clear in his judgment, this distinction is made solely for the purposes of public policy: it removes the risk that, if a contractor’s duty of care was extended to pure economic loss, there would be a flood of claims in analogous situations (in particular, claims by consumers against the manufacturers of defective products).
The current position
Jackson LJ was careful not to rule out the possibility that there may be circumstances where a contractor assumes responsibility to a client not to cause economic loss. However, he also declined to give any examples of when this might arise.
Stanley Burnton LJ’s judgment in Robinson v Jones followed the judgment of Jackson LJ. However, it also stated that the TCC decisions where building contractors were held to have assumed a duty of care in tort in relation to economic loss resulting from defects in the building they constructed, in the absence of damage to other property, were wrongly decided (Storey and Tesco referred to above). These decisions can no longer be relied upon and it is unclear what approach the TCC will take on this issue in the future.
To the extent that there is a distinction between the positions of Jackson LJ and Stanley Burnton LJ, it may be that the TCC judges will take their lead from Jackson LJ (a former head of the TCC), who commented that “if the matter was free from authority”, he would be inclined to the view that the only tortious obligations imposed by law in the context of a building contract were to take reasonable care to protect the client against “suffering personal injury or damage to other property”.
We will have to wait and see. We may even need another Court of Appeal or Supreme Court decision to clarify the issue, especially in relation to design and build procurement.