Here comes the rain again

No, not another boring law report – the Court of Appeal judgment in Pearson Education Ltd vs Charter Partnership Ltd is fascinating for three reasons:

• It reinforces the importance of non-contractual remedies in defect cases
• It contradicts a similar case in 2002, discussed extensively in Building at the time
• It clarifies commencement of the limitation period in design cases.

Charter designed a rainwater system for a warehouse in 1988/1989. It specified a rainfall intensity of 75mm an hour. Had it exercised reasonable skill and care, it would have specified an intensity of 150mm an hour. As a result of its negligence, a stock of books in the warehouse owned by the first tenant was damaged by flooding in 1994.

Loss adjusters investigated on behalf of the tenant’s insurers. They discovered the design defect, but did not tell the tenant. The lease was transferred to a new tenant, Pearson, but no survey of the warehouse was carried out. Even if it had been, there was no visual evidence to identify the defect. There was a second flood and more damage to books. Once again, loss adjusters identified the defect. This time, insurers decided to act.

Charter was found to have been negligent but it argued that the first flood brought its liability to an end. It said it was not reasonably foreseeable that further damage would follow once the defect had been identified, since repair work would be carried out. So the flood broke the chain of causation.

As the Court of Appeal pointed out, this is not an attractive proposition – Pearson had no knowledge of the defect found after the first flood, since the insurers did not report it. So, if Charter was correct, Pearson’s claim would be barred for reasons over which it had no control.

Charter relied on an earlier case – Baxall & Norbain vs Sheard & Ors. Again, the capacity specified by the designer was 75 not 150mm and a flood occurred, causing damage to contents. It was thought the flood occurred because of debris blockage and the under-capacity issue was not appreciated. A second flood then occurred with further damage to contents and the defect was identified.

Charter said it was not reasonably foreseeable that further damage would follow once the defect had been identified

In Baxall, the Court of Appeal found the tenants had commissioned a survey before they took a lease and, after the first flood, those surveyors should have found the defect. The tenant had a reasonable opportunity of inspecting the drainage system and discovering the defects before the second flood, so the chain of causation was broken.

But Charter was not so fortunate. The Court of Appeal said: “If an architect who has the primary responsibility for producing a safe design produced a defective design, it is not obviously fair … that he should be absolved from liability … on the ground that another professional could reasonably be expected to discover his shortcoming.”

On the limitation point, again Charter failed in its arguments. It suggested that, because the original error in specifying the capacity of 75mm occurred in November 1988, more than 15 years had elapsed by the time the claim form was issued in January 2004.

But the Court of Appeal asked when the act or omission that resulted in the inadequate drainage system occurred – as opposed to when the first mistake was made. It found this was when Charter specified to the drainage subcontractor a capacity that Charter should have known was inadequate. That occurred late in January 1989 – days within the 15-year limitation period.

So, a just result achieved by a nudge to precedent and a generous interpretation of the facts. And another example of why it is so difficult to give firms advice on the tort of negligence as applied to building defects.