The loves of Lady Justice

In his article "The comeback kid", Stephen Furst explained how, in Baxall Securities Ltd vs Sheard Walshaw Partnership, architects were found liable in tort to future tenants of a building with whom they had no contract (15 December 2000, page 72). It was viewed as a groundbreaking case. But in January of this year, it went to appeal and the architect was found not liable.

Should consultants crack open the champagne? Sadly for them, the answer is no, quite the opposite. Although the case was won by the architect on appeal, its principles were confirmed.

Let me explain. Sheard Walshaw Partnership designed an industrial unit in Stockport. It specified the roof drainage system and inspected the work of the specialist subcontractor that designed and supplied the roof and guttering. Sheard Walshaw scribbled off the final certificate, blissfully unaware that the overflows were missing and that its own specification was of insufficient capacity for heavy rainfall (something anyone who has spent any time in Stockport could have predicted).

The drainage system was doomed and, as a result, so was the tenant's stock – badly damaged by two sets of floods while stored in the unit. The tenant, damp and annoyed, looked for someone to blame. The contractor was off the hook, courtesy of the final certificate, and the specialist roof contractor was out of business, so the architect seemed like the only bet – even though the tenant had no contract with it.

Lady Justice has smiled benevolently on consultants for a number of years. Courts have repeatedly found that they owe very limited liabilities to third parties with whom they are not in contract. Hence the endless cry for warranties from purchasers, tenants and funders. However, Lady Justice may have grown bored with her pets. The court of first instance pronounced that the architect would be liable unless the tenant had had a reasonable opportunity to inspect the system before the damage occurred. Only that would break the "chain of causation" legally requisite for a claim. The judge found the cause of the first flood to be the lack of overflows, which he believed should have been apparent to the tenant or its surveyor, and poor maintenance. However, he considered the second flood to be partly a result of the architects' negligent specification, which he did not think was something the tenant could reasonably have discovered. As such, the architects were found liable for the losses resulting from that second flood.

Lady Justice has smiled benevolently on consultants for a number of years. Now she may have grown bored with them

Neither party seemed happy with this. The architects appealed on the basis that both floods were caused by the absence of overflows, implying that this was something that a blind surveyor in a hurry should have spotted (a little cheeky, when the architects themselves had inspection duties, but there you are). The tenant, on the other hand, felt that the architect should be responsible for both floods as the absence of overflows was not a reasonably discoverable, or "patent", defect.

The Court of Appeal concluded that the lack of overflows was the cause of both floods, that it was a patent, rather than latent, error, and that the tenant had had the opportunity to discover it but failed to do so. The architects were off the hook. However, although Sheard Walshaw skipped its way out of court, consultants in general may have lost a little spring in their step. The Court of Appeal has confirmed the principle that architects (and probably other consultants) are liable in tort to third parties in respect of latent defects that in turn cause damage to property other than the building.

Consultants may feel they are only just getting to grips with the greater rights for third parties in contract introduced by the Contracts (Rights of Third Parties) Act 1999. Now third party rights are confirmed in tort. Lady Justice has found a new love in that elusive third party.