Where a designer and a contractor both contributed to a defect, the losses are normally split 20/80. But if the designer’s duties increase, so do its apportioned costs

Two cases have recently come to court over the defective design of soil nailed retaining walls on either side of the Wembley Light Maintenance Depot, which is next to the main railway and opposite Wembley stadium. The linked cases of Carillion JM Ltd vs Robert West Consulting and Phi Group Ltd vs Robert West Consulting throw up issues involving apportioning loss where more than one party is held liable.

Robert West Consulting (RWC) was the lead consultant and civil engineering designer for the depot project and Phi Group (Phi) was the detailed designer of the retaining walls. The court found that RWC and Phi were liable to the contractor Carillion for 100% of Carillion’s provable losses and anticipated costs in remedying the defects in the walls.

That was not the end of the matter, however, because the court then had to deal with apportioning this loss as between RWC and Phi. Such issues are governed by the Civil Liability (Contribution) Act 1978, which specifies that the level of contribution must be just and equitable, having regard to the extent of the relevant person’s responsibility for the damage in question.

Where one of the contributing parties is seen as the “perpetrator” of the damage but the other is simply the supervisor, this is often referred to as the “poacher/gamekeeper” scenario. Apportionment in such cases is often in the range of 80-66.6% and 20-33.4% between the contractor and the supervisor respectively. The conventional approach in construction defects cases has been that the contractor is fixed with about 80% to two-thirds and the supervisor with about 20% to one third. The high point was McKenzie vs Potts (1995) in which the judge found that the contributing parties’ breaches were equally causative of the problem but then distinguished between the contractor and the architect and found for various reasons that the contractor had the greater responsibility. As a result, the apportionment then became 60/40% as between contractor and architect.

McKenzie vs Potts illustrates that it is necessary to look at the nature of the parties’ duties and the extent to which these are co-extensive with each other. In such circumstances, the “poacher/gamekeeper” scenario does not really apply. This was what happened in the Carillion litigation. Phi and RWC each had a responsibility towards Carillion to identify the two types of instability found in the retaining walls and ensure that these were addressed. RWC’s role as lead consultant and its precise contractual duties meant that it could not be regarded as only a “design checker” or “design reviewer”. Phi’s responsibility for the detailed design of the retaining walls meant that it would be liable to Carillion to a substantial degree but the court considered that Phi and RWC were equally responsible to Carillion at pre-construction stage.

As things turned out, Phi assumed a greater involvement with the remedial works that were planned following a number of slope failures such that ultimately the court formed the view that the apportionment as between Phi and RWC should be 60% and 40% respectively, equal to the “high point” identified in McKenzie vs Potts.

Interestingly the judge added that if the only default by Phi and RWC had been their negligence following the second of two slips which occurred in 2005 (that is, there had been no negligence at the pre-construction stage), the apportionment would have been closer to 75-80% as against 25-20%.

Clearly you need to be very careful when you are analysing potential contributions between parties in these circumstances, which may alter depending on the changes in the nature and extent of the duties between the parties as the contract progresses. Do not assume that, simply because you are a design checker, your contribution will be about 20% or 30%.

The other point to note is that Phi had settled with Carillion prior to the proceedings against RWC coming to trial. As a result of the apportionment made by the court, however, Phi is still liable to pay to RWC a sum over and above its settlement with Carillion to reflect the 60/40 apportionment. Even if one party settles with the other, the level of that settlement is not necessarily a cap on that party’s liability in any subsequent contribution proceedings.

Simon Lewis is a partner in Dickinson Dees and acted for Carillion JM Ltd

This article was originally published under the title: Bigger portions