Who's liable now?

In the February 2001 issue of Building Services Journal, the case of Baxall Securities versus Sheard Walshaw Partnership (SWP) was reviewed. The previous wisdom, based on cases such as Anns versus Merton (1978) and Murphy versus Brentwood (1991) showed that, in the absence of a contract, the rights of recovery of an owner/occupier who has suffered loss as a result of the "wrongdoing" of a builder or professional were extremely limited. The Baxall case, however, indicated that the courts might be opening up the position by extending the ability of such parties to recover.

This case has recently been overturned by the Court of Appeal – so is what was said in February 2001 now wrong?

The history
The defendants, SWP, were the architects responsible for the design of, amongst other things, the roof drainage for a development near Stockport. This design had two alleged flaws – the rainfall specification which the drains were designed to cope with was inadequate, and no overflow pipes had been incorporated.

Two floods followed, which caused damage to electrical goods stored in the building by the claimant, Baxall, who was the tenant in the building. Judge Bowsher QC, concluded that the first flood had been caused by a combination of a blockage, which was Baxall's fault, and the absence of overflow pipes. Although the lack of overflows was SWP's fault, the Judge said that Baxall's surveyor should have noticed the flaw before Baxall moved in, making the flaw a patent defect. The Judge therefore awarded nothing to Baxall for the first flood.

The Judge decided the damage caused by the second flood was partly due to the lack of overflow pipes, and partly due to the low rainfall specification in the design. Again, SWP could not be blamed for the lack of overflow pipes, but were found liable for the under-design of the drainage system. Neither Baxall nor its surveyor could have picked up the inadequate specification of the drainage system in the plans. The Judge therefore found SWP liable in the tort of negligence for the consequences of the second flood.

Latent defects or patent defects?
SWP contended in their appeal that the judge had been wrong to conclude that there was any shortfall in the gutter design and that there were two defects in the gutter, one patent and one latent. They argued that there was only one defect, a propensity to overflow, which on any view was patent. They submitted that a fault became patent when the danger presented by the fault (not just the fault itself) was actually discovered. They argued that in this case Baxall (or its surveyor) knew of the danger, because they knew that the gutter had a propensity to overflow. The Court of Appeal was not impressed with this argument.

Baxall cross-appealed and argued that the judge was wrong to find that the absence of overflows was patent. They said it was not obvious, and he should have found SWP responsible for both floods.

Mr Justice David Steel, giving the leading judgment in the Court of Appeal, rejected Baxall's cross-appeal that the lack of overflow pipes was a latent defect. He agreed with the trial judge that a reasonable surveyor acting on behalf of a purchaser or tenant would have noticed the lack of overflows. This made the fault patent.

However, the Court of Appeal rejected the Judge's conclusion about the causes of floods and decided that the real cause of both of the floods was the absence of overflows. Since the lack of overflow pipes should have been obvious to a surveyor doing his job, the mistake was patent, and SWP were not be liable to Baxall for either flood. The claim of causation between SWP's error, in relation to the provision of overflows, and both floods was broken. SWP's appeal therefore succeeded.

In the course of their arguments, SWP had suggested that a defect would only be a patent defect (rather than a latent defect) if the danger posed by the defect had actually been discovered by the claimant.

Mr Justice David Steel dismissed this argument and explained that a latent defect is a "concealed flaw". This concept contains two elements – a flaw, which means an actual defect rather than the danger it causes (for example, a crooked wall rather than the risk of it falling down), and concealment. It needs to be hidden to the extent that it "would not be discovered following the nature of inspection that the defendant might reasonably anticipate the article would be subject to".

He then explained that this would be a question of degree – it is unreasonable to expect something relatively insignificant to be rigorously examined, but it is reasonable to expect something expensive and important (such as a building) to be subject to a more detailed examination. Because it is usually reasonable for a tenant to appoint a surveyor before taking a long lease, and reasonable for the surveyor to conduct due diligence on the property, any defect which would be revealed by the process of due diligence conducted by a surveyor is patent. He explained: "Where, in the normal course of events, a surveyor would be engaged in a survey of a building for a purchaser, and, with the exercise of due diligence, that surveyor would have discovered a defect, that defect is patent whether or not a surveyor is in fact engaged and, if engaged, whether or not the surveyor performs his task competently."

Conclusion
The Court of Appeal commented that it had been argued in the original trial by SWP's lawyers, and tentatively raised in the notices of appeal, that it was wrong in law to impose a duty of care on professionals owed to subsequent purchasers of property in regard to a latent defect. However, this proposition was not pursued at all by SWP in the appeal probably because it was considered too weak. So what is the answer to the question posed at the beginning of this article? It is "No, what we said back in 2001 is not wrong: a duty of care to subsequent owners/occupiers with whom there is no contract can be extended to the consultant in certain circumstances".