The £12m blame game

The 64 brand-new houses have now been demolished, and the claim is for £12m in damages. The architect was put in the frame for blame. Nothing he did makes him the culprit; it is simply the facts of the case, plus a smidgen of law, that were said to make him liable. It must come hard when someone says, “We know that you have done absolutely nothing wrong but here is the bill for £12m.” It gets even harder when the bill is for the alleged errors and omissions of folk that you did not choose, nor were in contract with. 

Gorebridge is a town just south of Edinburgh. Midlothian council decided to develop the former mining area for these rather pleasant new homes. The council teed everything up perfectly, engaging architects, a principal engineer, a peer reviewer for contaminated land, a structural engineer and a ground investigation engineer. What could go wrong, you ask. 

The court would want the contract clause to be plain and obvious if it was to bind a party to such an unusual liability

Well, it all began to go wrong when 22 of the residents complained of headaches, dry coughs, dizziness and anxiety. Six ended up in hospital. They all recovered from what turned out to be carbon dioxide poisoning. The gas seeped through the fractured sandstone rock strata, the house foundations and underpinning, then through the cavity walls and finally down the residents’ throats. Seemingly there was no gas-proof membrane incorporated in the floor slab construction. It wasn’t specified. 

Consultants and builders should take note of a worrying observation from the report by the incident management team that looked into the poisoning: “The Gorebridge incident could be an exceptional event. Alternatively, it might be a sentinel case indicating the possibility that mine gas intrusion into relatively newly built housing is a more widespread issue that has to date been undetected.” 

But to return to the case at hand: Midlothian looked at its contracts for professional services. The issue is whether the terms of the architect’s contract made that firm liable even if Midlothian had a professional services contract with each of the other professionals and even if those firms were the more likely culprits.

Midlothian council relied on the following clause in the contract with the architect: “5.1 The consultant shall as part of the build services carry out any site investigation works and surveys as may be necessary and shall use reasonable endeavours to see that reference to such is included in the build specific agreement produced by [it] in terms of clause 2.1 hereof. The consultant shall be wholly responsible for the site investigation works and surveys, if any, referred to in the build specific agreement and that irrespective of any sub-consultants, contractor(s) or others appointed (including without limit site investigation contractors and laboratories).”

The Scottish High Court (in Midlothian Council vs Bracewell Stirling Architects & Others) focused solely on whether the clause intended that the architect took responsibility for any other consultants or contractors in relation to the need to design and install a ground gas defence system on this housing site. The judge said: No, it did not. 

So Midlothian came to the Scottish Court of Appeal. The aim, said the Court of Appeal in its judgment, was “to ascertain what a reasonable person having all of the background knowledge of the parties at the time of contract would understand the language to mean”. The focus should be, the court added, on the words actually used in their documentary, factual and commercial context. And then, if the language was clear, effect should be given to that language. If not, the court could prefer a construction that accorded with business common sense. 

The parties parted company on whether the words were unclear and whether it was appropriate that the test of “business common sense” be applied. The Court of Appeal agreed with the High Court that clause 5.1 was not entirely clear. 

The door then sprang open to talk about the slippery concept of business common sense. It would be very unusual, the first judge in the High Court had said, for a firm to take on the onerous liability for not only its own acts and omissions but also for those of others he had not appointed. 

The Court of Appeal agreed, saying: “Although it may be open to a commercial enterprise to assume responsibility for the actings of another, with whom they have had no contractual relationship, whose specialist expertise would be outwith their own skill base and whose appointment preceded their own, it would be an unusual step and one carrying very considerable risks. These risks may not have been insurable by the first defenders. 

“It would, in addition, be anomalous if the standard of skill and care owed by the first defenders for their own actions was ‘reasonable’ but they were liable for those of the second and third defenders without qualification.”

The court would want the contract clause to be plain and obvious if it was to bind a party to such an unusual liability. In short, the clause was not clear and so the Court of Appeal upheld the decision of the first judge, who had ruled that the imposition of liability on the firm for a breach of contract by any of the other contractors would be a “striking departure from ordinary legal principle”.