B e f o r e :
MRS JUSTICE O'FARRELL DBE ____________________
____________________
Paul Cowan (instructed by Kennedys Law LLP) for the Claimant Paul Reed QC and Emma Hynes (instructed by DWF Law LLP) for the Defendant Hearing date: 16th June 2020 ____________________
HTML VERSION OF JUDGMENT APPROVED ____________________
Crown Copyright ©
Mrs Justice O'Farrell:
This claim concerns a geotechnical investigation and report prepared by the Claimant ("RSK") in respect of a site at 52-54 Kings Highway in Plumstead, London. The Defendant ("Hexagon") carried out a residential housing development at the site. Hexagon asserted a claim in negligence against RSK for damages, following ground collapse at the site causing damage to the housing.
By these Part 8 proceedings, RSK claims declaratory relief that, if and insofar as RSK assumed a common law duty of care to Hexagon in respect of the ground investigation and report, the nature, scope and extent of such duty was circumscribed by the limitations of liability provisions contained in RSK's proposal document.
Hexagon opposes RSK's claim for relief on the grounds that use of the Part 8 procedure is inappropriate in all the circumstances; further, Hexagon was not bound by the limitations of liability in RSK's proposal because they were not brought to Hexagon's attention and it did not agree to be so bound.
Background
By letter dated 21 November 2013 from RSK to Skillcrown Homes Ltd ("Skillcrown"), RSK submitted its proposals and budget costs for undertaking geoenvironmental and geophysical investigations at the site:
RSK stated that the results of the investigation would be compiled into a combined factual and interpretative site investigation report.
Having set out the proposed scope of the work and its estimated fees, RSK stated:
RSK's terms and conditions were enclosed with the proposal letter and included the following provisions:
The proposal was formally accepted by Skillcrown on 4 December 2013 by signing the agreement form sent with the proposal letter, stating:
By email dated 28 April 2014 from Skillcrown to RSK, Skillcrown notified RSK that Hexagon was happy to wait for the final version of the report to be in joint names.
On 30 April 2014 RSK published its site investigation report, in which the client was identified as Skillcrown and Hexagon.
The general notes to the report included the following:
The introduction to the report included the following:
The service constraints set out in Appendix A included the following:
In about June 2014 Hexagon purchased the site.
By a contract dated 4 July 2014, executed as a deed, Hexagon engaged Skillcrown to complete the design and carry out the construction of residential housing on the site.
Practical completion of the works was certified on or about 30 November 2015.
On 2 May 2016 a ground collapse occurred, damaging some of the dwellings. Remedial works were carried out to stabilise the ground and make the site safe.
Proceedings
By a letter of claim dated 16 October 2017, Devonshires, solicitors acting for Hexagon, asserted that RSK owed a common law duty of care to Hexagon, RSK was negligent in carrying out its investigations and/or preparing the site investigation report, and its failure to advise as to the risk of voids associated with chalk mines at the site caused Hexagon to suffer loss and damage.
The following matters were relied on by Hexagon as giving rise to a duty of care:
By letter dated 11 December 2017 Kennedys, solicitors acting for RSK, responded to the letter of claim, disputing liability for any losses suffered by Hexagon. In response to the assertion of a duty of care, they stated:
By letter dated 14 November 2018, Devonshires replied, stating:
On 25 November 2019 RSK commenced these Part 8 proceedings, seeking the following relief:
In support of its claim RSK relies on two witness statements of Ms Nikki Baynes of Kennedys, dated 25 November 2019 and 24 January 2020 respectively.
Hexagon relies on the witness statement of Mr Daniel Wilford of DWF Law, dated 20 December 2019.
Assumed facts
Mr Cowan, counsel for RSK, confirmed that RSK's position is that there was a contract between RSK and Hexagon, formed when Hexagon was identified as joint client with Skillcrown in the report dated 30 April 2014. Hexagon's position is that there was no contractual relationship between RSK and Hexagon. Mr Cowan accepts that for the purpose of the Part 8 claim, the Court should assume that there was no contract between RSK and Hexagon.
The basis of the Part 8 claim is an assumption that RSK owes a duty of care at common law to Hexagon in respect of the site investigation report.
The issue in dispute is the nature and scope of that duty; in particular, whether the limitation of liability provisions in RSK's contract with Skillcrown apply to limit RSK's duty in tort to Hexagon.
The Court is not asked to construe the meaning and effect of RSK's terms and conditions, including the limitations on liability, for the purpose of this Part 8 claim; the Court is asked to determine whether the nature and scope of any duty of care would be limited by those terms and conditions as a matter of principle.
Parties' submissions
Mr Cowan submits that the contractual scope and terms of RSK's professional retainer determined the nature and scope of the services that RSK was required to undertake, the timing and extent of such services, and the standard and terms on which those services were to be performed. The service constraints in the report disclaimed any responsibility or liability outside RSK's duties to the "client" as defined in the proposal and subject to its terms. In the report, the "client" was expressly re-defined to include Hexagon. Accordingly, where the provision of the report to Hexagon as "client" by RSK gave rise to the assumption of a common law duty of care to Hexagon, it was intended by the parties and objectively clear in all the circumstances that the nature, scope and extent of that common law duty of care should be defined by and subject to the terms of the proposal. Those terms include the limitations of RSK's liability set out in clause 6. Therefore, the limitation of liability set out in the proposal limit the scope and extent of RSK's liability to Hexagon at common law.
Mr Reed QC, leading counsel for Hexagon, submits that the claim is not suitable for determination as a Part 8 claim because it raises disputed issues of fact. On the issue of law, he submits that a limitation of liability in contract does not bind a third party in tort. Even if there were a contractual relationship between RSK and Hexagon, which is disputed, Hexagon would not be bound by the limitations of liability relied on because neither the proposal nor RSK's terms and conditions were provided to Hexagon. RSK's terms and conditions were bespoke, rather than standard terms and conditions, and therefore could not reasonably be anticipated. A fortiori, RSK's terms and conditions do not bind Hexagon for the purpose of defining the nature and scope of the duty of care at common law or any limitation in respect of such duty.
Applicable legal principles
It is common ground that where there are concurrent duties of care at common law and in contract, the contractual obligations will usually define the scope of the tortious duty, unless there is evidence that the party owing the obligations undertook some additional task from which an extended assumption of responsibility can be inferred. In cases concerning concurrent duties, the tortious duty may be limited or excluded where it would be inconsistent with the applicable contract: Henderson v Merrett [1995] 2 AC 145 (HL) per Lord Goff at pp.194A-196F. However, such issue does not arise in this case because the Court is asked to assume that there is no contract between RSK and Hexagon. Therefore, the Court must assume there is no concurrent duty of care in contract and tort for the purpose of this claim.
RSK's claim depends on the proposition that even where there is no direct contract between A and B, the nature and scope of A's common law duty of care to B may be determined by the terms of A's professional retainer with C.
In Leigh & Sillavan Limited v Aliakmon Shipping co Limited [1986] AC 785 (HL), the House of Lords rejected the buyer's claim against the shipowner in negligence for loss of the goods because there was no contract between the parties and the buyer had no legal ownership or possessory title to the goods at the time of loss. In rejecting the buyer's attempt to rely on the obiter remarks of Lord Roskill in Junior Books, Lord Brandon stated at p.817G:
In Pacific Associates v Baxter [1990] QB 993 (CA), the Court of Appeal held that an engineer appointed to supervise works did not owe a duty of care to the contractor on the basis that there was no assumption of responsibility, having regard to the contractual matrix. In considering Lord Brandon's observations in The Aliakmon , Purchase LJ stated:
In White v Jones [1995] 2 AC 207 (HL) a solicitor, retained by a testator, was found to owe a duty of care at common law to the intended beneficiaries under the proposed will. Lord Goff's opinion was that this could be achieved (to avoid the claim otherwise falling into a 'black hole') by extending the assumption of responsibility imposed on the solicitor towards his client to the intended beneficiary but stated at p.268G:
And Lord Nolan stated at p.294G:
In Killick v Pricewaterhouse Coopers [2001] PNLR 1, the court held that auditors retained by a company to value shares owed a duty of care in tort to the shareholders but declined to give summary judgment as to whether any liability on the part of auditors to the shareholders could be subject to a limitation clause in the contract between the auditors and the company. Having referred to the relevant authorities, Neuberger J stated:
In Riyad Bank v Ahli United Bank (UK) plc [2006] EWCA Civ 780 the Court of Appeal held that the defendant bank owed a duty of care to the first claimant investment fund for advice given to the second claimant and passed on to the fund based on an assumption of responsibility, despite the contractual context in which the second claimant limited its liability to the fund for such advice. Neuberger LJ stated:
In Customs and Excise Commissioners v Barclays Bank plc [2006] UKHL 28 , Lord Bingham declined an invitation to review all the relevant authorities so as to identify a formula for the relevant test but provided the following helpful observations:
In Galliford Try Infrastructure Limited v Mott Macdonald Limited [2008] EWHC 1570 (TCC) , Akenhead J summarised the approach to be taken in determining whether any duty of care at common law arose in a commercial context:
An example of the analysis to be undertaken by the court can be found in Arrowhead Capital Finance Limited v KPMG LLP [2012] EWHC 1801 (Comm) , a case in which the court struck out the claim on the ground that the defendant owed no duty of care to an investment fund that provided loans to the defendant's client. Stephen Males QC (then sitting as a Deputy High Court Judge) explained:
A similar exercise was carried out by His Honour Judge Stephen Davies (sitting as a Judge of the High Court) in BDW Trading Ltd v Integral Geotechnique (Wales) Ltd [2018] EWHC 1915 (TCC) .
The above cases were concerned with the question whether there was any duty of care based on an assumption of responsibility but that question necessarily involves a determination of the nature and scope of any duty of care. A bare finding that a party owes another a duty of care is meaningless in the absence of a finding as to the nature and scope of such duty. In a commercial context, the nature and extent of a common law duty of care will be framed by the contractual nexus or lack of contractual nexus between the parties, together with the wider factual and contractual arrangements, including any stated limitations or exclusions from liability. The cases all serve to emphasise the importance of the factual matrix when considering whether any common law duty of care arises, including the nature and scope of any such duty.
Mr Reed submits that for a clause excluding or limiting liability to be effective so as to exclude the imposition of a duty of care, such as the disclaimer in Hedley Byrne & Co Limited v Heller & Partners Limited [1964] AC 465 (HL), it must operate directly between the parties.
By analogy with the principles applicable to contracts, a party who wishes to rely on its standard terms and conditions must give reasonable notice of the existence of those terms. To be incorporated, the terms must fairly and reasonably be brought to the other party's attention: Goodlife Foods Ltd v Hall Fire Protection Ltd [2018] EWCA Civ 1371 (CA).
A higher degree of notice is required for unusual and onerous terms: Interfoto Picture Library Limited v Stiletto Visual Programmes Limited [1989] 1 QB 433; Bates v Post Office Ltd [2019] EWHC 606 (QB) per Fraser J at [979].
Where there is a course of dealing, or where industry standard terms and conditions are used, the court will more readily find that the notice is adequate: Circle Freight International Ltd v Medeast Gulf Exports Ltd [1988] 2 Ll.Rep. 427.
Discussion
The difficulty for RSK in this case is that the contractual matrix is in dispute and the Court does not have before it the evidence needed to resolve that dispute. The Court has been asked to assume that there is no contract between RSK and Hexagon but RSK's position is that there is a such a contract. Clearly, the existence of a direct contract between the parties could impact the nature and scope of the duty of care at common law. It might be assumed for the purpose of the claim that the terms of any contract between RSK and Hexagon mirrored the terms of the contract between RSK and Skillcrown. However, the Court has not been asked to construe the relevant provisions and has not had full submissions as to the interpretation and meaning of the same.
Hexagon's position is that RSK did not provide either the proposal or RSK's terms and conditions to Hexagon; further, the provisions of clause 6.3 of RSK's terms and conditions would not bind Hexagon (and, therefore, would not limit or exclude any common law duty of care) because the terms were unusually onerous and were not drawn to Hexagon's attention.
Mr Cowan accepts that there is no evidence before the Court that Hexagon received a copy of those documents. There is no evidence that Hexagon knew of, or agreed to be bound by, RSK's terms and conditions.
The site investigation report did not set out the limitation of liability contained in clause 6.3 of the terms and conditions. Further, there was no reference to such limitation of liability in the body of the report or its appendices.
RSK has produced evidence of a number of standard form contracts which contain limitations of liability. However, the terms in this case were bespoke and, as Mr Reed submitted, potentially excluded all substantive liability to Hexagon for any negligence on the part of RSK. Clause 6.3(d) purported to limit liability to the reasonable cost of correcting or completing the relevant part of the work. In circumstances where Hexagon's losses allegedly were caused by reliance on the work, this could leave it with no effective remedy.
Against that background, Mr Cowan's suggestion that the Court could determine this issue on a "quick glance" at the relevant terms and conditions, or carve out from any declaratory relief clause 6.3(d), would be unsatisfactory. The Court cannot determine these issues in a vacuum and certainly cannot determine these issues without proper findings as to the existence of any contract between the parties, the terms and conditions of any such contract and the proper construction of such terms.
In those circumstances, this claim is simply not suitable for determination by way of Part 8 proceedings.
Conclusion
In my judgment this case is not suitable for a Part 8 determination.
For the reasons set out above, the Court will make the following orders: