Deemed design liability in consultant appointments

A recent Scottish Court of Session decision has considered the interpretation of deemed design liability clauses in consultant appointments. The consultant in question was found to be liable for designs which pre-dated its appointment and which had been proposed without its involvement. The case provides an informative contrast with earlier cases where similar clauses have been given a narrower interpretation in a multi-disciplinary design setting. Parties should carefully consider the scope of such provisions in the specific context in which they appear and introduce clarification where necessary.

Arbitration Appeal No 1 of 2021

The arbitration which lead to this appeal arose from a project for the rehabilitation of a water mains system. A design and build contract was entered into for the works with a main contractor (the “Contractor”). The Contractor’s design works were sub-contracted to a designer (the “Designer”) under an amended NEC Professional Services Contract 2005, Option A (the “Design Contract”).

Part of the works involved the use of a polyurethane lining to coat the inside of ageing pipes in the water mains. The lining material failed and the Contractor claimed against the Designer on the basis that the material chosen was inappropriate and in breach of its design obligations.

The Designer objected on the basis that the lining had been selected by the Contractor in mid-2010, long before the Design Contract was entered into in 2011. Although the Designer had been involved with the project on a letter of intent basis since early 2010, the Designer said that the selection of the lining was done without recourse to the Designer and the Designer was never asked, formally or informally, to comment on issues involving the lining.

The Contractor placed particular emphasis on two clauses in the Design Contract (the “Deeming Provisions”). The first deemed the Designer to have, “provided for any other design works necessary to provide a complete design for the purposes of the construction works and in accordance with the Scope”. The second deemed to be Designer’s responsibility, “any design responsibility noted as `Construction and Design Partner' within the documents provided for within section 2 of the Scope [which was back-to-back with the Contractor’s design obligations under the main contract]”. The Contractor argued these provisions showed that the Designer had taken full and complete responsibility for the design.

The Contractor commenced an arbitration against the Designer and succeeded in its claim. The Designer appealed to the Scottish Court of Session.

Liability Upheld

The Court upheld the arbitrator’s award. The Deeming Provisions were sufficiently clear to pass full design responsibility to the Designer. The Contractor had, “in effect, stepped down its design responsibilities to the petitioner.”

The fact that the selection of the lining material had taken place prior to the Design Contract without involvement from the Designer was not something which could influence the interpretation of the Deeming Provisions. The Contractor’s contract with the employer stated explicitly that no acceptance of any design work by the employer’s representatives (which in any event was found to be very limited) would relieve the Contractor of its responsibilities.

The Court also rejected the Designer’s submission that such a broad interpretation of the Deeming Provisions would result in absurdity. In the Court’s view: “It is not an absurd result to have responsibilities passed to others, whether … those others are up or down the line.”

Midlothian Council v Bracewell Stirling Architects

A similar Scottish appeal case considering similar issues is Midlothian Council v Bracewell Stirling Architects, decided in 2018. This case involved a £12m damages claim for loss at a Midlothian housing development, where the homes were rendered uninhabitable due to carbon dioxide leaking from disused mining works underneath. Bracewell were appointed as the lead design consultant and agreed to be “fully responsible for the whole design” notwithstanding “the stage to which the design … has been developed prior to the Consultant having been appointed”. However, the contract also stated that Bracewell were responsible for the performance of any sub-contractors to whom it had delegated work.

Sub-contractors appointed by Midlothian Council had carried out the ground investigations, which failed to identify the CO2. The Inner House of the Court of Session had to decide whether Bracewell, having full responsibility contractually for design, was responsible for the designs of the council-appointed sub-contractors.

The Inner House considered that the wording of the appointment was not sufficient to impose strict liability on Bracewell for the design failings of third parties with whom it was not in contract. Its responsibility for “the whole design” was intended to embody the architect’s usual responsibilities for overall co-ordination of the design works. It was “not to be construed as an acceptance of liability for anything that might ultimately go wrong with the design, no matter what its cause.” It was also of note that the clause preserving Bracewell’s liability for sub-consultants mentioned only those sub-consultants appointed by Bracewell.

The Inner House also noted a strong commercial rationale against the imposition of such broad design responsibility:

“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.”

Conclusions and implications

These two decisions provide an informative contrast as to the use of deemed design liability provisions in consultant appointments. They show that the interpretation of such provisions can vary significantly depending on the context in which they are used. In Arbitration Appeal No. 1, it was unexceptional that the Contractor wished to step-down its entire design responsibility to the Designer, even where that involved responsibility for design decisions which the Designer had not been involved in. The different circumstances prevailing in Midlothian, and particularly the involvement of other third-party consultants, made a similar proposition of reposing entire design responsibility in a single designer a highly unusual one. Parties should therefore give careful consideration to the operation of such clauses in consultant appointments and introduce clarification where necessary.

References:

Arbitration Appeal No.1 of 2021 [2021] CSOH 41

Midlothian Council v Bracewell Stirling Architects [2018] CSIH 21