Property Law & Practice 2013-14 Report on Legal Liability

A. Issues:

There are a number of issues that arise in the construction project posed, especially if there are not sufficient measures in place to limit legal liability. These issues are:

The state of the current site, because it is known to be in an extremely dangerous condition, and this may result in harm to any person that enters the site. The design of the building has been undertaken by in-house architects. Thus, the potential liability for defective design has to be considered, in relation to the construction. Potential liability for professional negligence may arise, because of the direct contract between ABC and the purchasers and the business leaseholders. There are obligations under the Party Wall etc Act 1996 (PWA 1996), because of the shared party walls between the building and adjoining neighbours. Finally, jib poses a problem, because it may amount to trespass of airspace and there is a potential breach of adjoining neighbours’ right to light. The purpose of this report is to highlight when exclusion clauses and notices cannot be used to limit liability. This will be identified through the obligations that are owed and the potential liability if there has been a failure to meet them. In development this size there is a wide range of potential claimants, as such the report needs to undertake a broad approach to determine potential classes that could result in legal liability for ABC and/or XYZ. The structure of this report is to examine the six different areas of potential advice, in which a summary of advice will be given at the end of each section. Thus, the report will include six standalone mini-reports.

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B. Law of Negligence & Vicarious Liability:
B.1 Law of Negligence, Latent Damage and Obligation of ABC for its Vicarious Liability for Its Architect:

The hiring of an in-house architect may give rise to a future claim of latent damage under the Latent Damage Act 1986 (LDA 1986), breach of contract and if there is the harm caused by negligence. The act of tort will arise if the property causes physical harm, such as falling debris. The liability under tort will begin from the time that the damage is discovered. The same argument applies if a latent defect is identified with respect to a breach of contract. The rationale is if the design and/or the construction are defective then there should not be a limitation of liability, because it was not identifiable until years later (Abbott v Will Gannon Smith [2005] PNLR 30 CA). The case of Invercargill City Council v Hamlin [1996] 1 NZLR 513 identified that the time runs from the point of “reasonable discoverability”, which means that ABC cannot place a clause in the contract with respect to when potential liability for defect runs.

B.2 Negligence and Vicarious Liability – Application to the Leaseholder and Purchaser:

The main factor that is highlighted is whether there is actual or reasonable knowledge of the defect for when the purchaser and/or leaseholder can launch a claim for the defective property (Murphy v Brentwood DC [1991] 1 AC 398). It is also not possible for ABC and XYZ to exclude liability for latent defect, which is the purpose of the LDA 1986. In addition, the defective property may give rise to a breach of warranty, which highlights that there is a liability if there is a contract in place. If the negligent harm is purely economic then there needs to be a direct contractual relationship for liability (D & F Estates v Church Commissioners for England and Wales [1989] AC 177; Murphy v Brentwood DC). For example, if the negligence is due to the defect of design then this is a pure economic claim. The claim will be allowed when there is a direct relationship between the designer and the person negatively affected by the defect of design. The rationale is that the direct relationship creates the duty of care and proximity. In the case of the purchasers and leaseholders, the direct relationship is created through the sale and lease deeds with ABC. The link between ABC and the architect is that he/she is an in house employee, thus there is vicarious liability.

B.3 Delegation of Duty to XYZ by ABC:

It may be that ABC excludes its liability to XYZ as the main contractor. There is a duty owed by XYZ to ABC to supervise, in order to prevent latent defects (East Ham v Bernard Sunley [1966] AC 406). The delegation of liability from ABC to XYZ may be furthered through a clear contractual clause, which highlights that the contractor should ensure that any design defects are corrected to maintain the obligation of quality assurance. Nevertheless, the contractor owes the duty of care of the average professional in the industry. This means the expectation of rectification of design will only be to the extent that it is obvious to the reasonable contractor. This means that the contractor must adapt obviously defective designs into a workable solution. If he/she fails to do this then the contractor (XYZ) will be held liable. If it is not an obvious defect then the architect will be held liable.

IRC v Maxse (1919) 12 TC 41 held that a profession “in the present use of language involves the idea of an occupation requiring purely intellectual skill, or if any manual skills… controlled by the intellectual skill of the operator” will be held liable for breaches of professional knowledge. The duty of care that is owed is of a “reasonable degree of skill and care” for the given professional. This means that if there is a defect of architectural design or supervision that the design is followed then there will case of professional negligence (Saif Ali v Sydney Mitchell [1980] AC 198; Nye Saunders and Partners (a firm) v Alan E Bristow (1987) BLR 92). This breach must be below the standard of the reasonable architect. Thus, if it can be shown that the defect was of design (and not construction) then the architect will be in breach. This breach will then hold ABC liable. Finally, the contracts directly with the purchasers and leaseholders will enable an economic claim under negligence for breach of professional negligence.

B.4 Recommendation:

Thus, the potential liability of ABC for being in control of the design has to be ascertained, in relation to the liability for XYZ continuing to carry out a defective design. This will be important for the purchasers to identify, because liability may or not be with the seller ABC. It may be worth delegating the duty of supervision and monitoring the design to XYZ. Nevertheless, it is unlikely that this will prevent a claim brought by the purchasers and leaseholders if treated as consumers, due to enhanced obligations through the direct contractual link. An exclusion clause for latent defect may be considered, but it will have no effect due to the LDA 1986 and the fact that such a defect is a breach of warranty.

C. Landlord Obligations:

It is important to note, that ABC when acting as a landlord, owes an obligation to provide a safe and fit properly. This means that all residential properties must be fit for human habitation, which includes an implied repairing covenant under ss. 13-14 LTA 1985. This includes repair of the common parts, even if there are commercial leases that contain a least repairing covenant. These obligations cannot be excluded. Regardless of whether it is a commercial or residential lease, there is an obligation to ensure that the premises are not defective. Failure to so will give rise to liability in tort, which means that the landlord must repair the premises in a reasonable manner. These obligations cannot be excluded.

Recommendation:

If there is a defective property ABC, as a landlord and freeholder of the property, will have to ensure that common defects are repaired. In addition, any defects specific to its commercial and residential leases will have to be repaired. Finally, in the case of residential properties, there is an obligation to ensure the properties are fit for human occupation. Nevertheless, it is advisable that the general repairing option lies with the leaseholder in the commercial leases, but this will not extend to defective property.

D. Trespass to Land – Trespass to Airspace:

Two next issue concerns the jib is swinging over the land occupied by several neighbouring properties. This will amount to a breach of airspace. The liability will be that of XYZ unless ABC retains control of the site. Thus, it is advisable that there is a delegation of control to XYZ and limitation of liability, with respect to failures by XYZ to gain permission from the neighbours to swing the jib. In addition, such a clause should give special consideration of any negligence that may ensue to the swinging jib (i.e. all supervision is the obligation, which means that there is an effective limitation of liability for ABC).

E. Right to Light and Nuisance:

There are a potential nuisance and breach of land law, in respect to the number of the adjoining buildings that have windows over the site. The private nuisance arises because the building blocks their light. This is a breach of their right to light and can be a public nuisance. There needs to be a special consideration that the building does not block the light, which means that the 45-degree rule should be followed. Limitation of liability cannot occur, because the action will be in nuisance and under the land law. Thus, there needs to be proper designing of the building, which means that ABC will be ultimately liable as it is using an in house architect. Another potential nuisance that may arise is if ABC and XYZ do not minimise the dust and debris from the site. ABC may delegate these obligations to XYZ and limit liability; however, as the owner-occupier, there is still a duty to supervise. This means that to limit liability ABC will need to have a supervisory plan in place.

F. Occupier’s Liability:
Homeless Persons & Vacant Site:

The frequenting of homeless people may give rise to legal liability if the site is not appropriately secure to prevent access. Section 1(1) of the Occupiers Liability Act 1957 (OLA 1957) provides a duty of care to visitors on the site. A homeless person will not be identified as a visitor; rather he/she will be a trespasser. However, the Occupiers Liability Act 1984 (OLA 1984) requires that visitors on a construction site without invitation also have to be protected. It is arguable that the property is not a construction site yet, but this does not mean that there should be no protection for trespassers at all. Rather, there is still an obligation to prevent harm to trespassers. Under s. 1(2) OLA 1957 it provides that there is an obligation to protect licensees. A licensee can be a trespasser who enters the land where the occupier is aware of the trespass and the danger. Without knowledge of the trespass, there will not be a direct obligation.

Taylor v Glasgow City Council [1922] 1 AC 44 indicates that if there is an allurement on the land, such as a vacant property then a license may be implied. This has been limited with OLA 1984, as such, there is a reluctance to impute an implied license based on allurement alone. The implication is that the accessibility of the site is not enough to impute occupier’s liability. The failure to prevent the homeless persons would give rise to liability under s. 1(2) OLA 1957. To discharge a liability under s. 1(2) OLA 1957, ABC has to take all reasonable acts to make the property safe (s. 2(2) OLA 1957). It is possible for him to discharge liability through a notice, which identifies that no trespassers are allowed (Roles v Nathan [1963] 1 WLR 1117) and the danger of the site is identified (White v Blackmore [1972] 3 WLR 296). It may be argued that if no sign is put up, and the danger is obvious then there will not be a liability against ABC because the individual has assumed the risk. Nevertheless, as the property is boarded up it may not be obvious how dangerous the site is to others.

Recommendation:

Therefore, a sign that clearly should be posted, which states that:

• No trespassers are allowed; and
  The dangers of the site
• The posting of the sign should be at all possible access points, in order to exclude liability.

Liability for Active Construction Site:

When the site becomes active, there may be dual liability under OLA 1957 and OLA 1984 for ABC and XYZ. This will depend on the nature of control by ABC and XYZ. For XYZ to be held as an occupier, it should have a degree of control and supervision. As XYZ is the controlling contractor then it will owe an obligation to prevent visitors, employees, and sub-contractors from dangers caused by physical defects on the site. It is important to stress that there is an obligation on ABC and XYZ to secure the site, which includes all moveable; otherwise, liability may arise from harm that emanates from the site. Securing of the site is also important, because if children access it and are harmed then there will be a liability, even with signage, due to the frivolity of youth doctrine. If the harm is caused by an adult entering the site when there is clear signage of danger then there is assumption of risk and no obligation is owed.

Recommendation:

ABC and XYZ will need to ensure that there are special measures in place to secure the property when it is an active construction site. This is because any harm that emanates from the site needs to be reasonably mitigated (s. 2(2) OLA 1957) to protect third parties on the site or passing by the site. Securing the site, in order to prevent children from entering is paramount because signage is not enough. Nevertheless, such signage is important to prevent liability for adult trespassers, such as homeless persons.

G.Obligations under the PWA 1996:

There is an obligation under s.

1. PWA 1996 that there must be notified of any work on a party wall or that may affect a party wall (Jessop, 2000, p. 8). In fact, Excavations below the level of the foundations of nearby buildings also require that there are notifications under s. 6 PWA 1996. Finally, ss. 2 to 5 PWA 1996 provides that works directly on the party walls, which pose harm to the neighbor’s wall must be notified (Bickford Smith and Lamont, 2007, p.
2. The failure for ABC to notify those neighbors under the PWA 1996 will result in a civil breach of the act. In addition, any damage that is caused must be rectified (Geoffrey Kaye v Matthew Lawrence [2010] EWHC 2678).

The obligations of notification are as follows:

There must be at least one month’s notice before the construction starts (ss. 2-3 PWA 1996);
The neighbors then have the right to consent, consent with provisos or reject the proposed building (s. 4 PWA 1996); If the neighbor fails to reply and/or no agreement is made then s. 10 PWA 1996 must be engaged (i.e. the dispute resolution procedure) (RICS, 2011; s. 4.1 PWA 1996). Security may be requested by the affected neighbors in case there is harm to the party walls ( 12(1) PWA 1996), in order to meet the obligation of rectification. The failure to engage the notice procedure is too big a risk, because if notice is not served, and harm occurs then there is a presumption of negligence that cannot be discharged.

Recommendation:

It is essential that ABC serves notices of all neighbours that fall under the PWA 1996; otherwise, it will be in breach of the act, and if harm occurs, there is a presumption of negligence that cannot be waived. Rather, it is the obligation of ABC to prove they were not liable for the harm, which is difficult due to the nature of the harm. ABC may argue that they are not liable, because such an act is delegated to XYZ and liability limited. However, the PWA 1996 holds the property owner liable, which cannot be delegated.

H. Conclusion:

To summarise the following recommendations identified in each of the highlights of the section that there are obligations that ABC and XYZ will owe. Many of the obligations cannot be excluded through the limitation of liability clauses and notices. Those that do allow the limitation of liability requires reasonable steps to be taken, in order to notify persons of the potential harm (e.g. proper and sufficient signposting of the danger of the site, prohibition of trespassers, and limitation of liability). Thus, the overall advice that is given is that ABC and XYZ do not cut corners and fully comply with the law, especially the PWA 1996 due to the nature of the construction project.

References

1. Adriaanse, J (2010) Construction Contract Law 3rd Edition, Palgrave MacMillan
2. Bickford Smith, S and Lamont, C (2007) “Party Walls etc Act 1996: Ten Years On” Property Bar Association Mini-Conference 13th November 2007
3. Dugdale, T (2006) “The Date of Damage in Defective Property Cases” PN 22(3) 196-199
4. Jessop, D. (2002) ‘Party Wall Practice & Procedure in Brief’, The Journal of the RICS Building Surveying Faculty 4, 8-10
5. Law Commission (2013) Rights to Light Consultation Paper 210
6. Lowe, D (2005) Duty of Care Deeds and Commercial Property RICS
7. McGee, A (2000) “Economic Loss and the problem of the running of time” (2000) CJQ 19, 39-55
8. Abbott v Will Gannon Smith [2005] PNLR 30 CA
9. Andreae v Selfridge [1938] Ch1
10. Bernstein of Leigh (Baron) v. Skyviews & General Ltd. [1978] Q.B. 479
11. Bunker v Charles Brand [1969] 2 QB 480
12. D & F Estates v Church Commissioners for England and Wales [1989] AC 177
13. D & F Estates v Church Commissioners for England and Wales [1989] AC 177
14. Darby v National Trust (2001) 3 LGLR 29
15. Duke of Westminster v Guild [1985] QB 688
16. East Ham v Bernard Sunley [1966] AC 406
17. Edwards v Railway Executive [1952] AC 737
18. Geoffrey Kaye v Matthew Lawrence [2010] EWHC 2678
19. Hedley Byrne v Heller & Partners [1964] AC 465 HL
20. Invercargill City Council v Hamlin [1996] 1 NZLR 513
21. IRC v Maxse (1919) 12 TC 41
22. Jolley v London Borough Council [2000] 1 WLR 1083
23. Kelsen v Imperial Tobacco Co [1957] 2 QB 334
24. Keown v Coventry Trust Healthcare NHS [2006] EWCA Civ 39
25. Lanphier v Phipps (1838) 8 C&P 47
26. Liverpool City Council v Irwin [1977] AC 239
27. Lowery v Walker [1911] AC 10
28. Michael Hyde and Associates Ltd v JD Williams and Co Ltd [2000] EWCA Civ 211
29. Midland Bank Trust Co Ltd V Hett, Stubbs and Kemp [1978] 2 WLR 167
30. Murphy v Brentwood DC [1991] 1 AC 398
31. Murphy v Brentwood DC [1991] 1 AC 398
32. Nye Saunders and Partners (a firm) v Alan E Bristow (1987) BLR 92
33. Pirelli General Cable Works Ltd v Oscar Faber and Partners [1983] 2 AC 1
34. Ratcliffe v Sandwell MBC [2002] EWCA Civ 6 (2002) 1 WLR 1488
35. Roles v Nathan [1963] 1 WLR 1117
36. Saif Ali v Sydney Mitchell [1980] AC 198;
37. Taylor v Glasgow City Council [1922] 1 AC 44
38. Tomlinson v Congleton [2003] 3 WLR 705
39. Turriff Ltd v Welsh National Water Development Authority [1994] Const LY 122
40. Westminster City Council v Ocean Leisure [2004] BLR 393).
41. Wheat v Lacon [1966] AC 552
42. White v Blackmore [1972] 3 WLR 296

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