Tortious duties of care and third party rightsJohn Redmond

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Tortious duties of care and third party rights

• Why do we worry about third party rights?

• Collateral warranties/ Rights of Third Parties Act

• Concurrent duties in contract and tort

• Complex structures

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Once upon a time not a very long time ago

The broadening scope of tort claims in the 1970s

Dutton v Bognor Regis UDC [1972] 3 BLR 11

Anns v Merton LBC [1978] AC 728

Junior Books v The Veitchi Co Ltd [1983] 1 AC 520

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Back to orthodoxy – the invention of the collateral warranty

D&F Estates v Church Commissioners [1989] AC 177

Murphy v Brentwood District Council [1991] 1AC398

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Contracts (Rights of Third Parties) Act 1999

A person who is not a party to a contract can enforce a term of that contract where:

• the contract expressly provides that he may; or

• the contract "purports to confer a benefit on him"

The third party can be identified by name or by class or description. He need not be in existence when the contract is entered into (eg all future tenants)

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Contracts (Rights of Third Parties) Act 1999

Are collateral warranties dead?

If not, why not?

Step in rights

Copyright

The comfort of a piece of paper

Schedules of Third Party Rights

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Collateral warranties in practice

Linklaters Business Services v

Sir Robert McAlpine Ltd,

How Engineering Services Ltd,

Southern Insulation (Medway) Ltd and others[2010]EWHC 2931 (TCC)

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Linklaters v McAlpine

Linklaters Business Services

Sir Robert McAlpine

How Engineering Services

DS Property Developments

Southern Insulation

Main Contract

Sub Contract

Sub Sub Contract

Lease

Collateral Warranties

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Linklaters Business Services v Sir Robert McAlpine Ltd

Chilled water pipework installed by How

Insulation by Southern

Practical completion September 1996

Leaks found in June 2006

Caused by defective insulation, allowing damp air to condense on the pipes, causing corrosion.

Linklaters replaced all the pipework

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Linklaters Business Services v Sir Robert McAlpine Ltd

Linklaters sued McAlpine & How under the warranties

McAlpine sued How

How sued Southern in tort (duty owed to How) and for contribution (duty owed to Linklaters) – contract claim time barred

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Linklaters Business Services v Sir Robert McAlpine Ltd

Did Southern owe a duty in tort to How?

Yes – concurrent with contractual duty

But not in breach – not negligent

Did Southern owe a duty in tort to Linklaters?

Linklaters had sufficient interest because of obligation to keep in repair

But there is no cause of action in respect of "the thing itself"

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Linklaters Business Services v Sir Robert McAlpine Ltd

Complex Structures

Structural steel contractor might be liable for damage caused to floor or walls (Murphy)

But is paint manufacturer liable to car owner for damage caused by rust?

Where is the dividing line?

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Economic Loss in the Washington Supreme Court

Affiliated FM Insurance Company v LTK Consulting Services No 82738-9

Fire on the Seattle monorail due to negligent wiring by LTK

Seattle Monorail Services lost $3million in maintenance costs (of the damaged train) and lost business - all "economic loss".

Judge Mary Fairhurst:

"LTK, by undertaking engineering services, assumed a duty of reasonable care. As we have defined it, with respect to risks of physical damage to the monorail. SMS enjoyed legally protected interests in the monorail, and LTK's duty encompassed those interests"

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Washington Supreme Court (2)

Eastwood v Horse Harbor Foundation No 81977

Lessee of Double KK Farm, Poulsbo cited for unlawful burning of waste and improper management of horse manure.

Judge Mary Fairhurst:

"An injury is remediable in tort if it traces back to the breach of a tort duty arising independently of the terms of the contract……We hold the duty to not cause waste is an obligation that arises independently of the terms or a lease….."

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Concurrent claims in contract and tort

Robinson v PE Jones (Contractors) Ltd [2011] EWCA Civ 9

Contract December 1991, completion April 1992

Problems found in September 2004 – defective flues

Proceedings issued December 2006

Claim for breach of contract and also for negligence

Contract claim time barred

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Robinson v PE Jones (Contractors) Ltd

Judge Davies, Manchester TCC

If there is a contractual duty to take reasonable care, there was probably a similar duty in tort, unless contract term to the contrary.

Jackson LJ, Court of Appeal

Unless there is an assumption of responsibility there is no co-extensive duty of care.

Contractual duties are negotiated and consensual.

Tort duties are a matter of policy

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Robinson v PE Jones (Contractors) Ltd

Professional people are likely to have assumed a duty to avoid economic loss

They "give advice, prepare reports, draw up accounts, produce plans and so forth"

A builder is not a professional person and will owe the duty of care not to cause physical damage or damage to property.

A builder will not have assumed responsibility for economic loss unless there are special circumstances

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Robinson v PE Jones (Contractors) Ltd

So – there will be a concurrent duty of care, but not necessarily a coextensive duty

But what about

specialist subcontractors?

design-build contractors?

complex structures?

Questions