Legalese: Mark Klimt writes on liability for architects’ certificates
A recent decision of the Court of Appeal regarding liability for architects’ certificates is generally considered to be good news for the profession, although such certificates still, clearly, need to be approached with caution. A developer (Optima) had built a block of flats and had engaged Strutt & Parker to inspect the building and to produce architects’ certificates for the benefit of purchasers and their lenders. The certificates stated that the flats within the building had been constructed satisfactorily. In the event, the construction was unsatisfactory and the inspections had been negligently conducted. Although a number of the purchasers did not receive the certificates until after they had exchanged contracts and had executed their leases, the sales were offered on the basis that such architects’ certificates would be provided. As a result, a number of the purchasers brought proceedings in the High Court and it was held to be immaterial as to when the certificates were received; the judge at first instance found that the claimants were entitled to damages, as the certificates were enforceable warranties, constituted negligent misstatement and were a breach of the separate duties which the architect owed, namely to carry out inspections properly and to take proper care when producing an architect’s certificate.
In the event, the Court of Appeal reversed this decision for a number of reasons. Firstly, it was held that the architect’s certificate on its wording was simply a representation, rather than a warranty (which has more serious legal implications). While the purchasers were lay people, it was presumed that they had the benefit of legal advice in their conveyancing transactions and that the distinction as a result of the way the certificates were worded between a representation and a warranty was, therefore, known to them.
On the question of whether the certificates constituted negligent misstatements, the Court of Appeal, while having sympathy with the wish to deliver a remedy to purchasers in light of the wrong statements on their certificates, felt the High Court judge had taken inadequate account of certain key legal principles. Prominent among these was that in order for a negligent misstatement to be actionable, the claimant must show that it relied on that statement and that such reliance caused it a loss. The judge had held that the ‘reliance’ consisted of the reassurance given to purchasers that they would be issued with certificates, stating that the building had been satisfactorily constructed. However, the Court of Appeal ruled that an architect could not be held responsible for reliance by parties on statements at a time when the statements had not yet been made and could (in theory) have in fact stated that the building was unsatisfactory, had that been the architect’s view.
Nor did the Court of Appeal agree with the first instance judge’s ruling that there were separate duties of care to inspect and in relation to certification; the higher court held that in truth, the duty was a single one, namely to the recipient of the certificate who relied on it. The duty to carry out periodic inspections competently was owed to the developer, as opposed to the purchasers.
The decision may come as a relief to architects, who often find that they are being pressed into issuing certificates, even when they have not had a regular involvement in the project. If, though, this decision is used by clients to persuade the architect that what is being requested is not really such a big deal, it will turn out not to be such very good news after all. In this case, a legal analysis enabled the architect to avoid liability, notwithstanding its negligent inspections and notwithstanding the certificates wrongly stating the condition of the building. This should not, however, serve as encouragement to an architect to depart from the basic principles when issuing such certificates, namely to certify only that which it is in a position to certify and to make clear the extent and limitation of its involvement in the project to which the certificate relates. A failure to do so could not only land the architect in hot water in a court of law (the present decision notwithstanding) but may also have serious insurance implications if its insurer takes the view that the statement was deliberately wrong.
Mark Klimt is a partner at law firm DWF Fishburns