Architects will sleep better after an appeal over sign-off certificates reduced their exposure
For the first time since I started writing for RIBA Journal, I am able to follow up with an appeal decision on a case I have written about. Not only that, it is good news for architects.
In summer 2013, I reported on the case of Hunt v Optima (Cambridge) Ltd. Optima (the developer of a block of flats in Peterborough), had engaged Strutt & Parker (S&P) to provide architect’s sign-off certificates to purchasers. The flats turned out to have numerous defects, and the purchasers sued Optima and S&P.
The judge decided that not only was S&P liable in ‘negligent misstatement’, but also that the certificates amounted to collateral warranties. That decision potentially broadened the possibility of end users suing architects who provide certificates, even if they had not paid them any fee for producing the certificate.
The Court of Appeal has now taken a different view on architects’ liability in these circumstances.
First and foremost, the architect’s certificates need to have been relied on by the purchaser in buying the property. However, none of these purchasers received the certificates until after completion. Some were aware that certificates were to be provided, and had seen drafts, but the judge made the point that drafts could still be amended before they were signed and issued, so were not definitive statements that the works had been carried out properly.
Reliance must follow representation and cannot be retrospective. If the representation is the signed certificate it cannot be relied on before it comes into existence. A cause cannot post-date its consequence
The judge in the Court of Appeal said: ‘Reliance must follow representation and cannot be retrospective. If the representation is the signed certificate it cannot be relied on before it comes into existence. A cause cannot post-date its consequence.’
Regarding whether the certificates were collateral warranties in their own right, the Court of Appeal said that it is not sufficient solely to look at the certificates from the perspective of a lay person. All the purchasers had legal representation, and therefore the document phraseology pointed towards the fact it was intended to be a certificate and not a contractual warranty. If it had been intended to create a warranty, it would have been very easy for the certificate to say so.
Who is owed the duty?
Finally, the Court of Appeal rejected the concept that the architect must have owed a duty to the purchasers to carry out the work of inspection competently. The judge agreed that it must have owed such a duty to the developer but there is nothing to show that the certificate meant it was also owed to the purchasers. Any claim of the purchasers which was based on the certificate must rely on the law of negligent statements, and it is the statements in the certificates which the purchasers could rely on when entering into their contracts. These do not in themselves create a duty of inspection independent of any reliance on the certificate for the purpose of entry into any transaction.
This Court of Appeal judgment should be a big relief to any architect who provides certificates of this nature to purchasers of residential units. Admittedly, purchasers would usually expect to receive something like an NHBC warranty instead of an architect’s certificate, but it nonetheless reduces architects’ potential exposure.
However, the real lesson of course is that, if you provide certificates saying that a property has been constructed to a satisfactory standard, you should be absolutely sure that it has.
Alistair McGrigor is a partner at Nabarro
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