16 April 2021
There has been an reminder of the importance of collateral warranties and third party rights from relevant parties involved in construction projects in the recent case of Multiplex Construction Europe Ltd v Bathgate Realisations Civil Engineering Ltd & Ors  EWHC 590 (TCC) (16 March 2021) (bailii.org). The case demonstrates that it is in practice, very difficult to bring a claim in tort against a party to a project in the absence of a contractual relationship, particularly in the context of a large project where the contractual relationships have been carefully structured.
In this case, Multiplex engaged Bathgate in relation to the 100 Bishopsgate project in the City of London. The defendant subcontractor, Bathgate, had design responsibility both for the concrete core and for the temporary slipform rig works. Bathgate had engaged a consultancy called RNP to provide design checking service and specifically to provide "Category 3 checks". Both Bathgate and RNP had become insolvent. After Bathgate's liquidation, it was discovered that the slipform rig was defectively constructed and Multiplex had to have this replaced. Multiplex had obtained default judgment against Bathgate for the defects but it also wanted to make a claim against RNP's insurers, Argo, under the Third Party Rights Against Insurers Act 2010 in respect of the losses it suffered (which including replacing the slipform rig, and taking other remedial steps). This formed part of a £12 million claim against RNP's insurers.
The issue in the case was: did RNP owe any duties and/or obligations to Multiplex in respect of certain certificates in connection Category 3 checks provided by RNP to Bathgate?
The clear answer was no. In reaching this conclusion, Mr Justice Fraser considered the following legal tests/principles:
Mr Justice Fraser determined that whichever test applied the answer was no. This was for the following reasons:
Mr Justice Fraser also commented on the policy considerations in terms of consequences in litigation and settlement. If a duty of care were to be imposed, this would open the door for the main contractor to bring in other entities directly with whom it has never had direct contractual relations. This would complicate proceedings and also increase insurance premiums.
When members of the supply chain become insolvent, this can cause difficulties if a problem such as a defect emerges. It is logical that a client will look to see "who else" would be an attractive target for a claim. However, in the absence of a contractual relationship and save in exceptional circumstances, this case is a reminder that the hurdles to overcome for a claim in tort to succeed are unlikely to apply in the context of a complex construction project. It is important for employers/main contractors to ensure they are satisfied with the collateral warranties and performance security provided by the supply chain on a case by case basis. In this case, it would have been unlikely that the main contractor would have initially requested a warranty from RNP or that RNP would have agreed to this given their limited role (and the limited fee they were receiving). However, on a large complex projects such as this, it demonstrates that each parties' role, however small can have significant consequences to be considered and managed as appropriate.
by multiple authors