Mirant-Asia Pacific Ltd & Anor v Oapil & Anor

A professional designer’s contractual duty to exercise reasonable care and skill in designing a structure includes verifying provisional design assumptions on which the completed design depends. The verification must be sufficiently systematic and detailed to address known uncertainties in the relevant ground conditions. A designer who assumes responsibility for professional design services may be liable for economic loss flowing from negligent performance. Where a separate company deliberately contracts with the designer, is excluded from that contractual relationship, and communications are channelled through the contracting company, the necessary proximity for a tort claim for economic loss will ordinarily be absent. Inspection of a foundation for construction purposes is distinct from verification of the design assumption underlying it.

The claim concerned settlements in two foundations supporting a coal-fired power station in the Philippines. Mirant and Sual Construction Corporation claimed that Ove Arup & Partners International Ltd and Ove Arup & Partners (Hong Kong) Ltd had negligently designed the foundations, specified and supervised a ground investigation, and inspected the foundation formations.

The trial followed an earlier determination of preliminary contractual issues and an appeal in the same litigation. The remaining issues concerned contractual and tortious duties, economic loss, professional negligence, the adequacy of design verification and site inspection, causation, and limitation. The central questions were whether Arup had failed to verify the assumed bearing capacity of the ground and whether that failure caused the settlements.

1. Duties and economic loss. Arup owed CEPAS concurrent contractual and tortious duties to exercise reasonable care and skill in the design and in the agreed ground-investigation services. Applying Henderson v Merrett Syndicates [1995] 2 AC 145, a professional designer assuming responsibility for design services may be liable for economic loss flowing from negligent performance. The court respectfully disagreed with the wider proposition in Payne v Setchell [2002] BLR 489 that construction professionals are generally not liable for economic loss.
2. Arup did not owe SCC a tortious duty in respect of economic loss. The contractual structure deliberately placed the design contract between Arup and CEPAS, and that separation was understood and maintained in practice. Those circumstances negated sufficient proximity and an intention that Arup should assume direct responsibility to SCC.
3. Design obligation. The May 1995 design agreement required Arup to design the plant, including the boiler foundations. Verification of the provisional 3MPa bearing-capacity assumption was an integral part of that obligation. The assumption was expressly preliminary and qualified, and could not properly be used for the final design without further verification.
4. The required verification was a systematic and detailed geological exercise, including mapping formations, recording discontinuities and assessing rock quality. Further boreholes were not essential, but the detailed mapping and related investigations identified by Dr Redding were required. Neither Mr Manning nor Mr Pascall carried out that exercise. Their cursory inspection and geological-hammer testing on 23 July 1996 did not verify the design assumption.
5. Arup was negligent in permitting the foundations to be constructed on the unverified assumption that the ground would support 3MPa. It was not negligent, considered separately from the design-verification obligation, in the inspection or approval of the G2 and G5 formations before blinding.
6. The settlements were caused by the substantially poorer in situ ground beneath the foundations, including weak and degraded rock. The court rejected the alleged causes of post-inspection lowering, blasting damage, infill and loose rock fragments. On the balance of probabilities, the loss would have been avoided had proper verification been undertaken. The limitation issue therefore did not arise.

The judgment records that preliminary issues were decided by the same judge on 11 June 2003 and that the Court of Appeal gave judgment on 2 December 2003 during the present trial. Those decisions formed part of the same litigation and were not separately determined in this judgment.