HOW Engineering Services Ltd v Southern Insulation (Medway) Ltd

A concurrent duty of care in tort may exist between parties to a contract for services, particularly where the contract requires reasonable care and skill, unless the contract excludes or limits that duty. The scope of the tortious duty is defined by the contractual responsibilities and the kind of loss for which the defendant could reasonably be taken to have accepted responsibility. That scope may include the reasonable cost of remedying defective work, even where liability reaches the claimant through a chain of contracts and collateral warranties. A strike-out application should fail where the pleaded facts establish an arguable duty and loss falling within its scope.

The claimant had subcontracted mechanical and electrical services work for a commercial development and had engaged the defendant to insulate chilled-water pipework. Following alleged defective workmanship, the claimant faced claims through contractual and collateral-warranty routes for the cost of remedial works. It brought negligence proceedings alleging that the defendant owed a concurrent duty of care alongside the sub-sub-contract.

The defendant applied to strike out the claim, arguing that no duty existed in respect of pure economic loss or liabilities arising under collateral warranties and a standstill agreement. The remaining issue was whether the pleaded duty existed and extended to the claimant’s potential liabilities for reasonable remedial costs.

1. The strike-out application was dismissed. On the pleaded facts, the defendant owed the claimant a concurrent duty of care in tort alongside its contractual obligation to carry out the insulation works with reasonable care and skill.

2. The existence of a contract does not of itself exclude a tortious duty. The duty is defined by reference to the contractual responsibilities assumed by the parties. If the contract excludes or makes a type of loss irrecoverable, the concurrent duty is correspondingly circumscribed.

3. The scope of the duty was the execution of the insulation works with reasonable care and skill. The relevant kind of loss included the reasonable cost of putting right carelessly executed insulation work. The contractual route by which that loss reached the claimant did not intrinsically change its character.

4. It was reasonably foreseeable that defective work on a commercial development might result in liabilities passing up the contractual chain and through collateral warranties given to an end user. The absence of an indemnity provision did not prevent the pleaded duty from arising.

5. The fact that the works were supervised, involved no design obligation, or might be described as simple did not justify striking out the claim. Those matters could bear on factual issues or contributory negligence, but did not negate the pleaded assumption of responsibility for competent workmanship.

6. The standstill agreement did not create the claim or extend Southern’s substantive liability. It merely froze the limitation position between other parties. Any limitation issue remained triable. The court also noted the 15-year negligence long stop under section 14B of the Limitation Act 1980, as amended by the Latent Damage Act 1986.

Not stated in the judgment.