Liabilities generated by construction certificates

Hunt v Optima (Cambridge) Limited [2-14] EWCA CIB 714 Court of Appeal (Also Westlaw)

Facts

Optima was a developer which built a block of flats.  It hired architects, S&P to carry out inspections of the works and it produced Architects Certificates to be given to Optima's purchasers.  The Certificates stated that the building work had been carried out satisfactorily, which was incorrect.

Mr Hunt and the various other claimants each bought a flat and were given a certificate afterwards.  They sued the architects for negligent misstatement.

Held

1. The certificates were not warranties, which would have created a contractual relationship between the architects and the flat owners.
2. The flat owners had not relied upon these certificates because they had bought the properties before receiving them.  Therefore the mistakes in the certificates had caused them no loss.
3. The court refused to find that when the Architect was carrying out the inspections, it owed a duty of care to Optima's eventual customers.  There was no evidence that the Architect assumed a duty of care to such unknown persons when it carried out the inspection work.

Comment

1. Where a third party receives a certificate it is vital, if he is to rely upon it in respect of any mistakes it contains, that he can show that he acted in reliance upon the statements in the certificate AFTER receiving that certificate.  Otherwise, there is no causation to justify a claim.  It is a matter for concern that the first instance Judge did not adopt this approach, making it necessary for the Architect and its insurers to go all the way to the Court of Appeal.
2. In theory the claimants could have used the Third Party Rights Act to sue for breach of the original contract between Optima and S&P.  This is because the production of certificates by S&P was intended to be of benefit to third party purchasers such as Mr and Mrs Hunt.
3. The only way for these purchasers to have had definitely enforceable legal rights against S&P, the Architect, would have been to take proper deeds of collateral warranty.

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