The question of the circumstances in which architects (and their insurers) can be held responsible to subsequent owners for latent defects in buildings is a difficult one, on which different judges have often reached different conclusions. However, there does now appear to be some definitive guidance on the issue, in the form of the Court of Appeal’s decisions in two cases: Baxall Securities Ltd v Sheard Walshaw Partnership and Pearson Education Ltd v Charter Partnership Ltd .

Coincidentally, both cases involve the under-design of siphonic systems of rainfall guttering in warehouse premises. Both also related to the liability for damage to contents rather than repairs to the buildings themselves, and therefore did not involve the liability for the cost of repairing latent defects and pure economic loss considered in Murphy v Brentwood.

In Baxall, the warehouse was constructed in 1992 and had siphonic drainage running from a central valley gutter. The siphonic system, which should have featured a capacity of 150mm, was only designed for 75mm. In addition, the valley gutter had no overflows to deal with any overcapacity of rainfall. Before the claimant tenants bought the warehouse in 1994, engineers had noticed evidence of earlier water leaks and had concluded that the flooding had been caused by debris in the valley gutter. After Baxall bought the property, there were two further incidents of flooding: the first, in May 1995, was attributed to a lack of rainwater outlets and guttering; the second, in September 1995, was the subject matter of the proceedings against Sheard Walshaw Partnership. The Court of Appeal upheld the decision at first instance that the second incident of flooding was caused by a combination of an absence of adequate overflows and an under capacity in the rainfall system. The Court also found that the intervening surveys and inspections should have noted the absence of overflows and as a result, the failure to spot this patent or evident defect broke the chain of causation.

Steel J considered the difference between patent and latent defects and described a latent defect as one “that would not be discovered following the nature of inspection that the Defendant might reasonably anticipate that the article would be subject to”.

The judge stated that “actual knowledge of the defect, or alternatively, a reasonable opportunity for inspection that would unearth the defect, will usually negative the duty of care or at least break the chain of causation unless (as is not suggested in the present case) it is reasonable for the Claimant not to remove the danger posed by the defect and to run the risk of injury…”. The Court upheld the finding that the only effective cause of both floods was the absence of overflows. There was therefore no finding of liability in relation to the latent defect with the design of the downpipes that had contributed to the second flooding.

In March 2007, the Court of Appeal had an opportunity to review the Baxall decision, when it heard the appeal in Pearson. This claim related to the performance of downpipes in a warehouse completed in April 1990. The property was originally leased by International Book Distributors Ltd (IBD). Stock was damaged by severe flooding in July 1994. Loss adjusters identified the inadequacy of the siphonic drainage system, but there was no evidence that IBD were ever informed of this.

The lease was then transferred to the claimant, Pearson. No survey was undertaken before Pearson took over the lease and flooding again damaged the contents of the warehouse in July 2002.

In contrast to Baxall, the defects in this case were entirely latent and could not have been discovered by reasonable inspection. Furthermore, the Court found that Pearson was not aware of the previous flooding.

The architects argued that, given the first incident of flooding and the identification of the under-capacity in the system, the defendant’s potential liability was brought to an end. They also argued that it was not reasonably foreseeable that further damage would flow from the defect in the design once it had led to a flood. Both the court at first instance and the Court of Appeal reviewed but distinguished Baxall. The Court of Appeal concluded that “if an architect who has the primary responsibility for producing the safe design produced a defective design, it is not obviously fair, just and reasonable that he should be absolved from any liability in tort in respect of its consequences on the ground that another professional could reasonably be expected to discover his shortcomings”.

The Court of Appeal also found that it was foreseeable that, if an architect designed an inadequate drainage system in the warehouse, owners of property might suffer water damage. The Court found that there was no reason why the claimants should have carried out any investigation into the adequacy of the rainwater system - in effect, following the trail of patent defects that had existed in Baxall. The Court considered that the chain of causation had not been broken by a failure to obtain an intermediate inspection.

The decision confirms the principle that a designer is liable for loss or damage to a third party as a result of a latent defect in the design of a building, which had not been discovered or brought to the attention of the affected party by way of intermediate examination. The possible causation arguments successfully adopted in Baxall appear unlikely to make significant inroad into this principle, except in very limited circumstances.