Since the advent of the private Approved Inspectors (AIs) regime, there has been a lack of clarity as to the extent of AIs’ liability. Given that the key role of AIs is to inspect buildings for compliance (or non-compliance) with Building Regulations, you might expect that any failure to spot defects/deficiencies would be cause for AI liability in some form. However two recent TCC cases, whilst bringing clarity to this area, have emphasised the relatively narrow circumstances in which tortious and/or statutory claims can be brought against AIs, whether private or local authority employed.
Extent of AI liability
Private AIs are businesses or individuals who offer advice and certification that any building work complies with Building Regulations. Historically, only local authorities could provide inspectors to enforce and certify compliance with Building Regulations (local authority AIs), however the Building Act 1984 (BA) introduced the privatisation of this role, allowing individual inspectors to apply to the Construction Industry Council to become a private AI.
At the time the BA was introduced, it was still possible for an AI to be liable for economic loss caused by negligence (i.e. through failure to spot non-compliances with Building Regulations in an inspection), provided that the legal test under Hedley Byrne v Heller & Partners was satisfied (i.e. a special relationship existed and there was reliance). However, the House of Lords case of Murphy v Brentwood overturned this notion in 1990. The law in this area subsequently developed further so that a local authority AI cannot be found liable in tort for causing physical damage to property.
Only relatively recently, has the question arisen as to whether AIs could be separately liable under the Defective Premises Act 1972 (DPA) or the specific tort of deceit.
This year, in the case of Herons Court v Heronslea Ltd, the TCC considered AI liability under the DPA, which requires those who take on work "in connection with the provision of a dwelling" to carry out that work in a workmanlike manner and/or in a professional manner with proper materials so that the dwelling is fit for habitation. Waksman J differentiated between contractors, architects, structural engineers and so on, who may be classified as a person who "takes on work for or in connection with the provision of a dwelling" and AIs, whose work is not to provide the dwelling: "what it is contributing to is the aim of ensuring the building is lawful". It was accepted by the parties that the DPA did not apply to local authority AIs, and consequently, the court held that there was no practical difference between local authority AIs and private AIs, as they were both performing the same core duties in their statutory roles. For these reasons, it was held that private AIs have no liability under the DPA.
Also this year, the case of Zagora Management v Zurich Insurance dealt with a claim against an AI in relation to the tort of deceit "since under the existing law negligence alone will not suffice". The court found the AI had made representations that he knew were false, yet had signed off the certificates "to get the job off his desk". However, this was still not enough for the claim against the AI to succeed, namely because the claimant was a subsequent purchaser and there was no evidence that the AI intended for the final certificate to be relied upon by them (as required under the test for tort of deceit).
Take away points
The outcome of the cases above is that the courts have left little scope for claims against AIs under the DPA or the tort of deceit, and there was already little scope to pursue AIs in negligence for economic loss as a result of the Murphy v Brentwood case law. These decisions have generated some discussion and raised the question of why private AIs should be treated differently to other professionals. After all, private AIs are remunerated for their work, play a key role in the construction process and are required to maintain PI insurance for the work they carry out.
Hope for Employers may be found in the consultation on bringing section 38 of the BA into force. The consultation began in June and if successful, could give the private right to claim damages where individuals suffer because work on a building has not met Building Regulations standards. However, it is uncertain how this would be applied in practice, and whether there would be any statutory defences available to the AIs.
For the foreseeable future it seems that AIs are beyond the realm of culpability, even in the most negligent cases. All of this is good reason to put robust AI appointments in place to ensure there are contractual obligations on the AI. It should also be ensured that collateral warranties are given to any key stakeholders so that they too have a contractual right of recourse in the apparent absence of any tortious or statutory protection.