In Pearson Education Ltd v The Charter Partnership Ltd (2007), the architects (CPL) appealed the decision of the Technology and Construction Court where they were held liable for defective drains, which led to the flooding of a warehouse leased by Pearson Education Ltd (PEL).

Unbeknown to PEL, the same warehouse had flooded in the hands of another lessee several years earlier. The prior lessee's insurers investigated the cause of the flood and determined that CPL designed the drainage system with an inadequately low capacity. This information was never conveyed to the lessee (who was under the assumption that there was abnormally high rainfall that year) nor did the insurers try to recover from CPL. When PEL purchased the property a survey was conducted and this defect was not discovered, nor should it have been.

On appeal, CPL argued that due to the intervening events:

  • it was not reasonably foreseeable that further damage would flow from the defective design once it had led to a flood, for it was reasonable to expect that this would lead to identification of the defect;
  • it was not fair, just or reasonable that CPL’s duty of care should extend beyond the occurrence of the first flood; the occurrence of the first flood broke the chain of causation.
  • The court disagreed saying that the drains were a truly latent defect and the first flood only "set in train the inspection that identified the error". There is no basis of principle or authority why the fact that a third party becomes aware of a latent defect should be deemed to make the defect patent to others who neither know, or ought to know, of the discovery.

Lord Phillips of Worth Matrevers, CJ, stated that it was reasonably foreseeable that, if CPL caused an inadequate drainage system to be installed in the warehouse, owners of property within the warehouse might suffer flooding damage to their property. The test of forseeability in the context of duty of care does not require foresight of the precise sequence of events that results in damage.

The fact that PEL had a survey but that survey did not discover the latent defect did not break the chain of causation. They did not know of the previous flood and there was no reason why they should carry out any investigation of the adequacy of the rainwater system.

It was upheld that CPL owed a duty of care to PEL and were liable for £2.1M plus interest.

This case creates two worries for the construction professional and their insurers. Firstly, there may be greater exposure to claims for latent damage and secondly, trying to use the defence that a latent defect becomes patent when it becomes known to a third party other than the Claimant is unlikely to succeed, unless the Claimant is somehow put on notice of the latent defect. Even in these circumstances, the Defendant will only be able to argue a reduction in the Claimant’s recovery based on their contributory negligence.