Hunt and others v Optima (Cambridge) Ltd and others [2014] EWCA Civ 714

What happened?

This Appeal case concerned the issue of whether an architect owed a duty to third party purchasers.

The facts were as follows. During the construction of a block of flats, the architect, Strutt & Parker, was required to provide certificates on a periodic basis during the construction to certify that the works were being constructed to a satisfactory standard.  The purchasers of the flats had (purportedly) relied on the statements when purchasing the flats although the aforementioned certificates had not come into existence until after the sales had been completed.  Unfortunately, it soon became clear that the building works had been poorly executed and the inspections had been negligent. Matters worsened when the contractor went into administration.  The eight leaseholder purchasers then brought an action against the architect.

At first instance, the Court had held that the claimant leaseholders were entitled to recover damages from the architect resulting from breach of contract, breach of duty and negligent misstatement.

The architect appealed this decision in regard to six of the leaseholders (it did not appeal it in relation to two of the claimants as they had relied upon a certificate showing satisfactory construction of the flat before the sale agreement.  However, in relation to the balance of the leaseholders, the certificate was not provided to the relevant claimants until after the exchange of contracts and the execution of the lease of the flats concerned).

The Court of Appeal dismissed the action for negligent misstatement on the basis that the architect's certificates had not actually come into existence until after the sales had been completed.  It was not possible to show that there had been reliance on a statement and that such reliance had caused loss.  The architect had no contractual relationship with the purchasers and no direct contact with them and the certificates had not been relied upon to enter into the contract.

Lessons

Architects and certifiers need to bear in mind that this case arguably turned on the timing of the issue of the certificates.  It may have been a different matter had the certificates been issued in advance of completion. Bear in mind, that contractual or tortious liability may still arise depending on the wording of the certificate, the time of issue, the nature of any warranty given to a third party and any assurances given to third parties. 

For purchasers, it’s the old adage of prepare for the worst but hope for the best. Do your homework when purchasing a property. If you intend to rely on a statement or certificate then make sure you get to see it first.  If something is a potential dealbreaker then make sure it is resolved before you complete the purchase. Know what agreements establish liabilities.  Be clear on what your avenues of recourse will be if things go wrong.