Certification case study no.1

In this case Griffiths & Armour's client was appointed as structural engineer for the new build of a prestigious multi-million pound private dwelling. 

Griffiths & Armour
20 September 2014

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In 2008, some three years after completion, the property was sold for around £8m. When subsequent purchasers were making alterations to the house they discovered numerous examples of sub-standard workmanship and a number of areas where the contractor had clearly deviated from the design. These problems were allegedly going to cost around £500,000 to put right. Most of the issues concerned architectural rather than structural elements and we would not normally have expected a structural engineer to be at risk.

However, in this particular case, the circumstances were that:

• The architect was apparently unqualified and uninsured when he undertook the project;
• Possibly because he was uninsured, the architect appears not to have given any third party undertakings by way of a collateral warranty or certificate. The current building owner therefore had no direct right of action against the architect; 
• The structural engineer was insured and had provided a certificate in the standard CML form;
• The project was insured under a building warranty guarantee scheme, but the defects in question were not covered by this guarantee. 

The standard CML certificate, as provided by the structural engineer, can be relied upon by future purchasers and their lenders. It confirms amongst other things that, having inspected the property periodically, the certifier is satisfied that it has been generally constructed to a satisfactory standard in general compliance with drawings approved under the Building Regulations. 

The problem is that, having signed the certificate as structural engineers, the consultant had no reason to think that anyone would be placing reliance on that certificate for anything other than structural elements of the building. The structural engineer’s appointment limited the services in such a way that he had virtually no presence on site and, for obvious reasons, his remit didn’t extend to architectural elements. 

However, the solicitor’s advice is that the purchaser is probably entitled to rely on a literal reading of the CML wording which contains no such limitations – it simply says that the certifier is satisfied that the building works comply with the criteria mentioned therein. 

Outcome

This case is interesting because it demonstrates that the CML certificate operates entirely independently of any appointment agreement, both in the sense of creating a parallel right of action (similar to a collateral warranty) and with regard to how the certificate is to be interpreted. Had the claimant been the structural engineer’s client, then he may have been able to put up a convincing defence based on the fact that the client knew he had a limited role. It is clear from the legal advice received that those arguments cannot be raised against a third party, who is entitled to read the certificate at face value.

Bizarrely this means that in one sense the third party enjoys wider rights of recovery than the original client - if the third party were the assignee of the original client’s rights then equitable principles would prevent that result, but the purchaser in this case enjoyed a direct right of action under the terms of the certificate. This claim highlights some of the risks presented through signing the CML certificate in its un-amended form.

There are, however, various ways of improving its terms, one sensible approach being to amend it so that the undertakings set out in the certificate are restricted to the scope of the consultant’s duties under his appointment agreement. It is also advisable to include a clause akin to the ‘equivalent rights in defence’ clause appearing in the Construction Industry Council standard forms of collateral warranty.