When you are supplying services, you should be doing so under a contract. That should set out the standard expected and, if you don’t fulfil the term that requires work to be done in a certain way, or to a certain standard, you are exposed to a claim for breach of contract.
Contracts do not have to be in writing and, in this situation, a term will usually be implied that work will be supplied to the standard of the reasonably competent supplier.
Alternatively, there is the law of tort, or negligence. This is where you owe a duty of care to work to the standard of a reasonably competent supplier. If you fall below that standard, you might be found negligent.
Negligence is also relevant where an accident causes loss but there is no contract between the person who made the mistake and the person who suffered loss. This is often the case on construction sites when there are many people working. The contractual chain down to several sub-contractors should, in theory, cover everyone on site but there could be gaps, and the law of negligence cuts through that potentially complex chain of liability.
SUMMARY OF THE LAW
The essential elements of a claim are that the supplier or professional owed a duty of care; this will usually arise because there is a contract, or because there was a particular relationship that gave rise to the need for that professional to be careful in their work. Sometimes a third party is injured and that might fall outside any contractual liability. Here, if there is any doubt about whether a duty to take care was owed, then the test is: (i) was loss reasonably foreseeable, (ii) were the parties proximate and (iii) is it fair, just and reasonable to impose liability?
That duty must have been breached by poor advice or work. Did the professional do a poor job by comparison with what a reasonably competent supplier in their position would have done? This is tested by independent expert evidence. An industry peer will assess whether the work was objectively competent.
The breach must have caused loss. That is easy to see where there is personal injury or physical damage to plant or buildings or works on site, but it can also be ‘pure financial loss’ where no physical damage can be seen, but there is still financial loss such as tax liability, or when an asset loses value.
Losses need to be close to the negligent act. You don’t have to pay for every last consequence of the accident or bad work if the consequences were unforeseeable. Loss in contract and tort are treated slightly differently but, in essence, you are likely to have to pay to fix the physical damage and also pay for delays to the project that are directly caused by your problematic work. That said, if the loss was also caused, or added to, by the injured party then their ‘contributory negligence’ can result in the amount of compensation being reduced to reflect the relative blame of each party.
The injured person also has to take all reasonable steps to reduce their loss. They need to get the plant fixed to reduce their loss, not just sit on their hands and bill you for delays.
Claims in contract need to be brought within six years of breach or, if a contract by deed, 12 years. Claims for negligence must be brought within six years of the date that the damage occurred. If the loss went unknown for some time, you have three years from first discovery, subject to a 15-year maximum.
Looking at some practical examples, if a maintenance contractor is injured on a site, then there will be an investigation into what caused the accident. If the site was not being managed properly, with records to show safety training, risk assessments and method statements, then the site manager is likely to be in the firing line. A claim would be made against the employer for its employees’ negligence. The loss in that scenario would be relatively simple to assess based on the personal injury tariffs, but serious injury can run to many millions if permanent disablement results.
This sort of claim will be made in court and it should be covered by the main contractor’s liability insurance. Insurers typically step in to pay for defence costs and damages.
Another typical example would be where a maintenance contractor damaged plant that causes serious delays to a project. This could be a matter of the plant owner or hirer replacing it as soon as possible to mitigate delays and loss to the project, or it might be something much more specialist and difficult to replace. If the plant could not be fixed easily, then there will need to be an assessment of whether the engineer who did the work did it badly, or whether there was such a serious defect that despite best efforts the damage/loss/delays couldn’t be avoided. This can be a grey area, but assuming there is some exposure then there will need to be an assessment of what delays were directly caused by the loss of the plant.
If the claim is for breach of contract, then there might be clauses in the applicable contract to allow adjudication or arbitration, which are alternatives to court. Possibly some other alternative dispute resolution method such as mediation can be used if the parties agree. These are all private dispute resolution routes which keep much out of the public eye, although they still take time and can be expensive, particularly arbitration.
Again, there should be insurers to step in to defend the claim and pay damages if the engineer was negligent. Professionals typically carry liability insurance to cover their errors and omissions, but that cover will have a financial limit, and it is always vital to ensure that your contractors have enough cover to pay for the consequences of their errors.