No whey out of the contractor's design liability? – Technology and Construction Court finds that design liability for a dairy churns on the wording

Background

Workman Properties Ltd ("Workman") engaged Adi Building and Refurbishment Ltd ("Adi") for the expansion and refurbishment of facilities at Cotteswold Dairy in Gloucestershire, on the basis of an amended JCT Design and Build Contract 2016. The project suffered delays and cost overruns as a result of issues with the design of the dairy refurbishment works.

Adi, as the design and build contractor, assumed responsibility for the design's completion. The contract documentation included the Employer's Requirements ("ERs"), which described the state of the design handed over to Adi. Specifically, clause 1.4 of the ERs became the focal point of the dispute:

"Significant design has been developed to date which has been taken to end of RIBA Stage 4 with some parts of contractor specialist design elements together with Services design to Stage 4(i)."

The dispute centred upon whether this statement either:

1. constituted a warranty by Workman that the design was complete to RIBA stage 4 and BSRIA Stage 4(i) (collectively referred to as Stage 4/4(i)), as alleged by Adi;

or

2. was merely a description of progress of the design at the time the contract was entered into, as alleged by Workman.

For background, RIBA Stage 4 is the Technical Design Phase in the RIBA Plan of Work. During this stage, the design is fully developed and coordinated with all project elements, including architectural, structural and building services. The key focus of RIBA Stage 4 is to ensure that the design is buildable and meets all legal, safety and performance standards.

The Dispute Over Design Responsibility

Adi claimed that paragraph 1.4 of the ERs amounted to a contractual warranty by Workman that the design had been fully developed to Stage 4/4(i). This assertion formed the basis of Adi's contention that any shortcomings in the design provided were a breach of Workman's obligations. Adi argued that it had priced and planned the project on the assumption that the design was already at the specified stages. When issues arose during construction, requiring further development, Adi sought compensation for delays and additional costs, claiming they were a direct result of Workman's breach of warranty.

Workman maintained that Adi, as the design-and-build contractor, bore responsibility for completing the design to Stage 4/4(i). According to Workman, paragraph 1.4 of the ERs was merely descriptive, outlining the status of the design at the time of contracting. Workman argued that Adi had assumed the risk of any design deficiencies upon signing the contract, consistent with the general principles of design-and-build procurement.

Adjudications and Escalation to Court

Adi initiated the first adjudication, asserting that Workman had breached its contractual obligations by failing to provide a design completed to Stage 4/4(i). The Adjudicator sided with Adi, interpreting paragraph 1.4 of the ERs as a warranty. This ruling became the foundation for Adi's subsequent financial claims.

In the second adjudication, Adi sought compensation for delays and additional costs incurred due to the alleged breach. The adjudicator awarded significant sums to Adi, attributing the project's difficulties to Workman's failure to deliver a fully developed design.

Workman challenged the adjudicator's decisions in court under CPR Part 8.

The decision

The Court's task was to determine whether clause 1.4 of the ER's constituted a warranty by Workman or simply described the design's state of progress.

1. The Plain Meaning of Clause 1.4:

The Court focused on the language of clause 1.4 and its context within the broader contract. HHJ Stephen Davies emphasised that for a provision to be treated as a warranty, it must be clearly expressed. In this case, the wording of clause 1.4 was deemed descriptive rather than promissory. It provided information about the design's status but did not expressly guarantee that it was complete to Stage 4/4(i).

2. Contractual Allocation of Risk

HHJ Davies reinforced the general principle that under a design-and-build contract, the contractor assumes responsibility for both design and construction. Any deviation from this standard risk allocation would require explicit wording, which was absent in this case. Clause 1.4, when read in conjunction with other contractual provisions, was insufficient to shift design responsibility to Workman.

3. Impact of the Clause's Interpretation

Treating the clause as a warranty, the Court noted, would undermine the essence of a design-and-build contract. Adi was contractually required to complete the design, and any suggestion to the contrary would need unequivocal contractual language. The judge rejected Adi's interpretation, ruling that the contractor retained full design responsibility.

4. Procedural Appropriateness of Part 8

Adi had contested the referral of the dispute to Court under the Part 8 procedure on the basis that the dispute involved substantial factual issues, particularly regarding the parties' pre-contractual negotiations and knowledge of the design's status. Adi claimed that these issues made the case unsuitable for CPR Part 8, which is reserved for disputes where factual matters are agreed between the parties or uncontested.

However, the Court disagreed with Adi, finding that the case turned on contractual interpretation rather than factual disputes. HHJ Davies highlighted that Part 8 is appropriate where the dispute concerns legal questions that can be resolved based on the contract's wording. HHJ Davies also criticised Adi for failing to identify specific factual disputes that would justify a shift to Part 7 proceedings. The Court reaffirmed that general references to potential factual issues are insufficient to challenge the use of Part 8.

Take aways

This case features a number of important lessons and provides useful guidance. Key take-aways include:

• Contractors should exercise caution when relying on pre-contractual representations or assumptions. If such representations are critical, they should be clearly documented and incorporated in to the contract.
• The judgment underscores the importance of clear and unambiguous drafting of construction contracts. If the parties intend to include a warranty about the design's state of completion, they must use express language to do so.
• It also reinforces the principle that in design-and-build projects, the contractor bears the responsibility for completing the design. Any attempt to shift this responsibility must be explicitly stated in the contract.
• The Court's endorsement of CPR Part 8 highlights its value in resolving matters of contractual interpretation efficiently. Parties should carefully assess whether their disputes involve significant factual issues before challenging the use of this procedure.