Arbitration Appeal No. 1 of 2021 [2021] CSOH 41
In the first Arbitration Appeal to the Court of Session this year, the Court considered the operation of 'deemed design liability' clauses and the question of whether a design consultant could be liable for design decisions pre-dating their appointment.
The answer was they could.
The project in question was the rehabilitation of a water mains system. The contractor had entered into a design and build contract with the employer and thereafter had sub-contracted the design to a design consultant. The designer's appointment was in the form of an amended NEC Professional Services Contract 2005 Option A.
Central to the dispute was the use of a polyurethane lining to coat deteriorating pipes; the failure of which was the basis of the referral to arbitration. The contractor claimed against the designer, citing breach of contractual design obligations. The designer's defence was largely concerned with the fact that the lining had been selected prior to its appointment and without its involvement.
The following 'deeming clauses' were, however, contained in the designer's appointment:
- The designer was 'deemed to have provided for any other design works necessary to provide a complete design for the purposes of the construction works and in accordance with the Scope’; and
- 'For the avoidance of doubt, any design responsibility noted as ‘CDP’ [being a contractor's design portion] within the documents provided for within section 2 of the Scope, will be deemed to be the designer's responsibility’.
According to the contractor (and, the arbitrator), these provisions passed full and complete responsibility for the defective lining to the designer.
In appealing the arbitrator's decision, the designer argued, among other things, that the arbitrator had failed to correctly apply principles of contractual interpretation; The designer contended that to agree with the contractor would result in the absurdity of the designer being liable to the contractor for what was, in effect, the contractor's error.
The arbitrator agreed with the contractor and the Court of Session dismissed the designer's attempt to appeal. The deeming provisions were sufficiently clear that the "buck ultimately stopped with the [designer]". The Court noted that passing these responsibilities to the designer no doubt assisted the contractor, but that that should have been clear to the designer from the contractual terms.
This judgment has implications for contractors and designers alike: For contractors, the court is willing to accept a contractor shifting all design responsibility to a designer – even where the design choices were made prior to the designer's appointment – as long as the appointment is drafted sufficiently clearly. For designers, if they are being asked to accept full design responsibility in this way, that could include responsibility for design prior to their appointment and therefore that earlier design needs to be considered.
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