Approved Inspectors – Liability in the wake of Grenfell

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Since the decision in Murphy v Brentwood District Council, it’s been well established that claims for defective work giving rise to pure economic loss cannot be pursued against a Local Authority Building Inspector. But in the wake of Grenfell and other cases involving residential developments left unfit for human habitation, the spotlight is being turned on Approved Inspectors and their potential liability if works are defective and not in accordance with Building Regulations.

All building works (as defined by regulation 3) must comply with Building Regulations. The role of checking that the Building Regulations so far as they can reasonably be determined falls to a building control body, either the Local Authority or an Approved Inspector.

Approved Inspectors are independently monitored and regulated by the Construction Industry Council Approved Inspector Register (CICAIR) and are authorised to carry out the building control function.

They are usually appointed, under a contract of appointment, by the owner of the property or developer who is procuring the works.

CICAIR guidance states that inspections are carried out at certain stages of the work to “check, but not to guarantee” that the work complies with the Building Regulations and that “Final Certificates are therefore not a guarantee or a warranty for the building work that has been carried out”.

So what liability, if any, does an Approved Inspector have if the works are defective and not in accordance with Building Regulations, and to whom does an Approved Inspector owe a duty of care?

This question may take on significance particularly for purchasers and leaseholders where, for example, the developer or contractor have gone bust or have not suffered any loss, or do not have adequate insurance to cover the cost of remedying the defects.

Approved Inspectors will usually be under an express or implied duty to exercise reasonable skill and care. The person appointing the Approved Inspector may therefore have a contractual claim if a breach of the standard of care which has caused loss can be proven. Such claims may be difficult to establish given the fairly limited role undertaken and the CICAIR guidance. Appointments may also contain certain exclusions or limitations of liability and, in any event, the recovery of any claim is likely to be dependent on the level of the Approved Inspector’s professional indemnity insurance.

However, any purchaser or leaseholder would have to pursue a claim in negligence, in which case, it may be difficult to establish that there is sufficient “proximity” or closeness of relationship to make it reasonable for the purchaser or leaseholder to place reliance on the certificates issued by the Approved Inspector.

In Lessees and Management Company of Herons Court v Heronslea Ltd and others, the Court struck out a claim against an Approved Inspector under the Defective Premises Act 1972 on the basis that an Approved Inspector was not a person who “takes on work for or in connection with the provision of a dwelling”.

The Court took the view that the Approved Inspector’s primary function is to certify whether the design or construction is lawful in a regulatory sense, and not to check whether the work was done in a workmanlike or professional manner with proper materials so that the dwelling would be fit for habitation when completed.

In Zagora Management Ltd and others v Zurich Insurance plc and others [2019] EWHC 140 (TCC), claims against the Approved Inspector were based on an allegation of fraudulent misrepresentation; i.e. that the Approved Inspector knew that the statements in the Final Certificate that the works complied with Building Regulations were false, or there was no reasonable basis for believing the truth of the statements. This had resulted in major defects to a block of flats, including fire safety breaches, with an estimated cost to rectify of more than £10million.

The Approved Inspector accepted that it had not taken reasonable steps to satisfy itself that Building Regulations had been complied with and admitted that it made misrepresentations in issuing the certificates. However, the claim by the freeholder failed as it was impossible to establish that the Approved Inspector intended that someone acquiring the property would rely on the certificates two or three years after they were issued. The claim by the leaseholders also failed, as they were unable to establish that they purchased the flats in reliance on the certificates.

COMMENT: Whilst the above cases provide some clarity on the liability of Approved Inspectors, it remains the position that the scope for any claims is somewhat limited. However, this remains an emerging area and it is foreseeable that Approved Inspectors will continue to be the target of claims.