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The Duty to Verify Design Assumptions

In order to prepare a design, engineers and other designers must have reference to data describing the physical environment of the object being designed, although initial design will often proceed on the basis of assumptions if the required data is not immediately available. The requirement that such design assumptions be verified was addressed in the Court of Appeal's decision in Ove Arup and Partners International Ltd v Mirant Asia-Pacific Construction (Hong Kong) Ltd [2005] EWCA Civ 1585. The case was an appeal by Arup against an adverse finding of the specialist Technology and Construction Court.

Facts

Ove Arup & Partners International Ltd and Ove Arup & Partners Hong Kong Ltd are engineering consultants which were engaged by CEPA Slipform Power System Ltd (which later changed its name to Mirant) to design the foundations of a boiler house for a new power station in the Philippines. The parties entered into a design contract on May 29 1995. Arup was to develop a concept design through its Hong Kong office, with preliminary and detailed design to be carried out in the United Kingdom. The site of the boiler house required significant excavation to establish the ground level for the foundations.

Initial ground investigations were undertaken by Arup's experts, who discovered the existence of faults in the underlying rock formation. An Arup report of the investigations noted that "the variable and often low strength of the rock, even at considerable depth, may cause foundation problems for heavily loaded structures". Arup commenced the design work for the foundations on the basis of an assumed maximum bearing capacity of 3 megapascals (MPa). The first instance judge found that this was a "preliminary assumption which was to be subject to a detailed process of verification". Arup did not wait for confirmation of this design assumption before commencing detailed design work.

Further to Arup's initial investigatory work, the parties entered into a ground investigation agreement, signed on March 15 or 16 1996, under which Arup was to supervise further ground investigation work and - on request - inspect and approve ground conditions for the foundations. Arup undertook further ground investigations, particularly in July 1996, but despite having earlier identified the need to verify the 3 MPa design assumption on which the design was based, the court found that the investigations undertaken were not the systematic investigation which Arup had originally envisaged as necessary to verify the assumption and were insufficient for such verification. The foundations were built over the remainder of 1996 and subsequently failed in April 1997 as a result of settlement, which led Mirant to claim against Arup for breach of contract in relation to the failure of the foundations.

Decisions

The first instance judge found against Arup on the basis that it had failed to take adequate steps to verify preliminary design assumptions and had thus breached its duty to exercise due care and skill in the design of the foundations. Arup's investigation was found to have been insufficient; had it been sufficient, the variability of the ground would have been identified and analyzed and the subsequent damage would probably have been avoided.

One of Arup's key arguments concerned the issue of causation. Its primary allegation was that the settlement occurred because Mirant had built the foundations on fill material and/or as a result of explosive blasting carried out by Mirant, not because of a failure of the in situ ground (ie, as a result of the ground being unable to support the foundations designed by Arup). Arup argued that such blasting and/or use of fill material occurred after its July 1996 investigations. Arup's appeal challenged both the finding that it owed a duty to verify the design assumption and the finding in respect of causation.

The first instance judge found that Arup's duty under the design agreement was to carry out the design and that, in the case of foundation design, a designer requires information about ground conditions. He further found that where design assumptions are made, the verification of such assumptions is an "integral part of the designer's duty". Arup argued that the judge was incorrect in finding that its design duty under the contract included an obligation to verify design assumptions. Among other things, it argued that the design agreement did not include such an obligation (on the basis that an obligation to confirm that the design intent was being fulfilled, which had been included in drafts of the agreement, was not included in the signed version), and that such an obligation would be covered by the ground investigation agreement rather than the design agreement (in terms of the dispute, the ground investigation agreement was more favourable to Arup than the design agreement).

The Court of Appeal rejected these grounds of appeal, noting that although a designer may initially work from design assumptions where there is insufficient data, the designer has an obligation to ensure that additional information is acquired to verify such assumptions, and that confirming that the design intent has been fulfilled differs from verification of design assumptions. In respect of Arup's argument that the verification obligation arose under the ground investigation agreement, the court noted that even if the ground investigation under that agreement had yielded information which could verify the design assumptions, this would not affect the obligation under the design agreement to verify the design assumptions. This effectively confirmed that the duty to verify is an inherent element of the design obligation. Although not required to obtain verification data personally, the designer must ensure that someone obtains such information and must ensure that the client is informed of the need to obtain it. The court found that, unless the designer gives the client an explicit warning and disclaimer, it is not sufficient for a designer to leave it to the client alone to obtain and evaluate such additional information.

The court of first instance decided on the facts that the foundations had been built on in situ ground, rejecting Arup's contention that the relevant cause of failure was blasting and/or the use of fill material by Mirant. On appeal, Arup alleged that the first instance judge had failed to address certain factual issues correctly; it also asserted that there were some technical errors in the judgment. However, the Court of Appeal emphasized the difficulty an appellant faces in challenging a lower court's findings of fact, particularly when the court in question is a specialist court such as the Technology and Construction Court. The Court of Appeal found that it was open to the first instance judge to reach a decision on the basis of the evidence available and rejected these grounds of appeal.

The court confirmed that a designer's duty to design with due care and skill includes a duty to verify any design assumptions that may have been adopted (eg, in order to advance preliminary designs in the absence of available data). Although this case concerns the design of foundations, it is arguable that the requirement to verify design assumptions is also relevant to other design disciplines. Designers must ensure that they have processes in place to ensure that design assumptions are verified.

Comment

The court's decision does not give much guidance on the scope of the verification activities that must be undertaken by a designer in order to fulfil the duty to verify design assumptions. In the context of foundation design, the court noted that for some contracts a surface examination of ground conditions would be sufficient to allow a designer to discharge its duty to verify design assumptions, although on the facts this was insufficient in the case of the contract at issue. It appears that what a designer must undertake to fulfil the duty to verify design assumptions will depend on the circumstances of the case.

Given the court's reference to warning clients and issuing disclaimers, a designer which has not verified its design assumptions may wish to consider addressing this through an appropriately worded disclaimer. However, such a disclaimer must be explicit; Arup's design included a note that the foundation bases were to be founded on unfractured rock (which is not what occurred in reality), but this note was not sufficient to override the duty to verify the design assumption.

The case also highlights the importance for designers of using contract documentation to limit their liability (eg, through the use of time bars and monetary caps on liability), as liabilities arising from design faults on construction projects will almost certainly be many times greater than the design fees.

Finally, the case emphasizes the Court of Appeal's reluctance to disturb findings of fact by a lower court in complex technical cases where the lower court is a specialist tribunal, such as the Technology and Construction Court. The Court of Appeal's judgment notes that "a party seeking to persuade this court that findings of fact by a specialist Technology and Construction Court judge were wrong has an uphill task", a view that should be considered carefully when appealing a decision by a specialist tribunal.