Duty to warn of design defects?

An emerging issue in construction defect cases is the duty of a builder or other contractor to warn of design defects, or the fitness of the product or material for the purpose it is going to be used for.  For example, is a builder liable if he constructs a roofing detail, in accordance with the architect’s plans, which he knows is likely to leak but fails to warn the homeowner? The answer is likely to be yes, the builder does owe a duty of care to warn the homeowner before carrying out work that is likely to cause loss to the homeowner.

Overseas cases

Overseas cases say that the builder or contractor does have to warn the owner in certain circumstances. 

The duty to warn was found in the Canadian case of Brunswick Construction Ltd v Nowlan.  The contract contemplated the appointment of an engineer to supervise the works but none was.  The builder built the house in accordance with the plans and specifications.  The design did not contain sufficient provision for the ventilation of roof space and timbers and as a result serious rot affected the house.  The Court held that Brunswick was liable because it was under a duty to warn the owner of the problems with the plans.  This duty arose because:

1. The builder was experienced and should have been aware that the design was bad;
2. Since no engineer or architect was appointed to supervise, it was clear that the owner relied on the skill and the attention of the builder;
3. The builder knew it was being relied upon and so should have warned the owner of the inherent danger in executing the architect’s plans, particularly in relation to the inadequate ventilation;
4. The builder’s obligation was to carry out work which would perform “the intended duty or function”.  This obligation overrode the obligation to comply with the plans and specifications;
5. The builder was liable for the failure of the work, even though it was carried out in accordance with the plans and specifications.

In the Canadian case of BowValley (Bermuda) Ltd v St John Ship Building Ltd the supplier was alleged to have breached a duty to warn an owner about flammability of thermal wrapping. The Court found that the supplier was liable to the owner for breach of the duty to warn, despite the fact that the supplier warned the contractor and despite the fact that the owner knew as much about the product as did the supplier and contractor.  In this case the owner selected the supplier, not the contractor. 

Implied warranties under the Building Act 2004

In New Zealand, the Building Act 2004 provides for implied warranties for building work in relation to household units.  There are warranties that the building work will be carried out in a proper and workmanlike manner and with reasonable skill and care, that the materials will be suitable for purpose, and that the building work will be carried out in accordance with all legal requirements.  These warranties suggest a reliance on the builder which would arguably extend to a duty to warn of design defects.

However, there is a further warranty that the building work is carried out in accordance with the plans and specifications.   

The implied warranties under the Building Act 2004 may prove inconsistent in some cases, such as where the builder is concerned that the plans may not allow the building to be weathertight.  In such a situation, the builder (or subcontractor) should approach the owner or head contractor, advise of the design defect and seek an amendment to the plans and building consent.  Any communications regarding design defects should be recorded in writing to avoid any potential arguments regarding notice later on.  If the owner or head contractor is not willing to amend the plans and consent, the builder should seek legal advice before continuing work.

Where there are concerns that the plans are defective and may lead to a breach of other warranties under the Act, it is suggested that the obligation to carry out the work with reasonable skill and care and in accordance with the Building Code, will override the obligation to carry out the work in accordance with the plans and specifications. 

Sub-contractor liability

Would a duty to warn of design defects extend in New Zealand to subcontractors? 

The implied warranties under the Building Act 2004 would also apply to any work carried out on a household unit by a subcontractor but those warranties would be in favour of the head contractor.  The homeowner would therefore need to claim against the head contractor who would in turn claim against the subcontractor.

It is possible that a Court may also find a duty on a subcontractor to warn the owner of design defects.  It has already been accepted in New Zealand that a subcontractor owes a duty to the owner in respect of the building structure.

Conclusion

Builders and subcontractors should not adhere rigidly to the plans and specifications if there are concerns about defective designs.  Any concerns need to be raised with the homeowner or headcontractor (preferably in writing) and amendments to the plans and consent documents requested.  If the builder or subcontractor fails to do so, they may be sued by the homeowner or headcontractor for failure to warn of the design defects.