When does a sub-contractor assume design liability for its components

DBE Energy Limited (DBE) engaged Biogas Products Limited (Biogas) to supply and install pasteurising tanks and AD tank heaters under two separate contracts as part of a wider system for the construction of a new anaerobic digestion plant worth £12million. The contracts under which Biogas was to supply these components consisted of agreements set out in emails and purchase orders which were further expanded on in meetings.  Biogas was required to design, manufacture and supply the components with “utmost skill, care and diligence”. Following completion of the works, there was a catastrophic failure in the system which was caused by the tanks and heaters as a result of incorrect pressure calculations during the design process.

DBE alleged that the failure had been caused by Biogas’ negligent design. Biogas argued that it had not been employed to carry out a significant design role. It alleged that it had provided limited input in this respect and that it was not obliged to have regard to the design requirements of the system that the components were to be added to.

The Court disagreed with Biogas and held that whilst there was no formal contractual documentation, it was evident from other documents that the scope of works for Biogas included the detailed mechanical design for the plant along with assisting with the development of the process design and Biogas had indeed become involved in such design work. As such, “Biogas was obliged to ensure that its design for the Tank Heaters and the Pasteuriser Tanks could be safely integrated into the overall design of the AD Facility. It could not properly ignore the process and mechanical design work that it was undertaking, whether that design work was being done on its own or… in conjunction with others”.

The Court also considered that even if Biogas had not been carrying out such an important role, it was “…clear that a designer of the Tank Heaters and the Pasteuriser Tanks needed to have regard to the system into which its components would be integrated in any event”.

Important to the Court’s finding is that Biogas was aware of the system in which the tanks and heaters were to be placed, understood that they would need to be integrated in order to function as intended and that the components were very much intrinsically linked to the overall mechanics of the wider system. Biogas was found liable for defects in its design of the pasteurising tanks and heaters, as they were not compatible with this wider system.

DBE was awarded £224,303.77 covering costs of installing temporary tanks, costs yet to be incurred relating to the substitution and installation of replacement tanks and the loss of revenue.

What does this mean for you?

Even when not offering broad design services, contractors, consultants and suppliers should be aware that there may be a duty to consider how the item they are designing and/or supplying will function within the system it is intended for. If they fail to do this then they may be considered to have breached their duty of care, thus exposing themselves to liability for losses arising from failure of the relevant components to integrate.

Contractors, consultants and suppliers should make it clear from the outset exactly what services they will be supplying, explicitly excluding anything that they are not undertaking but which they might be expected to by their client.

For more information on the article above please contact Lianne Edwards or Mark Manning.