Does a main contractor's own actions break the causal link with its subcontractor's shortcoming and, as a result, the damage can no longer reasonably be attributed to the subcontractor, or does this only play a role in the context of own fault?

Marcella de Haan, Partner at Ekelmans Advocaten discusses this case in an annotation published in the trade journal VAST (2024/N-018). 

Court of Appeal of The Hague
November 14 2024, 200.292.073/01
Mr Van Kooten, Mr Nijhuis, Mr Baron van Wassenaer van Catwijck
Articles 6:98 and 6:101 of the Civil Code

In brief

A main contractor holds its subcontractor liable for damage caused by subsidence in new-build homes. As a result of an error in the foundation advice obtained from a third party, the piles installed by the subcontractor did not have sufficient load-bearing capacity. The parties disputed, inter alia, whether the damage caused by the subsidence of the homes could still reasonably be attributed to the subcontractor and whether the main contractor was at fault, as he had carried out too little and too late an investigation and the consequential damage would otherwise have been (largely) avoided. Both court and court of appeal dismissed the main contractor's claims on the grounds of own fault.

The case involves a main contractor claiming compensation from its subcontractor for damages resulting from subsidence that occurred in new-build homes.

Facts

Based on foundation advice obtained from a third party, the subcontractor installed piles for the foundation of new-build houses. During the piling, the advised calendar values are not met and the work is briefly halted, but later continued. Also during this period, control probes are carried out at the request of the main contractor, which deviate from the probes used for the design. An offer for a test load is not acted upon by the main contractor; without further investigation, residential construction is started on the foundation in question. Later, damage is found to the brickwork of the new-build houses and subsidence is also reported. Construction is halted and a new foundation recommendation is obtained by the main contractor. This concludes that the original advice had miscalculated the piles, resulting in insufficient bearing capacity, and recommends further investigation and reinforcement measures to bring the bearing capacity up to standard (in the form of additional piles). The main contractor undertakes remedial work without further investigation and without consulting the subcontractor. During this work, the houses sag further. Subsequently, the houses and foundation are demolished and entirely new houses are built.

Procedure

The main contractor believes that the subsidence resulted from errors in the foundation advice and claims compensation from the subcontractor for, among other things, the costs of its repair attempt and the subsequent demolition and new construction of the houses. The costs of demolishing and rebuilding the foundation installed by the subcontractor have already been reimbursed under the main contractor's CAR insurance policy.

The subcontractor put up a defence and is of the opinion that the subsidence was caused by the unsuitability of the ground, or at least the main contractor's unsound repair attempt, and disputes the causal link between any errors in the foundation advice and the claimed damage. The subcontractor also relies on fault on the part of the main contractor, because no additional investigation was carried out or at least not carried out in time and, as a result, the correct measures were not taken that could have prevented the claimed consequential damage to the houses.

At first instance, the court ordered an expert opinion on the cause of the subsidence, from which it follows, among other things, that the initial foundation recommendation - on the basis of which the subcontractor carried out its piling work - was indeed incorrect. The court ruled that the claimed damages were nevertheless not eligible for compensation, as the subcontractor's reliance on the main contractor's own fault succeeded. The main contractor could have been expected to perform additional investigations and it is assumed that, based on these investigations, the correct measures would have been taken to increase the bearing capacity of the piles and prevent (further) subsidence. According to the court, the damage resulting from the failure to conduct that investigation and take those measures should remain for the main contractor's account under Section 6:101 of the Dutch Civil Code.

The main contractor appealed. The Court of Appeal found that  there was a condicio sine qua non connection between the errors in the original foundation advice, or at least the foundation installed by the subcontractor on the basis thereof, and the claimed damage. However, also according to the court of appeal, the main contractor - as a result of the deviating calendar values during the pile driving and the control soundings received shortly afterwards - should have had further investigations carried out (such as additional soundings and/or the test loads quoted to him) prior to the start of residential construction, and it follows from the expert's report that this would have revealed the inadequate load-bearing capacity of the piles and that the subsequent subsidence of the houses could then have been limited or prevented. However, according to the court, this does not make the claimed damage in such a removed connection to the subcontractor's shortcoming that it can no longer be attributed to the subcontractor within the meaning of Section 6:98 of the Civil Code. According to the court of appeal, the causal link has not been broken as it has not been established that the claimed damage would have been completely prevented if the main contractor had acted differently.

However, the main contractor's conduct also qualifies as own fault according to the court of appeal. The court of appeal estimates the extent to which the circumstances attributable to the main and subcontractor contributed to the damage at 90% and 10% respectively. The main contractor would not have disputed, with reasons, that the damage would have been almost completely prevented if it had carried out further investigations in time. The court of appeal is of the opinion that fairness in this case demands that the subcontractor's obligation to pay compensation lapses in its entirety and it also does not have to compensate this 10%. In doing so, the Court of Appeal took into account i) that the subcontractor's shortcoming can be traced back to an error made by someone else in the foundation advice received by him, ii) that the main contractor did not carry out (or have carried out) the further investigation, even though he was aware of the facts and circumstances that necessitated that investigation, and iii) that the subcontractor only earned €30 on the foundation advice and that this amount is disproportionate to the claimed damage.

Causal link: reasonable attribution

In assessing whether the damage can reasonably be attributed to the subcontractor, all the circumstances of the case should be considered, including - as Article 6:98 of the Civil Code explicitly mentions - the nature of the liability and the nature of the damage. The circumstances relevant in this context may also include whether the damage has a (very) remote connection to the event creating liability (i.e. the errors in the foundation advice and the subcontractor's execution of the foundation based on it) as well as whether the damage is reasonably foreseeable (see, inter alia, HR 3 October 2014, ECLI:NL:HR:2014:2895, NJ 2014/429).

The court's opinion that the damage in this case can still reasonably be attributed is not extensively motivated in the judgment. However, if we go through some relevant circumstances in this case, the judgment is easy to follow;

• there is material and property damage;
• It is about contractual fault liability;
• That the houses are subsiding as a result of the error in the foundation advice and the lack of load-bearing capacity of the installed piles is not in itself unforeseeable and is not remotely related to the deficiency.

The fact that the principal could have prevented or mitigated these consequences by intervening earlier does not constitute sufficient grounds in this case to reasonably not attribute the damage, but does provide ammunition for the plea of own fault.

Own fault: the equity correction

The 90/10 causal division between the circumstances to be borne by the main and subcontractor, respectively, retained by the court in the context of own fault concerns an estimate based on the expert opinion and the litigation debate. More striking is the judgment that even that 10% need not be compensated by the subcontractor under the equity correction.

Also when ruling on the possible application of a fairness adjustment, all relevant circumstances of the case must be taken into account, both on the side of the subcontractor and on the side of the main contractor (see, inter alia, HR 5 December 1997, NJ 1998/400). This may include, inter alia, the varying seriousness of the mistakes made and the degree of culpability thereof, the nature of the damage and whether or not the parties are insured. In the judgment, the court of appeal runs through the nature and seriousness of the conduct of both parties and also includes the margin on the foundation advice in its opinion. The latter point does not look immediately convincing. It is true that the subcontractor earned almost nothing from the foundation advice itself, but obviously he did earn something from the subsequent installation of the foundation, which ended up being defective because of the errors in the advice. Moreover, the third party hired by him who provided the advice was at his risk, in relation to the main contractor. This was still under discussion between the parties, but it was ruled in the proceedings that the third party who provided the foundation advice was engaged by the subcontractor.

Incidentally, the verdict on the own fault or at least the causal allocation in that context would probably have turned out differently with regard to the unclaimed costs (paid by the CAR insurer) of demolishing and replacing the foundation - installed by the subcontractor based on the incorrect foundation advice. After all, if the main contractor had carried out further investigations in time and discovered the fault earlier and taken the appropriate measures, this would have prevented the consequential damage to the houses, but even in that case, costs would have been incurred for obtaining a new foundation recommendation, carrying out follow-up investigations into the remedial measures to be carried out and then carrying out those remedial measures on the foundation itself.

Tip for practice

If a discussion is held about reasonable attribution pursuant to Article 6:98 of the Dutch Civil Code or a fairness correction pursuant to Article 6:101 of the Dutch Civil Code, it is worthwhile to check which specific circumstances from the case, in addition to the circumstances explicitly mentioned in the sections of the law, could further play a role in a judgement on this and to take concrete positions as to why these circumstances should or should not lead to attribution or a fairness correction. In doing so, it may also be useful to distinguish between the various consequences/damages. As far as own fault is concerned, it is also useful to make a distinct distinction in the submissions between causal allocation and a possible equity correction.

Source: VAST 2024 / N-018, Marcella de Haan / A publication of M.A.D.Lex