§ Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)I am pleased to have secured parliamentary time to debate compulsory indemnity insurance for chartered architects and architects generally, which is of considerable importance. The unfortunate set of circumstances that befell my constituents Mr. Gareth Jones and Mrs. June Jones have repercussions for thousands of people throughout Great Britain. I wish to make it plain that I have nothing but the highest regard for architects as a profession, and I know that their professional standards are among the highest in the world. It is, however, the exception that frequently proves the rule.
In 1989, Mr. and Mrs. Jones purchased a parcel of land for the purpose of erecting a dwelling house—their home. They had saved assiduously to build their dream home in the village of Penmachno near Betws-y-coed in my constituency. It was Gareth Jones's home village, and he had spent many a long year working throughout the United Kingdom and beyond to secure enough capital to purchase their dream home.
In 1990, Mr. and Mrs. Jones began making plans in earnest, and, of course, they had to consider who was going to prepare the plans. Mr. Jones had offers from part-time building consultants and architectural drawers who would prepare all the plans, submit them for planning approval and allow for inspection at a cost of less than £500.
Being mindful of the fact that this was probably the greatest financial commitment that he would enter into, Mr. Jones decided that he should instruct a chartered architect to have added security if "something should go wrong." So it was that my constituent reasonably opted for the services of a chartered architect, despite a fourfold increase in fees. Mr. Jones was happy to pay the extra in view of the transaction's importance to him and to his family.
Mr. Jones consulted a chartered architect, Mr. D. J. Broomfield, RIBA, who practised at Colwyn Bay, Clwyd. Plans were drawn up, submitted to the borough council and approved. Mr. and Mrs. Jones paid Mr. Broomfield £2,000 to include the necessary inspection fees and supervision, which would lead to an architect's certificate. There were mistakes in the plans that were never communicated to Mr. and Mrs. Jones, but, in any event, the building work was commenced in earnest and my constituents were happy to see their dream home taking shape.
Unbeknown to them, however, the local planning authority and building control officer served a rejection notice on Mr. Broomfield, referring to no fewer than 17 problems with the property. Among the problems were water ingress through the gable end, the porch, severe cracking in the plasterwork and inadequate drainage around the property—all substantial items. It transpired that Aberconwy council had written to Mr. Broomfield about all those items, but he must have concealed the letters, and never uttered a word to the builder or to my constituents.
Mr. and Mrs. Jones then found that they were not able to communicate with the architect. Calls went unanswered and letters unacknowledged. Unbeknown to them, Mr. Broomfield was undergoing personal problems, culminating in his taking his own life in January 1993.
566 The following is a brief list of problems at the property. There was considerable rising and penetrating damp. There were problems on the chimney to the lounge involving the cavity tray. There was an absence of apron flashing. A chimney stack on an outer cavity wall was wrong. The outer leaf and the cavity were wrong. There was evidence of dampness at the reveals, again probably a damp course problem. Window openings had not been completed, and all were lacking a suitable cill to throw water away from the walls. The mastic pointing to the frames had not been carried out.
The porch showed signs of extensive penetrating and rising damp. The damp-proof membrane did not tie into the damp course, which appeared to be below the floor level. The stepped flashing was cemented to the wall, and it was not possible to determine whether a cavity tray was incorporated. There was a lack of gutters. Hairline cracks had appeared in the render, and trussed rafters required additional bracing to conform to British standard 5268. Background ventilation was required to habitable rooms. Mechanical ventilation was required in the kitchen. The ground floor was not insulated, and storm water drainage had not been installed.
Therefore, through no fault of their own, my constituents are in a ruinous position. They have an uninhabitable house with a substantial mortgage and a repair bill in excess of £30,000, which they do not have and which they have no prospect of obtaining. Initially, they wrote to the Architects Registration Council of the United Kingdom, which said merely that the deceased Mr. Broomfield had been registered by it, under the Architects (Registration) Acts 1931 to 1969, until his death on 8 January 1993. It suggested that Mr. and Mrs. Jones consult a solicitor to find out inter alia whether Mr. Broomfield had professional indemnity insurance, and to consider taking proceedings against the deceased's estate—not a straightforward action. According to my constituents, in any event, the estate was almost insolvent.
I was consulted, and I wrote to the Royal Institute of British Architects about professional indemnity insurance. I was told to contact the widow and ask whether any insurance existed. I then met RIBA's chief executive to register my view that compulsory PII should be introduced urgently. May I draw a comparison with the legal profession? No solicitor is entitled to practise without proof of PII having been paid. As a solicitor, I think that that is both right and proper—I have no hesitation about it. It is costly, but clients are protected and so are lawyers.
With the best will in the world, however, things sometimes go wrong, especially under extreme pressure of work. By the very nature of their work, architects have a higher potential to inflict problems on clients. It is astonishing that a highly regarded body such as the RIBA does not insist on it. I always thought it did. The Architects Registration Council of the United Kingdom does not insist on it and, since taking up this case, I have had numerous letters from architects, some RIBA members and others not. Nearly all support my contention, with the reservation that all people engaged in drawing plans for remuneration should be covered by insurance.
567 On 24 May, the chief executive of the British Institute of Architectural Technologists wrote to me saying:
In the front page article in Building Design of 26th April we were interested to read your comments on the question of compulsory professional indemnity insurance for Architects. As a professional institute in the construction industry we have already introduced mandatory PII for all members who provide services direct to clients. I enclose a copy of our Code of Conduct.We spent a long time discussing the introduction of mandatory PII but considered that the risk of losing some members who were not prepared to carry professional indemnity insurance was outweighed by the public's perception of Architectural Technologists and what our professional Institute was trying to achieve. We therefore support your view in pushing for compulsory PII for Architects.I have received another letter from the Royal Incorporation of Architects in Scotland. It said:Since May 1992 the Incorporation has placed obligations on its membership generally to carry PI insurance when they are responsible for businesses; although the wording of the obligation is flexible enough to permit those responsible for public sector businesses to provide appropriate indemnity by some other means.It is important to bear in mind that the provision of appropriate forms of insurance is an important factor in realising this obligation, and RIAS Insurance Services has for the past few years provided a range of PI policies to suit small part-time businesses up to major international practice requirements.We believe such obligations are a part of a professional approach, and could form a model for others.However, the provision of PI insurance is not a long-term solution since it runs on a claims-made basis—and the demise of the architectural business, or the death of the architect can therefore leave future clients vulnerable.The only solution to that sort of problem is to have a project based or building based insurance—a matter which the profession has supported since the publication of the BUILD (Building Users Insurance against Latent Defects).Although I am aware of the Government's dogmatic objections to regulation, I am also keenly aware of the Government's duty to protect consumers. For most people, such a project is the single largest and most important contract of their entire lives, and they deserve security.The Minister will know that, in 1993, the Warne inquiry's terms of reference included the following: the need to ensure health and safety and the protection of the environment; the need to safeguard the interests of the consumer of architectural services; and the importance of maintaining professional standards. The Housing Grants, Construction and Regeneration Bill, which is currently before the House, is just the vehicle for change to ensure that consumers' interests are protected. Of course, the architectural profession has agreed to lay members serving on its professional body. If we are to strengthen protection for the public, this matter is a core issue that needs to be examined.
While looking at the format and purpose of the Architectural Registration Council for the United Kingdom, I discovered that it has not even touched upon the subject. I find that most disturbing. There is a need to ensure that all people engaged in drawing plans for remuneration should be insured. As I have said, I am not singling out the architectural profession. It has been suggested to me by one correspondent that a BUILD-type insurance protecting both the consumer and the provider should be introduced. I am certainly not averse to that.
Another correspondent, a member of the RIBA, states in his letter: 568
I am writing to you to lend my support, in principle, to your call for all architects to hold PII … I believe architects have a moral duty, if not a professional duty to be insured, but I am concerned that you appear to single out architects without addressing the problem of `plan drawers' of all descriptions.Thousands of Building Regulation and Planning Applications are processed every week, which do not bear the designer's signature, mostly from the Black Economy within the Construction Industry and related professions. They are a time-bomb waiting to go off! These individuals are not insured and they certainly do not declare their earnings to the Inland Revenue, which is why they don't sign their work, and when things go wrong they can't be sued.The way forward, in the interests of fairness, must surely be to insist that all applications placed before a Local Authority bear the name and qualifications of the designer and that all designers show proof of being insured, or, better still, why not promote the idea of single-project insurance cover which protects clients, contractors and designers alike—A LICENCE TO BUILD. Singling out architects for special treatment does not address the problem.I agree with that statement and, indeed, fully endorse all the comments of that professional gentleman.We now have at least two solutions—which I find attractive—that could deal with the problem and that would enable people to have security, so preventing a recurrence of the awful calamity that befell by my constituents. I call upon the Minister to give an undertaking that he will urgently consider those solutions and incorporate them in the Housing Grants, Construction and Regeneration Bill.
Mr. and Mrs. Gareth Jones are being sued for possession by their building society. They face ruination. I am sure that many other people throughout the United Kingdom are in a similar position. I sincerely believe that the Government owe them a duty as consumers, and I trust that the Government will not shrink from that responsibility.
The House has heard the views of the profession and the public. The RIBA has begun to move in the right direction since this case has been highlighted. I understand that a professional indemnity insurance policy, tailored for small practices and sole practitioners, has recently been launched by the RIBA insurance agency. As I have said, the RIBA is moving in the right direction, and the Government must now be invited to move in a similar direction. The situation is a calamity for those people caught up in it. This debate may not assist my constituents, but they have been most helpful in the preparation of notes for the debate, because they do not want others to suffer what befell them and have little or no redress.
I ask—indeed, plead with—the Government to move in the right direction. Failure to do so would be an abrogation of duty to our electors, many thousands of whom, through no fault of their own, have been caught in this awful trap.
§ The Parliamentary Under-Secretary of State for the Environment (Mr. James Clappison)The hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) has eloquently told us of a tragic sequence of events, with a number of tragic aspects, involving his constituents Mr. and Mrs. Jones, who have been the losers. I am sure that hon. Members will wish to join me in expressing great sympathy to them in the predicament in which they find themselves.
569 I am sure that the hon. Gentleman appreciates that there may be some legal consequences of the case, so I do not want to go into too much of the detail. However, I shall certainly respond to the issues that he raised. I note what he said about compulsory professional indemnity insurance for architects. I hope that I can give him some reassurance, but I have to make it clear at the outset that I do not agree that compulsory professional indemnity insurance for architects is the answer.
This case illustrates the sort of problems that can arise when things go wrong with what should be a straightforward project. Fortunately, that does not often happen, but when it does, the problems could be the result of actions, or lack of actions, by any one of a number of people involved in the building process. It is not limited to architects. Any argument in favour of compulsory professional indemnity insurance would apply equally to a number of other trades or professions—builders, for example—who design buildings or supervise building operations. Indeed, it applies to anyone who wishes to design a building on a commercial basis.
The function of building design is not and cannot be protected by law, although the ability to use the title "architect" is so protected. I see no reason for architects alone to be singled out and compelled to have professional indemnity insurance. It would be unfair for architects to be forced to bear the cost of such insurance regardless of their circumstances—for example, they might not be currently practising—and not to impose the same conditions on other building designers. It would also be unfair to potential clients, who would not automatically have that additional protection if they chose someone other than an architect to design their building.
The hon. Gentleman drew some comparisons. I accept that some professions—doctors and lawyers, for example—do have compulsory professional indemnity insurance. I do not consider that necessary or desirable in the construction industry. The Government are opposed to most compulsory insurance as a matter of principle, because of the way it affects the operation of the market.
Perhaps the overwhelming flaw in any compulsory regime is that insurers cannot be compelled to provide cover. In extreme eases, that could even drive professionals out of business. It may also put insurance companies under strong moral pressure to provide insurance, even in cases where acceptance is not commercially sound. While there are some instances—for example, motor and employers liability insurance—where there are overwhelming reasons for a compulsory regime, I do not believe that the same considerations apply in this case.
Compulsory insurance can also cause difficulty for policyholders and insurers. Requiring certain sectors to purchase insurance can weaken their power to negotiate acceptable policy conditions and premium rates. Furthermore, the costs of compulsory insurance could fall more heavily on new entrants and on those who lack a track record, and may therefore add to barriers to entry to the industry.
In raising this issue, the hon. Member for Meirionnydd Nant Conwy aims to protect the client in a building project from the results of bad workmanship and design. I certainly support that aim.
570 Regardless of the insurance position, all clients already have the additional protection of the building regulations. All builders are required by law to build in compliance with those regulations. They are designed to ensure the health and safety of people in and around buildings, and are enforced through regular inspections at all stages of the building process.
Let us consider the issue of legal remedies. Generally speaking—without going into specific cases, for the reasons that I have mentioned—legal remedies are available if things go wrong, and failure to honour a contract can be pursued through the courts. Under statute law, the Defective Premises Act 1972 is particularly important because it requires that work is done in a workmanlike or professional manner and with proper materials, so that, as regards that work, the dwelling will be fit for habitation when completed.
The main problem with legal remedies, of course, is the ability of the person who is found responsible to pay to put things right. That is not a new or uncommon issue. The Government have considered carefully possible ways of dealing with defects that come to light after a building has been completed.
In his report "Constructing the Team", Sir Michael Latham considered options for reform of the law of liability for building defects. Among the options was a change in the law to amend the principle of joint and several liability, to liability in proportion to the amount of blame assigned to each offending party. That was considered specifically because of the way in which the cost of restitution of building defects tends to fall on architects.
The Government have since referred the matter of liability to the Law Commission, which recently reported that there should be no change in the joint and several liability regime. The Government are now consulting on its recommendations.
Sir Michael Latham's report also recommended the introduction of compulsory latent defects insurance. He applied that recommendation specifically to commercial, retail and industrial buildings and not to domestic work. However, his view was that, if compulsory insurance was not introduced, the construction industry has a ready method of introducing an insurance-backed warranty regime through the terms of construction contracts. The Government endorse that approach.
The same view is reflected in our response to the Justice report on how to improve the legal rights and practical remedies available to an owner, tenant or occupier of residential premises on which building work has been carried out defectively. One of the report's recommendations was the establishment of insurance-backed warranty schemes, endorsed by lending bodies and backed by legislation.
The Government would welcome such schemes if they were voluntary, but we would find it difficult to accept that particular proposal, because it is based on a statutory scheme. We would prefer trade associations and other organisations in the construction industry to extend existing schemes for improving the quality of building work and protecting the householder against defective building work. As I am sure the hon. Member will be aware, the most notable of those organisations is the excellent National House Building Council guarantee scheme, which now covers about 90 per cent. of new homes.
571 The Government regard the extension of voluntary schemes to insure buildings against defects and to provide professional indemnity cover as the best way forward.
Most architects are currently covered by some form of professional indemnity insurance. Those in big practices are covered by their employers' insurance, and the same is true of the many architects who are employed by local authorities and elsewhere in the public sector. Academic or non-practising architects do not need to be covered, while those who undertake only the occasional job might take out ad hoc insurance for an individual project.
Some architects practise without insurance. Although the vast majority encounter no problems, we encourage all architects to take out some form of professional indemnity insurance. That must, however, remain a matter for the individual and his professional organisation, and we certainly do not consider that such insurance should be compulsory. The matter should be dealt with in the contractual arrangements between the client and the architect or other building professional. If he wishes, the client may insist on employing someone with professional indemnity insurance.
Since the events to which the hon. Member referred took place, I have been pleased to hear that the Royal Institute of British Architects has introduced a rule that anyone appearing on its professional practice register must have some form of professional indemnity insurance.
Before saying more about that rule, I should explain that there are two main bodies concerned with the regulation of architects. The first is the Architects Registration Council of the United Kingdom, which is known as ARCUK, to which the hon. Member referred. It is the statutory body that has responsibility for registering all architects. To practise under the title "architect", an individual must by law be registered with ARCUK. As I said, however, there is no protection of the function of an architect, and anyone—registered or not—is allowed to design buildings and to undertake that function.
To be registered with ARCUK, a person must prove that he has the prescribed academic qualifications and practical training experience. There are also provisions for recognition of European Union qualifications and for assessment of overseas applicants. But admission to the register is entirely on the basis of ability to carry out the functions of an architect, and there are no provisions about professional indemnity insurance.
Current legislation will reform the structure of ARCUK and make minor changes to admission criteria. However, the changes to the criteria remain firmly based on the ability of the individual to function as an architect, and do not extend any of the criteria to cover financial or insurance matters. We believe that that is as it should be. The reforms, which gained widespread support during 572 public consultation, are based firmly on the idea that ARCUK should be a minimalist body concentrating on the core functions of registration and discipline.
The other main body—I say "main" because there are also bodies for Scotland and Northern Ireland—is the Royal Institute of British Architects, which the hon. Member also mentioned. It is the professional body to which about 70 per cent. of architects belong. It has a royal charter, but it is not a statutory body. Its members refer to themselves as "chartered architects". I am sure that the hon. Gentleman intended his proposals to cover not only chartered architects but also those who are registered.
In the past, the RIBA has considered introducing compulsory professional indemnity insurance as a condition of membership. However, it decided against that for a number of practical reasons, not least because many of its members were not practising and it seemed unjust to require them to pay for an expensive insurance that they did not need.
The RIBA instead maintains a register of practices, for which the entry requirements have recently been expanded to include the need for adequate professional indemnity insurance. Entry to the register is entirely voluntary, but a large majority of architectural practices are entered on it.
The register is a major step forward, and means that a member of the public looking for an architect entered on it is guaranteed to get someone who is covered by some form of professional indemnity insurance. Having just heard an account from the hon. Member of the events affecting his constituents, Mr. and Mrs. Jones, I must say that, had this requirement been in force when they were first looking for an architect, it is quite possible that they might have chosen someone from this register with professional indemnity insurance.
I understand the concerns raised by the hon. Member, and I hope that, in the course of this response, I have been able to set them in context. I certainly understand why he is so concerned about this issue, and I trust that I have been able to reassure him to some extent, particularly on some of the measures that have been introduced by the architectural profession, including those which have been introduced since the events in this case took place.
I can reassure the hon. Gentleman that the Government are concerned to improve design and quality in building, and to remove defects and the need for litigation. We feel that that is best done by voluntary measures in co-operation with the industry rather than by compulsion. We also believe that the reforms contained in the Housing Grants, Construction and Regeneration Bill, which is currently being debated in Committee, will be of great help to the architectural profession, and result in a streamlining of the system. I therefore hope that my remarks will have given the hon. Gentleman some reassurance in the light of the admittedly tragic experience of his constituents.