A consultant prepares a site report for a seller. It shows the report to a potential buyer, who relies on it. Will the consultant be liable to the buyer if the report is inaccurate?
In BDW Trading Ltd v Integral Geotechnique Wales Ltd [2018] EWHC 1915 (TCC), a housebuilder complained that a firm of consulting engineers (IGL) had failed to identify that materials containing asbestos might be present in part of a site in Wales, as a result of which it had spent around £1.6m to remediate the land and had incurred consequential costs of around £400,000.
Historically the housebuilder (which traded under the names Barratt Homes and David Wilson Homes) had worked closely with IGL on a number of projects and had its own agreement with the firm that regulated their relationship in circumstances where the house builder instructed IGL directly. But the seller had commissioned this particular ground investigation report itself, before offering the site for sale.
The seller had stipulated that the report must be capable of assignment with warranties and the letter with the report stated that “the attached may be assigned to the site purchaser and to two further parties”. But the report itself made it clear that it had been prepared for the seller, excluded third-party rights, and stated that it should not be passed to others without IGL’s consent.
The report was then provided to the house builder before it bought the site, without IGL’s consent. It contacted IGL to ask about soakaways – and received a reply almost immediately. But, as a result of an oversight or mistake on its part, the housebuilder failed to arrange for the ground report to be assigned or novated to it, or to obtain a collateral warranty. So the question for the court was: did IGL owe the housebuilder a duty of care in tort?
The court dismissed the claim. The housebuilder was a sophisticated developer with a reasonable knowledge of the basic contract law principles that apply to the construction sector – and it had access to legal advice, if needed. IGL had made it clear that the way in which it would be prepared to accept liability to the eventual site purchaser – which it capped at £300,000 – was through an assignment. And in the absence of such an assignment, IGL had not owed the housebuilder any duty of care.
The judge dismissed the housebuilder’s argument that, because IGL knew that it had seen its ground investigation report, it ought to have warned the housebuilder that it had not consented to the housebuilder having or relying on the report and that it would not accept liability to the housebuilder, should the report prove to be negligent. No such duty could reasonably be imposed upon IGL. Furthermore, there was nothing in the exchanges between the parties that ought to have made IGL aware that the housebuilder believed that it could rely on the report without doing more. The housebuilder should have taken the steps that were necessary to enable it to rely on the report – and had failed to do so.
In any event, the report had warned that there was no guarantee that sample testing would actually encounter any contamination that might subsequently be found to exist and IGL had not been negligent as alleged.
Allyson Colby, property law consultant
