After a recent contaminated land case, Francis Ho and Volkan Palanci examine whether surveyors may owe a duty of care in tort to a future site owner.
Francis Ho
When a consultant produces a report on contaminated land, can its findings be relied on by future buyers of the site?
This question was central in a recent case, BDW Trading v Intégral Géotechnique (Wales) [2018] EWHC 1915, which concerned a contaminated development site in the south Wales village of Ogmore-by-Sea. The site had been owned and used by Bridgend County Borough Council as a residential education centre. It was then sold off to BDW, a division of the Barratt Group, for new housing.
Prior to sale, the council appointed Intégral Géotechnique (IG) to carry out desktop and intrusive investigations of the site and produce a geotechnical site report, primarily to identify possible contamination. As is common in such situations, the report had been disclosed to BDW prior to sale.
Volkan Palanci
During construction, BDW discovered several areas tainted by asbestos. These were not mentioned in the IG report. BDW sued IG for the amount by which it would have reduced its purchase price had it known it was buying a contaminated site.
The Technology and Construction Court (TCC) was asked whether IG owed a duty of care to BDW in the tort of negligence for failing to assess the extent of contamination by asbestos in its report. To construct a duty of care, there must be a close relationship between the parties and it must be just and reasonable for the consultant to owe a duty of care to the buyer.
IG’s report stated that third parties were not entitled to rely on its contents. However, IG had been aware that a buyer was likely to read it and had agreed that the council could assign its benefits under the report to a buyer. As it transpired, the council (perhaps mistakenly) failed to effect an assignment to BDW. This meant there was no contractual relationship between IG and BDW.
Judge Stephen Davies disagreed that there was a tortious duty of care for several reasons.
The report was put together by IG for the council’s use. Although it did not oppose the report being circulated to third parties, it never specifically agreed to one being able rely on the report save where its appointment was validly assigned or novated, an event which never took place.
The report clearly stated that it could not be assigned to another party without the express consent of IG. This had not been obtained. An earlier assurance by IG to the council that it would allow the report to be assigned was insufficient to uphold a tortious duty of care. It was BDW’s responsibility to ensure that the requisite steps for assignment or novation were actioned rather than IG’s.
Finally, IG was not obliged to advise BDW that it had not consented to the developer relying on the report, despite BDW purchasing the site based on the report.
What lessons can be drawn from the case? Developers or owners should consider commissioning a report from a reputable and experienced consultant to give comfort to buyers or investors about the condition of a site, rather than having to blindly accept contamination risk or ask for that risk to remain with the owner.
For consultants, it may be market reality that their reports or investigations are used by site owners and relied on by prospective third-party buyers. If so, it is prudent for a consultant’s professional indemnity insurers to understand (and limit) how many potential third parties there may be and the extent and duration of liability (in financial terms) to the client and any third parties.
Any report’s conclusions should be subject to skill and care and not amount to any warranty or guarantee that a site is free of contamination.
Francis Ho is a partner at Penningtons Manches and chair of the CIOB’s Contract & Procurement Special Interest Group. Volkan Palanci is a trainee at Canary Wharf Contractors
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