ARTICLE
17 September 2018

Housebuilder Loses Out Following A Failure To Seek An Assignation Of Rights

BL
Brodies LLP

Contributor

Brodies LLP
BDW purchased land for a housing development from Bridgend County Borough Council (Bridgend).
UK Real Estate and Construction
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BDW purchased land for a housing development from Bridgend County Borough Council (Bridgend). The site investigations following the purchase found extensively more asbestos in the ground than had been identified in the geotechnical report provided with the sale. BDW raised a claim against the firm of engineers who prepared the report, Integral Geotechnique (Wales) Limited (IGL). IGL expressly stated that the report could only be relied on by others following assignation and due to an internal error, BDW failed to seek the assignation. The court found that as there had been no assignation, IGL did not owe a liability to BDW. 

The Background

Bridgend County Borough Council (Bridgend) owned a site in South Wales for which it intended to obtain planning permission for a residential development and then sell the site to a housing developer. IGL had been instructed by Bridgend to produce a geotechnical report, in connection with the marketing of the site.

The report had been prepared for Bridgend and stated that it was not to be passed on or relied on by third parties without the consent of IGL. IGL's liability for the report was restricted to £300,000. The instruction did, however, make provision for the report to be assigned to the party that eventually purchased the site. 

Bridgend put the site on the market and the tender package included IGL's report. IGL's report identified "very little risk of any sources of contamination being located on site." However, following the purchase of the site, 8,500m² of ground contaminated with asbestos required to be removed at an estimated cost of around £860,000. 

BDW raised an action against IGL on the basis that it had failed to give proper advice on the full extent of the asbestos contamination on site. BDW did not obtain an assignation of the report, therefore it had no contractual link with IGL. Therefore, IGL raised the claim on the basis of breach of duty care in tort (delict in Scotland).  

The Court's Decision

The court dismissed BDW's claim for the following reasons:

  • The court considered that no duty of care existed between the parties, as IGL did not agree to BDW placing any reliance on the report unless it had been assigned to them. 
  • The court considered that even if it had come to a different view, it would not have found it fair, just or reasonable for IGL to assume liability to BDW in the absence of the assignment.

On the question of negligence, IGL's report was prepared on the basis of the information reasonably available to them, which had not indicated the risk of asbestos contamination in the ground. Furthermore, the purpose of the report was simply a high level geotechnical appraisal which was not intended to be relied on for the purposes of purchasing the site. Further site investigations would be required. Therefore, even if a duty of care was owed, the court would not have found IGL in breach of this duty. 

Key points:

  • This case shows the restrictive approach the courts take to the suggestion that a professional may owe – and subsequently breach – a duty of care to a party who is not its client, particularly in circumstances of pure economic loss. 
  • It also highlights the importance of ensuring that where the advice of a third party is relied upon, appropriate rights and guarantees are taken to enable recourse against that party if needed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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