This was a professional negligence claim brought by the claimant, a national housebuilding company trading as Barratt Homes and David Wilson Homes (“BDW”), against the defendant, a firm of consulting geotechnical and geo-environmental engineers (“IGL”).
The issue complained of was in relation to IGL failing to give proper advice to BDW about the risk that materials containing asbestos (“ACMs”) might be present within parts of the site which the claimant acquired for housing development (“the site”).
The relevant facts
The site in relation to which the dispute arose was owned by Bridgend County Borough Council (“Bridgend”) and comprised of the easterly built-up area and the westerly grassed-over area.
Bridgend intended to obtain planning permission for residential development with a view to selling the site for housing development.
At the time the site was being put out to tender, Bridgend invited IGL to provide a site geotechnical report. It was clearly expressed to IGL that the report should be capable of being relied upon by the prospective purchaser and it must be capable of assignment with warranties.
IGL proposed that the works be undertaken in two phases. Phase 1 involved a geotechnical desk study, including an examination of historical maps, and a trial pitting investigation with samples being taken for laboratory testing. The need for phase 2 depended upon the outcome of phase 1 desk study and the trial pitting investigations.
IGL excavated nine trial pits located mainly in the western area of the site. This was due to the issues associated with accessing the eastern part which housed buildings and underground services. Made ground was not encountered in any of the six trial pits located in the westerly parts of the site. As for the remaining three trial pits, limited and localised made ground had been found but there was no evidence of contamination by ACMs.
IGL went on to prepare a report in respect of phase 1 and recommended that a further inspection for signs of contamination takes place during site clearance. The report also stated that it was for Bridgend’s use only and should not be passed to others without IGL’s written consent. It did not however exclude the possibility of assignments to the prospective site purchasers.
BDW was interested in acquiring the site for development and began the process of collating information in respect of the same.
BDW instructed Western Environmental (“West”) to further inspect the site and it found that there were considerable amounts of asbestos in the buildings. Another company, City Environmental Services (“City”) provided BDW with a quote to undertake demolition of the existing structures, including the removal of asbestos.
An exchange of contracts took place between Bridgend and BDW. Crucially, BTW did not seek the assignment of IGL’s report.
Following completion BDW instructed City to begin work on site which included removal and disposal of all asbestos products encountered within the buildings or those identified in the report prepared by West. ACMs were found in a number of parts of the grassed-over area and the build-up area.
The remediation works were completed however at a cost significantly higher than originally anticipated. As a result BDW brought a professional negligence claim against IGL.
Key legal issues
The judge had to decide whether IGL owed a duty of care to BDW and whether IGL was negligent. He also considered arguments on loss suffered by BDW and alleged contributory negligence on BDW’s part although these are not covered in this article.
Judgment
The claim was dismissed.
Perhaps not surprisingly the judge found that no duty of care was owed by IGL. In the absence of a contract between BDW and IGL, BDW were required to establish the duty of care existed by reason of an assumption of responsibility.
No such assumption existed in the present case as it was clear that in order for BDW to have legal recourse in relation to IGL’s report, it needed a further legal document such as a letter of reliance or a collateral warranty to be entered into.
Although it was not compulsory, the judge went on to consider the issue of the alleged negligence on IGL’s part. He found that IGL was not negligent in failing to identify the risk of underground contamination with ACMs as the risk was only hypothetical at the time. Additionally, as IGL recommended a further inspection and testing of the site, its report should have been treated as provisional.
Lessons to be learnt
The importance of due diligence in respect of site acquisitions cannot be underestimated. As this case demonstrates, a failure to ensure assignments or novation could result in significant financial implications and lack of protection for the prospective purchaser.
It is essential that developers obtain advice on technical issues, such as contamination, from the appropriate professionals and that reliance could be placed on their reports. In this particular case, BDW failed to obtain IGL’s consent to the report being assigned and more importantly, it did not put any assignments or warranties in place.
Our construction team will be happy to advise you on any issues relating to site acquisitions and ensure that adequate mechanisms are put in place to protect your position.
