This case illustrates the pitfalls of relying on a surveyors report when there is no contractual relationship between the parties and no duty of care can be found.
Bridgend County Borough Council owned a site in the Vale of Glamorgan which they intended to sell for housing development. The site had previously been used as a residential education centre since the 1930’s, and over previous years some of the original buildings had been demolished. Some had subsequently been built on and some grassed over, a part of which was now a dry ski slope.
In 2012, the Council instructed Integral Geotechnique Integral (Wales) Ltd (‘IGL’) to carry out a geotechnical and environmental report on the land which was to be included in the package of information sent out to interested potential buyers. It included a desk top study and site investigation which involved excavating nine trial pits. The trial pits were dug in the more easily accessible areas which had not been built on. The report acknowledged potential asbestos contamination within the existing buildings but expressed no opinion on whether further contaminants would emerge when buildings were cleared for development or whether there might be asbestos in the ground. It did however state that there was no “visual or olfactory” evidence of contamination and that further contamination investigations were recommended once the site had been fully cleared. The report, which was some 29 pages long including plans and schedules, gave advice on general geotechnical issues as well as on foundations and floor slabs and was not limited to advice on contamination.
IGL’s appointment was governed by its standard conditions which incorporated the Association of Civil Engineers (‘ACE’) Conditions. These made clear that the report was not to be relied on by third parties or confer any benefits and limited liability for claims concerning contamination to £300,000. IGL were aware however that their report would be used in the marketing of the site (it was part of the tender package) so in sending the report initially to the Council, they stated “We confirm that the attached may be assigned to the site purchaser and onto two further parties.“
Trials teach us what we are; they dig up the soil, and let us see what we are made of.”
Charles Spurgeon
BDW purchased the site in 2014. Although they relied on the report findings during their acquisition due diligence, no assignment of IGL’s report to BDW took place, nor did BDW seek any legal reassurance from IGL that they could rely on the report. BDW proceeded to clear the site, groundworks commenced and as work progressed extensive asbestos contamination was revealed in the ground. BDW were forced to remediate the site at considerable cost. They claimed that, had they known about the extent of ground contamination before purchase, they would have negotiated a lower purchase price to compensate for the expense of remediation. BDW commenced a court action in 2018 against IGL for damages. They sued in contract, and in the alternative in negligence, on the basis that in the absence of a contractual relationship, IGL owed a duty of care to BDW and that the report had been negligently prepared.
BDW purchased the site in 2014. Although they relied on the report findings during their acquisition due diligence, no assignment of IGL’s report to BDW took place, nor did BDW seek any legal reassurance from IGL that they could rely on the report. BDW proceeded to clear the site, groundworks commenced and as work progressed extensive asbestos contamination was revealed in the ground. BDW were forced to remediate the site at considerable cost. They claimed that, had they known about the extent of ground contamination before purchase, they would have negotiated a lower purchase price to compensate for the expense of remediation. BDW commenced a court action in 2018 against IGL for damages. They sued in contract, and in the alternative in negligence, on the basis that in the absence of a contractual relationship, IGL owed a duty of care to BDW and that the report had been negligently prepared.
The judgement is a reminder of the not insignificant commercial value to purchasers of formal assignment, collateral warranties or letters of reliance of technical reports.
Link: BDW Trading v Integral Geotechnique (Wales) Ltd [2018] EWHC 1915 (TCC)
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