Duty of care – buyer beware!


Author: Oliver Tobin


Oliver Tobin, Associate, Fladgate LLP (otobin@fladgate.com)

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A recent decision of the Technology and Construction Court (TCC) has emphasised the challenges a claimant faces establishing a duty of care in the absence of a contractual relationship.

In BDW Trading v Integral Geotechnique[1], the TCC found that a where a consultant prepared a report in respect of a site to be sold for residential development, the consultant did not owe a duty of care to the ultimate purchaser who had been shown the report. There was no assumption of responsibility by the consultant where the report expressly prohibited third party reliance and contemplated a contractual assignment that had not taken place.

Facts

The consultant, Integral, was appointed by Bridgend Council to produce a geotechnical report in respect of a site that it intended to sell for residential development.  Integral was aware that its report would be relied upon by the eventual site purchaser, BDW.  To this end, Integral’s appointment was assignable to a site purchaser; however, third party reliance on the report was expressly prohibited.

Following its survey, Integral concluded that there was a possibility of asbestos contamination within the building structure but made no mention of asbestos in the ground itself.

Upon purchasing the site, BDW neglected to take an assignment of Integral’s appointment, despite relying on the report findings during its acquisition due diligence.  Asbestos was subsequently discovered and BDW was forced to remediate the site.

In the absence of an assignment, BDW had no contractual recourse against Integral.  BDW instead commenced a professional negligence claim, arguing it was owed a duty of care in tort by Integral in respect of the report, which BDW considered to have been negligently prepared.

Had it been aware of the presence of asbestos, BDW argued it would have negotiated are reduction in sale price to cover costs of remediation.

Judgment and analysis

The claim was dismissed by the court, which concluded that Integral owed no duty of care to BDW.  Whilst Integral knew its report might be relied on by BDW, in the absence of an assignment of its appointment, no such duty of care existed.

The contemplation that a future purchaser might rely on the report was insufficient to impose a duty of care, particularly where third party reliance on the report was expressly prohibited.  The TCC considered it to be unfair and unreasonable to impose a tortious duty of care on Integral in the circumstances.

The case offers useful guidance to both purchasers and construction professionals, emphasising the difficulties faced establishing a duty of care in the absence of a contractual relationship.

In acquiring a site or property, prospective purchasers should carefully check whether they can rely on any surveys or reports prepared.  To ensure the existence of a contractual relationship, purchasers should, where the contractual documentation allows, either effect an assignment of the consultant’s appointment or receive a properly executed collateral warranty or letter of reliance from the consultant as part of the transaction.

Consultants should make sure their scope of duty is properly defined within their appointment.  Disclaimers are unlikely to be effective in excluding liability to third parties under appointments, so express exclusion clauses should be negotiated and clearly set out.


[1] BDW Trading Ltd v Integral Geotechnique (Wales) Ltd [2018] EWHC 1915 (TCC)

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