Darcliffe Homes Ltd v Glanville Consultants & Anor

Factual and Procedural Background

The Plaintiff, a property development company ("Company A"), claimed damages for professional negligence against two engineering companies ("Company B" and "Company C") regarding erroneous advice on ground investigations related to a proposed residential development at a site ("the Site") near a town in The State. The trial was held over four days in October 2024 and was limited to an agreed list of issues. Prior to trial, Company A and Company B settled claims against Company C, leaving the trial to proceed against Company B only. The principals of Company A, experienced in residential development, gave evidence supporting the company's prudent management.

Company A acquired options over the Site from another entity in 2014 and engaged Company B to provide a Phase 1 Geo-Environmental Assessment report, issued in July 2014 ("Company B's First Report"). This report was used to promote the Site's inclusion in a local development plan. An updated report was issued in April 2016 ("Company B's Second Report"), substantially identical to the first. Planning permission for 66 homes was granted in December 2016.

In 2017, Company A appointed Company C to carry out a Phase 2 intrusive site investigation, which was completed by early 2018, with further investigations in mid-2018. Company A formally purchased the Site in November 2019 for approximately £5 million to develop housing. Company A alleged reliance on the reports from Company B and Company C, claiming that both failed to warn of high risk of ground dissolution due to chalk beneath the Site, resulting in substantial remediation costs. The claim sought approximately £7.5 million for negligence and breach of contract. The trial did not address quantum, noting that sums recovered from Company C would reduce any award against Company B.

Legal Issues Presented

1. What were the contractual terms and scope of Company B's obligations in producing the Phase 1 Geo-Environmental Assessment?
2. What duties of care did Company B owe to Company A in preparing the reports?
3. Did Company A rely on Company B's reports when purchasing the Site, and was such reliance reasonable and foreseeable?
4. Did Company B breach its duty of care by failing to exercise reasonable skill and care in the reports?
5. Did any breaches by Company B cause loss to Company A?
6. Do the losses claimed fall within the scope of Company B's duties?
7. Was Company A contributorily negligent in relation to coordination of ground investigations?
8. Are any claims time-barred under the Limitation Act 1980?
9. Did Company C rely on Company B's reports, and was such reliance lawful?
10. What is the appropriate measure of loss against each defendant?
11. Must Company A give credit for any profit made from developing the Site?

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Manchester Building Society v Grant Thornton UK LLP [2022] AC 783	Framework for scope of duty in professional negligence; six-step test for causation and duty nexus.	The court acknowledged the framework but held it primarily applies to novel duty of care cases; applied a more straightforward approach to scope of duty here.
Rushbond Plc v JS Design Partnership LLP [2021] EWCA Civ 1889; URS Corp Ltd v BDW Trading Ltd [2023] EWCA Civ 772	Clarification that the Manchester Building Society checklist is not to be rigidly applied to standard duties of care.	Supported the court's decision to avoid overcomplicating scope of duty analysis in this case.
South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191	Example of causation in negligence linked to the "mountaineer" scenario where negligent advice did not cause injury.	Distinguished the present case, holding that injury here would not have occurred but for the negligent report.
Perry v Sidney Phillips & Son [1982] 1 W.L.R. 1297	Measure of damages in professional negligence: difference in valuation caused by negligent report.	The court recognized this as the appropriate measure if causation were established.
British Westinghouse Co v Underground Ry [1912] AC 673	Net loss rule in damages: losses and gains arising from breach must be netted off.	Applied in context of mitigation and collateral benefits to assess claimed losses.
Stanford International Bank Ltd (in liquidation) v HSBC Bank plc [2023] AC 761	Reaffirmation of the net loss rule in damages claims and the principle that damages are compensatory.	Used to reject the defendant's submission that profits from house sales offset losses from remediation.
Hadley v Baxendale (1854) 9 Ex 341	Rule on remoteness of damage: losses must arise naturally or be within parties' contemplation.	The court held the claimed losses would fall within the first limb if causation was established.

Court's Reasoning and Analysis

The court began by defining Company B's contractual obligation as producing a Phase 1 Geo-Environmental Assessment, understood as a preliminary desktop exercise analyzing ground conditions with reasonable skill and care. The court rejected the defendant’s argument that the duty was limited only to facilitating planning promotion, emphasizing that Company B owed a full duty to perform the assessment competently regardless of the purpose.

Examining Company B's reports, the court found that they gave a "clean bill of health" with respect to ground conditions, but expert evidence established that Company B failed to properly analyze or warn of the risk of chalk dissolution beneath the Site. The report's author was not a geotechnical engineer and merely collated information without adequate analysis. The court accepted expert testimony that Company B should have included a warning about chalk dissolution risks and reviewed relevant data, which they failed to do, constituting breach of duty.

Regarding causation and reliance, the court considered whether Company A relied on the reports when purchasing the Site and whether such reliance was reasonable. The court found that the minimum additional warning needed to avoid negligence was a simple generic statement about chalk dissolution risk. However, Company A's principals likely would not have been significantly influenced by the inclusion of such a warning, as they would have still proceeded with the purchase and engaged Company C for intrusive investigations.

The court noted that Company C had access to all relevant ground information, including the underlying data used by Company B, and was aware of the chalk geology. Therefore, Company A failed to establish a sufficient causal link between Company B’s breach and the losses incurred, as the subsequent investigations would have revealed the risks regardless.

On losses, the court acknowledged that if causation were established, damages would be assessed on the basis of the difference in price paid for the Site versus what would have been paid if the reports had properly disclosed the ground conditions. However, the court rejected the defendant's argument that profits from house sales should offset losses, holding that such sales were planned independently and did not arise from the breach.

The court also addressed contributory negligence, rejecting the suggestion that Company A was negligent in failing to share archaeological survey results with Company B or Company C, finding this unrealistic given the survey's purpose and timing.

Limitation issues were largely dismissed as irrelevant given the court’s findings on causation and breach. The court also held that Company C relied on Company B's reports as a factual matter but was not legally entitled to do so due to disclaimers in the reports.

Holding and Implications

The court DISMISSED the Plaintiff's claim against Company B.

The direct effect is that the Plaintiff’s claim for damages fails due to lack of causation despite finding breach of duty by Company B. No new legal precedent was established. The Plaintiff remains liable for remediation costs, and any recovery from Company C is to be credited. The court invited the parties to agree on consequential matters or propose resolutions if agreement cannot be reached.