“Chalk it up to experience” - Darcliffe Homes Ltd v Glanville Consultants and another

A dispute arose between a construction company, Darcliffe Homes Limited (‘Darcliffe’), and two engineering companies, Glanville Consultants (‘Glanville’) and Ground and Water Limited (‘GWL’), both of which were commissioned to produce a report on ground conditions for Darcliffe prior to its purchase of a site in Reading. All claims were settled against GWL, so the issue before the court was whether Glanville provided negligent advice on the ground conditions at the site.

Background

Darcliffe engaged Glanville to provide a Phase 1 Geo-Environmental Survey to it in 2014 in relation to a site near Reading. Glanville prepared two reports in the course of its engagement. The first report was provided to Darcliffe in July 2014, which was used to promote the site. Upon Darcliffe’s request a second, updated report was provided to them in 2016, although the second report was the same in substance as the first report. Neither report flagged the risk of ground dissolution sufficiently. Darcliffe ultimately purchased the site in November 2019 for circa £5 million to build a housing development.

Darcliffe alleged that the site was at significant risk of ground dissolution as a result of the presence of chalk underneath the site and that Glanville failed to report this. Darcliffe claimed that they had to incur substantial remediation costs when constructing the development as a result of Glanville’s negligence in failing to warn them of the risk.

Issues for the Court

1. The scope of Glanville’s obligations to Darcliffe

The judge found that Glanville was commissioned to carry out a Phase 1 Geo-Environmental Survey and was obliged to exercise reasonable care and skill in doing so. The report was to be a “‘desk study’ type report”, so it would primarily consider information which can be readily obtained from existing sources. However, even so, the report should have contained specific “analysis of the ground conditions”. In fact, Glanville itself stated in email correspondence with Darcliffe that the assessment would “identify any potential sources of contamination” which would imply at least some level of analysis to be undertaken.

The judge specifically dismissed Glanville’s argument that the purpose for which the report was commissioned (to support the promotion of the site and to secure planning permission) was relevant to the scope of Glanville’s duty. Regardless of the stated purpose for commissioning the report, Glanville had a duty to deliver a “reasonably competent” report.

2. Glanville’s alleged breach of its duty of care

Glanville’s report concluded that “there should be no significant geo-environmental issues that would prevent the site from being redeveloped for its intended use”. It did not draw the reader’s attention to any significant issues as to ground condition.

The court considered expert evidence that indicated a number of failings on Glanville’s part, including that:

1. Glanville should have reviewed and fully considered the relevant guidance, and proceeded with an assumption that dissolution features were present due to the nature of the underlying soil; and
2. They failed to take into account tabulated records of chalk dissolution features which had been identified in 5 geologically similar locations in the vicinity of the site (and which were included in a report that Glanville had annexed to their own report) which meant that there was a significant chance of similar issues manifesting at the site.

The court highlighted that Glanville did not seem to have analysed the ground condition at all.  In fact, the author of Glanville’s first report explicitly stated that the report did not contain her “own assessment”, she merely collated and repeated information provided by Envirocheck, an external company. Glanville also failed to give any consideration to the fact that the site was “underlain by chalk”. Had Glanville undertaken any such analysis, they would have either concluded that dissolution features should be assumed to be present at the site or warned Darcliffe of the risks flowing from the presence of such features nearby.

As a result of Glanville’s failure to engage with the data, the court ultimately concluded that they were in breach of their duties to provide a reasonably competent report.

3. Whether Darcliffe would have acted differently if Glanville had not provided a negligent report

Whether causation was established hinged on the answer to three questions. Each of these are considered in turn below.

1. What was Glanville obliged to do to not be negligent?

Expert evidence suggested that all Glanville would have had to do to provide non-negligent advice was to add a “single simple warning” which could have in fact been generic. It was not sufficient to flag that “the sites geology is at a low from ground dissolution”. The meaning of “low” risk should have been clarified by Glanville.

2. Would Darcliffe’s corporate mind have been affected if Glanville provided non-negligent advice?

The judge considered that the corporate mind of Darcliffe would have been its Managing Directors. In cross-examination, one of Darcliffe’s Managing Directors said that he had read the conclusion of the report which referenced that the site was at “low risk” but he may have only skim read the rest of the report. On this basis, the judge’s view was that on a skim read, the Managing Directors either would not have noticed the additional sentence warning of the risk or, at most, would have raised it with GWL when engaging them for the more intrusive, Phase 2 investigations. Regardless, the corporate mind would not have been affected, certainly not to the extent to make it plausible that Darcliffe would have abandoned the transaction.

3. What would Darcliffe have done differently if they had been given non-negligent advice?

Darcliffe’s position was that had Glanville alerted them to the risk of ground dissolution, they would have provided GWL with more focussed instructions to consider dissolution features during their Phase 2 investigations. However, GWL had access to Glanville’s Phase 1 report and to the Envirocheck report which contained the underlying data. The Phase 1 report was specifically referenced in GWL’s Phase 2 report itself. In addition, GWL’s report referenced that the site was “underlain by chalk”. In other words, there was no need for Darcliffe to draw GWL’s attention to this specific section of the report. The judge therefore considered that GWL and Darcliffe were not in a different position than they would have been had Glanville provided non-negligent advice.

Comment

1. The case poses the question of where the bar is in establishing causation in professional negligence cases.  Specifically, the judgment illustrates the importance of putting forward evidence of both reliance on the negligent advice and of the fact that had non-negligent advice been provided, the party would have acted differently.
    
2. This case makes it clear that at a minimum, the recipient of a specialist report must have read the negligent advice. In such circumstances, it seems that some of the burden shifts to the recipient of the report. The case is set in the context of the construction industry and the judgment does at points reference that concepts are to be understood and construed as they would have been in the industry. The judge also emphasised that one of the Managing Directors had at best skim read the report. This poses the question of how high the evidential burden is to establish reliance on the report. Is the recipient just required to have read the report? Or would the court go further and require them to also understand the contents and be able to query them? There is some suggestion that it might be the latter, as the judge noted in particular that neither of the Managing Directors queried the confusing phrasing of the report when it stated “the sites geology is at a low from ground dissolution”.
    
3. On the point of whether the recipient would have acted differently, parties may be faced with further evidential difficulties. The suggestion by Darcliffe that they would have abandoned the transaction was not supported by any evidence and the judge did not find that proposition plausible. In contemplating litigation in professional negligence cases, parties have to consider what evidence they are able to put forward to support that they would have acted differently in circumstances where the nature of the evidence required was not explored by the court.
    
4. Although the case concerned allegations of professional negligence, it should not be disregarded that the dispute arose in a construction context. There may therefore be some lessons to be learnt from the case for those in the construction industry.  
    
5. Specifically, there is no doubt that searches and in-depth reports are key in informing decisions developers make in purchasing sites to develop. Searches and specialist reports also inform purchasing, leasing and financing decisions as the condition of the land itself can have a significant knock-on effect on the profitability of the investment, as this case demonstrates. In clarifying the circumstances in which consultants may or may not be liable for providing erroneous and inaccurate information in their reports, the case emphasises the importance of developers themselves reviewing and understanding results of searches and investigations. This may be even more important in the context of desktop searches where the level of analysis required is inevitably lower on the part of consultants. Seeking legal advice on these points may be sensible. 
    
6. The case also highlighted the interaction between desktop searches and in-depth investigations and reports. It may be tempting to think that desktop reports should be given less weight if a further report is going to be commissioned later down the line. However, since the Phase 2 report relied on findings in the Phase 1 report, it is clear that appropriate analysis of desktop search results can be just as important if not more important in certain cases, particularly because the Managing Directors said had they known about the risk they would have drawn the attention of the Phase 2 company to it.

Further information

If you have any questions regarding this blog, please contact Jemma Brimblecombe, Dorottya Toth, or Cameron Mason. 

About the authors

Jemma Brimblecombe is widely recognised for her skills and experience in commercial litigation. She acts for both claimants and defendants in a wide range of sectors, including financial services, legal services, accountancy, and construction. She is listed in Legal 500 where she is described as “a tough, forensic litigator with a no-nonsense approach to her cases”.

Dorottya Toth is a trainee solicitor, currently in her third seat in the Dispute Resolution team.

Cameron Mason is a Senior Associate in our Real Estate and Construction team. He has experience in both contentious and non-contentious construction and engineering matters, including working for a range of clients on major infrastructure projects and commercial and residential developments.