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Darcliffe Homes Ltd v Glanville Consultants [2024] EWHC 3184
Introduction
Property developers regularly engage professional consultants whose reports guide them in assessing site viability, potential risks and overall project feasibility. However, what happens when a consultant’s advice is found to be negligent? What does the developer need to show in order to successfully claim for damages?
The recent case of Darcliffe Homes Ltd v Glanville Consultants provides an interesting example of a negligence claim in the construction industry where, even though the consultant was found to have acted negligently, the claim was dismissed on the grounds that the negligence had not caused the developer’s losses.
This article sets out the legal context surrounding reliance on consultants’ reports, reviews the case and highlights lessons developers and construction professionals can learn from the judgment.
Reliance on expert reports
Developers in the construction industry routinely rely on the reports and advice provided by consultants to guide key decisions. In Smith v. Eric S. Bush [1990] 1 AC 831, the House of Lords held that a consultant owed a duty to a purchaser to exercise reasonable skill and care and that a claimant could rely on such advice.
Darcliffe v Glanville – Background
The case was heard before Adrian Williamson KC sitting as a Deputy Judge in the Technology and Construction Court (“TCC”) with the judgment being published in December 2024.
Darcliffe Homes Ltd (“Darcliffe”), a property developer, engaged Glanville Consultants (“Glanville”), to perform a desktop analysis of ground conditions of a site near Reading that they were proposing to purchase to use for a residential development. Glanville provided its report in 2014 (updated in 2016) which gave a clean bill of health for the site. Planning permission was granted in December 2016 for the construction of 66 dwellings. Intrusive site investigations were subsequently carried out by Ground and Water Ltd (“GWL”) (also instructed by Darcliffe), who submitted both a formal report and report by letter in 2017-2018. Darcliffe subsequently purchased the site in November 2019 for approximately £5 million. Darcliffe later discovered that the site suffered from ground dissolution due to underlying chalk, which greatly increased the cost of the build. Consequently, Darcliffe claimed approximately £7.5 million in damages for negligence and breach of contract against Glanville and GWL. Damages claimed were for recovery of the substantial remediation costs; in the alternative, for the diminution in value between what Darcliffe had paid for the site and what they would have paid had the site investigation reports been accurate. All claims against GWL were settled before trial.
TCC judgment – Negligence
The judge found that Glanville was negligent in its reports. Glanville had produced a desktop summary of the ground conditions at the site but had performed no analysis. Glanville’s report stated “It is indicated that the site’s geology is at a low from ground dissolution”, this sentence was incomplete, did not identify the source of the information or issue any sort of warning. The report concluded: “the conceptual model has demonstrated that there should be no significant geo-environmental issues that would prevent the site from being redeveloped for its intended use”. The report was produced by a practitioner who was not qualified in geo-technical engineering. Experts from both sides agreed that Glanville’s advice was inadequate.
TCC judgment – Causation
Despite the above breach, the claim failed on causation. In coming to that conclusion, Williamson DJ noted that causation was a question of fact and presented the issues as three discrete questions:
“(a) If Glanville were in breach of duty, what was the minimum further and/or different that they were obliged to do in order not to be held negligent?
(b) In the light of the answer to (a), how would Darcliffe’s corporate mind have been affected if Glanville had given non-negligent advice as thus defined?
(c) Would Darcliffe have done differently than they in fact did, the corporate mind having been affected as mentioned above in answer to (b)?”
Addressing each of these points in turn:
Requirements for non-negligent advice
This was held to be a very minimum requirement, as much as a line or two of warning would have been sufficient for the consultant to discharge its duty of reasonable skill and care.
The corporate mind
The judge was complimentary about the way Darcliffe functioned as a company. He called it “a well and prudently run business”. He described the directors, Mr Denton and Mr Smith, as “honest and careful witnesses”. When speaking of the corporate mind he noted that, in reality, the “mind” was specifically that of the Messrs Denton and Smith. This was to have severe consequences when it came to a review of witness evidence. In his testimony, Mr Denton admitted that, whilst he had “read the conclusion that said “low risk”, yes”, he had not read the whole of Glanville’s report:
“I’m not going to claim that I read the rest of the report. I may have skim read it.”
Consequently, the judge held that even if non-negligent advice been given and even if an extra sentence of warning been added to the report, this would have made no difference. Given such a cursory reading, the corporate mind would not have been much affected, if at all.
What would Darcliffe have done differently
As to the third question posed, the judge held that Darcliffe would not have done anything differently. Had Darcliffe been given non-negligent advice by Glanville, and had they been made aware of the issue of potential ground dissolution, they would have engaged GWL for further investigations. This is in fact what happened.
Obiter remarks on measure of loss
As a separate point, the judge made obiter remarks on the measure of loss in such situations. Following Perry v Sidney Phillips & Son [1982] 1 W.L.R. 1297, the correct measure of loss was diminution of value between the sum actually paid for the purchase of the site and the sum which should have been paid had the report not been negligent.
Implications – Developers take heed
Following this judgment, developers would be wise to demonstrate both engagement and reliance regarding specialist advice. In particular:
- Developers should thoroughly review all consultant reports. The court put a low bar on what would have been deemed non-negligent; a single sentence setting out a warning was held to be sufficient. In this context, it is incumbent upon developers to “read the small print”, take heed of all warnings and seek clarification on any ambiguities or potential risks identified. It is salutary that the directors of Darcliffe were not seen as reckless. The judge assessed them to be careful men – and yet their actions were held to be insufficiently diligent;
- A claimant must be able to demonstrate that the corporate mind has been affected by a report on which it relies. Where the testimony and practice of an individual or a few individuals are concerned, their behaviour will be analysed. The question remains as to how this will be interpreted where a large board is involved;
- The injured party must show that, but for the negligent advice, it would have acted differently. What else would it have done? If it would have taken the same course of action anyway, that would be fatal to the claim; and
- As always in disputes, record-keeping is crucial. If developers can produce contemporaneous evidence that they reviewed reports and made decisions based on that advice, they stand a much higher chance of convincing a tribunal that they relied on that advice.
Whilst this case concerned geo-engineering reports on site conditions, the lessons are likely to be applicable to advice from consultants in a wide range of disciplines, from ecology to structural engineering to fire safety.
Should you wish to discuss any of the issues raised in this article, please contact Sarah-Jane Dobner.
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