Proving causation of loss is key in professional negligence claims

In Darcliffe Homes Ltd v Glanville Consultants, Ground and Water Ltd [2024] EWHC 3184, Adrian Williamson KC sitting as a Deputy Judge of the High Court in the English Technology and Construction Court had to consider a claim by claimant property developers ("Darcliffe") alleging professional negligence of an engineering company producing a ground condition report ("Glanville").

In 2014, Darcliffe engaged Glanville to provide a report concerning their ground investigation of a proposed development of a site near Reading. Glanville produced a report in 2014 and an updated report in 2016. Subsequently, Darcliffe purchased the site in order to build the housing development. Darcliffe alleged that they relied upon the reports when purchasing the site and that Glanville failed to identify that the site was at high risk of ground dissolution due to the presence of chalk beneath the site. Darcliffe also alleged that after purchasing the site, it was discovered that the site was affected by widespread chalk dissolution and that they had to incur substantial remediation costs when constructing the development. Darcliffe claimed approximately £7.5 million for negligence and breach of contract.

The Judge considered the scope of Glanville's obligations and whether Glanville had been in breach/negligent in their performance of the obligations. The Judge concluded that Glanville had been in breach/negligent. However, the Judge then considered whether the negligence had caused Darcliffe any loss. The Judge concluded that it had not.

Glanville had submitted a proposal for a "desk study" type report including a "Phase 1 Geo-Environmental Assessment", upon which Darcliffe engaged Glanville following agreement of fees. According to the Judge, the court's task in relation to a commercial contract such as this one was to determine the relevant scope of each party's obligations by ascertaining the objective intention of the parties, set in their admissible context. On the basis of the factual and expert evidence, he concluded that a Phase 1 Geo-Environmental Assessment was a concept reasonably well understood in the UK (although of American origin) requiring an analysis of ground conditions, albeit on a preliminary, desktop basis. Glanville were obviously obliged to exercise reasonable care and skill in carrying out the assessment.

In considering whether Glanville had met this standard, the Judge recorded that 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. Darcliffe's expert witness expressed the view that Glanville had failed the test of reasonable competence, because if they had competently reviewed the available data they would have concluded there was a significant chance of dissolution features below the site footprint. The Judge accepted this evidence.

That dealt with the question of breach. However, the Judge then posed the following questions: (a) what was the minimum further Glanville were obliged to do in order not to be negligent; (b) how would Darcliffe's corporate mind have been affected if non-negligent advice so defined had been given; (c) what would Darcliffe then have done differently from what they in fact did. All these questions of course went to the issue of reliance or causation.

On question (a), the evidence of Darcliffe's expert had been that a simple warning about the potential for chalk dissolution features in general terms would have sufficed. On question (b), Darcliffe's factual evidence was that they had "skim read" the report, and the Judge concluded that they would either not have noticed the warning if included or that they would have drawn it to the attention of GWL, the company engaged by Darcliffe to carry out the Phase 2 site investigation (GWL were the second defendant in these proceedings, having also failed to identify the risk of dissolution features, but Darcliffe had earlier reached a settlement with GWL). Therefore Darcliffe's corporate mind would not have been much affected. On question (c), the Judge was not satisfied on the balance of probabilities that Darcliffe would have done anything different – they would simply have engaged GWL on the terms and the instructions with which they did.

The case neatly illustrates that demonstrating a breach of duty is not sufficient to found liability. A claimant may need to consider carefully what non-negligent performance would have been and provide credible evidence of a difference in decisions or outcome in those hypothetical circumstances, to demonstrate that the breach has caused the loss claimed. In this case, Darcliffe's directors, whom the Judge found to be honest and careful witnesses, gave evidence that if Glanville had identified the risk of dissolution features, they would have re-briefed GWL in a different way for the Phase 2 investigation. However, the Judge concluded that GWL were or should have been aware of all the relevant implications of building on the site without the need to be "re-briefed" and that Darcliffe would simply have engaged GWL on the terms and with the instructions which they did.

Authored by Rupert Sydenham.