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BDW Trading Limited v Integral Geotechnique (Wales) Limited [2018]

24 August 2018

This claim arose out of the purchase of a development site which turned out to be contaminated by asbestos.

The site had belonged to a local authority, and had been used as a residential educational centre from the mid-1930s. Prior to marketing the site for sale, the local authority commissioned a firm of consulting engineers to prepare a report on the evidence and risks of possible contamination by asbestos. The report identified certain potential areas of contamination, but did not deal with the risk that further asbestos may remain within the ground.

The local authority obtained the report with the intention that it should be provided to and relied upon by the eventual purchaser of the site. This was reflected in the terms of the agreement between the engineers and the local authority, which provided that:

  • The report had been prepared for the local authority’s use only; it should not be passed to others without the engineer’s express consent and third parties had no right to rely on it.
  • However, the report could be assigned to the eventual site purchaser.
  • The engineer’s total liability in respect of any future claim (whether brought by the local authority, or by the eventual purchaser based on the assigned report) was limited to £300,000.

Unfortunately, although the eventual purchaser was provided with a copy of the report, and did in fact rely on it, due to an oversight the local authority never assigned the report to the eventual purchaser. As a result, the engineer’s contractual liability remained with the local authority only, and did not pass to the purchaser.

The court was asked to consider whether, in these circumstances, the engineer owed a tortious duty of care to the purchaser notwithstanding the fact that there was no contractual duty owed. In other words: if the report had been prepared negligently, did the purchaser have the right to sue the engineer for negligence in order to recover the losses they had suffered as a result of inadvertently purchasing contaminated land?

In coming to a decision, the court looked at the terms of the contract which should have been (but was not) assigned to the purchaser; had the contract been assigned as it should have been, then the purchaser would have been able to bring a claim against the engineer pursuant to the terms of that contract, and subject to the contractual limitations it imposed. The engineers had not been asked, and did not agree, to the purchaser placing any legal reliance on the report other than through the mechanism of contractual assignment. It was not the fault of the engineers that this contractual assignment had not taken place, and it would not have been fair, just or reasonable to impose a tortious duty on the engineer in this situation.

The claim against the engineer therefore failed.

Comment

In many professional liability claims, the defendant will have owed both tortious and contractual duties to the claimant. There are certain situations in which a claimant may wish to rely on one rather than the other, but in general, contractual and tortious duties mirror each other, so the distinction is not hugely significant. The situation is different, however, where the claimant is somebody other than the professional’s original client; there are certain situations in which a professional can owe a duty of care to people other than their own client but, as this case illustrates, those situations are very limited. So where a third party claimant takes an assignment of the original contract that existed between client and professional, the third party’s claim will usually be for breach of contract only. It is therefore vital that such assignments are not overlooked.