Reputation, returns and redress

Even the greatest expert can be sued if bad advice endangers a client’s investment in a property

You may have been asked by a client to produce a report into a redevelopment opportunity on, or potential purchase of, a property. You can take some reassurance from the fact that a client can usually only receive substantial damages for negligence in such a report if it can show that the purchase or redevelopment would not have gone ahead had the report been correctly carried out.

This issue formed a central part of a recent case involving a structural engineer’s negligent report before a house purchase in Hastings in 2011. The buyer had commissioned a structural report on the property from a respected and eminent structural engineer of good reputation.

That report did not mention the tilting walls at the property, so that, having bought it on the basis of the report, the purchasers were dismayed that it needed to be demolished due to the excessive tilt of the walls.

Unusually, the defendant structural engineer took the view that the degree of tilt of the walls was not a big concern, by comparison to whether there was continued movement of the walls. His experience of the houses in the area, combined with his high standing in his field, did not outweigh the relevant guidance on wall tilt (and the related safety risk) specified by the BRE, by which test the property required demolition.

Another key factor in the case was whether the purchaser had been partly negligent by failing to inform the engineer of its plans to carry out works to the house, including a loft conversion. The engineer conceded that the plan to carry out the loft conversion was only formulated after the he had been instructed to produce his report. However, the claimant had taken preparatory steps (including the preparation of the design for a loft conversion and other works) before exchanging contracts on the purchase. The planning application for the works was submitted the day after contracts were exchanged. 

Expertise is not necessarily enough to avoid questions of negligent advice where the professional’s viewpoint differs from an accepted body of opinion

The defendant suggested the buyer was negligent in not checking the loft conversion plans with the structural engineer before purchase. However, this distracts from the main point in the case, which is whether the defendant engineer was negligent in not advising of the demolition risk at the time of carrying out his report. Furthermore, the judge decided that, although the buyer had taken preparatory steps to perform the loft conversion ahead of the exchange of contracts for the property, a firm plan to do so did not crystallise until after exchange of contracts.

The case is unfortunate on many levels. The judge had no doubt that the finding of negligence would be a blow to the engineer after a distinguished career of more than 50 years. The judge also speculated that the defendant and its experts had an unjustified suspicion surrounding the case, that the purchasers were highly interested in the plot but not the house, and had always intended to demolish the house and build a replacement. 

These sorts of emotive reactions by parties often do prolong a dispute, and the judge noted that a case of this nature cries out for resolution by mediation.

The key point for professionals to remember from this judgment is that expertise gained from a distinguished and successful career is not necessarily enough to avoid questions of negligent advice where the professional’s viewpoint differs from an accepted body of opinion. Where a major investment is made by a client on the basis of your advice, that will leave you open to a claim if the client can show reliance on your professional advice and that it would not have proceeded had that advice been correct. 


IN PLAIN ENGLISH

Partial possession and sectional completion 

Clients sometimes use the expressions ‘partial possession’ and ‘sectional completion’ interchangeably, when in fact they are quite different animals. Sectional completion is a pre-meditated arrangement to split up the works into various sections, each of which (under a typical JCT contract) will have its own date for completion, its own part of the contract sum attributable to it, and its own rate of liquidated damages for delay. These are pre-agreed at the start of the project, and enable the work to be delivered to suit the client and its contractor in smaller phases rather than in one deadline for the project as a whole.

By contrast, partial possession is an ability (under a typical JCT contract) to finish off part of the works and hand it over to the client ahead of the completion date for the rest of the works. Alternatively, if the works are delayed but the contractor is able to complete a large part of the work, the contractor might agree with the client that that part can be possessed by the client. Once partial possession occurs, that part of the works is deemed to have achieved practical completion for the purposes of the contract. The employer takes over responsibility for that part of the works, including matters such as insurance, and the contractor’s liability for liquidated damages for delay is reduced pro rata.