Wrong but not responsible

Ever since poet Samuel Taylor Coleridge made for the leafy, lofty beauty of north London’s Highgate to tackle his opium addiction, the area has been a lure for creative individuals. Such individuals create interesting properties, as exemplified in Russell vs Stone (trading as PSP Consultants) [2019] EWHC 831 (TCC). This case evidenced raw creativity of the kind seen in TV programme Grand Designs clashing with the precise rigours of construction law. Mr and Mrs Russell now finally own an impressive residence with a curved shape built on a sloping site in Millfield Lane, Highgate, but the project to build the house suffered a number of problems and took longer and cost more than the Russells expected or would have wished. 

All too often a claimant is concerned with the defendant’s wrongdoing, and the focus moves away from the true cause(s) of the loss suffered

As they had no recourse to statutory adjudication because of the residential exception, the case ended up in the High Court, where the Russells argued the property cost them more to build than it ought to have done due to the negligence of the defendants, a firm of quantity surveyors whom they had appointed to act as QS, contract administrator and project manager. The key allegation was that Stone had failed to properly manage and/or advise on the tender process. 

The Russells argued: “Had Stone not breached the appointment and/or been negligent then the Russells would have had the opportunity, and would have taken the opportunity, to postpone the appointment of contractor until a proper and thorough review had taken place, following which negotiation with either the first contractor or others could and would have been undertaken or the Russells would not have embarked on the project”. 

Stone argued that this allegation was far too vague and that: “The burden is on the claimants to prove that PSP’s advice about the tender and the management of the tender process in the circumstances at the material time fell below the standard of a reasonably competent quantity surveyor, project manager and contract administrator, causing them to suffer the loss claimed.”

The court held that, on the facts, Stone had not been negligent and, even if it had, the claimants’ case would have failed on the issue of causation. The court quoted from the judgment in William Clark Partnership Ltd vs Dock St PCT Ltd [2015] EWHC 2923 (TCC): “[…] establishing causation in construction related professional negligence claims against design professionals such as quantity surveyors and project managers is notoriously difficult precisely because of the difficulty in showing how things would have turned out differently even if the professional had not acted negligently”.

The court was unimpressed by the claimants’ arguments and made clear that: “If the [claimants] would have paused and revisited the project, then there needed to be some articulated and particularised case as to what they would have done and what the outcome would have been on the balance of probabilities. There simply was nothing other than a generalised assertion.” Standing back a little, this case is another warning that causation of loss does not simply follow from a finding of negligence alone. All too often a claimant is concerned with the defendant’s wrongdoing, and the focus moves away from the true cause(s) of the loss suffered.

Bank of Ireland (UK) plc vs Watts Group plc [2017] EWHC 1667 is another case that shows the practical difficulties in pursuing a professsional. Derwent Vale York as a developer acquired funding of £1.4m from the Bank of Ireland (UK) before going into liquidation. Watts Group was appointed by the bank to consider the costings that were submitted by the developer and to approve facility drawdowns as the works progressed. The bank committed to provide the £1.4m, but three months before practical completion the developer went into liquidation. The bank was left with a loss of £750,000 and brought a claim on the basis that if the initial appraisal report (IAR) produced by Watts had been properly prepared, it would not have permitted the drawdown of the loan. 

In turn, Watts argued that the bank’s own negligent decision to lend money had caused the loss. The court rejected the bank’s allegation of negligence and breach of contract and found that when Watts produced the IAR it was not in receipt of drawings that would have shown that the project under construction was different from the one that secured planning permission. The court also ruled that the claim had failed on the matter of causation and that the true cause of the loss was the decision by the bank to lend, not the IAR. Put another way, the bank would have lent the money notwithstanding any comment in the IAR.

The judge in Russell vs Stone made the point: “There can be no doubt that from the Russells’ point of view this was a project beset with difficulty and, as homeowners undertaking a very personal project, one can only sympathise with them over their experience. But that is not what this case is about. Rather it is about PSP’s responsibility, and the extent of their responsibility, for what went wrong, and in particular what has been described in these proceedings as an “overspend” of nearly £1m”. The tangible clash between strict codified rules in law and the practical realities of creativity continues …

Hamish Lal is a partner in Akin Gump Strauss Hauer & Feld