Loss Prevention Alerts

Loss Prevention Alert No 16 - LIABILITY FOR DEFECTIVE SURVEY

This loss prevention alert has been produced by the Loss Prevention Working Group (LPWG) of the AGS. It highlights issues that the LPWG considers may be of relevance to members. It is not intended to provide a definitive response to any issues and before taking action members should consider carefully whether they need to seek independent legal advice.

The Scottish case of Beechwood Development Company (Scotland) Limited v. Stuart Mitchell, t/a Discovery Land Surveys demonstrates a common head of damage arising out of a negligent survey.

The pursuer house-builders - Beechwood - identified a site known as Mair's Garden Centre for development. As was often the case, it would build the houses for its client, a related company, Westpoint Homes Limited. The site was bounded on the east by the Manse Burn. The defender was engaged to provide a topographical survey. Planning approval was granted for 28 apartment units.

After planning permission was granted, it emerged that the Manse Burn ran at certain points on a more westerly course than had been depicted on the defender's earlier survey. The consequence of that discovery was that it was now impossible, if the Burn continued to run on that course, to construct block 2 of the development in the position shown on the plans on the basis of which planning permission had been granted.

An official who had dealt with the planning application supported a proposal that would allow Beechwood to acquire some of the Council's land, divert the course of the Manse Brook, and then infill its former course, so allowing block 2 to be built on the original footprint. The developer pursued that solution but eventually the local authority refused to sell the land. Several weeks were spent pursuing this unsuccessful course. An alternative proposal was then adopted which involved moving the footprint of block 2 to a more southerly position. Eventually, for this plan, planning permission was granted. The defender accepted that his erroneous plotting involved a breach of contract and a breach of his duty of care at common law but contended that any loss sustained by Beechwood was caused or materially contributed to by its own fault or by the fault of Westpoint.

The pursuers contended that the defender's mistake had caused the 22 week delay during which time it was deprived of income. The court held that for some of this period of 22 weeks the fault could not be attributable to the defender as the developer and its advisors had effectively taken their foot off the pedal for other reasons. The court held though that the problems over the location of block 2 made it impossible for Beechwood to place a firm order with the selected timber kit supplier and to obtain the details and drawings required by the planners. This delay was calculated by the court to be about 10 weeks for which the court awarded £31,000 odd, with total damages at around £60,000.

An interesting angle on the case is to be found in Tony Bingham's column in Building Magazine (Friday 27 April 2001). He argues that the developer did not really lose its profitability permanently, the ability to earn that profit was merely delayed and instead of earning that money at a particular time, he earned it 10 weeks later. If this analysis is correct, then the loss would be very much smaller than the sum awarded by the court. Impeccable as this reasoning might be, it does not at the current time represent the law and loss of profits claims arising out of poor survey and investigation work can be very substantial.


Prepared for the Members of the AGS by Steven Francis, DLA

Date of Issue: 16 May 2001