Realstone Limited V. Messrs. J. & E. Shepherd And Others
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2008] CSOH 31 |
| Court | Court of Session |
| Date | 21 February 2008 |
| Docket Number | CA60/07 |
| Published date | 21 February 2008 |
| OUTER HOUSE, COURT OF SESSION [2008] CSOH 31 | |
| CA60/07 | OPINION OF LORD HODGE in the cause REALSTONE LIMITED Pursuers; against MESSRS J & E SHEPHERD AND OTHERS Defenders: ________________ |
Pursuers: Kennedy, Solicitor Advocate; Balfour + Manson LLP
Defenders: Cowie; Dundas & Wilson C.S.
21 February 2008
[1] This is an action by a developer against chartered surveyors arising out of alleged professional negligence in the preparation of a plan of a plot of ground. The defenders challenged the relevancy of the pursuers' pleadings at debate and sought to have the action dismissed. The pursues sought to have the defenders' plea to the relevancy repelled.
[2] The pursuers are a development company based in Chesterfield, Derbyshire. They were owners of land at Dalbeattie which they were developing for housing. They sold off several plots within the development to third party purchasers. On 20 February 2004 the pursuers' solicitors instructed Andrew Ross Limited ("ARL"), an architect's practice based in Dalbeattie, to prepare a plan of Plot 23 of their development. The letter in question was commendably brief, stating in one sentence that the adjusted layout plan had been approved and that they would be obliged if Mr Ross would let them have deed plans for plots 6 and 23 as soon as possible so that contracts might be issued. ARL instructed the defenders to prepare the plan of plot 23 and the defenders did so.
[3] The pursuers allege that the plan was defective and that they have suffered financial loss as a result. Using the plan, they conveyed the plot of ground to a purchaser and had to buy it back at an inflated price after they discovered that the sold plot extended into land designated for the roadway of the development site.
[4] The pursuers' averments as to the nature of their contract with ARL are sparse. They aver merely that solicitors on their behalf "wrote to [ARL] requesting a detailed deed plan for Plot 23". There are no averments as to the terms of the contract between the pursuers and ARL which may have been established by prior dealings. During the debate Mr Kennedy for the pursuers described Mr Ross of ARL as the pursuers' "local site agent" but there are no averments relating to his or ARL's status. The pursuers have no averments as to the manner in which ARL and the defenders entered into their contract for the provision of the particular plan (or plans if they also produced a plan of plot 6) or the terms of that contract. Neither party has any averment that the contracts contained terms which excluded, limited or regulated the liability of any of the parties. It may be, as the defenders aver, that the contract between ARL and the defenders was simply a handwritten fax instructing them to produce the plan or plans as the pursuers accepted that the defenders had a continuing business relationship with ARL and that it was normal practice for the defenders to receive instructions by such means. Nothing is stated about the terms on which the defenders and ARL conducted their business in their continuing relationship. It appears from the pursers' averments that ARL were simply a conduit through whom the defenders were instructed to produce the plans. If that is the case, it is surprising that the relationship between the pursuers and ARL in relation to obtaining plans was not one of principal and agent. But the pursuers' pleadings assume the existence of a contractual chain between them, ARL and the defenders. In summary, little is known at this stage of the action about the relevant contractual arrangements.
[5] The pursuers aver that the defenders had previously produced plans of other plots in the development. The defenders knew that the pursuers would use those plans to define the subjects of sale in entering into contracts of sale of those plots and in conveying the plots to the purchasers. Thus when the relevant contract was entered into the defenders would have known that the plan of Plot 23 was to be used by the pursuers for this purpose.
Parties' submissions
[6] Mr Cowie for the defenders invited me to dismiss the action on the basis that the pursuers had not pleaded a relevant case that the defenders owed them a common law duty of care to avoid financial loss. He submitted that the pursuers had chosen to request ARL to provide the plan and that ARL had in turn contracted with the defenders to obtain it. He submitted that as a general rule where parties created a contractual chain in which A contracted with B who in turn subcontracted with C, C did not owe a duty of care to A in his performance of his obligations to B to avoid causing financial loss to A. Whether one analysed the test for the existence of a duty of care as the threefold test of (i) foreseeability, (ii) proximity and (iii) whether it was fair, just and reasonable to impose a duty as in Caparo Industries Ltd v Dickman [1990] 2 AC 605 ("the threefold test") or asked whether C had assumed a duty of care to A, as in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, no duty of care arose. He acknowledged that the law, exceptionally, could impose a duty of care on C to fill a gap in the law by giving A a remedy in order to achieve practical justice. But he submitted that in this case there was no reason why the pursuers could not obtain a remedy by pursuing a contractual claim against ARL, which could in turn seek a remedy against the defenders. He referred to White v Jones [1995] 2 AC 207, Simaan General Contracting Co v Pilkington Glass Ltd (No 2) [1988] 1 QB 758 (CA), Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830 and, in responding to the pursuers' written arguments, Noble v De Boer 2004 SC 548.
[7] Mr Kennedy for the pursuers invited me to repel the defenders' plea-in-law to the relevancy and to allow a proof on the basis that the court could conclude that a duty of care arose in the averred circumstances. As a fall back, he invited me to allow a proof before answer. In support of his contention that the case fell within a well established category in which the courts had found that a duty of care was owed he referred me to Hedley Byrne & Co v Heller & Partners Ltd [1964] AC 465, Junior Books Ltd v Veitchi Co Ltd 1982 SC (HL) 244 and Henderson v Merrett Syndicates Ltd. He referred in particular to the speeches of Lord Fraser of Tullybelton and Lord Roskill in Junior Books at pp.265-266 and 277 respectively. He submitted that, where a case fell within an area where it had been established that a duty of care existed, it was not necessary to consider again whether it was fair, just and reasonable that a duty of care arose: Noble v De Boer, Lord Marnoch at para.11. All that needed to be established was foreseeability and proximity. There was no dispute that the defenders could have foreseen the use that the pursuers would make of the plan.
[8] In relation to proximity Mr Kennedy submitted that the defenders were aware that the pursuers would immediately use the plan of the plot of ground in their contract with a purchaser and would become bound to a contract which, if the defenders were careless in preparing the plan, they would be unable to implement. The defenders were a national firm of surveyors; they were well aware both that the plan would be used by the pursuers and how the pursuers were to use the plan; they were aware of the option of using disclaimers and exclusion clauses but they chose not to include any disclaimer of liability. He referred to The...
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