Ships in the Night – A Cautionary Tale
(1) GOVERNORS & CO OF THE BANK OF IRELAND (2) BANK OF IRELAND (UK) PLC v WATTS GROUP PLC  EWHC 1667 (TCC)
Laurie Clay and Sheona Wood review the recent Technology and Construction Court decision in Bank of Ireland v Watts Group PLC  EWHC 1667 (TCC) concerning the duty of care owed by a quantity surveyor in providing a report to a bank as part of its lending decision. Whilst the judgment turned on its own facts, one of the most interesting aspects of the decision was the Court's comments on the independence and reliability of the expert surveyor evidence. In a typically clear and candid judgement, Mr Justice Coulson strongly criticised the bank's expert surveyor witness. He also helpfully observed that the amount of a professional's fees in professional negligence cases can be good evidence of the limited nature of the service which he or she is expected to provide.
The case also serves as a useful reminder that parties must exercise caution when faced with an expert witness who is so dedicated to his or her client's case that he or she compromises their independence and overlooks their duty to the court. Such was found to be the case here, unusually, giving Mr Justice Coulson little option but to rely on the evidence of the defendant's expert wherever a difference of opinion arose.
Two banks ("the Claimant"), sought damages for professional negligence against the defendant quantity surveyors ("Watts") in connection with a residential development project in York. The Claimant had agreed to lend £1.4 million to Derwent Vale York Limited (the "Borrower") to fund the project and had engaged Watts to provide an Initial Appraisal Report ("IAR") on the Borrower's development proposal and to verify the construction cost estimate. The final version of the IAR (for which Watts charged a fee of £1,500) was delivered to the Claimant in April and provided that the Borrower's estimated construction cost of £999,099 were realistic.
The Borrower's first drawdown was in April 2008. However, by May 2009 the Borrower's majority shareholder had gone into administration and the Borrower entered a creditors' voluntary liquidation. The unfinished property was subsequently sold at a loss.
The Claimant brought proceedings against Watts alleging that it was in breach of its contractual and/or tortious duties in providing a negligent IAR and that had the IAR been properly prepared, the Claimant would not have permitted the drawdown and would not therefore have suffered the £750,000 loss claimed. Watts denied negligence and raised further issues as to reliance, causation and loss. They alleged that the Claimant's negligent decision to lend to the Borrower in the first place was the real cause of the loss.
Having pointed out that the key factual witnesses from the Bank had not been called as witnesses and that important documents were not available and having considered the evidence which was available, the Court rejected each of the Claimant's allegations of negligence. It held that even if there had been negligence, the Claimant's case would have failed on the grounds of causation, the loss was not recoverable as it was not within the scope of the surveyor's duty (following BPE v Hughes Holland) that the loss had wholly been caused by the Bank's lending failures, and even if the Bank had been found to have suffered loss it would have had those losses reduced by 75% to reflect the Claimant's contributory negligence.
In arriving at the decision that there had been not breach of duty, the Court considered the respective parties expert surveyor evidence. The Claimant had appointed Mr Vosser as their independent expert witness. Notably, during the course of the trial it emerged that the claimant had been Mr Vosser's principal client over the last few years. Mr Justice Coulson was extremely critical of the closeness of this relationship, which, he concluded, had clearly affected Mr Vosser's impartiality and the independence of his evidence.
Coulson J took the unusual step of commenting that wherever there was a conflict between the opinion of Watts' expert witness and the "unreliable" expert opinion of Mr Vosser, that Watts' expert's account would be preferred. He was particularly critical of Mr Vosser's
• Lack of realism: Mr Vosser provided an initial report, which filled a whole lever arch file, incurring fees of £24,000 in order to examine Watt's limited role of producing the IAR for which they had been paid a fee of £1,500.
• Attempt to mislead: Mr Vosser deliberated excised words from a quotation as a "blatant misuse of a source document"
• Applying the wrong test for negligence: Instead of considering what a reasonably competent monitoring surveyor would have done, Mr Vosser took the court through a line-by-line analysis of what he would have done that Watts did not.
There were never any concessions or margins of error in Mr Vosser's analysis and accordingly Justice Coulson "doubted whether his evidence went to the right issue".
For further information please contact Sheona Wood, Partner on 020 7280 8804 or Laurie Clay, Trainee Solicitor, on 02072205326
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.