The High Court has delivered its judgement in Darcliffe Homes Ltd v Glanville Consultants Ltd and another company [2024], a case concerning the acquisition of a development site near Reading that was later found to be at a significant risk of dissolution, which occurs when water passes through soluble rock and produces underground cavities, due to underlying chalk geology. The judgement provides valuable insight into the causation element of negligence and underlines the critical importance of thorough geotechnical due diligence when acquiring land for development.
Background
The land in question was situated at Stoneham Farm, Tilehurst, Long Lane, near Reading. In 2014, Darcliffe Homes Ltd (“Darcliffe”) entered into a development agreement for the land with a stipulated minimum price for the intended development. Planning permission for 66 homes was granted in December 2016, subject to reserved matters and legal agreements.
Before obtaining planning permission, Darcliffe instructed Glanville Consultants Ltd (“Glanville”) to prepare a Phase 1 Geo-Environmental Assessment Report (“Phase 1 Report”), which was among the documents used to promote the site. In 2017, Darcliffe further engaged Ground and Water Limited (“GWL”) to carry out a Phase 2 Intrusive Site Investigation. GWL conducted site investigations in November 2017, issuing its final report (“Phase 2 Report”) in January 2018, with additional investigations following in July 2018.
In June 2019, Darcliffe was notified that the reserved matters under the planning permission had been approved, and it proceeded to purchase the site for approximately £5 million, intending to develop a residential scheme.
Subsequently, Darcliffe alleged that after acquiring the site, it discovered extensive chalk dissolution, necessitating significant remediation costs. Darcliffe claimed that it had relied on the reports provided by Glanville and GWL when proceeding with the purchase and sought damages of £7.5 million for negligence and breach of contract.
The Reports: Duty of Care and Breach
Glanville’s position was that its primary responsibility was to facilitate the promotion of the site within the West Berkshire local plan. Its duty of care was, therefore, framed as being limited to risks directly associated with that promotion. Glanville’s initial communication with Darcliffe suggested that its role was to demonstrate the absence of any particular issues preventing responsible development.
Upon analysis of the facts, the court found that Glanville’s duty extended beyond site promotion. It was required to conduct a “reasonably competent” Phase 1 Geo-Environmental Assessment using reasonable skill and care, which included producing a desk study report, developing a conceptual model, and assessing ground conditions. The resulting Phase 1 Report appeared to give the site a clean bill of health in respect of geo-environmental risks.
It transpired that Glanville had advised that “it was indicated that the sites geology is at a low [risk] from ground dissolution” based on data provided by Envirocheck without conducting any independent analysis of the ground conditions despite this being central to their engagement. The court found that they failed to properly consider the fact that the site was underlain by chalk. Had they done so, they ought to have advised Darcliffe that, irrespective of whether dissolution features were explicitly identified, their presence should have been presumed until proven otherwise.
Although the claim against GWL was settled before trial, the court noted that GWL had, as a matter of fact, relied on the reports produced by Glanville in preparing its Phase 2 Report, though it was not necessarily entitled to do so as a matter of law.
The Court’s Analysis
The court found that Darcliffe had established that Glanville had failed to exercise the degree of reasonable skill and care to be expected of a reasonably competent engineer producing a Phase 1 Report and was therefore found to be in breach of its duties.
The court examined the causation element of the case and assessed whether Darcliffe could prove that Glanville’s breach of duty had directly led to its financial losses. The court focused on three critical questions:
- What were the minimum steps that Glanville should have taken in order not to be held negligent, for example, by including in its reports a simple warning of the risk of dissolution;
- How would Darcliffe’s corporate mind have been affected if Glanville had been given non-negligent advice; and
- What would Darcliffe have done differently as a result.
On the first question, the court concluded that Glanville needed to do little more than it had to meet the required standard of care.
On the second question, the court considered the evidence of Mr Denton, one of the principals of Darcliffe, who suggested that had non-negligent advice been received, Darcliffe would have taken further advice to understand the potential costs implications. However, it was noted that Mr Denton had merely “skim-read” the report. As a result, the court found that Darcliffe would not have realistically withdrawn upon receipt of a non-negligent report from Glanville.
On the third question, the court did not accept, on the balance of probabilities, that Darcliffe would have acted differently. It concluded that Darcliffe would have proceeded to engage GWL on the same terms and with the same instructions.
This case gives rise to a number of important issues for developers and their solicitors as highlighted further below.
Key takeaways for developers
- Developers should be aware that geotechnical reports, including Phase 1 and Phase 2 assessments, are not necessarily comprehensive. These reports do have their limitations and the use of phrases such as “low risk” should be interrogated;
- Developers should not “skim read” reports they commission as the courts may conclude that the developer has not in fact relied upon the contents of the report; and
- Developers should familiarise themselves with the geological features of the areas in which they operate and be alive to the risks posed by such features as chalk deposits which do affect a large swathe of the country.
Key takeaways for developer’s consultants
- Consultants should check with their developer clients what the client is trying to achieve by seeking their advice and whether their advice will be a key component of any decision to acquire a site;
- Consultants should ensure when carrying our geotechnical surveys that data compiled by other consultants is properly checked and independently verified; and
- Where geotechnical surveys are carried out by consultants, they should ensure that any potential risks are flagged and explained thoroughly to developer clients and recommend whether any risks require further investigation.