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From the Non-Contentious Business Sub-Committee: a reminder of the extent of actions for negligent misstatements
From the Non-Contentious Business Sub-Committee: a reminder of the extent of actions for negligent misstatements
By Alastair Teague, Member, Non-Contentious Business Sub-Committee
A reminder of the extent of actions for negligent misstatements
In this time of information overload, some members might be forgiven for having missed the decision of Hunt and others v Optima (Cambridge) Limited [2014] EWCA Civ 714, either in the professional media or when referred to within recent professional development update courses. The case provides buyers, and particularly their advisors, with a cautionary reminder about the extent to which reliance can be placed on a Professional Consultant’s Certificate (PCC) which is to be issued to a buyer covering the standard of construction of new builds (or conversions) as an alternative to the developer guaranteeing the construction within schemes such as NHBC or a New Homes Warranty. This case considered the extent to which buyers can rely, and possibly subsequently sue, on the statements contained within PCCs that later turn out to have been made negligently.
Briefly, Optima developed 2 blocks of flats which, during their construction, were regularly inspected by the supervising consultant who on completion of the works issued the PCCs. Subsequently it became clear that the buildings suffered serious defects in their construction. The buyers sued both the developer (who had gone into administration) and the firm of surveyors who had issued the PCCs. The defendant surveyors denied liability on the basis that there was no reliance by the buyers on the negligent misstatements made in the PCCs as, save in relation to one flat, the PCCs had not been issued before the buyers had contracted to purchase. At first instance, the timing of the issue of the PCCs was not considered a bar to the tortious claim of negligent misstatement against the surveyors, as the buyers had been told before contracting to purchase that a PCC would be issued. The Court of Appeal, however, said that the approach taken at first instance was wrong. The court restated that to be liable on negligent misstatements contained in the PCC, the PCC (and thus the statement) had to be in existence prior to the buyer contracting to buy and that the buyer had to have relied upon the statements contained within that certificate. Accordingly, save for the one flat owner where the PCC had been issued prior to the buyer contracting to buy, as the PCCs had not been in existence at the time the buyers contracted to purchase, the buyers could not have relied on the negligent statements contained within the them. Consequently, the surveyors were not liable for negligent misstatements in the PCCs, as at the time of the contracts there had been no such representations had been made upon which the buyers could have placed reliance; that reliance cannot be retrospective.
Therefore, where one is acting for the first buyer of a new build (and/or their mortgagee) the construction of which is being certified by a PCC, that PCC must be in existence PRIOR to exchanging contracts with the developer seller if the buyer (or their mortgagee) is to be able to sue the professional consultant for any negligent misstatement contained within it should it subsequently become clear that the construction is defective. Failure to ensure that the PCC is in place prior to exchange of contracts may not only prevent the buyer or their mortgagee pursuing a cause of action against the surveyor, it may render their advisor liable in negligence.
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