Inner House success for Arnot Manderson team in professional negligence third party claim against surveyors
Andrew Young QC and Nick Gardiner were instructed on behalf of the professional indemnity insurers of Semple Fraser LLP (in liquidation). Semple Fraser were sued by their former clients STV Central Ltd for failing to advise them about a drafting error in a clause in a commercial lease which had the effect of producing an exorbitant annual rental.
The case related to a decision by STV to relocate to Pacific Quay in Glasgow. They instructed Semple Fraser as their solicitors and CBRE as their surveyors to secure a lease. Heads of Terms were agreed between the Landlord and STV. Unfortunately a mistake in the drafting of the Retail Price Index (RPI) formula had the effect of increasing the rent payable in an exponential manner. After a mediation the Landlord agreed to insert a new RPI formula into the lease in return for STV paying a substantial sum. STV raised an action of professional negligence against Semple Fraser for it’s losses. They in turn convened CBRE as a third party under section 3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 on the basis that STV could have sued them for breach of their duties in contract and delict. Semple Fraser admitted liability and the principal action was settled. Lord Woolman dismissed the action between Semple Fraser and CBRE at debate on the basis that there was nothing in the pleadings or emails to suggest that STV looked beyond Semple Fraser for advice on the terms of the lease and therefore nothing to indicate that they undertook contractual liability to STV. His Opinion was reclaimed to an Extra Division of the Inner House of Lady Paton, Lord Brodie and Lady Clark of Calton.
Semple Fraser averred that it was part of the surveyors’ job (their retainer) to give expert advice about the wording of the RPI provision so that the heads of terms were accurately recorded in the lease. Lady Paton and Lord Brodie noted that the defender had requested the third party’s advice in relation to the wording of the RPI provision and found that the court could not hold that the surveyor’s duty did not extend to giving expert advice about the rent review provisions to another member of the professional team (when asked to do so) and thus indirectly giving such advice to the client. They held that the Semple Fraser’s contention that CBRE owed STV a duty of care ex contractu in relation to the RPI clause was stateable although ultimately would be a matter for proof.
As an alternative case Semple Fraser submitted that even if CBRE did not have a contractual duty to advise on the RPI formula by volunteering their advice, which they reasonably knew would be relied upon, they had assumed a delictual duty to exercise reasonable skill and care. Lady Paton and Lord Brodie accepted that the appropriate test to apply when considering whether there was a delictual duty of care owed by the surveyors to STV was “the assumption of responsibility” test as set out by Sir Brian Neill in BCCI v Price Waterhouse (no 2)  PNLR 564 and that this question fell to be determined on an objective basis as set out in Henderson v Merrett Syndicates  2 AC 145. Lady Paton noted that Semple Fraser offered to prove that they specifically requested advice from CBRE about the wording of the RPI provision and that CBRE did not reject the request as not within their responsibility but on the contrary offered advice on the clause. They also offered to prove that STV knew that the defender and the third party were working together on the wording of the RPI provision and that the third party knew that STV had that knowledge. They submitted that STV were therefore relying or depending on the third party and the third party knew (or ought to have known) that they were doing so. On that basis Lady Paton held that the defender had pled a sufficiently relevant and specific case of the existence of a duty of care ex delicto owed by the third party to STV. Lord Brodie agreed with this analysis. The court allowed the reclaiming motion, allowed a proof before answer and remitted the case back to the Commercial court.
The majority opinions of Lady Paton and Lord Brodie and the dissenting opinion of Lady Clark of Calton dated 12 May 2015 can be read here