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What Lies Beneath?

Date: 04/09/2013 | Dispute Resolution

In the recent case of Manorgate Limited v First Scottish Property Services Limited (FSPSL) a buyer was entitled to damages from the provider of an inaccurate Property Enquiry Certificate (PEC).

Manorgate purchased a site after obtaining a PEC from FSPSL.  It intended to demolish the existing buildings and erect new commercial premises.  One unit would be used for its own retail branch and the others would be let to complementary traders.  After purchasing the site, Manorgate discovered that it was designated as a site of archaeological significance.  This had been excluded from the PEC and had a major effect on Manorgate’s plans.  Dealing with the archaeological artefacts and the remains at the site would cause significant expense and difficulty for Manorgate.  Ultimately, it was concluded that the development was uneconomic.  Manorgate sued FSPSL for damages in respect of (a) the lost capital value of the Site; (b) site investigation costs; (c) trading losses; and (d) development losses.

The court dismissed FSPSL’s arguments and awarded damages to Manorgate, but the damages were reduced as not all losses were foreseeable.   It was held that the PEC had played an important part in Manorgate’s decision and, had it been accurate, Manorgate would have withdrawn from the missives.

FSPSL argued that Manorgate should have taken further steps to protect themselves and not relied solely on the PEC.  They argue that Manorgate should have queried or double-checked the accuracy of information provided in the PEC.  Lord Woolman found this a surprising position to adopt as, if purchasers were obligated to carry out their own separate investigations into the same matters, it would deprive PEC’s of any real utility.
From the losses sought by Manorgate site expenditure costs were deemed foreseeable, as were economic losses because FSPSL knew that the site was to be used for commercial purposes.  However, Manorgate couldn’t claim for the diminution in capital or for the development profit, as those losses weren’t reasonably foreseeable.

When purchasing a site, developers generally obtain further searches of a property.  However, because property services hold themselves out as providing a specialist searching service and expect recipients to rely on their certificates, any failure to disclose will constitute a breach of duty.  This case highlights the care that must be taken in relying on the information provided by property services and to those providing that information to ensure the work is carried out properly.

If you’ve suffered losses as a result of professional negligence, or are facing a claim for alleged losses against you, please contact any member of our Dispute Resolution team who will be happy to discuss matters with you.

The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.

Written by

Sheila Webster | Davidson Chalmers Stewart
Sheila Webster

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