Construction Law Principles and Case Analysis: Carruthers Property

This report provides a detailed analysis of a construction law case involving Mr. Carruthers and a property investment. The case explores issues of professional negligence related to property valuation and structural surveys. The report examines the roles of surveyors, structural engineers, and estate agents, and the legal ramifications of inaccurate valuations. Key legal concepts such as professional negligence, the SAAMCO principle, and the Estate Agent Act 1979 are discussed in relation to the case. The report highlights the impact of negligent behavior on Mr. Carruthers' investment, the application of relevant case law (including South Australia Asset Management Corporation v York Montague Ltd and Banque Bruxelles Lambert SA v Eagle Star Insurance Co. Ltd), and the potential legal liabilities of the involved parties. The analysis considers the implications of relying on reports from inexperienced professionals and the importance of due diligence in property transactions. Ultimately, the report aims to provide a comprehensive understanding of the legal principles and practical considerations in construction law as they apply to the Carruthers property case.

Construction Law

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Description of the case.................................................................................................................1
Issues............................................................................................................................................2
Legal cases and its application to the current case scenario........................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7
BIBLIOGRAPHY............................................................................................................................8

INTRODUCTION
Construction law specifically targets all the disputes and matters related to performing
construction, engineering and related work. Its legal principles, rules and regulations such as
safety, worksite management, hiring practicesand environmental management need necessarily
comply to perform necessary construction work. Legislation helps to resolve legal issues in the
field of construction of building and other associated work. The current research assignment
thrust is to examine the statutory provisions of construction law and apply to the mentioned case
scenario. Various case decisions will be properly evident with the legal case findings to
authenticate and support the final decision. It covers detailed assessment of key provisions
including professional negligence and others.
Description of the case
As per the case, in the summer of 2015, Mr Carruthers had planned to acquire new
premises to expand their operations and diversification. For such plan, he need some office space
and found that the remainder of premises could be let to generate additional revenue. A
commercial estate agent, named August Properties approached him with number of properties,
among all, Mr. Carruthers decided to opt for the property that had been advertised as having
redevelopment potential. It is because; he opined that the final property would incorporate a
shared meeting room & gym that will help to charge higher rent. The property has been
advertised as Rare freehold development opportunity for sale that offers a great commercial
potential with minimum investment. It situates in the prime location with a total area of 1,139
square meters in close proximity to the main street. It has an easy access to the public
transportation hub and Heathrow Airport. In order to complete the conversion work, Mr.
Carrruthers require a mortgage of £0.5m to fit out the top floor for office area, reception &
meeting room on the ground floor. The mortgage term was to carry out a structural survey in
order to assure that investment in the property is worthy. For this, Mr. Carruthers instructed his
solicitors to hire a structural engineer, Rock Associate who will be liable to estimate the
conversion work cost from hotel to A category office.
The valuation performed by the long-established and accredited firm of surveyor, named
Starling & Co. One of the experienced surveyors, named Mr. Dove had been sent for the survey
work who had great experience in this field but due to too much work load he hastily views the
property. As per the final remark, property is in very good condition and requires minimal work
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to convert to offices. It requires removal of internal partitioning, service updating and little bit
structural work that will provide lettable area of 1200 sq m. Mr. Carruthers’s structural engineer
report confirmed the same hence, on believing the same, he found that investment of £0.5m in
the property will be definitely worthy and provide good return. However, actually cost of
building construction escalated to £1 million with less lettable area of just 920 sqm below the
target requirements of 1,000 sqm.
Issues
In the cited case scenario, one of the main issues that hadfound is that although Starling
& Co. hires a highly experienced surveyor, Mr. Dove but at the time of survey, he had excessive
work pressure and hastily surveyed the property. In the case, it is clearly states that his camera
battery was not charged and on walking round, he takes a few scribbled notes. Even he was
anxious to do more work still send his hastily written report to the Wren & Co., which signed on
the behalf of Starling & Co. It clearly highlights the possibility of occurrence of professional
negligence. Due to suspicion over hastily report, Mr. Carruthers wait for structural engineer,
Rock Associates report who hired Simon Swallow, nephew of Mr. Carruthers golfing friend. He
completed his graduation from Brunel University recently hence, do not have any experience in
the concerned field. Here, the key legal challenge that is identified that Rock Associate business
policy is that if any fresh graduate recruited in the business that it is essential to supervise their
work for the first two years to avoid any risk of incorrect and misleading valuation. Before
sending the valuation to the final client, all the work or valuation carried by the recent graduates
must be revises and reassess. However, in the cited case, believing the competency and
excellence, Rock Associate had not revalued by Simon’s valuation, which was against the
corporate policy.
Believing both the surveyor’s report,Mr. Carruthers decided to acquire the property.
However, as per the actual results, building has asbestos in many area, internal partition is the
part of structural work and removal of it needs additional support. Moreover, bathroom
provisions allow split tenancies and fire escape provision declined ground floor area from the
minimum set required area of 1000 to 920 sqm. Besides this, ground floor area requires extra
reinforcement and early, Starling & Co. goes into liquidation. Due to decline in the support,
expected rental revenue for the 800 sqm of £12,000 appears 720 sqm with rental income of just
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£1 million. As a result, Mr. Carruthers became unhappy due to increased cost that lowers
potential income.
Legal cases and its application to the current case scenario
South Australia Asset Management Corporation Vs York Montague Ltd is one of the
popular case law of damages for negligent valuation. In accordance with the case, valuation is an
exact science and within a specified range of figures, they may differ without any negligence
behavior. However, if in any circumstance, valuer found negligent then they will be obliged for
the lossesthat was the result of inappropriate valuation. Although, valuer is not essentially liable
to compensate entire loss and in order to decide liability for the damages, it is necessary to
ascertain the element of loss suffered due to such transactions that were attributable to inaccurate
valuation delivered. For such purpose, the incorrect valuation must be compare with the
valuation provided by a reasonable valuer. Such valuation also considers the change in the
market value because valuers are not obliged to compensate such losses that are the result of fall
in market value (South Australia Asset Management Corporation V York Montague Ltd, 2018).
As per the final judgment, surveyor who makes valuation of the property is liable only for the
damages that arisen due to the difference between purchase price and competent valuation.
Claimant is unable to claim for the losses due to fall in property market value. Applying it to the
given scenario, Mr. Dove inaccurately valued the property redevelopment cost by £0.5 million
due to his negligence work. Although, Mr. Carruthers did not believe such report and waited for
Simon’s report, in which, the valuation was provided as reasonable estimate. Believing it, he
decided to purchase the land and unfortunately, suffered loss by rising cost and decreased
targeted yield (Parbhoo, Strydom and Cameron, 2015). It also tends to decline the expected
income from rent. Thus, in such situation, it can be suggested to Mr. Carruthers that he could
sought legal case against Simon Swallow and recover the losses incurred.
Evidencing from another case of Banque Bruxelles Lambert SA Vs Eagle Star Insurance
Co. Ltd, plaintiffs were mortgagees and valuers were defendants. In the mentioned case,
defendants negligently performed their duties and liabilities and as a result, over-valued the
expected projection. Thereafter, the property market collapsed and borrowed defaulted their
payment, which in turn, plaintiff suffered substantial loss that they had granted to the borrower.
In the case, the main question was that whether the plaintiff could claim damages for the losses
due to difference in property value at the time of mortgage and sale. Court held the decisions that
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negligent loss only incorporates those losses that are attributable to the changes in general market
situation. Sir Thomas Bingham state that when a mortgage lender believe valuer’s valuation and
entered into a transaction and suffered loss due to foreseeable risk, hence, defendant would be
liable for his professional negligence behavior (Banque Bruxelles Lambert Sa V Eagle Star
Insurance Co Ltd And Others Appealsz: Ca 24 Feb 1995, 2016).
Applying it to the cited case;it is clear that although Mr. Dove worked negligence and do
not provided an accurate valuation, still, as Mr. Carruthers did not come to a final decision and
did not take any action, therefore, he could not be liable. However, Simon Swallow who had
opined the estimation reasonable had worked negligently and found legally liable towards Mr.
Carruthers. In spite of this, Wren & Co. must review and reassess the work performed by Simon
because he was the fresh graduates and as per the policy, his work must be review, which was
not actually done. Therefore, such company also would be accountable.
As per the SAAMCO cap principle, whenever a surveyor or valuer goes further than just
providing an inaccurate valuation then suggest client to work on course of action of take. In such
situation, if surveyor work negligently and as a result, developer face any loss than for such
foreseeable loss, surveyor would be liable to compensate such cost upon believing such, client
had adopted an action. According to the SAAMCO test, SC (Supreme Court) held the decisions
that the solicitor’s firm who had made documentation for the loan are not legally responsible
(Solicitor was not the underwriter of the financial fortunes of a whole transaction, 2017). This is
on considering the present case of Mr Carruthers where he has consulted 2 distinct real estate
companies for the valuation of the property that he was seeking to buy and invest into. Also,
from both the places, he got similar estimations about the property in which he was willing to
invest. This is on considering the specific requirements stated by Mr Carruthers to his solicitors
where both the reports have met his expectations. Although, he was primarily dependent on the
report to be produced by the 2nd company with specific structural descriptions to meet his
expected norms to invest into the property. For which, he did not rely entirely on the report
submitted by the 1st company named Starling & Co. that later became insolvent (Abdulai and
et.al., 2015).
On facing the reality, he found some major discrepancies in the findings of both the
reports where there existed some more expenses needed to be undertaken for a proper structuring
of his chosen property for investment. This made him disappointed about the fact and it followed
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by a desire of claiming both the companies. This section has thus stated about such legal cases
that are applicable in this particular case of Mr Carruthers. Considering this fact, there exists The
Estate Agent Act 1979 for suing the estate agents. It is specially for providing misleading
information to the clients and misinterpreting the valuation related details (Ballesteros and et.al.,
2016).
This is on linking to the present case of Mr Carruthers in which he together dealt a
similar situation of wrong information with falsified statements of fact by both companies that
clearly mismatched his specified criterion and he resultantly faced a loss. However, the 1st
company that he referred was later declared insolvent and thus cannot be claimed. It is therefore
on considering the falsified statements produced by another company named Rock Associates,
they can be sued for the damages encountered for their negligent approach. In which they missed
to check out the report prepared by one of their newly joined graduate engineer who just passed
his course (Information on how to sue estate agents, 2018). Also, Mr Carruthers was together
dependent on the structural engineering report prepared by the 2nd company that involved some
major falsified facts. Herein, the newly appointed estate agent failed to conduct a correct
inspection of the property.
A similar example of such type of case is Lough Eske Holdings v Knight Frank &
Rutley. Herein, the client claimed the company for professional negligence by alleging their real
estate agent for not carrying out a proper assessment of the property. As a result, to which, they
were found to breach their professional obligation. On considering a well-known fact, it has been
found that a negligence mainly leads to a fiscal recompense in the law court with a condition of
resulting into a directly attributional loss (Information on how to sue estate agents, 2018).
Likewise, in this case, the complainant received a minimal reward of 1 pound by yet being liable
for paying the fees to the agency. This is due to the claims made against the agency where they
accused the plaintiff for not paying their charges for full valuation of the property and thus they
won the case with a partial win of the claimant.
CONCLUSION
As per the legal findings of the case, it becomes clear that Simon Swallow had been
found legally responsible towards the losses suffered by Mr. Carruthers because of his
negligence in the valuation processes. Moreover, Wren & Co. also can be sought because the
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work carried out by Simon was not being revalued which is against the policy of supervising the
fresher’s work. Hence, both the parties can be legally sue for the losses suffered by Mr.
Carruthers.
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REFERENCES
Books and Journals:
Abdulai, R. T. and et.al., 2015. Real estate, construction and economic development in emerging
market economies. Routledge.
Ballesteros-Pérez, P and et.al., 2016. Dealing with weather-related claims in construction
contracts: a new approach.
Parbhoo, N., Strydom, J. and Cameron, J., 2015. Prevaricate and lose: construction law. Without
Prejudice. 15(3). pp.106-.
Online
Banque Bruxelles Lambert Sa V Eagle Star Insurance Co Ltd And Others Appealsz: Ca 24 Feb
1995, 2016. [Online]. Accessed through: <http://swarb.co.uk/banque-bruxelles-lambert-sa-
v-eagle-star-insurance-co-ltd-and-others-appealsz-ca-24-feb-1995/>.
Information on how to sue estate agents, 2018. [Online]. Available through:
<https://www.contactlaw.co.uk/56-nolink-uk/areas-of-law/disputes/professional-
negligence-law/848-sue-estate-agents.html>.
Solicitor was not the underwriter of the financial fortunes of a whole transaction. 2017. [Online].
Available through: <https://www.clarkewillmott.com/news/saamco-cap-clarified/>.
South Australia Asset Management Corporation V York Montague Ltd, 2018. [Online]. Available
through: <http://swarb.co.uk/south-australia-asset-management-corporation-v-york-
montague-ltd-etc-hl-24-jun-1996/>.
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BIBLIOGRAPHY
http://www.dlapiperrealworld.com/law/index.html?c=GB-ENG-WLS&t=construction&s=&q=
http://swarb.co.uk/south-australia-asset-management-corporation-v-york-montague-ltd-etc-hl-24-
jun-1996/
https://www.clarkewillmott.com/news/saamco-cap-clarified
https://www.contactlaw.co.uk/56-nolink-uk/areas-of-law/disputes/professional-negligence-law/
848-sue-estate-agents.html>
http://swarb.co.uk/banque-bruxelles-lambert-sa-v-eagle-star-insurance-co-ltd-and-others-
appealsz-ca-24-feb-1995
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