Outer House case concerning a Property Enquiry Certificate obtained by Manorgate from First Scottish which failed to reveal that the site for which the certificate was obtained was designated as being one of archaeological significance. It intended to demolish the existing buildings and erect new commercial premises. One of the new units was to be used as a retail branch for its flooring business. The other units were to be let to complementary traders. However, following purchase of the site, the designation led to Manorgate mothballing it after concluding that the intended development was uneconomic. Manorgate then sued First Scottish for damages in respect of (a) the lost capital value of the Site (b) site investigation costs; (c) trading losses; and (d) development losses.

First Scottish accepted that the Certificate should have referred to the archaeological designation and that they had been negligent in omitting it. However, amongst other things, they argued that (1) the omission had not caused Manorgate’s losses (2) that there had been contributory negligence on Manorgate’s part and (3) Manorgate’s losses were too remote to have been foreseeable by First Scottish.

Lord Woolman rejected the First Scottish defences and awarded damages (albeit the damages were reduced as some of the losses were not foreseeable).

Causation
Lord Woolman found that Manorgate had relied on the certificate and would have withdrawn from the missives for the purchase of the site if the certificate had been accurate.

Contributory negligence
First Scottish argued that Manorgate should have queried or double-checked the accuracy of the information in the certificate. Lord Woolman found that a surprising position for it to adopt noting that, if purchasers were obliged to carry out their own separate investigations, it would deprive Property Enquiry Certificate of any real utility.

Foreseeability
Whilst the diminution in value of the site, site investigation costs and loss of business profits (First Scottish knew the site was zoned for commercial use) were foreseeable, First Scottish could not have reasonably foreseen a sequence of events that led to the buildings being demolished. Nor could they have foreseen that the purchaser of the site would both seek to carry on business there and also sell the site and generate development profit and, as a result, no damages were awarded for development profit.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.