J Jarvis & Sons Ltd v Castle Wharf Developments Ltd and others

Building contractor tendering for design and construction of development – Contractor commencing work – No planning permission for contractor’s scheme – Local planning authority issuing enforcement notice – Contractor alleging that it was induced into tender and work by misstatements – Whether contractor relying upon misstatements – Appeals allowed The first defendant (Castle Wharf) was a single-purpose company created for the development of a site in Nottingham. It retained the second defendant (Gleeds), a firm of quantity surveyors, as its agent, to co-ordinate and pass information to contractors. Castle Wharf also retained the third defendant (Ellis) as its architect. In June 1996 conditional planning permission was obtained for the first phase of development and the claimant (Jarvis), a building contractor, tendered for the design and construction of it. When Jarvis produced its contractor’s proposals, they showed a scheme differing from the approved scheme. Castle Wharf and Ellis therefore entered into discussions with the local authority to revise the approved scheme in a way that would allow savings to be made without the need to make a fresh planning application. Following a meeting between Jarvis and Gleeds, in November 1996, to discuss those proposals, Jarvis prepared a menu of options. Castle Wharf agreed a price at which Jarvis would carry out the development, in accordance with its contractor’s proposals as amended by the menu of options. Castle Wharf then sent a letter of intent to Jarvis, subject to contract, that included a statement that, in the event of the contract not proceeding, Jarvis would be paid on a quantum meruit basis. Jarvis accordingly commenced work on the development. The local authority subsequently issued an enforcement notice alleging a breach of planning control, namely that the development was taking place without planning permission. Work stopped, and a further revised scheme was submitted for planning permission and approved in July 1997. Castle Wharf then entered into a contract with Jarvis for the completion of the development. Jarvis later commenced proceedings against Castle Wharf, Gleeds and Ellis, alleging that: (i) it did not become aware that the scheme agreed in November 1996 did not have planning permission until the receipt of a letter in February 1997; (ii) Castle Wharf and/or Gleeds induced it to tender and carry out the design and building work on the basis of misrepresentations made by Gleeds between September and November 1996; and (iii) it suffered loss due to Gleeds’ and/or Ellis’ negligence in failing to obtain planning permission, leading to the subsequent intervention of the local authority.The judge found in favour of Jarvis. The defendants appealed. Held: The appeals were allowed. 1. There was no reason, in principle, why the professional agent of an employer could not become liable to a contractor for negligent misstatements made to induce it to tender. In the instant case, however, no contract was entered into if Gleeds breached a duty of care by inaccurately representing that Jarvis’ scheme, as modified, would comply with the planning consent, and if Jarvis relied upon those misstatements to make the tender offer. Jarvis was free to walk away from the development once it knew the truth of what had been represented. 2. Jarvis was an experienced contractor and it had not relied upon Gleeds’ misstatements in November within a few days thereafter. The judge’s conclusion, that reliance upon Gleeds’ breach of duty continued until February 1997, was wrong and the cause could not be established. 3. Consequently, Castle Wharf was exonerated. Its liability, other than for the reasonable costs of works on the basis specified in the letter of intent of November, only arose if Gleeds, its agent, was liable. 4. The judge’s findings of breach of duty by Ellis were against the weight of evidence and therefore could not stand. David Friedman QC and Duncan McCall (instructed by Eversheds) appeared for the respondent; Nicholas Dennys QC and Simon Lofthouse (instructed by Freeth Cartwright Hunt Dickens of Nottingham) appeared for the first appellant; Roger Stewart and Kate Vaughan-Neil (instructed by Kennedys) appeared for the second appellant; Nicholas Elliott QC and Fiona Sinclair (instructed by Reynolds Porter Chamberlain) appeared for the third appellant. Sarah Addenbrooke, barrister