“The Conflict of Interest Issue Ridge should never have acted as both the Quantity Surveyor for the developer and as an Independent Monitoring Surveyor. That dual role was in clear conflict with [2.1.5 of the RICS Professional Guidance, UK Lender's Independent Monitoring Surveyor, 1st edition, March 2015 ("the RICS Guidance for IMS's") and Part 3 of the "RICS Professional Standards and Guidance, Global, Conflicts of Interest, 1st edition, March 2017" ("the RICS Conflicts Guidance") The Pricing Issue (b)Ridge failed to properly advise that the contract sum for the works agreed between the developer Signature Living Residential Limited and its building contractor Signature Living Contractors Limited was not adequate and/or was sufficiently low (in that it fell into the bottom quartile of construction costs for that Scope of Work calculated using BCIS indexes) that there was a significant risk that: (i) Signature Living Contractors Limited would not complete and/or would not be able to complete the Works for that price and/or for the remaining part of that price which had not already been paid to it; and (ii) If, for whatever reason, Signature Living Contractors Limited could not complete the Works, any replacement contractor would charge significantly more than that contract price to do so - a sum in the region of£12.5 to£13.5 million overall for the Works exclusive of professional fees, contingency allowances and VAT. The Cost To Completion issue (c) Whilst North Wall had specifically directed Ridge to provide, and Ridge had agreed to provide, its own estimated costs to completion of the Works, Ridge both failed to do so, and advised in such a confused and unclear way that it was not reasonably apparent that it had so failed. The Relationship Issue (d) In addition, Ridge failed to properly advise that the relationship between Signature Living Residential Limited and its building contractor Signature Living Contractors Limited was sufficiently close to pose a number of risks to the successful completion of the Project including: (i) Increasing the risk identified above that the Contract Price agreed between them would not be adhered to; and (ii) Increasing the risk of programme or cost slippage; and (iii) Increasing the risk that proper quality control of the works had not been applied by Signature Living Residential Limited and its building contractor Signature Living Contractors Limited”
“Jason Howard · Multidisciplinary organisation - project management, quantity surveying, building surveying · 10 offices - 650 people . Jason is managing Partner for Liverpool and Manchester . Longstanding relationship with Signature - 5 or 6 years . Also longstanding relationship with Lendy · On Signature projects: · Typically start with being asked to price up architect's (Sig Living's) proposal to RIBA standards Then some discussion with Sig to firm up pricing · Ridge then normally appointed by Lender o No conflict of interest because Ridge is much bigger than Sig (not an important client) and reputation with lenders much more important. They act for Lendy on non-Sig stuff, for example . Contracts are fixed price, hence no variation noted, only proportion completed . In practice Ridge have pushed back on quantum requested by contractor by being more conservative on proportions completed”
“The proposed revised Target Construction Cost of the Works provided by Signature Living are estimated at£6,531,500 (Six Million Five Hundred and Thirty One Thousand and Five Hundred Pounds) including Preliminaries, Contractors OH&P, Project Contingency and Professional Fees.”
“As mentioned below, we are looking at another transaction with Signature Group, similar to Walrus, to provide finance to finish the development of a building in Liverpool. We are still discussing with Signature the underlying collateral to ensure we have enough protection, however we should reach agreement for the deal to go ahead. Therefore I would like to establish a new cell, Cell 3 Walrus II, so we can start opening the bank account etc. I have attached the current deal memo as background, but will send a finalised version for the directors to consider before approving the transaction.”
“£12.9m senior secured facility (£9.8m initial draw) · 12 month facility term (6 month non-call) . First lien security over >£18.6m GDV project, with Additional Collateral and Guarantees · Up to 70% LTV; ~ 13% LTV (including Guarantees) · Expected returns: 33% - 42% IRR; 1.19x - 1.24x MOIC (on average capital deployed)”
“5.1 Proposed Cost of the Works The proposed revised Target Construction Cost of the Works agreed with Signature Living is now estimated at£7,780,500 (Seven Million Seven Hundred and Eighty Thousand and Five Hundred Pounds) including Preliminaries, Contractors OH&P, Project Contingency and Professional Fees. This is due to confirmation that the developer has revised the scheme which now includes for the construction of 2 additional floors. The construction cost for the previous design was valued at£6,531,500 as referred (sic) to within the previous report. 5.2 Works Completed to Date As per section 4.5 of this report; based upon the progress of the works on the site as of19th October 2018 . The overall expenditure of the works to date is summarised within the below table. Due to the revised construction cost, the remaining expenditure for the project is now valued at approximately£2,935,458 .”
“Jason, Huzaifa, Thank you for taking the call. As discussed please find attached: - Ridge Scope (that was previously reviewed in detail with Alex, lan and Jason) - Example of the Monitoring report for Victoria Mill project the format of which we would like to see OHS resembling - please see section 2 and elements of section 1 (e.g. 1.11 and 1.12) of the attached word document As mentioned, we are under a strict time schedule and we would appreciate your next version to include: - Detailed costing and timing analysis for Floor 8 and 9 Planning permission status and commentary with next steps and follow ups and timing …We need to have the this done by tomorrow eve or over the weekend, as a number of other workstreams are entirely dependent on this.”
“1.11.Construction programme; Advise on the adequacy of the construction programme and the projected time period for completion of the Project. Report on any risks which could impact on the completion of the development in accordance with the programme. 1.12. Construction Costs; Advise on the adequacy of the contract sum in relation to the Project. Report on any risks which could result in a cost overrun.”
“To avoid time stress and give you more time to complete a fair assessment and update the report accordingly, we will be fine if you could just send us a clean email tonight highlighting 1) Ridge estimated cost to completion number 2) that having received the final numbers from Signature, you are completing/confirming your analysis and 3) your need [x] days to complete and produce the work and send it to us. The purpose of this is to communicate the status to our investors to keep the transaction on track. Feel free to give a realistic estimate as to the report completion.”
“Following our discussion and below, I think one item that we are both certain on is that the remaining cost to completion is as follows from Signatures and Ridge's perspective with the delta being up to£300k and the final difference is being finalised over the course of today / tomorrow: Summary Costs To Complete Signature£3,060,000 Ridge£2,768,958 Delta£ 291,042 ”
“Based upon the updated scope of works planning strategy and funder; Signature Living have reviewed the total cost of the works v the target cost included in the JCT Building Contract (£10,200,000 ).Signature Living (SL) have confirmed that a revised construction cost of£7,614,000 has been agreed with SLCL in the sum of£7,614,000 (Seven Million Six Hundred and Fourteen Thousand) including Preliminaries, Contractors OH&P, Project Contingency and Professional Fees. The revised scope of works takes due cognisance of the following revisions to the scope of works: · Omission of external cladding to the existing building. · Revised specification of windows. · Revised specification of kitchens. · Omission of roof top gym and running track. · Omission of viewing platform. . Revised scope of works to 5th Floor.”
“In order to benchmark/review the updated costs for the updated scope of works Ridge have prepared an Estimate of Cost. The Ridge estimate of cost (Appendix G) amounts to£8,467,000 . In reviewing the Ridge costs v the SL/SLCL updated figure it is noted that the agreed cost to completion excludes the following: . Preliminaries -£308K · Contingencies -£202K · Fees -£238K Similarly it is recognised that the SL/SLCL agreed costs for mechanical and electrical services are significantly lower than the Ridge allowances. The items highlighted above have been reviewed with SL/SLCL who have confirmed that the revised total cost of£7,614,000 is robust and agreed between the parties to the contract.”
“1 Ridge cost to completion assumes that all certified monies (£4,845,042 ) have been paid. 2. SL cost to completion of£3,060,000 identifies a disconnect of£291,042 . 3. Ridge await confirmation that all previous payment recommendations have been honoured by the previous lender.”
“Contract Completion Date:31st May 2019 . Anticipated Completion Date Stated by the Contractor: "End of February 2020 or possible later" …Programme Commentary: The works have progressed since the previous IMS visit carried out on the23rd September 2019 . The Developer has not advised of a revised envisaged completion date for the project or issued an updated construction programme. As previously reported and based on current progress, in our opinion Practical Completion (PC) is now more than likely to be the end of March 2020 or later.”
“69. The investment into Old Hall Street was intended to be less than a 12-month bridging loan, so when several months had passed and progress was not aligning with the timeline in the Ridge Report, it became a concern that the project may not be completed within the 12 months as anticipated. The anticipated deadlines for completion of the project were extended a number of times. 70.Works at Old Hall Street continued to slow down and we had concerns that the investment would not succeed to plan. We considered what options were available to protect the investors, such as refinancing the deal from current investors or seeking a third party to take the investment from Eiger. Ultimately this could not be achieved, it was becoming apparent from conversations with Signature and Anstey Horne, that substantially more money would be required to complete the redevelopment works than the Ridge Report had advised… 73. In April 2020, Cortland Trustees Limited which was the security trustee for Eiger under the Loan Agreement, placed Signature Living Residential Limited into administration for failing to comply with a demand for payment. FRP were appointed as administrators. My recollection is that the decision to place Signature Living Residential Limited into administration was taken to try and ensure that Cortland was in a good position to deal with the administrators to seek the best outcome for the investors in Old Hall Street.”
“22. In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”
“I hope it will assist the court and counsel in preparing submissions for Monday, if I indicate that D will accept that: - It owed a duty to exercise reasonable skill and care in connection with the provision of the Report dated 8 November and sent on 9 November. - The duty was owed in contract (as C contends) or in tort: the content of the duty and the consequences of any breach thereof is unaffected by the dispute as to whether the Report was provided pursuant to a contract. Further, it is likely that D will accept that it was in breach of duty in certain limited respects, but no further concession can be made in that area of the case until the way in which C formulates its case as to breach and generally is clear.”
“3.13 I am of the opinion that one of Ridge's major failures or shortcomings relates to Ridge's failure to advise that the developer's construction costs and costs to complete were at significant variance from standard RICS BCIS benchmarking figures and very low and that in the event of contractor insolvency net construction costs might well exceed circa£ 12,500,000 -£13,500,000 exclusive of professional fees and any contingency and VAT.”
“Target cost contracts are a further variant to cost reimbursable contracting. Under a target cost contract, the employer and contractor agree a target price for carrying out the works and the basis for adjusting the target price. They also agree their respective shares of any savings made if the cost of carrying out the works is less than the target price, or any additional cost incurred if the target price is exceeded. This provides a means by which financial ‘pain’ and ‘gain’ are shared between the employer and the contractor. Therefore, target cost contracts are often said to contain a ‘painshare/ gainshare’ mechanism. This mechanism should actively encourage both parties to work together to manage the cost of the works.”
“Q. Just explain to his Lordship what you meant when you said, "it was a requirement of our funding and for us to enter into the loan that there was a report"? A. It is stated in the loan agreement as one of the conditions precedent that there has to be a report issued by an independent monitoring surveyor supporting the number and that was our funding requirement. So it was in the check-list that the lawyers had before they had authorised us and Cortland to release the money out, so it was an up-front requirement for it.”
“ Was it reasonable for the Claimant to rely on the Defendant's report' (if it did so rely) having regard to the matters there set out at paragraphs 35(b) and 41 of the Defence.” the Defence.”
“5.1. In my opinion it was reasonable for Eiger to rely on Ridge's report… 5.8. It is my opinion that a lender in Eiger's position would have been reasonable in believing that it could rely on Ridge's report and that it was expected that it would do so by both Ridge and North Wall… 5.14. In my opinion, the Project appeared to be a sound development proposal which a number of lenders would have found to be attractive. I do not believe that any losses were caused by their negligence in entering into a loan agreement without carrying out any proper investigation or due diligence.”
“53. The Court of Appeal considered that the burden of proving facts which engaged the SAAMCO principle lay upon the claimant. This is not a straightforward question, but in my judgment they were right about this. The legal burden of proving any averment of fact lies upon the person who is required to assert it as part of his case. In the ordinary course, this means that the claimant has the burden of pleading and proving his loss, whereas the defendant has the burden of proving facts (such as failure to mitigate) going to avoid or abate the consequent liability in damages. The practical effect of the principle formulated in SAAMCO in cases such as this is to limit the amount of the damages recoverable in respect of loss flowing from the claimant's decision to enter into a transaction. But it is not a principle of assessment, let alone of avoidance or abatement. It is an essential part of the claimant's case that he was owed a relevant duty. As Lord Hoffmann expressed it in SAAMCO , at p 220: “The appearance of a cap is actually the result of the plaintiff having to satisfy two separate requirements: first, to prove that he has suffered loss, and, secondly, to establish that the loss fell within the scope of the duty he was owed.”
“a person under a duty to take reasonable care to provide information on which someone else will decide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong.”
“6. Lord Sumption JSC explained in Hughes-Holland at paras 20–29 that the idea of limiting the damages recoverable in the tort of negligence to those falling within the scope of the duty of care assumed by the defendant long pre-dated the decision in SAAMCO . As we say in Meadows v Khan[2022] AC 852 , para 28, it is helpful to analyse the place of the scope of duty principle in the tort of negligence in the following way. When a claimant seeks damages from a defendant in the tort of negligence, a series of questions arise: (1) Is the harm (loss, injury and damage) which is the subject matter of the claim actionable in negligence? (the actionability question) (2) What are the risks of harm to the claimant against which the law imposes on the defendant a duty to take care? (the scope of duty question) (3) Did the defendant breach his or her duty by his or her act or omission? (the breach question) (4) Is the loss for which the claimant seeks damages the consequence of the defendant's act or omission? (the factual causation question) (5) Is there a sufficient nexus between a particular element of the harm for which the claimant seeks damages and the subject matter of the defendant's duty of care as analysed at stage 2 above? (the duty nexus question) (6) Is a particular element of the harm for which the claimant seeks damages irrecoverable because it is too remote, or because there is a different effective cause (including novus actus interveniens) in relation to it or because the claimant has mitigated his or her loss or has failed to avoid loss which he or she could reasonably have been expected to avoid? (the legal responsibility question)… Application of this analysis gives the value of the claimant's claim for damages in accordance with the principle that the law in awarding damages seeks, so far as money can, to place the claimant in the position he or she would have been in absent the defendant's negligence… 17. Therefore, in our view, in the case of negligent advice given by a professional adviser one looks to see what risk the duty was supposed to guard against and then looks to see whether the loss suffered represented the fruition of that risk.This is the point of the mountaineer's knee example given by Lord Hoffmann in SAAMCO at p 213.”
“My Lord asked is this one of those distressed asset cases where the loss is suffered as soon as you make the loan or is it a different case where the loss is suffered afterwards? And it is the former, because the key collateral for this loan is a development. I hope that is common ground having now been through this case. There was some subsidiary collateral that was worth a little bit of money but the key collateral was the development. We loaned the money on the basis of the development having a particular risk profile, i.e. a risk profile by which we could see what the costs to 6 complete was going to be and that the loan covered it and that there were no problems with the relationship and that the overall cost of the works was viable/sufficient. That was not in fact true in each of those three ways. The amount we were 10 loaning was not sufficient to complete the works; the overall cost of the works was likely to be significantly more than the contract sum; and the relationship between the parties (which had given rise to this extraordinary target cost situation) was incredibly risky. So we lend 9.8 million plus more money to follow -- sorry, more accurately, we enter into a loan agreement on the basis that we are going to have to then lend 9.8 million plus more money to follow, on the basis of a collateral that was significantly different.”
“When, then, does the lender first sustain measurable, relevant loss? The first step in answering this question is to identify the relevant measure of loss. It is axiomatic that in assessing loss caused by the defendant's negligence the basic measure is the comparison between (a) what the plaintiff's position would have been if the defendant had fulfilled his duty of care and (b) the plaintiff's actual position. Frequently, but not always, the plaintiff would not have entered into the relevant transaction had the defendant fulfilled his duty of care and advised the plaintiff, for instance, of the true value of the property. When this is so, a professional negligence claim calls for a comparison between the plaintiff's position had he not entered into the transaction in question and his position under the transaction. That is the basic comparison. Thus, typically in the case of a negligent valuation of an intended loan security, the basic comparison called for is between (a) the amount of money lent by the plaintiff, which he would still have had in the absence of the loan transaction, plus interest at a proper rate, and (b) the value of the rights acquired, namely the borrower's covenant and the true value of the overvalued property.”
“Although C’s case on loss (see below) is incomplete, miscalculated and generally opaque, it can be accepted that C ended up making a loss as a result of lending on the security of OHS. The loss crystallised when the property was sold in 2024. What caused it? C has chosen not to tell the tale. The available fragments of evidence enable the court to identify numerous causes which have nothing to do with the matters complained of against D: (i) bad work 2015-2018 (no case pleaded vs D, nor could there be); (ii) bad work 2019-20 (steel frame erected, needed replacement), etc; (iii) Signature inaction and worse; (iv) insolvency process; (v) development abandoned > water ingress and general dilapidation; (vi) impairment resulting from sale of flats; (vii) Covid.”
“THE JUDGE: Does it follow from that, Mr. Lawrence, that you say the claimant has to produce a full account of all the losses that it has sustained in relation to this transaction and then has to identify an element within that which is attributable to the breach of duty? Is that your submission? MR. LAWRENCE: It is effectively, my Lord. Of course I recognise that the courts do not require comprehensive fastidious precision when it comes to issues about the quantification of damages. I recognise that well-known line of authority. I recognise certainly that the courts will not expect a claimant -- accordingly will not expect a claimant to delve into all the minutiae in order to make good a claim of this sort”