Lloyds Bank Plc v McBains Cooper Consulting Ltd

A project monitor is liable for loss caused by negligent information or recommendations within the scope of its contractual retainer. It is not liable for all losses arising from the funded project where those losses would have occurred even if the information had been correct. Where the monitor should have identified payments for works outside the funded contract, recoverable loss may be confined to those payments. Contributory negligence must be assessed by examining the whole relationship, including the claimant’s initial conduct and knowledge, rather than only the period immediately surrounding the breach.

Lloyds Bank engaged McBains Cooper Consulting Ltd as progress monitor for a church redevelopment funded by a bank facility. The Technology and Construction Court found breaches concerning the reporting of the project’s funding shortfall and the recommendation of payments for third-floor works outside the funded contract. It awarded the bank £127,115.95 and interest.

McBains appealed on the scope of its duty, causation, the relevance of the bank employee’s knowledge, and contributory negligence. The central issues were whether McBains was liable for all later funding losses or only payments caused by its negligent recommendations, and how responsibility should be apportioned.

Disposition. Longmore LJ gave the judgment, with which Lewison LJ and Rose J agreed. The appeal was allowed in part.

1. Contractual scope. The retainer required McBains to report matters adverse to the bank, ensure that drawdown applications were properly claimable under the facility, and check that sufficient funds remained to complete the development. The breach concerning the general funding shortfall caused no loss because the bank already knew that the project was underfunded.
2. Scope of duty and causation. Applying the principle in South Australia Asset Management Corporation v York Montague ([1997] AC 191), McBains was responsible for consequences of its wrong information or recommendation, not for losses the bank would have suffered from continuing to fund an unviable project. McBains should have identified that drawdown applications included third-floor works outside the facility. It was liable for the £259,792 paid for those works, but not for unrelated sums paid under Progress Reports 14–17. Grounds 2 and 3(a) succeeded to that extent. A respondent’s notice was unnecessary to support the reduced award on the facts.
3. Information and advice. The distinction between information and advice was not decisive. As explained in Hughes-Holland v BPE Solicitors ([2017] 2 WLR 1020; [2017] UKSC 21), the labels are neither distinct nor mutually exclusive. The fundamental scope-of-duty principle remained sufficient. Permission was refused on grounds 3(b) and 4.
4. Knowledge and contributory negligence. The bank accepted that Mr Mannering’s relevant knowledge was the bank’s knowledge. Contributory negligence required consideration of the whole relationship from its inception. The bank had knowingly made an underfunded loan, failed to establish arrangements for extra costs, ignored warnings, failed to provide relevant facility information, accepted inadequate security, and understated the significance of reduced security. Responsibility was therefore reapportioned to two-thirds against the bank and one-third against McBains.

McBains’s liability was reduced to £86,597. The order required adjustment because McBains had already paid £288,304 pursuant to an adjudication.

• Court of Appeal (Civil Division) allowed the appeal in part, reduced McBains’s primary liability to £259,792 before contributory negligence, and reapportioned responsibility so that the final liability was £86,597.
• Queen’s Bench Division, Technology and Construction Court Sir Antony Edwards-Stuart, sitting as a High Court Judge, found breaches of contractual duties and awarded Lloyds Bank £127,115.95 and interest by order dated 18 January 2017.