Eiger v Ridge: A Cautionary Tale Worth £2.5 Million

Introduction

There is a developing body of case law in relation to project monitoring surveyors (as distinct from project managers) who are typically appointed by funders and lenders in the context of construction developments.

Prior to the most recent exposition of negligence claims against project monitors in Eiger Funding (PCC) Limited v Ridge and Partners LLP [2026] EWHC 609 (TCC) (“Eiger Funding”), the courts have considered the scope of a project monitor’s liability in three principal decisions: Bank of Ireland v Faithful & Gould Ltd [2014] EWHC 2217 (TCC), Lloyds Bank plc v McBains Cooper Consulting Ltd [2018] EWCA Civ 452 and Bank of Ireland v Watts Group plc [2017] EWHC 1667 (TCC).

Collectively, the following general principles can be extracted from these earlier decisions:

1. The scope of a project monitor’s duty will of course depend on the specific contractual arrangement in an individual case. However, typically, a project monitor’s obligations include: perusing the development appraisal and costings, providing an initial report, monitoring the progress and reporting on the risks, checking drawdowns against work done, reviewing expenditure by the developer and considering the viability of a project as against the loan facility.
2. Lenders cannot pass on the entire responsibility for a non-viable project to the project monitor in circumstances where the lender was aware of viability issues with the project.
3. A project monitor is not liable for losses that would have been suffered by the funder/lender in any event.
4. The extent of a project monitor’s liability is based on a “scope of duty” analysis, applying South Australia Asset Management Corp v York Montague Ltd [1996] UKHL 10 and Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20.

Readers are reminded that RICS Guidance is highly pertinent to any examination of the scope of a project monitor’s duty and whether that duty was breached. As will become clear when we consider Eiger Funding more specifically, the RICS “Lender’s independent monitoring surveyor” Guidance Note (‘the RICS Guidance’) is an invaluable reference point for cases where a project monitor’s liability is in issue.

Factual Background

In November 2018, Eiger Funding (PCC) Ltd (‘Eiger’) decided to make a substantial loan (£12.9 million) (‘the Loan’) to Signature Living Residential Limited (‘Signature’) to fund the completion of a residential development in Liverpool (‘the Project’). Another related company, Signature Living Contractors Ltd (‘SLC’), was the contractor for the Project pursuant to a JCT Contract with Signature.

In making its decision, Eiger relied on a report produced by independent monitoring surveyors, Ridge and Partners LLP (‘Ridge’), concerning the viability of the Project (‘the Report’). Ridge had previously been involved with the Project; Signature instructed them in 2015 to prepare cost appraisals which formed the basis of the pricing in the JCT Contract.

The Project was not successful. Negligible progress was made in 2019/2020, and Signature went into administration in April 2020. Eiger sought to recover part of the substantial losses that it suffered as a result of the Project’s failure from Ridge.

Eiger’s case was that Ridge had been negligent in connection with the Report in four respects: (a) pricing of construction costs, (b) costs to completion, (c) contractor relationship, and (d) conflict of interest. It contended that it would not have made the loan had Ridge not been negligent.

Although Ridge had defended the claim on all grounds, the key areas of dispute were breach of duty and quantum.

Decision

Duty of care was not in dispute (having been conceded by Ridge towards the end of the trial). In its judgment, the court summarised Ridge’s duty as being to advise with reasonable skill and care upon (a)  the adequacy of the contract sum in relation to the Project, (b) any risks which could result in a cost overrun, (c)  any risks which could impact on the completion of the development in accordance with the programme, and (d) the costs to complete (paragraphs 66 and 67).

Ridge was found to have breached its duty of care to Eiger on all grounds. In summary:

• Pricing & Costs to Completion. The Report was a “confusing and unsatisfactory document” (paragraph 69) which gave advice on the total construction costs “without any proper basis for such advice”, and of a cost to complete with “little foundation” (paragraph 70). Overall, Ridge failed to advise that “there was a significant risk that substantial costs would be incurred over and above those put forward by Signature” (paragraph 75).
• Contractor Relationship. All parties to the transaction were aware that the Project was “a related company arrangement” between Signature and SLC (paragraph 76), and the court noted that Eiger, as experienced businesspeople, “should have been aware of the advantages and disadvantages of such arrangements” (paragraph 77). The Report fell short, however, in failing to give advice in relation to the conversion of the JCT Contract from a fixed price to target price contract (paragraphs 78 to 80); and that the agreed figures between Signature and SLC were “likely worthless”, being made between related companies without any legal formality (paragraph 81)
• Conflict of Interest. As discussed further below, the court held that Ridge had failed to comply with RICS Guidance, which prohibited it from acting where there was a conflict of interest without Eiger’s informed consent. Despite the fact that the relevant figures in the JCT Contract were based on its costs appraisals in 2015, Ridge failed to report the fact that construction costs had increased by circa 20% since then (paragraph 90).

Eiger’s ‘no transaction’ case on causation was successful, with the court finding that the Report was causative of Eiger’s decision to make the Loan to Signature (and rejecting any contributory negligence).

Loss, however, was “clearly the most difficult question in this case” (paragraph 106), particularly with regard to remoteness/scope of duty. Eiger’s overall losses from the Loan stood at £10,799,856. Applying the framework outlined by the Supreme Court in Manchester Building Society v Grant Thornton, the court found that the Ridge’s duty was to supposed to guard against the risk that “Eiger would enter into a loan agreement with Signature on  the basis of construction costs / costs to complete which made that loan unduly hazardous” (paragraph 113). The Court awarded damages reflecting the fruition of that risk by taking the difference between the cost to complete that Ridge stated in the Report (about £2.9 million) and the figure that it should have given (£5.4 million), resulting in damages of £2.5 million (paragraph 136).

Comment

The approach taken by Adrian Williamson KC, sitting as a Deputy Judge of the High Court, to a project monitor’s scope of duty demonstrates the growing tendency to adopt the more flexible approach outlined by the Supreme Court in Manchester Building Society v Grant Thornton as against the increasingly unpopular SAAMCO advice/information distinction. In the authors’ experience, this is very much the trend in the context of professional negligence disputes more generally and the project monitor field is no exception.

The court considered the risk which Ridge had an obligation to safeguard against, which ultimately limited responsibility to the consequences of its own advice as opposed to the success of the transaction as a whole. This serves as an important shield for defendants wishing to limit their liability.

A further point of interest is the court’s reasoning on whether this was a “distressed asset” case. The court concluded that: “Eiger suffered recoverable loss on 30th November 2018, when they entered into the agreement with Signature, which agreement contained a significant risk that substantial costs would be incurred over and above those put forward by Signature. The quantification of that risk is dealt with below. The duty was to guard against precisely that risk. The loss suffered represents the fruition of that risk, because the Loan Agreement was a considerably less valuable asset than NWC/Eiger believed, in reasonable reliance upon the advice given by Ridge” (paragraph 118). The “distressed asset” conclusion was intertwined with the defined scope of duty and consistent with the fact that the risk materialised at the point of lending.

Arguably, however, Eiger Funding is most notable for its treatment of the project monitor’s duty of independence and conflicts of interest as part of a negligence claim:

1. Section 2.1.5 of the RICS Guidance (which was referred to at paragraph 84 of the judgment) provides that: “The need for clear and unbiased advice is an essential aspect of the work of an IMS. The primary duty of care, considering the interests of the lender, must be beyond doubt, both in the appointment and in the assessment and reporting of project risk. Nevertheless, clarity on inherent and potential risks should always be seen as a benefit to the borrower too. The IMS should always be appointed by and solely responsible to the lender. This is sometimes done with the consent of the borrower, although this must not in any way dilute the duty of care to the lender, even though the IMS fees will normally be paid by the borrower as part of the development costs. It is essential that the independence of the lender’s IMS cannot be perceived by any project party to have been compromised. The potential perception of a conflict of interest, should a project suffer distress or disputes arise, must be avoided”.
2. Ridge had placed itself in a position where it had an obligation to provide Eiger with an independent view of the construction costs of the development. However, Ridge itself had prepared the costs appraisals and so, as the judge put it, Ridge was effectively “marking their own homework” (paragraph 86) without informed consent. Ridge’s compromised position was also compounded by the fact that Ridge failed to report the fact that construction costs had increased by circa 20%.
3. Further, when measured against the RICS Guidance, it is plain that Ridge had fallen short of the standards expected of a reasonably competent project monitor and/or industry standards. Whilst RICS standards are frequently referred to when considering a surveyor’s liability, Eiger Funding appears to elevate the status of the RICS Guidance.
4. The imposition of strict “no-conflict” standards is welcome in preserving the integrity and transparency expected of a project monitor. It is an important signal that a project monitor cannot ultimately fulfil their obligations as a professional if these standards are compromised.

We note that the scope of duty was defined fairly narrowly in Eiger and the court’s conclusions flowed from that. It remains to be seen whether the same analysis will follow where the project monitor’s responsibilities are prescribed in wider terms.

Article by Priya Gopal and Joshua Griffin