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Short Answer

The client may have a claim in negligence against the environmental consultant for pure economic loss, provided the client can establish that the consultant owed a duty of care to the client as a known or reasonably foreseeable recipient of the report. However, the 6-year limitation period under the Limitation Act 1969 (NSW) s 14(1)(b) runs from the date the cause of action accrued. If the loss crystallised at settlement (4 years ago), the claim is within time, but the margin is narrow and proceedings should be commenced promptly.

Relevant Authorities

• Perre v Apand Pty Ltd [1999] HCA 36, duty of care for pure economic loss, vulnerability of the plaintiff
• Woolcock Street Investments v CDG [2004] HCA 16, surveyor/consultant liability to subsequent purchaser, vulnerability test
• Bryan v Maloney [1995] HCA 17, builder liability to subsequent purchaser for latent defects
• Esanda Finance v Peat Marwick Hungerfords [1997] HCA 8, auditor liability to third parties, known reliance
• Limitation Act 1969 (NSW) s 14(1)(b), 6-year limitation for action on a cause of action founded on tort
• Limitation Act 1969 (NSW) s 50C, long-stop limitation period for building/engineering actions (10 years)
• Civil Liability Act 2002 (NSW) Part 4, proportionate liability for economic loss from failure to take reasonable care

Reasoning

Duty of care: The threshold question is whether the environmental consultant owed a duty of care to the client, who was not the consultant's contractual client. In Perre v Apand, the High Court established that a duty of care for pure economic loss turns on the vulnerability of the plaintiff, specifically whether the plaintiff was unable to protect themselves from the risk of loss.

In Woolcock Street Investments v CDG, the High Court held that a structural engineer did not owe a duty to a subsequent purchaser because the purchaser could have protected itself by commissioning its own inspection. However, where the consultant's report is provided for the purpose of being relied upon by purchasers (as in a due diligence pack), the duty may be established if the consultant knew or ought to have known that purchasers would rely on the report.

The client's position is stronger if: (1) the report was included in the vendor's disclosure or due diligence materials; (2) the consultant knew or ought to have known the report would be provided to prospective purchasers; and (3) the client had no reasonable opportunity to commission an independent report before settlement.

Limitation period: Under s 14(1)(b) of the Limitation Act 1969 (NSW), the limitation period for tort is 6 years from accrual. For pure economic loss from a negligent report, the cause of action accrues when the plaintiff suffers actual loss, in this case at settlement when the client paid the inflated purchase price. With settlement 4 years ago, the claim is within the 6-year period but the client should file within the next 12 months.

The long-stop period under s 50C (10 years from the act or omission) may also apply if the report is characterised as relating to building or engineering work.

Proportionate liability: Part 4 of the Civil Liability Act 2002 (NSW) applies to claims for economic loss arising from a failure to take reasonable care. The consultant may seek to reduce its liability by identifying other concurrent wrongdoers (e.g., the vendor).

Caveats

The duty of care analysis depends heavily on the terms of the consultant's engagement letter and whether it contained a reliance disclaimer addressed to third parties. The client's solicitor should obtain a copy of the engagement letter and the report itself before finalising the advice. If the report contained an express disclaimer of liability to non-clients, the duty of care analysis will be materially different.