Those who
earn their crust in the world of property do not, for the most part, have much
that is good to say about the law of negligence. Surveyors have found to their
cost that clients are far less tolerant of honest errors than they used to be;
mortgage valuers have been appalled at the rising cost of indemnity insurance
as it has tracked the extension by the courts of their liability to
house-buyers; and local authorities are uncomfortably aware that, when a
defectively built house is not picked up by a building inspection and a
subsequent purchaser sues, they may well turn out to be the only potential
defendant left standing.
In short, the
discovery by any house-buyer that his property is defective is likely to be bad
news for one or more of the professionals who have been involved with it.
As to why
this field of liability has proved to be such a growth area in recent years,
various reasons may be suggested, but it seems reasonable to attribute some
responsibility at least to the continued existence of the doctrine of caveat
emptor. If the law grants immunity to the person who has actually sold me a
pup, it is hardly surprising that I should look around for someone else to
blame. By contrast, where sellers are legally responsible for defects (as in
the sale of goods), the need to look elsewhere is far less pressing. How many
negligence actions have arisen out of a pre-purchase survey of a car? Or against whoever carried out the last MOT
inspection? The answer is ‘Not many’ and, if the fact that the seller is liable
for defects is not the only reason for this, it is surely an important
contributing factor.
Has caveat
emptor outlived its usefulness in sales of land? Has the time come when vendors of houses,
like those of cars, should be under some responsibility in respect of
undisclosed defects? ‘Yes’ thought the Law Commission’s Conveyancing Standing
Committee in its 1988 consultation paper: ‘Honesty or Suspicion in
Conveyancing?’ (the very title shows what the committee thought of the morality
of caveat emptor!). ‘No!’ thundered the vast majority of those who
responded to that paper. The voice of the majority (which, disappointingly for
the committee, consisted almost entirely of property professionals; hardly any
replies came from members of the public) has indeed been heard — the
committee’s final recommendations have now been published under the title: ‘Let
the buyer be well informed’ and, like those of many previous committees, they
conclude that caveat emptor should be left alone.
In coming to
this conclusion, the committee does not appear to have altered its opinion as
to the basic immorality of caveat emptor, but rather to have accepted
the view of many of its respondents, namely, that the imposition of a more
moral principle would create so many practical problems as not to be
worthwhile. In particular, strong opposition was expressed to any suggestion of
‘vendors’ surveys’ (on the usual grounds of extra cost, conflict of interest
etc), while the difficulty of defining a seller’s duty of disclosure in
sufficiently clear terms was regarded as a good reason for having no duty at
all.
Given its
decision not to press any further for the reversal of the caveat emptor
principle, the committee cast around for other reforms of either law or
practice which might improve the position of house-buyers. Having described the
basic objective of such reforms as being to put all relevant information about
the property into the buyer’s hands without undue trouble, delay or expense,
the committee identified two areas in which voluntary codes of practice would
be of benefit, in addition to making two suggestions for changes in the law.
Of special
interest to those involved in the marketing of real estate was the committee’s
strong suggestion that all relevant factual information about a property should
appear in estate agents’ particulars, and its invitation to ‘the estate agents’
professional bodies’ to produce good practice recommendations to this end.
Further, while not prepared to suggest that such ‘minimum contents’ should be
made compulsory, the committee endorsed a previous recommendation of the
Director General of Fair Trading that criminal liability under the Trade
Descriptions Act 1968 should extend to false or misleading statements in estate
agents’ particulars, provided that such a statement was inserted knowingly or
recklessly.
The
committee made two other recommendations. First, it proposed a change of
practice on pre-contract inquiries to ensure that the vendor’s solicitor would
provide sensible basic information without being asked for it, the purchaser’s
solicitor would ask only relevant questions, and these would be answered
helpfully (and not evasively, as frequently happens at present). Second, it
called for improvements in the land registration system so that information of
public concern or widespread effect would appear (or at least be referred to)
in a single local land charges register, instead of requiring the purchaser’s
solicitor to make searches in a variety of registers.
Whether
these reforms will come about and, if they do, whether they will solve the
existing problems, remains to be seen. What is clear, however, is that, for the
foreseeable future at least, the abolition of caveat emptor is very much
on the back burner.
liability goes through the roof
The
consequences of a negligent survey, and the damages payable by the surveyor to
his client, have been the subject of comment in these columns on a number of
occasions in the past. Most of the cases have concerned arguments over the appropriate
measure of damages to be awarded to a house-purchaser who relies on his
surveyor’s report in deciding to buy — whether such damages should be limited
to the property’s ‘diminution in value’ or whether a more generous measure may
justifiably be adopted is something on which considerable legal costs have been
(and will no doubt continue to be) expended. However, a recent case has
revealed an alarming extension of a surveyor’s potential liability for
negligence beside which arguments over ‘cost of repair or diminution in value’
seem to pale into insignificance.
Allen v Ellis & Co [1990] 1 EGLR 170 concerned the purchase by
the plaintiff of a modest three-bedroom detached house in north London. The
property dated from the 1930s and the plaintiff, before agreeing to buy,
commissioned a structural survey from the defendants. This report, which was
generally favourable, stated firmly that the garage (which was used as a
utility room) ‘is detached & brick built in 9′ brickwork & is in
satisfactory condition’.
The truth of
the matter was rather less healthy, as the plaintiff found to his cost when
investigating a leak from the garage roof. As the trial judge remarked, what
the defendants ought to have reported about the garage was that its
walls were of breeze block rather than brick and that its asbestos-sheet roof
was ‘brittle or fragile, likely to split and crack, scantily supported, much
repaired and right at the end of its useful life’. Since they had said no such
thing, the plaintiff simply placed a piece of board on the roof, stepped on to
it and fell through, sustaining fairly severe injuries.
Having
satisfied himself that the defendants were guilty of negligence, Garland J held
that the plaintiff was entitled not only to the property’s ‘diminution in value’
based on its dilapidated garage but also for the much greater losses resulting
from his injuries. The learned judge acknowledged that ‘a structural survey is
not a safety audit’ but could see no way round the fact that ‘if the roof had
been accurately described . . . the plaintiff would never have been in peril of
suffering the injuries which he did in fact suffer’.
Although not
arising directly in this case, two further points are worth bearing in mind.
First while the House of Lords in Smith v Eric S Bush (a
firm), Harris v Wyre Forest DC [1989] 17 EG 68; 18 EG 99 held that a
mortgage valuer was not protected by a disclaimer clause because it did not
satisfy the statutory test of ‘reasonableness’ imposed by the Unfair Contract
Terms Act 1977, it was acknowledged by their lordships that a ‘reasonable’
disclaimer would indeed have operated to exclude the valuer’s liability. It is
important to realise that such a disclaimer would not protect a surveyor
against the kind of liability in issue in Allen v Ellis & Co
because, by section 2(1) of UCTA, any attempt to exclude or restrict one’s
liability for ‘death or personal injury resulting from negligence’ is utterly
ineffectual.
The second
point concerns the extent of the potential liability opened up by this latest
decision. Although the plaintiff’s injuries (which were not detailed) were
described by the judge as ‘serious’, the amount of damages awarded in respect
of them suggests that, mercifully, he suffered rather less than he might have
done (his loss of earnings, in particular, below £1,500). It is possible that a
future plaintiff might be far more seriously injured and, of course, a
negligent surveyor would be fully liable for this. With personal injury awards
now topping the million-pound mark in very serious cases, surveyors’ indemnity
insurance premiums may shortly be due for another hike!
