The case of Yianni
v Edwin Evans & Sons [1981] 2 EGLR 118 hardly requires an
introduction: the very name brings a cold sweat to the brows of those who earn
their corn by inspecting properties on behalf of building societies. Many of
the fears which were expressed at the time of that decision (eg that the
distinction, clear to every valuer/surveyor, between a structural survey and a
mortgage valuation would be completely obliterated by ignorant lawyers) have
proved to be somewhat overstated, but the extent of a valuer’s duty in this
area remains a topic of some uncertainty and, therefore, of concern. Perhaps
the most important problem lies in the fact that there is virtually no
authority upon the extent to which a valuer is expected to notice
structural defects in the property which he is inspecting. Most of the reported
cases on professional negligence have arisen out of full structural surveys,
while in Yianni — which might have been expected to raise the question
in its naked form — the defendant valuers admitted that they had been
negligent. It is accordingly of the greatest interest to report on the recent
case of Stevenson v Nationwide Building Society [1984] 2 EGLR 165
which not only casts some light upon this problem but also brings in two added
dimensions — ‘in-house’ building society inspections and clauses disclaiming
responsibility.
Ironically
(and, as we shall see, perhaps significantly) the plaintiff was an estate
agent; with offices in Wiltshire and Somerset; he had, however, no experience
in either valuation or surveying. In 1981 he was considering the possibility of
opening a further office in Radstock and, with this in mind, inspected a
property there which was known as County Bridge. This property, which consisted
of two shops, a maisonette and a flat, was in fact built across the River
Wellow on steel girders with an in-filling of unreinforced concrete upon arches
of corrugated iron. The plaintiff approached the defendant building society
with a proposal that they should lend him a substantial part of the purchase
price on mortgage and that he should then open an agency for them on the
premises. The defendants were in principle agreeable and, in due course, the
plaintiff made formal application for a loan. The form which he filled in for
this purpose contained the usual clauses, including the following:
The
inspection carried out by the Society’s Valuer is not a structural survey and
there may be defects which such a survey would reveal. Should you wish to
arrange for a structural survey this can be undertaken by the Society’s Valuer,
at your own expense, at the same time as the Society’s Report and Valuation is
made . . . .
I understand
that the Report and Valuation on the property made by the Society’s Valuer is
confidential and is intended solely for the consideration of the Society in
determining what advance (if any) may be made on the security, and that no
responsibility is implied or accepted by the Society or its Valuer for either
the value or condition of the property by reason of such Inspection and Report.
The
plaintiff (who, the evidence established, was familiar with forms of this kind
and understood their significance) signed the form and, in March 1982, the
property was inspected by a Mr Biddle, a staff valuer employed by the
defendants. His report recommended that a sum of £5,000 (out of a requested
advance of £39,000) should be retained until the plaintiff had carried out work
on the roof, the electrical system and the external decoration; however, it
made no reference whatsoever to the fact that the building spanned the river
and was of very peculiar construction.
The
plaintiff, having been told the contents of the valuer’s report (and assuming
quite naturally that there would be no serious defects other than those
specifically mentioned), bought the property in May 1982 and let the second
shop to a butcher. In June this butcher was using the toilet at the rear of his
part of the premises when part of the floor collapsed (with what consequences
for the butcher history does not relate). A subsequent structural survey of the
property revealed that much of it was in a very dangerous condition; in
particular, the corrosion of some of the steel beams, together with the
defective quality of the concrete infill, meant that the entire floor
construction under the rear buildings was beyond reclamation.
Faced with a
property which, on the evidence, was unsaleable unless and until it was
expensively repaired, the plaintiff claimed damages from the defendants on the
ground that their valuer had been guilty of negligence in the preparation of
his report. His action was duly tried before Mr J Wilmers QC, sitting as a
deputy judge of the Queen’s Bench Division, at Bristol Crown Court.
As mentioned
above, one of the most interesting features of Stevenson v Nationwide
Building Society is the fact that the judge was called upon to consider
just what, in practical terms, is expected of a valuer carrying out a building
society inspection. His opinion is worth recording in some detail:
I bear in
mind that [the staff valuer] was called on to do a building society valuation
and not a structural survey. Nevertheless, I have no doubt that I must hold him
not to have exercised reasonable skill or care. Given the nature of these
premises, I do not think that it is possible to discharge properly the duties
of a valuer unless he either looks under the building himself or, if he for
some reason could not do so, ensured that he had the report of some other
competent person who had done so. In either event, the actual state of these
premises would have been revealed. I do not need to determine the depth of
water at the time of Mr Biddle’s inspection . . . Any valuer reporting on these
premises, constructed as they are, must, in my view, either brave such water as
he finds or find someone else to do it . . . Nor do I accept that the bank was
as dangerous as Mr Biddle suggested. I accept [the expert witness’s] evidence
that it would have been quite possible, even without going into the water, to
see enough of the underside of the building to put any careful qualified man on
notice . . . Even if the water was as Mr Biddle says, his duty would have been
to say that he could not report properly until he had ascertained the state of
the structure from below.
Having thus
held the valuer to have fallen below the standard of care and skill reasonably
to be expected in the circumstances, and having stated that the building
society, as his employers, were prima facie vicariously liable in
respect of this negligence, the learned judge turned to consider whether the
disclaimer had any effect upon the situation. The judge rejected, on the
evidence, a claim by the plaintiff that the defendants had overridden this
clause by suggesting that he need not have a survey done but could rely upon
their inspection, and it was accordingly held that the plaintiff, who had
freely admitted that he fully understood the significance of such clauses, was
bound by this one unless it could be struck out as unreasonable under the
Unfair Contract Terms Act 1977. The decision on this last point is again worth
recording in detail:
Here we
have, on the one hand, a Building Society which follows what is accepted to be
fairly standard practice in importing this term, or notice, or disclaimer. It
does so with a full warning, and it offers the applicant a way of circumventing
the refusal to accept responsibility by its offer to arrange for a full survey,
provided the applicant will pay the extra cost. Since such a survey would
involve extra cost, I can see nothing unfair in this. Moreover, when I bear in
mind that the person affected by the disclaimer is someone well familiar with
such disclaimers and with the possibility of obtaining a survey, and also
familiar with the difference between a building society valuation and a survey
and their different costs, it seems to me perfectly reasonable to allow the
Building Society, in effect, to say to him that if he chooses the cheaper
alternative he must accept that the Society will not be responsible for the
content to him.
This
decision, which effectively deprived the plaintiff of any remedy, provokes a
number of comments, most of which must wait until next week. However, readers
may like to spend the intervening period in debating the following issue. A
building society says to its customer: ‘If you choose to pay for a full survey,
we will do it carefully and skilfully. If you do not, we will carry out a mere
valuation and charge you for it; we will not, however, undertake to do
it with even the amount of care and skill which this lesser service involves.’ Is this ‘fair and reasonable’? Stevenson says ‘yes’.
