Building society instructing valuation firm to prepare report – Defendant employee preparing report – No direct dealing between employee and purchasers – Whether employee owing duty of care to purchasers – Whether one purchaser entitled to full amount of damages – Judge finding duty of care and awarding damages – Appeal dismissed
The claimant and her mother wished to purchase 18 Trelawney Road, Falmouth, Cornwall (the property), subject to a mortgage from Bradford & Bingley Building Society. In June 1992 the building society instructed Clive Walker Associates, a firm of surveyors and valuers (the firm), to inspect the property and prepare a report using the valuation forms attached. The instruction form stated that the building society was considering an application for a mortgage on the property from the claimant and her mother, who were named as applicants.
The defendant was employed by the firm as a surveyor and valuer. In June 1992 he made and signed a mortgage valuation report valuing the property at £47,500, and stating: “I certify that I am not disqualified under section 13 of the Building Societies Act from making this report”. The report provided to the claimant and her mother by the building society omitted all references to the defendant and the firm. The claimant and her mother duly bought the property jointly. In October 1995 they made a declaration of trust transferring absolutely the whole beneficial interest in the property to the claimant, subject to the mother’s right to live there.
The claimant subsequently issued proceedings against the defendant personally, alleging that his valuation was negligent. Contrary to the Professional Indemnity Regulations of the RICS, the firm’s professional indemnity was cancelled on 2 September 1994 without run-off cover, and, accordingly, the defendant was uninsured for the claim. Applying Smith v Eric S Bush (a firm) and Harris v Wyre Forest District Council [1989] 1 EGLR 169, the judge held that the defendant had owed the claimant and her mother a duty of care and that the report had negligently failed sufficiently to notice and report upon settlement cracks between an original building and an extension. The judge awarded the claimant damages of £14,500 for the defendant’s overvaluation.
On appeal, the defendant contended that: (i) he did not owe the claimant a duty of care because he was an employee of the firm instructed by the building society and he had not assumed personal responsibility; and (ii) if he did owe the claimant a duty of care, the judge should have awarded the claimant only half the amount of damages, on the basis that she had only a half-interest in the property because she had purchased it jointly with her mother, who had not been a party to the proceedings.
Held: The appeal was dismissed.
1. The facts were barely distinguishable from those of Harris. The relevant relationship was that between the purchaser and the employed professional valuer and the nature of the valuer’s employment was irrelevant. The defendant was a salaried employee of the firm. As a professional man, he must have realised that the purchaser would rely upon him to exercise proper skill and judgment, and that it was reasonable and fair that the purchaser would do so. Although the claimant and her mother did not know who had carried out the valuation, they were to be taken to have relied upon the professional skill and care of the person who had done so: see Smith, Yianni v Edwin Evans & Sons [1981] 2 EGLR 118, and Phelps v Hillingdon London Borough Council [2000] 3 WLR 776. Moreover, the defendant had signed the original report in his personal capacity, and was, for the purposes of section 13 of the Act, the person competent to value the property. Thus, although the defendant was an employee, he personally owed a duty of care to the claimant and her mother.
2. It was not relevant to the question under consideration that the defendant was not insured, although it was a material consideration that there might be circumstances in which employed professionals could find themselves personally liable for claims against which they were uninsured. Prudent employees would want to ensure that their solvent employer’s professional indemnity policy covered them personally, and they might need to take steps to obtain personal insurance if that cover did not continue after their employment ended.
3. The claimant admitted that it had been a mistake that her mother had not been joined to the proceedings. The simple fact was that the defendant owed a duty of care to the claimant and her mother jointly from the moment he undertook the inspection and valuation of the property. The property was, throughout the period relevant to the claim, a joint venture resulting in joint ownership. It was significant that both the claimant and her mother were named in the instruction form pursuant to which the defendant carried out his inspection and valuation. In the circumstances, it was appropriate for the court to exercise its discretion to order that the claimant’s mother be joined to the action as a necessary party within the terms of section 35 of the Limitation Act 1980.
Paul Teverson (instructed by Hine Downing, of Falmouth) appeared for the claimant; Ronald Walker QC and Steven Ball (instructed by Camerons) appeared for the defendant.
Thomas Elliott, barrister
