Negligence — Valuation for mortgage — Valuer appointed by lenders — Duty of valuer — Distortion in front bay of house purchased by plaintiffs in reliance on defendants’ report — Report declared not to constitute a structural survey but valuer expected to answer questions and to comment on structure — Disclaimer pleaded but not relied on at trial — Smith v Bush applied — Judge held that valuer may be considered negligent even if he has arrived at correct market value — Decision in Official Referees’ Court goes against valuer’s firm
plaintiffs, a couple who wished to change their house, were attracted to the
subject property, a detached house in Maidstone, Kent, built in the 1930s, with
four bedrooms, garaging for two cars and a decent-sized garden — They
negotiated a price of £74,000 and agreed to buy the property subject to
contract — They applied to National Westminster Home Loans Ltd (NatWest) for an
advance — NatWest instructed the defendant firm of surveyors to provide an
inspection and valuation report, of which the plaintiffs received a copy and
for which they paid a fee — It was made clear that the report was for the sole
purpose of considering a loan and that it would not constitute a full
structural survey — Among the notes on the report form was a disclaimer of
responsibility on the part of NatWest and the valuer but, although this
disclaimer was pleaded in the defence, it was not supported at the trial in
view of the decision and speeches in Smith v Bush — The plaintiffs
relied on the report and completed the purchase of the property at the agreed
price of £74,000 — Later in the same year the plaintiffs noticed a distortion
in the front bay of the house and on further investigation found cracks to the
return wall of the bay, a displaced gully and cracked drain beneath the same
wall and wet ground around the drain — Double glazing had been fitted so as to
fit the configuration of an already distorted bay
— It was not disputed that the defendants had owed the plaintiffs a duty of
care in carrying out the professional work in which they had been instructed
report was in a form which contained a number of notes for the applicants and
specific questions for reply by the valuer — The replies given indicated that
the condition of the main structure was satisfactory, as were the drains,
electric wiring and central heating; that there were no essential repairs
required; that there was no likelihood of settlement, subsidence or other
perils; that there were no adverse features that might limit marketability; and
that no further inspection was necessary — The value of the property for
mortgage purposes with vacant possession in its present condition was £74,000.
the valuer gave evidence that he had observed a noticeable distortion in the
front bay window and that the internally fitted double glazing had been made to
accommodate the distorted window frame — He had satisfied himself that the
movement or distortion was of long standing and that there was no sign of
recent further movement or settlement — He decided that the distortion was due
to blast from a bomb or bombs dropped in the vicinity of the property during
the 1939-45 war — The judge heard expert evidence from both sides — He came to
the conclusion that if the valuer had carried out his inspection with
reasonable care and skill he would have seen more than the distortion of the
window frames — He would have seen the skewness of the brickwork of the bay,
the cracks in the return wall, the disturbed roof over the bay and the leaking
drain underneath — In the judge’s view, the valuer had been negligent both in
failing to observe the defects which he should have seen and in failing to heed
the significance of those which he did see — The judge also criticised the
replies given by the valuer to the questions on the reply form, eg his
statements that the main structure was satisfactory, that essential repairs
were not required, and that the property was not likely to be affected by
subsidence or settlement
submitted on behalf of the defendants that there had been no breach of duty —
The valuer was aware of the distortion of the bay and took it into account in
his valuation — He had arrived at a value which the defendants claimed to be
the correct market value, £74,000 — There had been no significant movement of
the bay window since the double glazing had been carried out — The judge
rejected this line of argument — He expressed the view that even if £74,000
were the correct market value of the property this was not a defence to a
charge of negligence — The valuer was still at fault in failing to observe
important defects and was negligent in preparing and presenting much of the
information in the report — Too much weight was placed on the claim that
£74,000 was the correct market value — The judge in fact accepted evidence that
the true market value was of the order of £7,000 less than £74,000, although it
was noted that for a person anxious and determined to buy a house like the
subject property £74,000 could be said to represent the market value
assessed the plaintiffs’ damages, on the basis of Perry v Sidney Phillips
& Son, as £7,000 plus £2,000 general damages for distress, upheaval and
physical inconvenience, making a total of £9,000
The following cases are referred to in
this report.
Perry v Sidney Phillips & Son [1982]
1 WLR 1297; [1982] 3 All ER 705; [1982] EGD 412; (1982) 263 EG 888, [1982] 2
EGLR 135, CA
Smith v Eric S Bush (a firm) [1990] 1
AC 831; [1989] 2 WLR 790; [1989] 2 All ER 514; [1989] 1 EGLR 169; [1989] 17 EG
68 & 18 EG 99, HL
In this action the plaintiffs, Mr and Mrs
Henley, claimed damages against the defendant firm of surveyors, Cloke &
Sons, of Maidstone, Kent, for alleged negligence in carrying out an inspection
and valuation for mortgage purposes of a house at 277 Boxley Road, Maidstone,
Kent.
David Marshall (instructed by William A
Merrick & Co) appeared on behalf of the plaintiffs; James Palmer
(instructed by Lloyd Cooper) represented the defendants.
Giving judgment, JUDGE THAYNE FORBES
QC said: This action concerns an inspection and valuation report prepared
in April 1984 by Mr Cloke of the defendant firm concerning the property known
as 277 Boxley Road, Maidstone, Kent (hereafter called ‘the property’).
The property is a detached house with
four bedrooms, which had been built in the 1930s. It was then owned by Mr and
Mrs Clifford. It is, and was then, an attractive house, with central heating,
garaging for two cars and a decent-sized garden. It is situated in a pleasant
residential area of Maidstone. It was being offered for sale at a price of
£78,000.
The house that Mr and Mrs Henley then
lived in was the second one that they had owned since their marriage and they
had lived there for about 10 years. In early 1984 the plaintiffs had been to
see quite a number of houses because they were considering moving home. In due
course they went to see the property, liked what they saw and became interested
in buying it. They negotiated and agreed a price of £74,000, subject to
contract, and applied to National Westminster Home Loans Ltd (hereafter called
‘NatWest’) for an appropriate advance secured by a mortgage on the property. It
is possible, though by no means clear, that in making their application for the
loan from NatWest the plaintiffs filled in a form the reverse of which
contained declarations like those which appear on p 6 of bundle B. Declaration
(e) on that page is worded as follows:
NatWest will obtain an inspection and
valuation report for mortgage purposes on the property . . . The report will be
in the form required by NatWest from a Valuer approved by NatWest for the sole
purpose of enabling NatWest to consider making a mortgage advance. As a
courtesy a copy of the report will be sent to Mr and Mrs Henley, but without
responsibility to Mr and Mrs Henley by the Valuer or Nat West for its contents.
. . .
I have quoted that declaration verbatim,
except in so far as I have inserted the names NatWest and Mr and Mrs Henley.
The defendants are a firm of surveyors
and valuers who carry on business in Maidstone, Kent. On April 3 1984 NatWest
wrote to the defendants as follows:
We have been requested to provide
mortgage facilities to (Mr and Mrs Henley) against the security of the Property
and in this connection we should be obliged if you would undertake an
inspection and valuation of the property in accordance with the arrangements
made between ourselves.
The applicant has been requested to
forward to you the above fee to include VAT and out-of-pocket expenses. Please
do not proceed until this has been received.
The applicant has been informed that your
report will not constitute a full structural survey, and has been asked to
contact you direct should a full survey be needed, or if any further
information on the property is required.
The defendants duly received NatWest’s
letter of instruction and on April 7 1984 Mr Ian Cloke [FSVA] carried out an
inspection of the property. On April 9 he prepared his written ‘Inspection and
Valuation Report for Mortgage Purposes’. The report is addressed to NatWest and
consists of Mr Cloke’s typewritten answers and insertions on NatWest’s then
standard form for that type of report. The plaintiffs are named as applicants
for the mortgage.
It is clear from the face of the report
that a copy would have been sent to the plaintiffs, because there are a number
of notes for applicants. Notes 1 and 2 state that a report has been obtained
for the sole purpose of enabling NatWest to consider making a mortgage advance,
that it is not a purchase valuation and that a structural survey has not been
carried out. Other notes are worded as follows:
3
This report is to (NatWest) by its Valuer, and neither (NatWest) nor the
Valuer gives any warranty, representation or assurance to you that the
statements, conclusions and opinions expressed or implied in this document are
accurate or valid.
4
The Valuer has made this report without any acceptance of responsibility
on his part to you.
. . .
7
This report is not a substitute for an independent professional opinion
and you may wish to obtain such advice for your own purposes.
It was not suggested either by or on
behalf of Mr Cloke that he was not aware that Mr and Mrs Henley would probably
purchase the property in reliance on the inspection and valuation done by him,
without having a further independent survey. Mr Cloke has been
1965. I am satisfied that, based on his experience of this sort of work and on
his knowledge of the wording of the report and application forms, he was aware
that Mr and Mrs Henley would probably purchase the property in reliance on his
inspection and valuation report without an independent survey.
Accordingly, in my judgment, the
defendants owed a duty of care to Mr and Mrs Henley to exercise reasonable
skill and care in the inspection and valuation, unless there was an effective
disclaimer of responsibility: see Smith v Eric S Bush [1990] 1 AC
831* per Lord Templeman at p 848 A-C and G-H.
*Editor’s note: Also reported at [1989] 1
EGLR 169.
In paras 2 and 3 of their defence the
defendants pleaded the plaintiffs’ declarations to NatWest and the notes to
applicants on the defendants’ report of April 9 as effective disclaimers,
limiting or excluding liability for breach of any duty of care owed to the
plaintiffs. Mr Palmer, on behalf of the defendants, did not seek to support
those pleas, having regard to the decision of the House of Lords in Smith
v Bush and, in particular, to the speech of Lord Griffiths and his
judgment that the Unfair Contract Terms Act 1977 bites upon such disclaimers:
see p 856 E-H. Having decided that the Unfair Contract Terms Act does apply to
such disclaimers and that such a disclaimer has to satisfy the test of
reasonableness provided by section 2(2) of the 1977 Act in order to be
effective, Lord Griffiths then held that section 11(3) of the 1977 Act imposes
the burden on the surveyor to establish that in all the circumstances it is
fair and reasonable that he should be allowed to rely upon his disclaimer of
liability.
In Smith v Bush the House
of Lords held that the test of reasonableness was not discharged and that it
was not fair and reasonable for the surveyor to rely upon his disclaimer. Mr
Palmer came to the conclusion — quite rightly, in my opinion — that he could
not distinguish this present case from the circumstances in Smith v Bush.
Accordingly, Mr Palmer did not submit that it was fair and reasonable that the
defendants should be allowed to rely upon the disclaimers in these
circumstances or that the defendants had discharged the burden of showing that
to be the case.
In my judgment, therefore, in carrying
out the inspection and valuation of the property for mortgage purposes the
defendants owed to the plaintiffs a duty of care to use reasonable skill and
care. The defendants have not sought to prove or argue, and have thus failed to
establish, that any purported disclaimer is fair and reasonable. Under the
provisions of the Unfair Contract Terms Act 1977 any such purported disclaimer
is thus ineffective.
In due course Mr and Mrs Henley received
a copy of the defendants’ report, sent to them by NatWest. Mr Cloke had signed
the report on behalf of the defendants on the first page after the following
statement:
I personally inspected the property, both
internally and externally, on 7 April 1984.
Mr Cloke gave evidence before me and
described what he saw on his inspection. In particular he told me that he did
observe that there was a noticeable distortion of the front bay windows. He
became aware of the distortion because he saw that the internally fitted double
glazing had been fitted to accommodate the distorted window frames. Although he
did not notice it he accepted that the brickwork to the bay must have sloped
downwards from right to left when viewed externally from the front of the
property. Mr Cloke’s observation of the specially fitted double glazing made
him conclude that the front bay was distorted and running off true from right
to left. He told me that his inspection of the property generally satisfied him
that the movement or distortion of the front bay was of long standing and that
there was no other sign of unusual recent movement or settlement of the
property, or that anything had happened to the structure of the property for a
considerable time. Thus he decided that the distortion was due to blast from a
bomb or bombs which had been dropped in the vicinity of the property during the
1939-45 war.
Sections 1 to 4 of the report prepared by
Mr Cloke deal with the tenure and general description of the age, nature, size,
construction and services enjoyed by the property. No criticism is made of
these sections of the report.
Section 5 of the report is headed and the
relevant details of property given by the defendants as follows:
Condition.
The Valuer is not required to carry out a
structural survey, nor to inspect the work in other parts of the structure
which are covered or inaccessible, but should state if there are any factors
which in his view make a closer inspection of these areas necessary:
(1)
Main structure.
Answer by Mr Cloke:
Satisfactory.
(5)
Conditions of electrical, plumbing and drainage installations. The
Valuer should state if tests are considered to be necessary.
Answer by Mr Cloke:
It would appear that the property has
been rewired and a new central heating system installed quite recently. The
drains appear to be in satisfactory condition.
(6)
Essential repairs and estimated cost.
Answer by Mr Cloke:
There are no essential repairs.
I then move to section 6, headed ‘Risks’,
then the following questions:
Is the property likely to be affected by
. . .
(2)
Settlement?
Answer by Mr Cloke:
No
(3)
Subsidence?
Answer by Mr Cloke:
No . . .
(7)
Other perils?
Answer by Mr Cloke:
No
Then section 6 continues:
If there is evidence of the property
having been affected in the past by any of the perils (1) to (7) in this
question, please comment and state if further investigation is necessary.
Answer by Mr Cloke:
No
I then turn to section 8, which is headed
‘Situation and Amenities’. Question (3) is:
Are there any adverse features which
might limit marketability?
Answer by Mr Cloke:
No
Then I turn to section 10, which is
headed:
Existing property — open market value for
mortgage purposes with vacant possession.
(1)
In present condition
Answer by Mr Cloke:
£74,000.
(2)
When repairs in question by sub-question (7) completed.
Answer by Mr Cloke — blank. He put a dash
in, thus indicating that no cost of repairs was involved. I then turn to
section 12, which is headed ‘General’.
(1)
Do you recommend the property as suitable security for a mortgage
advance?
Answer by Mr Cloke:
Yes
(4)
Is a further inspection necessary?
Answer by Mr Cloke:
No.
Having read the report, Mr and Mrs Henley
saw no reason not to go ahead with the proposed purchase of the property. They
were duly granted the mortgage advance that they were seeking from NatWest.
They completed the purchase at the agreed price of £74,000 and moved into
occupation on July 17 1984.
Both Mr and Mrs Henley gave evidence
before me. I have no hesitation in accepting them both as truthful, accurate
and reliable witnesses, whose evidence I accept. Neither of them had noticed
the distortion of the front bay before the purchase, and nothing in the
defendants’ report had alerted them to the existence of the distortion or that
the house had, in the opinion of Mr Cloke, suffered bomb damage.
I accept Mr Henley’s account of how he
first came to notice the distortion to the front bay of the house. Towards the
end of 1984 he
was tilted from right to left. On investigating the matter further he found
cracks to the return wall of the bay. There was a displaced gully and cracked
drain beneath on the same return wall adjacent to the bay. The gully was
concealed to some extent by a nearby tree, just discernible in the photograph
of the property in the estate agent’s particulars. The presence of the gully
was clearly indicated by the downpipe leading to it and the tree presented no
real obstacle to somebody wishing to look at the gully. The ground around the
drain was very wet and the drain was clearly leaking badly. Further examination
of the interior by Mr Henley revealed the way in which the double glazing had
been fitted to accommodate the distorted bay window frames.
I am satisfied, upon the evidence of Mr
Henley and the evidence of Mr Stephen Morgan [ARICS], a chartered surveyor, a
partner in a firm of surveyors, auctioneers and estate agents, who gave expert
evidence on behalf of the plaintiffs, that all the matters observed by Mr
Henley were matters that could and should have been observed by Mr Cloke if he
had carried out his inspection and valuation of the property for mortgage
purposes with the reasonable skill and care to be expected of a competent
surveyor at that time.
I am satisfied, from the evidence of Mr
Morgan, that the distortion to the brickwork of the bay — that is to say that
the courses tilted downwards from right to left — was clearly visible from the
front garden, but only once the observer stepped over the front flower bed and
looked at the house from the back of the front lawn, something that a competent
surveyor should have done as part of this type of inspection.
I also accept Mr Morgan’s evidence that,
from that position, the effect of the distortion of the bay would have been
visible in the line of the roof above and over the bay.
Although Mr Cloke realised that the bay
was distorted because firring pieces had been used in the double glazing,
nevertheless he did not see the distorted brickwork, the cracks to the return
wall, the distorted roof over the bay, the displaced gully and the leaking
drain beneath. In my judgment, the reason Mr Cloke failed to observe these
important matters is because he did not carry out his inspection with the
reasonable skill and care that was required. He was negligent in the way in
which he carried out his inspection, both in failing to observe the defects
that he should have observed and in failing to heed the likely significance of
those that he did notice. I therefore find that the particulars in para 11(3)
of the statement of claim are made out.
Had Mr Cloke taken proper notice of what
he had observed, some further simple visual observation would have shown what
he had missed and he would not have been so confident that the distortion was
in fact the result of bomb damage.
I have been assisted in arriving at that
conclusion because of the evidence of Mr Morgan contained in the first three
paragraphs of the conclusions section of his report dated August 6 1986.
Nothing in the report of Mr G Pullen [FRICS], the expert who gave evidence on
behalf of the defendants, gives me any reason to doubt those conclusions of Mr
Morgan, which I accept as reliable evidence of what should have been done by Mr
Cloke and observed by him had he acted with reasonable skill and care.
For a time after he discovered the
distortion to the front bay Mr Henley did not take any action. This was because
Mrs Henley was still recovering from having undergone surgery and he did not
want to distress her. However, in the early part of 1985 he told her about the
matter and they instructed a structural engineer, Mr Robin Parkes of A G Weekes
& Partners, to carry out an inspection of the property.
Mr Parkes duly inspected the property and
wrote a letter to Mr Henley dated July 31 1985, which contained his findings.
He amplified his findings by his oral evidence, which I accept. He said that
the condition of the building in 1985 was such that the distortion to the bay
must have been fairly obvious in 1984. He described the bay window as having
suffered significant settlement, the majority of which had occurred before the
double glazing was installed. At the stage of his initial investigation he had
been and was of the opinion that there was still a possibility of continuing
movement, although there was no evidence at that stage that significant
settlement was still taking place. He stated that the damage was severe,
although the building was not in danger of collapse. He said that the damage to
the building was too great to be dealt with by patching. The bay had to be
rebuilt to remedy the distortion to the bay properly, although extensive
remedial works are not now deemed to be necessary if the only consideration was
the structural stability of the building.
I am satisfied that Mr Parkes is accurate
and reliable in his description of the state of the building in 1985 and the
state in which it would have been at the time of Mr Cloke’s inspection. Mr
Parkes recommended monitoring the cracks. The cracks were duly monitored in
accordance with Mr Parkes’ recommendations. In June 1986 Mr Parkes produced a
site investigation report. The monitoring of the cracks had shown that no
significant movement of the structure had taken place within the past six
months.
In general I accept that Mr Parkes’ site
investigation report gives an accurate description of the building and its
defects, although he failed to note the distortion to the roof of the bay,
which I am satisfied from the evidence of Mr Morgan also existed at the time. However,
I am not satisfied that the settlement of the bay was caused by the leaking
drain in its immediate vicinity. Mr Parkes accepted that there had been no
significant movement of the bay window since the installation of the double
glazing. The soil investigations and trial pits carried out for the purpose of
his report did not reveal any erosion of the soil in the foundations of the bay
window.
It appears from the evidence of Mr L
Gilford [the defendants’ solicitor] that the double glazing may have been installed
as early as 1971. The plaintiffs accepted that it had been installed by about
1980. In my judgment, these facts, together with Mr Parkes’ evidence, support
Mr Palmer’s submission that the subsidence was not caused by the leaking drain.
If the leaking from the drain predated the double glazing and caused the
settlement, it is difficult to see why there was no further movement after the
double glazing was installed. Depending on which date is correct, the stability
of the bay would have lasted from 1971 or 1980 while the drain was still
leaking. If the leaking from the drain started after the double glazing was
installed, then Mr Parkes’ evidence confirmed that no erosion of the soil had
occurred and no settlement had been caused.
In re-examination Mr Parkes stated that
in 1985 he was able to satisfy himself that, structurally speaking, the
movement to the bay window had stopped and nothing had to be done to arrest any
further movement. However, he went on to describe the building as suffering
from severe distress. To put that right and to remedy the damage caused by the
previous structural movement he considered that it was necessary to carry out
works described by him in a letter of February 21 1986. I accept that evidence
as fair and accurate.
Mr Palmer submitted that there was no
breach of duty on the part of the defendants because Mr Cloke’s report was
factually correct and, in the event, the valuation was accurate. Mr Palmer
argued that the defendants’ duty was to look at the property and to come to a
conclusion as to its value, making use of Mr Cloke’s experience and local
knowledge and taking into account all the defects which were exhibited in the
building. The information supplied in the report is no more than an indication
of how the valuer came to his valuation, Mr Palmer submitted. He further
submitted that this was what Mr Cloke did. He knew about the distortion to the
bay and took it into account in arriving at a valuation which was, Mr Palmer
submitted, the correct market value of the property at the time.
I am of the opinion that Mr Palmer placed
too much emphasis on what he claimed was the fact that Mr Cloke arrived at the
correct market value. Even if I were persuaded that £74,000 was the correct
market value for the property, despite its damaged condition, it does not
follow that Mr Cloke carried out his inspection and report with reasonable
skill and care. In my opinion he clearly did not. I have already held that he
was negligent in failing to observe or heed certain important defects in the
property when carrying out his inspection. I am also satisfied that he acted
negligently in preparing and presenting much of the information which was
contained in his report.
I accept Mr Marshall’s submission that
the information in the report was significant not just for the purposes of the
current market valuation but also for the purposes of judging the general
marketability of the property now and in the future. Additionally for the
plaintiffs, the information was important for deciding whether they wished to
proceed with the purchase, and I duly took note of Mrs Henley’s observation
that she saw no reason why one should go ahead with buying a damaged article
when it was possible to shop elsewhere and buy an undamaged article. I accept
Mrs Henley’s evidence when she stated that had they known of the damage they
would not have gone ahead with the purchase.
In my judgment, proper skill and care in
preparing and presenting the report required the defendants, and Mr Cloke on
their behalf, to
should have been observed during such an inspection by Mr Cloke. In my opinion
the report fell lamentably short of that required standard. Given that Mr Cloke
had observed that the front bay was distorted, I do not consider that his
description of the main structure in section 5(1) of the report as satisfactory
can be justified. I accept the evidence of both Mr Parkes and Mr Morgan that
the damage to the building was severe and that the report should have reflected
that in suitable wording. I also accept Mr Morgan’s criticism of the answer
about the drains that appears in 5(5), although the significance of that is
perhaps less than the other aspects of this report’s deficiencies. Mr Cloke was
not in a position to give such a positive answer about the drains, having not
looked at the gully, something which he should have done.
I also accept that the repairs which were
required to the distorted bay were within the meaning of the word ‘essential’
from the point of view of the marketability of the building. Accordingly, Mr
Cloke’s answer to 5(6) was wrong. Having regard to the lack of any real
investigation of the distortion that he had observed, I regard the answers to
6(2) and 6(3) — the questions relating to subsidence and settlement — as
indicative of Mr Cloke’s less than satisfactory approach to the inspection. If
he had taken more care he would have observed defects like the displaced gully
and the evidence of a leaking drain. If he had observed these matters, and
given their proximity to the settlement involved, he could not reasonably have
said, in my judgment, that it was not likely that the property would be
affected by subsidence or settlement.
Be that as it may, his bald negative
answer to the last part of section 6 was clearly false and misleading. Since he
had come to the conclusion that the building had been damaged by bomb blast in
the past, he should have said so. In my opinion, he was unable to give any
explanation for that omission which was indicative of anything other than
negligence on his part.
I also regard his answers to 8(3), 10(1)
and 10(2) as unsatisfactory for the reasons given by Mr Morgan and which appear
in his report as well as in his oral evidence.
In my judgment, the information provided
in the defendants’ report was, for the foregoing reasons, inaccurate and
misleading. I accept the evidence of Mr Morgan that a competent surveyor using
reasonable skill and care would not have filled in the report as Mr Cloke did
but would have dealt with the information required by the report in the manner
described by Mr Morgan. In my opinion, Mr Pullen did not seek to say that the
information given by Mr Cloke was what a competent surveyor, using reasonable
skill and care, would have provided in the circumstances.
In my judgment, the breaches of duty
pleaded in paras 11(1) to 11(7)* are clearly made out.
*Editor’s note: Paras 11(1)-(7) of the
statement of claim read as follows:
11. The loss and damage were
caused by the negligence of the Defendants, their servants or agents.
(1) Advising that the condition of the main
structure was satisfactory when in fact and in truth it was unsatisfactory
being severely affected by settlement and/or subsidence.
(2) Advising that the drains appeared to be in
satisfactory condition when in fact and in truth the drain and/or gully in
front of the house were leaking to such an extent as to cause settlement and/or
subsidence of the house by softening the ground thereunder
(3) Advising that there were no essential repairs
to be carried out despite the foregoing.
(4) Advising that the house was not likely to be
affected by subsidence or settlement despite the foregoing.
(5) Advising that the value of the house was
£74,000 when in fact and in truth it was substantially less than £74,000.
(6) Advising that no further inspection was
necessary.
(7) Failing to advise that a full structural
survey should be carried out and/or that full tests should be carried out on
the drains.
I now turn to the question of damages. In
Perry v Sidney Phillips & Son [1982] 1 WLR 1297† the Court of Appeal held that the correct
measure of damages in cases involving the purchase of property in reliance on a
negligent surveyor’s report is the financial loss constituted by the
difference, if any, between the price paid for the house and its market value
in its actual condition at the time of purchase. It is important, in my judgment,
that this be kept firmly in mind because it does not follow that the cost of
remedial works considered necessary by the purchaser is necessarily
co-extensive with the recoverable damage at law.
† Editor’s note: Also reported at (1982)
263 EG 888, [1982] 2 EGLR 135.
Mr Michael Chapman [FSVA], an experienced
surveyor and valuer, gave expert evidence on behalf of the plaintiffs about the
question of damage and the market value of the property in its damaged state. I
found him to be an impressive witness who was objective and to the point. He
accepted that £74,000 was a fair valuation for the property in 1984 if it were
in good order, those being his exact words. His reports of January 6 1986 and January
17 1991 were written on the basis of the information contained in the reports
of Mr Morgan and, to some extent, Mr Parkes. He was not consulted until after
the work to repair the distorted bay had been carried out, so he did not
inspect the building in its damaged state. Based largely on the report of Mr
Morgan, Mr Chapman had approached the matter on the basis that the building was
still unstable in 1984 and, in consequence, not capable of being mortgaged. He
readily accepted in cross-examination that it was now clear that the actual
state of the building in 1984 was that it was stable, and that, were the
building otherwise in good condition, the defective drain — which would have
cost about £1,000 to repair — would probably make no difference to the market
value.
Given that the building was stable, Mr
Chapman agreed that the property was probably mortgageable, but he said that
the market value of the property would not have been the same as one that was
in good order. In Mr Chapman’s opinion, the value of the property in 1984,
known to be structurally stable but with the distorted bay and defective drain,
would have been 5% to 10% below the market value of the property had it been in
good order.
I have no hesitation in accepting Mr
Chapman’s evidence to that effect. I am satisfied that the market value of this
property in 1984, having regard to its actual condition, was of the order of
£7,000 less than £74,000, namely £67,000.
Mr Chapman did accept that a person
anxious and determined to buy a house like the property in Boxley Road or its
neighbourhood in 1984 might have been prepared to pay £74,000 for the property
in its actual damaged state. He also accepted on re-examination that for such a
person £74,000 could be said to represent the market value of the property.
However, I did not understand him to be resiling from his general evidence that
the true market value was of the order of £74,000 less 10%. A person who is
particularly anxious to buy a property may well be prepared to attach a higher
value or premium in the market to something which that person is anxious to
buy. In my judgment, the real market value is that which represents the value
commanded in the market by the prices that ordinary prospective purchasers like
the plaintiffs would have been willing to pay, given the actual condition of
the property.
In addition the plaintiffs are entitled
to recover general damages for the distress, upheaval and physical
inconvenience of having remedial works carried out. Mrs Henley described what
it was like for the five months that the work took to carry out and I have no
hesitation in accepting her account. In my judgment, a figure of £400 per month
for the damages under this heading is appropriate, making £2,000 in all.
Accordingly, there will be judgment for
the plaintiffs in the total sum of £9,000, which is inclusive of those general
damages.
