Action by purchaser of house against surveyors alleging negligence and breach of duty — While the case was being opened on behalf of the plaintiffs liability on the part of the defendants was admitted, so that the issue before the official referee was confined to the assessment of damages — The measure of damages was agreed to be as established in the decisions in Philips v Ward and Perry v Sidney Phillips & Son, namely, the difference in value between that of the property in the condition described in the survey and the market value if the survey had been carefully carried out, together with interest as appropriate — After the purchase the plaintiffs found marked signs of sloping floors which professional inspection proved to be the result of structural movement — The evidence given by the respective surveyors for the purposes of the trial showed considerable conflict as to the probable costs of rectification and reinstatement, partly due to different views as to the likelihood of underpinning being required — Evidence given by estate agents revealed still greater differences of opinion, almost ‘irreconcilable’, as to the value of the property in its defective condition — The judgment shows how from such conflict a judge carrying out the functions of an official referee derives the assistance he needs for the assessment of damages — In the end he arrived at a diminution of £12,500 on the purchase price of £45,000 and he awarded in addition £1,200 in respect of anxiety and inconvenience, with interest on the £12,500
In this action
the plaintiffs, Mr and Mrs Wilson, sued the defendants, Baxter Payne &
Lepper, for damages in respect of a survey report on a semi-detached house
purchased by the plaintiffs at 76 Cloonmore Avenue, Orpington, on the faith of
the report.
Michael Hart
(instructed by T G Baynes & Sons, of Orpington) appeared on behalf of the
plaintiffs; Richard Hone (instructed by Barlow Lyde & Gilbert) represented
the defendants.
Giving
judgment, JUDGE DAVID SMOUT QC said: This action arises out of the purchase by
the plaintiffs, Mr and Mrs Wilson, of a semi-detached house at 76 Cloonmore
Avenue, Orpington, on April 22 1981. It was built shortly before the war in a
convenient area where there is a steady demand for houses and ordinarily a
ready market. There has in the past been some structural movement as a result
of subsidence in that road, for the area contains some London clay. None the
less, it is said that the road is not one that could be described as notorious
for subsidence.
Mr and Mrs
Wilson purchased the house for £45,000 on the faith of a survey report dated
February 2 1981. It was prepared by the defendants, who are local chartered
surveyors. Mr C R Martin of that firm conducted the survey and he did so on the
instructions of the plaintiffs. Unfortunately his report did not mention the
differences in floor levels which were indicative of settlement. The report of
the survey contains this passage under the heading ‘The Foundations’:
We cannot
advise you as to the depth or size of the foundations provided to this
property, as to obtain even a limited knowledge of this fact would require the
formation of excavation holes around the base of the main walls, which was not
carried out at the time of our inspection. We consider it reasonable to
believe, however, in view of the absence of any visible signs of structural
failure, or evidence of any past work having been carried out, that the
foundations, or other method of support provided to the main structure are
satisfactory, although we obviously cannot advise you as to the possibility of
any future movement.
There is a
passage under the heading ‘The Floors’ which runs as follows:
With the
exception of some solid flooring in the extension part of the kitchen, the
flooring throughout is of suspended timber construction covered with plain
timber boarding. As you are aware the property is occupied and furnished and
due to this we were unable to carry out a full and detailed inspection of the
floor timbers. Where it was possible to turn back small isolated areas of floor
covering, this action was taken and from this limited inspection the floors in
these places were seen to be in a satisfactory condition. In view of our
inability to be able to inspect this part of the structure, we should be
pleased, when the property is vacated and the floor coverings have been
removed, to revisit the property and make an inspection of the floor surfaces,
and report to you again without further charge. It must be appreciated,
however, that if any subsequent defects are noted, then the responsibility for
any remedial work which may be required, assuming that completion has taken
place, would remain with the purchaser, unless some prior arrangements have
been made with the vendor.
The plaintiffs
sue for damages alleging negligence and breach of contract and, also, for
damages for anxiety and inconvenience.
While the case
was being opened to the court by Mr Hart on behalf of the plaintiffs, Mr Hone,
counsel on behalf of the defendants, intervened to say that the defendants
recognised that they should have noted the difference in floor levels. He
accepted that this was in effect an admission of liability. That was a
realistic concession. In my view there is abundant evidence that the defendants
on this occasion fell short of the standard of ordinary skill and care owed by
competent surveyors.
The plaintiffs
upon taking possession had what Mr Wilson describes as the feeling of walking
downhill. Mrs Wilson, when she came to place the furniture in the dining room,
which is a downstairs reception room, found that the chairs did not set right.
After speaking to their solicitors they instructed another surveyor, Mr F J
Newell. In his report of June 11 1981, Mr Newell refers to a very bad slope in
the kitchen and states that in the rear lounge the floor slopes towards the
garden in a definite manner and that there are corresponding slopes in the
upper floors. There are, he says, visible signs of structural failure. Mr
Newell’s conclusions in the report were not challenged at the trial. Indeed, Mr
D Ensom, the building surveyor instructed on behalf of the defendants in regard
to this case, acknowledged in his report of August 18 1983 that the slope in
the kitchen was obvious and that the slope that could be felt in the landing,
in the bathroom and in the small back bedroom was likewise obvious to the eye.
He refers also to what he calls the most obvious clue, in that the casement
door which leads to the garden from the rear lounge was distorted.
The evidence
of structural movement was there for the professional eye to see, but, if it
was seen by Mr Martin on behalf of the defendants, it was for some reason not
appreciated. That failure constitutes professional negligence. It was, in my
view, inexcusable. The plaintiffs were accordingly misled into paying more for
the property than it was worth.
The measure of
damages for a negligent survey is the difference in value between that of the
property in the condition described in the survey and the market value had the
survey been carefully carried out, together with interest on the difference:
see the Court of Appeal
Phillips & Son [1982] 1 WLR 1297. It is that diminution in value with
which the court has to be concerned.
In the instant
case the purchase price of £45,000 was the value of the property had it been in
the condition described by the survey. That is common ground. Indeed, Mr Martin
in his report to the plaintiffs described that sum as an accurate reflection of
value as he then saw the property.
In order to
calculate how much the plaintiffs overpaid, the court has to determine a
hypothetical question, namely, what was the market value in April 1981 had the
defendants’ survey been carefully conducted and the defective condition of the
property been properly appreciated?
In seeking to
establish that value, regard must be had to the appropriate cost of
rectification of the defects which had not been properly appreciated, and also
to the risk in 1981 of such additional expenditure in the future that the
proper appreciation of such defects might entail. It may not be enough to
correct the sloping floors and the effect of any distortion in the structure.
It may be that underpinning of the foundations will prove necessary in order to
prevent future subsidence. Moreover, underpinning will itself involve
additional repairs to the superstructure that might otherwise not have been
required.
Attention has
been drawn to the decision of Talbot J in Bolton v Puley (1982)
267 EG 1160, [1983] 2 EGLR 138. Emphasis was there placed on the need to make a
reduction for any element of betterment that may be inherent in the
rectification work. So then, the determination of the April 1981 market value
had the defects been properly appreciated does not merely involve the deduction
from £45,000 of the cost of such repairs as should then have been thought to be
advisable. It is rather more complex than that. However, a sensible starting
point is to consider the cost in 1981 of work which then would have been
advisable had the defects been properly appreciated by the defendants and drawn
to the attention of the plaintiffs.
Various
figures have been canvassed. I consider first those in regard to the
superstructure, that is, with regard to the work of rectification above ground
without including any estimate for underpinning. The highest figure that has
been canvassed in regard to the superstructure is the estimate of Glassup &
Co Ltd, which was obtained by the plaintiffs in November 1983. It came to
£27,437, plus VAT. That estimate has been much criticised and none of the
professional witnesses in the case has been asked to consider it. It contains
many elements which are inappropriate. It goes well beyond what was necessary.
It would require an 18% to 20% reduction to 1981 prices in any event, and Mr
Newell mentioned that it is also likely to be 20% too high, quite apart from
price inflation, because builders tend to overestimate for work which requires
rectification of that done by previous builders. No one has been called to
support the estimate of Glassup & Co. It does not call for any detailed
analysis in this judgment. Even when trimmed down, it provides me with no
helpful guidance.
The next
highest figure before the court was that put forward by Mr Newell, who in July
1981 made a rough estimate of the whole of the superstructure works that he
then regarded as necessary. It totalled £18,700, plus VAT. It was Mr Newell who
had been called in by the plaintiffs after the defendants had failed to notice
the slopes in the floors and failed to appreciate the existence of past
movement in the property. Mr Newell is a surveyor of 35 years’ experience. He
is accustomed to providing building society surveys and full structural surveys
and he claims to specialise in subsidence problems. I was impressed by his
sensible and realistic understanding of the nature and the immediacy of the
plaintiffs’ problems. His figure of £18,700 did not include any item in respect
of the cost of underpinning the foundations, but it is important to note that
it took into account the effect on the superstructure that would be occasioned
by the necessity for underpinning, and as to that necessity for underpinning Mr
Newall expressed himself to be adamant.
That rough
estimate was made up as follows, and I take the list from exhibit P 1:
Redecoration, £3,000; electricity and plumbing, £400; carpets — that is the
removal and re-laying, £200; boiler, prime cost, £500; removals and refixing in
the bathroom, £700; floorings, ceilings and airing cupboard, £8,000; fractured
brickwork etc, £1,400; kitchen cracks, tiling, £500; rear room wall, £400; rear
bay, £2,000; roof, £1,600; total £18,700.
In contrast,
Mr Ensom, the defendants’ expert, with very considerable expertise in this
field, gave his estimate of £5,000. Again it was a rough figure. It was made up
as to levelling kitchen floor, £1,500; levelling the corner of the rear room,
£700; levelling the landing, £700; making good internal cracks, £300; making
good outside cracks and decorations, £150; roof, £250; doors, including the
bay, £900. That made a total of £4,500 to which he added a further £500 in
respect of decorations.
The disparity
between Mr Newell and Mr Ensom is not as inexplicable as might at first glance
appear. Having regard to the evidence given in the court I take the view that
it would be right to reduce Mr Newell’s rough figure of £18,700 in a number of
respects — by £1,000 for the rear bay; by £1,350 for the roof and by £1,000 in
respect of the figures, for flooring etc, that is to say by £3,450. I would
further reduce the resultant figure of £15,250 by 20% for betterment. That is a
reduction of £3,050. Mr. Newell’s figure accordingly as so adjusted comes down
to £12,200. That represents, as I say, the cost of rectifying the
superstructure on the assumption that underpinning proves necessary and making
an adjustment for betterment.
On the other
hand, Mr Ensom’s rough estimate does not, in my view, sufficiently take into
account certain factors that Mr Newell considers appropriate. I would add to Mr
Ensom’s estimate of £5,000 these further items: £400 for checking and
rectifying electricity and plumbing; £200 for lifting and re-laying carpets;
£700 for removals and refixing in the bathroom; £500 for the prime cost of the
boiler, the casing of which, it appears to me from the evidence, was likely to
have been cracked as a result of movement, and £500 for further floor levelling
upstairs, that is to say an addition overall of £2,300. Mr Ensom did not
consider there was any betterment element in his figures, for he says that his
assessment was done in an endeavour to bring the property to the condition
described in the survey. I think it appropriate, however, that I should make a
reduction of £300 in that respect because of the additional items that I have
included. Accordingly I uplift Mr Ensom’s figure not by £2,300 but by £2,000:
that comes to £7,000. With VAT of 15% the total is £8,050. We are dealing with
approximate amounts; I round it down to £8,000. That adjusted figure, namely
£8,000, is on Mr Ensom’s assumption that underpinning is not necessary. I
accept Mr Ensom’s carefully expressed view that there is no evidence that
underpinning must of necessity be carried out. His conclusion was that the
property had moved prior to 1979 and that in 1979 the addition of an extension
to the property had resulted in further disturbance, and also that between 1981
and 1983 there was no evidence of movement, although a crack had developed in
1983 or 1984 which he thought might well be the result of residual grumbling.
Without monitoring with scientific instruments he felt unable to say that
underpinning was likely to be necessary or even desirable. He was anxious as a
professional man not to commit himself on uncertain data. His report is in
these terms:
It has been
suggested by Elton Amodia that underpinning is desirable to remedy the
situation and Carrigan Underpin have also given an estimate for foundation
works. Before one starts underpinning, it is always as well to be certain as to
the cause and future probable continuation of structural movement and in this
case I am by no means certain that anyone has yet arrived at the correct
answer.
I believe
that the foundations and possibly the oversite concrete and the supporting
walls to the floors may have dropped on the rear corner of the house, but what
I am not sure about is whether this occurred prior to the alteration works
which are said to have been carried out about four years ago, or as a result of
these works. Although there is a slight crack on the rear I would not like to
say that the property is moving in a serious way at the present time and
although I do not believe the tree is a cause, this must be checked as
otherwise its removal might reverse the trend and cause a certain amount of
heave. In the end it might well be decided that underpinning is not required.
Against that
view is the recommendation by Elton, Amodia Associates, consulting civil and
structural engineers, who in April 1982 provided a report where there is this
passage:
According to
the geological data of the area, the subsoil is thought to be Flood Plain
Gravel at either ends of Cloonmore Avenue, and chalk in the middle. Our own
observations in the neighbour’s excavation showed shrinkable clay at least in
upper 3 ft from the existing ground level.
Then under the
heading of ‘Conclusions’ the report states:
From our
observations, we feel that the rear wall has subsided in the middle in relation
to the ends, but as a whole, the rear wall itself has subsided in relation to
the garage, hall and front lounge as a whole, as reflected by some cracking at
these junctions. The reason for the movement appears to be a combination of
shallow foundations and shrinkable clay at upper strata being affected by upper-level
moisture movements. If the subsoil is similar to that found in the neighbouring
property, another drought will show further subsidence. Hence, in our opinion,
underpinning is very desirable to remedy the situation.
I have to put
myself back to 1981. Any purchaser with knowledge of the defects and with
proper professional advice would appreciate that there was a risk of future
movement and that he would have to give careful consideration to the
advisability of underpinning involving not only the cost of such underpinning
but also considerable consequential expenses in regard to the superstructure.
Preliminary
estimates for the cost of underpinning indicate a figure on 1981 value of about
£3,500. Compare the report of Carrigan Underpin Ltd at p 40 and that of Withers
Foundations at p 47 of the bundle. If that were to prove necessary, then the
cost of the superstructure repairs would be in the region of Mr Newell’s figure
as adjusted, that is £12,200 with VAT of £1,830, say £14,000. Thus the cost of
underpinning and superstructure repairs would, if Mr Newell is right, total in
all £17,500.
Accordingly,
on the basis which I call the consideration of expenditure basis, I come to the
conclusion that a purchaser, had he appreciated the defects in 1981, would have
realised that if no underpinning were to prove necessary he would have to pay
for repairs to the tune of about £8,000, but that there was a real risk of
having to pay £17,500 to put the house to rights.
The estate
agents who have been called to give evidence take a more robust approach. Mr C
F Smith, who was called by the plaintiffs, has 50 years’ experience. His report
concludes, so far as 1981 values are concerned, as follows:
We understand
that Messrs Andrews & Ptnrs of Orpington offered 47 Cloonmore Avenue,
Orpington for sale which was also suffering from subsidence at a price of
£41,500 in 1982 but it was subsequently withdrawn as the property could not be
sold and we were informed by Messrs Andrews & Ptnrs that the normal market
value of the house at that time would have been £53,000. This would indicate
that the price being asked for the property, with its defects, was excessive as
no buyers were forthcoming. We, ourselves, had experience with a property
suffering from subsidence in 1980 the property being 1, Springvale, Barnehurst.
It is a semi-detached house, 3 bedrooms, 2 reception rooms, kitchen and
bathroom and was at the time sold for the price of £31,000, but the Building
Society when making their survey noticed some defects and we were called in to
carry out a full survey and it was found that subsidence had occurred in the
rear wall and flank wall and also that the party wall was affected. As a result
the sale fell through, and as the owner of the property could not persuade the
owner of the adjoining semi-detached house to have repairs carried out to the
party wall between the two houses it was decided to offer the property for sale
subject to the defects. We were asked as to what figure should be quoted and we
suggested £14,000 which was less than 50% of the selling price in good order.
We, ourselves, were not instrumental in effecting a sale but we believe that it
was sold at about £15,000 to a speculator, who bought it with a view to making
good the defects and selling at the full market price.
We were
recently called in by Messrs Trundles, Loss Adjusters of Downe House, High
Street, Orpington to carry out a Valuation on 23 Tormount Road SE 18 which had
suffered severe subsidence at the rear and the Assessors did not consider that
it could be economically repaired and they suggested that the property be
offered for sale without a price being quoted in order to assess the difference
in value of the property in good condition and its condition that existed. We
made an inspection of the property and advised Messrs Trundles that we thought
that the value of the property in good order would be £30,000 and its value
subject to damage approximately £10,000. We might add that the property had
been purchased in 1983 for approximately £29,000 and the house was on the
market open to offers and the highest offer received at the time of our
inspection, which was June 15 1984, was £10,000, which is about a third of the
market value in good condition.
Taking all
these matters into consideration we consider that the value of 76 Cloonmore
Avenue in April 1981 when it was purchased for £45,000 was 50% of that figure
namely £22,500.
That approach
may be criticised as perhaps simplistic and it was suggested in
cross-examination that he had merely applied a 50% rule of thumb regardless of
the degree of movement. Mr Smith denied that. He said that he regarded this as
quite a serious instance of subsidence. He did not use Mr Newell’s expression
of there being a smell over the property even if underpinning was carried out,
but he did emphasise that most people are not interested in buying a property
where there is reason to fear the risk of subsidence. If Mr Smith is right,
then £22,500 would be the 1981 market value.
On the other
hand, Mr P L Coling, called for the defendants, takes the view that the
diminution in value was only £5,000. His report concludes:
In my opinion
the movement which has occurred is not so severe as to make the property
unsaleable. As a firm we have, over the years, sold houses which have been structurally
damaged. Prices have tended to reflect the degree of the severity of the
problem. In this instance, I would anticipate that a builder, speculator or
‘cash’ purchaser would be prepared to acquire the house with a view to carrying
out superficial remedial work at fairly modest cost. The best price would
probably come from such a person intending to occupy the property and who would
take the view that should underpinning prove necessary in the future, they
would either have the experience or the contacts to carry out the work at a
fraction of the cost of using specialist contractors. It is generally
recognised that the larger part of the cost of underpinning is usually in the
labour of excavating underneath the existing foundations and making good afterwards.
In January
1981 Mr Martin valued the house in the sum of £45,000. It is my opinion having
regard to the likely structural condition of the property at that time and the
possibility that at some time in the future it might be necessary to either strengthen
or underpin the foundations, I consider a sale could have been arranged at the
sum of £40,000 freehold.
To put the
matter in perspective there are no significant fractures to the main external
walls. The evidence of past movement is largely confined to the interior and
the sloping floors of the kitchen and rear reception room in particular.
The tenor of
Mr Coling’s evidence was that there were potential purchasers of a rather
specialised kind who would buy at a small discount and do the house up cheaply.
He, too, emphasised that without proper monitoring it was not possible to
determine whether or not underpinning might be necessary. Although Mr Coling’s
approach to the problem was thoughtful, I did not gain the impression that he
had given sufficient attention to the fear occasioned by the risk of future
movement on the mind of the average purchaser. Mr Coling told us that the
majority of the houses which he had inspected in the surrounding area showed
some evidence of movement, and indeed that statistics showed that the majority
of houses throughout the land showed some evidence of movement. None the less,
Mrs Wilson’s dining-room furniture would, in my view, suggest to a potential
purchaser a rather more serious risk of settlement and future subsidence than a
discount of £5,000 would indicate. Mr Coling having spoken of potential
purchasers as of a rather more specialised kind did, however, say that if
called upon to complete such a form for a building society as is shown on p 3
of the bundle he would there indicate that the risk of further movement was one
that the building society could accept. I acknowledge the strength of Mr
Coling’s convictions but I am not persuaded to his viewpoint. I would like,
however, to commend his integrity in drawing the court’s attention to a house
in Cloonmore Avenue which had to be withdrawn from the market because of
settlement. He distinguished that case because movement there was more
significant than in this instance.
In the result,
the consideration of expenditure basis has proved for me more helpful than has
the evidence of the estate agents which I would find irreconcilable. None the
less, I have to say that while not accepting Mr Smith’s ‘broad brush’ picture,
I do bear it in mind, for it appears to me to be closer to the reality of the
instant case than does the picture painted by Mr Coling. I am of the opinion
that potential purchasers would have strong reasons to fear, if properly
advised in 1981, that underpinning was more likely to be necessary than not. That
fear must be properly reflected in the assessment of damages.
In trying to
take into account all the circumstances that I have indicated and giving
consideration to the very different viewpoints, I have come to the conclusion
that the diminution of value on 1981 prices was £12,500 and I award damages for
that sum accordingly.
As to the
damages for anxiety and inconvenience, it is clear from the authorities that a
modest sum is appropriate. The plaintiffs were joint purchasers. In 1981 they
already had two children, but Mrs Wilson had had the distress of two
miscarriages and she had come to believe that she was unlikely to have further
children. Their move to Cloonmore Avenue accordingly had in it an emotional
element. They hoped to put the memories of the miscarriages aside in the
excitement of a new home. They had plans to improve it and refurnish it as and
when they could afford to do so.
Within days of
moving in, their hopes had foundered. Although, as Mr Wilson conceded, the
house worked fundamentally, they both lost the joy of it. They had put all
their savings into it. They have not felt able to make any alterations pending
the hearing of this case and have thought it wise to keep the house as it was
so that it be available for inspection by the various experts.
And so they
have not chosen the new carpets that they had in mind; they have not
refurbished the property; they have not made any structural alterations that
otherwise they would have done. They found entertaining difficult because of
the slopes in the dining room and the rocky chairs. They have had three years
of anxiety and inconvenience over and above the ordinary worries of litigation.
I award Mr Wilson in that respect £500. Mrs Wilson has had to live
more closely with the disappointment and with the inconvenience and I award her
£700 and I give damages in respect of those sums accordingly.
The judge
gave judgment for the plaintiffs of £12,500 plus £1,200 for anxiety and
inconvenience, with interest on the £12,500 at the short-term investment rate,
but with no interest on the £1,200. The plaintiffs were awarded costs.
