Negligence — Surveyors – Mortgage valuation report — Industrial building system — Practice of valuation surveyors — Published warnings of BRE relating to building system — Whether surveyor required to warn purchaser of construction system and potential future service charge increases
In 1988 the claimants applied to AD for a mortgage to finance the
purchase of a long leasehold interest in a maisonette that was once part of a
Ministry of Defence housing estate. AD instructed the third defendant surveyor
to provide a simple valuation report for £69 plus VAT. The surveyor, in
providing his report, noted that the property was built to the Jesperson
industrial system; he did not provide any other additional warnings. The
claimants purchased the property in December 1988. Following a failure of part
of the building, and the inability of the claimants to sell the property, AD
repossessed the property and later sold it for £6,000. In the court below,
Scott-Baker J accepted the evidence of a building surveyor expert for the claimants
that a reasonably competent surveyor, carrying out a mortgage valuation in
1988, would have armed himself with the requisite knowledge from the literature
or taken other appropriate steps to obtain the necessary information to make a
skilled professional valuation; he decided that the surveyor was negligent and
the damages payable were £67,859.77, inclusive of interest. The surveyors
appealed on liability and in respect of the quantum of damages.
liability was dismissed and that in respect of damages allowed in part.
rely upon the evidence of the building surveyor expert for the claimants; the
defendants had not called any evidence to say that it was excusable to embark
on a valuation without some knowledge of the warnings that appeared in the
literature, or that, in practice, it was acceptable not to give effect to those
warnings in a valuation report.
to warn about the structure of the building and the recommendations of the
Building Research Establishment in relation to that type of construction, and
to warn that the potential service charge contribution could well increase. His
valuation did not reflect these two considerations. The third defendant was not
negligent in failing to advise that the property should be regarded as unsafe
as security for a mortgage loan. The damages recoverable were reduced to omit
one head of claim of £476.57.
The following cases are referred to in this report.
Banque Bruxelles
Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191; [1996] 3 WLR
87; [1995] 3 All ER 365, HL
Bolitho (Dec’d)
v City and Hackney Health Authority [1998] AC 232; [1997] 3 WLR 1151;
[1997] 4 All ER 771; [1998] Lloyd’s Rep Med 26
Bull v Devon
Area Health Authority [1993] 4 Med LR 117
Eckersley v Binnie
(1988) 18 Con LR 1
Hontestroom, The
v The Sagaporack [1927] AC 37
Monarch Steamship
Co Ltd v A/B Karlshamns Oljefabriker [1949] AC 196; [1949] 1 All ER
1
Roberts v J
Hampson & Co [1990] 1 WLR 94; [1989] 2 All ER 504; [1988] 2 EGLR 181;
[1988] 37 EG 110
Wilsher v Essex
Area Health Authority [1988] AC 1074; [1988] 2 WLR 557; [1988] 1 All ER 871
This was the hearing of an
appeal by the defendants, Field Palmer (a firm), Neville John Freeston, Ian
McKinnon Mead, Benjamin Norman Aubrey French and the Ministry of Defence, from
a decision of Scott Baker J giving judgment to the claimants, Frederick James
and Deborah Jean Izzard, on their claim for damages for negligence against the
defendants.
Daniel Pearce-Higgins QC (instructed by Kennedys) appeared for the
appellants; Peter Smith QC and Malcolm Stitcher (instructed by Churchers, of
Fareham) represented the respondents.
Giving the first judgment, KENNEDY
LJ said: This is a defendant’s appeal from a decision of Scott Baker J
sitting at Winchester, who, on 20 February 1998, gave judgment for the
plaintiffs in the sum of £67,859.77, inclusive of interest, with costs.
Facts
The material facts are as follows — the plaintiffs
are a married couple who, in 1988, were minded to buy 37 Samson Close, Gosport,
as their first home. The property was a two-storey maisonette in a four- storey
block built in 1967 for the Ministry of Defence as part of the Rowner Estate.
The system of construction was the Jesperson 12M system, which combined large
concrete panels and timber cladding. In 1986 the Ministry of Defence sold off
part of the estate to a developer who renovated the properties and sold them to
individuals, many of them being, like the plaintiffs, first-time buyers. Other
properties were leased to the local authority for a relatively short term, but
the lease that the plaintiffs were intending to purchase was the 997-year
residue of a 999-year lease. The asking price was £42,000, and the housing
market at that time was buoyant. The plaintiffs needed a mortgage and
approached Allied Dunbar. They discussed with Allied Dunbar the type of survey
to be obtained, and were led to believe that a simple valuation report costing
£69, inclusive of VAT, would detect any major faults, so on 9 November 1988 the
first defendant firm, in which the third defendant was a partner, was
instructed. The letter of instruction from Allied Dunbar asked the defendants
‘to inspect the property as soon as possible and complete our mortgage
valuation form’. It was an express condition that the valuation be carried out
by an Associate or Fellow of the Royal Institution of Chartered Surveyors, and
the recipient of the letter was informed of the proposed purchase price and
that the advance applied for was £39,000. The letter concluded by saying:
Your comments in respect of valuation condition, repairs and
retentions should be made with these details in mind
The third defendant, Mr Mead, was a very experienced local
surveyor. He had become a Fellow of the RICS in 1960, and a partner in the
first defendant firm in 1966. In 1988 he was completing an average of about 25
mortgage valuations per week as well as other work. He inspected this property
on 13 November 1988, and completed his report on the Allied Dunbar form the
next day. On page 1 he accurately recorded the type of construction, and the
services charges were noted as £200 pa.
On page 2, three sections are worth quoting. In section 11, headed
‘Matters that might affect value’, the question is asked:
Is the property readily saleable at or about the valuation figure
for the purpose of owner occupation?
Mr Mead answered ‘yes’.
Section 14 is headed ‘General remarks’, and Mr Mead wrote:
These flats are built to the Jesperson system. They were
constructed for the Ministry of Defence and occupied as married quarters until
sold in 1986 when they were sold to a developer. The purchasers carried out
renovations and sold the individual units. They have proved popular with first
time buyers and offer spacious accommodation.
Section 15 is headed ‘Valuation for present purposes: value in
present condition’. Mr Mead entered the asking price of £42,000.
At the foot of the page, under the heading ‘Declaration to Allied
Dunbar Mortgages Limited’, Mr Mead certified, among other things, that ‘the
property is suitable for mortgage purposes’.
So the mortgage advance was made, some additional money was
borrowed by the plaintiffs from a bank and, on 18 December 1988, they moved
into their new home.
In 1991 Mr Izzard obtained a promotion at work that involved moving
to Suffolk. By that time, house prices had fallen, and, on any view, the
property was worth less than had been paid for it. The plaintiffs decided to
move and to try to let the property. Then, in September 1991, the metal support
for an access balcony on another block in the Rowner Estate failed. A careful
inspection revealed that the problem was widespread. The plaintiffs were unable
to maintain payments under the mortgage, so Allied Dunbar repossessed, and, in
April 1993, the property was sold for £6,000.
These proceedings
These proceedings were commenced on 26 October 1994. In para 6 of
the statement of claim, the plaintiffs asserted that the surveyor was negligent
in failing to point out that:
(a) large-panel systems buildings were known to be vulnerable to
structural problems;
(b) such buildings were difficult to weatherproof;
(c) the building had not had a detailed structural appraisal;
(d) in the absence of such an appraisal, it was unsafe to proceed
with the transaction, given the doubts about the structural condition of
large-panel system buildings and the known weatherproofing problems with these
buildings;
(e) the properties were likely to be expensive to maintain because
of potential problems with water penetration;
(f) there were likely to be problems with the funding of the
management company in a block of maisonettes of this sort, where the majority
of lessees were first-time buyers with modest incomes and the cost of any
structural work was likely to be considerable; and
(g) by virtue of (a) to (f) above, the property was worth
substantially less than £42,000.
It was also asserted that the surveyor was negligent in failing to
advise that it would be imprudent to buy/lend without a detailed structural
appraisal by a structural engineer. Further and better particulars were sought
of the allegations at (a) and (d) above, in response to which certain
publications were identified as sources of information available to the
defendants.
A defence was served on behalf of the first to fifth defendants
inclusive, the sixth defendant not having been served with the proceedings. The
defence denied negligence and drew attention to parts of the wording of the
Allied Dunbar valuation form.
At trial
Before the trial judge, Mr and Mrs Izzard gave evidence, and there
were called on their behalf three other witnesses — Mr Ronald Wilde, Mr
Christopher Ennis FSVA and Mr Kieran Godkin ARICS. Mr Wilde is a highly
qualified and experienced building surveyor. He is a Fellow of the RICS, and
was called to express an expert opinion as to what, in 1988, Mr Mead ought to
have known and what his report should have said. Mr Ennis was a surveyor who
had provided a homebuyers’ standard valuation and survey report in November
1988 in relation to another property in the Rowner Estate, and Mr Godkin gave
uncontested evidence as to what the value of 37 Samson Close would have been if
no mortgage finance had been available. His figure was £14,000. The judge also
had available a number of valuations made by other surveyors in relation to
other properties in the Rowner Estate, which indicated that the figure of
£42,000 was not out of line. However, Mr Wilde, who the judge found to be an
impressive and impartial witness, asserted that:
(a) By 1988 it was known to competent surveyors that buildings such
as that of which 37 Samson Close formed a part gave rise to special problems.
As compared with conventional buildings, there was an increased risk of
structural failure, which could be very expensive to put right.
(b) Those who intended to lend or borrow on the security of such
buildings should not do so unless:
(i) there had been a structural appraisal of the building by an
engineer, which appraisal should be repeated at intervals thereafter; and
(ii) the arrangements for the payment of service and maintenance
charges were not such as to subject the intending purchaser to a very onerous
risk.
(c) Even on the best possible scenario (ie a clear structural
appraisal and a reasonable arrangement for the payment of charges), the ongoing
risks were such as adversely to affect the purchase price, but, in the present
case, where there was no structural appraisal and no real information as to
arrangements for the payment of charges, Mr Mead’s report should have had
advised against any advance of Allied Dunbar’s funds.
In other words, Mr Wilde’s evidence was broadly supportive of the
allegations in the statement of claim, and Mr Ennis was called because, in
general, his report (albeit a much fuller and more expensive report than the
simple valuation provided by Mr Mead) raised the concerns that Mr Wilde said
should have been raised. However, as Mr Daniel Pearce-Higgins, for the
defendants, emphasised, Mr Ennis’s valuation figure was well in excess of the
figure that Mr Wilde considered to be appropriate.
Defence case
Mr Mead gave evidence for the defence, and so did Mr Peter Powell,
who is a Fellow of the RICS employed by James Harris, chartered surveyors, of
Petersfield. Mr Powell was called as an expert, but, as the judge pointed out,
he mistakenly approached this matter on the basis that he was dealing with a
defects case. Mr Peter Smith QC, for the plaintiffs, put to Mr Mead in
cross-examination, and Mr Mead accepted, that the Rowner Estate represented his
only experience of valuation reporting in respect of system-built flats and
maisonettes, and, as properties in that estate were not on the market until
late 1985 or 1986, his experience of such properties was limited. Assuming his
figure of £200 pa for service charges in respect of the relevant property was
correct, the obligation was, it seems, to pay 0.95% of the cost of six blocks,
so the total expenditure on all six blocks was only in the region of £20,000
pa. Mr Mead was not surprised because he said:
The only feature of which I was aware which might cause high
maintenance would have been damp penetration. But at the same time, having
inspected similar properties, I had never come across damp penetration in any
of the units.
In fact, 37 Samson Close was adversely affected by damp penetration
soon after it was occupied by the plaintiffs, and, although
to system-built properties of this type.
Eventually, Mr Smith asked:
Q Your report therefore gives, does it not, a misleading
impression because it fails to anticipate or deal with potential exposure on
service charges which might arise in properties like this?
A Yes.
Mr Smith then asked what Mr Mead did to acquire expertise in
valuing system-built properties and received the answer:
Specifically I cannot answer, but the sort of actions I would have
taken would have been to discuss it with other valuers and surveyors both in
the firm and friends, and probably with the local authority building control
officer.
Mr Mead was then asked about textbooks and about articles that had
appeared in professional publications, such as Estates Gazette and Chartered
Surveyor Weekly. He said that after the Ronan Point disaster in 1968,
everyone was cautious, but, from what he had read, the Jesperson system was
clear. Mr Mead said that the Building Society Valuer by Richard J Byrom
was a textbook with which he was familiar, and to which he referred. He then
retracted that admission, and accepted that it was unfortunate that he was
unaware of the recommendation in the book that:
A building society valuer should not recommend a property with
this form of construction as suitable security unless a comprehensive and
entirely satisfactory consulting civil or structional engineer’s report on the
building is provided.
It is worth noting, in passing, that the recommendation is
addressed to ‘a building society valuer’, not someone doing a full structural
survey. Another textbook, by Malcolm Hollis, in its 1986 edition, stressed the
need to investigate service charge liability, and contained this paragraph:
From the foregoing you will have seen there are a number of likely
failures within this type of building that cannot be investigated within the
routine mortgage house or flat buyers report or even a structural survey…
unfortunately in this case it will mean that you are very restricted in the
extent of identification of the defects that may be present in the building.
Because of this it is important that you confirm your instructions carefully
and qualify your report so that your client is also aware of the limitations of
your report. You may also wish to point out the advisability of a more detailed
and destructive investigation of the fabric, provided the vendor will give
approval.
Mr Mead was asked:
Q Would it not have been better, Mr Mead, if you were embarking on
a new type of property for the first time that you would have read sources like
this so as to be fully familiar with problems that might affect this type of
building?
A In hindsight, yes, and if I had known of their availability.
The question of availability was then explored, and it became clear
that the texts were readily available. Mr Mead was then asked about Building
Research Establishment papers, of which he was unaware. He said that ignorance
was excusable because this was only a mortgage valuation. Mr Smith pressed for
clarification:
Q You do not think it is necessary when preparing a mortgage
valuation to warn the lender and borrower that this building does not have the
kind of appraisals as then recommended by the BRE. Is that your answer?
A No. I should have been aware.
Q And you were not aware, and you did not refer to it, did you?
A No.
Mr Mead was asked to look at the Chartered Surveyors Weekly
for 25 June 1987, with which he claimed to be familiar. It drew attention to
the BRE papers, and he was asked:
Q Now that paragraph surely shows that you should look at those
papers as part of the valuation exercise, does it not?
A Yes.
Q You did not, did you?
A No.
The cross-examination continued:
Q Follow the BRE guidelines and then following those you can then
make recommendations as to advances or not, as the case may be. That is the
position, is it not?
A Yes.
Q So the following of the BRE guidelines is the crucial point, is
it not?
A Yes.
Q You did not follow them, did you?
A No.
Both counsel and the judge explored the question of what
pre-reading could be expected before undertaking a mortgage valuation, and
counsel asked:
Q You cannot half read up on it. It leaves you half trained, does
it not?
A Yes.
In the Chartered Surveyors Weekly for 22 October 1987 there
was another article about LPS dwellings, which Mr Mead believed he had read. It
said:
Jesperson appears to be typical of concrete systems in as much
that its problems are not so much structural as psychological and aesthetic,
with severe water condensation problems thrown in because of the poor
insulation standards of the time.
The article continues:
A close study of the BRE research, their guidelines on appraisal
and conducting such appraisal and repair programmes as openly as possible is
now the only way forward for hundreds of councils and hundreds of thousands of
tenants.
Mr Mead agreed that would be equally applicable to an intending
purchaser, and counsel asked:
Q And none of those safeguards are applicable to this block, are
they? That is right is it not?
A Yes.
Finally, Mr Mead had his attention drawn to an article in Estates
Gazette for 18 July 1987 headed: ‘A Concrete Problem for a Surveyor’. He
accepted that he might well have read it. Early on the writer says:
For later purchasers of former council-owned houses… the
importance to mortgage surveyors is the fact that if the type of construction
is overlooked — even if no defects are immediately apparent — the only compensation available to a
purchaser who relies on that report and proceeds to purchase lies in an action
in negligence against the surveyor.
There is then a discussion of the structural problems that can
arise, and a reference to the BRE studies, which enabled counsel to extract
from Mr Mead the admission that he really could not do his job without reading
the BRE studies. The article continues:
Depending on the extent of deterioration, the need for remedial
work, together with the inconvenience to the occupier will feature large in the
surveyor’s report: the fact that repairs may be uneconomic will often be the
advice to the prospective purchaser and his lending institution. Even if
preventative measures are viable, there is no guarantee that further
deterioration will not occur in other parts of the structure, while the
recommendation for regular future inspections, even for houses where no defect
at all is yet apparent, will hardly endear a house to prospective purchasers.
A little later the writer says:
Purchasers considering buying one of these houses if it is offered
for sale on the open market…should be warned that they will acquire no rights
to make the original owner, the public authority, repurchase when the defects
later show through — they, or their surveyor, should have been aware of the
defects. It is here that the surveyor carrying out a mortgage survey, let alone
a housebuyers report, should proceed with great caution.
The article concludes:
The building industry and politicians took much pride in the way
in which the post-war housing problem was alleviated by using innovative
building techniques, but the problems now arising from the design of the
systems which
— and of their surveyors.
Mr Mead conceded that he did not proceed with caution. No doubt, if
he had the information that he conceded that he should have had, he would have
acted differently. He was asked:
Q Your report gave none of the health warnings, did it, that it
should have done when considering this type of property for this type of buyer
for this amount of money?
A No.
It is not surprising that in his judgment the judge said:
In the light of the evidence of Mr Mead there was little scope for
expert evidence on the defendant’s behalf. There was nothing that Mr Powell, or
anyone else, could have done to assist.
None the less, Mr Powell was called and he too found himself in
difficulties. He had apparently little experience of carrying out mortgage
valuations on system-built properties, and he conceded that the property in
question might be affected by defects that could not be found without a
detailed inspection. He too was asked to look at the literature, and he found
himself facing problems to which he, like Mr Mead, had no answer. Mr Smith
asked:
Q Tell me this, Mr Powell, the fact that a building might suffer
from the kind of problems that have been identified in these various reports is
going to affect its value, is it not?
A Yes.
He was then asked:
Q Would you in your capacity as an expert feel that it would be
appropriate for a valuation surveyor not to be aware of the recommendations of
the BRE?
A They should have been aware of them, my lord, yes.
The judge said that he found the evidence of Mr Powell less
impressive than that of Mr Wilde, and that really the defendants’ only point
was that a great many others carrying out similar valuations on the Rowner
Estate were making similar errors. That, of course, was a clear reference to
the written valuations that had been placed before the judge, and that emanated
from surveyors who were not asked to testify.
Judge’s conclusions
The judge considered the extent of Mr Mead’s duty of care. He
pointed out that although a building society valuation is only a limited
appraisal, there is still a duty to take reasonable care when carrying it out:
see Roberts v J Hampson &Co [l990] 1 WLR 94*. Both lender and
borrower wanted to know the value of the property, and, as the judge found, Mr
Mead missed two factors that had a potentially significant bearing on the
value: (1) the need for a structural appraisal; and (2) the possible extent of
maintenance charges.
*Editor’s note: Also reported at [1988] 2 EGLR 181; [1988] 37 EG
110
Mr Mead was negligent because ‘he should have searched the
literature or have taken other appropriate steps to obtain the necessary
information to be able to make a skilled professional valuation of the
property’. The judge rejected the argument that Mr Mead’s conduct could be
excused because he was doing the same as other surveyors carrying out
valuations on the Rowner Estate at the time. For reasons advanced by Mr Wilde,
and clarified by the cross-examination of Mr Mead and Mr Powell, what Mr Mead
did was simply not what was required of a competent surveyor. Having heard the
evidence of the plaintiffs, the judge was satisfied that they relied upon Mr
Mead’s report when deciding whether to purchase, so his negligence was the
cause of any recoverable loss they sustained.
Damages were awarded under four heads: (1) loss of value, being the
difference between the price paid (£42,000) and Mr Godkin’s valuation of
£14,000; (2) an agreed sum of £250 for storage heaters; (3) £476.57, being the
cost of mortgage payments less credit for rent in respect of the period after
the plaintiffs had moved and before the property was repossessed; and (4) the
sum of £9,600 related to the bank loan. As a result of a recent decision of
this court, it is now common ground that damages should not have been awarded
under this head.
There was also an award of interest, the amount being agreed.
Appeal — liability.
Mr Pearce-Higgins put forward four grounds of appeal in relation to
liability.
1. His first submission is that the judge should not have accepted
the evidence of Mr Wilde as setting the standard of a reasonably competent
valuer carrying out a mortgage valuation in November 1988. It is pointed out,
rightly, that Mr Wilde was a building surveyor who had not carried out a
mortgage valuation since about 1980. It is said that his evidence is ‘wholly
theoretical and by reference to contemporaneous literature’. No one, it is
said, was produced who advised as Mr Wilde said that Mr Mead should have
advised. In my judgment, this ground of appeal is hopeless. Mr Wilde was
clearly a witness of great experience in the relevant field, as can be seen
from his curriculum vitae. He said what a competent surveyor should have done
to arm himself with the requisite knowledge, and in the end both Mr Mead and Mr
Powell agreed with him. If the defendants had been able to call any witness to
say that it was excusable to embark on a valuation without some knowledge of
the warnings that appeared in the literature, or that, in practice, it was
acceptable not to give effect to those warnings in a valuation report, then the
position might have been different, but, in the end, there was no such evidence
before the judge. So, as he rightly said, ‘there was no evidence before me as
to any alternative acceptable professional practice’. Mr Pearce-Higgins
submitted that such evidence could be found in the practice of other surveyors
as evidenced by their valuations, but after the judge heard the evidence of Mr
Wilde, and the cross-examination of Mr Mead and Mr Powell, he could hardly be
expected to accept that the practice of others who followed the same course as
Mr Mead was an acceptable practice without hearing from any of them. In many
cases, what other professionals do is persuasive evidence as to what is
acceptable (see, for example, Bolitho (Dec’d) v City and Hackney
Health Authority [1998] AC 232 at p241), but such evidence cannot be
conclusive, and here the weight of evidence was clearly as the judge found it
to be.
2. The second ground of appeal is that the judge ‘should have
found, on the basis of contemporaneous literature reasonably available to a
valuer such as Mr Mead… that his advice was that of the reasonably competent
valuer’. I do not understand how, in the light of the evidence summarised
above, this ground of appeal can be regarded as arguable.
3. Then it is said that the judge ‘incorrectly dismissed the
evidence before him of the practice of other valuers giving mortgage valuations
on properties similar to the subject property, both before and after November
1988. Those valuation reports provided the best evidence of acceptable practice
at the material time.’ For the reasons that I have attempted to explain, the
judge, in my opinion, was right to regard the practice of other valuers as
being in the end of little weight compared with the evidence of those who
testified before him. It was certainly not the best evidence of acceptable
practice at the material time.
4. Ground four adds nothing to the preceding grounds.
Appeal — quantum
Two points are taken in relation to the award of damages. First, it
is said that the judge fell into error in determining that the value at the
material time was £14,000, but once it was accepted that the warnings should
have been given, and that, in the absence of a structural appraisal and more
information as to service charge liability, Mr Mead should have refused to
certify that the property was suitable for mortgage purposes, it would seem to
follow that its only reliable value was the price it could command without
support from a mortgage lender. As to that, Mr Godkin’s figure of £14,000 was
the only evidence. I accept that the judge, having seen and heard the
witnesses, could have come to the conclusion that a reasonably competent
valuer, practising in the relevant area, would have warned of the need for a
structural appraisal, and of the risk of a high demand for service charges, and
would have made some downward adjustment to his valuation to reflect those
factors, but would not have declined to certify that the property was
suitable for mortgage purposes. As can be seen from the judgment of Brooke LJ,
there was available to the court a body of material that could have been relied
upon to support that conclusion, but, as it seems to me, the judge was entitled
to prefer, as he plainly did, the evidence of Mr Wilde in relation to
certification. It may be that if the emphasis at trial had been less on
liability and more on quantum, the judge would have been persuaded to take a
different view, but I, for my part, am not persuaded that it is open to us in
this court to differ from the judge’s conclusions on an issue that depended so
much upon his evaluation of the oral evidence, and if his conclusion is
maintained, then, as it seems to me, his approach to the measure of damages was
correct. Indeed, neither side before us contended otherwise.
I accept Mr Pearce-Higgins’ final submission that the award in the
sum of £476.57 should not have been made, for the two reasons that he gave,
namely that it formed part of the loss for which the plaintiffs are properly
and fully compensated by the main award, and, second, that the plaintiffs
cannot have increased the damages that they are entitled to recover from the
defendants simply because they chose to let rather than to sell the subject
property in August 1991. I would therefore reduce the award made by the judge
by deleting items 3 and 4. That leaves the total of £28,250 plus interest,
which will need to be recalculated, and costs.
Conclusion
I would therefore dismiss the appeal in relation to liability, and
allow the appeal in relation to quantum to the extent that I have indicated.
Agreeing, WARD LJ
said: I have read the judgments of Kennedy and Brooke LJJ in draft.
As Scott Baker J recorded, Mr Ennis described the property, which
he valued in these terms:
The property is of a type that may not be considered suitable
security by some building societies, and, as a consequence, resale of flats of
this type may prove difficult.
The judge regarded that evidence as important because:
It shows that within days of the plaintiffs’ valuation another
surveyor who reported on another property close by in the same complex was
raising question marks about the soundness of the investment. First, he
questioned the willingness of some lenders to lend on this type of structure,
and, second, he warned about the liability for communal charges.
If that opinion was tentative, Mr Wilde’s was not, as this passage
from the cross-examination makes clear:
Q Then, ‘Notice to borrowers’, that is just the warning there.
Then the advice at the bottom to Allied Dunbar, where they say the property is
suitable for mortgage purposes, you say that they should have said it is not
suitable for mortgage purposes?
A Yes.
Scott Baker J: Sorry?
Mr Pearce-Higgins: The declaration to Allied Dunbar, ‘I certify
the property described above has been inspected… takes account of all matters
known to me and that the property is suitable for mortgage purposes.’ He should
not have signed that declaration?
A I think so, yes.
Q What else do you say he should have put in the report other than
its value as £14,000 and it is not suitable for mortgage?
A He should have advised that there is likely to be a high
expenditure on maintenance, and that it has not been appraised, and unless it
has been appraised…
Scott Baker J: Just a minute. ‘High expenditure…’
A On maintenance on this type of property, and that it needed an
appraisal by an engineer before it could be accepted as having adequate life
for the period of the mortgage.
Mr Pearce-Higgins: That is it then. In fact all of that could be
completely unnecessary, because if he gives a value of £14,000 and says he will
not give a certificate for mortgage purposes, that would be the end of the
matter?
A Yes, in so far as he considered the borrower reading his report
as well as (sic) the Society, I think he should do that.
The judge said of this evidence:
I found Mr Wilde to be an impressive and impartial witness, and I
accept his evidence.
The evidence called by the defendants was totally discredited. Mr
Mead, a palpably honest witness, admitted he had not read the relevant
literature and that, had he done so, he would have proceeded differently. In
effect, he admitted his negligence. Mr Powell, the defendants’ expert, had to
concede that he had approached the case with a complete misunderstanding of the
nature of the allegations made against the defendants, and he, too, was totally
discredited in the destructive cross-examination of him. There was no other
evidence before the judge.
The judge’s conclusions were:
I reject the defendants’ Bolam argument that Mr Mead was
doing no more or less than all the other surveyors who carried out valuations
on the Rowner Estate at the time. The plain fact is that there was no evidence
before me as to any alternative acceptable professional practice. There is no
evidence of a respectable body of professional opinion with a contrary view to
that of Mr Wilde. Mr Powell failed to address the question at all, approaching
the case on a defects basis. I conclude that Mr Mead failed to meet the
appropriate standards.
It is obvious to me that the judge had the proper standard well in
mind. The literature of which a reasonably competent surveyor ought have been
aware pointed ineluctably at the risks. The incompetent do not set the
standards. Neither do the experts. Nothing in the judgment suggests to me that
the judge failed to address himself to the correct standard, which is that of
reasonable competence. This court is not entitled to reverse that conclusion
merely as a result of our own comparisons and our views of the probabilities of
the case. Not that I think that the judge was wrong — on the contrary, he came
to the only conclusion that was available to him on the evidence, and, in my
judgment, he came, moreover, to a right conclusion.
The judge was also entitled to proceed upon a basis, and by
implication did proceed upon a basis, that Mr Wilde was also correct in his
opinion that:
In the circumstances, the true value of the property at the
material time was the price that any buyers, other than those who wished to buy
it with a mortgage for their occupation, would have been prepared to pay for
the properties on the open market.
Mr Godkin valued on that basis. It was the correct basis. The
comparables constituted by contemporary valuations for other building society
purchasers were not comparables at all, for like was not being compared with
like. The other valuers were asserting that their properties were fit to be
mortgaged. This property was not. The judge was fully entitled to accept Mr
Godkin’s valuation; indeed, it was hardly challenged. There being no dispute
that the measure of damage was the difference between the price paid and the
value on the limited open market, the appeal against the award of damages under
this head must fail.
Accordingly, I agree with Kennedy LJ that the appeal be dismissed
save to the limited extent of £476.57.
Dissenting on quantum, BROOKE
LJ said: I have encountered no difficulty in concluding that on the
evidence Mr Mead was negligent. I have encountered much greater difficulty than
the other two members of the court in determining the appropriate measure of
damages that ought to be paid as a result of his negligence. The reason is that
I regarded the way that the plaintiffs put forward their claim for damages,
which was accepted by the judge in a very short paragraph without any critical
analysis of any kind, as wholly unreal. I therefore found it necessary to
subject the evidence in the case to detailed scrutiny in order to see whether
the judge’s truly remarkable conclusion stood up to a suitably critical
examination.
The majority of the court, with whom I have the misfortune to
differ, has attached great weight to the way in which this very experienced
judge accepted the evidence of Mr Wilde, whom he found to be an impressive and
impartial witness. They have a good deal of authority to support them in this
approach. Although this is an appeal by way of
Area Health Authority [1993] 4 Med LR 117 per Mustill LJ at p142.
The judge saw and heard the witnesses, including the expert witnesses, and his
view as to the weight he should give to their evidence cannot be overlooked or
devalued: Hontestroom v Sagaporack [1927] AC 37 per Lord
Sumner at p47; Eckersley v Binnie (1988) 18 Con LR 1 per
Bingham LJ at p77; and in relation to expert witnesses, Wilsher v Essex
Area Health Authority [1988] AC 1074 per Lord Bridge at p1091G. As
Bingham LJ said in his dissenting judgment in Eckersley v Binnie
at pp77-78, in these circumstances a coherent reasoned opinion, expressed by a
suitably qualified expert, ought to be the subject of a coherent reasoned
rebuttal unless it can be discounted for some other good reason. In this case,
the task of discounting the evidence of the plaintiffs’ expert is made the more
formidable because the judge, in my judgment, rightly discounted the evidence
of the defendants’ expert.
In this judgment, I set out my reasons for concluding, after a
detailed analysis of the whole of the evidence, that there is ‘some other good
reason’ in this case for an appellate court, although it has not had the
judge’s advantage of seeing the witnesses, to depart from the conclusions the
judge impliedly expressed on the appropriate measure of damages. I use the word
‘impliedly’ because he does not explain how he thought it reasonable to
conclude, many years after the event, that every single valuer and every single
institutional lender who was concerned with the market of buying and selling
flats and maisonettes on the Rowner Estate in Gosport between 1986 and 1991
was, to use Ward LJ’s phrase, ‘incompetent’. I would have expected to see some
fairly rigorous analysis of the whole of the evidence before the judge reached
such a remarkable conclusion on the basis of the evidence of a single expert.
Since the judgment contained, for all practical purposes, no such analysis at
all, it appears to me that the advantage the judge had in seeing Mr Wilde is to
a considerable extent discounted by his failure to show that he clearly
understood the logical consequences of Mr Wilde’s evidence. If he had conducted
such an analysis and found these consequences to be as extraordinary as I
consider them to be, this could well have led him to reconsider the extent to
which he was willing to place reliance on the evidence of this single witness.
I therefore go back to first principles. In Banque Bruxelles
Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 it was held
by the House of Lords that the duty of a valuer was to provide his clients with
a correct valuation of the property being valued, and that a correct valuation
was the figure that a reasonable valuer would have considered it most likely to
fetch if sold on the open market: see Lord Hoffmann at p221G.
The evidence before the judge showed that, when Mr Mead sent his
valuation to Allied Dunbar, there was a very healthy market in the properties
on the Rowner Estate. Mortgage finance was plentiful, and the different
mortgage valuers were reporting to their clients in much the same way as Mr
Mead reported to his. I have collected together in Schedule 1 to this judgment
examples of the manner in which different valuers were reporting, and the terms
in which they were reporting. So far as the different valuers are identifiable,
I have called them A, Bl, B2, C and so on. Three different valuers, all of them
Fellows of the Royal Institution of Chartered Surveyors, were involved from one
firm, which carried out the majority of the valuations recorded in the papers
before the court, and these I have called B1, B2 and B3.
Although one leading building society was involved with more than
half these transactions (and a member of its in-house staff appears to have
done one of these valuations himself), two of the major clearing banks each
advanced finance on two occasions, and two other building societies are also
mentioned in the valuation reports that are before the court. A total of 807
dwellings on the Rowner Estate were disposed of by the Ministry of Defence
between about 1984 and 1991. 479 of them were eventually let to the local
authority on comparatively short leases, the last such lease being executed in
1991. The other 328 were sold to developers who refurbished them and sold them
on long leases, like the 999-year lease in the present case, to private
purchasers. In addition to the properties whose values are set out in the
schedule to this judgment, Mr Harris, the defendants’ expert witness, adduced
evidence in a schedule of comparables which showed that six properties of this
type were sold at prices between £38,995 and £41,000 between June and December
1998.
The judge, in effect, held that all these valuers fell below the
appropriate standard of care because they failed to advise their lender clients
of two matters. First, that they ought not to advance money on any of the
Jesperson system-built dwellings on the Rowner Estate because they had not been
subjected to a full structural appraisal. Second, that they ought to be very
wary of using these properties as security for a loan because their mortgagors
might default, being unable to cope with the uncertain and potentially onerous
liability to pay maintenance charges on a number of system-built blocks that
was required of a private leaseholder on an estate like this. In other words,
they should all have asserted, in Mr Wilde’s opinion, that the properties they
had inspected were not fit to be mortgaged, and downgraded their valuations
accordingly.
While it is always open to a judge, in an exceptional case, to
disregard strong evidence of the contemporary practice of a number of other
professional men who followed the same practice as that of their professional
colleague who is charged with professional negligence, he should, in my
judgment, be very cautious before, in effect, he holds that they all fell below
the standard of care that was appropriate in the circumstances, simply because
he is attracted by the evidence of a single expert witness, however
distinguished, who has given evidence in his court on behalf of a plaintiff. It
is not only all the valuers mentioned on my schedule who are being impliedly
treated as having been guilty of negligence but also, inferentially, all the
other valuers who advised the mortgagees who advanced mortgage finance to the
remainder of the 328 private purchasers: I do not know of any evidence to the
effect that any significant number of them bought without the benefit of a
loan. Even Mr Ennis, who adopted a more cautious approach than other valuers,
valued the property he inspected in November 1998 at £40,000, and this
valuation was written off by his fellow witness for the plaintiff as
‘hopelessly incorrect’.
It was in these most unusual circumstances that the judge was
persuaded that he ought to assess damages on the basis that the actual market
in the autumn of 1988 (and, indeed, the market in these properties that
flourished between about 1986 and 1991) was a completely false market, peopled
by many negligent valuers, and, rather more surprisingly, by credulous banks
and building societies lending money at a time when the problems of
system-built properties were very much in the news, so far as this type of
institutional lender was concerned. The judge therefore felt that he had to
seek, and that he was entitled to rely on, a wholly unconventional way of
measuring the plaintiffs’ loss. He did this in a single paragraph of his
judgment, which reads:
The plaintiffs called Mr Kieran Godkin to establish the true value
of the property when they bought it in 1988. Some criticism was made that his
method of valuation was hypothetical. Traditionally, valuers work on
comparables. That was not possible in this case. I accept his valuation of
£14,000 in the absence of any alternative.
The judge was not bound to follow this approach. An award of
damages is in the nature of a jury award; see Monarch Steamship Co Ltd v
A/B Karlshamns Oljefabriker [1949] AC 196 at p232. It was therefore the
duty of the judge to test the validity of the assumptions that led Mr Godkin to
produce a valuation of the Izzards’ property in 1988 that was only about
one-third of the value for which properties like theirs were passing hands at
the relevant time. If he had carried out this test in an appropriately critical
manner, it might have led him to revisit the basis upon which he had held Mr
Mead to have been negligent.
Mr Godkin was first instructed in July 1996 to prepare his
valuation as at December 1988 on the basis that:
the true value of the property at the material time was the price
that any buyers, other than those who wished to buy it with a mortgage for
their own occupation, would have been prepared to pay for the properties on the
open market.
Mr Godkin started by producing a schedule of comparables, which
shows that between November 1995 and July 1996 properties on the estate were
being sold for an average price of £11,000. He explained that these prices were
generally lower than they had been at any time since the properties were first
released to the public in the early 1980s, apart from the period starting in
1991, when prices had dropped following the discovery of the failure of the
concrete balconies that gave access to the maisonettes on upper floors. He
attributed the blight on the estate in 1996 to the non-traditional construction
and limited lifespan, which had caused defects and/or perceived defects,
together with the high maintenance charges for leaseholders (currently
fluctuating at £300-£500 pa) and the possibility that purchasers might have to
bear a share of future repair or refurbishment costs on the estate.
In July 1996 there were very few mortgage lenders that would loan
money on these properties. The main body of demand was derived from speculative
cash buyers who bought for the purpose of letting to tenants, a type of
purchaser that did not exist in 1988. In those circumstances, Mr Godkin was
constrained to rely for his valuation solely on the prices that had been
achieved on recent sales to cash buyers who were presumed to be aware of the
problems associated with these properties. This exercise produced a valuation
of £10,000 as at July 1996, which he extrapolated back to December 1988 as a
value of £14,000. He explained that the adjustments he had made included
allowance for differences in the condition of the property and of the estate in
general, the age of the property, given its limited life expectancy, changes in
private rented sector legislation, and market demand.
In December 1997 Mr Godkin addressed the question of blight at
greater length. He did not think that the wider differential in values now exhibited
between these properties and those of more traditional design (as compared to
the narrower differential that existed at the time of purchase) could be
exclusively attributed to the failed balconies. He believed that there might
still be a general perception among local people that the flats were
structurally unsound, and he explained the sort of problems that generally
well-informed people would take into account when making their bids: problems
associated with defective external joinery and possible water penetration, for
instance, and the risk that further structural defects might come to light. By
December 1997 the market had picked up a bit, and Mr Godkin gave a present
valuation of £14,000. He did not alter his earlier December 1988 valuation of £14,000.
In his evidence at the trial, Mr Godkin explained that he had grown
up in Gosport, although he did not return there as a surveyor and valuer until
1989. He had never visited the Rowner Estate on a professional basis until he
was first instructed to visit it in 1996 in connection with this litigation,
although he remembered that, in the middle of 1988, he had deterred a member of
his family from buying a property on the estate because he believed that the
non-traditional nature of the construction, and the fact that the flats or
maisonettes were subject to service charges, might mean that they were
susceptible to the vagaries of the market in the longer term. He accepted that
if building societies did not deem these properties to be suitable for lending,
the price of all the properties on the estate would fall dramatically. He also
accepted that, because of the general decline of property values in 1991, when
mortgage money was still available, the value of Mr Izzard’s flat in the summer
of 1991, before the balconies collapsed, would have gone down to about
£25,000-£27,000.
It is not apparent from the transcript that any substantial dent
was made on the opinion expressed by Mr Godkin. On the other hand, the basis
upon which he was asked to express an opinion as to value was completely
artificial.
It was, indeed, so completely artificial that it led me to consider
in much greater detail the evidence before the judge as to the history of
system-built properties in this country between 1979 and 1988, before going on
to consider the evidence of the other professional witnesses at the trial.
As Kennedy LJ has said, Mr R J Byrom, the author of The Building
Society Valuer, published in 1979, included warnings about pre-cast
concrete system buildings, which, he said, would normally be found in blocks of
flats several storeys high. He recommended that a building society valuer
should not recommend a property with this form of construction as suitable
security for a mortgage unless a comprehensive and entirely satisfactory
consulting civil or structural engineer’s report on the building was provided.
He said this because of the doubts that had been expressed about the continuing
structural stability of a small proportion of properties of this type of
construction.
In the 1980s the political climate changed. The Conservative
government was anxious to encourage homeownership, and, during that decade,
many system-built dwellings were sold to owner-occupiers with the assistance of
mortgage finance, whether by local authorities under ‘right to buy’ schemes or
by other public sector institutions like the Ministry of Defence when it sold
off its system-built married quarters in Gosport.
Sometimes, when difficulties aroused the consciousness of
politicians, parliament provided special provision to protect the purchasers of
such properties. One example is to be seen in the compensation scheme
introduced by the Housing Defects Act 1984 (now to be seen in Part XVI of the
Housing Act 1985), which, in its original form, had the effect of providing
financial help for the 16,000 owners of about 28 different types of
system-built public sector houses (as opposed to flats) that had been designed
before about 1960 and were known to be ‘defective by reason of their design or
construction’: see the 1985 Act, section 528(1)(a). Another example is to be
found in the amendments to Part V of the Housing Act 1985 (see sections 125(4)
and (4A) and 125A-C), which were introduced by the Housing and Planning Act
1986. These introduced into the statutory ‘right to buy’ scheme a requirement
that a landlord’s notice of purchase price must contain a description of any
structural defect known to the landlord, and an estimate of the likely service
charges or improvement contributions likely to fall on the purchaser in the
five years after he acquired ownership of the freehold or a long lease. Mr and
Mrs Izzard did not benefit from any statutory provisions of this kind.
During the 1980s, the Building Research Establishment (BRE) carried
out a number of studies of the problems that were affecting system-built
dwellings. In 1984-1985 it conducted a special investigation of
Taylor-Woodrow-Anglian, the large-panel system (LPS) involved in the Ronan
Point disaster in the late 1960s. At the beginning of 1986 the BRE published a
90-page report summarising the information it had received from 328 local
authorities in relation to 11 types of LPS buildings. The buildings in that
study were divided into those of up to four storeys and those of five storeys
and more, and the report also contained preliminary information about the
condition of the different systems.
In June 1986 the BRE published three information papers designed to
assist engineers in local authorities and elsewhere in the appraisal,
maintenance and repair of LPS buildings. These papers were primarily concerned
with the problem of ensuring weathertightness, and of detecting and remedying
defects in the seals between the different concrete blocks that were a
well-known cause of trouble and high maintenance costs.
In a book called Surveying Buildings, published in 1986, the
authors (Mr Malcolm Hollis and Mr Charles Gibson) included a section on ‘The
Inspection of Prefabricated Reinforced Concrete Dwellings’. In this section,
the authors stressed that a surveyor must not only identify correctly the
method of construction that had been used. He must also know the history of
that construction. Not every method of non-traditional construction was
defective, and he must ask: is this method of construction faulty? They
recommended to their readers a pamphlet published in 1984 by the Department of
the Environment (DoE) called ‘Housing Defects Act 1984, The Housing Defects
(Prefabricated Reinforced Concrete Dwellings) (England and Wales) Designations
1984, Supplementary Information’. This pamphlet showed photographs of most of
the more common types. Another valuable source of information on this topic
would be the local building inspector.
Mr Hollis and Mr Gibson pointed out that the concrete and the
reinforcement were the two places in which such a building was likely
to be vulnerable, although they were not the only parts that might be
defective. Because surveyors were likely to be restricted in the access they
were likely to have to potentially vulnerable parts, it was important that they
should qualify their report so that their client was also aware of its
limitations. They might also wish to point out the advisability of a more
detailed and destructive investigation of the fabric of the property they were
surveying, provided the vendor was willing to give approval.
In April 1987 the DoE annexed to one of its circulars some notes
for building society valuers on the valuation of system-built housing that had
been issued that month by the Building Societies’ Association (BSA). The
department said that valuers had a key role to play in a building society’s
approach to system-built housing. It was therefore important that valuers
should have the information they needed, including information about building
societies’ attitudes generally (a matter that was relevant to the question of
marketability) and about the approach of the particular society for whom the
valuation was being prepared, as well as technical information about the form
of construction under consideration. This circular also gave notice that a
further name had been added to the list of companies whose dwellings had
‘qualifying defects’ under Part XVI of the Housing Act 1985.
The BSA’s notes for valuers described clearly the problems the
market was facing in 1987. It explained how, for many years, valuers had
approached system-built housing very much in the same way as any other sort of
property, and how valuations of such property were often very much in line with
equivalent properties of traditional construction. In the early 1980s, however,
it became known that certain types of system-built properties were
likely to prove seriously defective within the term of a typical building
society advance. Doubts arose as to the long-term structural prospects of certain
types of these properties, and there was a substantial loss of confidence
in this sector of the market. [My emphasis.]
The BSA said that since then an enormous amount had been done to
overcome these problems. It mentioned the assistance that was available under
Part XVI of the Housing Act 1985, and the investigations being undertaken by
the BRE into ‘virtually all forms of post-war system building’. It explained
that these investigations, whose results were now beginning to emerge, were not
so much to give these systems a clean bill of health, since, in many cases,
there were no real grounds for concern, but more to provide a basis for the
realistic assessment of individual properties and to suggest what was required
in the way of future maintenance and repair. The BSA also described how much
more information was now available about system-built construction, and, in
particular, about ways in which individual types could be identified, their
geographical location, and their likely condition and lifespan.
Against this background, the BSA stressed that a building society
would not expect a valuer to reject a property out of hand simply because its
construction was system-built and for no other reason. Otherwise, a situation
might arise when a property might become unsaleable because no valuer would
recommend it to a society because he believed that other societies would not
lend on it, while no society would lend on it because valuers would not
recommend it.
The BSA expressed the view that it was likely that the vast
majority of houses of system-built construction that had not been designated
under the Housing Act 1985 would, with proper maintenance, have a life
comparable to that of houses of traditional construction. Of course, each
individual property had to be treated on its merits. Building societies would
expect their panel valuers to be familiar with the main types of system-built
construction to be found in their areas, and to have some idea, as part of their
local knowledge, of the record of the particular house types. A useful source
of knowledge in this respect might be the local authority. Valuers should also
be familiar with the main findings of any investigations carried out by the BRE
into systems prevalent locally.
Using local knowledge and experience, a valuer might often be able
to recommend a particular property without more ado. Or it might be proper for
him to recommend a more detailed investigation, such as a full structural
survey, because, for instance, the main structural members might be concealed
in the wall cavity. What they should not do was to reject a house out of hand
simply because it was system-built.
Although there was a time when valuers declined to proceed with a
valuation as soon as they realised the property in question was system-built,
that time had passed, and the BSA said that building societies and their
borrowers would generally prefer valuers to proceed with a recommendation (one
way or another) to the society concerned:
As with any other type of property, the valuation of a
system-built property will need to take account of all relevant factors and
should reflect any specific maintenance requirements that the property may
have. The aim is to arrive at a realistic valuation that will allow the society
to deal with the application on the same basis as they deal with applications
for mortgages in traditionally-built properties.
This, in my judgment, represented a very important source of advice
available to building society valuers at the time Mr Mead carried out his
valuation, reflecting as it did the expectations of building society clients at
the time. They would not have thanked him for advice in the form Mr Wilde
advocated at the trial. Although this important circular formed part of the
evidence in the case, the judge did not refer to it, or to its appendix, in his
judgment, although he did quote, without any supporting explanation, from one
paragraph of the summary of the general effect of the BSA’s valuation notes, which
was published in the Chartered Surveyor Weekly on 25 June 1987.
In July 1997 Estates Gazette published an article by a
lecturer at Birmingham Polytechnic that was concerned almost entirely with a
consideration of the defects in the concrete that was used by a number of
builders of system-built property in the immediate post-war years.
In the summer of 1987, the BRE published its report on the major
investigation it had conducted into LPS dwellings. Its main conclusion was that
no LPS buildings had been found that showed signs of structural distress
sufficient to give concern for the safety of people. In addition, no reports
had been received of any LPS building having failed to sustain the loads
experienced in service, including the fire loading.
The BRE had examined 15 different systems — low, medium and
high-rise — that between them represented about 80% of Britain’s total stock of
160,000 LPS dwellings. It published two reports; the first concerned with
construction issues, and the second offering ‘guidance on appraisal’.
Some of the systems it examined came badly out of the
investigation. For instance, there was serious criticism of Bison construction,
which made up about 23% of large-panel systems. Cebus, HSSB and Reema also came
in for criticism. Jesperson, on the other hand, received a fairly good bill of
health. Jesperson sites were investigated in both the South East and the North
West of England, and the report concluded that it appeared to be typical of
concrete systems, in as much as its problems were not so much structural as
psychological, with severe water condensation problems thrown in because of the
poor insulation standards of the time.
The judge was not shown the full text of this report, and I have
described it with the benefit of the summary that appeared in the Chartered
Surveyor Weekly dated 22 October 1997. Instead, he was shown the very brief
summary that appeared in a two-page BRE information paper and ended with the
passage headed ‘Guidance on Appraisal’, to which Mr Wilde attached much
importance at the trial.
This, then, was the background against which the defendants came to
make the valuation of 37 Samson Close in November 1998, which is at the centre
of this case. I turn to the evidence the judge received from professional witnesses.
Mr Ronald Wilde gave evidence on behalf of Mr and Mrs Izzard. He
was a chartered surveyor with immense experience, having first qualified in
1951. He had also qualified as a chartered building surveyor, and he accepted
that an ordinary chartered surveyor would not know as much as he did about
buildings and building techniques. He had been employed first as chief surveyor
and then as technical director by a leading timber treatment company until
1970, and, since
headed a special unit in his practice that had been instructed to advise on
many buildings of national historic or architectural importance, as well as a
very large number of buildings of lesser national importance. His advice has
been sought by many of the leading property-owning institutions in the land,
and he has given evidence in court many times. He is a Fellow of the Academy of
Experts and a Fellow of the Chartered Institute of Arbitrators, and he has been
an arbitrator in many disputes relating to the condition of buildings. He has
also written learned articles in professional journals and has lectured
extensively.
Mr Wilde first visited the Rowner Estate in 1992 and inspected the
Izzards’ property for the first time the following year. He eventually came to
be instructed on behalf of 19 potential claimants on the estate. He was of the
opinion that all the valuers whose reports he had seen had fallen below the
standard of care reasonably to be expected of a mortgage valuer. As I have
said, when asked about Mr Ennis, the witness for the plaintiffs who had
performed a much more detailed survey on a property two blocks away from the
Izzards’, Mr Wilde asserted to the proposition that he had assessed the risk
‘hopelessly incorrectly’. Mr Wilde had strong views, based on a lifetime’s
experience, which he was not afraid to express. He accepted that he knew
nothing at all about values in the Gosport area, and that he had not carried
out a mortgage valuation himself since 1980, although he was very well aware of
the difference between such a valuation and a fuller structural survey.
The plaintiffs did not call any other expert witness who had a
closer familiarity with the practice of local valuers providing mortgage valuations
for a small fee in a small town like Gosport, and with the standard of care
reasonably to be expected of them in the circumstances of this case, and this
gap in the evidence provided a difficulty for the judge to which he did not
allude in his judgment.
Mr Wilde did not criticise Mr Mead for failing to spot any defects
that would have been evident on his inspection. He said he was not in a
position to do so because he did not inspect the Izzards’ maisonette until five
years had elapsed since Mr Mead’s inspection. He would not have been critical
of any surveyor who had failed to spot the weakness in the balcony supports
that came to light in 1991. He also accepted that most buildings erected in the
1960s were not properly insulated, whether traditional or non-traditional, and
he had no criticism of Mr Mead in that regard.
He told the judge that a mortgage valuer has to make a general
appraisal of the property being valued, as opposed to a detailed and systematic
inspection. In a case like this, the appraisal must cover the block, or all the
blocks, for which the lessee will have to share the cost of repairs, and, in
the absence of specific instructions, Mr Mead must have deduced that the
liability would cover at least one block. It was common ground between Mr Wilde
and Mr Mead that a low maintenance liability would be reflected in a higher
valuation, and vice versa. Mr Wilde said, however, that a problem about blocks
like these was that maintenance tended to be expensive, as the 1986 BRE paper
warned, and that a low annual maintenance charge might hide the fact that the
management company was not spending enough on the property, and, in particular,
that it was not building up a proper sinking fund to cater for long-term
structural or maintenance problems. He accepted that the charges of £300 pa
actually levied on the Izzards during the three years in which they occupied
the property were not out of the ordinary.
Mr Wilde accepted that a major building society will itself possess
a lot of in-house information, and that all the big ones employed their own
staff valuers. He said that this did not relieve a valuer from the
responsibility of warning his client of the known risks of a non-traditional
type of construction. (Mr Mead, for his part, could not remember if Allied
Dunbar had a survey department or whether he had had a telephone conversation
about the Izzards’ property with anyone at that company. He was aware that one
or two building societies declined to lend on property on the Rowner Estate,
adding that some societies would not lend on all sorts of different kinds of
property.)
Mr Wilde explained that a mortgage valuation is an exercise in risk
assessment, and that from the valuer’s assessment of risk both the lender and
the borrower can make an informed judgment. The valuer should assess the risk
on the basis of the knowledge that was or should have been available to him.
All surveyors come across unusual properties from time to time and, if they do,
they have to do what they can to find out about the building they are being
asked to value.
He told the judge that the properties on the list maintained under
the Housing Defects Act were, for the most part, not LPS buildings. They were
mostly concrete-frame houses. The private sector had never really involved
itself in building LPS flats. This was the reason why, in Mr Wilde’s opinion,
the flats and maisonettes at Gosport presented such a challenge to the local
valuers because they had never had to value non-traditional LPS flats and
maisonettes like these before.
Because this was something quite new in the domestic private
housing market, Mr Wilde decided that he ought to adopt a logical approach when
considering the way in which the hypothetical reasonably competent valuer
should undertake his task. He said that unless he happened to have a close and
detailed knowledge of the nature and problems of LPS buildings, he would be
obliged to conduct a search for any published technical material on the
subject, and that he would have received virtually no help from the Institution
of Chartered Surveyors’ 1985 Guidance Notes. In 1988 this search would
certainly have led him to the 1986-1987 series of BRE information papers, even
if it had taken a conversation with another valuer or surveyor to lead him to
them.
The problem with valuing such buildings was that one could not
detect by eye the potential or actual problems lurking in the building. Even on
a fuller structural survey, a surveyor cannot actually resolve the risk.
Mr Wilde was adamant that the recommendation in the 1987 BRE paper,
that all LPS buildings should be subject to a full structural appraisal if they
were required to exceed 25 years of service life in all, should have been
brought to the attention of both the lender and the borrower.
He accepted that that paper had reported that the quality of the
reinforced concrete pre-cast components in LPS buildings had been found in the
BRE study not to be significantly better or worse than that of pre-cast
components in other forms of construction in that period. He also accepted that
the BRE investigators had visited three Jesperson sites and found nothing
untoward so far as their structure, as opposed to their insulation qualities,
was concerned. He also agreed that in the year after Mr Mead’s inspection, a
firm of structural engineers had made a structural check on four blocks of
flats in two of the other roads on the estate and reported that they were
structurally sound, and that the structural components of those blocks would
meet the age requirements of 60 to 100 years. He maintained, however, that
similar clearance could not be given to any other block on the estate
(including 37-48 Samson Close) unless and until an engineer had made a detailed
appraisal of that block. Although the BRE report had given the Jesperson system
a reasonably clean bill of health, Mr Wilde considered that such an appraisal
(followed by repeated five-year inspections) was mandatory, since, until it was
performed, the potential stability of the block was not known.
Even if a satisfactory structural appraisal had been performed, Mr
Wilde still believed that a mortgage valuer should have advised a prospective
lender that the property should not be accepted as security for a loan because
of the potentially open-ended maintenance liability. In fact, the Izzards’
liability represented a 0.95% share of the management company’s liability in
respect of their block and five similar blocks (or about £30,000 pa against
individual liabilities of £300 pa).
In this context, Mr Wilde was not only concerned with the potential
liability if an appraisal revealed any of these blocks to be defective. He was
also concerned with the known risks of water penetration through the supposedly
waterproof joints that joined the large concrete panels together, the problem
addressed in the 1986 BRE papers. Mr Wilde commented that a 1997 report with
the court’s papers had shown that a
have any evidence to show that any of the six blocks whose condition affected
the Izzards’ maintenance liability were troubled by this problem.
Mr Wilde said that, in his opinion, the logic of the BRE’s 1987
recommendation was that a valuer should not adopt the approach of advising that
a system-built property was acceptable as security for a loan unless he could
spot a defect. Each individual property should be treated on its own merits,
and until it had been approved as a result of a full structural appraisal,
money should not be lent on it. If a competent valuer advised in this way, this
should have the effect of persuading the owner to have the necessary appraisal
carried out.
Mr Wilde accepted that such a turn of events would have a dramatic
effect on the value of all these flats. Their current owners would have been
expecting to sell for a good price and would find their property effectively
worthless. Mr Wilde was not at all concerned about this likely outcome. He said
that the valuer’s duty is to his borrowers, and not to the body of owners as a
whole.
In summary, Mr Wilde considered that Mr Mead ought to have given a
warning that the Izzards’ property had not had a structural appraisal, and
that, without such an appraisal, it could not be accepted as having an adequate
life for the period of a mortgage. He ought also to have advised on the high
potential expenditure on maintenance. He felt that even if this block had
received structural clearance, like the other four blocks on the estate did in
1989, a competent valuer still should have declined to certify it as
mortgageable because the risk of the high maintenance liability make this kind
of building unsuitable for people in the private sector, and particularly those
with low incomes.
He said that all the other 12 valuers whose reports he had read had
failed to appreciate the real problem, and had got things wrong. He was unable
to point to anyone who had advised in the way he considered to be appropriate.
These other valuers included Mr Ennis, who did not give either of the clear
warnings Mr Wilde demanded. It was insufficient simply to say that there was a
scheme of repair in hand, and Mr Ennis ought to have warned his client that it
was not suitable to proceed. As I have already said, Mr Wilde was scathing
about Mr Ennis’s assessment of the risk.
Mr Ennis gave evidence briefly at the trial, in support of the
report he had prepared on 23 Samson Close on 17 November 1988. Unfortunately,
as it turned out, Mr Ennis was called before Mr Wilde made his attack on the
quality of his risk assessment, and he was not recalled to deal with this
issue. Mr Ennis counselled his then client against buying his property for
£43,000 because he was not convinced that his investment would be secure and
sound. After warning that the property might be of a type that would not be
accepted as suitable security by some lending institutions, Mr Ennis valued it
at £40,000.
Mr Mead had had 21 years’ experience as a surveyor and valuer in
the Gosport area before he suffered the heart attack in May 1991 that led to
his retirement in October 1991. He retired at about the same time as the
balcony on one of the properties on the Rowner Estate collapsed, and shortly
after the general collapse of values in the housing market. He told the judge
that the collapse of the balcony, which led to the replacement of all the
balconies on the estate, created a tremendous amount of adverse publicity. He
explained to the judge that once an estate like this gets this sort of
publicity, it takes years for values to be restored, and that it was the
balcony episode that was the main significant factor that continued to make the
properties unmortgageable. In 1998 a lot of the balconies were still supported
by scaffolding.
When he gave evidence, Mr Mead was obliged to try and remember
events that had taken place 10 years earlier. He said that in 1988 he was doing
25 mortgage valuations, three or four housebuyers’ reports, and two structural
surveys every week. He explained that when one carried out a housebuyers’
report one obviously had a far, far greater responsibility. For a mortgage
valuation, he would not usually take binoculars, and he would generally spend
30 minutes at the property and then fill in the sections of the report
afterwards.
He accepted that his valuations involved a fairly large proportion
of first-time purchasers, and he knew that they would rely on his mortgage
valuation.
He believed that he had first been asked to value a properly on the
Rowner Estate in 1986 when they first came onto the market. He had not
previously encountered system-built blocks of flats or maisonettes. He would
have discussed them with other local valuers and surveyors, both inside and
outside his firm, and also the local authority building control officer, from
whom he would probably have found out that they were examples of the Jesperson
system. The warnings he had read about system-built property had taught him to
be cautious about such construction, but not that he should recommend a
structural engineer’s appraisal if such an appraisal had not been carried out.
Mr Mead regularly read Estates Gazette and the Chartered
Surveyor Weekly, and, although he could not be categorical, he was sure he
would have read the 1987 articles that were put to him in cross-examination.
His office did not subscribe to the BRE information papers, and he did not read
them. It did not have a copy of the Byrom book, and, although he was familiar
with the Hollis and Gibson book, he did not recall having read the passages
from the 1986 edition that were put to him. He was familiar with the lists of
properties on the ‘death list’ associated with the Housing Defects Act, and
would have checked that Jesperson was not on that list.
His understanding of the Jesperson system was that it described the
way Laings built these properties using large concrete panels and a concrete
roof. He was aware of the concerns about system-built properties after the
Ronan Point collapse, and he knew that the initial reaction of the profession
had been a blanket refusal to pass these kinds of properties as suitable for
mortgage. However, from what he knew, the Jesperson system had been given a
qualified clearance, and it was not in the list of buildings with particular
problems.
He told the judge that he made an external inspection of the whole
block (numbered 37-48 Samson Close) of which 27 Samson Close formed part. There
was no way in which he could inspect the flat concrete roof, but he had no
reason to believe that it would fail. He would have looked to see if there were
any cracks in the external walls; apart from studying the general state of the
block, there was not much more that he could see. He would have expected that
any problem would be visible. If he had seen the rusty reinforcing rods
observed by Mr Ennis on 13-24 Samson Close he would have been concerned, but
such defects were not visible on the block he inspected.
He was not told that any other block was included in the potential
service charge liability. He would have assumed that the liability of £200 pa
related to the Izzards’ share of liability for that block. He probably obtained
that figure from a valuation of a similar property. He would have assumed that
the figure covered repairs and general maintenance, and he did not regard it as
particularly low. He could see that it did not cover an allowance for any large
structural repairs, but he was not expecting any.
He was aware that damp penetration was a feature that might
increase the future maintenance liability, but he had inspected similar
properties on the estate and he had never encountered it. He did not suggest
that there might be a need to inspect the condition of the main structural
members in the block, because, on his inspection, he did not consider this
necessary. He considered that his inspection would have given him sufficient opportunity
to satisfy himself that condensation was not going to be a problem during the
period of the mortgage. When it was put to him that the Izzards said that they
had encountered difficulties with condensation six months after starting to
live there, he said that if it had been a serious problem, he would have
expected them to come back and tell him about it, as others tended to do.
He explained to the judge that he was acting as a mortgage valuer,
and not as an adviser to a local authority. When shown the 1987 BRE
recommendation, he said that he did not think one would have recommended that
kind of structural appraisal every time one was instructed to do a mortgage
valuation, since most clients would probably not have proceeded further because
of the cost.
When he was shown the 1986 and 1987 BRE information papers and the
Hollis and Gibson book, he accepted that he should have done more to
familiarise himself with the information they contained. He accepted that he
had not obtained information from all the requisite sources, and, as a result,
he had not given all the requisite warnings.
If he had briefed himself properly, his report would have included
a warning about the potential problems he could not see from a visual
inspection, so that the mortgagees and borrowers could appreciate that there
might be problems with a building like this. He should have mentioned that the
BRE had recommended that there should be a structural appraisal of the
building. He should also have given a warning that properties like this might
attract a potentially greater liability in relation to service charges, and
that the current charge of £200 pa, although not abnormally low, might present
a false picture.
The judge found Mr Mead to be a patently honest witness.
Mr Powell, the expert called by the defendants, gave the judge
another insight into what it meant to be a surveyor and valuer on a local, as
opposed to a national, scale. He had been practising in the Hampshire area
since 1978. Most of his mortgage valuations were for first-time buyers: he had
conducted 101 such valuations in 1988. The properties on the Rowner Estate
would have been at the bottom end of the market. He would not regard his
knowledge of system-built blocks as extensive. He had probably first encountered
them in the mid-1980s. He would have known about the Ronan Point disaster and
the Housing Defects Act list, and he did not have complete ignorance of the
subject.
He was not familiar with Mr Byrom’s book, and, in any event, things
had moved on since 1979. He would have had access to journals and papers, and
discussions with professional colleagues and competitors, who may or may not
have had expertise in this type of construction. He would also look at
textbooks. He did not read the BRE information papers, which were usually
highly technical and were directed more towards engineers and specialist
building surveyors than to surveyors in general practice or valuation surveys.
He thought there was some truth in the suggestion that some general surveyors
are avid readers of professional literature and others avoid it as far as they
can. He thought he probably fell into the middle of that spectrum.
I need not concern myself with the detailed evidence that Mr Powell
gave on the third day of the trial, because the general effect of that evidence
had been undermined by Mr Mead’s admissions and was rejected by the judge. Mr
Powell agreed that he had approached the problem on the wrong basis. He also
agreed that it was generally accepted that these properties had problems that
were not discernible from a visual inspection, and that all the published
material suggested that a cautious approach would require an appraisal before
this type of property became mortgageable. He said that he would expect the
risk of potentially higher future maintenance costs to be reflected in the
value. He agreed that it was no part of the duty of a mortgage valuer to be
concerned about the negative impact his valuation might have on the seller. He
was not aware of any publication in circulation at the time that he was giving
advice contrary to that given in Mr Hollis’s book.
In my judgment, the general effect of all this evidence was that
the plaintiffs have successfully proved that in November 1988 a reasonably
careful valuer would be failing in the duty of care he owed to his clients if
he did not advise them along the lines in fact adopted by Mr Ennis, who wrote
his report in the same month as Mr Mead. Mr Ennis told the judge that he had
qualified in 1979 and had worked as a surveyor for 10 years under the direction
of two partners in a local firm. Over that time, experience had taught him to
pay particular reference to structures built in the post-war period if they
were in local authority occupation or were police houses or on government-constructed
estates. Such properties were frequently of unusual preformed concrete
construction, and Mr Ennis had learned that this information was always of
considerable interest, both to purchasers and prospective lenders.
Mr Ennis was self-employed at the time he wrote his report, and
when he was asked to re-read it 10 years later, he concluded that he had given
his various warnings because the difficulties for prospective purchasers and
lenders, both present and future, must have been very obvious to him at that
time.
The main warnings Mr Ennis gave were as follows:
1. The property is of a type that may not be considered as
suitable security by some building societies, and, as a consequence, resale of
flats of this type may prove difficult;
2. There are no signs of any damp penetration into the main
habitable rooms, but you will appreciate that dampness could be penetrating the
timber framework in those areas where we cannot make a detailed examination;
3. From a normal inspection of this building we must admit to
being less than impressed with the general standard of construction;
4. The property may be of a type that would not be accepted as
suitable security by some lending institutions. In any event, timber frameworks
are of poor quality, and substantial redecoration and repair is required
externally;
5. Your solicitor should arrange to have sight of the management
accounts. You should very carefully identify your liability in respect of
communal charges.
6. We must urge you to give very careful consideration to the
contents of this report, since we are not convinced that your investment of
some £43,000 will be secure and sound.
In his expert report before the trial, Mr Wilde said that he
believed that, in this report, Mr Ennis had exhibited the grasp of the
essential character of these buildings and their potential problems that valuers
and surveyors reporting on them should have had, whether their inspection was
for a mortgage valuation or a homebuyer’s report. It was only when Mr Wilde was
shown Mr Ennis’s valuation of £40,000, which he had not previously seen, that
he backtracked violently in cross-examination:
Q There has been no mention of an ongoing high maintenance charge,
has there?
A No.
Q And there has been no mention of a BRE assessment?
A No, he has not mentioned a BRE Assessment.
Q There has been no reference to any structural problems at all,
has there?
A He just says there is a scheme of repair in hand.
Q Yes. But in your view there should have been a clear warning
that this sort of building is subject to very high maintenance charges?
A Yes.
Q And secondly, there should have been a warning that since this
building had not had its 25-year BRE assessment it is not suitable to proceed?
A That is right. Yes.
Mr Wilde was then shown Mr Ennis’s valuation.
Q He gives an unqualified valuation of £40,000. You would
criticise him for that, would you?
A Yes. I would.
Q Because, as you have said in your report, making a report in
these circumstances is an assessment of risk?
A Yes
Q And are you saying Mr Ennis has hopelessly incorrectly assessed
the risk?
A I think so, yes.
As I said at the outset of this judgment, this court does not have
the advantage the judge enjoyed of seeing and hearing the witnesses give
evidence, an advantage that is just as great when it is the evidence of an
expert witness that is under consideration on an appeal. I am conscious of the
fact that this very experienced judge accepted Mr Wilde’s evidence, and said he
found him to be an impressive and impartial witness. The judge did not,
however, mention the sudden volte-face in Mr Wilde’s evidence that I have just
described. Indeed, he said, in his judgment, that Mr Ennis’s evidence was
important for two reasons:
First, he questioned the willingness of some lenders to lend on
this type of structure, and, second, he warned about the liability for communal
charges.
As Mr Pearce-Higgins QC observed, this observation completely
missed the point. Mr Wilde considered that Mr Ennis was as negligent as all the
other surveyors and valuers who had visited this estate between 1986 and 1991,
since he did not give any warning that this kind of building was subject to the
risk of very high maintenance charges, to such an extent that it should be
regarded as unmortgageable.
Later in his judgment the judge said:
I reject the defendants’ Bolam argument that Mr Mead was
doing no more or less than all the other surveyors who carried out valuations
on the Rowner
to any alternative acceptable professional practice. There was no evidence of a
respectable body of professional opinion with a contrary view to that of Mr
Wilde… I conclude that Mr Mead failed to meet the appropriate standard.
In reaching this conclusion, the judge not only completely
discounted the evidence of what a considerable number of other professional men
in the same field of practice as Mr Mead were in fact doing at the time. He
also overlooked, no doubt because they were not examined at any great length at
the trial, the BSA’s Guidance Notes to building society valuers, which were
published the previous year, only a few months before the BRE’s final report.
The BSA did not wish valuers to report to building societies in the way
suggested by Mr Wilde without very good cause, for the reasons set out in that
document.
I have no doubt that a cautious valuer would have advised in that
sense, in much the same way as it was shown in the evidence that one or two
cautious building societies declined to lend on property like this, and events
have proved them right. On the other side of the coin, the 1997 Residents’
Survey shows that this caution would have deprived a lot of people of the
opportunity of living in capacious homes they could not otherwise have
afforded, a matter that would have been well in the minds of those banks and
building societies that were willing, with the government’s encouragement, to
lend their money on the security of property like this in 1988:
Of those residents in the properties surveyed, three quarters are
satisfied it meets their needs… Satisfaction with their homes relative to
facilities was generally very high… Very few respondents recorded internal
improvements they would like to make to their homes… As far as the general
environment was concerned all respondents felt the best feature of the estate
was the spaciousness of their properties.
The court is concerned not with the standards of the cautious
valuer, but the standard reasonably to be expected of the reasonably competent
valuer. In my judgment, in the light of the BSA paper, the overwhelming
evidence of the contemporary practice of valuers of properties on this estate,
and the other evidence to which I have referred in this judgment, the judge
ought to have rejected Mr Wilde’s evidence, in so far as he suggested that a
valuer would have been negligent if he did not express the opinion that these
properties were unmortgageable for either or both the reasons he adumbrated. It
is the task of the judge to determine the appropriate standard of care in the
light of all the evidence, not the task of an expert witness, however
distinguished.
It follows from my analysis of the evidence that, in my judgment,
the judge ought to have found that Mr Mead was negligent because:
1. he did not give a warning
about the structure similar to that set out in item 10 on the attached
schedule;
2. he did not give a warning that the potential service
contribution could well increase, for the reasons set out in the 1986 paper and
Mr Hollis’s book;
3. he did not adjust his valuation to take into account these two
considerations.
On the other hand, the judge was, in my judgment, wrong to hold
that Mr Mead should have advised that the property should be regarded as unsafe
as security for a mortgage loan.
It must be remembered in this context that, although there was a
good deal of unrest about the quality of the concrete used in many system-built
dwellings between 1945 and 1960 — a matter reflected in the enactment of the
Housing Defects Act and in the Estates Gazette article in July 1987 —
the evidence showed that this problem was not so serious from 1960 onwards. The
BRE’s major investigation made a very positive finding in this regard in
relation to LPS buildings (the quality of the concrete being found not to be
significantly better or worse than that found in any other forms of
construction of the period), and no adverse finding was made in relation to the
composition of the concrete either on the three Jesperson sites visited by the
BRE investigators or by the structural engineers in relation to the four blocks
they inspected on the Rowner Estate the year after Mr Mead’s visit.
The judge did not take those considerations into account. Nor did
he allude to the fact that a structural appraisal of the type recommended by
the BRE was not a mere structural survey by a chartered surveyor. It would
involve engineers making invasive investigations into the structure of the
building to satisfy themselves that the blocks were structurally sound. In 1989
the engineers carried out this work when the four blocks they examined were
largely empty, and their report describes the invasive techniques they
undertook. Although I appreciate the prudence of the BRE recommendation, I am
unable to conclude that, against this background, a valuer in 1988 would have
been professionally negligent if he did not advise that a 21-year-old Jesperson
block on the Rowner Estate at Gosport that exhibited no outward signs of
structural weakness, should be regarded as unmortgageable unless a structural
appraisal was carried out.
It follows that, in my judgment, the plaintiffs are entitled to
recover damages not on the basis of Mr Godkin’s evidence, but on the basis that
Mr Mead’s valuation ought to have taken into account the effect of the warnings
I have suggested would have been appropriate. There is no evidence that
warnings of the type shown in item 10 on the attached schedule would have
affected the property’s value in any significant way if they had been given in
1988. It was common ground that the risk of a higher maintenance charge would be
reflected in a lower valuation. Mr Mead valued this property at £42,000, the
price for which the Izzards purchased it. At the same time, Mr Ennis was
valuing a nearby maisonette at £40,000 without taking into account sufficiently
the risk of a higher future maintenance liability. In my judgment, it is
reasonable to conclude on the evidence that if Mr Mead had taken these factors
properly into account, he should have valued the Izzards’ maisonette at
£38,000, £4,000 less than his actual valuation and the price paid. It follows
that, in my judgment, the plaintiffs are entitled to recover £4,000 under this
head, being the difference between the price they paid and what Lord Hoffmann
would describe as ‘the correct valuation’ in December 1988.
There was a very important issue at the centre of this appeal as to
whether the court should accept Mr Godkin’s figure or Mr Mead’s valuation as
the correct measure of assessing the ‘true value’ of the property in December
1988. The fact that Mr — concentrated his arguments on defending Mr Godkin’s
approach and did not, no doubt for wise tactical reasons, suggest to us that we
ought to make a discount on Mr Mead’s figure, if we considered that to be the
appropriate starting point, cannot, in my judgment, disentitle us from doing so
if we consider that the evidence warranted it, and neither side contended that
we should order a new trial on this issue.
I agree with Kennedy LJ, for the reasons he gives, that the award
in the sum of £476.57 should be disallowed.
For these reasons, I, too, would dismiss the appeal in relation to
liability. As to quantum, I would have reduced the sum awarded by the judge to
£4,000 under the first head of the award, and £250 under the second head,
making a total of £4,250, to which interest should be added.
Schedule of valuers’ comments (1987-1991)
Valuer A
1. 24.6.87 £24,750
PRC Laings. Easyform system.
Valuer B1
2. 20.5.88 £35,000
The flats are built of concrete panels… These units have a steady
demand but at prices somewhat below their traditionally constructed
counterparts.
Valuer B1
3. 13.7.88 £38,500
… constructed in non-traditional form, the walls being of precast
concrete panels with a flat asphalted roof. This form of construction is known
as the Jesperson system and is generally acceptable for mortgage purposes.
None the less values are normally somewhat less than the traditional brick
equivalent.
Valuer B1
4. 17.7.88 £38,500
Similar to 3.
5. 19.8.88 £39,000
Prefabricated concrete structure.
Valuer B1
6. 1.9.88 £43,950
Similar to 3.
Valuer B3
7. 19.10.88 £40,000
The maisonette is of non-traditional construction in that the end
walls are concrete panelled, but are considered to be suitable for mortgage
purposes.
Valuer B1
8. 12.1.89 £41,500
Similar to 3.
Valuer B1
9. 26.4.89 £42,000
Similar to 3.
Valuer B1
10. 11.8.89 £36,000
The property is built of precast reinforced concrete construction
using a method known as ‘large panel system construction…’ A report by the
Building Research Establishment recommends all buildings of this type should be
subject to a full appraisal to assess their structural condition and
durability. It is believed that such an appraisal has not been carried out on
this building. There may therefore be defects not apparent from the limited
inspection carried out, which may come to need attention in the future. The
property is however suitable for mortgage purposes and there is a reasonable
market for this type of unit so long as the purchase price is less than the
more traditional brick construction.
Valuer B2
11. 5.9.89 £42,250
Concrete panelled together with some timber cladding…
non-traditional construction… suitable for mortgage purposes. Final sentence
similar to 10.
Valuer B1
12. 20.9.89 £41,750
Similar to 10.
Valuer C
13. 20.3.90 £35,000
The properties were originally constructed for the Ministry of
Defence and have recently been converted, constructed of Jesperson pre-cast
concrete which we understand is not designated defective under the Housing Act.
Valuer E
14. 24.3.90 £29,000
Similar to 10.
Plus: Some lenders will not provide mortgage finance on this type
of unit due to its construction, and this may have an adverse effect on
saleability.
Valuer D
15. 17.7.90 £33,500
The property type is known as a Jesperson system-build and this should
be
made known to the property insurers.
Valuer F
16. 27.9.90 £31,500
Non-traditional Laing Jesperson PRC system-built.
Similar to 10.
Plus: It would be in the applicant’s own interest to urge the
landlord or person responsible for maintenance of the building to arrange for a
full appraisal in accordance with the BRE recommendations so that future
maintenance requirements and likely costs can be ascertained in future.
Valuer B3
17. 26.4.91 £26,000
The building is of a non-traditional construction as the main
walls are of precast concrete panels with a flat roof… the Jesperson system.
In our opinion these flats are suitable for mortgage purposes. There should be
a good market for this type of flat so
long as the purchase price is kept at something less than the more traditional
brick equivalent.
Valuer G
18. 5.7.91 £28,500
The type of construction is non-traditional, ie the Jesperson
system… We know of no known inherent structural defects with this design,
although the applicants should be aware there may be problems on resale due to
the nature and character of the development.
Appeal dismissed. Leave to appeal to House of Lords refused.