Negligence — Action against surveyors in respect of mortgage valuation — Appeal by defendant surveyors from assistant recorder’s decision awarding damages to house buyer — Application of Unfair Contract Terms Act 1977 — Plaintiff, respondent to present appeal, purchased a terraced house, at the lower end of the market, in Norwich — The asking price was £17,250, but respondent agreed, subject to contract, to pay £17,500 and in fact subsequently paid £18,000 — She required a mortgage, but only to the extent of £3,500 — The Abbey National Building Society instructed the appellant firm of surveyors to carry out the mortgage valuation — It was common ground that what was required was not a structural survey but a reasonably careful visual inspection — The report was reassuring, valuing the house for mortgage purposes at £16,500 and stating that it was readily saleable, had been modernised and that no essential repairs were needed — Respondent, who had paid a fee of £36.89, was given a copy of the report, expressed satisfaction with it and proceeded with the purchase — Both the mortgage application form and the report itself contained clear and comprehensive disclaimers of liability — Unfortunately, the inspecting surveyor overlooked a serious defect — Although aware that chimney breasts in two first-floor rooms had been cut away, he did not check whether the chimneys above had been left with adequate support — He could easily have done so by ‘putting his head and shoulders through the trap door into the roof space’ — Eighteen months later one of the flues collapsed through ceilings, bringing part of another with it, causing extensive damage but luckily no personal injuries — In the respondent’s action against the appellants the assistant recorder found the appellants liable for negligence and awarded the respondent £4,379.97 damages — On appeal the appellants did not dispute the existence of a duty of care or their failure to carry out a reasonably careful visual inspection or the amount of damages if liability was established — They contended, however, that the disclaimers absolved them from liability for negligence and that they satisfied the requirement in section 11(3) of the Unfair Contract Terms Act 1977 that it was fair and reasonable to rely on the disclaimers — Held by the Court of Appeal that, apart from the 1977 Act, the disclaimers would have provided the appellants with an effective defence, but that, having regard to all the circumstances, it would not be fair and reasonable to allow the appellants to rely on them and thus avoid liability — The onus was on the appellants, under section 11(5) of the 1977 Act to establish reasonableness, and they had not done so — It was emphasised by the court that the appellants were dealing with a property at the lower end of the market, that they knew that the respondent would rely on their report and that to their knowledge she was unlikely to instruct another surveyor to inspect the property — It might be different in cases where the applicant was ‘a surveyor or a lawyer who understands these matters’ — In the circumstances of the present case the reasonableness requirement was not satisfied — Appeal dismissed
The following
cases are referred to in this report.
Alderslade v Hendon Laundry [1945] KB 189
Hedley
Byrne & Co Ltd v Heller & Partners Ltd
[1964] AC 465; [1963] 3 WLR 101; [1963] 2 All ER 575; [1963] 1 Lloyd’s Rep 485,
HL
White
(Arthur) (Contractors) Ltd v Tarmac Civil
Engineering Ltd [1967] 1 WLR 1508; [1967] 3 All ER 586, HL
This was an
appeal by surveyors, Eric S Bush, a firm carrying on business as surveyors and
valuers in Norwich, against a decision of Assistant Recorder Gerald Draycott
QC, at Norwich County Court, awarding the plaintiff, Mrs Jean Patricia Smith,
the present respondent, damages for professional negligence. The matter
concerned a valuation for mortgage of a house at 242 Silver Road, Norwich.
Nigel Hague QC
and Miss Jane Davies (instructed by Barlow Lyde & Gilbert) appeared on
behalf of the appellants; Robert Seabrook QC and Philip Havers (instructed by
Hood Vores & Allwood, of Dereham, Norfolk) represented the respondent.
Giving
judgment, DILLON LJ said: The defendants in this action, a firm of surveyors,
appeal against a judgment against them for damages for professional negligence
awarded to the plaintiff by Mr Gerald Draycott, sitting as an assistant
recorder, at the trial of this action in the Norwich County Court on April 17
1986. The appeal raises a question of some general importance as to the
application of the Unfair Contract Terms Act 1977 (the ‘Act’).
The story
begins in 1980. At that time the plaintiff, Mrs Smith, lived at Coulsdon in
Surrey in a house which she owned and which was subject to a mortgage in favour
of the Abbey National Building Society. She decided, however, to move to Norwich.
Her personal circumstances were that she was a state enrolled nurse, but had
been
was separated from her husband and she had two children, both living with her,
a girl of 15 and a boy of 12.
She found a
purchaser for her house in Surrey, and she also offered for a house at Horsham
St Faiths, near Norwich. But that purchase fell through. By the beginning of
October 1980 she was, as the judge’s note of her evidence records, desperate to
get another house in Norwich, because she had been offered a good price for her
house in Surrey and did not want to lose her purchaser. She then found the
house with which this action was concerned, 242 Silver Road, Norwich. It was on
offer at an asking price of £17,250, but the vendor said that he already had
someone else interested at that price, and so she agreed to buy the house,
subject to contract, for £17,500. It was a terraced house, some 70 years old,
at the lower end of the housing market, but the plaintiff regarded it as
suitable for herself and her children as it was well decorated, had central
heating and she could move in without doing any work to it.
To raise the
price she needed a mortgage, and so on October 6 1980 she applied to the Abbey
National for a mortgage and completed their standard mortgage application form.
In fact she only required a mortgage for £3,500, which was well below the price
of the house, but nothing turns on that.
Under section
25 of the Building Societies Act 1962 (now section 13 of the Building Societies
Act 1986) a building society which makes an advance on the security of a
freehold or leasehold property has to get a report from an appropriately
experienced person as to the value of that property and as to any matter likely
to affect the value thereof. Building societies satisfy this requirement either
by instructing firms of surveyors in general practice or by using their own
in-house employed surveyors. In the present case, the Abbey National instructed
the appellants, a firm of surveyors and valuers carrying on practice in
Norwich; they acted by their senior partner, Mr Cannell*, a chartered surveyor
who was amply qualified for the job.
*Editor’s
note: The surveyor, Richard S Cannell FRICS, was partner in charge of the
surveys and professional services department of the firm of Eric S Bush and not
the senior partner.
It has always
been the case that applicants for mortgages are required by the building
society to pay the fees for the valuation reports which the societies are by
the statute required to get. It used for many years to be the practice that
building societies refused to disclose the reports to the applicants, on the
footing that they were only obtained for the building societies’ own purposes.
But this practice gave rise to widespread discontent in that applicants could
not see why they should not have copies of reports for which they had paid.
Before October 1980, therefore, the building societies had adopted instead a
new practice of making copies of the reports available to the applicants for
mortgages, but with extensive disclaimers of liability.
In accordance
with this new practice, there was included in a somewhat lengthy set of
declarations, just above the place where the plaintiff signed the mortgage
application form, the following:
I/We have read
the Notes for the guidance of Mortgage Applicants and accept that if the loan
is approved the Mortgage Guarantee Policy Premium will be added to the Loan.
I/We accept
that the Society will provide me/us with a copy of the report and mortgage
valuation which the Society will obtain in relation to this application. I/We
understand that the Society is not the agent of the Surveyor or firm of
Surveyors and that I am making no agreement with the Surveyor or firm of
Surveyors. I/We understand that neither the Society nor the Surveyor or the
firm of Surveyors will warrant, represent or give any assurance to me/us that
the statements, conclusions and opinions expressed or implied in the report and
mortgage valuation will be accurate or valid and the Surveyor(s) report will be
supplied without any acceptance of responsibility on their part to me/us.
Just below her
signature it is recorded that she had paid the inspection fee, which was
£36.89. There is a somewhat similarly worded disclaimer of liability in printed
notes for the guidance of mortgage applicants which it was the practice of the
Abbey National to supply to all mortgage applicants, but I need not refer to
those notes because the disclaimer there adds nothing to what appears in the
mortgage application form, as above set out, and in the copy of the appellants’
report which was supplied to the plaintiff as mentioned below.
Mr Cannell
inspected the property on October 8 1980. It is common ground that he was not
required to carry out a structural survey. What he was required to do was to
make a reasonably careful visual inspection of the property and to fill in the
Abbey National’s standard printed form headed ‘Report and Mortgage Valuation’.
Mr Cannell said that he would usually spend about half an hour on an inspection
for a building society; that was generally in line with the evidence, as to
their own practice, given at the trial by two other experienced surveyors, Mr
Manwaring and Mr Wreford. It seems that thousands of such inspections and
reports are made by surveyors for the purposes of building society mortgage
applications every year over England and Wales as a whole.
A copy of Mr
Cannell’s report was sent by the Abbey National to the plaintiff under cover of
a letter from the Abbey National dated October 9 1980. The report gives the
value of the property for mortgage purposes, with vacant possession, as
£16,500. It answers affirmatively the printed question whether the property was
readily saleable for the purposes of owner-occupation and was likely to remain
so at or about the mortgage valuation. The report states that the property had
been modernised in recent years to a fair standard and that no essential
repairs were required. The report amply warrants the plaintiff’s reaction to
it, as expressed in her evidence at the trial:
The
impression I got from the report was that I was very pleased with it — it did
not show anything seriously wrong with the property.
On the third
page of the copy of the report sent to the plaintiff there was the disclaimer
on which the appellants particularly rely, distinctively printed in red,
whereas the rest of the form is printed in black. It is as follows:
TO THE
MORTGAGE APPLICANT(S):
IMPORTANT
1 THIS DOCUMENT IS NOT A MARKET VALUATION.
IT IS NOT, AND SHOULD NOT BE TAKEN AS, STRUCTURAL SURVEY. It has been obtained
by the Society from a qualified surveyor or firm of surveyors to comply with
Section 25 of the Building Societies Act 1962.
2 If you are purchasing the property, you
will receive a notice that the Society does not warrant that the purchase price
is reasonable.
3 This is a report to the Society by its
surveyor(s) and neither the Society nor the surveyor(s) give any warranty
representation or assurance to you that the statements, conclusions and
opinions expressed or implied in the document are accurate or valid.
4 The surveyor(s) has/have made this report
without any acceptance of responsibility on his/their part to you.
The plaintiff
admits that she read this.
The plaintiff
then proceeded to buy the property. She was forced by her vendor to increase
her offer to £18,000, but nothing turns on that. She did not have any other
survey of the property done, because, as she said in evidence and the judge
accepted, she relied on the building society survey.
Unfortunately,
in his inspection of the property Mr Cannell overlooked a serious defect. He
noticed that the chimney breasts in two of the first-floor rooms, including the
main bedroom, had been cut away, but it did not occur to him to check whether
that had been done in a way which left the chimneys above adequately supported.
Had it occurred to him to check, it would have been easy to have done so (since
there was a trapdoor through which he could have looked into the roof space
with the aid of the ladder he had with him) and it would have taken him no more
than 10 minutes. Had he checked he would have seen at once that the brickwork
of the chimneys had been left unsupported by the removal of the chimney
breasts. The absence of adequate supports meant inevitably, as explained by Mr
Manwaring at the trial, that the flues would collapse at some time. The house
was thus in truth a dangerous structure, and unfit for habitation until
adequate support for the flues had been provided.
Some 18 months
later, at about 10.30 pm on June 1 1982, the inevitable happened. One of the
flues collapsed through the main bedroom and landing ceilings, bringing down
part of another flue with it. Rubble came down the stairs into the lounge.
Fortunately the plaintiff was downstairs at the time; had she been in her bed
she might have been killed or seriously injured. The building work to get the
place right was put in hand at once by the plaintiff, but it was five weeks
before she could move back into her bedroom.
By this action
the plaintiff claimed damages from the appellants for the negligence of Mr Cannell
in failing to check whether the removal of the chimney breasts had left the
chimneys without adequate support and consequently failing to give in his
report correct advice as to the condition of the property. The assistant
recorder upheld the plaintiff’s claim, and awarded her £4,379.97 damages,
including interest.
On this appeal
two points only are raised, to which I shall come. The appellants do not
dispute the assistant recorder’s findings: (i) that in preparing his report Mr
Cannell owed a duty of care to the plaintiff, apart from the disclaimers which
I have mentioned, since he knew that she was likely to rely on his report; (ii)
that she did indeed rely on his report; (iii) that he was negligent in the
sense that in carrying out a reasonably careful visual inspection of the
property he ought to have looked to see whether the chimneys had been left with
adequate support after the removal of the chimney breasts; and (iv) that there
was no contributory negligence on the plaintiff’s part. The appellants do not
in this court dispute the amount of damages awarded in the court below, if
liability is established.
The appellants
submit, however:
1 that the disclaimers, ie the provisions
set out above in the form of mortgage application signed by the plaintiff and
in the notice in red on the copy of Mr Cannell’s report which was supplied to
the plaintiff, have the effect of absolving the appellants from all liability
for negligence which would otherwise have fallen on them; and
2 that the Act does not preclude the
appellants from relying on the disclaimers because, they submit, the
requirement of reasonableness under section 11(3) of the Act is satisfied in
relation to the disclaimers.
The assistant
recorder held against the appellants on issue (1) because he found that it was
an implied condition of the disclaimers that if the disclaimers were to apply,
there should have been a complete visual inspection of all parts of the fabric
of the house. In other words, the disclaimers would have applied if Mr Cannell
had looked into the roof space but had then negligently failed to see what was
plain before his eyes there, but they did not apply, as he negligently failed
to look into the roof space at all. Counsel for the plaintiff in this court
have — rightly — felt unable to support the reasoning of the assistant recorder
on this issue, but they have submitted that the wording of the disclaimers is
not sufficiently explicit to exempt the appellants from liability for
negligence. They say that so far as the appellants’ position is concerned (as
opposed to the Abbey National’s position) the disclaimers merely told the
plaintiff that the appellants had not carried out a full structural survey of
the property and that she had no contract with the appellants.
Reference was
made in a general way in the course of argument to the well-known line of
authorities, stemming from Alderslade v Hendon Laundry Ltd [1945]
KB 189 in which the courts have considered the principles which are applicable
to clauses which purport to exempt one party to a contract from liability to
the other party for the consequences of the first party’s own negligence.
Assuming, however, that those are the principles which ought to be applied to
the construction of these disclaimers, I find it impossible to conclude that
the disclaimers do not cover tortious liability of the appellants for
negligence. The final words in the notice on the copy of the report supplied to
the plaintiff
The
surveyor(s) has/have made this report without any acceptance of responsibility
on his/their part to you
and the
corresponding words at the end of the declaration in the form of mortgage
application are really meaningless if they do not extend to responsibility or
liability in negligence. If authority is required, it is to be found in the
speeches of Lord Upjohn and Lord Pearson in Arthur White (Contractors) Ltd
v Tarmac Civil Engineering Ltd [1967] 1 WLR 1508 at 1526B-F and 1529
C-G.
At common law,
as is recognised in Hedley Byrne & Co Ltd v Heller & Partners
Ltd [1964] AC 465, where there is no contract the assumption of a duty of
care can by appropriate words be avoided — eg where a reference is given
‘without responsibility’ — and where a report is supplied subject to
stipulations disclaiming responsibility the recipient cannot accept the report
and ignore the stipulations: see per Lord Reid at p 492 and per
Lord Morris at p 504. Apart, therefore, from the Act, the disclaimers relied on
would, in my judgment, have provided an effective defence for the appellants
against the plaintiff’s claim.
I turn,
therefore, to consider issue (2), the effect of the Act. The relevant sections
of the Act are as follows:
2(1) A person cannot by reference to any contract
term or to a notice given to persons generally or to particular persons exclude
or restrict his liability for death or personal injury resulting from
negligence.
(2) In the case of other loss or damage, a person
cannot so exclude or restrict his liability for negligence except in so far as
the term or notice satisfies the requirement of reasonableness.
11(3)In
relation to a notice (not being a notice having contractual effect), the
requirement of reasonableness under this Act is that it should be fair and reasonable
to allow reliance on it, having regard to all the circumstances obtaining when
the liability arose or (but for the notice) would have arisen.
Under section
11(5) the onus is on those claiming that a contract term or notice satisfies
the requirement of reasonableness to show that it does.
The assistant
recorder includes in his judgment a finding that he had not been satisfied by
the appellants that in all the circumstances of this case it would be fair and
reasonable to allow reliance on the disclaimers. But this is tacked on to the
section of his judgment which deals with the quantum of damages and it may
relate back to the assistant recorder’s view that the disclaimers were
inadequate because Mr Cannell had never looked into the roof space at all.
The question
is whether the requirement of reasonableness, referred to in section 2(2) of
the Act is satisfied, ie whether, on the words of section 11(3), it is fair and
reasonable to allow reliance on the disclaimers, having regard to all the
circumstances obtaining at the relevant time. In view of the generality of the
words ‘all the circumstances’, Mr Hague for the appellants concedes that the
court is not limited to considering merely the questions whether the notice
referred to in the section was sufficiently clearly brought to the attention of
the person concerned or was sufficiently clearly expressed for that person to
have been able to understand it.
Whether in any
particular case it is fair and reasonable in all the circumstances to allow
reliance on a notice excluding liability for negligence must, of course, depend
on the circumstances of the particular case. In that sense no case is a
precedent for any other case. But the circumstances of the present case are
very ordinary, and we were told that there were many other cases awaiting the
outcome of this appeal. That is not surprising considering the number of
building society surveys that are carried out. It appears that it is the
practice of very many if not all building societies to include as a matter of
course in their printed forms disclaimers to protect the society itself and its
surveyors from all liability, in substantially the same terms as the
disclaimers in the present case.
It is common
ground that it was no part of Mr Cannell’s duty to carry out a full structural
survey of the house, and this was understood by the plaintiff. She knew that
she was taking a chance on there being no hidden defects in the house which
would not have been apparent on a reasonably careful visual inspection of the
house. To hold that the surveyor in such a case as the present cannot rely on
the disclaimers does not involve extending the surveyor’s obligations so as to
make it incumbent on him to detect such hidden defects. His obligation is still
merely to carry out a reasonably careful visual inspection.
But where he
is dealing with a property at the lower end of the market and he knows that the
purchaser is likely to rely on his report, and not instruct his or her own
surveyor, I find it very difficult to see why it should be fair and reasonable
to allow him to rely on an automatic blanket exclusion of all liability for
negligence if his visual inspection of a property turns out not to have been
reasonably careful.
The appellants
have urged various considerations as showing that it is fair and reasonable
that they should be allowed to rely on the disclaimers. They are all general
considerations, unrelated to the particular facets of this case, and they are
said to warrant an automatic blanket exclusion of all liability to mortgage
applicants for negligence in respect of building society surveys. They say, for
instance, that the surveyors never meet the mortgage applicants and so have no
opportunity of clarifying or explaining anything they may have put in a report for
a building society. They say also that it is of great benefit to the mortgage
applicants that the report required by a building society under the statute,
before it can agree to make a mortgage advance, should be available quickly and
cheaply, and they suggest that neither of these ends will be attained if the
surveyor has always in his mind the fear of litigation and the need to satisfy
his insurers. They also naturally point to the fact that the interests of the
building society, merely as mortgagee, and the interests of the purchaser, as
owner of the equity of redemption, are not the same; but this point is greatly
weakened when it is seen that the report covers such questions, in which the
purchaser is vitally interested, as the marketability of the property and
whether urgent repairs to the property are required.
Giving full
consideration to all that has been urged by Mr Hague, I cannot see that it is
fair or reasonable that a professional surveyor making a mortgage report at the
lower end of the property market, when he knows that the would-be purchaser who
is applying for a mortgage on the property has paid the fee for the report,
will be supplied with a copy of the report and is likely to rely on the report
and so is not likely to instruct any other surveyor, should be able to rely on
any general disclaimers, such as those in the present case, unrelated to any
special factors affecting the particular property, to exempt him from liability
to the purchaser for negligence if it should happen that he, the surveyor,
carries out his visual inspection of the property without due care.
It may be
different — I express no opinion — where the mortgage applicant who chooses to
rely on a building society’s surveyor’s report despite having read such
disclaimers is himself a surveyor or a lawyer who understands these matters. So
far as the plaintiff was concerned, — and I fancy this would go for most
purchasers — I do not think she would have seen any reason to incur the
additional cost of instructing a second surveyor after she had read the copy of
Mr Cannell’s report.
I do not doubt
that Mr Cannell, when he makes a visual inspection of a property with a view to
making a mortgage report to a building society, intends to act with reasonable
care. I do not see why he should not be liable in damages like any other
professional man who fails to show reasonable care if on a particular occasion
he has failed to take reasonable care in his inspection.
I would
accordingly dismiss this appeal.
Agreeing that
the appeal should be dismissed, GLIDEWELL LJ said: I have had the advantage of
reading in draft the judgment of my Lord Dillon LJ. I gratefully adopt his
recital of the facts, including the relevant documents.
There are two
issues in this appeal:
(1) On their face, did the words of the
disclaimer suffice to prevent any duty of care being owed by the defendants to
Mrs Smith?
(2) If so, did the disclaimer satisfy the
requirement of reasonableness — Unfair Contract Terms Act 1977, sections 2(2)
and 11(3).
(1) The effect of the disclaimer
The documents
which are particularly important are the declaration on the mortgage
application form signed by Mrs Smith and the notice at the end of the
defendants’ report of October 8 1980, below their valuation. Dillon LJ has set
this out in his judgment. Mrs Smith said in evidence that she read this notice.
We are thus not concerned with the question whether the disclaimer was brought
to her attention. Clearly it was.
The reason
which the assistant recorder gave for holding that the disclaimer was not
sufficient to avoid responsibility, ie that there was an implied condition
that, if the disclaimer is to apply, there should have been a complete visual
inspection, is unsound. Counsel for Mrs Smith did not attempt to rely upon it.
Mr Seabrook’s
argument is that the disclaimer did not cover liability for negligence. If that
is correct, the disclaimer did not cover anything. Mrs Smith was never in a
contractual relationship with the defendants. If they were or could be liable
to her, that liability could only be in the tort of negligence — which is how
the plaintiff’s claim is framed
The payment by
Mrs Smith of £36.89 was not a payment of a fee for the provision of a report to
her. The building society required the inspection, report and valuation by a
surveyor both for their own purposes and to comply with section 25 of the
Building Societies Act 1962. At October 6 1980, the only contract was a promise
by the building society to obtain a report and valuation and then consider
whether to make to Mrs Smith the mortgage loan she required in consideration of
the payment of £36.89 to them.
In my view,
the wording of the disclaimer set out in the notice on the defendant’s report
and valuation did suffice to prevent the defendants owing any duty of care to
Mrs Smith. In other words, it was so worded as to relieve them of all liability
in negligence.
(2) The requirement of reasonableness
Did that
notice satisfy the test of reasonableness in the Act of 1977? In other words, is it ‘fair and reasonable to
allow reliance on it, having regard to all the circumstances obtaining at’
October 8 1980, ie the date of the report?
This is a question of policy, which could sensibly be answered either
way.
The argument
for the plaintiff, as it eventually emerged, is that it is necessary to
distinguish between a disclaimer of liability for not doing something which the
defendant was not purporting to do, ie carrying out a full structural survey,
and doing incompetently that which Mr Cannell was purporting to do, ie making a
visual inspection sufficient to reveal any state of disrepair which would
affect the value of the property, to ascertain the general condition of the
property and to place a value upon it. It is submitted that it is unfair to
exclude liability for negligence in the latter category.
Mr Hague for
the defendants has two main arguments on this: (a) The lack of support for the
chimney flues in the roof space and the chimney stack above would only have
been revealed by a full structural survey, not by a visual inspection of the
sort Mr Cannell was carrying out. In my view this is not correct. The judge
accepted the evidence of Mr Manwaring, a chartered building surveyor called as
an expert witness for the plaintiff, that the fact that the chimney breasts had
been removed (which Mr Cannell observed) should have put him on inquiry as to
whether the flues and stack above had been left unsupported. That inquiry would
have involved no more than putting his head and shoulders through the trapdoor
into the roof space, when the lack of support would at once have been apparent.
The judge said that it would have taken no more than 10 minutes to check, and
that Mr Cannell should have looked through the trapdoor but did not. I agree
with him. In my view Mr Cannell was guilty of lack of proper care in doing the
sort of inspection he was purporting to do.
(b) That Mr Cannell was carrying out the
inspection for, and reporting to, the building society and nobody else. Mr
Hague argues that it is not fair or reasonable that the defendants should be
under any duty of care to a potential purchaser, with whom they had no
contractual relationship, simply because the building society chose to supply a
copy of their report to Mrs Smith. This is the nub of the case. If a surveyor’s
inspection is competently carried out, a potential purchaser who chooses not to
commission his own inspection, despite the warning notice, will obtain the
benefit of the report. But Mr Hague argues that he cannot justifiably complain
if the inspection failed to reveal some defect which a reasonably competent
inspection should have revealed.
It is my
opinion that this argument fails because its basic premise is incorrect. While
it is true that the surveyor carried out his inspection and wrote his report
and valuation because he was commissioned to do so by the building society, he
knew that a copy of his report would be sent to Mrs Smith and that most
probably she would rely upon his report and valuation without obtaining any
other advice. In my judgment, a professional man who knows that a potential
purchaser of a house (herself possessed of no special skill) will most probably
rely upon his skill and competence should not be allowed to relieve himself of
liability if he fails to exercise a reasonable degree of skill and competence
in the task on which he is engaged.
In agreement
with Dillon LJ, I would thus hold that, in so far as the disclaimer excluded
liability for negligence in the carrying out of the limited sort of inspection
Mr Cannell was engaged to do and was purporting to do, the notice of disclaimer
did not satisfy the requirement of reasonableness within sections 2(2) and
11(3) of the Act of 1977. For this reason I, too, would dismiss the appeal.
Also agreeing,
SIR EDWARD EVELEIGH said: Section 2(1) of the Unfair Contract Terms Act 1977
prevents the defendant firm from excluding ‘liability for negligence except in
so far as the term of notice satisfies the requirement of reasonableness’.
In the present
case it is first necessary to decide whether or not there would be liability
for negligence apart from the notice which seeks to exclude that liability.
The words in
red displayed prominently in the report are not simply a disclaimer of
liability. They also constitute a warning that the report is of limited value
as a survey report. If the plaintiff had relied upon the report to an extent
which would be unreasonable, bearing in mind the warning, there would be no
liability on the defendants and no need to consider the efficacy of a notice
excluding liability.
However, in so
far as the words constitute a warning, they do not, in my opinion, warn a
person to place no reliance at all upon the report. They do not say that it is
dangerous to rely upon the report for what it purports to be or for what it
says.
The report did
not reveal what a valuation report would have revealed if properly prepared,
albeit for its limited purpose. On the contrary it asserted that the property
was readily saleable for the
the report did not merit even that degree of confidence. The warning, in my
opinion, was not such as to make it unreasonable for the plaintiff to rely upon
the report as she did. Therefore the defendant will be liable to the plaintiff
unless the notice is effective to exclude liability.
In this court,
counsel has not sought to argue that the defendant would not have been liable
in the absence of a notice of disclaimer. None the less, I have analysed the
position because I think it is important to bear in mind the basis of the
defendant’s liability when considering whether or not it would be fair and
reasonable to allow reliance upon the notice having regard to all the
circumstances obtaining when liability arose.
A relevant
part of the circumstances obtaining when liability arose was the fact that the
report stated that the house was readily saleable for the purpose of
owner-occupation and was likely to remain so. There was no warning that this
assertion was unreliable. It would have been perfectly simple to discover the
dangerous state of the premises. No structural survey was needed for that. The
least attention to the task that the plaintiff was entitled to expect from the
defendant would have revealed the fault. The defendant’s fault can hardly be
regarded as a mere accidental error or omission.
I, therefore,
am of the opinion that it would not be fair and reasonable to allow reliance
upon a disclaimer which might, I know not, be effective in other circumstances.
The appeal
was dismissed with costs. Leave to appeal to The House of Lords was refused.
