Negligence — Assessment of damages — Action against surveyors by purchasers of bungalow — Surveyors failed to detect that outer walls of bungalow were built of blocks of cement and aggregate, the latter consisting either of mine waste or of mundic, a substance liable to deteriorate and crumble — The defective material was discovered some few years after the purchase when the owners wished to raise an additional loan from a building society — The judge at first instance awarded the plaintiff owners (the present respondents) damages of £19,500, being the difference between the value of the house in a sound condition in 1979 (the date of purchase) at £33,000 and the site value less demolition costs of £13,500 — The judge accepted that repair was impossible — He rejected the defendant surveyors’ submission that repair was possible at a cost of between £8,000 and £12,000 — Soon after the trial the plaintiffs sold the bungalow for £70,000 — Having heard of this the defendants decided to appeal against the judge’s award — They were out of time but obtained an extension and served notice of appeal together with an application for leave to adduce fresh evidence — Both the appeal and the application came before the present court — It was submitted that the price obtained for the sale soon after the trial was relevant as reflecting on the basis of the award — It was also desired to adduce evidence from a surveyor that the material used in the building blocks was not
pointed out on appeal that the sale of the bungalow for £70,000, for which
there could be a variety of possible reasons, did not destroy the basis of the
judge’s award — Appellants had to show that the judge was wrong in his
assessment and, subject to the question of fresh evidence, they had not done so
— As to the fresh evidence, part of which was of a secondhand nature, it was
evidence which could have been produced at the trial and there was no
justification for seeking to present it on the appeal — Application for leave
to produce evidence and appeal dismissed
The following
case is referred to in this report.
Salter v Hoyle & Smith Ltd [1920] 2 KB 11
This was an
appeal by Sautelle & Hicks, a firm of surveyors, defendants in an action by
Paul Edward Marder and his wife, Christine Evelyn Marder, for negligence in the
survey of a bungalow purchased by the plaintiffs, respondents to the present
appeal.
F H S Gilbert
(instructed by Davey Mashiter, of Liskeard) appeared on behalf of the appellants;
G W Roddick QC and D H Fletcher (instructed by Druces & Attlee) represented
the respondents.
Giving the
first judgment at the invitation of Purchas LJ, STAUGHTON LJ said: In 1979 Mr
and Mrs Marder bought a bungalow in Cornwall for £33,000. It had a hall,
lounge, dining-room, two bedrooms, a bathroom/wc and an outside garage. Before
making the purchase they instructed the defendant firm to survey the bungalow.
They received a report which did not draw attention to any defects of great
materiality. Unfortunately, what the defendants failed to detect was that the
outer walls of the bungalow were built of blocks of cement and aggregate, the
aggregate being either mine waste or a substance called mundic, which, as I
understand it, is a particularly vicious form of waste used as aggregate from
time to time in those parts in the years between the wars. It is said to be
liable to deteriorate and eventually crumble. That omission to detect the
nature of the block forming the outside walls of the property was negligent.
The judge found the defendants liable for that omission, and there has been no
appeal from that conclusion. There is, however, an appeal on the issue as to
damages.
In 1982, when
Mr and Mrs Marder had been in the bungalow for three years or so, they arranged
for substantial extensions to be built at either end, thus adding three or four
more rooms. They also had high-quality fittings installed. The total cost of
those improvements is said to have been £26,000. They were carried out without
anyone detecting the nature of the outer walls of the original building. But
then a further survey took place, because Mr and Mrs Marder wished to raise an
additional loan from a building society. The new surveyor on this occasion did
detect the defect. As it happened, he had surveyed the property for another
possible purchaser or lender in 1979 and had turned it down, so he knew what to
look for.
Thereupon,
this action was brought by Mr and Mrs Marder against the defendant surveyors.
It came to trial in 1986 before His Honour Judge Mantell QC, sitting as a judge
of the High Court in Bodmin. Mr and Mrs Marder were still living in the house
at the time.
The evidence
on behalf of the plaintiffs was that no repair was possible; the only way to
cure the problem was to pull down the defective part of the house and rebuild
it. Their case was that it would last at the most for only another five years,
or perhaps even less than that. So they said that the whole house as it stood
in 1979 would have to be pulled down; and from 1982 onwards the inner section
would have to be pulled down. On that basis the case for the plaintiffs was
that the damages were the difference between the value of the house if it had
been sound, on the one hand, and the site value less demolition costs on the
other. The value of the house sound was taken as £33,000, the purchase price.
The site value, less demolition costs, was taken to be £13,500, the difference
being £19,500. That was the loss on the plaintiffs’ evidence. Incidentally, Mr
C T Geeson [FRICS], one of the experts who gave evidence for the plaintiffs,
valued the property as in fact it was in 1982 at £27,000. It would seem that
that figure was arrived at on the basis that the middle section would have to
be rebuilt but the new sections at either end would stand.
The defendants
did not directly challenge the evidence as to valuation. They called no
evidence as to value directly. However, they claimed by their experts and by
their own evidence that repair was possible at a cost of between £8,000 and
£12,000. If one took that figure then the comparison of values would be between
£33,000, the sound value, and £21,000 or £25,000, the actual value, being the
sound value less the cost of repairs required to make the building sound. That
was the contest at the trial.
The judge gave
judgment on November 11 1986. He rejected the cost of repair as a measure of
damages either in 1979 or at any other time. He said in his judgment:
It seems to
me that as of now, and as of 1982 or 1979 for that matter, had the position
been known, the only remedy open to the plaintiffs was and is to demolish and
rebuild, which means that as of 1979 or any subsequent date the true value of
this property was and remains its site value less the cost of demolishing the
existing building.
I do not for
my part think that the judge can have meant, when he referred to demolishing
the existing building in 1982 or 1986, the demolishing of all building on the
site. He meant, I think, the 1979 section of the building. In any event the
judge awarded the difference between the value as a sound house in 1979 and the
site value less demolition costs. That, as I have said, was £19,500. He also
awarded interest at 12%, which amounted to £16,000 or so.
It is, I
suppose, arguable that the damages might have been measured in 1982 when the
defect was discovered rather than in 1979. It is by no means clear that anybody
advanced that argument at the trial. It certainly would not have suited the
defendants to do so. By 1982 the plaintiffs had spent £33,000 on buying the
property and £26,000 on improving it. They should have had a property worth
£59,000. In fact, according to Mr Geeson, they had one worth £27,000, because
the middle section needed to be demolished and rebuilt. The damages on that
view in 1982 would have been £32,000, very much larger than the principal sum
which the judge awarded, although the interest would have been less.
Very soon
after the trial Mr and Mrs Marder put the property on the market. There was
nothing underhand about that. Their solicitor had told the defendants that they
intended to do so. The property was put on the market either in December 1986
or January 1987. The asking price was £75,000. In the estate agent’s blurb it
was described, with the usual hyperbole, as a fine detached four-bedroomed
bungalow residence which had recently undergone extensive improvements,
modernisation and extensions in 1981, when the whole property was reroofed,
rewired, replumbed and a new oil-fired central-heating system installed.
However, through caution or conscience, this note was added at the end of the
particulars:
The original
bungalow was built pre-war; therefore we would recommend that purchasers have
analyst test on the blockwork.
Contracts were
exchanged in March 1987 for the sale of the bungalow for £70,000. Completion of
that sale took place in April. The defendants found out about that sale and the
price. Notice of appeal was served on their behalf in August 1987 out of time, together
with an application for leave to adduce fresh evidence. The registrar extended
the time for service of notice of appeal and referred the application for leave
to adduce fresh evidence to the full court. We now have to deal with both that
application and the appeal.
The first
point taken by Mr Gilbert, on behalf of the defendants, is that these
plaintiffs have now received £70,000 for this bungalow and that in itself is
something which ought to be taken into account in reduction of the loss which
they claimed to have suffered. The fact that they have received £70,000 is
admitted. There has been no objection to that fact being put before the court
by way of additional or fresh evidence.
There are a
number of possible reasons for the price obtained. In particular, there are
four reasons why, in my judgment, it may be of no benefit to the defendants.
First, it may be partly explained by the change in the planning climate in that
part of Cornwall where this bungalow is situated. When the judge was assessing
damages as at 1979 in 1986, there did not appear to have been any active
prospect of further development considered by him. But things changed early in
1987; and the purchasers from Mr and Mrs Marder may well have been prepared to
pay more because they had an expectation of being able to build further a
dwelling in the one-acre plot which went with the bungalow. That would no doubt
increase the value. Second, the £70,000 is in part explained by the extensions
which the plaintiffs have built at their own expense. Third, it is no doubt in
part explained by inflation between 1979 and 1986, and not just inflation
generally, but inflation in the specific realm of house prices. It would seem
that it certainly occurred. The plaintiffs had invested their money in real
property, and they had a good claim to the benefit by way of
received under the judge’s judgment compensation in the shape of interest at
12% from 1979 until 1986, and 12% is way above the interest rate appropriate to
stable currency. But I would doubt if it were anywhere near sufficient
compensation for the inflation in house prices over that period.
A fourth
reason which might explain the £70,000 figure is simply that the new purchasers
paid too much; in other words, the plaintiffs obtained a windfall. That would
be a collateral matter for which the defendants could claim no credit. There is
a well-established principle set out in McGregor on Damages, 15th ed,
para 16, that some credits which a plaintiff may receive are collateral and not
to be deducted from damages due to him from a defendant. One of the examples
given in that paragraph is where a buyer of goods which fall short of warranty
nevertheless had succeeded in reselling them at a higher price than their value
in their defective state. The footnote refers to the case of Salter v Hoyle
& Smith Ltd [1920] 2 KB 11, which was a decision of this court. I would
say that, if and in so far as the purchaser may have paid too much, that was
certainly a collateral matter from which the defendant gets no benefit. I
appreciate that this doctrine of collateral credit may not always seem very
just to defendants who have to pay damages, but it is both logic and law.
Therefore, the receipt of the £70,000 does not by itself destroy the basis upon
which the judge awarded damages. The defendants have to show that the judge was
wrong in his assessment of damages, either with or without the additional
evidence upon which they seek to rely.
Without the
new evidence the defendants’ case can be comprised in a very small compass,
once the £70,000 point has gone. The only criticism which Mr Gilbert has made
of the judge’s judgment on other grounds relates to the 1982 value. Having
rejected the cost of repair, the judge took the 1979 value and awarded the
difference between sound value and site value. He said that he would have
arrived at the same conclusion in 1982, although he was not asked to do so and
that formed no part of his decision. If he had done that, then it may be that
he could have been criticised for not taking Mr Geeson’s figure of £27,000 as
the value of the site with the existing building but less the cost of pulling
down the middle section. However, if he had gone further into that matter, it
would have been of no benefit to the defendants. The damages would have been
higher, as I have sought to show. So the criticism of that part of the judge’s
judgment does not assist this appeal.
I come now to
the new evidence. The application is to adduce the oral evidence of Simon John
Marriott Dowling FRICS. We have an affidavit of Mr Dowling which indicates the
evidence which he would give. He is a Fellow of the Royal Institution of
Chartered Surveyors and has had experience in the West Country as a surveyor of
residential property. He says in para 2 of his affidavit that he has received a
summary chemical analyst’s report prepared, as he believes, by Dr H J Hignett,
and that his opinion is based on that. It would seem that Dr Hignett reached
the conclusion that the building blocks were not mundic but mine waste and were
therefore not so liable to decay as the judge thought, albeit still subject to
a considerable question mark. However, Mr Gilbert faces this difficulty: the
evidence as to the nature of the defect could very well have been obtained at
the original trial, and really no explanation has been offered why that was not
done. So he does not seek to call Dr Hignett as a witness by way of fresh
evidence. Any such application would be doomed to failure. Therefore he accepts
that he cannot rely on passages in Mr Dowling’s evidence which depend upon the
evidence of Dr Hignett. He says that only paras 3 to 6 of Mr Dowling’s
affidavit are excluded, but I am by no means sure that the effect of Dr Hignett
does not pervade a great deal of the rest of Mr Dowling’s evidence.
There are,
however, at least two points on which Mr Dowling’s evidence is to some extent
independent. First of all, he says that he himself inspected the property in
August 1987 and found no evidence of major structural weakness. That, too, is
evidence which plainly could have been obtained before the trial and should
have been obtained. There can be no excuse whatever for not producing that
evidence earlier and no ground for seeking to introduce it now.
The one
remaining matter is this. Mr Dowling values the bungalow as it now is,
extensions and all but sound without any defective material, at £85,000. He
then points to the fact that a purchaser had been found at £70,000. That is
some reduction, just a little less than 20%, by way of discount from the sound
value. Mr Dowling argues that a similar discount is all that could have been
expected in 1979, and a discount of 20% then would have meant damages of some
£4,000, perhaps even less or perhaps a bit more. The trouble with that, apart
from the assumption that seems to be underlying it to some extent, that as Dr
Hignett is now saying the property was not as defective as the judge found, is
that it is based on some unknown person’s opinion of the present value of the
property reached by some unknown process. The court knows that a purchaser has
been willing to buy the property for £70,000. From that Mr Dowling deduces that
the property was not very defective and that a 20% discount would do. But we do
not know how that purchaser reached his conclusion and on what basis. I would
regard that evidence as being of very little persuasive value in its own right
and as such, on the authorities, ought not to be admitted by way of fresh
evidence. Accordingly, I would dismiss the application for leave to adduce
fresh evidence and also this appeal.
PURCHAS LJ and
SIR ROUALEYN CUMMING-BRUCE agreed and did not add anything.
The
application for leave to adduce fresh evidence and the appeal were dismissed with
costs.
