Negligence — Limited survey of property — Measure of damages — Major defects — Death-watch beetle infestation — Whether damages should be based on the diminution of value principle or on cost of repairs and ancillary expenses — Cogent reasons in present case for departing from the general rule — Damages awarded on the basis of costs of repair and ancillary costs and including a sum for inconvenience and distress — Case of interest to surveyors and valuers
the trial there was no contest on liability except in regard to certain details
— The issue was one of damages and included both the correct measure of damages
and problems of quantification — The subject property was a listed building,
exceptionally attractive in appearance in an excellent position on the edge of
the New Forest, with two acres of formal garden and another two acres of
paddock — Parts of the house dated from the 17th century — The plaintiff, a
businesswoman, negotiated a price of £300,000, subject to contract and survey —
The defendants were instructed to ‘make a survey of the main walls and roof
only of the property’, but it was accepted that the survey was to include also
the question of dampness — The survey report contained the statement, which
reflected the agreement of the parties, that ‘my survey is restricted to items
of major expenditure which would affect your intention to purchase or the price
offered’ — In fact the defendants reported some minor problems with damp, but
not the main problems and otherwise failed to report on the major problems —
There were indeed major problems, a very bad infestation with death-watch
beetle, movement in some of the walls and severe damp in some places — The
outbuildings, which were not within the defendants’ remit, were also infested
with death-watch beetle — It was conceded during the trial that, although not
within his remit, a prudent surveyor who had seen the extent of the beetle
infestation in the house (as he should have done) ought to have warned his
client to investigate the outbuildings — An architect instructed by the
plaintiff made a fresh survey, which revealed a long-standing and severe attack
of death-watch beetle, extensive damp (providing, in the form of damp oak, the
favourite food of the beetle), distortion of the walls, in particular of the
west gable wall and the chimney built against it — The estimated cost of the
remedial works directly related to the defendants’ survey was £77,997.44 —
Owing to lack of available funds the necessary works had not been put in hand
by the date of the trial
expert evidence was given on both sides — Both valuers took as a starting point
the price of £300,000 paid by the plaintiff which they agreed was a fair
valuation if the house had been in the condition described in the defendants’
report — The main item in any calculation was the cost of repairs — The judge
had to decide whether those costs should be recoverable as a simple head of
damages or whether damages should be awarded on the basis of diminution of
value in relation to the purchase price of £300,000, which in this case would
be heavily influenced by the cost of repair — After considering the principles
set out by Bingham LJ in County Personnel (Employment Agency) Ltd v Alan R Pulver
& Co, the guideline mentioned by Megaw LJ in Dodd Properties (Kent) Ltd v Canterbury City
Council, and the cases of Philips v Ward and Perry v Sidney Phillips & Son,
the judge came to the conclusion that he should hold the plaintiff entitled to
damages on the basis of the cost of repairs, together with the ancillary costs
associated with those repairs, and damages for distress and inconvenience, with
the return of the fee paid to the defendants for the survey report — Although
the diminution of value principle was recognised as being prima facie appropriate
where property is acquired following negligent advice, it was not invariably
the correct approach; and it was not the right measure in the present case —
Further, although the general rule is that damages should be assessed as at the
date of the breach, this rule is not to be mechanistically applied — In the
present case the plaintiff did not have the opportunity of cutting her losses
at or about the date of purchase and she had acted reasonably throughout — The
cost of repairs would be assessed as at the date when they were likely to be
done — They had not in fact yet been done
|
1 Cost of repair |
£77,997.44 |
|
2 Removal, |
6,349.70 |
|
3 Rental of |
4,986.00 |
|
4 Removal and |
750.00 |
|
5 Fee paid for |
253.00 |
|
6 Damages for |
8,000.00 |
|
|
£98,336.14 |
similar detail the damages which he would have awarded on the diminution of
value basis — These figures, together with the explanations given of some of
the differences, will be of interest to valuers
was awarded damages in the sum of £98,336.14 — As the judge explained, it was
not appropriate to award interest
The following
cases are referred to in this report.
County
Personnel (Employment Agency) Ltd v Alan R
Pulver & Co [1987] 1 WLR 916; [1987] 1 All ER 289; [1986] 2 EGLR 246,
CA
Dodd
Properties (Kent) Ltd v Canterbury City Council
[1980] 1 WLR 433; [1980] 1 All ER 928; [1980] EGD 229; (1979) 253 EG 1335,
[1980] 1 EGLR 15, CA
Perry v Sidney Phillips & Son [1982] 1 WLR 1297; [1982] 3 All
ER 705; [1982] EGD 412; (1982) 263 EG 888, [1982] 2 EGLR 135, CA
Philips v Ward [1956] 1 WLR 471; [1956] 1 All ER 874, CA
In this
action, the plaintiff, Mrs Pamela Syrett, claimed damages against the firm of
surveyors, Carr & Neave, of Ringwood, Hampshire, for negligence in a survey
carried out on her instructions of a property known as Wootton Old Farm,
Wootton, Hampshire.
Richard Gray
(instructed by Payne Hicks Beach) appeared on behalf of the plaintiff; Colin
Nixon (instructed by Kennedys) represented the defendants.
Giving
judgment, HIS HONOUR JUDGE BOWSHER QC said: The plaintiff claims damages
for negligence against a surveyor arising out of a survey of a property known
as Wootton Old Farm, Wootton, Hampshire. It is a very bad case of negligence,
and indeed so bad that, in the absence of any evidence from the surveyor who
conducted the survey (Mr C C Carr [FRICS]), it is difficult to see how the
errors were made. By the end of the trial there was no contest on liability
except with regard to certain details.
The plaintiff
works in the business of property management, based in London. Her husband is
engaged in a number of businesses including a security company, which among
other things sells burglar alarms.
In 1986, the
plaintiff and her husband were living with their seven-year-old son in a large
five-bedroomed flat in London. They decided to change their life-style by
selling their large flat and in its place buying a large country house and a
small London flat. They wanted spacious accommodation because they wanted to
have school friends of their son to stay (to compensate for his being an only
child), they wanted to accommodate his nanny, and they wanted to entertain
friends and business acquaintances. In addition, the plaintiff and her son both
ride horses and her husband engages in other sports, and they wanted to extend
these activities.
The plaintiff
grew up in the country near Winchester, and so she looked at three or four
properties in Hampshire. She then became attracted to Wootton Old Farm.
Everyone is agreed that this is an exceptionally attractive building in an
excellent position on the edge of the New Forest, with two acres of formal
garden and another two acres of paddock. Parts of the house date from the 17th
century. The plaintiff negotiated a price of £300,000 subject to contract and
subject to survey. She had a budget of £100,000 to make improvements to the
property.
The plaintiff
accepted that in a house of this age there would be matters which required
attention, but before she entered into a contract she wanted to be assured that
there were no items of major expenditure which would affect her decision to
purchase. Accordingly, she instructed the defendants, as a firm recommended as
having local expertise, to make a limited survey.
By a letter
dated September 4 1986 the defendants agreed to ‘make a survey of the main
walls and roof only of the property’. An attendance note of Mr Carr confirms
that he agreed to consider main walls, roof and damp. I am in no doubt that
damp was to be included in his survey.
Mr Carr
reported on September 12 1986. His report contained the statement, which I find
reflects the agreement between the parties, that ‘my survey is restricted to
items of major expenditure which would affect your intention to purchase or the
price offered’. There were in fact major defects in the property including a
very bad infestation with death-watch beetle, movement in some of the walls,
and severe damp in some places. The favourite food of the death-watch beetle is
damp oak, and dampness goes hand in hand with death-watch beetle in houses
where there are oak beams. The defendants reported some minor problems with
damp, but not the main problems, and otherwise failed to report on the major
problems. One of the plaintiff’s complaints relates to some outbuildings which
were also infested with death-watch beetle. Liability for those outbuildings
was contested on the basis that, as was the fact, they were outside the
defendants’ brief. Late in the trial it was conceded by an expert witness
called for the defendants that once a prudent surveyor had seen the death-watch
beetle infestation in the house (as he should have done), he should have warned
his client to investigate the outbuildings.
The plaintiff
was very unfortunate that she was not recommended to consult a different local
surveyor, Mr Richard McNeil [FRICS], who gave evidence for the defendants. He
verified two witness statements, one dated April 2 1990 and the other dated
July 24 1990, the day before he gave oral evidence. In neither of those
statements did he disclose the information put forward in oral
examination-in-chief that he himself had inspected this property in October
1976 and again in September 1980, on instructions from a building society which
was considering on the first occasion a re-mortgage and on the second occasion
a further advance against the property. In his examination-in-chief he did not
disclose the facts (no doubt because he was not asked) elicited by me during
re-examination that on each occasion he saw death-watch beetle and recommended
to the building society that treatment to the timbers and damp-proofing should
be carried out. Mr McNeil did say in his first witness statement: ‘I have never
inspected a property of this age which has not suffered from an infestation of
woodworm and/or death-watch beetle’. In the light of information either known
or available to them, it is surprising that the defendants contested liability
for so long. That is a matter which has no relevance to the issue of damages,
but it might be relevant on costs. The defendants did make admissions on the
first day of the trial in the following terms:
The defendants
failed adequately to inspect the property and to see the evidence of
death-watch beetle and its effects on the timber in various parts thereof, in
particular in the roof void, the attic bedrooms and the first floor bedrooms.
The defendants
failed in their written report of September 12 1986 to report to the plaintiff
the evidence of death-watch beetle in the premises and to warn her that the
full extent thereof could not be determined by a survey such as this, that it
might be extensive, and that remedial work might be required, and to advise her
that a specialist inspection would be prudent.
In reliance
upon the defendants’ written report of September 12 1986 the plaintiff
contracted to and did purchase the property for the sum of £300,000.
Later, at 2 pm
on the second day of the hearing, the defendants by their counsel admitted that
they no longer resisted liability in respect of the damp-proof course with the
exception of the damp-proof course in the kitchen. Consultants had recommended
that a special damp-proof course be inserted in all the walls of the old part
of the house. Part of those old walls were in the kitchen. On behalf of the
defendants it was said that there was no evidence of damp in that particular
room. However, the kitchen fitments impeded the fullest damp tests, and in any
event, when damp is found in all the other old walls of the house it seems only
prudent to extend damp-proofing to the one room in which damp has not been
positively found.
The plaintiff
stated in evidence:
Had I known
of the death-watch beetle infestation, I would not have purchased the property
but would have purchased another suitable property in the area.
I accept that
evidence. The whole purpose of the survey was to discover whether there were
any major defects which would affect the decision to buy.
Relying on the
survey, the plaintiff exchanged contracts on October 1 1986. The price was
£300,000, which all concerned are agreed was a fair market price for the house
if it had been as described in the defendants’ report. The conveyance was
completed on February 6 1987, and the plaintiff and her family moved in during
that month. After exchange of contracts, she put her large London
selling the flat, the plaintiff rented a small one and a half bedroomed house
in London. Meanwhile, the plaintiff had discovered the death-watch beetle
infestation in her house in the country.
Quite
reasonably, she decided that they would live in the house for a while to get
the feel of the house before spending the budgeted sum on improvements. During
the period after moving in and before alterations were planned in detail, there
was one disturbing incident. In the autumn of 1987, Mr Syrett lit an oil-fired
Aga and then oil fumes were smelt in the bedroom above. The plaintiff had the
chimneys investigated and was advised that the linings of the flues had
perished and needed replacing and they were replaced at a cost of £3,569.
In October
1988 the plaintiff engaged Mr Peter Young, an architect, to advise on
alterations to the house. When he visited in October 1988 the plaintiff
mentioned to him her concern about some orange dust which fell on the covers of
the beds in the attic bedrooms. Mr Young advised a survey, which he was
instructed to conduct. That survey revealed a longstanding and severe attack of
death-watch beetle, extensive damp, and distortion of the walls, in particular
of the west gable wall and of the chimney built up against it.
Mr Young
advised that work should be done at a cost, including VAT and fees, of about
£150,000. At the trial he accepted that those works were not necessarily
related to the defendants’ negligent report. After discussions with the
quantity surveyor instructed by the defendants, Mr I A Rennie [FRICS], he
accepted a cheaper way of doing some of the work, deleted some items, reduced
others and reached some compromises. His final figure was £77,997.44. Mr Rennie
put forward a total of £41,467.39.
The work has
not been put in hand. The plaintiff said that she would like the work to be
done as soon as possible. She did not discover the problem until October 1988,
so she could not have had the work done before then. Until the sale of the
London flat in June 1989 she was short of funds because she had borrowed a
substantial amount of money to make the purchase on the basis that she could
let the house if there was any delay in selling the flat, and once the problem
had come to light, letting the house became impossible because the falling dust
left only two bedrooms habitable. She also has the problem that until she knows
the outcome of the litigation, she does not know how much she can spend on the
house. I find that she has acted entirely reasonably. I am sure that if she
could have done the work she would have done so because the state of the house
has been and is totally disruptive of her family life and causes her great
stress and worry. She and her husband cannot entertain their friends and
business clients, and she cannot, as she would wish, have her son’s friends to
stay. Since the sale of the London flat the bulk of their furniture went first
into storage and then in packing cases into the house, making many more rooms
unusable. When instructions are given for the work to begin, a month’s notice
will have to be given (this being a listed property) and the work will take 18 weeks.
(There is a dispute about the length of time that will be taken, but that is my
finding.) It is agreed that when the
work begins, the plaintiff and her family will have to move out of the house,
causing more inconvenience and more expense in the form of removal and storage
costs and rental of alternative accommodation. All of this damage is a natural
and probable consequence of the defendants’ negligence.
By whatever
principle damages are calculated, the cost of repair is relevant in this case.
I therefore turn to consider the costs of repair. This case has given rise to
more detailed consideration of costings than any other I have heard. In a
schedule of 166 items, many were agreed, under some pressure from me, but many
other items remained in dispute. Mr Young’s original figures were on the
generous side and Mr Rennie’s original figures were on the mean side. But
whereas Mr Young moved very substantially from his original position, Mr Rennie
was unwilling to budge from certain contentions of substance even though his
position seems to me to be plainly unsustainable. I will give some examples.
Example 1: Mr Young’s figures contain a contingency allowance of 5%, which is
fairly modest in the circumstances. Mr Rennie contended that as the property
had been opened up no allowance should be made for contingencies, and stuck to
that position even after he had admitted that 66% of the timbers in the roof
had not been examined because of the limits on the opening up.
Example 2: There was a difference between Mr Young and Mr Rennie as to the
cost of replacement timber. This came down to a difference over some floor
boards. Mr Young said that some temporary floor boards had been put in and they
should be replaced by boards which matched the original boards. Mr Rennie
admitted that the boards in question were white in appearance and were 6 in
wide while the original boards were 10 in wide and were of a pleasing reddish
colour which would polish up pleasantly if anyone wished to treat them in that
way. I find it surprising that it should be suggested that a period listed
house should be repaired in the way proposed by Mr Rennie.
Example 3: Specialists advised that a new damp-proof course should be
inserted in all the oldest walls of the house, including the kitchen, and
further advised that to have the advantage of their guarantee the plaster on
the inside walls should be hacked off and replaced. Mr Rennie contended that as
no damp had actually been measured in the kitchen the damp-proofing treatment
should not be taken into the kitchen and there should be no charge for removing
kitchen units from that room and there should be a reduction in the
specialists’ charges. I have already given my reasons for rejecting Mr Rennie’s
contentions in that regard.
Example 4: Mr Rennie gave evidence from personal experience that oil fumes
were commonly given off by an Aga until it reached its maximum efficiency on
heating up. But for the plaintiff it is contended that for the smell to get
into the bedroom there must have been a crack in the chimney and in the wall
between the chimney and the bedroom. No one has ever seen such a crack, either
internally or externally, in any chimney. There may be such a crack between
floor and ceiling and that seems the most likely route for the fumes to have
got into the bedroom. The chimneys are parts of the main walls and the chimney
in question is attached to the west gable, which has undoubtedly moved as has
also the chimney with it. Had Mr Carr noted the movement in the gable wall and
this chimney he should have suspected cracking and should have conducted a
smoke test on the chimney. He would then have seen smoke going into the bedroom
and would have realised by further inspection that the lining had crumbled
away. That would have led him to an inspection of the interior of the other
chimneys and he would have discovered that their linings also had crumbled.
Example 5: There are some outbuildings which contain a quantity of oak which
needs repair and treatment. Mr Rennie maintained that the estimated cost of the
work to the outbuildings should be deleted from the plaintiff’s claim because
the outbuildings were not included in the defendants’ brief. He took up this
stance even though he readily admitted in cross-examination that if a prudent
surveyor found a severe attack of death-watch beetle in the main house (as he
should have done) he ought to have advised his client that the outbuildings
should be investigated. I find that the costs of work to the outbuildings
should be included in the costs of repair for the purpose of this action.
Having regard
to my findings as between Mr Young and Mr Rennie on the differences between
them which could be and were adequately tested at the trial, I have no
hesitation in finding that Mr Young’s evidence was more persuasive than Mr
Rennie’s and should be preferred also on those points where the differences
could not be adequately tested.
There was an
issue between Mr Young and Mr Rennie as to the length of time that would be
taken for the work. The time taken to do the work is relevant to consequential
losses such as rental of alternative accommodation. Mr Young invited tenders
from 10 builders. In the event, after four had tendered, only one was willing
to do the work. That builder estimated that the time to be taken would be 25
weeks. Mr Young beat him down to 20 weeks. Mr Young says that allowing for the
fact that he has agreed certain omissions in the work, the time taken should be
reduced to 18 weeks. Mr Rennie says that because of the omissions the length of
the work should be reduced to 10 weeks. Mr Young justifies his estimate by
saying that it is not right to look at the difference between his original
estimate in terms of money and compare that with his present estimate. The
major item of reduction is due to a concession made by him that it would not be
necessary to take off the roof. While the roof was being taken off, other work
could have been in progress, certainly on the ground floor and probably also on
upper floors of the house in rooms not directly under the working position of
the roofers at any one time. On this point also I prefer Mr Young’s evidence to
that of Mr Rennie and find that the best estimate of the time to be taken on
the work would be 18 weeks.
I therefore
find that the costs of repair in July 1990 would be in the sum now assessed by
Mr Young, £77,997.44, and that the time to be taken to do the work is likely to
be 18 weeks. The precise make-up of
judgment.
Other costs
ancillary to the repairs are as follows:
1 Removal, storage and insurance of furniture
for 18 weeks. The plaintiff claims £6,400, which seems to me to be reasonable.
2 Rental of alternative premises at an agreed
price of £277 per week, which for 18 weeks would be £4,986.
3 Removal, storage and reinstallation of a
burglar alarm system. This system is very sophisticated and delicate and would
suffer badly from dust and from the vibration caused during works on the
premises. Having heard the evidence of Mr Syrett, whose company installed the
system, it seems to me to be reasonable that the system should be removed
before work is started. This is an expense which the plaintiff incurs as a
result of going into the property before the defects were discovered. Mr Syrett
very fairly accepts that the number of hours charged in his company’s estimate
appears inflated.
I accept the
number of hours put forward by the plaintiff’s counsel as reasonable and I
assess the cost of this item at £750.
4 There is a claim for recovery of the fee paid
for the report on the basis that it was useless. The plaintiff is entitled to
£253 under this head.
5 Damages are also claimed for inconvenience
and distress.
6 The plaintiff also claims interest.
I turn to consider
the basis on which damages should be assessed.
The costs of
repair formed part of the considerations of both experts who gave evidence of
value. In addition to being Professor of Building Surveying at the Department
of Construction Management in the University of Reading, Professor Malcolm
Hollis is also a director of the very-old-established firm of Baxter Payne
& Lepper. He has considerable experience dealing in London with clients who
are looking for what he calls ‘more interesting houses’ outside London, but as
far afield as Wiltshire, Gloucestershire, Hampshire and Sussex. He sees that
market as a whole and to that extent has the advantage of the surveyor called
for the defendants, Mr Richard McNeil, to whom I have already referred. Mr
McNeil, a director of Cornerstone Professional, practising from Lymington, has
the advantage of detailed local knowledge. Mr McNeil tends to go no further
than 10 miles from his office for valuations. Wootton Old Farm is about six
miles from his office.
Both surveyors
took the purchase price of £300,000 as the starting point, it being agreed that
that was a fair valuation for the house as described by the defendants.
Professor Hollis then took the costs of repair given by Mr Young, £70,000, and
using a method accepted by the defendants, projected that figure back to give
an equivalent cost for the same work being done in September 1986. That figure
he calculated as £52,000. Considering the general hypothetical purchaser who
had knowledge of the defects, the costs of repair would be directly relevant.
If works can be delayed they are not a direct deduction, but here they could
not be delayed, and the purchaser would know that entry into occupation would
be delayed. Professor Hollis took that delay as 16 weeks. As a result of the
delay the purchaser would be faced with the additional costs of holding two
homes (either financing costs through delayed sale of his existing home or
rental of alternative accommodation). In addition, Professor Hollis said that
one should take into consideration the risk that the repairs ‘may damage the
wisteria that is so much a part of the character of the south elevation of this
property’. That wisteria is well established and obviously old and could not be
replaced in its present glory for many years. It is notable that Mr McNeil also
said: ‘Works on this scale could destroy much of the essential character of a
property of this age and type’. On the basis of no evidence, it was suggested
by counsel for the defendants in his closing speech that there might be an
element of ‘betterment’ arising out of the repairs: but even disregarding the
legal objections to that submission, it seems more likely that the repairs will
damage the overall value of the house rather than the contrary. Professor Hollis
described the cost of repairs as the ‘core’ of the deductions, which in this
case would be deducted in totality, but there would not be a 100% deduction for
what he called the peripherals.
Taking these
matters into account, Professor Hollis gave his opinion that £55,000 would be
deducted from the £300,000 market value, giving a value for the house in its
actual state in September 1986 of £245,000.
Mr McNeil, on
the other hand, took Mr Rennie’s repair figure of £41,000 and adjusted that to
a repair cost of £29,000 in September 1986. On the basis of the property not
being opened up, and there being a measure of uncertainty about the figure, he
estimated a market price of £275,000, allowing for a contingency of about 15%.
Taking the same figure, which Mr Rennie adhered to after opening up, he
eliminated the 15% contingency and estimated a market price of £285,000, which
he later revised to £283,000. He said that a minimum ‘bedrock’ price would be
£265,000 and that would be the value if Mr Young’s figure of £78,000 for
repairs were to be accepted. Mr McNeil based that opinion on the rarity of
properties of this type in the New Forest and on the state of the market at the
time. He described market conditions in the New Forest in the last quarter of
1986 as ‘good’. Professor Hollis said that the market generally was ‘reasonably
firm’, ‘steady’, ‘not buoyant’.
I prefer the
evidence of Professor Hollis. The art of valuation is well supported by local
knowledge. But the market for this type of house is very much larger than the
10-mile radius around Mr McNeil’s office. Since Mr McNeil regards this type of
property as being so rare in his area, he must have comparatively little
experience of dealings in such property compared with Professor Hollis, who has
as his clients many potential purchasers for this type of property. The vendor
must have known that potential purchasers for his property would not
necessarily limit their search for a house to his area. Moreover, it is
difficult to believe that Mr McNeil’s two reports to the building society had
not been drawn to his attention and in September he had men working on the roof
from scaffolding. Only a sentimental fool with money to burn would buy a house
for £265,000 knowing that he would have to spend £78,000 on it to make it worth
at most £300,000, and probably less owing to possible damage to the character
of the house by the works. The hypothetical buyer should not be taken to be a
sentimental fool, because there are not many sentimental fools able to retain
their money for long enough to buy houses for £300,000 at 1986 prices.
Certainly the plaintiff is a hard-headed businesswoman who would not go in for
that sort of deal. Although she was attracted to the Winchester area and to
this house in particular, she would not have bought this house at all had she
known about the death-watch beetle, and that would have been the view of the
ordinary hypothetical purchaser who was looking for a home rather than a
property developer who was looking for a house to do up for resale. The
property developer would certainly not buy at a price which could not show a
profit.
The major item
of the plaintiff’s costs is the cost of repairs. I have to decide whether those
costs should be recoverable as a simple head of damages or whether I should
award damages on the basis of diminution in value, which in this case is
heavily influenced by the cost of repairs.
In a
solicitor’s negligence action, County Personnel (Employment Agency) Ltd
v Alan R Pulver & Co [1987] 1 WLR 916* at p 925, Bingham LJ stated
eight principles to be applied in assessing damages. The first four of those
are of particular relevance in this case and are as follows:
(1) The overriding rule was stated by Lord
Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25,
at p 39, and has been repeated on countless occasions since: the measure of
damages is
‘that sum of
money which will put the party who has been injured, or who has suffered, in
the same position as he would have been if he had not sustained the wrong for
which he is now getting his compensation or reparation.’
As Megaw LJ
added in Dodd Properties (Kent) Ltd v Canterbury City Council
[1980] 1 WLR 433 at p 451:
‘In any case
of doubt, it is desirable that the judge, having decided provisionally as to
the amount of damages, should, before finally deciding, consider whether the
amount conforms with the requirement of Lord Blackburn’s fundamental principle.
If it appears not to conform, the judge should examine the question again to
see whether the particular case falls within one of the exceptions of which
Lord Blackburn gave examples, or whether he is obliged by some binding
authority to arrive at a result which is inconsistent with fundamental
principle.’
(2) On the authorities as they stand the
diminution in value rule appears almost always, if not always, to be
appropriate where property is acquired following negligent advice by surveyors.
Such cases as Philips v Ward [1956] 1 WLR 471; Pilkington
v Wood [1953] Ch 770; Ford v White & Co [1964] 1 WLR
885 and Perry v Sidney Phillips & Son [1982] 1 WLR
1297, lay down that rule and illustrate its application in cases involving both
surveyors and solicitors.
(3) That is not, however, an invariable approach,
at least in claims against solicitors, and should not be mechanistically
applied in cases where it may appear inappropriate. In Simple Simon Catering
Ltd v J E Binstock Miller & Co (1973) 228 EG 527 the Court of
Appeal favoured a more general assessment taking account of the ‘general
expectation of loss’. In other cases
Properties Case [1980] 1 WLR 433, 456, per Donaldson LJ. In other cases the
measure of damage may properly include the cost of making good the error of a
negligent adviser: examples are found in Braid v W L Highway &
Sons (1964) 191 EG 433, and G & K Ladenbau (UK) Ltd v Crawley
& de Reya [1978] 1 WLR 266.
(4) While the general rule undoubtedly is that
damages for tort or breach of contract are assessed as at the date of breach
(see for example, Miliangos v George Frank (Textiles) Ltd [1976]
AC 443, 468, per Lord Wilberforce), this rule also should not be mechanistically
applied in circumstances where assessment at another date may more accurately
reflect the overriding compensatory rule. The Dodd Properties Case both
affirms this principle and illustrates its application.
*Editor’s
note: Also reported at [1986] 2 EGLR 246.
Following the
guideline set out by Megaw LJ in Dodd Properties (Kent) Ltd v Canterbury
City Council [1980] 1 WLR 433, it seems to me that the appropriate measure
of damages to put the plaintiff in the same position as she would have been in
if she had not sustained the wrong is the cost of repairs plus the costs
ancillary to those repairs plus compensation for the blight on her happiness
since October 1988. If she had received a careful rather than a negligent
report, she would not have bought this property and she would have bought a
property which would have been worth what she paid for it and would not have
required large expenditure in repairs and would have given her much enjoyment
already. It does not seem to me that this approach falls within one of the
exceptions mentioned by Lord Blackburn and I therefore turn to consider whether
there is some binding authority which obliges me to arrive at some different
result.
The two
principal binding authorities which I have to consider are Philips v Ward
[1956] 1 WLR 471 and Perry v Sidney Phillips & Son [1982] 1
WLR 1297*. In Philips v Ward, the Court of Appeal held that on
the facts of that case (see Morris LJ at p 476, line 5) the appropriate
measure of damages was the difference in value between the value of the
property as it was described in the defendants’ report and the value as it
should have been described. In that case, the difference in value was £4,000
and the cost of repairs at the time of purchase was £7,000. The work of repair
had not been done by the date of the trial, and the Court of Appeal held on the
facts of that case that it was not reasonable to have delayed doing the repair
(per Morris LJ at p 475). Both of those facts differ from the facts of the
present case. The date when the infestation by death-watch beetle was
discovered in Philips v Ward is not clear from the report. In the
statement of facts on p 471 it is stated that the plaintiff bought in June 1952
and moved in and ‘it was then found that the timbers of the house were badly
affected by death-watch beetle’. The only reason for postponing the doing of
the works put forward by the plaintiff appears to have been that the plaintiff
wanted the property to be available for inspection at the date of the hearing.
That reason was, not surprisingly, rejected by Morris LJ (p 475 first
paragraph). I infer that the purchaser in Philips v Ward
discovered the death-watch beetle soon after moving into the property and he
had a choice between selling the property again at its true value, making a
loss which was less than the then cost of repairs, or doing the repairs. In
those circumstances, to award as damages the cost of doing the repairs would
have given him a benefit to which he was not entitled in the absence of a
warranty from the surveyor as to the state of the property. That is not the
case here where instant resale of the property would not have left the
purchaser with a loss less than the cost of repairs and, more important, the
purchaser had no reason to make an instant sale of the property because she did
not know of the defect until two years after moving in and by then she was so
heavily involved with the property that it was reasonable for her to keep it
and repair it. It seems to me to be wholly artificial to tell a plaintiff that
her damage is to be measured in relation to a loss which she could have taken
by making a sale two years before she learned that there was a loss to be
realised. That does not seem to me to be what the Court of Appeal was saying in
Philips v Ward on the facts of that case.
*Editor’s
note: Also reported at (1982) 263 EG 888, [1982] 2 EGLR 135.
In Perry
v Sidney Phillips & Son also the defects unreported in the negligent
report seem likely to have been discovered very soon after the plaintiff moved
into the property. The defects were a leaking roof and a septic tank giving off
an offensive smell (see p 1300 H). Again, the plaintiff had a choice of either
cutting his loss by reselling or undertaking the necessary repairs. He chose
not to resell until after the trial, and he did not have the means to undertake
repairs. Oliver LJ in that case (at p 1304 G) rejected a submission, based on Dodd
Properties, that the loss should ‘be assessed on the basis of some
hypothetical value at the date of trial because the plaintiff has chosen — as
he did in this case — to retain the property and not to cut his loss by
reselling it’. In the same case at p 1302, Lord Denning MR said:
The general
rule of law is that you assess the damages at the date of the breach so as to
put the plaintiff in the same position as he would have been in if the contract
had been properly performed. Even if the claim be laid in tort against the
surveyor, the damages should be on the same basis.
If the
plaintiff is unaware of the breach until two years after the breach took place
there may be many reasons for not applying that general rule and, in my
judgment, there are cogent reasons for not applying that general rule in this
case. Those cogent reasons are that the plaintiff did not have an opportunity
of cutting her losses at or about the date of purchase and that she has acted
reasonably throughout and that all the expenses which I find she has suffered
or is likely to suffer are natural and probable results of the negligent
survey. The plaintiff did have an opportunity of cutting her losses two years
after purchase of the property in October 1988, but in her circumstances at the
time it seems to me to have been reasonable for her to decide not to do so, and
in any event there is no evidence before me as to what would have been the
financial results of her selling at that time.
Accordingly,
to return to the words of Megaw LJ in Dodd Properties, I do not feel
that I am ‘obliged by some binding authority to arrive at a result which is
inconsistent with the fundamental principle’.
I therefore
hold that the plaintiff is entitled to damages comprising the cost of repairs
together with the ancillary costs associated with those repairs and damages for
distress and inconvenience together with return of the fee paid for the report.
The cost of
repairs should be assessed as at the date when they are likely to be done, the
plaintiff having acted reasonably in delaying the repairs. That much is not in
issue between the parties. But for the plaintiff it is submitted that the costs
should be increased from the date they were estimated earlier in 1990 up to the
date when the work is likely to be done to take account of the effects of
inflation. For the defendants it is contended that builders, in particular
builders in the Lymington area, are so short of work that it should be possible
to negotiate with them to stick with the prices already agreed and given in
evidence. I accept the defendants’ evidence in that regard. The price of
repairs should be the price given in evidence by Mr Young without adjustment.
The plaintiff
claims damages for inconvenience and distress. She plainly is entitled to such
damages on a scale which is not excessive but modest: see per Lord
Denning MR in Perry v Sidney Phillips & Son at pp 1302, 1303.
A most helpful article by Miss Kim Franklin in (1988) Construction Law
Journal at p 264 makes interesting comparisons between the misery caused by
people being in an unsatisfactory home and the distress caused by ruined
holidays and minor personal injuries. The plaintiff has been restrained in
describing her distress and inconvenience, but it has been real, substantial,
and prolonged, lasting from about October 1988 until early next year. It has
been much more serious than a spoilt fortnight in Mallorca though not as bad as
the experiences of some householders. I assess those damages on a moderate
scale in the sum of £8,000.
The damages
therefore are as follows:
|
1 Cost of repair |
£77,997.44 |
|
2 Removal, storage |
6,349.70 |
|
3. Rental of alternative premises |
4,986.00 |
|
4. Removal and reinstallation of burglar alarm |
750.00 |
|
5. Damages for inconvenience and distress |
8,000.00 |
|
£98,336.14 |
As none of those costs have yet been incurred, apart from items 5
and 6, I do not think it appropriate to award interest.
If, however,
it should be held that I am wrong and that I should have awarded damages on the
diminution in value approach, I would award damages and interest on that basis
as follows:
|
1 Diminution in |
£55,000.00 |
|
2 Interest from the |
31,679.03 |
|
3 Removal, storage |
|
|
4 Rental of |
1,000.00 |
|
5 Rental and |
750.00 |
|
6 Fee paid for |
253.00 |
|
7 Damages for |
4,000.00 |
|
£92,682.03 |
The figures assessed for items 3 and 4 on this method of calculation
are lower than on the first method of calculation because Professor Hollis took
16 of the 18 weeks of rental and storage into account in reaching his valuation
figure, and one should not indulge in double counting. For the same reason, the
damages for inconvenience and distress are lower.
Where damages
are calculated on the basis of diminution in value they are calculated as at
the date when the purchaser relies on the negligent advice by entering into a
contract to purchase, and interest therefore runs from the same date: Perry
v Sidney Phillips & Son at pp 1301, 1302.
Subject to
corrections of my arithmetic, I therefore award to the plaintiff damages in the
sum of £98,336.14 and no interest.
