Negligence — Mortgage valuation report — Limitation Act 1980, section 14A — Whether plaintiffs had knowledge to commence proceedings — Whether knowledge of plaintiffs included that of solicitors
In February
1983 the plaintiffs, who had previously been given a copy of the survey report
prepared for their building society, purchased a terrace house. That report did
not contain evidence of subsidence, settlement or landslip. In 1985 the
plaintiffs were informed that the property was unsuitable as security for
remortgage purposes because of a major structural defect. In April 1985 the
plaintiffs’ solicitor wrote to the building society and, after referring to the
defect, stated that he had been advised that whoever surveyed the property for
the society in 1983 should have observed an extremely obvious structural
defect. In September 1985 the plaintiffs’ solicitor received a report from a
valuation surveyor that the property had cracks which would have been apparent
in 1983. In April 1986 the plaintiffs changed solicitors, and in December 1989
issued a writ against the defendant surveyors claiming damages for negligence.
The principal limitation period expired in February 1989, but at the hearing of
a preliminary issue the plaintiffs sought to rely on section 14A of the
Limitation Act 1980; they asserted that they did not know that the damage was
attributable to the defendants until May 1987 and did not know the identity of
the defendants until 1988.
for the purposes of section 14A of the Limitation Act 1980 included that of
their solicitor, who had received the September 1985 surveyors’ report. The
plaintiffs had sufficient knowledge in 1985 to justify embarking on the
preliminaries to the issue of the writ.
The following
cases are referred to in this report.
Broadley v Guy Clapham & Co [1994] 4 All ER 439, CA
Davis v Ministry of Defence The Times August 7 1985, CA
Dobbie v Medway Health Authority [1994] 1 WLR 1234; [1994] 4 All ER
450, CA; [1994] 1 WLR 1553, HL
Halford v Brookes [1991] 1 WLR 428; [1991] 3 All ER 559, CA
Nash v Eli Lilly & Co [1993] 1 WLR 782; [1993] 4 All ER 383,
CA
This was the
hearing of a preliminary issue in a claim by the plaintiffs, Mr and Mrs
Heathcote, for damages for negligence against the defendants, David Marks &
Co, arising out of a mortgage valuation report.
Digby Jess
(instructed by Isherwood & Hose, of Heywood) appeared for the plaintiffs;
Patrick Field (instructed by James Chapman & Co, of Manchester) represented
the defendants.
Giving
judgment, Buckley J said:
In January 1983, the plaintiffs, Mr and Mrs Heathcote, wished to purchase 39
Canal Street, Heywood, described in the documents as ‘An older type, but
modernised end terraced house’. They obtained a mortgage offer from Midshire
Building Society and were given a copy of the society’s survey report. It
stated that there was no evidence of subsidence, settlement or landslip.
Contracts were exchanged on February 14 1983 and the conveyance was completed
on March 4.
Sometime in
early 1985, the plaintiffs noticed a crack in the living-room wall. In February
1985 the local authority, to whom the plaintiffs were hoping to remortgage the
property, sent a surveyor to carry out an inspection. As a result the
plaintiffs were told that the property was unsuitable as security and the
proposed remortgage refused. The plaintiffs had been hoping to remortgage to
assist with their financial problems. As a result of remarks made by the local
authority surveyor, the plaintiffs instructed Waldron & Schofield,
solicitors. Mr Waldron wrote to Midshire Building Society on April 16 1985. I
quote two paragraphs from that letter:
Approximately
8 weeks ago our clients had in mind to obtain a re-mortgage of their property.
The surveyor who was instructed to value the property advised the Building
Society concerned that the property was not acceptable security in view of a
major structural defect.
Over the
course of the past 5 weeks a large crack has appeared in the property and our
clients are extremely apprehensive concerning their personal safety. The
surveyor who inspected the property for the proposed re-mortgage did pass a
comment that whoever surveyed the property when it was originally secured to
your Society in 1983 should have observed what he referred to as an extremely
obvious structural defect.
Mr Waldron
obtained legal aid initially under the so-called green form scheme. A legal aid
certificate was issued in due course dated September 4 1985. Under the words
‘Description of Legal Aid’, it stated: ‘To take proceedings against Midshire
Building Society for damages of breach of contract and/or negligence’. Mr
Waldron
in July and September 1985.
In April 1986
the plaintiffs changed solicitors. On December 21 1989, after further
investigation and reports, a writ was issued against the defendants claiming
damages for negligence. The defendants are the firm of surveyors who were was
instructed by the building society to carry out the original survey in 1983.
The plaintiffs and Mr Waldron appear to have assumed initially that the
building society employed its own surveyor.
The statement
of claim served on June 11 1990 claims the difference in value between the
price paid for the property and its value with the defects subsequently
discovered. That is a prima facie measure of damages although further
claims are included. It is agreed that the primary limitation period expired in
February 1989. The plaintiffs, however, assert that they did not know that the
damage they alleged was attributable to the acts or omissions of the defendants
until May 1987. Further, they did not know the identity of the defendants until
1988. They seek to rely on section 14A of the Limitation Act 1980 as inserted
by the Latent Damage Act 1976, section 1. If they are correct in either
assertion, the relevant limitation period would not have expired by the date of
the writ. The defendants deny those assertions and the matter comes before me
as a trial of the preliminary issue. There was in evidence before me: a bundle
of documents to which I shall make some reference; a statement from Mr Waldron;
and statements from the plaintiffs which were agreed as their evidence in
chief. The plaintiffs were both cross-examined and Mr Richard Byrom [ARIBA FSVA FCIarb], a chartered
architect and valuer, was called for the defendants.
Section 14A
provides as an alternative to the primary six-year limitation period a period
of three years from the ‘starting date’ which is defined, so far as is relevant,
as the earliest date on which the plaintiffs had the knowledge required for
bringing an action for damages in respect of the relevant damage.
Under the
section there are two aspects to knowledge. The first, pursuant to subsections
6(a) and 7, relates to the damage suffered. Since this is not the main
area of dispute I paraphrase the subsections and the authorities as stating
that there must be knowledge that the damage was worth suing for. The second
referred to in subsection 6(b) concerns: ‘The other facts relevant to
the current action’. This is divided into three areas of knowledge (subsection
8), of which only the first two, (a) and (b), are relevant. I
quote:
8. The other
facts referred to in sub-section 6(b) above are —
(a)
that the damage was attributable in whole or in part to the act or omission
that was alleged to constitute negligence and
(b)
the identity of the defendant.
Hence the
issues raised by the pleadings to which I have already referred. Since the
evidence and argument before me was directed to what the plaintiffs knew or did
not know at various times it is necessary to state what I understand by the use
of the word ‘knowledge’ in section 14A. In Davis v Ministry of
Defence The Times August 7 1985, CA, May LJ said:
Knowledge is
an ordinary English word with a clear meaning to which one must give full
effect. Reasonable belief or suspicion are not enough.
Lord Donaldson
MR in Halford v Brookes [1991] 3 All ER 559 at pp573j to 574a
while not questioning the final decision in Davis suggested that a
reasonable belief will normally suffice. I quote a short passage:
This leaves
entirely open what is meant by having ‘knowledge’ in the context of other
paragraphs such as para (c), which refers to the identity of the
defendant. The word has to be construed in the context of the purpose of the
section, which is to determine a period of time within which a plaintiff can be
required to start any proceedings. In this context ‘knowledge’ clearly does not
mean ‘know for certain and beyond possibility of contradiction’. It does,
however, mean ‘know with sufficient confidence to justify embarking on the
preliminaries to the issue of a writ, such as submitting a claim to the
proposed defendant, taking legal and other advice and collecting evidence’. Suspicion,
particularly if it is vague and unsupported, will indeed not be enough, but
reasonable belief will normally suffice. It is probably only in an exceptional
case such as Davies v Ministry of Defence that it will not,
because there is some other countervailing factor.
The quotation
from Schiemann J’s judgment in Halford at p573c illustrates another
aspect of the problem. In giving the judgment of the Court in Nash v Eli
Lilly & Co [1993] 4 All ER 383 Purchas LJ referred to both Davis
and Halford at p391. At p392 he pointed out the subjective ingredient
which is involved, namely the level of intelligence and understanding of the
plaintiff. At p392b to d, he said:
We do not, of
course, intend to lay down a definition of the word ‘knowledge’ for the
purposes of a statute in which Parliament left the word to speak for itself. In
applying the section to the facts of these cases, we shall proceed on the basis
that knowledge is a condition of mind which imports a degree of certainty and
that the degree of certainty which is appropriate for this purpose is that
which, for the particular plaintiff, may reasonably be regarded as sufficient
to justify embarking upon the preliminaries to the making of a claim for
compensation such as the taking of legal or other advice.
Broadley v Guy Clapham & Co [1994] 4 All ER 439 was concerned
with what facts the plaintiff needed to know to start the period running as
opposed to the meaning of the word knowledge.
Hoffmann LJ at
p449 referred to the passage I have cited from Halford at p573 and
reiterated that the purpose of section 14 is:
To determine
the moment at which the plaintiff knows enough to make it reasonable for him to
begin to investigate whether he has a case against the defendant.
In Dobbie
v Medway Health Authority [1994] 4 All ER 450 at p455 Sir Thomas Bingham
MR cited with approval the test of Lord Donaldson MR, which I have quoted. As
Sir Thomas Bingham MR said in Dobbie: ‘The test is not (usually) hard to
apply’. However, there will be cases whether under section 14, or as here
section 14A, in which the debate centres on whether the plaintiff had enough
information to know, believe or merely suspect the relevant matters. Letting
the word knowledge speak for itself or reliance on its natural or ordinary
meaning, while helpful, may not point to an obvious answer. The problem stems
from the fact that it is common usage to say ‘I know’ when strictly speaking
one means ‘I believe’. For example, A asks B whether he knew some matter or
other and B replies ‘Yes, X told me’. B believes what X, as a reliable witness,
has told him and therefore says he knows it. It seems to me that the courts
have narrowly avoided being drawn into philosophical arguments concerning the
nature of knowledge and belief. They should continue to avoid such pitfalls by
concentrating on the information which the claimant had and deciding whether it
should be regarded as sufficient. As Purchas LJ said in Nash at p395e to
f:
Whether a
claimant has knowledge depends both upon the information he has received and
upon what he makes of it.
Putting this
together with Lord Donaldson’s test should enable a court by focusing on the
particular claimant and the information at his disposal, to decide whether that
claimant has sufficient information to justify embarking on the preliminaries
to the issue of a writ. That is the way in which I believe knowledge is to be
understood in section 14A. Of course, it has to be applied to the particular
matters identified in subsections 7 and 8. This approach can conveniently take
account of another point which Nash decided and which it was submitted
arises in this case, namely that, albeit a claimant firmly believes a relevant
matter, nevertheless if it is reasonable for him to seek confirmation from an
expert before taking the matter further his belief only becomes knowledge
within the section when confirmation is received.
The damage
alleged in this case is that the plaintiffs paid too much for the house in 1983
in view of the defects then present. It is further alleged that it can be
attributed to the acts or omissions of the defendant because the plaintiffs
accepted the incorrect statement in the valuation report concerning the absence
of evidence of settlement. The first factual issue is when did the plaintiffs
first know of that damage
omissions of the defendants.
Mr Digby Jess,
for the plaintiffs, submitted that the matters which came to the plaintiffs’
attention whether from their own observations, for example, sloping floors or
distorted door frames, or from the council’s surveyor, or Peter O’Hare
Associates’ reports, all in 1985, were insufficient to fix them with knowledge
that the damage could be attributed to the building society or the defendants.
He accepted that a later report of May 18 1987 from Morris Dean & Co did
fix the plaintiffs with knowledge, but nothing earlier.
Mr and Mrs
Heathcote’s statements explain that while they observed certain physical
idiosyncrasies of the property soon after moving in they thought that they were
the result of either earlier settlement that had run its course and no longer
constituted a problem, or possibly heavy lorries passing close by. They did not
realise there was any real defect in the property, less still that their
ignorance of it could be attributed to the building society’s surveyor. Mrs
Heathcote’s statement accepts that the council surveyor who visited the
property in connection with their application to remortgage appeared concerned
at the condition of the property, suggested that they consult a solicitor and
indicated that the mortgage could not proceed. It further states that Mrs
Heathcote thought that the property was suffering from subsidence probably from
the passage of large lorries, but that it was a matter for their insurers. She
did not understand that there was any suggestion that the property was
defective when purchased. Mrs Heathcote told Mr Heathcote of these matters.
The statement,
while admitting the evidentially obvious, is careful to recite that Mrs
Heathcote did not appreciate that the property as purchased suffered any defect
and that she understood Peter O’Hare Associates to be saying that they could
not confirm the condition of the property at the time of the purchase or whether
its value was affected. Mr Heathcote’s statement is in similar terms.
In my view,
these statements suffer from the defects inherent in so many witness statements
prepared for use at trials or arbitrations, namely they assert what the
draftsman — presumably a solicitor — knows to be necessary and hopes the
witness can just about rise to, as opposed to what would emerge from the
witness in ordinary examination-in-chief.
When I saw and
heard Mr and Mrs Heathcote cross-examined, let me say at once, I quickly formed
the view that they were honest witnesses doing their best to recall the events
of about 10 years ago. Mrs Heathcote agreed that they were concerned when the
internal crack appeared and wondered if something was wrong. When shown the
passages from Mr Waldron’s letter dated April 16 1985 which I have quoted
above, she agreed that it was likely she had told Mr Waldron the matters
included. She also told me that they were concerned that there was an apparent
defect and that they had the valuation report that all was well at the time of
purchase. Mr Heathcote’s cross-examination was to similar effect.
It is to be
noted that in May 1985 Mr Waldron submitted an application to the Law Society
for an extension of legal aid to cover a consultant structural engineer’s fee.
It is worth quoting the grounds upon which he relied. I quote:
When the
client applied for re-mortgage of their property the building society’s
surveyor stated that there was a serious structural defect which should have
been perfectly apparent to the surveyor who originally surveyed the property
for mortgage purposes 2 years previously. The property has been declined as
acceptable security and the clients are therefore left with the only option of
suing the surveyor on the basis of his negligent survey. The disbursement for
which authority is sought is the anticipated fee for a consultant structural
engineer.
That was dated
May 10 1985.
Mr Waldron’s
statement which, as I have said, was agreed states that his instructions from
the plaintiffs were that the council’s surveyor told them that the property
should never have been accepted as security when originally purchased. He
confirms the steps he took which are apparent from the documents and that he
wrote to Peter O’Hare Associates on September 17 1985 because their first
report had not specifically addressed the issue of negligence of the original
surveyor. The documents show that estimates of remedial work were obtained in
1986 and were substantial. The plaintiffs’ instructions were transferred to
Isherwood & Hose in about April 1986.
When Mr
Waldron wrote to the building society in April 1985, the matter was passed on
to Legal & General, insurers of the property. Isherwood & Hose pursued
a possible claim on insurers with the loss adjusters Graham Miller. The
original claim contemplated against the building society on the assumption that
it was responsible for the valuation report, was not pursued further at that
time. It should always have been clear to solicitors that insurers would only
accept a claim in respect of damage attributable to an insured peril, in this
case subsidence, and then only for damage during the period of cover. In any
event Graham Miller indicated as much in a letter of November 12 1986 to
Isherwood & Hose who repeated it to Morris Dean & Co, structural
engineers, whom they appointed in April 1987. Their letter report dated May 18
1987 stated that movement was, in the main, long standing and not recent. That
a claim against the building society or the surveyor instructed by it had not
been completely forgotten appears from Isherwood & Hose’s letter to JR
Turner, another engineer, of June 23 1987.
On July 20
1987, Graham Miller wrote to Isherwood & Hose stating expressly that
insurers would only make a contribution to damage occurring since the inception
of the policy in February 1983. In a further letter dated March 23 1988 to
Morris Dean & Co — who by then were also involved in handling the insurance
claim — Graham Miller made it clear that only a small contribution was
appropriate since Morris & Dean themselves were of the opinion that most of
the settlement had taken place before purchase by the plaintiffs. Still I can
find no trace in the papers, nor was I referred to any evidence to show that
Isherwood & Hose were taking any action in the claim against the building
society or original surveyor.
By October
1988, clearly the possibility of pursuing such a claim was in mind and the
present defendants had been identified. At first the writ was issued and served
against the building society. When solicitors instructed by it pointed out that
the present defendants had been instructed to carry out the mortgage valuation
those proceedings were discontinued and the present action commenced. The
primary limitation period had, of course, expired.
From that
review of the evidence, the following matters are reasonably clear and I find:
1. The
plaintiffs saw a copy of the material parts of the defendants’ valuation
reports.
2. They relied
upon the statement that there was no evidence of settlement or subsidence.
3. In early
1985, the plaintiffs observed a crack in the internal living-room wall.
4. In about
March 1985, as a result of an inspection by the local council’s surveyor, the
plaintiffs were told that: the property had a major structural defect; it
should have been observed by the original valuation surveyor; and the property
was not acceptable security for a mortgage.
5. The
proposed remortgage was refused.
6. The
plaintiffs were advised by the local council surveyor to consult a solicitor.
7. The
plaintiffs were concerned by the defects in view of the terms of the valuation
report.
8. The
plaintiffs consulted Mr Waldron, a solicitor, with a view to a claim against
the building society.
9. Mr Waldron
obtained legal aid for that purpose and an extension to cover the fees of an
expert.
10. The
expert, Peter O’Hare Associates, confirmed a structural defect, namely the
signs of settlement which has taken place in the gable wall of the structure in
a report dated July 12 1985.
11. When asked
to advise whether the defect should have been seen by the valuation surveyor,
Peter O’Hare Associates stated in their report of September 20 1985:
The cracking
which is referred to in my report and highlighted on the photographs is fairly
apparent as is the plaster cracking on the internal walls and clearly there is
a defect as indicated in my report which in my view was worth drawing to the
attention of the Building Society in 1982. It is assumed that the cracks and
the bulge were apparent at that time.
Since the
plaintiffs had instructed solicitors in 1985 they must be fixed with the
knowledge of those solicitors if it added to their own. If the question is posed:
‘Did the plaintiffs in 1985 have sufficient information to justify embarking on
the preliminaries to the issue of the writ?’, I am afraid my answer must be,
‘Yes’. Apart from arguing against that conclusion generally, Mr Jess submitted
in particular that the O’Hare reports, particularly the passage in September 20
1985 (the one I have quoted), were at best equivocal on the key issue of
whether the defects were reasonably discoverable during 1983. He suggested the
passage in question could even be regarded as negative advice from an expert
destroying any knowledge which might otherwise be attributed to the plaintiffs
or their solicitors. I can only say I do not read it in that way. It was at the
very least, in my view, sufficient to justify proceeding to collect further
evidence and generally taking the claim further. There is no evidence before me
that either solicitor treated O’Hare’s September 20 reply as negative. If
either regarded it as equivocal neither sought further clarification. In any
event, there is no evidence to justify or explain the delay to May 1987 when
Morris Dean & Co confirmed the long-standing nature of the defect. In fact,
virtually nothing more was done by either solicitor in respect of the original
claim.
Attention from
September 1985 onwards focused on a claim against the insurers. That was, in
itself, very sensible but I can see no excuse for ignoring the potential claim
against the building society surveyor. It was simply allowed to become statute
barred.
Mr Jess
valiantly attempted to save the day by a further submission that in any event
the plaintiffs did not know the identity of the present defendants before 1988.
He prayed in aid the copy valuation report shown to the plaintiffs which he
suggested lead them to assume that the surveyor was employed by the building
society. Again, I regret I read it quite differently. In any event, as Mr
Patrick Field for the defendants pointed out, if there was any doubt they only
had to ask.
There is no
evidence or basis for a conclusion that they could not easily have discovered
the position as it emerged later, so that subsection 10 would fix them with
that knowledge. It is unnecessary to go further though, had it been, I would
have held that any competent solicitor would at least have been alive to the
possibility of an outside surveyor being instructed and would or should have
ascertained the position at once.
In the result
I hold that the plaintiffs’ action is too late. I hope the reality of the
situation is that the real battle before me was between insurers and that the
plaintiffs will not go uncompensated because they have been very poorly served
by the legal profession. I can see no excuse for this matter not being put on a
proper footing years ago. It is perhaps best if I say no more.
My thanks are
due to both counsel for their excellent arguments.
Judgment for
the defendants.
