Negligence — Claim by purchasers of house against valuers for alleged negligence in a valuation for mortgage purposes — Defendants instructed by building society — Inspection carried out at the end of 1984 — Question as to whether there had been a lack of care in following up defect observed in the course of inspection — Standard of care required — Smith v Eric S Bush and Roberts v J Hampson & Co cited — Valuer’s duty to ‘follow the trail of suspicion’ — Plaintiffs’ action fails
one of whom had occupied a flat in the subject house, decided to join together
in purchasing the house when it came on the market — In deciding to purchase
it, for the sum of £30,000, they relied on the valuation report made by the
defendants for the purposes of mortgage on the instructions of a building
society — Plaintiffs paid a fee for the valuation — The report drew attention
to evidence of past structural movement, which the valuer regarded as neither
serious nor progressive, although he recommended an investigation of the drains
to eliminate any leak which might cause trouble — He advised that the timber
structure of the roof should be looked at and, in view of wood in the cellar of
the house, recommended an inspection for beetle infestation
does not go into details as to the scale of the troubles or the sequence of
events which gave rise to the present action, in which a number of experts gave
evidence, some of it conflicting — The judge was satisfied that the plaintiffs
had relied on the defendants’ report in deciding to purchase the house — There
was no dispute as to the standard of care which was applicable; this was
clearly laid down in Smith v Eric S Bush and Roberts v J Hampson & Co — The valuer in these
circumstances owed a duty to use reasonable care and skill so as not to miss
defects which were observable by careful visual examination — If there were
specific grounds
trail of suspicion until he had all the information which it was reasonable for
him to have before making his valuation — In the present case the main issue
was as to whether the valuer had carried out sufficiently the duty to ‘follow
the trail’
conceded that the defective wall construction, consisting of sand and aggregate
mixture with some cement, was not a defect which was directly discoverable in
the course of a valuation survey of the kind which the defendants were
instructed to make — The plaintiffs, however, submitted that there were
features which should have put the valuer on notice that serious problems
existed which required further investigation — It was suggested that the valuer
should not have proceeded with the valuation until further investigations had
been made — Examples of the features mentioned were the recurrence of external
cracks in a flank wall, some internal cracks, the construction and state of
cellar walls and the roof space (into which it was alleged that the valuer did
not enter) — The judgment dealt in detail with the evidence under each of these
headings and preferred the evidence for the defendants
conclusion was that, taken together in the context of the building as a whole,
its age and state of decorative repair, and having regard to similar houses in
the same area, the defects mentioned did not give rise to any duty on the
valuer to refrain from proceeding with the valuation or to make further
recommendations for investigation beyond those which he had already made — It
was therefore unnecessary to assess damages, but the judge would have accepted
the view that the house in its defective condition would have realised a market
price of about half that paid by the plaintiffs — The valuer’s report was ‘a
thoroughly competent report, carefully done and, I would add, masterly succinct’
The following
cases are referred to in this report.
Perry v Sidney Phillips & Son
[1982] 1 All ER 1005; [1981] EGD 824; (1981) 260 EG 389, [1981] 2 EGLR 124
Philips v Ward [1956] 1 WLR 471; [1956] 1
All ER 874, CA
Roberts v J Hampson & Co [1988] 2 EGLR
181; [1988] 37 EG 110
Smith v Eric S Bush (a firm) [1989] 2
WLR 790; [1989] 2 All ER 514; [1989] 1 EGLR 169; [1989] 17 EG 68 & 18 EG
99, HL
In this action
the plaintiffs, Simon Bere and Miss Susan Parchment, sought to recover damages
for alleged negligence in a mortgage valuation survey against the defendants,
Slades, a firm of estate agents, surveyors and valuers, of Croydon. The
valuation was carried out on the instructions of the Halifax Building Society
and related to a house at 8 Burdett Road, Croydon.
Andrew Burr
(instructed by Lewis Silkin) appeared on behalf of the plaintiffs; Daniel
Worsley (instructed by Lloyd Cooper) represented the defendants.
Giving
judgment, HIS HONOUR JUDGE NEWMAN QC said: In this action the plaintiffs seek
to recover damages against the defendants caused, they allege, by the
negligence of the defendants through their Mr M J Holdsworth [FRICS] in the
carrying out of a Halifax Building Society Scheme 1 valuation survey for
mortgage purposes. The circumstances out of which the action arises can be
briefly stated. The second plaintiff moved into the first-floor accommodation
at 8 Burdett Road, Croydon, in the middle of 1982. No 8 is an Edwardian
property dating back to the first decade of the century. That accommodation
was, in effect, a self-contained flat, save that access was through the front
hall of the house off which doors to the various rooms on the ground floor
opened. These were lockable. The ground-floor rooms were occupied at that time
by a Mr and Mrs Stamford, who owned the house.
On August 18
1984 Mr Stamford died. His widow remained in the house for some few months
thereafter. She was helped by her daughter-in-law, Mrs Joan Stamford, from whom
I heard evidence. Mrs Joan Stamford had lived in the property for two years,
from 1958 to 1960, when she moved to 12 Burdett Road and from where ‘she popped
in and out quite a lot’ — sometimes two or three times a day. She therefore
knew the property well.
Her
mother-in-law’s health deteriorated, however, and she had to move into a home
and the house was put up for sale. The second plaintiff was told that she and
her child would have to vacate unless she could raise the funds to purchase the
house. The first plaintiff, the son of her friend, Mr Robin Bere, who gave
evidence, agreed to come in with the second plaintiff to make a joint purchase.
The asking price was £31,000 to include furniture; this was subsequently
reduced to £30,000. The purchase was to be financed on an endowment mortgage
basis through the Sun Life of Canada to whom the plaintiffs paid £53.75
surveyor’s fee. They did not deal directly with the Halifax Building Society,
who instructed the defendants to carry out their Scheme 1 valuation.
On December 13
1984 an appointment was made for between 11 am and 12 noon on Friday December
28 1984 — the key to be obtained from Mrs Joan Stamford at no 12 for access to
the downstairs rooms. Mr Holdsworth duly attended the appointment. He was
accompanied upstairs by Miss Parchment and Mr Robin Bere, as he now accepts,
and downstairs by Mrs Joan Stamford and Mr Robin Bere. He allows one hour for
each local visit including travelling time. He thought the inspection lasted
perhaps three quarters of an hour, but I accept the plaintiffs’ submission that
it was obvious that he had no recollection of this visit other than from his
notes, save that his memory would have been refreshed by his subsequent visits,
which in turn, he candidly admits, might also have coloured his recollection of
his original visit.
His notes form
the most reliable source of evidence of what he found on the inspection.
It would be
surprising if it were otherwise. Mr Holdsworth is a very experienced man in
this field of work, which he has carried out in the Croydon area for some 13
years; he estimates that he has completed 9,000 to 10,000 such surveys, of
which up to 1,000 would have been Edwardian properties. Mr Robin Bere thought
that he brought that experience to bear on this property for a quarter to a
half an hour; Mrs Stamford thought 20 minutes to half an hour from the time
that she got her key to the time that she got home again. I doubt that Mr
Holdsworth found it necessary to spend more than half an hour at this modestly
sized property. The important matter for me to decide is what he did and saw
during this inspection and whether that was sufficiently and properly done.
In the light
of the recent decision of the House of Lords in Smith v Eric S Bush
[1989] 2 WLR 790,* the defendants concede that, subject to reliance by the plaintiffs
being established on the evidence, they owe a duty of care to the plaintiffs
which was not excluded. I accept Miss Parchment’s evidence that she went ahead
with the purchase based on the report; and that if a major problem had been
disclosed she would not have bought the house; and that she thought she was
getting a surveyor’s report and not a valuation. The first plaintiff went ahead
with her. I am satisfied that the plaintiffs’ reliance on the report is
established. The standard of care is not in issue. Smith v Eric S
Bush makes it clear that for this type of work the surveyor owes a duty of
reasonable skill and care not to miss obvious defects or defects which are
observable by careful visual examination, ‘the fairly elementary degree of
skill and care involved in observing, following up and reporting on such
defects. Surely it is work at the lower end of the surveyors’ field of
professional expertise’: per Lord Griffiths at p 810. However,
‘following up’ is important in this case.
*Editor’s note: Also reported at [1989] 1
EGLR 169; [1989] 17 EG 68 and 18 EG 99.
Lord Templeman
at p 803 adopted Ian Kennedy J’s judgment in Roberts v J Hampson
& Co [1988] 2 EGLR 181 at p 185:
If there is specific ground for suspicion
and the trail of suspicion leads behind furniture or under carpets, the
surveyor must take reasonable steps to follow the trail until he has all the
information which it is reasonable for him to have before making his valuation.
This duty to
follow up is crucial to the plaintiffs’ case. They have had to concede from the
outset that the substantial defect upon which their claim for damages rests,
namely that the external walls to the flank elevation of the main house and the
two- and single-storey extension thereto, together with the main rear wall of
the house and the cellar walls, are not of traditional brick construction but
have been built of a form of concrete construction consisting of a sand and
aggregate mix with some cement which is unstable and for which the only
practicable remedy is reconstruction in traditional brick. The plaintiffs
conceded that this was a defect which was not directly discoverable on a Scheme
1 valuation survey. It was a concession sensibly made having regard to the
overwhelming evidence to that
cross-examination that, ‘contrary to what I or any other ‘man in the street’
might expect, even a full structural survey would not have revealed this
‘freak’ construction’ and this was the view of Mr Patrick Austin [CEng], the
defendants’ civil engineer.
The
plaintiffs’ case therefore has been that the Scheme 1 valuer/surveyor ought not
to have valued the property but should have recommended further detailed
investigations. They rely on three, it was submitted, but I think on the
evidence four, specific defects which were visible and were together sufficient
to put a reasonable and prudent surveyor on notice that greater problems might
exist sufficient to warrant detailed following up before valuation. These were:
1 external crack recurrence;
2 internal cracks;
3 the construction and state of the cellar
walls;
4 as pleaded, dampness and the need for a
drains test; as submitted in argument, the roof space into which it is alleged
Mr Holdsworth did not enter.
It was common
ground that the surveyor, while looking at specific matters, had to make his
judgment on the state of the house as a whole. Mr Burr’s first submission was
as to the internal cracks. He put the following questions:
1 Did any significant internal cracks exist in
1984?
2 If so, where and how extensive were they?
3 Did he notice and report on them or decide
that they were not significant?
4 Did he fail to notice or refer to them when
he should in the proper exercise of due care have done so?
It was
elicited, in cross-examination of Mr Holdsworth, that in his notes made at the
time the only reference to cracks was to the external-flank-wall cracks,
although some cracks at first-floor level were covered by his reference to
‘historic partition settlement’. He agreed that he could not ignore cracking in
making his reports; he agreed that he has not referred in his notes or his
report to the cracking in the ground-floor front room. It was put to him that
he had failed to see it; he replied that if it was there on December 28 1984,
it was not of sufficient size or significance to warrant specific mention in
the report; he added that a crack would have to be ‘over 5 mm in that position
before I would take account of it having regard to its shape and position’.
Referring to a photograph taken in about November 1986, he thought that the
crack appeared to be less than 5 mm. This contrasts with Mr Gardner’s evidence
to the effect that, as seen in 1986, as an isolated crack on a newer ceiling of
the severity that he saw, it should have been of great concern to a surveyor.
He agreed, however, that it was just up to 5 mm at worst in August 1987 and
that his reaction would have been to look for movement at the junction of the
front wall and flank wall. There was ‘lay’ evidence regarding the crack which
assists. Mrs Stamford said that the crack had been there for quite a while. She
identified it in photograph 13. It was above her mother’s bed. There was no
crack across the fireplace then. She recalled something being said to Mr Robin
Bere when Mr Holdsworth was inspecting, but she could not remember anything in
particular being said.
Mr Robin Bere,
when shown photograph 13, said that it looked far worse in the photograph.
Shown photograph 14, he said that it was the crack that really stood out; it
was not a hairline crack, it was more than a normal crack, but, in
cross-examination, looking at photograph 9, he said the cracking was much worse
than when he saw it on December 28 1984. It appears to have got much worse.
Mr Graham
Pullen [FRICS], in evidence on behalf of the defendants, reported that Mr
Gardner had told him that the crack had opened up in the time that he had been
dealing with the property and Mr Gardner agreed that a hairline crack following
that pattern would not have been a problem; it would have suggested that some
movement had occurred at some stage (which accords with Mr Holdsworth’s
evidence). Mr Pullen, in examination-in-chief, expressed the view that cracking
is normal in a house of this age and in poor decorative repair (a fact noted by
Mr Holdsworth). The crack in 1984 followed the line of a plaster board repair;
it was consistent with minor structural movement or unrepaired bomb damage. It
was a very common occurrence. Of itself it gave rise to no cause for alarm.
On all this
evidence I am satisfied that Mr Holdsworth did see the crack — it was too
obvious to be missed and the evidence does not support a man of his experience
being so careless as to overlook it. I am satisfied that when he saw it it was
much smaller than illustrated in the photographs, though more than hairline,
but that for the reasons given by Mr Pullen, whose evidence I prefer to Mr
Gardner’s on this, Mr Holdsworth did not consider it to be significant enough
to warrant being recorded in his notes, certainly not sufficient to justify by
itself further investigation. The only question is whether there were other
specific defects which, taken together, should have caused him to view the
crack differently.
Mr Burr next
considered the inspection of the cellar, or lack of it, for it was the
plaintiffs’ case that Mr Holdsworth did not make any or any sufficient
inspection of the cellar. Mr Robin Bere said that he switched on the light and
went down into the cellar but that Mr Holdsworth just peered into the cellar;
he did not go into it beyond descending the ladder for one or two steps. His
view was that Mr Holdsworth would not have seen an awful lot. Mrs Stamford said
that Mr Bere went right down to the bottom but Mr Holdsworth went down one step
and just looked around; that he didn’t look for long at all and that he didn’t
go down where he could see the coal, which was to the right of the steps as far
as you could go, whereas the wood was at the bottom of the stairs. When her
mother-in-law left the premises, Mrs Joan Stamford had had the use of the coal
and had been down to collect it. I am satisfied that access was possible to the
cellar wall beneath the flank wall.
Mr Holdsworth’s
evidence was that he would not have lost the opportunity to inspect the cellar.
He said initially: ‘I would have gone to the bottom of the stairs’ and then
firmed up and said that he went to the bottom of the stairs. In
cross-examination he said the cellar was obstructed by firewood. He saw the
concrete walls of the cellar ‘distantly’ from the foot of the stairs’ ladder
and he could see the rough and uneven surface and that the aggregates were
exposed. He said he did not consider it worthy of comment.
On the balance
of probabilities I find as a fact that Mr Holdsworth did inspect the cellar. He
records in his notes that there was much cut firewood and he also records,
under ‘sub-floor ventilation flank possibly to rear, maybe for boiler’, a
reference which shows that at the time he had observed, albeit perhaps outside,
the ventilation bricks (upon which considerable significance was sought to be
placed during the trial), causing him to postulate in his mind the former
presence of a boiler in the cellar. His inspection may well have been from the
ladder and was certainly not beyond the foot of it, but he took in visually the
whole cellar. Was that enough to discharge his duty of care?
The
plaintiffs’ strongest evidence as to this was that of Mr Peter Richardson
[CEng, MIStructE, MIGasE], their expert structural engineer. His opinion was
that when you see concrete in a cellar you become suspicious at once. He had
not very often seen concrete basement walls in the Croydon area, where he had
done a lot of work. He was shown photograph 16 and agreed that it was only by
touching and scraping that you could find that it was a weak mix. If you
scraped with a knife, aggregate and sand fell to the ground. But it was common
ground that sand and aggregate were not falling to the floor, there to be seen
without scraping or touching the wall. He said that it deteriorated because of
the damp but, if buttressed in the wall, was still strong enough to take the
wall above it.
Mr Gardner
thought that the problem needed further investigation but in cross-examination
agreed that the presence of concrete walls in cellars in Croydon was not
uncommon, but in fact the superstructure deterioration was in advance of that
in the cellar walls, and that he could not have been expected to discover that
those walls were of concrete from what was to be seen in the cellar.
Some effort
was made during the course of the trial, by the production of Polaroid
photographs taken during the trial of the air bricks, to show that the flank
wall above ground level was visibly constructed of concrete. But, if this were
right, all the experts giving evidence had failed to see this after repeated
visits and detailed reports; against that background it would not have shown Mr
Holdsworth in carrying out his Scheme 1 valuation as being in any way
negligent.
I have yet to
deal with the external cracking in the flank wall, but Mr Gardner was further
of the view that although this flank wall included the cellar wall it did not
particularly relate to the cellar wall. Mr Pullen in his evidence said that
from what he had seen in the cellar he would not have refused to value nor
would he have recommended an engineer’s investigation; he would not have been
concerned. ‘This is what you see in a cellar of that age,’ he said.
I have
considered this evidence very carefully. On the one hand there is the surveyor
who does not go right into the cellar, who did not
concrete wall. On the other hand, the experienced surveyor of 9,000 to 10,000
homes, about 1,000 of which were Edwardian, who, in carrying out this type of
survey, casts his eye around a not uncommon type of cellar, takes in the
condition, notes the wood and the possibility of woodworm infestation and
appreciates the possibility of a boiler perhaps having been installed in there
in the past. I am not persuaded that this was not a sufficient discharge of Mr
Holdsworth’s responsibilities for the purposes of this survey. Even if he had
made a closer inspection, it would not have caused him, on the evidence I have
reviewed, per se to cause further investigation to be made and in all
probability not led to the discovery of the nature of the flank wall which this
case is all about. Unless other specific factors exist which, looked at in the
context of the property as a whole, make the condition of the cellar walls of
greater significance, of itself the inspection of the cellar was adequate.
At one stage
it seemed to me possible that the external-wall cracking could have been
significantly related to the state of the cellar walls. This external cracking
in the flank wall is described by Mr Gardner in his report and is illustrated
in the photographs. He placed emphasis on the recurrence of the cracking in
these areas which had previously been made good. He conceded in
cross-examination that they looked like cracks to the render only, that it was
not unusual to find such cracks in render and that this render looked as if it
was the original. About 50% or less had recracked and, if he ‘had to stab at
it’, the recracking had occurred at least 10 years ago.
Mr Austin
agreed with this estimate, as did Mr Pullen. Again, it was common ground that
the cracking was due to differential settlement, the cellar providing a firmer
foundation, as Mr Holdsworth concluded, than that under the rest of the wall to
the front or rear. It was at this point that Mr Holdsworth said that the
flank-wall cracking appeared to define the limit of the cellar and I explored
the possibility that the defective cellar wall might have caused the
differential settlement. But this was wholly rejected by Mr Austin, whose
evidence on this I accept, who said that the cellar wall, despite its condition,
was far stronger than the shallower foundations and that there was no evidence
of any subsidence of the cellar wall, which had sufficient compressive strength
to support the wall above.
Mr Holdsworth
therefore correctly related the external cracking of the flank wall to the
cellar, the presence of which provided a better foundation than the other part
and this had resulted in differential settlement. He did not rest at that, for
he noted that there had been a recurrence of cracking and advised the drainage
system be tested. I am satisfied that Mr Holdsworth fully discharged his duty
of care in dealing with these external cracks subject to the totality of the
state of the building being considered. There was no issue that there was
dampness, which was fully noted by Mr Holdsworth.
Finally, there
was an issue as to whether Mr Holdsworth inspected the roof space. He told me
that he did. This was from his recollection, not his notes. Mr Robin Bere told
me that the loft access was very small; it was at the top of the stairs by a
cupboard and it was 9 ft to 10 ft up — there was no means of access, for
example a ladder, available — and that the loft space was not inspected. In his
evidence Mr Holdsworth said that there were no exceptional features which
warranted particular annotation in the interior roof structure. The photograph
of what was there to be seen is photograph 6. The only effect (apart from the
state of the roof itself, with which he deals in his notes and reports) of
seeing that would have led him to the reasonable assumption that the flank
walls with which we are concerned were constructed of brick and would have
negatived any suspicion, if there had been any, to the contrary.
I need not
therefore make a finding of fact on this issue, but I do — not on the basis of
Mr Holdsworth’s memory of having inspected the roof space but on the basis of
the evidence as a whole, which shows that his was a thorough, conscientious and
competent inspection.
I have reached
this conclusion because, in the course of the evidence, it became increasingly
clear that the report which Mr Holdsworth produced was, as Mr Pullen opined, a
thoroughly competent report, carefully done and, I would add, masterly
succinct.
Turning to it,
he reports the evidence of historic structural movement and crack recurrence,
repairs which he has noted to have been carried out ‘over a long period’, which
is consistent with the expert evidence of repairs being at least 10 years old.
He expresses a major opinion that it is not serious or progressive, but has
taken the care to recommend investigation of the drains to eliminate any leak
which could cause it to become progressive if left untreated. He then deals
with other matters including the reroofing, taking care to advise that the
adequacy of the timber structure should be looked at (not, in my judgment,
advice likely to have been given by a surveyor who had not bothered to look at
the timbers in the roof void) and made reference to the building inspector.
Again, as already referred to, he takes the precaution, in view of the presence
of wood in the cellar, to recommend an inspection for beetle infestation.
I am very
conscious of the importance this claim may have for the plaintiffs. It was for
this reason and as a result of the arguments urged upon me by Mr Burr (together
with want of time on the final day) that I have reserved this judgment. For the
sake of completeness, having, I hope, dealt in some detail with Mr Burr’s
submissions as to the particular damage which was present in the building on December
28 1984, I find that, taken together in the context of the building as a whole,
its age and state of decorative repair, and having regard to similar houses in
the same area, these defects were not sufficient to give rise to any duty not
to value or to refer for greater inspection. Mr Holdsworth was thorough in
recommending that certain matters be followed up (drain inspection, woodwork
infestation inspection), but I am satisfied that there was not sufficient
evidence of defects or interrelation of defects to justify further
recommendations such as might have led to the discovery of the true
construction of the walls which require to be replaced; and the plaintiffs’
claim fails.
In the
circumstances I do not, of course, have to assess damages. Had I to do so, it
is sufficient for me to say that I would have applied the measure of damages as
set out in Perry v Sidney Phillips & Son [1982] 1 WLR 1297*
following Philips v Ward [1956] 1 WLR 471. I would have rejected
Mr Gardner’s evidence that only £2,200 would have been paid for this property
with all its defects known as wholly unrealistic and would have preferred the
evidence of Mr Pullen that it would have achieved a market price of
approximately 50% of the price paid by the plaintiffs, that opinion being supported
by a list of 11 other actual sales of property, some in far worse condition
than this property, in which a similar result was achieved.
*Editor’s note: Also reported at [1981]
EGD 824; (1981) 260 EG 389, [1981] 2 EGLR 124.
The plaintiffs’ action was dismissed with
costs, not to be enforced without the leave of the court. The sum of £2,000
paid into court by the defendants was ordered to be paid out of court, with any
interest, to the defendants’ solicitors.
