Council tenants — Right to buy — Calculation of proposed purchase price — Council employing independent valuer — Alleged overvaluation — Joint actions for damages — Whether council owed duty of care to tenants — High Court holding that duty of care not established — Judgment for the defendant council — Actions dismissed
The plaintiffs in this joint action were both secure tenants of the council and lived in flats in high-rise blocks at 140 Barnes House, St Marks, Barking, Essex, and 47 Perryman House, The Shaftesburys, Barking, Essex, respectively. Each had qualified to purchase his home under the provisions of the Housing Act 1985 and bought 125-year leases of those properties. During the right to buy procedure, as required by section 125 of the 1985 Act, the council were required to serve a notice on the secure tenant describing the property and stating the price at which, in the opinion of the landlord council, the tenant was entitled to have the freehold conveyed or the lease granted to him together with details of how the price was arrived at.
The plaintiffs subsequently claimed that the council were liable in damages for negligence and/or breach of statutory duty and/or negligent misstatement or negligent misrepresentation. It was alleged that, in arriving at the price in each case, the council had overvalued the property to such an extent that they must be held to have been negligent. The council denied that a duty of care was owed to the plaintiffs. They denied negligence and, if they did owe a duty of care, they had discharged it by employing a competent firm of local valuers as an independent contractor.
Held The actions were dismissed.
1. A local authority owed no duty of care to a tenant when stating their opinion of the price in a notice served under section 125 of the Housing Act 1985 giving the tenant details of his right to buy.
2. Whether such a duty of care existed was determined by the consideration of the facts and circumstances in each case. However, a duty was not raised if it was inconsistent with, or had a tendency to, discourage the due performance of the local authority statutory duty: see X (Minors) v Bedfordshire County Council [1995] 2 AC 633.
3. A duty of care in giving an opinion as to price was not inconsistent with the due performance of the local authority’s duty but it did have a tendency to discourage it.
4. Moreover, section 125 imposed no statutory duty on the local authority. It provided for a step in a compulsory sale transaction between landlord and tenant and for the landlord to give his opinion to the price at which he would sell. In all commonsense it was difficult to see how a duty of care arose in those circumstances.
5. Superficially, there was an analogy with the mortgage valuation cases: see Smith v Eric S Bush (a firm) [1989] 1 EGLR 169 and Yianni v Edwin Evans & Sons [1981] 2 EGLR 118. No fee was paid by the tenants in both situations. But the important distinguishing feature here was the existence of the statutory right to apply to the district valuer for a determination as to price. In those circumstances, it was not just or reasonable that there should be a duty of care on the local authority.
6. If the plaintiffs had been able to establish a duty of care the council would have been able, by pleading that they had exercised care in choosing a competent valuer, to defeat the plaintiffs’ claim leaving it to a prudent plaintiff to join the valuer in the action.
Martin Russell (instructed by Moss Beachley & Mullem) appeared for the plaintiffs; Andrew Jordan (instructed by Barlow Lyde & Gilbert) appeared for the defendant council.