Property valued by defendants – Plaintiff purchasing property after valuation – Plaintiff claiming damages for negligent valuation – Date of accrual of cause of action – Whether six-year limitation period applied – Whether cause of action accruing when contracts exchanged or when purchase completed – Judge finding action time-barred – Appeal dismissed
The plaintiffs proposed to purchase a residential flat in Portsmouth. Their mortgagees commissioned a valuation report from the first defendant firm. On June 2 1988 the second defendant, a chartered surveyor employed by the first defendant, inspected the property and prepared a written report. The plaintiffs did not seek an independent report for themselves. They claimed that they relied on the first defendant’s report and exchanged contracts to purchase the lease of the flat on July 8 1988. Completion took place a fortnight later on July 22 1988. Thereafter, defects in the property came to light, which the plaintiffs claimed should have been detected when the second defendant inspected the flat, and should have been described in the report.
The plaintiffs issued a writ on July 18 1994, more than six years after exchange but less than six years after completion. It was common ground that the plaintiffs were not entitled to take advantage of the extended period under section 14A of the Latent Damage Act 1980, since all the relevant facts had been known to them well before three years prior the date of the writ. The defendants claimed that the plaintiffs’ claim was statute-barred by section 2 of the Act and applied for the action to be struck out. The district judge held that the law was not sufficiently clear to justify striking out the claim. The judge allowed the appeal, holding that it was for the court to proceed on the footing that all the factual allegations made by the plaintiff were true and then decided whether the plaintiffs’ case was arguably sustainable. Taking that approach he held that the plaintiffs’ cause of action accrued at exchange of contracts, since on that date the plaintiffs, by their irrevocable commitment to the purchase of the flat, suffered damage by virtue of the defendants’ putative negligence sufficient to crystallise or complete their cause of action. The plaintiffs appealed.
Held The appeal was dismissed.
The negligent act or omission occurred on the occasion of the inspection on June 2 1988. The plaintiffs were informed of the valuation shortly afterwards. Their cause of action arose when they acted on the valuation and thereby suffered damage. That was when they signed and then exchanged the contracts. Thereafter they were effectively bound to complete the purchase whenever the event took place, whether immediately after exchange or at the date agreed between them. From the moment that they exchanged, the plaintiff acquired an interest in the property and an immediate and binding obligation to insure it. Since none of the remote events that might have led to rescission of the contract of sale, or completion not to take place, occurred, completion was only a formality. On exchange they acquired a lease that was worth less than they were led to believe by the report and upon the strength of which they agreed to purchase. Accordingly, it could be concluded that the cause of action accrued when the contracts were exchanged, which was outside the six-year limitation period.
Paul McCormick (instructed by Anderton & Co, of Portsmouth) appeared for the plantiffs; Andrew Parsons (instructed by Grindeys, of Stoke-on-Trent) appeared for the defendants.
Thomas Elliott, barrister