Negligence — Housebuyers report — Claim for dry rot compromised — Later claim for structural defects — Whether period of limitation under section 14A of Limitation Act 1980 ran from date of knowledge of surveyors’ negligence in relation to dry rot — Whether terms of compromise precluded further claim
In September 1986 the defendant firm of
surveyors provided the plaintiffs with a housebuyers report and valuation in
respect of a house they were purchasing. In 1987, following their purchase of
the property, the plaintiffs discovered dry rot and had it eradicated at a cost
of £4,000. The defendants denied liability for not disclosing the dry rot. They
paid the plaintiffs a contribution of £750 to these costs by way of full and
final settlement of any and all claims, the plaintiffs signing a form of
discharge. In 1992 the plaintiffs discovered substantial structural damage to
the property caused by subsidence, and commenced the present proceedings in
March 1994. In the court below Kay J, in deciding a preliminary issue of
limitation, held that the writ had been issued outside the limitation period
prescribed by section 14A of the Limitation Act 1980 and that the plaintiffs
were precluded by the terms of the compromise from pursuing any other complaint
against the defendants.
one single and indivisible cause of action arising out of one negligent act,
the making of a single report. For the purpose of section 14A of the 1980 Act
the cause of action accrued when damage was suffered for the first time. The
present proceedings were issued after the expiration of the limitation period.
Although the terms of the compromise did not arise for direct consideration, it
clearly precluded all further claims.
The following cases are referred to in
this report.
Arnold v National Westminster Bank plc
[1991] 2 AC 93; [1991] 2 WLR 1177; [1991] 3 All ER 41; [1991] 2 EGLR 109;
[1991] 30 EG 57
Brunsden v Humphrey [1884] 14 QBD 141
Felton v Gaskill Osborne & Co [1993]
2 EGLR 176; [1993] 43 EG 118
Henderson v Henderson (1843) 3 Hare 100
Horbury v Craig Hall & Rutley [1991]
EGCS 81
Pirelli General Cable Works Ltd v Oscar Faber &
Partners [1983] 2 AC 1; [1983] 2 WLR 6; [1983] 1 All ER 65; [1983] 1 EGLR
135; [1983] EGD 889; (1982) 265 EG 979, HL
Steamship Mutual Underwriting Association
v Trollope
& Colls (City) Ltd (1986) 33 BLR 77
Talbot v Berkshire County Council [1994]
QB 290; [1993] 3 WLR 708; [1993] 4 All ER 9
Vervaeke v Smith [1983] 1 AC 145; [1982] 2
WLR 855; [1982] 2 All ER 144, HL
This was an appeal by the plaintiffs, John
Stephen and Teresa Helen Hamlin, from the decision of Kay J on February 16 1995
on a preliminary issue of limitation in proceedings against the defendant firm
of surveyors, Edwin Evans.
Jonathan Lurie (instructed by James &
Charles Dodd) appeared for the appellants; Stephen Powles QC (instructed by
Cameron Markby) represented the respondents.
Giving judgment, Waite LJ said: This is an appeal by
housebuyers from a holding by Kay J on February 16 1995 that their negligence
claim against the surveyors on whose report they had relied at the time of
purchase is statute-barred. Their claim was based on two heads of negligent
omission in the same document, namely a failure to report,
the property was subject. The consequences of the two failures became apparent
at different times. The dry rot was discovered first and was the subject of a
relatively minor claim notified to the defendants and settled. The structural
defects were not discovered until some time after the date of that compromise.
They cost a great deal more to remedy and were the subject of a writ issued
about two years after their discovery. By then more than eight years had passed
from the date of the impugned report, and six years from the date of discovery
of the dry rot.
On the trial of a preliminary issue of
limitation (for which purpose he was required to assume the alleged negligence
to be established) the judge ruled that time ran against the plaintiffs under
the amended section 14A of the Limitation Act 1980 from the date of their
knowledge of the surveyors’ negligence under the first head (the failure to
report the dry rot) and the writ had accordingly been issued outside any
limitation period authorised by that section. He further ruled (in case that
conclusion should be wrong) that the terms of compromise of the first complaint
had been expressed in terms sufficiently wide to preclude any subsequent
complaint under the second head. From both those rulings the plaintiffs now
appeal to this court.
Facts
The pleaded facts which the judge had to
assume to be correct were as follows. The plaintiffs purchased 76 Brookmill
Road, Deptford (‘the property’), in November 1986 at a price of £43,950
financed by a mortgage from a building society which in the usual way required
the property to be the subject of an inspection and report by surveyors. On
September 1 1986 the defendant firm of chartered surveyors supplied the
plaintiffs with a housebuyers report and valuation. It described the property
as a mid-Victorian house restored to reasonable standards. Attention was drawn
to various minor defects, including traces of woodworm holes in some
floorboards. In dealing with the main walls the report said:
An inspection of the other houses in the
terrace … indicates that considerable structural movement has taken place in
these houses with major settlement in the front walls. There are some
indications of movement at the rear [of the property], but it is thought that
this is old, not serious and further movement is unlikely.
The report concluded with a statement
that the proposed purchase price of £43,950 was a reasonable figure in the then
current market conditions.
In 1987 the plaintiffs discovered
infestations of dry rot in the property which had to be eradicated during 1988
at a total cost in excess of £4,000. They complained to the defendants that
this rot had not been disclosed in their report. That gave rise to a letter,
headed ‘without prejudice’, from the partner concerned in the following terms:
Thank you for your letter of 29 November
1988. I note the costs involved in eradication of dry rot, as recently
discovered. There appears to be no evidence that dry rot was there potentially
or actually, at the time of my survey in early September 1986. To this end, I
do not think that Edwin Evans have any liability to contribute towards the
costs of rot eradication, unless you can prove that the potential for dry rot
was reasonably discoverable.
Having said this, I am conscious of the
unforeseen expenditure which you have incurred, and am prepared to offer on
behalf of Edwin Evans and Sons the sum of £750 by way of an ex gratia payment:
this is purely to avoid the uncertainties of costs here, which may prove
considerable both for you and for us.
If you are prepared to accept this sum in
full and final settlement of any claim which you may have against Edwin Evans,
I ask that you complete and return the attached Discharge Form.
Enclosed with that letter was a document
headed ‘Form of Discharge’ which read:
We, Mr and Mrs Hamlin, hereby agree to
accept from [the defendants] their servants agents or employees the sum of £750
in full and final settlement, satisfaction and discharge of any and all claims
known or competent [sic] to us at the time of dating this Form of
Discharge, arising or to arise from a Housebuyers Report and Valuation on [the
property]. We understand and agree that payment hereunder is made without any
admission of liability whatsoever.
Provision was made in the form for the
signatures of the plaintiffs to be subscribed and witnessed.
The form of discharge was duly signed by
the plaintiffs on January 22 1989 and sent to the defendants, who replied with
a cheque for £750 under cover of a letter referring to that payment as a ‘full
and final settlement’.
In 1992 the plaintiffs became aware of an
enlarging fracture in one of the walls of the property. They called in a firm
of experts who reported very substantial damage to the whole property through
subsidence. The writer of the report described the property as falling into the
worst category structurally of any properties that he had seen, and stated:
Even with repairs carried out to arrest
further movement below ground, I would still consider the property to be
totally unmortgageable …
The statement of claim in the action
included an allegation (which the judge was required to assume to be correct)
that the property was at the date of the defendants’ housebuyers report ‘in a
defective condition in that it was suffering from serious subsidence, dry rot
and major structural disrepair’.
Proceedings
The writ in the action was issued on
March 2 1994, indorsed with a statement of claim which particularised the
defendants’ negligence as failure to notice and advise the plaintiffs on the
structural disrepair. There was a pleading of general damage and special damage
was particularised in the sum of £33,950 — being the difference between the
price paid by the plaintiffs (£43,950) and the actual value of the property at
the date of the report in the condition which the defendants failed to report
(£10,000). An alternative figure of £30,000 was claimed as damage representing
the cost of rectifying the structural defects which were not, but should have
been, reported.
Law
Although the appeal turns on the true
construction of section 14A of the Limitation Act, there are two principles of
common law which are relevant to that construction and which it is convenient
to mention at the outset.
(1) In the case of latent damage to
buildings the plaintiff’s cause of action will accrue when damage occurs, irrespective
of discoverability — Pirelli General Cable Works Ltd v Oscar Faber
& Partners [1983] 2 AC 1*. It was this decision which, as is well
known, led to the passing of the Latent Damage Act 1986 and the amendment of
the Limitation Act 1980 by the introduction of section 14A.
*Editor’s note: Also reported at [1983] 1
EGLR 135
(2) The principle as to maintaining
consecutive claims in respect of heads of damage resulting successively from
one act of negligence is classically stated by Wigram V-C in Henderson v
Henderson (1843) 3 Hare 100 [at pp114 to 115]:
In trying this question I believe I state
the rule of the Court correctly when I say that, where a given matter becomes
the subject of litigation in, and of adjudication by, a Court of competent
jurisdiction, the Court requires the parties to that litigation to bring
forward their whole case, and will not (except under special circumstances)
permit the same parties to open the same subject of litigation in respect of
matter which might have been brought forward as part of the subject in contest,
but which was not brought forward, only because they have, from negligence,
inadvertence, or even accident, omitted part of their case. The plea of res
judicata applies, except in special cases, not only to points upon which
the Court was actually required by the parties to form an opinion and pronounce
a judgment, but to every point which properly belonged to the subject of
litigation, and which the parties, exercising reasonable diligence, might have
brought forward at the time.
As was pointed out by this court in Talbot
v Berkshire County Council [1994] QB 290 (per Stuart-Smith LJ at
p296) the principle of Henderson v Henderson applies not only to
instances of res judicata properly so called, but also to cases where it
would be an abuse of the process to allow a subsequent action to proceed. It
remains a widely applicable principle but a flexible one — see Vervaeke
v Smith [1983] 1 AC 145 and Arnold v National Westminster Bank
plc [1991] 2 AC 93*. The concluding reference by Wigram V-C to ‘exercising
reasonable diligence’ contains obvious scope for relaxation of the rule in
cases where the first claim is advanced by a plaintiff who is pardonably
ignorant of the circumstances giving rise to a second claim.
*Editor’s note: Also reported at [1991] 2
EGLR 109
Section 2 of the Limitation Act 1980
provides that an action founded on tort shall not be brought after the
expiration of six years from the date on which the cause of action accrued.
Section 14A of the Act, as inserted by the Latent Damage Act, reads:
14A Special time limit for negligence
actions where facts relevant to cause of action are not known at date of
accrual
(1) This section applies to any action
for damages for negligence, other than one to which section 11 of this Act
applies, where the starting date for reckoning the period of limitation under
subsection (4)(b) below falls after the date on which the cause of
action accrued.
(2) Section 2 of this Act shall not apply
to an action to which this section applies.
(3) An action to which this section
applies shall not be brought after the expiration of the period applicable in
accordance with subsection (4) below.
(4) That period is either —
(a) six years from the date on
which the cause of action accrued; or
(b) three years from the starting
date as defined by subsection (5) below, if that period expires later than the period
mentioned in paragraph (a) above.
(5) For the purposes of this section, the
starting date for reckoning the period of limitation under subsection (4)(b)
above is the earliest date on which the plaintiff or any person in whom the
cause of action was vested before him first had both the knowledge required for
bringing an action for damages in respect of the relevant damage and a right to
bring such an action.
(6) In subsection (5) above ‘the
knowledge required for bringing an action for damages in respect of the
relevant damage’ means knowledge both —
(a) of the material facts about
the damage in respect of which damages are claimed; and
(b) of the other facts relevant to
the current action mentioned in subsection (8) below.
(7) For the purposes of subsection (6)(a)
above, the material facts about the damage are such facts about the damage as
would lead a reasonable person who had suffered such damage to consider it
sufficiently serious to justify his instituting proceedings for damages against
a defendant who did not dispute liability and was able to satisfy a judgment.
(8) The other facts referred to in
subsection (6)(b) above are —
(a) that the damage was
attributable in whole or in part to the act or omission which is alleged to
constitute negligence; and
(b) the identity of the defendant;
and
(c) if it is alleged that the act
or omission was that of a person other than the defendant, the identity of that
person and the additional facts supporting the bringing of an action against
the defendant.
(9) Knowledge that any acts or omissions
did or did not, as a matter of law, involve negligence is irrelevant for the purposes
of subsection (5) above.
(10) For the purposes of this section a
person’s knowledge includes knowledge which he might reasonably have been
expected to acquire —
(a) from facts observable or
ascertainable by him; or
(b) from facts ascertainable by him
with the help of appropriate expert advice which it is reasonable for him to
seek;
but a person shall not be taken by virtue
of this subsection to have knowledge of a fact ascertainable only with the help
of expert advice so long as he has taken all reasonable steps to obtain (and,
where appropriate, to act on) that advice.
The role of the Latent Damage Act 1986
was not to repeal Pirelli‘s case, but to mitigate its consequences. The
24th report of the Law Reform Committee (Cmnd 9390), which that Act implemented,
had recommended (para 4.4) against making any change to the general rules
governing accrual of a cause of action. Consistent with that recommendation the
1986 Act did not, when introducing section 14A into the 1980 Act, import any
special definition of the accrual of a cause of action. Pirelli
therefore still applies to fix the date of accrual at the point when the damage
was suffered (regardless of knowledge or discoverability): see McGee on
Limitation Periods (1990 ed) at p90.
The note in the 1995 Supreme Court
Practice vol 2 at para 6152A p1897 cites two decisions, neither of which
was binding on the judge but which he nevertheless rightly considered with
attention because they are not only relevant but in conflict with each other.
In Horbury v Craig Hall & Rutley, a decision of Judge Bowsher
QC as an official referee on May 24 1991 reported in the December 1991 issue of
the Journal Professional Negligence at p206, the facts were that the
plaintiff in November 1980 purchased a Victorian-terraced house for £24,995 in
reliance on a survey report provided by the defendants. That report had failed
to draw attention to a dangerous feature of the property, namely that when the
chimney breasts had been removed from the house the lower portion only had been
taken away, leaving the upper portion unsupported in the loft. This defect was
discovered in the course of loft conversion work in 1984, and it cost the
plaintiff £132 in April 1984 to have this dangerous feature removed by her
builder. Increasing problems with dampness caused the plaintiff to consult
experts in July 1985 who reported that the house was seriously infested with
dry rot. It cost the plaintiff £56,000 to have this made good, and on February
25 1988 she issued a writ against the defendants, seeking to recover this
expenditure by way of damages for professional negligence in failing to note
the existence of the dry rot in their report of October 1980. The judge found
(after hearing expert evidence) that the defendants had been negligent in
failing to note an infestation of dry rot which was present at the date of
their inspection, and held that the £56,000 would have been recoverable as
damages for that negligence. It does not appear to have been seriously disputed
that the cause of action accrued at the date of the purchase on the basis of
the survey report in November 1980, and that the primary period of six years
under subsection (4)(a) had therefore expired. The crucial question for
the court to decide, therefore, was when the plaintiff had ‘the knowledge
required for bringing an action for damages in respect of the relevant damage’
under subsection (5) so as to provide the starting point for the three-year
period under subsection (4)(b). The judge felt bound to hold (with understandable
sympathy for the plaintiff in a case which the figures made a very hard one)
that this date occurred when she learned in April 1984 of the defendants’
negligence in failing to advise her about the (relatively minor) matter of the
unsupported remains of the partially demolished chimney stacks. The three-year
period under (4)(b) measured from that date had passed by the date of
the writ, and her claim was accordingly statute-barred. The Act did not permit
any later starting point to be adopted by reference to the plaintiff’s
subsequent knowledge (within the three-year period before the writ) of the
(much more major) consequences of the defendants’ failure to discover the dry
rot. He said:
It is vital to a proper understanding of
this case that if the plaintiff has any cause of action at all, she has one
single cause of action, not a bundle of causes of actions relating to different
defects in the house … as they arise.
In Felton v Gaskill Osborne
& Co [1993] 2 EGLR 176*, Judge O’Donoghue was concerned, in negligence
proceedings against surveyors at a hearing in Liverpool County Court in June
1992, to deal with a case where the plaintiff had in June 1983 purchased a
property on the basis of the defendants’ report to his mortgagees. The report
had failed to draw attention to two matters — a leaning chimney stack and
dampness. The plaintiff became aware of both defects at or soon after
completion, but he was content not to make any claim at that time. Early in
1989 he sought to sell the property, and was alerted by a prospective purchaser
to much more serious defects of which he had not previously been aware — namely
a bulge in a gable wall and cracking in a main wall above the bay window caused
by a defective
It was common ground that the cause of action had accrued at the date of the
purchase in 1983. On the trial of a preliminary limitation issue, the judge (to
whom Horbury was not cited) acceded to a submission by the plaintiff
that the starting point for the three-year period under (4)(b) was the
discovery by the plaintiff of the more serious defects in 1989. For that he
relied on the definition of knowledge in subsection (6) as relating to ‘the
material facts about the damage in respect of which damages are claimed’ and
the generic reference to ‘proceedings for damages’ when materiality is dealt
with by subsection (7). He regarded both those references as indications of
intention on the part of parliament to refer the operation of section 14A to
the particular head in respect of which the plaintiff seeks to claim damages,
and not to ‘damage’ in a general sense. He felt that such an interpretation
accorded, moreover, with fairness because:
*Editor’s note: Also reported at [1993]
43 EG 118
If the submissions so ably made by
counsel for the defendant firm were correct, the fact that a plaintiff had
known that there had been some negligence on the part of the defendant,
but had chosen not to institute proceedings for damages on the grounds that he
could live with that situation, might by this indulgence be prevented from
later instituting proceedings in respect of a far more serious example of
negligence of which he was earlier unaware, giving rise to a far more serious
claim for damages.
Reasoning of Kay J
The judge, having considered both those
decisions said:
In my judgment the interpretation of
Judge Bowsher QC in Horbury was correct, and in the circumstances of the
present case the plaintiffs, on the assumed facts, had a single cause of action
which became statute-barred prior to the commencement of these proceedings.
In view of that conclusion it was
strictly unnecessary for him to make a finding in regard to the letter of
discharge, but dealing with it shortly he said:
It is something of a one-off document and
its drafting is not of the best. However, it seems to me that (1) it is not
restricted to claims that were ‘known’ to the plaintiff at the time, as is
apparent from the use of the disjunctive in ‘known or competent’, and (2) as it
was brought into existence on the basis of an express non-admission of
liability, the reference to claims ‘arising or to arise’ extends to
circumstances such as the present … If I had had to construe the form of
discharge, I would have done so in favour of the defendants.
Argument on appeal
Mr Lurie for the appellant contends that
the references in section 14A to ‘damages in respect of the relevant damage’
(subsection (5)), to knowledge of ‘the material facts in respect of which
damages are claimed’ (subsection (6)(a)), and to the requirement that
such knowledge must be judged qualitatively by the objective test of sufficient
seriousness laid down by subsection (7) all point to a preoccupation on the
part of the draftsman with the particular head of injury to his property of
which the plaintiff is for the time being complaining. Some may be minor, some
may be serious; all are liable to emerge at different times and dates. The
intention of section 14A is to apply a separate starting date for each. Any
other interpretation would, he submits, run the risk of promoting litigation
and discouraging compromise. Subsection (7) does, it is true, afford a measure
of protection to the house-owner in cases where the damage first discovered is
too trivial to provide reasonable grounds for litigation; but in the general
run of cases where the damage is serious enough for that subsection not to
apply, the effect of the construction of section 14A favoured by the judge
would, it is submitted, result in a house-owner who had chosen to forgive
relatively minor damage suffered in consequence of a negligent survey being
penalised for his forbearance, since he would be disabled thereafter from suing
the surveyor in respect of any more serious failures that might come to light
later. For that he relies on Judge O’Donoghue’s decision in Felton,
which should, he submits, be preferred to the approach of Judge Bowsher QC in Horbury.
He claims that the construction for which he contends would, moreover, be
consistent with the majority decision in Brunsden v Humphrey
[1884] 14 QBD 141, where a cab driver whose person and vehicle had both been
damaged in an accident caused by the negligence of the defendants was held not
have been disentitled by the fact that he had recovered damages already from
the defendant for damage to his vehicle from bringing fresh proceedings against
him for his own bodily injury. The damage under each head may have arisen from
one and the same act of negligence, but it was damage of a different kind, and
the causes of action were not identical: per Bowen LJ at p151. That, he
submits, is an authority establishing a principle of wide application,
notwithstanding the trenchant dissent of Lord Coleridge CJ, who said (at p153):
It seems to me a subtlety not warranted
by law to hold that a man cannot bring two actions, if he is injured in his arm
and in his leg, but can bring two, if besides his arm and leg being injured his
trousers which contain his leg, and his coat-sleeve which contains his arm,
have been torn.
Mr Stephen Powles QC for the respondent
surveyors submits that in a case like the present, where the tort complained of
is negligence committed by error or omission in one single report, there can in
the nature of things be only one cause of action — negligence in the making of
the report. That cause of action accrues when damage is suffered, and it makes
no difference whether that damage be multiple or single, or whether (if
multiple) it comes to light at varying points of time with varying degrees of
gravity. The reasoning in Horbury was, he submits, entirely correct.
Conclusion
I prefer Mr Powles’ analysis. The present
case is to be contrasted with cases involving claims against those with responsibility
for defective building work, where there may well be different causes of action
against different contractors and in respect of different categories of damage
to the same building (as in Steamship Mutual Underwriting Association v Trollope
& Colls (City) Ltd (1986) 33 BLR 77). Here there is but one single and
indivisible cause of action arising out of one negligent act, the making of a
single report. Section 14A is expressed to apply (subsection (1)) to cases
where the (knowledge-related) starting date introduced by the section occurs at
a date subsequent to that on which ‘the cause of action accrued’. There was
only one such cause of action, namely the negligent making of the report; and
it accrued when damage (great or small) was suffered for the first time. The
reference in subsection (5) to ‘relevant damage’ can only sensibly be construed
as referring to damage relevant to that same cause of action. That construction
of the section harmonises, moreover, with the principle of Henderson v Henderson.
It does, of course, give the section a more arbitrary effect than the Henderson
principle, which (being founded on the restraint of abuse of process) imports a
discretion and can be mitigated in individual cases where no abuse of process
is found to have occurred. But it is in the nature of any system of limitation
of actions, as the judge pointed out in his judgment in the instant case, that
it may at times work arbitrarily or even harshly. Horbury provides a
vivid illustration of harsh working, but the reasoning of that decision was, in
my judgment, entirely correct, and should be followed in preference to that of Felton.
As for Brunsden v Humphrey, that is a decision which in Talbot
v Berkshire County Council (supra) this court declined to follow,
and whatever authority it may still have under the general law is, in my view,
of no assistance in construing the intentions of parliament when enacting
section 14A.
The question of the compromise and letter
of discharge does not therefore arise for direct consideration. Had it done so,
I would take the same view as the judge. The only way of giving proper effect
to the phrases ‘known or competent’ and ‘arising or to arise’ is to treat them
as indicating an intention that the compromise was intended to be all-embracing,
that is to say as covering all claims emanating from the report — known or
unknown, subsisting or inchoate.
I would dismiss the appeal.
Simon Brown and Neill LJJ agreed and did not add anything.
Appeal dismissed with costs.