Surveyor valuing property and declaring it suitable for mortgage – Claimants purchasing property and discovering substantial structural defects – Mortgagee repossessing and selling property at price considerably lower than price paid – Whether surveyor negligent – Damages – Quantum – Judge allowing claimants’ claim – Appeal allowed in part
The claimants were a married couple who wished to buy a property known as 37 Samson Close, Gosport. The property was a two-storey maisonette in a four-storey block built in 1967 for the Ministry of Defence as part of the Rowner Estate. The system of construction was the Jesperson 12M system, which combined large concrete panels and timber cladding. In 1986 the MoD sold part of the estate to a developer who had renovated the properties and was selling them to individuals. The lease, which the claimants intended to purchase, was the 997-year residue of a 999-year lease and the asking price was £42,000. The claimants needed a mortgage and discussed with their building society the type of survey to be obtained. On 9 November 1988 the first defendant firm was instructed. The letter of instruction from the building society asked the first defendant to “inspect the property as soon as possible and complete our mortgage valuation form”. It was an express condition that the valuation was to be carried out by an associate or fellow of the RICS. The third defendant, a partner of the first defendant, made an inspection of the property on 13 November 1988, and the report was duly completed on the building society form. It valued the property at £42,000 and declared that it was suitable for mortgage. The mortgage advance was made and the claimants moved into the property.
In August 1991 the claimants moved out and let the property. In September 1991 a metal support for an access balcony on another block on the estate failed and an inspection revealed that the problem was widespread. The claimants became unable to let the property and to maintain the payments under the mortgage. The building society duly repossessed the property and in April 1993 it was sold for £6,000. The claimants issued proceedings alleging negligence. The judge found that, although a building society valuation was only a limited appraisal, there was still a duty on a surveyor to take reasonable care when carrying it out. He found that the third defendant had missed two factors that had a potentially significant bearing on the value of the property; first, the need for a structural appraisal and, second, the possible extent of maintenance charges. It was concluded that the claimants had relied on the third defendant’s report and so his negligence was the cause of any loss they sustained. Judgment was entered for the claimants in the sum of £67,859.77. The defendants appealed.
Held: The appeal was allowed in part.
1. The judge had been entitled to accept the evidence of the claimants’ expert witness as setting out the standards of a reasonably competent valuer carrying out a mortgage valuation. He was a witness of great experience and it was reasonable for the judge to conclude that there had been no evidence before him as to any alternative acceptable professional practice. He had been entitled to regard the evidence of the practice of other valuers giving mortgage valuations on properties similar to the claimants’, as having little weight compared to the evidence of those that had testified before him.
2. However, the award in the sum of £476.57 representing the costs of mortgage payments, less credit for rent in respect of the period after the claimants had moved, and before the property was repossessed, should not have been made. It formed part of the loss for which they were fully compensated by the main award, namely the difference between the price paid and the proper value of the property at the date of purchase. The claimants could not increase the damages that they were entitled to recover because they chose to let rather than to sell the property in August 1991.
Peter Smith QC and Malcolm Stitcher (instructed by Churchers, of Fareham) appeared for the claimants; Daniel Pearce-Higgins (instructed by Kennedys) appeared for the defendants.
Thomas Elliott, barrister
