Stuart Pemble explains how a seemingly surprising outcome does no more than state the normal law of damages.
Key point
- A surveyor can be negligent when failing to find a defect they could never have reasonably spotted
The proper measure of damages for a surveyor’s negligence is assessed by reference to diminution in value (the difference between the property’s value as it was negligently represented to be and its value as it should have been described had the surveyor spotted all of the patent defects) and not the (often higher) cost of repairing the defects the surveyor failed to spot (eg Phillips v Ward [1956] 167 EG 279 and Watts v Morrow [1991] 2 EGLR 152).
Further, since the Supreme Court reconsidered the SAAMCO cap or principle (derived from South Australia Asset Management Corporation v York Montague Ltd [1996] 2 EGLR 93) in Hughes-Holland v BPE Solicitors [2017] UK SC21; [2017] EGLR 23 (www.egi.co.uk/legal/legal-notes-does-the-saamco-cap-still-fit), the distinction between cases where (i) a surveyor’s negligence only relates to the provision of information on which the claimant will rely (“information cases”) and (ii) advice is actually provided as to what decision the claimant should take (“advice cases”) has been reclassified. If the facts do not support its application – that damages in information cases are limited to the consequences of the information being wrong and not those that flow from the claimant’s decision to enter into the contract in question (only recoverable in advice cases) – then it should not be applied. It only assists where the consequences of entering into the transaction are greater than the consequences of the negligence.
But what if the claimant claims costs for defects which a surveyor could not have been expected to find? The Court of Appeal (Peter Jackson, Coulson and Andrews LJJ) had to consider that conundrum in Hart and another v Large [2021] EWCA Civ 24; [2021] PLSCS 10. In a decision which some may find surprising (although one which upheld the conclusion reached at first instance: [2020] EWHC 985 (TCC); [2020] PLSCS 105), the court not only found that the surveyor was liable for those damages but that this conclusion “gives rise to no departure from the well-known principles governing the measure of loss in negligent surveyor cases”.
The negligence
In November 2011, Chris and Kerry Hart purchased an extensively remodelled house on a Devon clifftop. Richard Large was the surveyor who provided a HomeBuyer’s Report. The property suffered serious problems of dampness, so much so that it had to be knocked down and rebuilt. The Harts brought claims against their solicitors, the architects responsible for the rebuilding, and Large. The claim against the solicitors and architects settled and the issue for the courts to decide was the extent of Large’s liability to the Harts.
At first instance, deputy judge Roger Ter Haar QC held that Large had been negligent for failing (i) to recommend that the Harts obtain a Professional Consultant’s Certificate from the architect and (ii) to draw the Harts’ attention to the lack of damp-proof membranes.
PCCs are used where the property has been built under the supervision of an architect or other construction professional and there is no NHBC or similar cover. They contain declarations by the professional regarding periodic inspections of the property and that the works conform to drawings and instructions as well as an express statement that the professional was aware that the PCC was going to be relied on by the first purchasers of the property following completion of the works. Expert witnesses agreed that Large should have advised that a PCC be obtained before the Harts purchased the property.
In relation to the lack of membranes, the judge held that it was clear that there was no evidence of any damp-proofing at all. This was mainly because the walls were rendered in such a way that a competent surveyor could not actually see whether or not there were any membranes, although there were some locations where membranes should have been visible but were not (and on which a competent surveyor should have reported). Large’s report assumed that because membranes should have been present, they were.
The key point to stress is that the majority of the defects were something that no competent surveyor could have spotted.
Damages
The judge concluded that had Large given proper advice on both matters, the Harts would have withdrawn from the purchase. While diminution in value was the accepted starting point for assessing damages, there was disagreement as to how it should be calculated. Large argued that the accepted approach meant that the diminution should only refer to those defects he should have spotted but did not. The judge disagreed on the basis that this would not adequately compensate the Harts. He awarded damages based on the difference between the price paid and the value of the property with all of the actual defects, including those Large could not have spotted.
The lack of a PCC was key to this – because obtaining one “was precisely to obtain some sort of protection against the presence of defects which a competent surveyor could not identify in a newly rebuilt house”. Large’s failure to recommend that one be obtained meant that he was responsible for that loss. And the SAAMCO principle was not triggered because the financial consequences of entering into the transaction were not greater than the consequences of the negligence (which is when the principle applies): they were the same.
On appeal
Coulson LJ, who gave the leading judgment and Andrews LJ, who gave a brief supporting judgment, agreed with the judge at first instance on every point. They were keen to stress that this finding simply reflected the loss caused by Large’s failure to advise Hart properly.
Stuart Pemble is a partner at Mills & Reeve
