Claim by purchaser of house against surveyors for breach of contract and negligence — Substantial defects not disclosed in survey report — Appeal from decision of deputy High Court judge who found negligence and assessed damages on the basis of cost of repairs at date of trial — After trial, and pending the appeal by surveyors, the plaintiff purchaser sold the house in its unrepaired state — Cost of repairs basis for assessment of damages no longer appropriate — Issues before the Court of Appeal were the correct measure of damages and date of assessment and whether there was a right to damages for ‘vexation’ — Held that the correct measure was the difference between the price paid for the house and its value at the date of purchase, damages being assessed at the date of breach, not date of trial — ‘Some compensation for inflation’ added in the shape of interest at appropriate rate from date of breach until judgment and afterwards at judgment rate — Damages for ‘vexation’ properly awarded by judge — Objection based on Liesbosch case rejected — Compensation under head of ‘vexation’ to be a modest recognition of ‘anxiety, worry and distress’ arising from the physical consequences of the breach — Damages to be assessed by an official referee — Surveyors’ appeal allowed in part
This was an
appeal by Sidney Phillips & Son, chartered surveyors, of Hereford from a
decision of Patrick Bennett QC, sitting as a deputy judge of the Queen’s Bench
Division, in an action brought by Ivan H Perry as plaintiff against Sidney
Phillips & Son as defendants. The action arose out of a survey report made
by the appellants concerning a house called Kyre Bank Cottage, Kyre, near
Tenbury Wells, Worcestershire, which Mr Perry was then proposing to purchase.
The decision of Patrick Bennett QC was reported at (1981) 260 EG 389, [1981] 2
EGLR 124.
J Hicks QC and
John L Powell (instructed by Reynolds Porter Chamberlain) appeared on behalf of
the appellants; P Latham (instructed by Turner Peacock) represented the
respondent.
Giving
judgment, LORD DENNING MR said: In 1976 the plaintiff, Mr Perry, was minded to
buy a house. He saw what looked like a very attractive property. It was Kyre
Bank Cottage, Kyre, near Tenbury Wells, in Worcestershire. He made an offer of
£27,000 subject to survey and contract. He employed a firm of surveyors, Sidney
Phillips & Son, to carry out the survey. They surveyed the property and
prepared a report. Mr Perry read the report. On the faith of it — although it
did disclose some defects in the property — he was satisfied that the cottage
was a sound buy. So, on July 2 1976, he completed the contract of sale for
£27,000.
Unfortunately,
after Mr Perry took possession, he found many defects. They had not been
mentioned in the report. In particular, there were serious defects in the roof
and in the septic tank. The surveyors had not noticed them. The roof leaked and
the rain came in. The septic tank gave off an offensive odour. Mr Perry
consulted a different firm of surveyors. They made a report showing that there
were many defects which had not been mentioned by Sidney Phillips & Son in
their report. Mr Perry instructed solicitors. They wrote to Sidney Phillips
& Son listing the defects. Sidney Phillips & Son instructed their own
solicitors. The upshot was that the surveyors denied any liability.
This placed Mr
Perry in a quandary. He simply did not have the money to undertake major
repairs. He carried out what minor repairs he could on a ‘do-it-yourself’
basis. As Sidney Phillips & Son were denying liability, he could not risk
doing the repairs on borrowed money.
On his
solicitors’ advice, Mr Perry brought an action against Sidney Phillips &
Son for damages for their negligence in making their report. The claim was put
both in breach of contract and in negligence. In 1981 the case was tried by Mr
Patrick Bennett QC (sitting as a deputy High Court judge). He dealt with
liability before considering the quantum of damages. At that stage Mr Perry and
his wife were still living in the cottage.
Mr Bennett QC
found that the surveyors were negligent in making their report. He held that
damages should be assessed according to the cost of repairing the defects in
1981 when the action was tried. He also held that Mr Perry ought to be awarded
damages for vexation — that is, the worry, discomfort and distress which he had
suffered by reason of the house being in the poor condition. The defendants
appeal to this court.
But then the
unexpected happened. After the trial and pending the appeal, Mr Perry decided
to sell the house. After the trial in April 1981 Mr Perry found himself in
financial difficulties. He had received bills from his solicitors for £4,788
costs. He could not get any assurance as to the date when damages would be
assessed. He was faced with the prospect of the appeal and long-drawn-out
hearings as to damages. So Mr Perry put the cottage on the market without doing
any of the repairs. He sold it for £43,000.
Mr Perry made
an affidavit to explain why he had found it necessary to sell the cottage. In
August 1981 he had been offered a job as a clerk with stockjobbers on the
London Stock Exchange. It was necessary that he should live nearer to his new
place of work. So he sold the cottage and bought a house at Fittleworth in
Sussex.
We now have to
consider how the damages are to be assessed. The cases show up many
differences. I need only draw attention to these:
First — where
there is a contract to build a wall or a house, or to do repairs to it, then if
the contractor does not do the work or does it badly — the employer is
entitled, by way of damages, to recover the reasonable cost of doing such work
as is reasonable to make good the breach. The cost is to be assessed at the
time when it would be reasonable for the employer to do it — having regard to
all the circumstances of the case, including therein any delay due to a denial
of liability by the contractor or the financial situation of the employer. The
work may not have been done even up to the date of trial. If the cost has
increased in the meantime since the breach — owing to inflation — then the
increased cost is recoverable, but no interest is to be allowed for the
intervening period, see Radford v de Froberville [1977] 1 WLR
1262; William Cory & Son Ltd v Wingate Investments Ltd (1981)
17 Build LR 109: likewise if a wrongdoer damages his neighbour’s house by
nuisance or negligence, and the neighbour is put to expense in the repairing of
it, see Dodd Properties Ltd v Canterbury City Council [1980] 1
WLR 433.
Second — where
there is a contract by a prospective buyer with a surveyor under which the
surveyor agrees to survey a house and make a report on it — and he makes it
negligently — and the client buys the house on the faith of the report — then
the damages are to be assessed at the time of the breach — according to the
difference in price which the buyer would have given if the report had been
carefully made from that which he in fact gave owing to the negligence of the
surveyor. The surveyor gives no warranty that there are no defects other than
those in his report. There is no question of specific performance. The contract
has already been performed, albeit negligently. The buyer is not entitled to
remedy the defects and charge the cost to the surveyor. He is only entitled to
damages for the breach of contract or for negligence. It was so decided by this
court in Philips v Ward [1956] 1 WLR 471, followed in Simple
Simon Catering Ltd v Binstock Miller & Co (1973) 228 EG 527.
Those cases
were both concerned with breach of contract by surveyors. It is their duty to
use reasonable care and skill in making a proper report on the house. In our
present case Sidney Phillips & Son failed in that duty in 1976 when they
made the negligent report. Mr Perry acted on the report in 1976 when he bought
the house in July 1976. The general rule of law is that you assess the damages
at the date of the breach: so as to put the plaintiff in the same position as
he would have been in if the contract had been properly performed. Even if the
claim be laid in tort against the surveyor, the damages should be on the same
basis.
So you have to
take the difference in valuation. You have to take the difference between what
a man would pay for the house in the condition in which it was reported to be
and what he would pay if the report had been properly made showing the defects
as they were. In other words, how much more did he pay for the house by reason
of the negligent report than he would have paid had it been a good report? That being the position, the difference in
valuation should be taken at the date of the breach in 1976. We were given some
approximate figures of the difference in the valuation. The plaintiff’s figure
was £6,000. The defendants’ figure was £2,250.
I would go on
to say — and this is important — that although the date for the assessment of
damages is 1976, there is some compensation for inflation because those damages
carry interest. Probably 9 per cent, 10 per cent or even 11 per cent would be
awarded nowadays from 1976 until the date when the damages are paid: or, at least,
up until judgment is given and then afterwards at the judgment rate.
The second
point is as to the distress, worry, inconvenience and all the trouble to which
Mr Perry was put during the time when he was in the house. Mr Hicks sought to
say before us that damages ought not to be recoverable under this head at all.
He referred to the case of The Liesbosch [1933] AC 449. In that case
Lord Wright said that the loss due to the impecuniosity of the plaintiffs was
not recoverable. I think that that statement must be restricted to the facts of
The Liesbosch. It is not of general application. It is analysed and
commented upon in this court in Dodd Properties Ltd v Canterbury City
Council [1980] 1 WLR 433. It is not applicable here. It seems to me that Mr
Perry is entitled to damages for all the vexation, distress and worry which he
has been caused by reason of the negligence of the surveyor. If a man buys a
house — for his own occupation — on the surveyor’s advice that it is sound —
and then finds out that it is in a deplorable condition, it is reasonably
foreseeable that he will be most upset. He may, as here, not have the money to
repair it and this will upset him all the more. That too is reasonably
foreseeable. All this anxiety, worry and distress may nowadays be the subject
of compensation. Not excessive, but modest compensation. That appears from such
cases as Jarvis v Swans Tours Ltd [1973] QB 233; Jackson v
Horizon Holidays Ltd [1975] 1 WLR 1468; Heywood v Wellers
[1976] 1 QB 446; and Hutchinson v Harris (1978) 10 Build LR 19.
In our present case, the judge said:
I think it
was reasonably foreseeable that if Mr Perry bought the house in such a
condition that he was exposed to the incursion of water, the anxiety resulting
from the question of when the repairs should be done and the odour and smell
from the defective septic water tank, such matters would cause him distress and
discomfort which I have gathered together under the term ‘vexation’ . . . In my
view the plaintiff is entitled . . . to damages for such discomfort, distress
and the like which he has suffered as a result of the defendant’s negligence
in, in effect, giving this house a clean bill of health . . . I am satisfied
that he has not acted unreasonably and he has not failed to mitigate his damage
and that the consequences which have flowed from the defendant’s breach of
contract and/or negligence were foreseeable, are direct and have not been
diminished or extinguished by any failure on the part of Mr Perry to mitigate
his loss.
Mr Perry is
entitled to damages on that score also. The quantum of damages is to be
assessed by an official referee later on.
In the
circumstances, I think that the appeal must be allowed in so far as it affects
the date at which damages are to be assessed, but dismissed on the question of
vexation.
Agreeing,
OLIVER LJ said: I agree with the order which my Lord has proposed. It is not
now suggested that the measure of damages which was proposed by the learned
deputy judge ought to be sustained in its totality, not because of any error in
his reasoning — although no doubt the appellants would have wished to challenge
that if the matter had proceeded on that basis — but because it has been
overtaken by events, the house having now been sold by the plaintiff at a price
very considerably in excess of that which the plaintiff paid for it in 1976. In
these circumstances, the cost of repairs, which have not in fact been carried
out, cannot any longer be an appropriate measure; and the debate before us has
concentrated
damage on the basis of what the learned deputy judge described as ‘differential
in valuation’ is, as Mr Hicks submits, the difference between the price paid by
the plaintiff and the value at the date of its acquisition — the property which
he actually got — or whether it is, as Mr Latham suggests, the difference
between the value of the house at the date of the trial in its defective
condition and the value which it would then have had if it had been in the
condition in which on the basis of the surveyor’s report it should have been.
Speaking for myself, I have no doubt whatever that the basis suggested by Mr
Hicks is the right one. What Mr Latham contends for in effect makes the
surveyors warrant the value of the property surveyed, and indeed the learned deputy
judge seems so to have thought. He said this at p 16 of his judgment:
Mr Hicks, in
the course of an extremely helpful address, warned me against putting the
surveyor into the shoes of the vendor; that is, warranting the condition of the
property and requiring, if that warranty is breached, the surveyor to pay
compensation to the purchaser.
I interpose to
say that I do not believe for a moment that vendors normally do do that and it
may be that this is a misprint for ‘valuer’. The learned judge then goes on to
say:
In reality
the surveyor is not far removed from that situation. The purchaser is relying
upon his skill, his expertise and his care to ensure that what he, the
purchaser, is buying is worth what he is paying for it. In that sense, the
surveyor is describing the property which is being bought.
With the
greatest respect to the learned deputy judge, I cannot agree with that. The
position as I see it is simply this, that the plaintiff has been misled by a
negligent survey report into paying more for the property than that property
was actually worth. The position, as I see it, is exactly the same as that
which arose in the case of Philips v Ward, to which the Master of
the Rolls has already referred, and in the subsequent case of Ford v White
& Co [1964] 1 WLR 885. It is said by Mr Latham that this proposition is
supported in some way by a more recent case, Dodd Properties Ltd v Canterbury
City Council [1980] 1 WLR 433. That was a case in which the plaintiffs were
claiming damages in tort against the defendants, they having removed a support
to the plaintiffs’ premises. It could not be suggested in that case that there
was any other measure of damages than the cost of repair, the only question
being the date at which the repairs ought to have been carried out; and the
debate there was as to the date at which it was reasonable for the plaintiffs
to have carried out the repairs. As I read the case, it merely exemplifies the
general principle which is set out in the headnote to the case:
. . . the
fundamental principle as to damages was that the measure of damages was that
sum of money that would put the injured party in the same position as that in
which he would have been if he had not sustained the injury
— and the
question was what loss the plaintiff, acting reasonably, had actually suffered.
I see nothing
in that case which justifies the proposition for which Mr Latham contends that
damages are to be assessed on the basis of some hypothetical value at the date
of the trial because the plaintiff has chosen — as he did in this case — to
retain the property and not to cut his loss by reselling it. I therefore am of
the same view as the Master of the Rolls that the right measure of damage is
the measure suggested in both Philips v Ward and Ford v White
& Co, which is simply the difference between what the plaintiff paid
for the property and its value at the date when he obtained it.
The other
question which has been much debated is whether the learned judge was right in
awarding damages for vexation, that is the discomfort and so on suffered by the
plaintiff as a result of having to live for a lengthy period in a defective
house which for one reason or another was not repaired over the period between
the acquisition by the plaintiff and the date of the trial.
Mr Hicks has
challenged the recoverability of damage under this head on two grounds. First
of all, he says that the valuation of the property as at the date of its
acquisition would, as a matter of valuation, take into account any discomfort
which a prospective purchaser would suffer as a result of defects in the
property. With the greatest respect to Mr Hicks, I do not think that that is a
realistic view at all, and I should be extremely surprised to find any valuer
who is prepared to say that that is a factor which he took into account in
making his valuation.
The second
ground upon which Mr Hicks contended that damages under this head ought not to
be recovered is, he says, that the discomfort suffered by the plaintiff was due
to the plaintiff’s own failure to carry out the repairs which would otherwise
have avoided the discomfort, and the reason assigned by the plaintiff in his
evidence for not carrying them out was that he was too poor to do so by reason
of the fact that he had paid too much for the property and had not got the
money to put the house in proper repair. Mr Hicks suggested, on the basis of
the well-known case of The Liesbosch [1933] AC 449, that this is simply
an attempt to create additional damage as a result of the poverty referred to,
and it is too remote.
If Mr Hicks
were right — that is to say, if the only reason why these repairs were not
carried out was the poverty of the plaintiff — then I think that something
could be said for this proposition. But it seems to me that the real question —
and it was one which was grasped by the learned deputy judge — was this: Was it
reasonable in all the circumstances for the plaintiff not to mitigate his
damage by carrying out the repairs which were required? One reason, no doubt, was the plaintiff’s
poverty. As I said, if that were the only reason, The Liesbosch might
well provide an answer for the defendants. But in fact the plaintiff’s conduct
in not carrying out the repairs was quite reasonable for a number of other
reasons; and one of the reasons why he did not do them was because the
defendants were strenuously resisting any liability at all for the repairs and
denying that they were responsible. The learned judge found that the
plaintiff’s conduct in all the circumstances was reasonable. I think that is a
finding of fact and is a matter which cannot be challenged in this court and,
in my judgment, it provides the answer to Mr Hick’s contention. I think that
damages — they may not be very substantial — under this head are recoverable,
and I would therefore concur with the view which the Master of the Rolls has
expressed.
For these
reasons, therefore, I agree that the appeal should be allowed on the point of
valuation; and as far as the learned deputy judge’s decision is challenged by
Mr Hicks, that challenge fails.
Also agreeing,
KERR LJ said: There is only a little which I wish to add. Before the learned
judge this case was conducted on the basis that Mr Perry had bought the house
as his permanent home, and that he was going to continue to occupy it as his
permanent home, with the result that he would have to do the repairs which were
the subject-matter of the dispute, because the necessity for these had not been
noticed by the defendants, and, in that respect, the defendants were negligent.
It was on that basis that the judge concluded that the right approach to the
question of damages was to take the cost of the repairs as the basis. In this
court Mr Latham has rightly abandoned that approach because of the events to
which the Master of the Rolls has referred, which have occurred since the
trial. The plaintiff has sold the house and has changed his life by moving to
another job and living in another locality. So the question of doing the
repairs, and of the actual cost of the repairs, has never arisen. In these
circumstances, this appeal has proceeded on both sides on the basis that the
cost of the repairs as such — let alone the question as at what date — did not
arise. For myself, I am not in any way expressing any dissent from the approach
of the judge, but I would say that I would reserve my view as to whether in a
case like this the approach by way of cost of repairs is necessarily right. We
have not heard the point argued and it does not arise for decision.
Given the fact
that that approach to the measure of damages falls away on this appeal, it
seems to me abundantly clear that this case is governed by a trilogy of similar
cases where property has been bought in reliance on negligent professional
advice. Those cases are Philips v Ward [1956] 1 WLR 471; the
decision of Pennycuick J in Ford v White & Co [1964] 1 WLR
885; and, finally, the approval of both those cases in this court in the case
of Simple Simon Catering Ltd v Binstock Miller & Co (1973)
228 EG 527. The effect of those three decisions can be summarised in the way in
which it was conveniently stated by Pennycuick J in Ford v White
at the top of p 888. He said:
In the simple
case of the purchase of property at a price in excess of its market value as a
result of wrong advice, the measure of damage must be the difference between
for
convenience I will reverse the order in which he put it
(1) the price
actually paid, and (2) the market value of the property at the date of
purchase.
To that I
would only add — as the Master of the Rolls has done — that interest is of
course awarded on that difference. It seems to me that the present case is
entirely concluded by those authorities, subject only to the argument which Mr
Latham has put forward to the effect that, because of what has happened in
relation to the discharge of foreign money obligations, and because of the
vicissitudes of sterling which culminated in the decision of the House of Lords
in Miliangos v George Frank (Textiles) Ltd [1976] AC 443, it is
said that these authorities no longer apply. I cannot accept this, and no
authority has been cited by Mr Latham which begins to bear this out. He relied
mainly on Dodd Properties Ltd v Canterbury City Council [1980] 1
WLR 433 and this is the only case to which I need refer. That was a case where
a building occupied by the plaintiff suffered damage by reason of adjacent
building operations, so that the cost of repairing the building could provide
the only possible measure of damages. That was common ground. It was then held
that the date for assessing the cost of repairs was to be taken as at the date
when the repairs should reasonably have been done. There is nothing in that
case which has any bearing on the cases to which I have referred. However, one
point was mentioned in that case upon which Mr Latham relied, because of a few
sentences at the end of the judgment of Denning LJ (as he then was) in Philips
v Ward at p 474, where he had referred to the assumption that sterling
was to be taken as having a constant value; and it was said that to that extent
Philips v Ward could no longer be treated as an authority.
While it is
perfectly right that those sentences have been overtaken by the fate of
sterling and the decision in Miliangos, this was only one of the reasons
given by Denning LJ for arriving at the decision in Philips v Ward;
but the same result — without referring to that point — was reached by the
other members of this court. Therefore, while the authority for those sentences
has been overtaken by the passage of time, this does not in my view afford the
slightest reason for going behind the basic approach of the three cases to
which I have referred. There is nothing else which Mr Latham put before us
which would justify a departure from the principle of those cases.
So far as the
question of damages for vexation and inconvenience is concerned, it should be
noted that the judge has awarded these not for the tension or frustration of a
person who is involved in a legal dispute in which the other party refuses to
meet its liabilities. If he had done so, it would have been wrong, because such
aggravation is experienced by almost all litigants. He has awarded these
damages because of the physical consequences of the breach which were all
foreseeable at the time. The fact that in such cases damages under this head
may be recoverable — if they have been suffered but not otherwise — is
supported by the decision of this court in Hutchinson v Harris
(1978) 10 Build LR 19.
For the
reasons given by Oliver LJ it seems to me that in this case it was reasonable
for the plaintiff not to do any repairs by the time of the trial, and those
reasons went beyond his lack of means. In any event, it seems to me that the
authority of what Lord Wright said in The Liesbosch case is consistently
being attenuated in more recent decisions of this court, in particular in Dodd
Properties Ltd v Canterbury City Council and what was there said by
Donaldson LJ. If it is reasonably foreseeable that the plaintiff may be unable
to mitigate or remedy the consequence of the other party’s breach as soon as he
would have done if he had been provided with the necessary means to do so from
the other party, then it seems to me that the principle of The Liesbosch
no longer applies in its full rigour. In The Liesbosch, as I see it, it
was not reasonably foreseeable that the plaintiff would be put into the
difficulties in which he was put by the other party’s breach of duty.
Accordingly, I agree with the judge’s assessment in principle and also as
regards the date for the assessment of the damages for vexation.
The final
matter I would add relates to the passage which Oliver LJ has read from the
judgment at p 16. I can only understand that passage if, instead of the word
‘vendor’, the judge had intended to say ‘valuer’; but, even if he did, I agree
with what Oliver LJ has said.
The appeal was
allowed in so far as it related to the basis and date on which damages were to
be assessed. The quantum of damages was referred to an official referee. Costs
in the Court of Appeal and below were ordered to be costs in cause and an order
was made for legal aid taxation of the plaintiff’s (respondent’s) costs. Leave
to appeal to the House of Lords was refused.
