Negligence — Mortgage valuation — Three schemes offered by building society, namely, (1) where the valuer’s client was the building society, although a copy of the valuation was provided to the purchaser, (2) where the purchaser was the valuer’s client, a copy of the valuation going to the society, (3) a full structural survey — In the present case the plaintiff purchasers, a young couple with very modest resources, chose the first scheme (previous negotiations for another property, adopting the second scheme, having failed) — Plaintiffs were seeking a 95% mortgage — They purchased the subject property relying on a valuation carried out for the building society under the first scheme by a valuer employed by the defendant firm, a copy of the valuation having been received by the plaintiffs — Plaintiffs paid the asking price, £19,000, for the property — The valuer’s report, which certified to the building society that the property was suitable for the maximum advance, drew attention to a limited amount of dampness in the external walls and a certain amount of dry rot in the skirtings of a bedroom; it recommended that the plaintiffs should undertake to engage a reputable timber specialist to eradicate the rot — Unfortunately, a few months after the plaintiffs moved into the house indications appeared of dry rot which proved to be a serious infestation and the present action was brought
doubt on the authorities that the defendants owed the plaintiffs a duty of care
— Although the first scheme contemplated a limited appraisal only, it was to be
an appraisal by a skilled professional man, taking reasonable care in making
the valuation — It was accepted that this limited appraisal did not require the
lifting of carpets or moving of furniture as a matter of course, but if there
is a specific ground for suspicion and the trail of suspicion leads behind
furniture or under carpets the valuer must take reasonable steps to follow the
trail until he has all the information which it is reasonable for him to have
before making his valuation — In some cases a half hour’s inspection may
suffice, but in others it may be necessary to spend two or three or more times
as long, regardless of the fee — In the present case the question of duty was
not complicated by the existence of a disclaimer
disclosed a breach of the duty so defined — The defendants’ valuer mentioned ‘a
certain amount of rot’ in the skirtings, but in fact the skirting board was
badly infested at the time and the valuer failed to check whether it was, as he
wrongly believed, localised — He did not test the wood blocks of the floor and
appeared to have ceased to follow the ‘trail of suspicion’ in the skirtings
because of the intervention of a piece of furniture (which, from the layout of
the room, did not appear to have been substantial) — He did not recommend the
retention of any part of the loan, although if he had done so the plaintiffs
would not have gone ahead
quantum of damages, the value of the house with its defects at the time of the
survey was £15,000 (it was eventually sold for £14,000) — The difference
between the £15,000 and the price paid by the plaintiffs was, therefore, £4,000
— Plaintiffs were also entitled to £1,500 for disturbance and disruption,
making a total of £5,500
The following
cases are referred to in this report.
Anns v Merton London Borough Council [1978] AC 728; [1977] 2 WLR
1024; [1977] 2 All ER 492; [1977] EGD 604; (1977) 243 EG 523 & 591, HL,
[1977] 2 EGLR 94
Harris v Wyre Forest District Council [1988] 2 WLR 1173; [1988] 1
All ER 691; [1988] 1 EGLR 132; [1988] 05 EG 57, CA
Hedley
Byrne & Co Ltd v Heller & Partners Ltd
[1964] AC 465; [1963] 3 WLR 101; [1963] 2 All ER 575; [1963] 1 Lloyd’s Rep 485,
HL
Yianni v Edwin Evans & Sons [1982] QB 438; [1981] 3 WLR 843;
[1981] 3 All ER 592; [1981] EGD 803; (1981) 259 EG 969, [1981] 2 EGLR 118
Yuen
Kun Yeu v Attorney-General of Hong Kong
[1987] 3 WLR 776; [1987] 2 All ER 705, PC
In this action
Mr and Mrs A P Roberts, the plaintiffs, claimed damages for negligence against
J Hampson & Co, surveyors and valuers, of Llandudno, Gwynedd, in respect of
the valuation of a bungalow called ‘Delfryn’, at Eglwysbach in the Conway
Valley. The valuation was carried out on the instructions of the Halifax
Building Society.
Michael Black
(instructed by Leak, Almond & Parkinson, of Manchester) appeared on behalf
of the plaintiffs; Mrs Teresa Peacock (instructed by Pinsent & Co, of
Birmingham) represented the defendants.
Giving
judgment, IAN KENNEDY J said: The page references in this judgment follow the
colours of the files with which I was provided: thus, red (R) is the
contemporaneous correspondence and black (B) is the file which contains the
experts’ reports.
In early 1984
Mr and Mrs Roberts were engaged to be married (Mrs Roberts was then a Miss Iveson).
They wanted to buy a house against their forthcoming marriage. He was 22 and in
a junior grade on the railways: she was 21 and a hairdresser. They went first
to the Halifax Building Society in Llandudno for advice. They went to the
Halifax because it was the biggest society and, to their minds, would therefore
give the best advice and service. Mrs Roberts knew something of the deputy
manageress, a Miss Wetherson, because she did Miss Wetherson’s hair.
Mr and Mrs
Roberts’ means were very modest. When Miss Wetherson had made the necessary
calculations she told them that the limit of any mortgage advance on their
earnings would be in the order of £18,500. The Roberts had only a few hundred
pounds saved. Miss Wetherson gave them a copy of the Halifax’s leaflets and
explanatory material, included in which was their advice on valuations and
surveys. Mr and Mrs Roberts took the material away, read it and began to look
for a house in their price range.
In due course
they found one called ‘Brook Cottage’ at Conway. They made an offer of £18,000,
subject to contract, which was accepted. It is their recollection that they
went together to see Miss Wetherson. The mortgage application form was filled
in and signed by Mr Roberts. Of the actual form that was completed, part of one
page only has been produced by the Halifax, this for reasons of
confidentiality. A blank of the form is at pp R 11-16: the parts not disclosed
are immaterial. As to R 17 itself, the part of the text in capitals is in the
original printed in red. R 17 was signed by Mr Roberts: it is this fact which
leads Miss Wetherson to believe he must have called on his own because it is
her practice to have both joint applicants sign. This difference of
recollection is again immaterial.
It is agreed
that Miss Wetherson had explained the procedure as to surveys and valuations
either then or on the previous occasion. Mr and Mrs Roberts both understood it;
of that there is no doubt.
The Halifax
offered three schemes, as outlined in their brochure. In practice Miss
Wetherson discussed only schemes 1 and 2 with her clients, since so few of
their predecessors had ever opted for scheme 3, the conventional full
structural survey. I am satisfied that she did explain the two schemes
properly, that she did, as she says she did, recommend scheme 2, and that the
Roberts understood the position: they chose scheme 2.
In scheme 1
the valuer’s client is the Halifax, though a copy of the valuation is provided
to the purchaser: in scheme 2 the purchaser is the client, though a valuation
is provided for the Halifax. This important difference is reflected in the
administrative arrangements. Miss Wetherson gave the initial instructions in
respect of ‘Brook Cottage’ to, as it happened, the defendants, and specified
scheme 2, the scale fee for which was £103.50. The defendants wrote to the
plaintiffs the letter at R 19 (a copy of the conditions of engagement are at R
5) and the plaintiffs confirmed their instructions.
The resulting
inspection report was dated April 27 1984 and is at R 20-23. In accordance with
the terms of engagement the report itself did not include a valuation, but a
valuation was prepared for the Halifax as part of the services bought by the
single fee. A copy of the valuation was sent to the plaintiffs. The report and
valuation together made gloomy reading for the plaintiffs. The house was valued
at £14,000 in its existing state, and a retention of £4,000 was advised to meet
the costs of the repairs listed in the valuation. The proposed installation of
central heating would have added £1,000 to the final value, when the house
would have been worth £19,000. The plaintiffs tried to negotiate a reduction,
but the vendor would not move. The plaintiffs had no means of financing the
purchase in the face of the proposed retention, even if it would have been
sensible to pay £18,000 for ‘Brook Cottage’. So the purchase went off.
The plaintiffs
restarted their search. They found a bungalow called ‘Delfryn’ at Eglwysbach in
the Conway Valley, the property with which this case is concerned. It is
described in the selling agent’s particulars, a copy of which is at R 7.
Seemingly, it had been on the market for a little time, for the original asking
price of £22,500 had been reduced, first, to £19,950 and then, by the time the
plaintiffs saw the house, to £19,000. They made an offer of £19,000, again
subject to contract, which offer was accepted. The plaintiffs returned to see
Miss Wetherson, although on this occasion it was Miss Iveson who signed the
mortgage application form. On this occasion they selected scheme 1, as the
instructions to the valuers (the defendants) show. These instructions also show
that the plaintiffs were seeking a 95% mortgage.
The plaintiffs
were in something of a quandary. Their means were, as I have said, very
limited, particularly in terms of the money available for the deposit and
initial expenses. The survey on ‘Brook Cottage’ had cost £103 and they feared
that one or two more ‘wasted’ inspections could eat into their capital so as to
make it impossible for them to proceed with their plans. They say that they
discussed the matter with Miss Wetherson. On the previous occasion Mr and Mrs
Roberts had taken Miss Wetherson’s advice and selected scheme 2, in part
because ‘Brook Cottage’ had been unoccupied for about four years and they were
able to see for themselves that the house was not in perfect condition. On this
occasion the house appeared to be in good condition: it was still lived in; it
had obviously had a good deal of money spent on it quite recently and
decoratively it appeared to be in very good order. They put their quandary to
Miss Wetherson and asked about a scheme 1 valuation. They report her as saying
that if they chose scheme 1 they would at least know that the house was worth the
price they were proposing to pay, because, if the property was not worth that,
the building society would not be prepared to lend, since the society had to
consider its position in the event that they defaulted. She added that a scheme
1 valuation should identify any serious defects which would seriously diminish
the property’s worth. Miss Wetherson had no recollection of this discussion. I
am not surprised that she did not. She said herself that at the material time
not many scheme 2 inspections were taken up and so two first-time buyers,
buying on the faith of a scheme 1 valuation, would be nothing surprising to
her. Again, it matters not whether one or both of the Roberts were present at
this discussion because it is clear enough that one would have reported to the
other before any final decision was taken. Although what Miss Wetherson did or
did not say about the relative merits of the two types of survey is not
directly material to the questions that I have to decide, I think that it is
likely that she had such a discussion as the Roberts recall and that they have
reported her reasonably accurately.
I now turn to
describe ‘Delfryn’ in more detail. The particulars claimed that it was
in
exceptionally good order throughout. This unique property was built in 1932 and
has been extensively modernised and extended in recent years to create a very
comfortable small home of charm and character.
It appears that
it was built in about 1932 and it was built as a church hall for the chapel
which lies to its north. There are a plan of the property and a site plan
attached to the report by Mr Jackson [surveyor acting for the defendants — see
later]. It is not easy to be quite confident about the history of the hall’s
conversion to a bungalow, but it is clear that bedroom 2 is a more recent
addition. Mr Jackson’s floor plan is accurate enough, subject to three minor
corrections: first, the door between bedroom 2 and the inner hall is hung not
in the position shown but about half way between that position and the ‘inner hall’
on the plan. The second is that the cupboard in the hall is, in fact, a
wardrobe cupboard in bedroom 1 and the solid wall should be at the west and not
the east end of this cupboard. The third is that the drawing of the bathroom is
somewhat out of scale and there is a larger area of back lobby, in fact divided
in half by a stud partition wall, running north from the south wall of the
extension.
The property
is one that was somewhat misleading for a surveyor. It probably always had the
vestibule, but the main part of the hall was originally one large room, the
walls being internally buttressed on the
which is now the back lobby and bathroom would suggest itself being an extension,
but it is clear enough that it was in fact part of the original building,
although its original purpose is uncertain. This is so because the main walls
are cavity walls and the cavity continues through the outer walls of the
present-day bathroom. The wall between the kitchen and the back lobby is a 9in
solid brickwork wall and has never been an external wall. The idea that this
was an extension would have been suggested by the fact that it is roofed as a
lean-to from the main south wall. The floor of the hall proper was laid in wood
blocks on a bitumen bed, but the floor of bedroom 2 is a modern asphalt floor:
there is thus a change in flooring within the bedroom at the point where the
old wall of the hall was broken through to give access to the new addition. It
is unclear, and probably immaterial, whether bedroom 2 was added at the same
time that the major conversion was done. The major conversion itself was
reputed to have been done about eight years before the Roberts purchased, and
this date is confirmed by the colour of the ware in the bathroom. The skirting
board within bedroom 2 is of a different pattern to the board in the rest of
the property and there is a mismatch at the point where the wall is broken
through. The skirting on the new interior stud walls, which were erected from
sole plates nailed to the wood block flooring, is of the same pattern as that
on the original walls. It is a pattern which is still available today. It seems
curious, if bedroom 2 were built at the same time, that the same type of
skirting was not used throughout. However that may be, both surveyors who gave
evidence before me pointed out that this was ‘country-building’. That is not to
say that it was indifferent building but rather that it reflects the foibles of
the builder. Equally, they both said that, despite the, as one might think,
characteristically ‘chapel’ window in the north elevation, it would not have
been obvious that this was a converted chapel hall, for there are many
curiously assembled buildings in this part of the country. Although if anyone
had thought carefully about the problem, and certainly if they had read the
memorial plaque at the front of the chapel, they would have seen what the
history of this building was.
The valuation
was done by a Mr D P Jones, an assistant to the sole principal of the
defendants. Mr Jones had obtained the degree of BSc in building studies in 1980
and had then done his professional training in a general practice in Liverpool.
He passed his examinations for associate membership of the Royal Institution of
Chartered Surveyors in the summer of 1983 in the building surveying division
and joined the defendants in September 1983. In the eight months that he had
been with the defendants, the major part of his time had been on building
society inspections and valuations.
The Halifax’s
instructions were dated May 29 1984 and were received by Mr Jones on the
following day. By chance, he was going to the area that day and he was able to
make an appointment to see ‘Delfryn’ at noon. He would have allowed for about
half an hour at the property, an assessment not dissented from by either of the
expert surveyors. He would have been equipped with damp-meter, fine screwdriver
and a torch and would have had a clip-board with pro formas such as R 31, which
are his working notes in the present case. Upon his return to his office, he
would have dictated his report and valuation, which was signed on the following
day. The report and valuation is typed in triplicate. The copy at R 34 is that
provided for the applicant. During the trial, to illustrate another point, a
copy was handed in from the defendants’ files to illustrate what would have
been seen by the Halifax. The Halifax were told that the property was certified
as suitable for a maximum advance. The Halifax sent R 34 in the folder R 32 and
33, under cover of their own letter (R 35). R 33 repeats the caution about a
scheme 1 valuation and gives certain further advice. I shall have to consider
the valuation (R 34) in detail later in this judgment but, for the present, I
note only that it contained these words:
A limited
amount of dampness was noted in the external walls at the rear of the property.
A certain amount of rot was noted in the skirtings within bedroom (1) and we
would recommend that an undertaking is obtained that a reputable timber
Specialist is engaged to eradicate the rot. The purchase price for the property
compares favourably with sale prices recently obtained for other similar
bungalows in the area. Valuation of property £19,000.
Comforted by
the thought that the property was valued at the price they had agreed to pay
and by the absence of any reference to substantial defects or the insistence
upon a retention, Mr and Mr Roberts proceeded with their purchase. The details
of the conveyancing are substantially immaterial. I note, however, that in the
inquiries before contract, on p R 39 in response to the question: ‘Does the
property have a damp proof course?’ the
vendor replied, ‘Yes, so far as the vendor is aware — please arrange for a
structural survey to be carried out to confirm the foregoing.’ And in response to the question: ‘So far as
the vendors are aware, has the property been affected by any of the following:
a) structural or building defects; b) subsidence; c) dry or wet rot, rising
damp, woodworm or other infestation?’
the reply was: ‘The Vendor is not aware of any of these matters having
affected the property. The purchasers should, none the less, arrange for a full
structural survey to be carried out to ascertain whether the property has been
so affected. The purchasers should rely on such survey.’ The only point in these essentially formal
questions and formal replies are that they did nothing to disabuse Mr and Mrs
Roberts of the view that they had taken. The purchase was completed on August
20 1984 and the Roberts moved in to ‘Delfryn’ virtually immediately.
Two or three
months after they moved in — and therefore probably in the second half of
October — they found ‘mushrooms’, as they thought they were, on the wall and
skirting in the back lobby. The wall affected was that on one’s right as one
entered the back door and the attack continued along that short wall as far as
the entrance to the kitchen. Neither of the plaintiffs knew what this attack
was and Mr Roberts sought to counter it by removing the fungus, scrubbing the
area and treating it with bleach. Shortly afterwards, the mushrooms returned in
the same place and Mr Roberts tried to deal with them again in the same way. A
few days later, Mrs Roberts looked in a cupboard which she had not, up to that
time, often used and found a further attack. This cupboard was above the
immersion heater: that attack was on the same wall as that previously affected
but now on the other side of the kitchen opening and on the kitchen side of the
wall. A further inspection at that stage revealed more growth under and to the
left of the sink: the sink was under the kitchen window.
Mr Roberts
looked in the Yellow Pages and then telephoned a concern called
‘Home-Guard’. Mr Burslem of that firm called in November. It was, Mrs Roberts
told me and I accept, no more than a month before the first outbreak and Mr
Burslem’s visit and this visit followed within a matter of days of the third
discovery. The fungus was true dry rot. Mr Burslem was unwilling to give any
estimate for its remedying until the full extent of the attack was revealed by
the removal of the plasterwork. To save the cost of having this done by
builders, Mr Roberts undertook the work himself, and this resulted in delay. He
was only able to work in his spare time and it was Christmas time before Mr
Roberts had completed the removal of the plaster and the laying bare of the
affected woodwork. By this time Home-Guard had gone out of business and so the
Roberts sought help from Rentokil instead.
Rentokil’s
surveyor, Mr Harris, surveyed the property on January 25 1985 and produced a
report which is R 54-61. He was accompanied by Rentokil’s damp-proof-course
surveyor, who was to advise upon the insertion of a chemical damp-proof course.
That surveyor’s report is at pp R 75-78. The respective quotations were £2,246
plus VAT and £592 plus VAT.
Mr Harris gave
evidence. He has since left Rentokil, but in January 1985 he had been with them
for 10 years, during which he had received their standard training. He had only
a vague recollection of his visit to ‘Delfryn’, but he remembered that Mr
Roberts was working on removing plaster on the day that he attended. Mr Harris
was at the premises for about three to four hours. Mr Harris confirmed the
findings of his report in general terms and opined that the origin of the dry
rot was a damp problem. He said that there was salting on the walls, this
salting being evidence of a long-standing process of ground water moving up
through the walls by capillary action, an increasing deposit of salts being
left behind as the water evaporated. It was his opinion that there was no
damp-proof course in the walls. I think he is wrong in this conclusion because
the more careful survey done on behalf of the defendants, for the purposes of
this action, by Mr J G Jackson [BSc ARICS], revealed that there was an old
bitumen damp-proof course. It may be and, indeed, I think on the whole of the
evidence, it is likely that this damp-proof course had perished somewhat with the
passage of time. But in any event, for a reason explained by Mr Jackson, to
which I shall refer in more detail later in this judgment, it is clear that
ground water was being drawn up the walls.
So Mr Harris’
opinion that there was rising damp is correct, albeit his views as to its cause
may not be. As is clear from his report, Mr
casings of the doors and in the partitions and sole plates of the internal
walls. Some of the decay was wet rot, but in general it was dry rot. He found
dry rot on the rear wall in bedroom 1 as well as in the studding to the inner
hall. In the kitchen he found quite heavy infestation and he found fruiting
bodies. The bathroom and the kitchen were the areas most heavily attacked. That
region was, in his opinion, the original seat of the attack. He conceded in
cross-examination that fruiting bodies may be found at the extremes and not at
the original seat of any attack but, none the less, it was his opinion that the
outbreak had started at the point that I have mentioned.
The defendants
dispute the plaintiffs’ claim that all the damage to the property is the result
of one original infestation. The defendants suggest that the infestation
furthest from the suggested seat — that in the casings of the doors of the hall
— may well have been a secondary infestation provoked by Mr Roberts’ attempts
to remove the original mushrooms. They suggest that when he scraped them away
he released spores which floated in the air and settled at other points, such
as on the casings of the hall doors. Mr Jackson said that the life sequence of
an outbreak of dry rot, from the alighting of a spore to the production of
fruiting bodies, could be as little as three to four months. This is a separate
question from that discussed by Mr Ian Caird [FRICS], the surveyor who gave
evidence for the plaintiffs, who mentioned the speed of growth of dry rot
outwards from a particular point of infestation. Because of the hacking away of
the plaster, the removal of many of the wood blocks from the floor and other
acts designed to remove infected wood, it has been impossible to trace with any
certainty whether the extremes of the attack are, indeed, extremes of the one
attack or whether they are reinfestations such as Mr Jackson has opined. His
figures are minimum figures and, upon a review of the whole of the evidence, I
believe that it is very unlikely that the further infestations could have been
provoked by anything that Mr Roberts did in the kitchen. While the spores are
miniscule and drift in the air and can, no doubt, find their way into the
smallest of cracks, the hall was in good repair and well painted and it seems
to me unlikely that, time apart, the dry rot there is a secondary infestation.
I pass
therefore to the details of Mr Jones’ inspection and the physical signs that
would then have been available to him.
Mr Jones began
by measuring the external walls, as his sketch on R 31 shows. (Such
measurements were relevant to the valuation which he was asked to make.) As he went round he noted the condition of
the exterior. The external decorations, the joinery and the roof were all
satisfactory. However, he noticed that there was high ground around the extension
of bedroom 2 and that soil rested against the walls of that room above
damp-proof-course level. Photograph 4, attached to Mr Caird’s report in the
black file, illustrates where the high ground was, although the photograph
somewhat exaggerates the position. The soil was not as high as this photograph
would suggest and much of the apparent ‘height’ is long grass and other
vegetation. It was generally agreed that Mr Jones was broadly right in his
assessment that there was high ground at the rear of the property and round the
extension and that more extensive high ground found by Rentokil’s damp-proof
surveyor was the result of an over-enthusiastic definition of ‘high ground’. Mr
Jones said that he was untroubled by the high ground against the extension
because soil against the external leaf of a cavity wall is not something of the
first importance. Continuing on his journey round the house, Mr Jones came to
the concrete path at the rear of the original building. What he saw is
illustrated by photograph 7 of the photographs attached to Mr Jackson’s report
(black file). The first window — that with the waste pipe under it — is the
kitchen window; the second, which appears to abut on the return of the
extension, is that of bedroom 1. It is clear that the concrete path has, at
some time, been broken away to produce the channel shown in the photographs.
The channel extends from the entrance to the back door to the return wall of
the new extension and for a short distance along that wall. It thus follows
that it was likely that the channel had been cut when or after the extension
was built and therefore the cause for its being dug was in existence then.
That was the
external evidence which, as Mr Jones agreed, he had to have in mind when he
went inside the house. The construction that Mr Jones put upon this evidence
has to be seen in the light of his belief that the main walls were of solid
construction. In reaching this conclusion he was mistaken, but he was mistaken
without being negligent. Indeed, Mr Caird, the surveyor instructed by the
plaintiffs, made the same mistake when he was engaged upon a thorough survey of
the house to prepare himself to give evidence.
The external
walls were rendered and the rendering was carried down to and beyond the point
at which the damp-proof course would have been. This was bad practice and all
the professional witnesses are agreed that the rendering should be cut back and
bullnosed at a point about 6in above the damp-proof-course level. There was in
fact a damp-proof course in these walls, as Mr Jackson found. This damp-proof
course was not easily found and Mr Caird did not find it. Mr Jackson, who
clearly made his examination with the greatest care, was able to see traces of
bitumen felt, as well as beads of bitumen. Mr Jones told me that he believed
that there was a damp-proof course because of the age of the building, but I am
far from satisfied that he actually detected it by observation: he certainly
made no reference one way or the other in his notes or in his report. I do not
question Mr Jones’ honesty but I have grave doubts as to the accuracy of his
evidence. He claimed to have a greater recollection of the events of this
inspection than I believe it is possible for him to have had, having regard to,
first, the number of such inspections which he carries out within any given
week and, second, the fact that concern about the particular house was not
raised until a year later. I find that his evidence is in a large part based
upon reconstruction and contains a fully understandable element of
self-justification. If Mr Jones did believe that there was a damp-proof course,
he must have appreciated that it was possibly bridged, and almost certainly
compromised, by the level to which the rendering had been brought down. The
rendering was in good condition and unaffected by any spalling. This would have
suggested, particularly in the context of a supposedly solid wall, that the
amount of rising dampness could not have been very great for, if it had been,
it is likely that the frosts of winter would have produced some spalling damage
to the rendering.
When he went
inside, Mr Jones followed his usual practice in such cases. He carried out damp
readings with his electric damp-meter at 3ft to 4ft intervals along the
external walls and along the skirtings. He told me that he tested every 3ft to
4ft, subject to furniture being in the way. Since the major problem is likely
to be rising damp, his practice was to test at about 6in above the skirting and
then to retest higher up if he found any evidence of dampness. No one criticises
this procedure. He was, he said, naturally concerned about the same rear wall.
He had found dampness along the rear of the main bedroom, to the left of and
under the window. He said that he found a limited amount of dampness which
registered in the yellow area on his meter, which meant 17%-20% relative
dampness. He said that the actual figure would have been 19%. It is this sort
of precision which I believe to be unreliable at this distance in time. Having
found dampness, he would have tested upwards at 3in to 4in raises and it is his
evidence that the dampness extended upwards for about 1 ft. He deemed it to be
rising damp and in this he was right.
At this point
a further qualification has to be introduced. When the paper was stripped from
these walls — and it is not suggested that Mr Jones should have done so — it
was found that they had been replastered to about dado height. The walls behind
the new plaster were very wet indeed, but the new plaster had a damp-shielding
element in it which limited the amount of dampness which Mr Jones’ test would
have detected. This work had been done by a skilled plasterer who had matched
the new thickness to the old so well that the tell-tale bump at the junction,
which would ordinarily have been expected to be visible through the wallpaper,
was quite absent. Thus there was nothing to suggest to Mr Jones that there had
been any need for replastering. No one now knows whether that replastering was
done following the removal of a wooden dado or because of the same manifestation
of damp which had led to the path on the other side of the wall being cut away.
This factor, therefore, explains why the wall would have seemed less damp to Mr
Jones than in fact it was and underlines that one further ground of suspicion
was denied him.
Mr Jones did,
however, detect marked dampness within the skirting board under the window of
the bedroom. He told me that his judgment was that the rot was the result of
dampness which had been left in the wall since the time that the channel had
been cut and that this dampness had not completely resolved itself by the time
of his inspection, as his readings on the lower part of the wall tended to
show. He further judged that the rot in the skirting board was a local attack
only. It is upon the validity of this last conclusion that the case, in
essence, turns.
It is agreed
that the terms upon which such an inspection as that presently under
consideration are conducted do not require the
done. If Mr Jones had lifted the carpet adjacent to the skirting board — and
there is a dispute between Mr and Mrs Roberts and he as to whether it was
tacked down — it is, in my judgment, likely that he would have gained
significantly more information to aid his judgment. Mr Jackson has helpfully
drawn a sketch (exhibit D1) which illustrates how dampness was, in fact,
bridging the damp-proof course (any question of local defects in the damp-proof
course membrane aside). His sketch is self-explanatory, but it shows that the
bitumen layer on the concrete oversite was not in line with the damp-proof
membrane in the walls, nor was there any upstand or flashing to make good that
defect. Thus the wood blocks which were butted against the exterior walls were
acting as a wick and transferring the general dampness from the foundations
across the membrane to the higher parts of the wall. His sketch shows that the
skirting board was not flush with the wall itself but distanced from it by the
thickness of the plaster. The plaster had been brought down to the top of the
skirting board and that board was held firmly by nails driven into the
brickwork behind. The general dampness could and would have reached the
skirting board both from contact with the wood blocks and also along the nails
between the walls and the board. As Mr Jackson’s sketch shows, about 1 1/2 in
of the outermost blocks would be under the shadow of the skirting board and the
gap behind it. None the less it is self-evident — and I am prepared to find —
that if a damp-meter had been used to take a reading from the wood blocks
beneath the carpet and close up against the skirting board, a high figure would
have been revealed and, as I am satisfied, a very relevant and probably crucial
piece of information obtained. Such a reading would have told Mr Jones that the
process was active and he was not seeing the mere working out of a problem
which had essentially been remedied.
Mr Jones said
that the rot extended over about two-thirds of the length of the skirting and
that there was then a piece of furniture at the end towards the kitchen — he
did not specify what that piece of furniture was. The layout of the room and
the position of the windows suggest that whatever it may have been — and I am
not satisfied that Mr Jones’ recollection is necessarily correct — it is
unlikely to have been a wardrobe or any other substantial piece. Mr Jones did
not speak of moving it or trying to move it. He did not attempt to get a
reading from the floor, although he knew (or was about to learn if he had not
yet been to bedroom 2) that this floor was a wood block floor. He knew — or he
was to know — that because he lifted the carpet in that bedroom and saw the
join between the old wood blocks and the new asphalt floor. Equally, he did not
go and specifically check the corresponding piece of skirting board in the
kitchen under the sink, where broadly the same conditions obtained as obtained
at the point where he had found rot.
Mr Jones said
that he did not mention the bridging of the damp-proof course by the rendering
in his valuation because he knew that any specialist contractor called in to
remedy the rot would insist upon the necessary cutting back and bullnosing of
the rendering as a condition of a guarantee. His omission to make any reference
to this feature is one of the factors which leaves me uncertain as to whether
in truth he gave any close thought as to whether or not there was a damp-proof
course.
In my view, it
is not necessary to consider the other matters which Mr Caird raised. If the
plaintiffs’ case does not succeed on the material which I have so far recited,
it will not succeed upon the remainder. I should, however, say that I have the
gravest doubts about some of Mr Caird’s figures for damp readings. If they were
accurate and representative of the position as it would have been found by Mr
Jones, the carpets (and the house was fully carpeted) would almost inevitably
have been damp, mouldy and probably smelly: they were none of these things. It may
be that his figures are in part explained by the plaster having been removed
from the walls and the long period of non-occupation of the house. Equally, I
do not believe that there is a great deal of importance in the criticisms of
the way that he expressed himself about the damp readings and the various
scales on his damp-meter. Certainly any errors which he may have made were
detected in sufficient time, so that they do not impinge upon my judgment.
Consonant with
the view that he had formed, Mr Jones recommended ‘that an undertaking is
obtained that a reputable timber Specialist is engaged to eradicate the rot’.
Mr Jones said that he had estimated that the cost of remedying the rot,
together with the ancillary work to the rendering, would not be above £350 and
he would not have recommended a retention unless he thought the works would
have cost above £500.
Those being
the facts of the matter, I turn to consider whether they give rise to
liability.
The first
question is: what is the extent of the service that a surveyor must provide in
performing a building society valuation?
The service is, in fact, described in the Halifax’s brochure. It is a
valuation and not a survey, but any valuation is necessarily governed by
condition. The inspection is, of necessity, a limited one. Both the expert
surveyors who gave evidence before me agreed that with a house of this size
they would allow about half an hour for their inspection on site. That time
does not admit of moving furniture, or of lifting carpets, especially where
they are nailed down. In my judgment, it must be accepted that where a surveyor
undertakes a scheme 1 valuation it is understood that he is making a limited
appraisal only. It is, however, an appraisal by a skilled professional man. It
is inherent in any standard fee work that some cases will colloquially be
‘winners’ and others ‘losers’, from the professional man’s point of view. The
fact that in an individual case he may need to spend two or three times as long
as he would have expected, or as the fee structure would have contemplated, is
something that he must accept. His duty to take reasonable care in providing a
valuation remains the root of his obligation. In an extreme case, as Mr Caird
said, a surveyor might refuse to value on the agreed fee basis, though any
surveyor who too often refused to take the rough with the smooth would not
improve his reputation. If, in a particular case, the proper valuation of a
£19,000 house needs two hours’ work, that is what the surveyor must devote to
it.
The second
aspect of the problem concerns moving furniture and lifting carpets. Here
again, as it seems to me, the position that the law adopts is simple. If a
surveyor misses a defect because its signs are hidden, that is a risk that his
client must accept. But if there is specific ground for suspicion and the trail
of suspicion leads behind furniture or under carpets, the surveyor must take
reasonable steps to follow the trail until he has all the information which it
is reasonable for him to have before making his valuation. Thus, I think it is
entirely reasonable for Mr Jones to say that he took his damp readings along
the walls at intervals of 3ft or 4ft unless there was furniture in the way, but
it does not follow from that that he was relieved from moving furniture if an
evident defect extended behind it.
The next and
central question is whether the defendants owed a duty to the plaintiffs in
respect of the care with which they performed the valuation. Mrs Peacock
submits that the plaintiffs were outside the scope of the defendants’ duty of
care. She submits that the scope of a duty is not to be found in any broad
concept of neighbourhood or, now, in the test proposed by Park J in Yianni
v Edwin Evans & Sons [1982] 1 QB 438. She submits that that case was
wrongly decided and should not be followed. She submits that the correct test
is a tripartite one: there must be proved the fact of reliance, the
reasonableness of reliance and the foreseeability of reliance. I will dispose
at once of the fact of reliance, for it is not in question that the plaintiffs
did rely on the valuation provided by the defendants.
Yianni v Edwin Evans & Sons was discussed and distinguished by
the Court of Appeal in Harris v Wyre Forest District Council
[1988] 1 All ER 691*. The Court of Appeal declined to consider whether Yianni
was correctly decided, although Kerr LJ expressed certain reservations.
*Editor’s
note: Also reported at [1988] 1 EGLR 132 and [1988] 05 EG 57.
Park J had
been guided in formulating his test by a passage in Lord Wilberforce’s speech
in Anns v Merton London Borough Council [1978] AC 728 at pp
751-752, among other statements of the law. That passage has since received
detailed analysis by the Privy Council in Yuen Kun-yeu v Attorney-General
of Hong Kong [1987] 2 All ER 705. In these circumstances and since part of
the foundation of Park J’s test has been further explained, I believe that,
notwithstanding that Yianni v Edwin Evans & Sons has been
followed in other cases, I should adopt the test framed by Nourse LJ in Harris
v Wyre Forest District Council. At p 696J, having cited from the speech
of Lord Pearce in the Hedley Byrne case, the learned lord justice
continued:
That, I
respectfully think, is a valuable statement because, in dealing with the first
and perhaps less familiar kind of difficulty, it highlights a requirement which
is common to all those cases where the necessary proximity has been found. The
circumstances must be such that the maker of the statement ought reasonably to
recognise both the importance which will be attached to it by the recipient and
his own answerability to the recipient in making it. In Hedley
cases this requirement has been expressed as a voluntary assumption of
responsibility or the like, but it has been held that in some circumstances the
liability can extend to a case where the maker of the statement is under a duty
to make it: see Ministry of Housing and Local Government v Sharp
[1970] 1 All ER 1009; [1970] 2 QB 223.
I would
therefore frame the essential question which we have to decide in these terms:
were the circumstances such that the defendants ought reasonably to have
recognised both the importance which would be attached to Mr Lee’s valuation by
the plaintiffs and their own answerability to them in making it.
Nourse LJ then
addressed himself to the disclaimer of liability, as I shall have to consider
the suggested disclaimer in this case.
I believe,
therefore, that Mrs Peacock is essentially right, although I would prefer not
to subdivide the question but rather take this test: were the circumstances
such that the defendants ought reasonably to have recognised both the
importance which would be attached to their valuation by the plaintiffs and
their own answerability to the plaintiffs in making it? Although the structure of the case was
different in Harris v Wyre Forest District Council in that the
plaintiffs there were suing the lenders, with the lenders’ servant as second
defendant, there is no reason why the same test should not apply here.
I turn first
to the copy of the valuation which was provided to Mr and Mrs Roberts, together
with the covering notes (R 34 and 32, the accompanying letter being R 35). I have
already remarked upon the fact that a special copy is provided for the
applicant and that it is one page of a multipart set typed by the valuers. The
accompanying notes to which the applicants’ attention is drawn are:
1 The enclosed report is a copy of the Valuers
Report and Valuation for Mortgage prepared by the Society’s Valuer solely for
the use of the Society in assessing the adequacy of the proposed security for
mortgage purposes and in determining the amount (if any) to be advanced on
mortgage.
2 The report has been prepared in a form
specifically designed to enable the Society to deal with your application as
quickly as possible. The inspection by the Society’s Valuer was not a survey
and it is possible that there are defects in the property which were not
discovered by the Valuer in the course of his limited inspection. There may
also be defects which are not shown in the report as they are not significant
to the Society in assessing the adequacy of the security for mortgage purposes.
You should therefore not assume that the defects shown (if any) are the only
defects which may be present in the property.
3 If the valuer has suggested that the Society
make a retention from the advance in respect of improvements or repairs you
should satisfy yourself as to the cost of carrying out the necessary repair
work as the cost of these works could exceed the amount of the suggested
retention.
4 If you have not already done so, you should
consider what steps you need to take to satisfy yourself as to the condition of
the property. If you desire a survey for your own protection you should consult
a surveyor on your own account. YOU ARE RECOMMENDED TO DO THIS.
The valuer who
prepared the report and valuation for the Society may be prepared to undertake
a private survey on your behalf and if so the Society will be pleased to put
you in touch with him if you wish to consider using his services for this
purpose.
5 The valuation figure shown on the Valuers
Report and Valuation for Mortgage is the valuer’s opinion of the open market
value of the property (in some cases adjusted to allow for works which are to
be carried out).
As the
valuation has been carried out for mortgage purposes, it should not be regarded
as the only valid valuation figure relating to the property, but nevertheless
it is upon this valuation figure that the Society will make its assessment for
mortgage purposes.
6 Where the property is being purchased no
warranty is given that the purchase price is reasonable.
7 The Report and Valuation is for the Society’s
use and for your information only and is not to be disclosed to anybody except
your own professional advisers.
I was not told
how the fee structure operated in the event that the applicant chose to go to
the same valuer for a ‘private survey’, but I shall assume that he would be
charged for a scheme 2 survey, being credited with the cost of the scheme 1
which had already been paid. In para 7 there is a contrast between ‘the
Society’s use’ and ‘your information only’. I am not here dealing with a point
of construction, but I think it is unlikely that the ordinary applicant would
read any distinction into that contrast. The whole tenor of the warnings
contained in the notes is as to the limited nature of the inspection upon which
the valuation was based and on the desirability of a survey proper being
undertaken. However, any significance which there might be in the contrast is
reduced when in the last paragraph there is contemplated a disclosure to
professional advisers: this must be for the purpose of some use being made of
the information, for it could scarcely be for light reading only. Stress is
laid upon the different needs of the society and the applicant, but in the
final analysis both the society and the applicant are concerned whether the
property is worth the amount that is proposed to be paid.
In Yianni
v Edwin Evans & Sons the evidence showed that between 10% and 15%
only of purchasers who bought with the assistance of building societies had
their own surveys. The evidence in the present case is, unsurprisingly,
similar. Miss Wetherson said that at that time not many scheme 2 valuations
were being taken up. Mr Jones, in describing the pattern of his work, said that
in the average month he would do 35 to 40 scheme 1 valuations, six scheme 2
surveys and only one full survey. Thus in the Llandudno area some 13% to
15% of purchasers were having their own survey.
In my
judgment, there is clearly a sufficient proximity between the defendants and
the plaintiffs in the present case. The defendants undoubtedly knew from the
very fact that a scheme 1 survey was being undertaken that it was highly
unlikely that the plaintiffs were relying upon some other professionally based
information as to the property. They knew clearly of the terms of the Halifax’s
notes to applicants and therefore that there was no disclaimer of liability. Mr
Jackson, in the course of his evidence, said that in 1984 there was a
realisation among surveyors that valuations were read and relied upon by
borrowers. I am fully satisfied that there has been here established a duty on
the part of the defendants towards the plaintiffs to take reasonable care in
the making of their valuation.
I turn to the
question of breach. The only breach suggested is in relation to Mr Jones’
assessment of the rot and its cause. His description is a laconic one: ‘a
certain amount of rot’. The likelihood is that the skirting board was badly
infested in May 1984. Although the speed at which dry rot can spread is not
accurately predictable, it can be as fast as 14mm a week, there are no
circumstances proved here which would suggest any reawakening of dormant rot.
There was no installation of central heating, no flood or dripping pipe, no
carpeting of a previously uncarpeted area. The house had been superficially
well cared for and this does not appear to have been the case of a house whose
previous occupiers could not afford to heat it, where the arrival of a new
owner with the inclination and means to maintain a higher temperature may
trigger the spread of rot. In any event the months between the survey and the
discovery of the outbreak were summer and autumn months, when a change in the
living pattern of the occupants would be of less significance.
Although I
recognise that there were features suggesting residual dampness, particularly
the absence of spalling and the fact that the new plaster which had been put on
the lower part of this wall made it the more difficult to detect the extent to
which dampness was rising up it, I consider that Mr Jones made inadequate
investigations to determine whether the rot was indeed so localised as he, as I
believe, assumed. Mr Jackson agreed, as it seems to me wholly correctly, that a
surveyor must be conservative if there is something present in a house which
might be serious. He said that if there were evidence of past repairs and yet
evidence of rot in one room there should be a conservative approach, and that
the surveyor should recommend further investigation. His own test was that if
the repairs were likely to cost 10% of the proposed purchase price he would
certainly have recommended a retention. He said that if he were uncertain as to
the position he would recommend a retention and further investigation. In that
event, as he described it, the building society would require quotations to be
obtained before proceeding with the matter. In my judgment, Mr Jones was
wanting in that he did not take any test of the wood blocks of the floor, a
test which I am satisfied would have revealed some dampness to put him upon
further inquiry, even if there were not traces of rot itself. I was also very
surprised by his evidence that he did not trace the rot further because of the
presence of a piece of furniture. In my judgment, he failed to appreciate the
difference between his ordinary duty in relation to parts of the structure
which were hidden by furniture or by carpets and his duty where there was, what
I have called, a trail of suspicion. I am satisfied that there was in this case
a lack of reasonable care, albeit restricted to this one matter.
What is the
quantum of the plaintiffs’ damages? It
is agreed from the evidence which I have just recited and from the figures to
which I now turn, that in this case there ought to have been the recommendation
of a retention, with or without further investigations. I am satisfied that if
a retention had been called for, this purchase would not have gone through, for
the Roberts were unable to fund any part of the purchase themselves. I cannot
think that any other lender would offer any bridging facilities in the then
existing circumstances. It follows, therefore, that this purchase would not
have gone through.
Before I turn
to the question of quantum, I should record that the Roberts were treated with
the greatest consideration and, indeed, generosity, by the Halifax when their
plight was known. They are now housed in another property, which they are
purchasing through the Halifax, but in the interim their position was very
difficult. They stayed in ‘Delfryn’ for a total of 13 months and in August 1985
removed to Mrs Roberts’ mother’s home. They had to do so because by then Mrs
Roberts was having a baby and their advice was that ‘Delfryn’ was then no place
for a young baby: I am sure this advice was right. They were staying with Mrs
Roberts’ mother when their first child was born on October 14 1985 and remained
there for about 12 months. ‘Delfryn’ was finally sold by the building society
in July of 1986 for £14,000.
There was much
discussion before me as to whether this was a fair market price or not, and
whether it was influenced by the fact that the purchaser had relations in the
immediate vicinity, but I am satisfied that that was then its value. The
dispute between the two surveyors as to the value of the house in 1984 is quite
marked. Mr Caird said that it was worth something in the order of £12,000
whereas Mr Jackson valued it at £17,000. In the event the house was sold, as I
have said, for £14,000 in July 1986. This is not necessarily a good mark of its
value two years earlier, because the dry rot would undoubtedly have extended a
great deal in the interim and there was wage and cost inflation which would
have affected the remedying of the rot and of the associated defects. I am
satisfied that there was no very great change in house prices in the area over
those two years, so that that element does not require particular
consideration. I had supposed that there must be an element of ‘blight’ in a
house which had had so serious a defect, but I am satisfied by the evidence
that this is probably counteracted by the fact that today one may be reasonably
confident of eradicating dry rot and the execution of substantial works always
offers a purchaser an opportunity to give effect to his own ideas of how he
would like the house to be. It is clear, none the less, that the execution of
these repairs would, particularly in the case of the installation of a new
chemical damp-proof course, provide some element of amelioration.
The rival
contentions can be tested by reference to the work that would have been needed
to put the house in good order and which therefore would be reflected in its
value. The specific items are set out in para 5 of Mr Caird’s report (black
file). Both surveyors were agreed that it was necessary to install a chemically
injected damp-proof course. Mr Caird put the cost at £600, as did Mr Jackson in
1986 terms, but the latter gave a 1984 price of £500. Effectively they were
agreed on the cost of laying a new floor, which, in 1984, would have been £500.
For the present I pass over items c, d, e and f. Mr Caird put the cost of
redecorations at £800 and Mr Jackson did not disagree, but in giving his figure
as at 1984 he gave a figure of £300. It seems to me that there is a discrepancy
there and I incline to the view that Mr Caird is likely to be the more
accurate. In my view it is inappropriate to think in terms of stripping out all
the kitchen fittings and I do not take account of the small amount that would
be involved in replacing the cupboard that was defective. If the reduction of
levels outside the house is confined to the places where it was really
necessary I am satisfied that Mr Jackson’s figure of £250 is far more realistic
than Mr Caird’s figure of £1,500. The cutting back and bullnosing of the
exterior rendering is a relatively small matter which I doubt would cost the
£500 which Mr Caird valued it at.
The essential
problem concerns the eradication of the dry rot and the associated works, items
c, d, e and f. The difficulty is to project back, and to determine how much
less dry rot there would have been at the time of the valuation. I am satisfied
that the rot must already have extended throughout the larger part of the house
because, as I have already found, there was, on the balance of probabilities,
no secondary infestation in the hall but rather an extension of the original
process. The dry rot was therefore in a state where it was not very much less
extensive than it was found to be by the Rentokil survey at the turn of the
year, even 50 weeks at 14mm a week is only a matter of a few feet. Therefore
the stripping out would have been fairly extensive, even if the florid stage of
fruiting bodies was not yet in evidence. In his valuation as at 1986 Mr Jackson
was inclined to agree with Mr Caird’s assessment of £1,200 for cutting back the
base of all stud partitions and installing new sole plates for the internal
walls. It may well be that in this respect an investigation in 1984 might have
revealed less widespread infestation.
I find the
difference between his 1986 and 1984 figures, in respect of the rot generally,
remarkable. He opposed Mr Caird’s £3,000 for items d and e with a figure of
£2,000 based upon a quotation from the firm Timberwise. Mr Jackson accepted Mr
Caird’s £600 for item f, the consequent replastering of the walls. Mr Caird’s
figures for these four items, as at 1986, totalled £4,800 and Mr Jackson’s,
£3,800. But when Mr Jackson translated that latter figure into 1984 terms he
gave a figure of £500 for the majority of the work.
In my view,
therefore, there are two respects in which there is too great a discrepancy
between Mr Jackson’s 1986 and 1984 figures (the rot itself and the
redecoration) which leads me to doubt his valuation. I cannot therefore accept
his estimate of £17,000, although I have equal difficulty in accepting Mr
Caird’s £12,000, when the house was sold two years later for £14,000. I repeat
that I do not think that the repairs can be treated pound for pound as
diminishing the value of the house and I note that in his original report Mr Jones
opined that at £19,000 the price compared favourably with other properties in
the area. In my judgment, and this is my estimate based upon giving back to the
two discrepant items some of the weight which appears to have been inexplicably
withdrawn, I find that the value of ‘Delfryn’ at the time of survey was
£15,000.
The plaintiffs
claim for disturbance and disruption. It is not submitted that there cannot be
such a claim, and such a claim was allowed by Park J in Yianni v Edwin
Evans. Each assessment must be made upon the facts of the individual case
and there can be nothing in the nature of a conventional award. In my judgment
the disruption to this young couple was extreme and the result a particularly
upsetting one. Whereas they might have hoped to bring their new baby back to
their home they were denied that and had instead to live with Mrs Roberts’
mother. There is no suggestion that they were not welcome there, although there
were the usual discords. In my judgment, the difference in their situation
merits an award of £1,500.
Accordingly,
in my judgment the plaintiffs are entitled to recover £5,500.
