Liability — Defective building — Limitation Act — Preliminary issue in action against architects, engineers and surveyors as to whether any claim against the surveyors was time-barred — Question as to when time began to run against the plaintiff department so far as the surveyors were concerned — Lease of building in Coventry acquired by Property Services Agency — Surveyors instructed to carry out a survey of the building and to report in order to enable a decision to be taken as to whether to acquire the lease — Report was made in February 1975 and, being favourable to the acquisition, was acted upon by the plaintiff by the end of July 1975 when the plaintiff had become irrevocably committed to leasing the premises — Defects in the building began to appear in February 1976 — The writ in the present action was issued in January 1982 — The preliminary issue was concerned only with the question whether, if the surveyors had been negligent in their survey (which was not admitted), they were protected by the Limitation Act — This involved a decision as to whether the principles established by the House of Lords in Pirelli General Cable Works Ltd v Oscar Faber & Partners, in relation to consulting engineers and others concerned with the design of a building, applied to the survey report or whether the latter came within the Philips v Ward principle — Held by Judge Hawser, sitting as an official referee, that the Pirelli case did not govern the relationship between the plaintiff and the surveyors in the present case — Any cause of action against the surveyors would have been complete as soon as the plaintiff was committed irrevocably to the lease, ie by the end of July 1975 — The surveyors were employed to discover whether any defects or damage existed at the date of the survey and, if they had failed to use reasonable skill to do so and to report to the plaintiff, they would have been liable when the plaintiff acted upon the report — As the writ was not issued until January 1982 any action against them was statute-barred — Judgment for surveyors on the preliminary issue
This was a
preliminary issue in an action by the plaintiff, the Secretary of State for the
Environment, against Essex Goodman & Suggitt, architects (the first
defendants), LV Ingram & Associates, engineers (second defendants) and W F
Johnson & Partners, surveyors (third defendants), in respect of defects in
a large office block known as Park Court, in the City of Coventry, constructed
during 1974 and 1975. The offices were for the use of government departments.
The present proceedings related to the position of the third defendants only.
D Latham QC
(instructed by the Treasury Solicitor) appeared on behalf of the plaintiff; J
Uff QC and Miss Melanie Payne (instructed by Kennedys) represented the third
defendants.
Giving
judgment, JUDGE HAWSER said: This is a judgment on a preliminary issue. This
case raises a problem which I believe has not yet been dealt with since the
decision in Pirelli General Cable Works Ltd v Oscar Faber &
Partners [1983] 2 AC 1. It appears to be a novel limitation point.
The plaintiffs
are the lessees of a property known as Park Court in the City of Coventry
demised to them by Rigmell Ltd for 25 years from June 24 1975. The lease was
dated April 5 1976. The building, which was a large office block, had been
constructed in 1974-75.
Practical
completion took place in stages in April and May 1975. The plaintiffs went into
occupation on June 25 1975. There was still work to be done and materials to be
removed at that stage. The defects liability period, which was for 12 months,
expired on June 24 1976.
It is common
ground that the plaintiffs were irrevocably committed to the said lease by the
end of July 1975. The first defects in the building appeared in February 1976.
The writ was issued on January 6 1982.
The first and
second defendants were the architects and engineers. The claims against them
all relate to the design of the building (with the exception of one item which
is not alleged against the third defendants). The claims against the third
defendants all relate to matters of design.
The third
defendants acted for the plaintiffs as surveyors. I shall read paras 8 and 9 of
the statement of claim on pp 5 and 6 of the pleadings:
8. In February
1975 the third defendants provided for reward to the plaintiffs a survey report
on the building. The third defendants knew at all material times that the
plaintiffs required the said survey report so as to consider the decision
whether to acquire a lease in respect of the building so that the same might be
used by government departments such as the occupiers as offices.
9. It was an
implied term of the contract whereunder the third defendants provided a survey
report that the third defendants should exercise all reasonable professional
skill, care, diligence and competence in carrying out their survey and in
making their report: and in particular that they should observe and report on
all defects in the said property reasonably ascertainable and all other signs
and matters from which the existence or probable existence of defects might
reasonably be capable of being inferred and what measures would be required to
be taken to remedy the same.
The terms on
which they acted are set out in a letter dated January 31 1975, and I read from
pp 9 and 10 of the correspondence:
1. You are
invited to accept a commission for the above service in accordance with the
terms of this letter and in general accord with the RIBA 1971 Conditions of
Engagement (issued 1st May 1971 and reprinted 1st May 1973) and the Association
of Consulting Engineers Conditions of Engagement and Scale of Fees dated 1st
March 1963 (reprinted 1970).
2. The scope
of this commission is to conduct a survey of the premises known as Park Court,
Parkside, Coventry, in connection with the proposed leasing of the property to
the PSA and complete Inspection Report Form W447. This
3. The total
amount of fees and expenses to be incurred under this commission is limited to
£1,500 unless authority to exceed this figure is specifically given by the
liaison officer.
I also read
the letter on p 15 of the correspondence dated February 6 1975. This was a
letter written by the third defendants to the department of the plaintiffs and
says:
Thank you for
your letter of the 31st January 1975. We confirm that we shall be pleased to
accept the commission to carry out a Survey Report for this building in
accordance with the terms you outline.
We have taken
particular note of the time change and expenses budget limit of £1,500.
The report was
sent in a letter dated February 26 1975, which reads:
Dear Sir,
Park Court,
Coventry.
Following our
discussions on Thursday, 20th February, 1976, we enclose the Survey Report for
the above premises, together with one set of the floor plans which we trust
will be satisfactory.
Form W447 has
notes which include the following (they are not referred to in the pleadings
themselves). They read in this way:
Notes on the
completion of Form W447.
1 The intention of this form is to ensure that
buildings leased or purchased satisfy (or can be made to satisfy at a
reasonable cost),
(1) The statutory obligations to which the PSA is
either subject or by which as a policy it abides;
(2) Crown accommodation standards;
(3) User requirements.
2 Experience has shown that anything less than
a thorough inspection and assessment of property is likely to result in
unforeseen expenditure in carrying out remedial work. In cases where
constraints of time do not allow adequate information to be obtained, the
report form should clearly indicate those items not surveyed or which have
received superficial attention. The resulting omissions from the report must be
brought to the Estate Surveyor’s attention.3
Accommodation which fails to comply with the Crown standards or which
cannot economically be brought up to standard should not normally be acquired.
It is alleged
by the plaintiffs that they required the report so as to consider whether they
should acquire the said lease.
If I may
complete the relevant pleadings, there are certain particulars on pp 24, 26 and
27 of the pleadings bundle. On p 24 para (ii), the request is set out in this
way:
Please set
out all material terms of the alleged Contract stating whether implied or
expressed and in either event giving full and proper particulars.
The answer is:
The
plaintiffs refer to their said letter of the 31st January 1975, and their plea
of an implied term, the subject of the request under para 9(iii). The same
constitute the sum of the particulars to which the third defendants are
entitled.
The next one
is:
(iii) State all facts and matters relied on in
support of the alleged implied term (to the extent not admitted by the third
defendants’ defence herein).
And the reply
is:
Business
efficacy and the matters pleaded in para 8 of the statement of claim.
On p 26 at the
bottom appears this request:
As to the
allegation that the building was unsuitable for its purpose stating whether the
third defendants were instructed to advise as to the suitability of the
building giving particulars of such instructions and any advice given.
On p 27, it is
stated:
Not entitled.
Then follows
this request:
Please state
the like particulars in relation to the allegation of failure to advise that
there would be excessive maintenance and remedial work.
The
particulars given are:
Not entitled.
Finally, on
December 6 1984, the plaintiffs served voluntary further particulars in the
following form:
Under para 8
of the knowledge alleged as to the purpose for which the survey report was
required; the plaintiffs will rely in addition to the matters referred to in
the further particulars served on the 7th December 1983, on the following
observation at p 2 of section A of the survey report form W447 (referred to in
those particulars).
And then on p44
under 2 is set out the note to which I have referred above.
A preliminary
question has been ordered by His Honour Judge Smout dated April 3 1985, which I
have to deal with. It is formulated as follows:
Does the
limitation period as far as the Third Defendants are concerned commence to run
as from the date the Plaintiffs became irrevocably committed to leasing the
premises?
The third
defendants’ case put in brief is this: they say that the cause of action was
complete when the plaintiffs acted upon the allegedly negligent survey. This
could not have been later than the end of July 1975. The only duty cast upon
the third defendants (which it is agreed must be in tort and not in contract
since in contract the six years would undoubtedly have expired) was the
ordinary common law duty of a surveyor or a person such as a solicitor in the
circumstances, namely that at the date of the survey there should be in
existence defects or damage which the defendants ought reasonably to have been
able to discover. If that be the duty, then the cause of action would arise at
the date when the plaintiffs acted upon the negligent report or survey
complained of, which would be, in the present case, not later than the end of
July 1975.
There are a
number of cases dealing with this point. They start with Philips v Ward
[1956] 1 WLR 471. The whole position is neatly summarised by Lord Denning MR in
Perry v Sidney Phillips & Son [1982] 1 WLR 1297. I shall read
from the bottom of p 1301 to p 1302. At the bottom of the page the paragraph
begins:
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) 117 SJ 529.
A little
further down the page at D on p 1302, Lord Denning says:
Even if the
claim be laid in tort against the surveyor, the damages should be on the same
basis.
It is conceded
by the plaintiffs that if the instant case is correctly diagnosed as what I may
call a ‘Philips v Ward decision’, the third defendants will
succeed on the preliminary issue.
The
plaintiffs’ submissions were summarised very helpfully by Mr Latham as follows:
1 The duty of care owed by these defendants to
these plaintiffs arises out of the relationship created by the contract. The
contract defines the interests of the plaintiffs which are to be protected or
furthered by the contract and therefore the duty of care arises for the purpose
of protecting whatever interests are thereby identified.
2 On a proper analysis of the contract in the
surrounding circumstances in which it was made, the survey was wholly or in
part to ensure that steps could be taken which would provide a properly
constituted and designed building for the plaintiffs. That interest is an
identical interest to the interest which is protected by the duty of care owed
by designers and builders of the building and that interest in accordance with
the decision in Pirelli is an interest distinct and different from the
interest protected by the Philips v Ward line of cases as stated
by Lord Fraser at p 18 at G in Pirelli; in other words, an interest in
relation to the property itself as distinct from the economic loss.
The mere fact
that one can identify a duty of care directed to protecting the plaintiffs from
economic loss does not prevent the plaintiffs from having a separate cause of
action in relation to the damage to the property itself.
Mr Latham
relied upon the passages in Pirelli in support of his main argument and
submitted that the reasoning in Pirelli governed the present case. These
appear to be on pp 18 and 16 of the report and I shall read them. The passage
on p 18 commences just above G where Lord Fraser says:
Counsel for
the appellants submitted that the fault of his clients in advising on the
design of .the chimney was analogous to that of a solicitor who gives negligent
advice on law, which results in the client suffering damage and a right of action
accruing when the client acts on the advice: see Howell v Young
(1826) 5 B&C 259 and Foster v Outred & Co [1982] 1 WLR
86. It is not necessary for the present purpose to decide whether that
submission is well founded, but as at present advised I do not think it is. It
seems to me that except perhaps where the advice of an architect or consulting
engineer leads to the erection of a building which is so defective as to be
doomed from the start, the cause of action accrues only when the physical damage
occurs to the building.
If I may read
now from p 16 at F, Lord Fraser says:
I think with
all respect to Geoffrey Lane LJ
as he then was
that there
was an element of confusion between damage to the plaintiffs’ body and latent
defect in the foundation of a building. Unless the defect is very gross, it
may never lead to any damage at all to the building. It would be analogous to a
predisposition or natural weakness in the human body which may never develop
into disease or injury. The plaintiffs’ cause of action will not accrue until damage
occurs, which will commonly consist of cracks coming into existence as a result
of the defect even though the cracks or the defect may be undiscovered and
undiscoverable. There may perhaps be cases where the defect is so gross that
the building is doomed from the start, and where the owner’s cause of action
will accrue as soon as it is built, but it seems unlikely that such a defect
would not be discovered within the limitation period. Such cases if they exist
would be exceptional.
Mr Uff
submitted that Pirelli was not relevant to the present case. Pirelli,
he argued, dealt with latent damage whereas the present case was one of patent
damage.
Mr Latham
founded a further argument based on the proposition that the plaintiffs alleged
that there were two sorts of damage here, namely economic loss suffered by them
as having an inferior building, and the physical loss to the building itself
caused by the various defects pleaded. These, he said, were two distinct causes
of action and even if the plaintiffs were met by limitation on the first, they
could still pursue the second. He relied upon Brunsden v Humphrey
(1884) 14 QBD 141 regarding the existence of two causes of action.
Mr Uff
submitted that the main authority on this subject where the claim concerned
damage to property was Conquer v Boot [1928] 2 KB 336: see p 344.
He further submitted that since the case of Junior Books Ltd v Veitchi
Co Ltd [1982] 3 WLR 477, there was no real distinction between economic
loss and physical damage causing monetary loss: see pp 491, 495 and 498. He
contended that the damage in such cases was not the cost of the repairs but the
difference between the price paid and the value as described — the price
including the capitalised rent.
In my
judgment, Mr Uff’s submissions correctly state the law in cases where the duty
is simply that of taking reasonable care to ensure that the damage is reported
to the client. In my opinion, this is such a case. If the damage had not
occurred at the date of the report, the third defendants would not be liable at
all. If it was then in existence and reasonably discoverable, they would have
been liable immediately the plaintiffs committed themselves to the lease.
Pirelli dealt with engineers and by analogy with the architect or the
builders. It laid down the principle that the cause of action in such cases
arose when the damage which gave rise to it, and which actually completed the
cause of action, occurred, even though that damage was not reasonably
discoverable until a later date. Thus, the test was not, as had hitherto been
thought in building cases, discoverability but the actual occurrence of the
damage.
The present
relationship between the plaintiffs and the defendants is, however, in my view,
quite different. The surveyors were employed to find out whether any damage
existed and if they failed to use reasonable care and skill to do so and to
report it to the plaintiffs, they would have been liable as at the date when
the plaintiffs acted upon the report. If the defects in design, which the third
defendants ought to have discovered, existed at all, it seems to me that they
must have existed at the time of the survey for liability to arise. If the
damage occurred subsequently, that is after July of 1975, or if it could not
have been discovered by the exercise of reasonable care and skill, the third
defendants would not be liable, since they would have complied with their duty.
I think that
this governs the position and that accordingly the time for the statute of
limitations to run is from the date when the report was acted upon by the
plaintiffs, that is the end of July 1975.
I would add
that I do not think that one can divide up the causes of action here in the way
suggested by Mr Latham. In my judgment, there was only one cause of action and
that arose when the report was acted upon.
Accordingly, I
would hold that the third defendants succeed on the preliminary issue.
The
plaintiffs were ordered to pay the costs of the preliminary issue to the third
defendants, with liberty to apply including any application in respect of
further costs incurred as from the date of the judgment.
