Structural survey — Alleged breach of duty of care — Construction of exclusion clause — Professional indemnity policy — Surveyors’ report — Trainee surveyor inspecting premises — Report read by supervisor without on-site inspection — Plaintiffs buying house on basis of report — Claim for costs of remedying defects subsequently discovered — Surveyors applying to insurers on indemnity policy — Insurers contending that exclusion clause applicable — That clause specifying survey to be carried out by qualified person or someone nominated by assured “subject always to supervision of such work” — Judge finding for insurers — Whether some attendance on site by qualified person requisite for “supervision” within meaning of policy — Judge holding inspection requisite in absence of exceptional circumstances — Surveyors’ appeal allowed by majority in Court of Appeal
In February 1989, the defendant firm of chartered surveyors submitted a written structural report on 77 Barrowgate Road, Chiswick, London W4. On the strength of the report, according to the plaintiffs, the property was purchased for £500,000 but needed some £105,000 spent on it to remedy defects which a proper survey should have revealed. The defendants gave notice to the third party insurers who had issued a professional indemnity policy in respect of any civil liability arising in the course of professional business. Among the persons named in the policy form was a surveyor, T, who had passed RICS and was completing his final year test of professional competence, with three and a half years of practical experience. The exclusion provision stated that the assured would not be indemnified for claim or loss arising from a survey, inter alia, “by anyone who has not less than 5 years’ experience of such work or such other person nominated by the assured to execute such work subject always to supervision of such work by a person qualified”. The insurers held that there had not been the supervision as specified, whereas the surveyors argued that the report by T had been checked and approved by a qualified surveyor.
The court found in favour of the insurers, the judge holding that some attendance at an on-site inspection was necessary for proper supervision save in exceptional circumstances: see [1991] 2 EGLR 139. The surveyors appealed.
Held The appeal was allowed by a majority (Parker LJ dissenting).
1. The case required the construction of what was meant by “supervision” within the meaning of the exclusion clause of the policy. In its everday meaning “supervision” entailed to “keep an eye on”, which did not entail a continuous watch. A brief attendance by a qualified surveyor on site would have achieved nothing.
2. In the instant case, the policy did not specify that the exclusion clause would apply unless there had been supervision by a qualified person in an on-site inspection — even if only for a short period.
3. It was a matter of degree, in particular, the degree of supervision which a trainee would require, taking into consideration factors such as status, training, and experience. The exclusion clause required a degree of supervision of a trainee which would be regarded in the surveyors’ profession as good practice in the light of the particular trainee’s training and experience.
Simon Goldblatt QC and Colin Edelman (instructed by Davies Arnold Cooper) appeared for the appellant surveyors; Augustus Ullstein QC (instructed by Davies-Lavery, of Maidstone) appeared for the third party insurers.
