Negligence — Claim by house purchasers against chartered surveyors — Mortgage valuation — House found to be out of level — No cracks in structure visible — Defect had been deliberately ‘camouflaged’ — Discussion of differences between mortgage valuation, RICS House Buyers Report and Valuation and full structural survey — Conflict of evidence as to what a reasonably competent surveyor ought reasonably to be expected to detect when carrying out a valuation for mortgage — Held that claim by plaintiff house purchasers failed
question was a modern detached bungalow in a development built by speculative
builders about 1978 — At the date of purchase by the plaintiffs there was in
existence a current certificate issued by the National House-Building Council —
The plaintiffs purchased the bungalow for £49,500, which was the asking price
and was also the defendants’ valuation of the bungalow for mortgage purposes —
The plaintiffs obtained an advance on mortgage of £24,000 to purchase the house
from the Royal Bank of Scotland — The defendant firm of surveyors who made the
valuation for mortgage were chosen by the plaintiffs, not by the bank — The
plaintiffs reimbursed the bank for the cost of the report and were, as usual,
provided with a copy — The plaintiffs did not commission any other survey
before purchasing the bungalow — During visits before moving in they did not
notice anything wrong with the level, but on the day they moved in both
plaintiffs noticed that the floor sloped — The defendants’ report made no mention
of the defect in the level — The report stated that its purpose was to provide
a valuation for mortgage and that it was not a structural survey — It included
a disclaimer of liability — The standard of construction and the condition of
the main structure were reported to be satisfactory; a reference was made to
the need for some repairs to the roof — The defendants’ valuer said in evidence
that he had not detected that the property was out of level; it was not
something for which he would normally have checked unless there was some
visible evidence of movement, such as cracking of the walls — In fact, as was
subsequently agreed, the fall from right to left, looking at the front of the
bungalow, was some 3 1/2 in over a total width of 23 ft 6 in — There were no
signs of subsidence but there was evidence of steps taken to camouflage the
existence of the slope
present trial the decision of the House of Lords in Smith v Eric S Bush and Harris v Wyre Forest
District Council became known, with the result that the defendants conceded
that they owed a duty of care to the plaintiffs and that it would not be fair
or reasonable to rely on the disclaimer — The issues then left for the judge’s
decision were (1) were the defendants negligent in failing to observe and to
report on the undoubted defect in the level of the property; (2) if so, what
loss, if any, did the plaintiffs suffer as a result; and (3) if the plaintiffs
suffered such loss, to what extent was it due to their contributory negligence
in failing to obtain their own survey of the property?
conflict of evidence at the trial — A surveyor and a consultant civil engineer,
called on behalf of the plaintiffs, asserted that they could see as soon as
they arrived at the property that it was out of level; and they expressed the
view that a reasonably competent surveyor should have noticed the slope and
reported on it — Contrary evidence from a surveyor and a consultant architect
was given on behalf of the defendants; and the vendor, the only previous owner
of the property, testified that during the eight years she had lived in the
bungalow with her family she had been completely unaware of any lack of level —
The judge pointed out that it was only the evidence of the surveyors which was
of real value on the issue which he had to decide — Architects and civil
engineers could not speak with authority on what is reasonably to be expected
of an ordinary competent surveyor carrying out a mortgage valuation — The judge
found the defendants’ surveyor the more convincing of the two — In the course
of the evidence reference was made to the three possible types of survey which
a potential purchaser might commission, namely, an ordinary mortgage valuation
inspection (such as the defendants were instructed to carry out), the RICS
House Buyers Report and Valuation, and a full structural survey — The precise
differences between the three were not, however, discussed in depth
defendants’ duty in the present case, expressed shortly, was to look with the
practised eyes of a reasonably competent surveyor for obvious defects that
would significantly affect the valuation of the property — This summed up the
views expressed by Lord Templeman in the Bush and Harris cases, where he
approved the more detailed description of the valuer’s duties given by Ian
Kennedy J in Roberts v J Hampson & Co — The specific question in the present case was
whether the plaintiffs had proved that the ordinary reasonably competent
surveyor would and should have detected the lack of level — In deciding that
the answer was ‘no’ the judge was influenced inter alia by the following
factors: the unusual nature of such a fault in construction; the absence of
movement cracks; the difficulty of detecting slope in a small furnished
property; the deliberate camouflage of the defect at some time; the fact that
the male plaintiff, an experienced joiner, had failed at first to notice the
defect; and the fact that the previous owner had lived happily for eight years
without noticing that the bungalow was not level — Incidentally, the judge was
satisfied that the inspection for a mortgage valuation would not normally
involve the use of a spirit-level unless the slope was evident on a visual
inspection so as to call for further investigation — As the defendants had been
found not to be negligent, the question of contributory negligence by the
plaintiffs did not arise, but in any case the judge would not have found the
plaintiffs to be negligent by failing to commission an independent survey
before purchasing the property — Plaintiffs’ claim failed
of damages also did not arise, but the judge expressed the view that if he had
found for the plaintiffs he would have rejected their claim for £32,700, as the
difference between the purchase price of £49,950 and the alleged value of the
property in its defective condition, namely, £17,250 — There were claims also
for inconvenience and certain expenses — The judge would have substituted not
more than £2,000 for the difference in value and £1,000 for inconvenience and
distress, £3,000 in all.
The following
cases are referred to in this report.
Investors
in Industry Commercial Properties Ltd v South
Bedfordshire District Council [1986] 1 QB 1034; [1986] 2 WLR 937; [1986] 1
All ER 787; [1986] 1 EGLR 252, CA
Perry v Sidney Phillips & Son [1982] 1 WLR 1297; [1982] 3 All
ER 705; [1982] EGD 412; (1982) 263 EG 888, [1982] 2 EGLR 135, CA
Roberts v J Hampson & Co [1989] 2 All ER 504; [1988] 2 EGLR 181;
[1988] 37 EG 110
Smith v Eric S Bush (a firm); Harris v Wyre Forest District
Council [1989] 2 WLR 790; [1989] 2 All ER 514; [1989] 1 EGLR 169; [1989] 17
EG 68 & 18 EG 99, HL
This was an
action by Mr and Mrs Whalley, plaintiffs, for damages for alleged negligence by
the defendants, Messrs Roberts & Roberts, chartered surveyors, of
Manchester, in relation to a valuation for mortgage of a bungalow at 12 Hanley
Close, Disley, Cheshire.
Philip Raynor
(instructed by J F Fielding & Co, of Cheadle Hulme) appeared on behalf of
the plaintiffs; Raymond Machell QC (instructed by James Chapman & Co, of
Manchester) represented the defendants.
Giving
judgment, AULD J said: In June 1986 the plaintiffs, Mr and Mrs Whalley,
were minded to buy for £49,950 a bungalow at 12 Hanley Close, Disley, Cheshire.
They applied to the Royal Bank of Scotland, which I shall call ‘the bank’, for
a mortgage advance of £24,000 for the purchase. The bank instructed the
defendants, a firm of chartered surveyors, estate agents and valuers, to
inspect the property and to provide them with a valuation report. When the bank
did so it was on the basis that the plaintiffs would reimburse it for the cost
of the report, and it was understood by all concerned that the plaintiffs would
be provided with a copy. The plaintiffs did not commission any report of their
own.
The defendants
duly inspected the property and provided the bank with a brief report on the
nature and condition of the property, valuing it at £49,950, the very figure
that the plaintiffs were prepared to pay for it. A copy of the report was
provided to the plaintiffs. It contained the following notice and disclaimer:
The contents
of this form completed by the valuer on the instructions of the bank will be
made available to the prospective purchasers of the property concerned. No
liability howsoever arising will be accepted in respect thereof.
In February
1987 the plaintiffs agreed to buy the property, and in March 1987 moved in. On
the day that they moved in both plaintiffs noticed that the floor sloped.
Subsequent inspection showed that it had been built out of level and had a
general fall from one side of the bungalow to the other of about 3 in to 4 in.
The defendants’ valuation report to the bank had made no mention of this lack
of level. The plaintiffs now claim damages in negligence against the
defendants, alleging that the defendants owed them a duty of care when
inspecting and reporting on the property for the bank and that they failed in
that duty of care in failing to observe and to report on the lack of level. As
a result, the plaintiffs claim that they have suffered damage in that they
relied upon the defendants’ valuation and bought the bungalow for £49,950 when
its true value was lower.
The defendants
by their defence, and at the beginning of the hearing of the action, did not
admit that they owed any duty of care to the plaintiffs or that the plaintiffs
relied upon their report. They denied that the lack of level in the property
was a defect which they should have observed or reported upon in the cursory
report required of them by the bank for valuation purposes, and they denied
negligence. In the alternative, they relied upon the disclaimer of liability
notice in their report. As to damages, they contended that the lack of level in
the property does not affect its value. The defendants also allege contributory
negligence against the plaintiffs for failing to commission their own survey
and report on the property.
On April 20
1989, during the course of the hearing, the House of Lords gave its ruling in
the two cases of Smith v Eric S Bush and Harris v Wyre
Forest District Council [1989] 2 WLR 790.*
The effect of that ruling in cases such as this is in summary as
follows.
*Editor’s
note: Also reported at [1989] 1 EGLR 169.
First, a valuer
instructed by a building society, bank or other proposed mortgagee, to value a
house, who knows that its valuation will probably be relied upon by the
prospective purchaser and mortgagor of the house, owes to the purchaser a duty
in tort to exercise reasonable skill and care in carrying out the valuation.
Second, a
disclaimer of liability by or on behalf of the valuer is a notice which
purports to exclude liability for negligence within the Unfair Contract Terms
Act 1977 and is, therefore, ineffective unless it satisfies the requirements of
reasonableness.
Third, in the
absence of special circumstances, it is not fair or reasonable for the valuer
to rely upon the disclaimer notice.
In the light
of those rulings, counsel for the defendants conceded on their behalf, first,
that they had a duty of care to Mr and Mrs Whalley in their inspection of 12
Hanley Close and in reporting on it to the bank; second, that on the assumption
that the disclaimer was valid at common law, it would not be fair or reasonable
for the defendants to rely upon it.
The issues
left for me are, therefore: first, were the defendants negligent in failing to
observe and to report upon the undoubted lack of level in the property? Second, if so, (a) what, if any, loss have
the plaintiffs suffered as a result and (b) whether and to what extent the
plaintiffs have contributed to that loss by their negligence in failing to
obtain their own survey of the property?
12 Hanley
Close is a modern detached bungalow set in a development of similar buildings
close to the centre of Disley village and near open countryside. It, and the
development of which it formed part, was built by a speculative builder in
about 1978. The property had the benefit of a National House-Building Council
certificate valid for 10 years and, therefore, still in force in 1987 when Mr
and Mrs Whalley bought it.
The bungalow’s
first and only owners during the eight years before that were Mr and Mrs
Templeton. By 1986 Mr Templeton had died and Mrs Templeton had put the house on
the market. As I shall mention in a little more detail later in this judgment,
during the eight years that Mrs Templeton lived in the house before selling it
to the plaintiffs she was never aware of any lack of level in the structure.
Mr Whalley is
a joiner of over 20 years’ standing and has, over that time, worked in the
building trade, mainly on small extensions. Mrs Whalley is a laboratory
technician. When they first saw 12 Hanley Close for sale in May 1986 they were
looking for a family home for themselves and their young daughter. Their
intention was to buy a house, live in it and improve it, for about five years,
and then sell with
obtained particulars from the estate agents offering it for sale. Those
particulars gave the asking price as £49,950 and mentioned that it had been
built eight years before by a local builder.
Mr and Mrs
Whalley inspected the property inside and out. Their evidence on this and the
other factors surrounding their purchase of the property is not in dispute. On
that evidence they spent 10 to 15 minutes looking round the inside of the
bungalow. They did that in the presence of Mrs Templeton, who was still living
there. Neither of the plaintiffs noticed any sign of lack of level. Apart from
one or two minor matters the building seemed to them to be in good condition.
They liked what they saw and decided to make an offer to buy at the asking
price and to apply for a mortgage loan of £24,000 towards that price from the
bank.
Mr Whalley
went to the Piccadilly branch of the bank in Manchester. There he saw the
senior assistant manager, Mr J L Mitchell. Mr Mitchell told him that before the
bank could make any mortgage advance it would have to have a valuation report
from a surveyor instructed by it and for which Mr and Mrs Whalley would be
required to pay. He advised Mr Whalley to find a surveyor of his own choice
rather than rely upon one chosen by the bank.
Mr Whalley
found the defendants in the Yellow Pages. He telephoned them and spoke
to someone — it may have been Mr S D Merry [ARICS] — in their survey
department. He said that he wanted 12 Hanley Close surveyed, told him that it
had the benefit of an NHBC certificate, and asked him what sort of surveys they
undertook. According to Mr Whalley, the defendants’ representative replied that
they could provide a full structural survey report or just a survey report. Mr
Whalley said that no mention was made of the intermediate type of report, the
RICS House Buyers Report and Valuation inspection.
Mr Whalley
asked the defendants’ representative to explain the difference between the two
surveys. He says that the reply was that a full structural survey report was a
detailed statement, room by room, of the property’s features and of any defects
found, and that the cost of it would be in hundreds of pounds. As to an
ordinary survey report, he said that the defendants’ representative explained
that the survey work was basically the same as for the full structural survey report
but that the report was briefer and the cost would be about £68.
Mr Whalley
chose the latter, having regard to the newness of the property, the NHBC
certificate and the costs, and notified the bank so that it could instruct the
defendants accordingly.
Mr Merry who,
as I have said, may have been the man to whom Mr Whalley spoke, gave evidence
for the defendants. He is a surveyor who was employed by them until July 1987.
He said that he had no recollection of a telephone conversation with Mr Whalley
but did not deny that it had taken place. He said that the practice of the
defendants was to fill in a form indicating the type of report requested and
that the form in evidence in this case showed that the defendants had
understood the request to be for a bank valuation report only. He said that Mr
Whalley would have been told that there were two other types of report
provided, namely, the full structural survey report and the RICS House Buyers
Report and Valuation inspection. He also said that Mr Whalley would have been
advised to obtain from the defendants one or other of those types of report in
addition to relying on the copy of the valuation report to be provided to the
bank. However, as I have inferentially indicated, Mr Whalley has no
recollection of being given any such advice by the person in the defendants’
firm to whom he spoke.
The bank duly
instructed the defendants to carry out the inspection by sending them its
standard valuers’ report form to complete. On the first page of that form were
printed the following words:
This
inspection is to provide a valuation and general guide as to the condition of
the dwelling and is not a structural survey but an examination of those matters
expressly set out in this report with comments.
On the second
page of the form the defendants were required to set out all the relevant
information derived from their inspection as to description of the property,
accommodation, rights-of-way and easements, services, construction, condition
and age. Clearly, the information that the defendants were to provide as to
condition was intended to be of the briefest. Further information as to
situation, rating, planning, status etc was to be provided on the third page.
On the last
and fourth page appeared the crucial entry for completion:
Valuation: We
are of the opinion that the current open market value for mortgage purposes is
. . .
and then the
form left in blank the figure to be inserted. Immediately below that the
printed form continued:
The Royal
Institution of Chartered Surveyors define market value as assuming (a) a
willing seller; (b) a reasonable period within which to negotiate the sale
taking into account the nature of the property and the state of the market; (c)
values will remain static throughout the period; (d) the property will be
freely exposed to the market; (e) no account is to be taken of any additional
bid by a special purchaser.
After an entry
allowing provision to be made for essential repairs there was the following
legend, followed by a space:
Comments: The
purpose of the valuation is for mortgage security. This may necessitate special
comments being made which are left to the valuer’s discretion but must include
anything which would reasonably affect value or marketability.
The printed
form concluded with the following notification and disclaimer to which I have
already referred:
The contents
of this form completed by the valuer on the instructions of the bank will be
made available to the prospective purchasers of the property concerned. No
liability howsoever arising will be accepted in respect thereof.
As I have
indicated, there is now no issue between the parties as to the existence of the
duty of care owed by the defendants to the plaintiffs, and no reliance is
placed by the defendants on the disclaimer; so nothing turns on this final
note.
The inspection
was carried out by Mr N D Bailey [ARICS], a young chartered surveyor employed
by the defendants. He and his fellow employee, Mr Merry, described in evidence
the mortgage valuation inspection which the bank had instructed as the briefest
of the three main types of survey which the defendants undertook. They said
that the primary purpose of such a report was to ensure that the property would
be an adequate security for the advance sought and, as part of that purpose, to
identify any major structural defects: such an inspection of the property
normally took only about half an hour and the charge for that inspection and
completion of the report form was about £56 plus valued added tax.
They said that
the other two types of survey were those for the House Buyers Report and
Valuation inspection report prescribed by the Royal Institution of Chartered
Surveyors, where the survey normally took one and a half hours to two hours and
cost about £125 plus value added tax, and a full structural report, where the
survey could take three to four hours and cost £250 plus valued added tax.
Those three
categories of survey and report appear from Mr Bailey’s and other evidence in
the case to have been broadly typical in time spent, thoroughness of survey,
nature of report and costs to those generally provided by chartered surveyors
and valuers.
From the
defendants’ record of receipt of instructions and from the completed report
form it appears that Mr Bailey inspected the property on June 15 1986. In his
evidence he said that he could not remember the inspection because it was one
of many that he had carried out. Such inspections were a regular part of his
work and he did about six of them a day on average. It was the type of
inspection for which he would not normally have used or required a spirit
level. It would have taken him about half an hour and he would have been
looking for signs of settlement in the form of external or internal cracks and
for dampness and rot. He added that on such an inspection he would not normally
have moved furniture or lifted carpets unless he was particularly alerted to
some defect calling for such disturbance.
He said that
having completed the inspection he would have recorded what he had found on the
bank’s report form provided to him and that the report signed by him which is
in evidence is that report. It is common ground that it makes no mention of the
property being out of level. He has answered questions on it as to standard of
construction and condition of the main structure as ‘satisfactory’, and he has
made certain suggestions about the need for repairs to the roof. His assessment
of marketability of the property was that there was then and would be a ready
demand for it. His valuation of its current open market value for mortgage
purposes was the asking price of £49,950.
Under the
heading ‘Comments’ at the end of the form he wrote:
A detached
bungalow of traditional construction having been built six years ago by
Maunders, members of the NHBC. The property is equipped throughout with average
quality modern style fittings.
The overall
condition was found to be satisfactory other than for the two minor items which
related to the roof. He continued:
We have not
inspected the roof space area or those parts of the property covered, unexposed
or inaccessible nor have we tested services within the property.
Mr Bailey said
in evidence that he had not detected on that inspection that the property was
out of level. He says that it would not have been something he would normally
have checked for unless there were present the normal indicators of movement of
the structure, mainly cracking of the walls. As his report indicates, there was
no such cracking here. He added in cross-examination that if he had detected
the lack of level he would have mentioned it in his report as something capable
of adversely affecting the property’s value and marketability.
The report was
completed by and signed on behalf of the defendants on June 18 1986 and returned
to the bank. The bank acknowledged it on the following day, enclosing a cheque
for £64.40, being the defendants’ fee of £56 plus VAT. The bank later recovered
that expense from Mr and Mrs Whalley. The bank sent a copy of the report to
them with an offer of a mortgage loan of £24,000. Before receiving a copy of
the report Mr Whalley had made a second visit with his daughter to inspect the
property. After receiving the copy report Mr Whalley made a third visit to have
a final look and to check on site the contents of the report. On neither of
those visits did he detect that the property was out of level.
Both Mr and
Mrs Whalley have given evidence, and I accept what they say, that they were
reassured by the defendants’ report and that in reliance upon it, the fact that
the building was covered by an NHBC certificate and their own assessment they
decided to go ahead with the purchase at the asking price. They have also said,
and I accept that this is a view which they now honestly hold, that if they had
known then that the property was out of level as it is they would not have
purchased it at any price.
Some nine
months later, on March 6 1987, Mr and Mrs Whalley moved in. Within half an hour
of their arrival, and as they were moving their furniture in, Mrs Whalley
noticed that the floor sloped downwards. She felt the slope as she walked from
one side of the house to the other. Mr Whalley did not notice it at that stage
but became aware of it some time later in the afternoon when he had to pick up
from the floor one end of a large chest of drawers. He also noticed in the
course of that evening that some furniture was leaning to one side and that the
top of some internal doors, although parallel to the ceiling, were also leaning
in the same direction as the furniture. He later checked with a spirit-level in
the loft and confirmed what he had begun to suspect, namely, that the wall
plates and brickwork were out of level. Mr Whalley immediately contacted the
defendants and told them what he had discovered.
On March 20
1987 Mr Bailey returned to check Mr Whalley’s complaint. He found, and
confirmed in a written report to Mr Whalley of March 31 1987, that the property
was out of level in that there was a fall from right to left, looking at the
front of the bungalow, of about 2 1/2 in. In fact, as is now agreed, the fall
is a bit more than that, some 3 1/2 in, a brick’s depth over a total width of
23 ft 6 in of the building. Mr Bailey found, as is also now agreed, no signs of
subsidence or of structural instability, simply that the building had been
constructed out of level.
He also found
that it had been finished in such a way as to camouflage that fact. For
example, door frames and internal joinery had been squared up to the slope, and
window frames had been levelled up by differential packing of the undersides of
their sills and by cutting individual bricks to different depths. In addition,
the front garden of the bungalow had been landscaped so as to follow the slope
of the building. Mr Bailey concluded his report by suggesting that Mr and Mrs
Whalley should get in touch with the builders.
Mr and Mrs
Whalley contacted the builders, but received no satisfaction from them. They
then consulted solicitors and, through them, instructed an independent firm of
estate agents and chartered surveyors, F W Allen & Son, to inspect their
home. The plaintiffs’ solicitors did not tell F W Allen & Son what the
problem was and instructed them to simulate a mortgage valuation of the
property for a bank. The member of F W Allen & Son who undertook this
commission was Mr Richard Dyson [ARICS]. He had been with the firm for some six
to seven years, having carried out valuations for them for five to six years
but having qualified as a chartered surveyor only two years before. Despite his
recent qualification he appears to have had considerable experience of
inspections for mortgage valuation, doing, he said, about 300 a year.
Mr Dyson
inspected the property in July 1987. He said, true to his instructions, that he
had no idea what, if any, fault he would find when he arrived. He said in
evidence that, without any prompting from Mr and Mrs Whalley, he became aware
of the slope as soon as he crossed the threshold of the front door. He said
that he could feel the lack of level after he had walked only 3 ft to 4 ft into
the entrance hall. He said that he had also had a feeling that the ceiling on
the far side of the entrance hall was lower than that of the front door. He
said that he then checked and confirmed the lack of level he had observed, room
by room, with a spirit-level. His findings and measurements were later
confirmed by him in a report in which he described the sloping with certain
measurements which were later remeasured more precisely and are not in dispute.
Ignoring for the moment the value judgments that he made, this is the
description that he gave in his written report to the plaintiffs’ solicitors of
July 24 1987 of his inspection:
The floor
slopes by approximately half an inch in three feet. The double doors between
the lounge and entrance hall and the door frames are not square. There is a
marked fall in the dining room floor down to the left hand side. The door
between the dining room and the kitchen is not square such that the left hand
side of the door head is half an inch below the right hand side of the door
head. In consequence of the dining room floor not being level there is a wedge
of daylight under the door with the widest gap being under the left hand side
of the door. In the inner hallway the floor was found to slope by approximately
half an inch in three feet. An examination of bedrooms one and two revealed
distortions with a fall on the floor in bedroom two being measured to
approximately quarter of an inch in three foot down to the left hand side. The
floor in bedroom three also appears to be sloping down to the left hand side.
On examining
the exterior of the property there is a significant misalignment of horizontal
bed mortar joints to the front elevation wall with an estimated slope of half
an inch in three feet down to the left hand side. Falls of bed mortar joints to
the brickwork to the left hand elevation wall were noticed towards the rear of
the property with a slope of one eighth of an inch in three feet being
determined down to the rear left hand quoin. The vertical alignment of the
right hand elevation wall is not perfectly plumb and there is an appearance of
a fall of bed mortar joints down to the rear.
An inspection
of the horizontal alignment of bed mortar joints to the rear elevation reveals
a fall down to the rear left hand quoin of the bungalow . . .
As I have
indicated, Mr Dyson claims that, immediately on entering the property, he
identified the existence of the slope by the feel on his feet and what he could
see. He said that, in his opinion, the extent and gradient of the slope were
such that a reasonably competent surveyor, carrying out a mortgage valuation
survey of the sort instructed by the bank in this case, should have observed
it, reported upon it and recommended that it be investigated further. He
agreed, however, that he had never before inspected a house out of level which
did not also have accompanying signs of distress in the form of cracking or
differential settlement.
The bungalow
was also inspected on behalf of the plaintiffs by Mr G F Shaw, a consultant
civil engineer of some 18 years’ standing. He first visited the property to
make a survey of the levels in August 1987. He said in evidence that he had
been told of the problem before his visit. Like Mr Dyson, he said that as soon
as he arrived he saw that the property was out of level. He saw that the brick
courses in the front of the house sloped down to the left. He said that as soon
as he went inside he saw and felt the slope.
He prepared a
report detailing the lack of levels throughout the building and identifying the
cause as one of faulty construction, thus confirming the factual findings of Mr
Dyson. He described the lack of level as ‘substantial’ and as ‘fairly gross’
and said that the degree of sloping was well over the normal building
tolerances to be found in the British Standards. He agreed in evidence that the
builders had taken steps to camouflage their faulty workmanship in the ways to
which I have already referred. He, like Mr Dyson, had never before encountered
a property out of level like this which did not also have signs of subsidence,
that is, cracking and/or differential settlement.
Mr Shaw, in
cross-examination, gave as his opinion that a surveyor should have noticed the
slope as he did and without the assistance of a spirit-level. However, I have
to remember that he speaks with the training and experience of a civil engineer
and, in this case, one who was alerted to the problem before his visit. It would
be wrong to rely upon him as an expert witness as to what a reasonably
competent chartered surveyor doing an inspection for a bank mortgage valuation
should or should not have seen when not alerted to the problem and where the
defect had been camouflaged by the builders.
Mr and Mrs
Whalley said in evidence that the discovery of the lack of level in the house
ruined their enjoyment of the bungalow as a whole from the day that they moved
in. Both said that as they move about the house they feel as if they are
walking up and down a hill, as if on a ramp. They said that they are conscious
of it all the time. Mrs Whalley said that her rolling pin tends to roll off the
work surface in the kitchen and that when she uses her Hoover she is conscious
of pushing it up and down hill. Mr Whalley says that he has not decorated the
bungalow because he has not the heart to do so, adding that he could not use
patterned wallpaper because it would only highlight a sloping ceiling. As to
their plans for improving the bungalow by extending it, Mr Whalley says that
they have had to abandon them because such an extension would either have to be
built out of level or eccentrically to the present building.
So much for
the evidence of the plaintiffs and that of their witnesses on this issue.
What about the
evidence called on behalf of the defendants?
I have already mentioned Mrs Templeton, the only previous owner of the
property. She gave evidence that in the eight years that she lived there with
her family she had never noticed any lack of level. She and her husband had
bought it from the builder in 1978 with the assistance of a mortgage loan from
the Halifax Building Society. No doubt that society had the benefit of a survey
at the time. She sat in court throughout the evidence of Mr and Mrs Whalley and
their witnesses and said, when she came to give evidence, that it had sounded
to her as if they were talking about a different house. She said that she had
never had to wedge any furniture, that she had had no problems with anything
rolling off the work surface or furniture, and that she had never had any
sensation of the house being on a slope.
Mr H M
Fairhurst, an independent consultant architect, of 40 years’ experience, gave
evidence for the defendants. He had prepared a written report, which he
confirmed in the witness box. He agreed the measurements of Mr Shaw of the
discrepancies in floor levels and that they were well outside normal
tolerances. He described the lack of level as ‘A slightly unusual defect for a
relatively new building’. He said, however, that, when making his inspection,
he was not aware at first of the defect. He said that it became evident to him
only after he had tested with a spirit-level. He emphasised the difficulty of
detecting the lack of level by sight or feel when, as in the case of Mr
Bailey’s inspection, the house was furnished and carpeted and when, as here,
the defect had been camouflaged by the builder. Mr Fairhurst was particularly
struck with the camouflage provided by the sloping ceiling, which was more or
less parallel to the sloping floor. As he put it, ‘Points of reference had been
moved’.
His view,
albeit speaking as an architect and not as a chartered surveyor, was that a
surveyor or architect even if carrying out a structural survey would have been
lucky to identify on a single visit the extent of the problem. For what it is
worth, he went on to agree in cross-examination that any reasonably competent
architect or surveyor inspecting the house ought to have been able to detect
that it was out of level. However, in so agreeing, he clearly had in mind a
more thorough inspection than that of the type commissioned by the bank in this
case. Like Mr Shaw, he cannot speak with authority on the duties or standards
of a profession outside his own.
The defendants
also called Mr R A Greenham [FRICS], a chartered surveyor and valuer of 21
years’ standing, to give evidence on their behalf. He had prepared a written
report which he confirmed in evidence. In it he stated that he had inspected
the property as he would have done for the purpose of preparing a mortgage
valuation. He said that had he not known in advance of the defect he would not
have noticed the sloping of the brickwork outside in relation to the window
sills and frames. As to the inside, he said that it would have been practically
impossible to appreciate the lack of level room by room, save for the open-plan
sitting-room and dining-room at the front, where it could be seen if one was
specifically looking for it. In summary, he said that a reasonably competent
surveyor undertaking the sort of report commissioned here could not reasonably
have been expected to note the defect. In his view, Mr Bailey would have been
lucky if he had done so.
In the light
of the evidence on both sides that I have summarised I turn to the first
question, namely, whether the plaintiffs have established negligence against
the defendants. As I have indicated, it has been conceded that the defendants
owed a duty of care to the plaintiffs in the survey carried out and in the
report on it prepared by Mr Bailey. However, it is not conceded by the
defendants that they had any higher duty of care than that appropriate to a
brief inspection by a chartered surveyor primarily concerned with the adequacy
of the property as a security and looking for obvious and serious defects that
might affect his judgment of its adequacy.
The defendants
were not instructed to undertake a structural survey or a survey of the detail
called for in the standard form of the Royal Institution of Chartered Surveyors
House Buyers’ Report and Valuation inspection. They were instructed to inspect
and to provide a mortgage valuation report. It is common ground that this
involved them in making a brief and reasonably careful visual inspection to
enable them, in the terms of the bank report form, to provide a valuation and
general guide as to the condition of the property. I am satisfied on the
evidence before me that this would not normally involve the use of a
spirit-level unless the lack of level in the property became evident on a
visual inspection so as to call for further investigation.
The
defendants’ duty, in short, was to look with the practised eyes of a reasonably
competent surveyor for obvious defects that would significantly affect their
valuation of the property. That duty of the defendants, as I have summarised
it, corresponds with the understanding of their expert witness, Mr Greenham, as
expressed in his report and in his evidence. It also corresponds with the
following passage in the speech of Lord Templeman in Smith v Eric S
Bush and Harris v Wyre Forest District Council [1989] 2 WLR
790 at pp 802 to 803, approving as of general application the description of
Ian Kennedy J in Roberts v J Hampson & Co [1988] 2 EGLR 181
at p 185:
The valuer is
and, in my opinion, must be a professional person, typically a chartered
surveyor in general practice, who by training and experience and exercising
reasonable skill and care, will recognise defects and be able to assess value.
The valuer will value the house after taking into consideration major defects
which are, or ought to be, obvious to him, in the course of a visual inspection
of so much of the exterior and interior of the house as may be accessible to
him without undue difficulty. This appears to be the position as agreed between
experts in decided cases which have been discussed in the course of the present
appeal. In Roberts v J Hampson & Co [1988] 2 EGLR 181, Ian
Kennedy J, after hearing expert evidence, came to the following conclusions
concerning a valuation commissioned by the Halifax Building Society. I have no
doubt the case is of general application. The judge referred to the Halifax
Building Society valuation, as described in the literature and as described by
expert evidence, and said at p 185:
‘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 which he must accept. His duty to take reasonable care in providing a
valuation remains the root of his obligation. In an extreme case . . . 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 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.’
The following
passages from the speech of Lord Griffiths, at pp 807 and 810, are also of
assistance:
The
inspection carried out is a visual one designed to reveal any obvious defects
in the property which must be taken into account when comparing the value of
the property with other similar properties in the neighbourhood . . . It is
only defects which are observable by a careful visual examination that have to
be taken into account . . .
The central
question for me is whether the defendants, through the failure of Mr Bailey to
spot the lack of level in 12 Hanley Close, are in breach of their duty of care
to the plaintiffs. More specifically, the question is whether the plaintiffs
have proved that any ordinarily competent surveyor would and should have
detected the lack of level. It is common ground that if the lack of level had
been observed by Mr
was capable of affecting the property’s value or marketability. It is also
common ground that the lack of level was well outside the normal building
tolerances — up to eight or nine times — and thus represented bad workmanship.
Both Mr and
Mrs Whalley, though they had not previously noticed the slope when they viewed
before purchasing, noticed it on the day they moved in. Mrs Whalley felt it as
she walked through from the living room to the dining room. Mr Whalley noticed
it later as he sat down and saw that a particularly large piece of furniture
that he had just installed in the living room was leaning to one side and that
the top of some double doors next to it was also leaning, yet parallel to the
ceiling. Of course, when they had previously visited the property it had been
full of Mrs Templeton’s furniture and belongings, just as it was when Mr Bailey
inspected it. No doubt, when the house was empty it enabled Mr and Mrs Whalley
when moving in to move about it in such a way and to have uncluttered sight
lines that enabled more ready observation of the lack of level than had been
available to Mr Bailey in his short inspection.
As against
those factors suggestive of liability there are contrary indicators.
First, it appears
to be most unusual for a building to be constructed out of level in this way.
None of the expert witnesses in the case had had experience of such a case and,
therefore, it is said that it could not reasonably be expected to have been in
the forefront of the mind of an ordinarily competent surveyor doing this sort
of inspection.
Second, lack
of level in a building is normally associated with, and first indicated by,
movement cracks in the structure. There were no such signs of distress here to
put Mr Bailey on alert.
Third, the
detection of the slope by sight or feel in a small furnished property such as
this is not easy. The building is divided into small rooms and the furniture in
them obstructs sight lines and prevents anyone walking more than a few steps in
a straight line. It is true that the whole of the front of the bungalow was
taken up with an inter-connected dining room and living room, but both were
furnished in such a way as to inhibit walking in a straight line from one side
of the bungalow to the other.
Fourth, the
fact that the building had been constructed out of level had been masked or
camouflaged externally and internally in the manner that I have mentioned.
Fifth, the
first plaintiff, Mr Whalley, being an experienced joiner and thus someone who
might be expected to be more sensitive to levels than many, had failed to
notice the slope in the property on the three occasions that he visited it
before agreeing to buy it.
Sixth, Mrs
Templeton, the previous owner, had lived there for some eight years without
having become aware of any slope.
In my view,
those factors when taken together are all powerful indicators against the
finding of breach by the defendants of their duty of care to the plaintiffs.
There remains the evidence of the expert evidence called on each side. The
plaintiffs relied upon Mr Dyson, a chartered surveyor, and Mr Shaw, a civil
engineer. The defendants relied upon Mr Greenham, a chartered surveyor, and Mr
Fairhurst, an architect. In my view, it is only the evidence of the surveyors,
Mr Dyson and Mr Greenham, that may be of value on this issue. Mr Shaw and Mr
Fairhurst, however competent they may be in their respective professions,
cannot speak with authority on what is to be expected of the ordinarily
competent surveyor: see Investors in Industry Ltd v South
Bedfordshire District Council [1986] 1 All ER 787, per Slade LJ at
pp 808 to 809*.
*Editor’s
note: [1986] 1 EGLR 252 at p 260.
As to the
evidence of Mr Dyson, I have to say, and I do so with some reluctance, that I
view with scepticism his claim that he saw and felt the property to be out of
level as soon as he crossed the threshold and that Mr Bailey should have become
aware of it on his inspection. I say that, not only because of the six
indicators against liability to which I have just referred, but because of the
turn which the case took on Mr Dyson’s evidence as to the alleged effect of the
slope on the value of the property. I shall deal with that aspect of the case
shortly. It is enough for me to note for the moment that Mr Dyson’s original
evidence as to the alleged diminution in value was, to use a neutral term,
remarkable, and that the plaintiffs have now abandoned any reliance upon his
valuation or his approach to the calculation of it.
As against the
evidence of Mr Dyson, I have the testimony of the much more experienced Mr
Greenham. I say straight away that I found him the more convincing witness. I
accept his explanation of the difficulties for the surveyor making a short
mortgage valuation inspection of identifying lack of level in a small and
furnished house, especially with that fault being so comprehensively
camouflaged. I also accept his evidence that, even though he had been
forewarned of the problem before his visit, he did not find it easy to detect
the lack of level. As I have already mentioned, his view was that Mr Bailey
would have been lucky to have discovered it.
On what he has
said and on the evidence and indicators to which I have referred, I cannot find
that the defendants, through Mr Bailey, ought reasonably to have detected the
lack of level when undertaking the mortgage valuation inspection of 12 Hanley
Close. Accordingly, the plaintiffs’ claim must fail.
I should add
that if I had taken a different view and found the defendants to be in breach
of their duty of care to the plaintiffs I would not have found the plaintiffs
to have been contributorily negligent in failing to commission a more thorough
report for themselves before purchasing the property. Putting the plaintiffs’
case at the lowest in this respect, such evidence as there is suggests that
they were not fully aware of the different types of survey and report that were
available to them or of the precise shortcomings of the mortgage valuation
report when considered with the other more detailed surveys and reports on
offer. Nor, in my view, do the warnings on the bank valuer’s report form or the
fact that many purchasers do, in fact, commission their own survey justify a
finding of contributory negligence against them in this case.
It may also be
helpful to the parties for me to record my view on the evidence as to the
alleged diminution in value caused by the discovery that the property was out
of level. The plaintiffs’ claim as pleaded by way of amendment to the statement
of claim was for damages of £32,700, being the alleged difference between the
purchase price of £49,950 and the alleged value to them in its sloping
condition, namely, £17,250. They averred that they intended to demolish it and
to rebuild it. So, presumably, the £32,700 bore some relation to the costs of
rebuilding on the site. In addition, they claimed damages for inconvenience,
removal and hotel expenses while the rebuilding took place. The plaintiffs were
thus alleging that the slope which Mrs Templeton had never even noticed in her
eight years in the bungalow had reduced its value by about two-thirds.
The sum
claimed by the plaintiffs was clearly based on figures that eventually appeared
in a report of Mr Dyson dated November 2 1988 and to which he tried to adhere
in evidence. In that report he gave as his opinion that no purchaser, if aware
of the defects at the time of the plaintiffs’ purchase, would have proceeded
without the defect having been remedied, that is, by demolition to lower-ground
level and rebuilding. After estimating demolition and rebuilding costs of
£56,000, and allowing for the salvage of some materials, he fixed upon a value
of some £17,250 for the bungalow as it stands. He claimed to have reached that
value on the basis that no building society or bank would be prepared to loan
money for the purchase of such a property on normal mortgage terms and thus
that the market and hence the price would be dramatically reduced.
As to the
precise figure of £17,250, he claimed to have reached it by several different
approaches: first, by way of site value plus the sale of salvageable materials;
second, by way of rental value; and, third, from his experience of what
builders would pay for this type of proposition.
Cross-examination
of Mr Dyson revealed a basic arithmetical mistake in one of his calculations
producing the precise figure of £17,250 and flaws in his approach as a whole.
There was also the fundamental difficulty in his evidence in that he, as a
surveyor, was not competent to give evidence upon the likely approach of a
building society or bank to an application for a mortgage in respect of the
property.
It is not an
exaggeration to say that Mr Dyson’s evidence as to the alleged diminution in
value had been destroyed by the time he stepped down from the witness box, so
much so that Mr Raynor, counsel for the plaintiffs, was constrained to concede
during the closing address of Mr Machell, counsel for the defendants, that he
could not rely upon Mr Dyson’s valuation or upon his approach to it. Mr Raynor
also acknowledged in terms that Mr Dyson was not competent to express an
opinion as to the likely attitude of a building society or bank to the property
and that the plaintiffs could not, therefore, rely on the proposition that the
property was not mortgageable.
Where did that
necessary concession leave the plaintiffs’ case on the quantum of damages if
the action had succeeded? Their only
other expert witness whose evidence touched on this issue was Mr
property should be demolished and rebuilt because of this defect. He felt
unable to give an opinion as to whether the property was mortgageable on normal
terms. All that he could say was that it was likely that the property could be
sold in its present state but at a reduced value to take into consideration its
defects. He added that he would not recommend anyone to live there and that he
would be worried if he had to sell it. But, of course, his profession is that
of an engineer, not of a surveyor or estate agent.
The
defendants’ evidence as to the diminution in value, if any, came from Mr Bailey
himself and from Mr Greenham, their independent surveyor. Mr Bailey said in
evidence that if he had observed the lack of level at the time he would have
applied ‘a nominal diminution in value’ of £1,000. Mr Raynor, for the
plaintiffs, conceded that if that were the true measure of damages he would
find it difficult to argue that there had been any breach of duty at all, since
a variation of £1,000 either way in property of this sort would not be outside
a reasonable band of valuation. Mr Greenham’s evidence was that a reasonable
allowance for the sloping condition of the property might be £2,000,
The plaintiffs
are thus left with no expert evidence of the diminution in value of the
property as a figure or even an approximate figure to put to the court. Nor
have they attempted to find such a figure by testing the market. The way in
which Mr Raynor was obliged to review the matter in his closing address was
that it would be a ‘significant’ not a ‘marginal’ diminution in value, by which
he meant more than £1,000. He invited me, in effect, to substitute my views as
to the effect of lack of level in the property at the time of purchase of it in
1987 for those of Mr Bailey and Mr Greenham. I do not feel competent or able to
do that on all the evidence before me. It would have been for the plaintiffs to
prove their case on this issue of quantum as on liability. They have not done
so, at least not beyond the figure of £2,000 acknowledged by Mr Greenham as a
reasonable allowance to make. I accept what he says and I would, therefore,
have assessed the damages, if recoverable, at no more than £2,000 under this
head.
As to the
element of damages that could have been recovered for inconvenience and
distress, I am satisfied that there is evidence upon which both plaintiffs
would have been entitled to an award if they had established liability. Mrs
Whalley has clearly suffered more than her husband in this respect. Once the
lack of level became apparent to her she has not been able to get it out of her
mind. It has almost become a fixation to her, though none the less genuine for
that. I do not think matters have been helped by false hopes they have been
given as to the amount of damages recoverable in the event of the action
succeeding.
Counsel for
both parties are agreed that, on the authority of Perry v Sidney
Phillips & Son [1982] 3 All ER 705, the award would have been in terms
of hundreds rather than thousands of pounds. Had the plaintiffs established
liability I would have awarded Mrs Whalley £750 and Mr Whalley £250 under this
head. That would have made a total award of no more than £3,000 in the action.
However, for
the reasons that I have given, the action must fail and there will be judgment
for the defendants.
Judgment was
given for the defendants with costs.
