Generally, where a surveyor has negligently failed to identify certain defects in a survey report, they will not be liable for the consequences of other defects they could not reasonably have been expected to identify (latent defects).
The High Court's willingness to go beyond this traditional understanding of damages is one reason why many of us followed the appeal journey of Hart v Large [2021] EWCA Civ 24 with particular interest.
Now, in a judgment which could have widespread ramifications for surveyors and their insurers, the Court of Appeal has confirmed the liability of negligent surveyors may, in certain cases, be far more extensive than many previously believed.
The 'Dream Home' gone horribly wrong
In 2011, the Harts purchased what was intended to be their dream home, perched on an exposed cliff top in Devon. The property had recently been extensively rebuilt and extended.
Prior to completing the £1.2m purchase, the Harts instructed a surveyor, Mr Large, to carry out a HomeBuyer Report.
Following completion, the Harts found widespread water ingress and dampness and eventually had to demolish the property. They brought claims against their solicitors and architect (which were settled at an early stage), and against Mr Large, who was found liable for negligence, including for failing to advise them to obtain a Professional Consultants Certificate ("PCC") and carry out further investigations.
More detail on the findings against Mr Large are given in this article.
Measuring the damages
The factual starting point for assessing damages is often referred to as the 'but for' test, i.e. what loss would have been avoided 'but for' the negligence? However, this does not in itself always lead to a fair result and a number of other principles exist to better define the recoverable losses.
Of particular relevance for surveyors is the SAAMCo principle (named after a 1996 judgment), which limits damages to losses falling within the scope of a professional's duties. This often serves to limit surveyors' liability, particularly in 'no transaction' cases where the purchase would not have proceeded 'but for' a negligent survey report.
However, on the particular facts of this case, the SAAMCo principle did not limit Mr Large's liability.
The information/advice hybrid
There have been a series of high profile cases in recent years clarifying the proper application of the SAAMCo principle.
A distinction is made between 'information' cases, where a professional provides information and is only liable for the consequences of that information being wrong (often referred to as the SAAMCo 'cap'); and 'advice' cases, where the professional advises on a course of action and can be responsible for the wider consequences of the transaction.
Mr Large's services were referred to by the court as a hybrid between 'information' and 'advice', but regardless of this distinction, the critical finding of the trial judge was that Mr Large should have advised the Harts not to proceed with the purchase without a PCC/doing further investigations. This negligence was fundamental to whether the purchase should proceed and the defects later identified were ones which he had a duty to safeguard the Harts from.
Accordingly, damages were assessed as the full diminution in value of the property, including that caused by latent defects which Mr Hart could not have been expected to identify in his report. This wider assessment of damages was the only way to properly compensate the Harts for the consequences of Mr Large's negligence.
Conclusions
The Court emphasised that this case turned on the particular facts.
However, while the consequences in this case were particularly severe, the circumstances of the advice given by Mr Large is not unusual and surveyors should take steps to protect themselves from similarly broad liabilities.
Any limitations to inspections must be clearly stated and advice should be given where additional layers of protection, including PCCs or further investigations might be required.
NOTE: Specialist legal advice should always be sought on the specific circumstances of a claim and whilst this article is representative of the law as at February 2021, it does not constitute such advice.
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