The recent Court of Appeal decision in the case of Large v Hart departs from the usual measure of loss in negligent surveyor cases as the diminution in value. Instead, taking the assessment from the valuation in the surveyor's report (in this case a Homebuyer's report) against the value with the true defects.
For a detailed look at the SAAMCo principle of assessment of damages, see our article here
The dispute
Mr and Mrs Hart thought that they were buying their dream home on a cliff in Devon. Instead, the purchase of the property turned into a nightmare when it became apparent that the significant rebuilding works which had been carried out by the previous owners had been so badly done that their only solution was to demolish and reconstruct their dream home.
Prior to purchasing, the surveyor, Mr Large, surveyed the property for the purposes of producing a RICS Homebuyer's report. Mr Large gave the property a clean bill of health and valued it at £1.2 million. The Harts completed the purchase for this price, but later discovered significant damp problems. A negligence action was raised against the surveyor, Mr Large, the conveyancing solicitors and the architects who had supervised the reconstruction works on behalf of the previous owners. The claims against both the architect and the conveyancing solicitors were settled before trial.
High Court Decision
The High Court found that Mr Large was negligent as he failed:
1. to identify visible damp proofing in places where he should have expected to see it and he wrongly assumed – without evidence – that damp-proofing was present, because the rebuilding works had only recently been completed; and
2. to advise the Harts that they should not proceed to purchase the property without having a Professional Consultant's Certificate ("PCC") in place. A PCC would have afforded the Harts some protection against the presence of defects, which a competent surveyor could not identify in a newly rebuilt house.
Assessment of Damages
The court departed from the usual measure of damages being the difference between the value of the property as it was represented to be and its value in its true condition. In this case, the major findings of Mr Large's breach of the duty of care, was his failure to recommend that obtaining a PCC was essential. On that basis, the Court considered that this approach was not appropriate as it would transfer the risk to the Harts and would "likely produce a gross injustice".
Instead, the Court based their award of damages on the difference between the value of the property as it had been reported to the Harts in the HomeBuyer Report, and its value with all the defects which in fact existed. As a consequence of this, the Harts received an award of £750,000, which was subsequently reduced to £374,000 to take into account out of court settlements with the solicitors and the architects. A further £15,000 was awarded for inconvenience and distress.
Court of Appeal Decision
The issue before the Court of Appeal was whether the correct measure of loss had been used. Mr Large argued that the diminution in value should have been assessed as the difference between the value as represented by Mr Large and the value reflecting the condition in which he should have reported the property to be.
It was said that Mr Large's duty was not only to inspect and report properly on the condition of the property, he was also obliged to make appropriate recommendations as to any further investigation which he thought was necessary. As such, the Court said that there was a "clear trail of suspicion, which in accordance with the RICS Practice Note, should have led Mr Large to advise that further investigation/enquiries into the state of the property were necessary".
While the established approach may have compensated the Harts for simple defects which Mr Large should have reported on but missed, it would not compensate them for his failure to advise that further investigations were required.
Accordingly, the Court of Appeal upheld the High Court's decision and found that the correct measure of loss had been carried out and agreed that any other measure of loss would not have compensated the Harts for the consequences of Mr Large's negligence.
What to take from this?
While this case is not going to radically alter the assessment of damages in the vast majority of negligent surveyor cases, it does establish a situation where the courts are willing to depart from their usual assessment of damages, where the facts of the case call for it.
Surveyors and other professionals should ensure they are alive to the risks involved when giving advice to clients. If you have any concerns or questions about this case and how it may impact you or your business, and what to do to manage the risk, please do not hesitate to get in touch with one of our specialists or your usual Brodies' contact.
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