This recent decision from the Court of Appeal will be of particular interest to surveyors and their insurers because of the extent of the liability imposed on the surveyor.
The Court upheld the first instance decision of Roger Ter Haar QC in the TCC, which departed from the usual measure of damages in a negligent survey claim and held the surveyor liable for all the defects present at the property, not just those which should have been identified in his report, but were not.
Background & The First Instance Decision
The Harts engaged the services of a surveyor, Mr Large in their purchase of a cliff-top house in Devon. The property had been extensively extended by the previous owners shortly before the sale. Mr Large provided a RICS Homebuyer’s Report, valuing the property at £1.2m and indicating that it was largely defect-free.
Prior to purchase, but after Mr Large had provided his report, there were discussions between the Harts, Mr Large and the conveyancing solicitors about whether further investigations should be carried out and various guarantees sought in respect of the recent building works, in particular a Professional Consultancy Certificate (“PCC”) from the architects who designed the extension and supervised the works.
In the year following completion of the purchase, numerous issues with the property came to light, primarily to do with the damp proofing, which were so extensive that the property had to be completely rebuilt.
Mr Large was found to have been negligence in that he i) failed to identify significant damp problems at the time of the inspection, having wrongly assumed (without any evidence) that there was damp proofing present and ii) failed to advise that the Harts should not proceed with the purchase without obtaining a PCC.
In considering the consequences of Mr Large’s failings, the Judge found that the Harts would not have bought the property but for Mr Large’s negligence.
Measure of Damages
Having concluded that this was a ‘no transaction’ case the judge went on to consider the measure of damages. It was common ground that the starting point, following Watts v Morrow, was the diminution in value of the property.
The judge then considered the distinction following, SAAMCO  AC 1919 and confirmed in BPE Solicitors v Hughes-Holland (in substitution for Gabriel)  UKSC 21, between cases where the professional is giving “information” and cases where they are giving “advice”.
Giving “information” will only render the professional liable for the consequences of that information being wrong (in this case any failing in the Homebuyers Report). Giving “advice” on a particular course of action can render the professional responsible in respect of the wider consequences (in this case, proceeding with the purchase in the first place).
Mr Large argued that he should only be liable for the diminution in value from any defects which he should have reported on in the Homebuyers Report but failed to (an information case), rather than in respect of the wider defects which turned out to be present at the property.
The Harts contended that the damages should reflect the difference in value between the property with the defects as reported to them in the Homebuyers Report and it value with all the defects which in fact existed, which would have been uncovered had Mr Large made the recommendations he ought to have (akin to an advice case).
The Judge referred to Mr Large as providing a hybrid of advice and information. The critical finding was that the transaction would not have proceeded but for Mr Large’s negligence in respect of the PCC and the damages reflected the diminution in value of the Property with all of the defects present (including the latent ones which Mr Large would not have been expected to identify in the Homebuyers Report).
Court of Appeal
In upholding the decision, the Court of Appeal reiterated that the central failing was that the Harts should have been provided with clear and unequivocal advice that there were risks which simply could not be assessed and against which the Harts needed protection if they wished to proceed (in the form of the PCC).
The breaches of duty by Mr Large meant that this was not a typical negligent surveyor case and the conventional measure of loss (a comparison between the value of the property in the condition it was reported to be in, and the condition it should have been reported to be in) was not applicable. The conventional measure of loss would not have compensated the Harts for the consequences of the crucial failings found by the judge, namely the advice that should have been given – but was not – as to further investigations into the damp-proofing and the need for the PCC.
The Court of Appeal was explicit that the specific factual circumstances, in particular the failure in respect of a PCC, meant that this was very different case to the typical negligent surveyor claim.
It does however demonstrate a willingness for the courts to depart form the usual principles of the assessment of damages should the facts of a particular case call for it. It also highlights the need for surveyors to consider advising prospective buyers on the need for further investigations when there are warning signs or a ‘trail of suspicion which would justify recommending further investigation’.
More concerning and of wider application to other professions, is the finding that the surveyor was providing a hybrid of “advice” and “information”. At first glance the case does not fall easily into the advice category. There may have been numerous other reasons why the Harts decided to purchase the property, regardless of what their surveyor said; something which was acknowledged by the Court of Appeal when it accepted that there were certain aspects of the transaction which were outside of Mr Large’s remit.
Nevertheless, the decision should serve as a cautionary tale to surveyors of the need to protect themselves from such a potentially broad liability. It may be sensible to ensure that they are absolutely clear about the limitations of their inspections, what assumptions they have made and the scope of their responsibilities. This may require standard terms and conditions to be revisited.