Hart v Large  –  the January 2021 Appeal Court Decision Summary by Carrie de Silva

Carrie de Silva LlB (Hons) MA i is a Principal Lecturer, Harper Adams University and a Consultant for BlueBox Partners Ltd.

Background

Most readers will, over the past nine months, have come across the High Court case of Hart v Large where a residential surveyor and valuer was found to be negligent.  This is not, shall we say, unprecedented.[1]  What has caused concern among surveyors and valuers has been the measure of damages.

The defendant surveyor was found liable for the negligent valuation (£1.2 million in 2011) of a detached cliff top property in Devon.  It was built in the 1920s but the subject of considerable extension and refurbishment in the two years prior to the valuation.

A HomeBuyer Report was carried out.  This was queried (was it appropriate for such a  property or should a full survey have been done?) but it was found to be an acceptable product, although some surveyors would certainly have advised otherwise. So no negligence at this point.

But the report was found to be negligent:

  • As the damp proof course could not be seen it should have been clearly indicated that it had not (and could not be) seen and that further investigation was required.
  • It should have been indicated that a Professional Consultants’ Certificate (PCC) was essential. This was not a new build, therefore no NHBC protection, and because there were no builders and/or architects guarantees, there was no recourse to the parties who actually caused the building defects.  The party engaging the builder and architect would, of course, have contractual protection, but this had not been transferred to the subsequent purchaser (the surveyor’s client).

Although PCCs and guarantees were talked about by the surveyor, there was a measure of vagueness and inconsistency.  The judgment was such that this was not  simply a provision of valuation, but an advisory role.  If the surveyor had said, in clear terms, that a PCC was vital, that the transaction should not go ahead without it, the client would not have purchased the property. So any subsequent losses were a direct result of this lack of clear, unequivocal advice.

Damages

In the High Court, figures were put forward (differing significantly, not to say dramatically,  between the expert witnesses engaged by either side) as to what work was required to remedy the building defects.  Because, the work was so substantial, the judge decided that demolition and re-build was indicated at an estimated cost of £750,000.  This decision has, itself, been queried as the judge concluded (in line with the claimants’ valuation expert) that if remedial work passed the £250,000 – £300,000 mark then rebuilding would be indicated. Given that the decided cost of demolition and re-build is over double the upper end of that band there must be a question mark over such a decision.  There is also plenty of online commentary from surveyors about the quantification of damages and actual valuations.  I can only comment on the legal reasoning.

Damages were put at £750,000 plus £15,000 for distress.  As the solicitors and architects had settled out of court to a total of £376,000, that left £389,000 to the defendant surveyor.

Appeal

Leave to appeal was refused on the matter of negligence, so that decision stood.  But leave was granted with regard to the assessment of damages.  A hearing took placed on 8th December 2020 with a very clear judgment handed down on 15th January 2021.

Established case law indicates that damages will usually be the difference in value on the date of valuation between the negligent valuation and the actual market value (Philips v Ward [1956] as confirmed in the Court of Appeal in Perry v Sidney Philips [1982] and in Watts v Morrow [1991], and, more recently in Thomson v Christie Manson & Woods [2005]).

This is, effectively, the so called SAAMCo cap.  Named after the South Australia Asset Management Corporation v York Montague Limited [1997] case, heard in the House of Lords.

To explain simply, with hypothetical values: if the true value was £800,000, the negligent valuation was £1,000,000 but actual losses were £350,000 (due to significant remedial work or, say, a drop in the market).  The purchaser has lost £350,000.  In normal circumstances (referred to in the case as ‘the usual Watts v Morrow approach’), the SAAMCo cap applies and the valuer is liable only for £200,000.

Watts v Morrow did, however, raise the issue of advisory cases as more fully set out in Hughes-Holland v BPE Solicitors [2017] Supreme Court.  If the client is basing their decision to purchase on the surveyor’s advice, and would not have purchased otherwise, then there will be liability for the total loss flowing from the transaction.

In this case, it was found that no competent surveyor could have given a definitive value as the damp proof could not be seen.  So an indication of matters unseen and a recommendation for further information was the only competent approach and requesting a PCC was the only form of guarantee available.

The Court of Appeal confirmed that this was an advisory case in that but for the surveyor’s advice, the purchase would not have gone ahead.  If a PCC had been stressed as vital, then if it had not been produced there would have been no sale.  If it had been produced, then liability would lie with the architect and the surveyor would have been protected.  So the damages awarded in the High Court stand.

It was raised by counsel for the surveyor that the finding is of great concern as it might significantly alter the measure of damages in negligent surveyor cases in general.  The judge did not agree and his reasoning seems reasonable.  The specifics of the case including  extensive works with no satisfactory records of completion or guarantees, concerns noted by both the client and surveyor or indications of shoddy workmanship which should have further prompted the surveyor to look further and to insist on guarantees, and the exposed coastal position all make it a case very much on its own facts.

So, a concerning level of damages against a surveyor (who was, incidentally, insufficiently insured  –  a lesson in itself).  But a reasoned application of the law which should not raise concerns about any significant changes.

Lessons for practice

In terms of practical lessons, highlighted on summaries of the original case:

  • If something has not or cannot be seen, then this must be indicated, with recommendations for further investigation where appropriate
  • The nature of the survey product must be clearly set out to the client.The general public does not necessarily distinguish between the levels and may just think a surveyor will pick up everything.  Links to RICS information is also not sufficient.  Clients must be made aware of the limitations of any work.
  • Where there are works which fall short of new build and NHBC protection, and the client did not deal directly with the builders/architects (with the concomitant contractual protection) then PCC or other guarantees must be obtained and their importance should be made clear in the written report.
  • Do not make unfounded assumptions about recent works be in order.
  • Do not assume other professionals, such as solicitors will pick everything up.
  • Telephone conversations should, preferably, be followed up with a corroborating email (or written note of telephone conversation on file at the very least), and emails, and any other records, should be retained with particular care taken when IT systems are altered/upgraded.
  • Ensure insurance covers the values of property you are working on, based on the highly unlikely, but possible, eventuality of a requirement of demolition and rebuild.
  • Read the full judgement here https://www.bailii.org/ew/cases/EWHC/TCC/2020/985.html

[1] See my Negligent Valuation Casebook: key cases from the 19th to the 21st century, email carrie@carriedesilva.co.uk for details.

5 comments on Hart v Large  –  the January 2021 Appeal Court Decision Summary by Carrie de Silva

  1. David Carver says:

    Whilst I don’t do mortgage work, I had thought the requirement for a PCC was for a new-build or a new conversion, when a building warranty was not available. Whilst the property in question had been extended and refurbed, it was not a new build and was not a new conversion, as such. Where is the line to be drawn, when we are saying a PCC is VITAL? At what level does it become VITAL ? A newly refurbed house, with loft conversion, by a local developer? I would now say yes, a PCC is VITAL for that, in the light of this judgement …? (I bet the developer won’t have one – so will a retrospective PCC be sufficient – or worth the paper it’s written on?)

    What about Building Regs? In Hart v Large, had the works been signed-off by Building Control or by an Approved Inspector? Did the surveyor’s report require this to be checked by the conveyancer? If so, did this not protect him, to any extent at all? If a build has been signed-off, is it not reasonable to assume that it has a DPC, seeing as this is one of the checks undertaken by the BCS?!

    Do we really need to require exposure of a DPC whenever we can’t see it??

    Marion, Chris or Phil, some further interpretation would be really helpful in relation to these questions – thank you. This judgement is going to add to the pressure on our PI premiums and I think it might be time to find a new career! Enough is enough.

  2. This is a horrendous decision for residential surveyors.

    In effect we will now be liable for hidden defects unless of referred to by connection as part of the information process provided (the risks associated with embedded timbers comes to mind) in the report or as here, sufficient advice was not provided concerning legal responsibility. The area of advice to be provided by surveyors is now not limited by the fact that the surveyor is not the lawyer transacting the sale.

    Lastly in the event of damages reaching a critical limit, in this case less than say 25% of the market value of the property, damages default to total rebuild costs, or am getting hysterical?

  3. John H Cranmer FRICS says:

    Is any allowance made for betterment anywhere in this case? The claimant will end up with a brand new property, with up to date services and insulation for example, not to mention the opportunity to construct a spectacular new home in a cliff top location, in return for a 1920’3 solid walled house with many of its building elements reaching the end of their life. Clever lawyers have argued that the questions over the damp proof course make it uninhabitable, and yet we all know that there are very many perfectly satisfactory older dwellings which do not have formal damp proof courses. Again, the claimant’s lawyers have been very skilled in sowing doubt and confusion by referring to it exposed position – damp proof courses protect againg rising dampness, rather than penetrating dampness occasioned by exposed locations – this is a total red herring – but has anyone explained that to the Judge?

  4. Richard Large says:

    Contrary to the judges’ conclusions (from both hearings) there was nothing particularly unusual about the property or the circumstances of the survey, certainly not within the context of coastal properties in the south-west of England. The unusual factors were what came to light afterwards: the perfect storm of incompetence by the building contractor (from whom the claimants had no legal recourse), the Building Control department (who did sign off the works and issued a statutory Completion Certificate, which the clients had been advised to verify in the report) and the solicitor (who failed to follow up on the recommendation by the surveyor that it would be reasonable to request that some form of transferrable protection, such as a Professional Consultant’s Certificate (PCC) be provided from the seller’s side of the transaction, particularly as this was how the property had been marketed, the works having been stated as designed and supervised by the architects). Yes, all those were unusual but they could not affect the duties of the surveyor.

    As there was nothing “unusual” about the property or the survey (it was accepted that there was no evidence of dampness at the time of survey) and no “specific” trails of suspicion that any latent defects might exist, the decision does seem to extend the duty of care of the surveyor to (a) require further investigations of components that cannot be seen, and (b) where appropriate (i.e. perhaps non-NHBC warranted new build, or properties with extensions etc. within the previous 6 years) to advise that the purchase should not proceed unless a PCC is available. What is strange is that, according to the judgments, these duties have always been undertaken (the case goes back to 2011). So where are all the “reasonably competent surveyors” who have been doing so? The errors that are present in the judgments cannot be appealed against. They will need to be challenged and hopefully rectified if and when a further case comes before the courts. In the meantime…..?

  5. Trevor Jones says:

    As a retired Surveyor, with benefit of hindsight, I would never have undertaken pre purchase Building Surveys, let alone Homebuyers Reports. The fact is it is far too dangerous. Surveyors are human beings incapable of perfect performance no matter how well they are trained or regulated. The potential earnings simply do not reflect the risks of financial ruin, loss of reputation, business, career not to say damage to your mental health. Unless some form of binding agreement can be formulated that restricts damages for professional negligence, say as a multiplier of the fee received, I suggest one finds another way of exercising the skills of a Surveyor to earn a living. You could be one of the lucky ones but ask yourself, is it really worth the risk?

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