Carrie de Silva LlB (Hons) MA i is a Principal Lecturer, Harper Adams University and a Consultant for BlueBox Partners Ltd.
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. 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.
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.
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  as confirmed in the Court of Appeal in Perry v Sidney Philips  and in Watts v Morrow , and, more recently in Thomson v Christie Manson & Woods ).
This is, effectively, the so called SAAMCo cap. Named after the South Australia Asset Management Corporation v York Montague Limited  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  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