Gordon Angus Mckinnon and Another v E. Surv Ltd (formerly Known as Ga Valuation and Survey Ltd)
| Jurisdiction | England & Wales |
| Judge | Jonathan Gaunt QC |
| Judgment Date | 14 January 2003 |
| Judgment citation (vLex) | [2003] EWHC J0114-1 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | CLAIM No.HC02C00172 |
| Date | 14 January 2003 |
[2003] EWHC J0114-1
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London WC2A 2LL
Jonathan Gaunt QC Sitting As A Deputy Judge Of The Chancery Division
CLAIM No.HC02C00172
Mr N.D.P. Mendoza (instructed by Lewis Silkin of 12 Gough Square, London EC4) appeared for the Claimant
Mr Justin Althaus (instructed by Prettys of Elm House, 25 Elm Street, Ipswich) appeared for the Defendant
I direct pursuant to C.P.R. Part 39 P.D.6 that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
Introductory
In April 1999 Mr Gordon McKinnon and his wife Delyth were considering purchasing a bungalow at 64 Herbert Road, Emerson Park, Hornchurch, Essex for their home. On 13 th April they instructed the Defendant company, then known as G.A.Valuation and Survey Limited, to provide an RICS/ISVA Homebuyer's survey and valuation report. They were duly provided with a report dated 15 th April 1999 prepared by Mr S. Barford, BSc ARICS of the Defendant company. The report was required by Mr and Mrs McKinnon's proposed mortgagee but its objective went further than merely satisfying the mortgagee. As the report itself stated:
"The principal objective of the report and valuation is to assist you to
• make a reasoned and informed judgment on whether or not to proceed with the purchase
• assess whether or not the Property is a reasonable purchase at the agreed price
• be clear what decisions and actions should be taken before contracts are exchanged."
It is common ground that the Defendant's report was defective and negligently prepared in respects which will appear below and that the Claimants are entitled to damages assessed by reference to the difference between the price they paid for the property in reliance upon the defective report and the value of the property at the date of the valuation on 14 th April 1999. The issue which I have to decide is whether, if it is established that at the date of valuation the property was no longer subject to movement and has not been subject to movement since but it would not have been possible to establish that until after the date of purchase, it is appropriate to take those facts into account. In other words, in assessing damages, is the Court entitled to use hindsight? If the valuation is to be carried out only on the basis of the information that should have been contained in the report which the McKinnons should have received, then, on the figures which have been agreed, the McKinnons' damages will be £93,000. If, on the other hand, it is established that movement in the property had ceased at the date of purchase and it is proper to take this into account, then the Claimants will only recover £37,000.
The Facts and the Issues
The present proceedings were instituted on 21 st January 2002. In the light of the admissions made in the Defence, on 15 th April 2002 a judgment was entered for the Claimants for damages to be assessed. On 2 nd August 2002 the matter came before Master Bowman for directions. He directed that there be a trial of preliminary issues in the assessment of damages. There were three Schedules to the Order, the first of which contained the issues ordered to be tried, the second the Agreed Facts and the third two Assumed Facts.
I will set out first the Agreed Facts:
"1. The Defendant at all material times carried on business as surveyors and valuers.
2. In 1999 the Claimants were considering purchasing the freehold of a residential property situated at, and known as, 64 Herbert Road, Emmerson Park, Hornchurch, Essex RM11 3LL ("the Property") in order to occupy the same as their home.
3. By an agreement made between the parties on or about the 13 th April 1999, the Defendant agreed that for reward it would inspect the Property and provide a written report upon its condition and value. The Defendant had been introduced to the Claimants by the Claimants' mortgage provider, Halifax plc, and the purpose of the Defendant's retainer was to allow the Claimants to obtain a loan by way of mortgage from Halifax plc.
4. The Defendant duly inspected the Property and by a report in writing dated 15 th April 1999 valued the property at £185,000. The report stated (amongst other things):
"Movement
There are signs to suggest that the property has been affected by past minor structural movement as evidenced by sloping floors, distortion to internal door openings and hairline cracking to the rear elevation. So far as can be seen from the single inspection the movement appears longstanding, unlikely to be progressive, and within acceptable tolerances."
5. In reliance on the Defendant's said report and valuation, the Claimants purchased the property, such purchase being completed on the 7 th June 1999 at a price of £185,000.
6. There was an implied term of the agreement between the parties that, in inspecting the Property and reporting to the Claimants upon its condition and value, the Defendant would exercise reasonable skill and care. The Defendant further owed the Claimants a duty of care in negligence to take reasonable care in inspecting the Property, in valuing the Property and reporting to the Claimants upon its condition and value.
7. It is agreed (for the purposes of these proceedings only) that, at the time of the Defendant's inspection, the following defects were present and that, in breach of contract and/or negligently, the Defendant failed to detect and report upon the same:
(a) Two of the flank walls were tilting;
(b) There was sloping to the brick courses to the rear elevation wall;
(c) There was distortion to the external door and window openings;
(d) The internal walls were out of alignment; and
(e) There was movement of the timbers within the roof structure.
8. It is further agreed … that the Defendant failed to advise the Claimants to have further investigations carried out in respect of the Property so as to ascertain whether structural movement had ceased or was either continuing or likely to be continuing, and that the Defendant's failure so to advise constituted negligence and a breach of contract.
9. Had the Claimants known the true value and condition of the Property they would not have proceeded to purchase the Property and occupy it as their home.
10. It has been established by a report dated 5 th March 2001 of Mr D.J. Parrish FRICS, which the Defendant has adopted, that:
(a) If it had been possible to establish that the property was not subject to movement as of the date of valuation, a reasonably competent surveyor would have valued the same at £148,000 but,
(b) If the property was, or might be, subject to ongoing movement, a reasonably competent surveyor would have valued it at £92,000, subject to the outcome of tests."
Those being the Agreed Facts, I am asked to assume the following two further facts, namely:
(1) That the property was not subject to movement as of the date of valuation, and has not been subject to movement since; and
(2) It would not have been possible to establish Assumed Fact (1) until after the date of purchase of the property.
I must emphasise that Assumed Fact (1) has not yet been established, because the property has not been monitored for the required length of time.
Those being the Agreed Facts and the Assumed Facts, the issues ordered to be tried were formulated as follows:
(1) Given the Agreed Facts, should the Court take account of Assumed Fact (1), notwithstanding Assumed Fact (2), in deciding:
(a) the correct date at which to assess damages in this case?
(b) the correct formula by which to measure damages in this case?
(2) Having regard to the answers in issue (1):
(a) as at which date should damages be assessed in this case?
(b) by what formula should damages be measured in this case?
The Report of the Engineer and the Valuer
It may be helpful before turning to the principles of law involved and the parties' respective submissions to record why the present issue arises for decision in this form. Following the McKinnons purchase of the property, they became concerned that the movement in the property was more severe than they had been advised and they commissioned a report from a structural engineer, Mr Peter Turner C Eng, MI Struct E. Mr Turner reported that the bungalow had suffered from moderate to severe distortion. He said that the Emmerson Park area was known to have suffered many heave recovery problems over the years after its development because many mature trees were felled before house building and the shrinkable clay soil subsequently swelled; these problems had, however, diminished over 15 or 20 years and he had not heard of a fresh problem of this nature in recent years. He thought it likely that the distortion in the house was caused by heave and that in all likelihood the heave recovery was spent. He felt that the evidence within the property, old repairs not having re-cracked, substantiated this. He advised, however, that there could be no certainty about this. It could however be demonstrated by precision level monitoring around the house perimeter: if 12 months passed with no recorded significant movement, that should be sufficient reassurance for a purchaser.
After the institution of these proceedings the parties instructed Mr D.J. Parrish FRICS of Gates, Parrish and Co as a single joint expert to prepare a valuation report. He was provided with a copy of Mr Turner's report. He recorded Mr Turner's opinion that the property was stable and not subject to continuing movement but that this could not be confirmed beyond all doubt unless level monitoring of the property took place. On the basis that the property...
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