Merrett v Babb
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MAY |
| Judgment Date | 15 February 2001 |
| Neutral Citation | [2001] EWCA Civ 214 |
| Docket Number | Case No: B2/1999/1251; 2000/0407 |
| Court | Court of Appeal (Civil Division) |
| Date | 15 February 2001 |
[2001] EWCA Civ 214
Lord Justice Aldous
Lord Justice May and
Mr Justice Wilson
Case No: B2/1999/1251; 2000/0407
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM TRURO COUNTY COURT
HHJ OVEREND
Royal Courts of Justice
Strand, London, WC2A 2LL
R. Walker QC and S. Ball (instructed by Howard & Over for the Appellants)
P. Teverson (instructed by Hine Downing for the Respondent)
Introduction
This is an appeal by the defendant, John Babb, against the decision of H.H. Judge Overend at Truro County Court on 9 th November 1999. Mr Babb is a surveyor and valuer who, on 1 st June 1992, made and signed a Mortgage Valuation Report for Bradford & Bingley Building Society of a property at 18 Trelawney Road, Falmouth in Cornwall in anticipation of a purchase of that property, subject to a mortgage from the building society, by the claimant, Miss Merrett, and her mother, Mrs Scheppel. The judge held that the Mortgage Valuation Report had failed sufficiently to notice and report on settlement cracks between an original building and a later extension and that this was negligent. There is no appeal against that finding. The judge awarded Miss Merrett damages of £14,500 plus an amount for interest. £14,500 was the difference in value between the property as it was described in the Valuation Report and its value as it should have been described.
There are two grounds of appeal. First, it is contended on behalf of Mr Babb that, contrary to the judge's finding, he owed the claimant no duty of care. Second, it is contended that, if Mr Babb did owe a duty of care, the judge should only have awarded Miss Merrett half the amount of damages and interest because she only had a half interest in the property which she had purchased jointly with her mother. Her mother was not a party to the proceedings and there was no proper basis in law for awarding the full amount of damages.
The Facts
Mr Babb is a professionally qualified surveyor and valuer. In June 1992, he was employed by, not a principal of, a firm of surveyors and valuers, Clive Walker Associates. The firm had about twenty branch offices, including one at 19 Mayflower Street, Plymouth, which Mr Babb ran as a salaried employee.
On 1 st June 1992, the Plymouth branch of Clive Walker Associates received instructions from the building society asking them to inspect the property at 18 Trelawney Road and to prepare a report, using valuation forms which were attached. They were instructed to return these to a branch of the building society in Malvern, Worcestershire. The instruction form stated that the building society was considering an application for a mortgage on the property from Miss Merrett and her mother, who were named as applicants. The form stated a mortgage valuation fee of £70. The purchase price was given as £47,500. The mortgage required was £17,500 for a 25 year term.
Mr Babb inspected the property on the same day. He prepared a Mortgage Valuation Report dated 1 st June 1992 which valued it in its present condition at £47,500. This gave details of the property and listed a number of essential repairs. Parts of the typed body of the report are expressed in the first person plural, that is, for example, "We would also comment …". The report contained on its first page a certificate in the following terms:
"I certify that I am not disqualified under Section 13 of the Building Societies Act 1986 from making this report."
Mr Babb signed this certificate, giving his name and professional qualifications, at the foot of the first page on the left. The date was then typed approximately in the centre of the page. To the right of this was the name and address of the firm, Clive Walker Associates with the Plymouth address. A continuation page was on the writing paper of the firm with the Plymouth address. This was signed by Mr Babb, again giving his professional qualifications, with the name of the firm typed immediately beneath his typed name.
Section 13 of the Building Societies Act 1986 provides:
"(1) It shall be the duty of every director of a building society to satisfy himself that the arrangements made for assessing the adequacy of the security for any advance to be fully secured on land which is to be made by the society are such as may reasonably be expected to ensure that –
(c)
each person making the assessment will have furnished to him a
written report on the value of the land and any factors likely materially to affect its value made by a person who is competent to value, and is not disqualified under this section from making a report on, the land in question."
The Mortgage Valuation Report was provided by the building society to Miss Merrett and her mother in a form which omitted all references to Mr Babb and his firm. They knew that it was a Report prepared for Bradford & Bingley Building Society by an independent valuer, but they did not know who the valuer was.
Mr Babb was employed as Branch Manager of the Plymouth office of Clive Walker Associates from 3 rd February 1992 to 8 th January 1993. The sole principal of the firm was Mr C.R. Walker. On 30 th August 1994, a bankruptcy order was made against Mr Walker in the Cheltenham County Court and the firm ceased business.Contrary to the Professional Indemnity Regulations of the Royal Institution of Chartered Surveyors, the firm's professional indemnity insurance was cancelled by Mr Walker's trustee in bankruptcy on 2 nd September 1994 without run off cover. We are told that Mr Babb is uninsured for this claim.
These proceeding were started by Miss Merrett against Mr Babb personally by a county court summons in the Truro County Court on 17 th November 1997. The appeal before this court proceeded on the uncontroversial basis that the cause of action for breach of any duty which he might owe to Miss Merrett and her mother arose when they contracted to purchase the property on 23rd July 1992, and that the six year limitation period for bringing proceedings for breach of that duty was current when the proceedings were started, but had expired by the time of the hearing before the judge on 9 th November 1999.
The judge decided that Mr Babb owed Miss Merrett and her mother a duty of care. He held that he was bound so to decide by the decision of the House of Lords in Smith v. Eric S. Bush and Harris v. Wyre Forest District Council [1990] 1 AC 831 with particular reference to the passage in the opinion of Lord Griffiths at page 865G, to which I shall refer later in this judgment. The judge considered submissions to the effect that Smith v. Bush should be seen in the light of later cases in which the existence of a duty of care is said to rest on an assumption of responsibility. Put shortly, the submission was, that, in the circumstances of this case and particularly since Mr Babb was an employee of the firm instructed by the building society, there was no assumption of responsibility by Mr Babb personally. He knew that the Valuation Report which he prepared would be relied on by Miss Merrett and her mother. But his duty was to the firm by which he was employed. The purchasers should be taken to have relied on the firm, not on him personally. It was the firm that assumed responsibility to them. The judge held that Smith v. Bush applied to the present case unmodified by subsequent decisions. He also held in the alternative that there was objectively an assumption of responsibility by Mr Babb sufficient to sustain a duty of care.
Miss Merrett and her mother bought the property jointly. On 12 th October 1995, they made a Declaration of Trust whose effect was that the whole beneficial interest in the property is now held by Miss Merrett absolutely, subject to her mother's right to live there for the rest of her life or so long as she wishes. Accordingly, apart from her right to live there, Mrs Scheppel has no financial interest in the property. It was in these circumstances that the claim was brought by Miss Merrett alone.
It was submitted to the judge that Miss Merrett, as the only claimant, could not claim in her personal capacity her mother's share of the proceeds of a cause of action which depended on their joint ownership. She did not bring the claim as trustee. The judge held that this was at best a technical objection which could be cured, if necessary, by joining Mrs Scheppel as a defendant. The judge considered that no useful purpose would be served by such an exercise even if it were technically required. He did not, so it seems, order Mrs Scheppel to be joined as a party, but gave judgment in favour of Miss Merrett for the full amount of the claim, brushing aside any technical legal difficulty in the way. It is fair to say that he dealt with this point shortly at the end of a judgment in which he dealt at much greater length with the duty of care issue and the question whether there had, on the facts, been a breach. The second of these issues, which occupied a large part of the judge's judgment, does not feature in this appeal at all.
Duty of Care authorities
The law relating to the duty of care owed by surveyors and valuers, who make inspections and reports of residential property on the instruction of building societies, to those who purchase the properties subject to a mortgage from the building society, is a discrete part in a wider jurisprudence. The starting point is Yianni v. Edwin Evans & Sons [1982] QB 438, a first instance decision of Park J. In that case, the plaintiffs, who wished to buy a fairly modest house at a price of £15,000, applied to a...
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