Surveyor’s PI: Hart v Large revisited

In June 2020, we commented on the High Court decision in the case of Hart v Large, which provided an important reminder for surveyors on the scope of their duties in advising prospective buyers of residential properties. It also addressed the appropriateness of recommending a Professional Consultant’s Certificate (PCC) as a condition to a purchase, as a way of protecting both the surveyor and purchaser. What was particularly interesting, and perhaps most concerning for surveyors, was the High Court’s approach to the assessment of damages, which is the issue that Mr Large took to the Court of Appeal in December last year. In January 2021, the Court of Appeal handed down judgment.

Background

The property was a recently renovated residential property in rural Devon and originally a bungalow built in the 1920s or 30s. Prior to being put on the market in 2011, the previous owners had carried out a substantial renovation of the property and engaged a firm of architects to carry out the required architectural services. Following the purchase of the property, it quickly became evident that there were serious issues with water ingress and damp that ultimately required extensive rectification works. The Claimants brought claims in negligence against the architects and the Claimants’ conveyancing solicitors which settled prior to trial.

Against Mr Large, at trial he was found negligent in: (1) failing to recommend a full building survey, rather than HomeBuyer report; (2) failing to draw attention to the issues of water ingress / damp in the HomeBuyer report; and (3) failing to recommend that the Claimants obtain a PCC.

High Court Decision – Damages

As a reminder, the High Court’s approach to the assessment of damages deviated from the usual Watts v Morrow (1991) approach that damages should be assessed by the extent to which the defects which should have been reported on would have reduced the value of the property below the purchase price of £1.2 million. Instead, the High Court considered that the starting point when assessing damages was the cause of action against the surveyor. In this case, the main breach of duty by the defendant surveyor was the failure to recommend that PCC be obtained prior to purchase. The Claimants were therefore awarded damages calculated by the difference in value of the property with the defects as reported, and the value with all the defects in the property.

On the valuation evidence, the High Court accepted that £250,000 to £300,000 for the cost of remedial works would be the threshold at which an incoming purchaser would instead consider demolishing and rebuilding the property. Therefore, considering the prices in 2011, the diminution in value award would be around £750,000. The High Court reduced the award by £376,000 to account for the settlement sum between the Claimants and the architects and solicitors, and also awarded £15,000 for inconvenience and mental distress.

Court of Appeal

Mr Large’s appeal was only on the issue of the assessment of damages; the Court of Appeal having refused to hear Mr Large’s appeal on breach and causation.

Mr Large argued that the principle in Watts v Morrow should have been followed because, reasonably, Mr Large should not have been expected to identify all the issues with damp and other latent defects with the property on inspection.

The Court of Appeal disagreed and upheld the High Court’s decision. However, in doing so the Court of Appeal made it clear that this was extremely specific to the facts of this case. Whilst the Court of Appeal agreed, in principle, that Mr Large could not reasonably have been expected to identify all issues with the property, it was necessary to consider the fundamental errors that Mr Large did make with respect to his failure to advise on: (a) the extent of the damp issues; and (b) that the purchase should not proceed without a PCC. On his site visit, Mr Large should have seen enough to “give rise to a trail of suspicion… which ought in turn to have led him to give very different advice”. If Mr Large had provided that advice, the Claimants would not have proceeded with the purchase and this was so fundamental that “Mr Large should be held to bear the consequences of such advice not having been given.”

The Court of Appeal held that any other method of assessment of damages would have been low and not proportionate to the fundamental error made in Mr Large’s advice.

Comment

The Court of Appeal’s decision, whilst highlighting the possibility of the Courts departing from the normal basis when assessing damages in such cases, also stresses the unusual and fact specific nature of the case. As such, it is likely that the Watts v Morrow approach will continue to be the go-to basis for the Courts. Nevertheless, the fact that the Court of Appeal felt able to depart from the usual basis highlights why this case remains an important one. Although the Court of Appeal was at pains to deviate from the usual assessment of damages, it felt it necessary to do so in order to compensate the Claimants for what it saw as such a fundamental breach by Mr Large. It is therefore possible that the Courts will do so again in other cases should the facts call for it.

As with the first instance decision, it highlights the consequences of failing to follow the trail of suspicion. Surveyors should therefore err on the side of caution and when surveying properties which have undergone extensive works and although clients may be persuaded to obtain a Homebuyer’s report due to cost and convenience, a surveyor should ensure that the client is making that choice from an informed position. As we have seen in this case, a surveyor should also consider whether it is appropriate, or even essential to recommend that the purchaser obtain a PCC ahead of purchase.

Further reading: Hart v Large [2021] EWCA Civ 24.