Purchasers wishing to buy property and obtaining survey for mortgage application – Contracts exchanged – Purchasers finding property uninhabitable and claiming survey was negligent – Whether plaintiff entitled to damages equivalent to mortgage interest payments, premiums for endowment policy and household insurance premiums – Appeal allowed
The plaintiffs wished to purchase the freehold of 35 Selkirk Road, London SW17, which was being offered for sale at a price of £95,500. They were offered a loan of £83,000 by a building society. For the purposes of the mortgage application, the defendants, a firm of estate agents and chartered surveyors, were instructed by the society to make a “House Buyer’s Report and Valuation”. The defendants knew they were providing professional services to both the plaintiffs and the society. In the report they valued the house as being in the region of £90,000. Contracts for purchase were exchanged on June 17 1998. However, when the plaintiffs arrived at the empty house they formed the view that it was uninhabitable, and they did not move in. They instructed different surveyors, who confirmed that the property was uninhabitable and estimated essential repair works at £25,000. The plaintiffs decided to remain in temporary accommodation and to offer the house for sale. They issued proceedings claiming that the survey and valuation had been negligent.
The judge found, inter alia, that the plaintiffs would not have bought the house if they had been properly advised and that they had been unable to sell the house between 1988 and the date of the trial. He accepted the evidence that the house had been worth £65,000, had required essential repairs and had been uninhabitable. On that basis he awarded the plaintiffs damages of £25,250 equivalent to the diminution of value plus stamp duty, general damages of £2,000 to each of the plaintiffs for “inconvenience and discomfort” and damages of £83,000 equivalent to mortgage interest payments, the premiums for an endowment policy and household insurance premiums. The defendants agreed that the actual value of the property had been £65,000 and that they were liable to the plaintiffs for damages equivalent to the diminution of value plus stamp duty, totalling £25,250, but they claimed that the other damages awarded by the judge were contrary to principle and ought to be discharged.
Held The appeal was allowed.
1. The powers of the court were confined to making once and for all awards of damages and therefore the judge’s order was to be discharged and an award of damages made in a conventional form.
2. The correct measure of damages in respect of negligent surveys of houses for private purchasers, where the surveyor was merely providing information to enable the purchaser to decide whether or not he wanted to go ahead with the proposed transaction, was diminution in value: see Jackson & Powell on Professional Negligence, 4th ed (1997) paras 3-137; Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1996] 2 EGLR 93 considered.
3. The judge had found that if the plaintiffs had been properly advised, they would have purchased a different property and would have taken on a similar mortgage. Therefore, they would have expended a similar amount in mortgage interest payments, endowment policy premiums and household insurance premiums. Accordingly, he had wrongly compensated them for those costs which they would have incurred in any event. Instead, in addition to the damages equivalent to the diminution in value, stamp duty and general damages of £2,000, he should have compensated the plaintiffs for the costs of their alternative accommodation until the house was sold and another acquired: Hayes v James & Charles Dodd (a firm) [1990] 2 All ER 815 distinguished.
Daniel Worsley (instructed by Lloyd Cooper) appeared for the appellants; Andrew Marsden (instructed by Bankes Ashton, of Bury St Edmunds) appeared for the respondents.
Thomas Elliott, barrister
