Surveyor's negligence claims: no tomorrow for Watts v Morrow?

The Facts 

The property was a £1.2 million bungalow located on a cliff top in Devon. It had been significantly reconstructed in 2009, before being put on the market in 2011. However, rather than a full building survey, Mr Large advised the Harts to obtain a HomeBuyer report, which is not as detailed.

Mr Large’s report identified only a couple of issues of concern. The Harts purchased the property but numerous defects quickly became apparent. This culminated in the Harts being told that there were significant structural problems with the property (primarily relating to water ingress and damp), and that extensive remedial works were required.

The Harts brought proceedings against Mr Large, their conveyancing solicitors and the architects who had supervised the 2009 renovation. The claims against the solicitors and the architects were settled out of court. However, the claim against Mr Large proceeded to trial.

At trial, the principal allegations against Mr Large were that he was negligent in (1) recommending a Homebuyer’s report rather than a Building Survey, (2) failing to identify the significant defects at the property and (3) failing to recommend that the Harts obtain a Professional Consultant’s Certificate to obtain some protection against the risk of defects. 

The decision

The Court had sympathy for Mr Large, and did not consider him to have been negligent for not advising the Harts to obtain a full Building Survey. However, Mr Large was held to have been negligent in other aspects of his duty to the Harts.  In particular, it held that he should have (1) highlighted the limitations of his inspection and (2) recommended the Harts obtain a Professional Consultant’s Consultant.

A closer inspection

The finding that Mr Large was not negligent for advising the Harts to obtain a HomerBuy Report rather than a building survey is unsurprising. The Harts’ expert conceded that it was a choice for Mr Large as to which form of report was carried out, and it was not necessarily wrong for him to undertake a HomeBuyer Report. Although the Judge did comment that Mr Large had a continuing obligation “to keep that advice under review (a) in the time between being asked to carry out a survey and reporting following that survey and (b) as appropriate (a very important qualification) when advising after reporting on the initial survey”.

Turning to the other allegations, it is important to note the fact that the property had recently been rebuilt was a significant factor in the Court’s assessment as the Court considered this presented two important risks.

Firstly, a newly reconstructed building will not have been exposed to the elements for very long, and this could impact on the extent of any visible damage.  It was accepted that, at the time of Mr Large’s inspection, the defects which later became apparent were not visible.  The main problem related to damp proofing/water ingress but there was no evidence of damp at the time of inspection – indeed the Judge opined it was “highly probable that sufficient works had been done in anticipation of his survey to disguise the extent of those problems”. Therefore, it is easy to share the Court’s sympathy for Mr Large.  However, the Court was critical of Mr Large in relation to two key aspects.

• Mr Large had essentially given the property a clean bill of health for dampness and damp proofing. When commenting on the damp proofing he had given ‘Condition Rating 1’ in the relevant sections of the report which meant “No repair is currently needed. The property must be maintained in the normal way.” 

However, generally there was no evidence of damp proof membranes and, in reaching this view, Mr Large had assumed that various damp proof courses were installed during the reconstruction, but he had not actually able to see or inspect them.  In the circumstances, Mr Large could not have said if the property had adequate damp proofing and he should have categorised those areas where he could not inspect as ‘Not Inspected’ (as per the appropriate RICS Practice Note). 

• Given the difficulties faced in reporting on a newly redevelopment property, Mr Large should have given greater emphasis to signs of sloppy workmanship (and there were a number of such signs).

The second risk presented by a redevelopment property arose from the lack of contractual protection afforded to incoming purchases. The Court commented that a surveyor might by lulled into a false sense of security because the reconstruction works were inspected by architects, and signed off by building control officers.  However, purchasers of such a property do not automatically obtain the contractual protection of those who had work done. Therefore, in the Court’s words, there was a need to ensure the purchaser has “the total package of advice and protection” and to draw attention in appropriate terms to protections available to the purchaser, including (on the facts of this case) a Professional Consultant’s Certificate.

In this particular case, Mr Large had placed understandable reliance on the previous role of the architects in the reconstruction work but, despite some concerns regarding the inspections carried out by the architect, he did not recommended in his report that such a certificate be obtained. It is notable that Mr Large did advise the Harts in later communications that the certificate be obtained but ultimately he did not advise that it was essential and the Harts proceeded without one.

And so to loss

Rather than spell the death-knell of Watts v Morrow the Court provided a clear explanation why these particular circumstances gave justification for departing from the usual method of assessing loss in such cases. The Court decided this was a ‘no transaction’ case as it accepted the purchase would not have proceeded had the Harts received the appropriate advice. 

In most surveyor’s negligence claims, including Watts v Morrow, the focus is on the role of the surveyor in valuing the property. However, referring to SAAMCo, the Court pointed out that the starting point when assessing loss is to consider the cause of action against the defendant. The major findings of breach of duty against Mr Large related to his failure to recommend a Professional Consultants Certificate, and the purpose of such a certificate was to obtain some protection against defects a surveyor could not identify. 

The Court decided that, were it to follow Watts v Morrow, the risk of such defects would be placed on the Harts when that risks would have either been transferred to the architect (via the certificate) or the transaction would not have proceeded.  Therefore, were the Court to follow Watts v Morrow it would not put the Harts in the position they would have been in had there been no breach of duty and it would be unjust. 

What can be learned?

The decision is a reminder to surveyors that it is important to:

• Continue to assess the appropriateness of the choice of survey during the course of your retainer.
• Explicitly state the limitations on any aspect of your inspection, and if an item cannot be seen/inspected that should be stated.
• Have regard to the types of protection that might be offered to purchasers of new builds/rebuilt property, particularly if your assessment of the property is influenced by the presence of such potential protection.
• Have regard for, and report on, signs of sloppy workmanship and any other issues which might call into question the quality of the rebuild or the potential protection.