Hubbard v Bank of Scotland PLC [2014] EWCA Civ 648

The Court of Appeal has recently recognised the limitations inherent in a mortgage valuation and  the limited duty of care owed by the surveyor carrying out the report.

Facts

Mrs Hubbard bought a property in 2005 with a loan from the Bank of Scotland. Unbeknown to her, the  property  was partly built on an infilled quarry. The Bank’s surveyor, Colleys, had inspected the  property and prepared a valuation report.

The valuation report noted two cracks at the property but concluded “no recent movement, no further  action”. However, the valuation report did not purport to be a full structural survey and through  its guidance noted its limited scope, indicating the option to request a more detailed report, and  suggested obtaining “independent advice” for any problems highlighted.

In 2007, after further cracks appeared, it was established that the property suffered from  differential subsidence. In 2010, a structural survey was undertaken which showed progressive  movement.

Mrs Hubbard claimed that Colleys’ report failed to:

  • State that the subsidence was ongoing
  • Advise her to seek independent specialist advice
  • Warn her that the valuation should be substantially reduced due to cracking

Findings at trial

At trial, the Claimant’s expert argued that the evident cracking of a property built on sloping  ground coupled with a wrap-around extension should have led to a nil value report pending a full  structural survey.

The Judge rejected this, ruling that the surveyor had not been negligent, the valuation was  accurate and the possibility of obtaining independent advice had been mentioned.

Mrs Hubbard appealed, stating that Colleys was in breach of its duty to warn about the risk of  possible future movement.

Court of Appeal

On appeal, the issue was whether a reasonably competent surveyor providing a valuation report would  have recommended taking independent advice and obtaining a full structural survey. If so, the Court  would then consider whether that advice was actually given.

The Court recognised the importance of the limitations of the valuation report. The surveyor who  was only undertaking a visual survey had a more limited duty than the structural surveyor. The fact that the  house was built straddling a former quarry was irrelevant as the surveyor neither knew nor ought to  have known of the existence of the quarry or the nature of the subsoil.

The Court of Appeal dismissed the appeal and found that there was no duty to recommend a full  structural survey as otherwise a surveyor would have to provide a nil value report pending a full  structural survey upon discovering almost any crack in any property.

Commentary

This decision recognises that a valuation surveyor has no duty to identify problems that could only  be uncovered by a full structural survey. A surveyor will also not be expected to recommend a full  structural survey unless his own survey indicates that it is necessary. However, it is important that the scope and the limitations of the valuation report are made very clear from the outset.