Hubbard v Bank of Scotland: Court of Appeal (March 2014)
This case confirms the scope of a surveyor’s duty when asked to provide a valuation report for mortgage purposes.
The claimant (Hubbard) purchased, with a loan from Bank of Scotland (BoS), a detached property on a site which had once been a quarry. A valuation report by a surveyor employed by BoS noted two cracks, but no recent movement. After the purchase there was differential subsidence adjacent to the original cracking and the house had to be underpinned.
Hubbard brought a claim against BoS, claiming that the surveyor’s report had failed to state that there was ongoing subsidence, failed to advise Hubbard to take specialist advice and failed to advise that the value of the property was reduced by the cracking.
The Court of Appeal held that the surveyor’s valuation report was not negligent for the following reasons:
- The surveyor’s report was only a valuation report and not a full survey, therefore the duty was more limited and the surveyor did not have to look beneath the surface
- The applicable RICS Mortgage Valuation Specification required a valuer to recommend more extensive investigation if it was suspected that hidden defects existed which could have a material effect on the value of the property. However, the surveyor did not have any such suspicion and there was no expert evidence that there was ongoing movement
- A soil expert gave evidence that the differential settlement was caused by water inundation, but the surveyor was not a soil expert, performed only a visual inspection and did not know and should not have known about the quarry
- Hubbard’s case was unrealistic in expecting a valuer to recommend a full structural survey on the basis of a small, old crack that was not ongoing
The Court of Appeal did not think it was necessary to decide whether the report did recommend that Hubbard took further advice, nor whether Hubbard had relied on it.
Hunt & Ors v Optima & Ors (July 2014)
This case saw the dismissal of a negligent misstatement claim where the statements in architects’ certificates came into existence after the relevant sale.
Claims were brought against Strutt & Parker (S&P) alleging that (i) their certificates as to the proper construction of flats were enforceable warranties; (ii) their certificates were negligent misstatements giving rise to a claim in tort; and (iii) S&P owed (and was in breach of) a duty of care to carry out its professional services with reasonable skill and care for the purpose of the production of the certificates.
The Court of Appeal held:
- The certificates were not enforceable warranties given that they were described as certificates, and made no reference to consideration or assignment of obligations. They also used the words “I am aware that this certificate is being relied upon”
- which would have been unnecessary if there was a contractual liability (for breach of warranty)
- With respect to the claim for negligent misstatement, the claim failed because “reliance must follow representation and cannot be retrospective”. If, as here, the representation was the certificate, it could not be relied upon before it came into existence
- There was no tortious duty of inspection independent of any reliance on the certificate for the purpose of entering into a transaction, although S&P did owe a contractual duty in respect of inspection
The Governor and Company of the Bank of Ireland v Faithful & Gould Ltd & Anor (July 2014)
In this case, the Court found in favour of a valuer in a claim for contribution by a project monitor, on the grounds that the valuer’s negligent valuation did not cause the funder’s loss.
The Bank of Ireland (BoI) lost over GBP 8 million when a developer to whom it had lent money went into administration. BoI sued the project monitor (F&G), which settled the claim against it and pursued CBRE for contribution. The Court found that:
- CBRE’s valuation of the GDV played a real and significant part in BoI’s decision to lend. However, CBRE could not have been liable to BoI for any overvaluation of the GDV, because the losses sustained as a result of entering into the transaction would have been sustained in any event irrespective of whether CBRE’s GDV was right or wrong
- BoI could only have had an arguable case against CBRE on the basis of CBRE’s assessment of the market value of the site. CBRE’s valuation of the site was about GBP 5 million too high
- Notwithstanding the above, F&G failed to prove that CBRE’s valuation of the market value of the site played a real or any significant part in BoI’s decision to fund the development. It was not sufficient for F&G to prove that BoI had relied on the GDV in deciding to lend, as the two valuations (market value and GDV) were separate
Having found against F&G, the Court did go on to consider what the position under the Act would have been had CBRE been liable for BoI’s loss. These obiter comments included an analysis of the meaning of “same damage” under the Civil Liability (Contribution) Act 1978, and consideration of scope of duty, the impact of any contractual or statutory limitation of liability, BoI’s contributory negligence, the applicability of the SAAMCO cap and apportionment as between the defendants in respect of both damages and costs.
STV Central v Semple Fraser (May 2014)
The claimant, STV, instructed the defendant solicitors, Semple, and valuers, CBRE, to secure a lease of new premises. It subsequently became apparent that the new lease contained a rent review clause linked to the retail price index, which had the effect of exponentially increasing the rent payable by STV.
STV pursued an action for professional negligence against Semple, which admitted liability and made an offer which was accepted by STV. Semple then sought contribution from CBRE, submitting that:
- CBRE had a duty to consider and advise on the rent review clause as CBRE had the competence to check the retail price index formula, it was implicitly understood that the members of the professional team advising STV would co-operate with one another and Semple would have been expected to seek assistance from CBRE in respect of the formula, and CBRE had acted in a manner consistent with an acceptance that it was obliged to provide STV with specialist input regarding the formula
- By its actions, CBRE voluntarily assumed responsibility to STV in relation to the advice which it did in fact proffer on the draft clause
The court dismissed the claim and held that, firstly, there was nothing to suggest that STV looked beyond Semple for advice on the terms of the lease, including the retail price index formula. Semple did not point to any contractual document, to any instruction or request made by STV, or to any advice proffered by CBRE to STV in this regard. While Semple would no doubt have welcomed specialist advice on the retail price index formula, there was nothing to indicate that CBRE undertook contractual liability to STV to provide it. Secondly, the court considered the issue of reliance, and found that it was fatal to Semple’s case that it did not expressly aver reliance by STV, and did not, in any event, establish that STV was relying on CBRE’s advice with regard to the retail price index formula.
The fact that the parties were members of a professional team who were expected to co-operate with one another did not give rise to CBRE’s obligation to provide input to STV in respect of the retail price index formula. There was no foundation for the averment that STV instructed CBRE along with Semple to negotiate and finalise a lease with the consortium.
Kellie & Anor v Wheatley & Lloyd Architects (July 2014)
Mr and Mrs Kellie (“the Kellies”) instructed Wheatley & Lloyd Architects (“Wheatley”) to build a garage/workshop at their property. The Kellies initially wanted the garage constructed in a Border Oak style design, but were told by both Wheatley and other architects approached with the project, that such a design would require planning permission which would not be forthcoming. In accordance with the advice given by Wheatley, the Kellies had the garage/workshop constructed in a different style and with a nearly flat roof. The Kellies subsequently claimed that (i) Wheatley’s advice was negligent in that the garage/workshop could have been built in the desired style, having regard to permitted development rights attaching to the property; (ii) they had suffered loss, as the value of their house was less with the flat roof design than with the pitched roof/Border Oak style; and (iii) it would have cost less to build a garage/ workshop to the Border Oak style.
The TCC dismissed the Kellies’ claim and held that:
- There was no breach of duty in relation to the possibility of building in the Border Oak style – whilst the Kellies had mentioned the Border Oak design, they had done so in a general manner and did not purport to make any stipulation or give a firm instruction in this regard. Whilst the permitted development rights could have been exploited, this could only have been achieved with changes to location and design which would have contradicted the Kellies’ instructions. Wheatley’s advice as to the planning and the design had been agreed in advance with a planning officer, which was clearly in accordance with good practice.
- Even had the Kellies been able to establish breach of duty, the claim would have failed on causation as it was unlikely that the planning authority would have granted planning permission for the Border Oak style garage.
- There was no evidence to support the claims for loss – the Kellies had not established that any difference in cost was such that no reasonably competent architect could have overlooked it, and there was no evidence to support the allegation that a Border Oak style garage would have enhanced the value of the property. Even if the Kellies had established that a Border Oak style garage would have enhanced the value of the property, there was no evidence that a reasonably competent architect ought to have known of that difference, or that the failure to explore the value-enhancing properties of a Border Oak style garage was a failure that no reasonably competent architect would have committed.