England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE TECHNOLOGY
& CONSTRUCTION COURT
(HIS HONOUR JUDGE RICHARD SEYMOUR)

		Royal Courts of Justice Strand London WC2 Monday, 8th October 2001

Monday, 8th October 2001

1. LORD JUSTICE JUDGE: I shall ask Lord Justice Jonathan Parker to give the first judgment.
2. LORD JUSTICE JONATHAN PARKER: This is an appeal by Mr and Mrs Robert Smith, the claimants in the action, against an order made by His Honour Judge Richard Seymour QC, in the Technology & Construction Court on 27 April 2001. The judge refused permission to appeal, but permission was granted by Kay LJ on the papers on 26 June 2001.
3. The appellants appear by Mr Jacques Algazy of counsel (who did not appear below); the respondent, Peter North & Partners, a firm of Chartered surveyors, appear by Mr Simon Henderson (who did).
4. In the action the appellants claim damages against the respondent in respect of an allegedly negligent survey carried out by the respondent for the appellants of a dwellinghouse at Brookfurlong Farm, High Cross, Shrewley, Rowington, in Warwickshire ("the property") prior to the appellants' purchase of the property in October 1997. By their Particulars of Claim the appellants allege that the respondent acted negligently and in breach of contract in various respects particularised in paragraph 7 of the Particulars of Claim. By paragraph 8 of their Particulars of Claim the appellants allege that in consequence they have suffered loss and damage and have been put to inconvenience and distress. Particulars of loss and damage are then pleaded. Paragraph (i) of those particulars claims the cost of repairs and remedial work to the property in an amount not less than £130,000. Paragraph (ii) claims the cost of seeking alternative accommodation during the execution of remedial works and of removing and storing furniture and effects. By paragraph 9 of their Particulars of Claim the appellants claim recovery of the professional fees paid by them to the respondent, on the basis of a total failure of consideration.
5. By his order, the judge struck out paragraph (i) of the particulars of loss and damage pleaded under paragraph 8 of the Particulars of Claim; he also struck out paragraph 9 of the Particulars of Claim; and he entered summary judgment for the respondent on the question whether (assuming the appellants' pleaded case on liability to be established) the appropriate measure of damage was the cost of carrying out repairs to the property ("the cost of repairs measure") or the amount by which the market value of the property in the condition described in the respondent's report exceeded the market value of the property in its actual condition at the date of the appellants' purchase ("the diminution in value measure"). The appellants appeal against the striking out of paragraph (i) of the particulars of loss and damage and against the entering of summary judgment: there is no appeal against the striking out of paragraph 9 of the Particulars of Claim.
6. The judge declined to strike out paragraph (ii) of the particulars of loss and damage, and there is no cross-appeal by the respondent against that part of the judge's order.
7. The factual and procedural background to the appeal is in summary as follows.
8. The property is a Grade II listed property of timber frame construction. It stands in some 21 acres of land. In about September 1997 the appellants, who were contemplating purchasing the property, retained the respondent to carry out a survey of the property. There is an issue as to the precise terms and scope of the respondent's retainer, but for present purposes it must be assumed that the appellants succeeded in establishing that (as they plead in paragraph 3 of their Particulars of Claim) the respondent was engaged "to conduct a full structural survey on the property and to advise them about its structure, condition and any necessary repairs to the property." In the light of an argument presented by Mr Algazy (to which I shall refer later) it is of significance to note that the property there referred to is the house itself. This is clear from the words which follow: "...which was a Grade II listed building of timber frame construction."
9. It is, of course, common ground that, whatever the precise terms of its retainer, the respondent owed the appellants both a contractual and a tortious duty of care.
10. A Mr Knight, an associate of the respondent firm, duly inspected the property and produced a written report dated 1 October 1997. On 27 October 1997 the appellants purchased the property for the price of £330,000, and they pleaded that they did so in reliance on Mr Knight's report: indeed in their response to a Part 18 request for further information they assert that the price of £330,000 was arrived at through a process of negotiation from an initial asking price of £350,000 down to £330,000 "in reliance on the repairs and the estimated costs advised by the [respondent]". The respondent does not admit that the appellants relied on the report, but, once again, it must for present purposes be assumed in the appellants' favour that they did so.
11. The action was commenced on 11 October 2000 and Particulars of Claim were served in November 2000. The appellants' case on liability is, broadly, that the respondent failed to advise them of the actual structural condition of the property. Although some 23 particulars of negligence are pleaded in the Particulars of Claim, the main thrust of the appellants' complaint is that the respondent failed to highlight the condition of the main timber frame superstructure. As already indicated, the appellants' claim by way of damages the cost of repairs to the property, together with additional damage, and the return of the fees paid to the respondent.
12. By its Defence, which was served on 30 November 2000, the respondent denies liability. As to damages, paragraph 20(a) of the Defence denies that the cost of repairs measure is the appropriate measure of damages.
13. At a case management conference held on 1 December 2000 the judge indicated to the appellants his provisional view that the cost of repairs measure was unlikely to be the appropriate measure, and suggested that the appellants might consider amending the Particulars of Claim so as to seek damages by reference to the diminution in value measure. In the event, the judge ordered the parties jointly to instruct a single expert on valuation who was "to be instructed to report on the value of the property... as at 27 October 1997 (a) in its actual structural condition... (b) in the condition described in [Mr Knight's report] [and] (c) in the condition alleged in the [Particulars of Claim]".
14. Pursuant to that order Mr Anthony Ridgway of Fisher German was jointly appointed as the single valuation expert. In a written report dated 20 April 2001 Mr Ridgway stated in his opinion that, as at 27 October 1997, the value of the property in its actual structural condition was £340,000, its value in the condition described in Mr Knight's report was also £340,000, and its value in the condition alleged in the Particulars of Claim was £325,000. In other words, Mr Ridgway concluded that the value of the property at the date of purchase was £10,000 more than the appellants paid for it (the purchase price was £330,000) and that its value in its actual condition was the same as its value in the condition described in Mr Knight's report. It follows (and this is common ground) that if the appropriate measure of damages in this case is the diminution in value measure, as opposed to the cost of repairs measure, the recoverable damage under that head also is nil. It must also follow that if the cost of repairs measure applies and the appellants were to succeed in recovering the cost of repairs in a sum of not less than £130,000, they would have acquired the property with the benefit of the repairs for (at most) a net outlay of £200,000 (that is to say £330,000 less £130,000).
15. In the light of Mr Ridgway's report, the respondent applied to the judge to strike out the reference to the cost of repairs measure pursuant to Part 24 of the Civil Procedure Rules, and to give summary judgment for the respondent under Rule 3.4 of the Civil Procedure Rules on the question whether (as the respondent contends) the diminution in value measure is the appropriate measure of damage in this case. In addition, as noted earlier, the respondent applied to strike out the claim for the return of fees paid by the appellant and the appellants' claim for additional damages representing the cost of obtaining alternative accommodation and storage costs. In the event, the only substantive issue which arises on this appeal is as to whether the appropriate measure of damage is the cost of repairs measure or (as the judge concluded) the diminution in value measure. I say the only substantive issue because Mr Algazy, for the appellants, has a procedural objection to the course which the judge took in making the order which he made.
16. At the hearing before the judge on 27 April 2001 the appellants relied on two witness statements by Mr Anthony Biebuyck, of their instructing solicitors, which had been served on the respondent only on the day of the hearing. In those witness statements (and in particular in his second witness statement dated 26 April) Mr Biebuyck gave evidence as to the terms of the respondent's retainer and as to the nature of the property. He also deposed the reasonableness of the appellants' decision to remain in the property despite the alleged lack of repair, rather than reselling it. As to the respondent's retainer, Mr Biebuyck says, in effect, that Mr Knight was not instructed to prepare a valuation of the property, but merely to advise about repairs. As to the nature of the property, Mr Biebuyck describes it as being not simply a domestic property, but part of the appellants' extensive business premises and equestrian facilities. In his first witness statement he says:

"The property was not simply a domestic house but part of the [appellants'] business premises of 20 acres of extensive and equestrian facilities."

17. In his second witness statement he says (in paragraph 9):

"Because this was only one building, it is likely, as indeed is the opinion of the joint valuation expert, that the repairs would have no significant effect on the value of property overall. That is indicative of the irrelevance of valuation since nothing that the defendant either did or did not do under the retainer could affect valuation. The expenditure by the claimants has not increased valuation. The effect of the defendant's default has been for the claimants to suffer the costs of repair. That is therefore the relevant measure of loss and damage with consequential losses. They cannot therefore recover their expenditure except through an award of damages. Watts v Morrow [that is a reference to authority to which I shall refer later in this judgment] dealt with a residential property for domestic occupation by a single family, pure and simple without any complications. It is also a case where most of the value of the property lay in the house itself. That is far from the case here."

18. As to the appellants' decision to remain in the property, Mr Biebuyck says this (in paragraph 10 of his second witness statement):

"The claimants' circumstances are also wholly different from those of claimants in domestic residential properties seeking damages against valuers. The Warwick area is the centre of the show-jumping world. It is convenient for international transport links and many important members of the show-jumping community live locally. This property was bought from other show jumpers and the neighbours include Nick Skelton, who is of equivalent status to the first claimant as one of the top two or three show jumpers nationally. The claimants had moved lock, stock and barrel with staff, horses and equipment from their premises in Essex and, having given up those premises, had to continue to pursue their business. That was obvious at the outset of the retainer. They had no alternative but to remain in this property, which was uniquely suited to their needs. By keeping the property and repairing and reinstating it, they were mitigating their loss as far as they possibly could. They carried out minor works sufficient to enable their business to be pursued despite the state of the premises while they moved to domestic accommodation elsewhere."

19. Given that Mr Biebuyck's witness statements were only served on the day of the hearing before the judge, with the consequence that the respondent had no opportunity to answer them, the respondent now seeks an order under Rule 52.11(2) of the Civil Procedure Rules enabling it to rely on a further short witness statement by Mr Knight, addressing the points made by Mr Biebuyck. The application was not opposed and accordingly we granted it.
20. In his further statement Mr Knight says that it is not correct that he was not instructed to provide a valuation: he says that he was instructed by Mrs Smith, the second appellant, to provide a mortgage valuation to Lloyd's Bank, which he duly did. However, so far as the terms of the respondent's retainer are concerned, as I have already said it has to be assumed for present purposes that the retainer was in the terms pleaded by the appellants. As to the nature of the property, Mr Knight says that at no stage was he informed or advised that the property was to form part of a complex of commercial equestrian facilities, and that he recalls that he was informed that the property was to be the appellants' family home.
21. I can now turn to the judge's judgment. Unfortunately no transcript of the judgment is available, but we have been provided with an agreed note of the judgment which we are told has been approved by the judge. Addressing the issue as to the appropriate measure of damage, the judge said this (according to the agreed note):

"In my judgment the proper approach to damages for alleged negligent survey was established in the Court of Appeal in the line of authority from Philips v Ward through to Watts v Morrow. These decisions are binding on me and I must follow them. Therefore the cost of repairs basis for loss as pleaded in the Particulars of Claim cannot succeed. Although these decisions are binding, I consider them right in principle. A surveyor agrees to exercise reasonable care and skill to inspect the property to detect features of the property which ought to be brought to the clients' attention and to take care in setting out his findings in their report. He does not warrant the state of the building or the accuracy, only to exercise care and skill.

If a surveyor expresses a view as to value he should expect the client to rely on it. If a client purchases a property, he invests in the acquisition of an asset and that asset may or may not be worth what was paid. If the client pays more than the value of the property the excess in the price represents the loss that the client has sustained as a result of his reliance on the surveyor's report. If a client does not purchase the property he has not made a loss. Where the client forms a view as to the extent of the repairs to be undertaken to the property following purchase, it must be common ground that they are contemplating meeting this expenditure in the execution in the work and the supply of materials to improve the property. If a client spends a larger sum then the excess he has to pay is not a consequence of any deficiency in the surveyor's report, but is a consequence of remedying a defect in the property. In any event if, notwithstanding the repair bill, the property was worth what the client paid for it, then there can be no loss. It is not relevant that the repairs undertaken by the client may or may not lead to a pound for pound increase in the value of property.

Therefore the argument based on the costs of repair cannot succeed."

22. The judge then went on to consider the claim for repayment of professional fees, saying this:

"The alternative claim based on alleged failure of consideration is unsustainable. If the defendant had done what they were contracted to do they are entitled to their fee and that is so although the premise is that they have not done what they were contracted to do. The claimants have performed their part of the contract in payment of the fee."

23. The judge then went on to address the claim for additional damages, but since there is no cross-appeal against that part of his order I need not read any more of the note of his judgment.
24. The judge accordingly made the orders sought in relation to paragraph 1 of the particulars of loss and damage pleaded under paragraph 8 of the Particulars of Claim, and in relation to paragraph 9 of the Particulars of Claim.
25. I can now turn to the arguments which have been addressed to us on this appeal. I start with Mr Algazy's procedural objection to the course which the judge took in striking out the relevant parts of the Particulars of Claim and in giving summary judgment to the respondent on the damages issue.
26. Mr Algazy submits that it was not appropriate for the judge to reach the conclusions and to make the order he did without first hearing and making findings on the evidence - in other words, without a trial. Mr Algazy points to the unresolved issues of fact as to the terms of the respondent's retainer, and to the extent to which Mr Knight was made aware of the appellants' requirements for the property and its prospective use as an adjunct to (if not part of) a commercial equestrian complex.
27. In his written skeleton argument Mr Algazy submits (somewhat inconsistently, perhaps) that the judge embarked on the (admittedly) impermissible exercise of conducting a mini-trial. Mr Algazy has referred us to the much-quoted observation of Lord Woolf MR in Swain v Hillman [2001] 1 All ER 91 at 94, to the effect that the proper disposal of an issue under Part 24 does not involve the judge in conducting a retrial, but rather that the purpose is to enable the court to dispose summarily of cases which have no real prospect of success.
28. Mr Algazy submits that the issue as to the appropriate measure of damage ought to be allowed to proceed to trial, so that the factual background can be investigated, issues of fact resolved and any proper factual inferences drawn.
29. On the substantive issue, Mr Algazy entirely accepts that the weight of authority, following the decision of this court in Watts v Morrow [1991] 1 WLR 1421, favours the diminution in value measure over the cost of repairs measure, at least in the context of domestic purchasers. At the same time, he reminds us that the diminution in value measure is not to be applied in a mechanistic or automatic fashion, and that the court must consider the particular facts arising in each case. Mr Algazy submits that the judge was guilty of applying the diminution in value measure mechanically, in that he gave no consideration to the question whether the cost of repairs measure might be the appropriate measure in the particular circumstances of this case. Mr Algazy further reminds us that the authorities expressly recognise that the application of the diminution in value measure is no more than (to adopt the description used by Bingham LJ in Watts v Morrow at 1444 and by Nourse LJ in Patel v Hooper & Jackson [1999] 1 WLR 1792, at 1801B) the "prima facie rule."
30. Mr Algazy has referred us to a passage in Clerk & Lindsell on Torts 18th Edition, at paragraph 8-126, where the diminution in value measure is referred to as the normal measure. He submits that in negligence cases involving defective property (that is to say cases against architects, quantity surveyors, engineers or building contractors) the issue as between the cost of repairs measure and the diminution in value measure has not been decisively settled. He referred us to a passage in Charlesworth & Percy on Negligence, 9th Edition, paragraph 8.55, which states:

"The measure of damages will depend upon the nature of the defendant's breach. The plaintiff should be restored, so far as he can by money, to the position he would have occupied had a breach of duty not occurred. The starting point for claims will usually be the cost of rectification but in appropriate cases consequential loss may be recovered and also damages for physical inconvenience."

31. Mr Algazy also relies on the decision of this court in Harbutt's Plasticine v Wayne Tank & Pump Co Ltd [1970] 1 QB 447 (a case in which the defendant's negligence caused a building to be destroyed by fire). Accordingly he submits that (and in this he is in my judgment plainly correct) that the prima facie rule established in Watts v Morrow is not an absolute rule, and that its application depends upon the facts of the particular case.
32. In the course of his oral submissions today Mr Algazy has referred us to two cases in which the prima facie rule established in Watts v Morrow was held not to apply. Those cases are Zeneca Plv v King Sturges, an unreported decision of Mr Recorder Rupert Jackson QC, judgment being given on 18 September 1996; and Hanley Smith v Darlington [2001] EG 160. As I understand the position, however, Mr Algazy was not putting forward these cases as anything other than examples of cases in which the prima facie rule has been displaced. At all events, the cases do not appear to me to be in any way on all fours with the instant case.
33. Turning to the evidence in the instant case, Mr Algazy submits that there are five factors which (at least arguably) point to the cost of repairs measure as being the appropriate measure of damage. In the first place he points to the terms of the respondent's retainer as contended for by the appellants (that is to say that the respondent was retained specifically to report on repairs and not to provide the appellants with a valuation). Second, he points to the appellant's evidence to the effect that the property was to be used as part of a complex of commercial equestrian facilities, rather than purely as a domestic dwelling. Third, he asserts - although there is as yet no specific statement in the evidence of the appellants to that effect - that Mr Knight was aware of the appellants' requirement in relation to the property. Fourth, he submits that on the appellants' evidence valuation was not relevant to the respondent's retainer given that the appellants' specific requirement was "to ascertain the cost of repairs necessary to provide equestrian facilities which included living accommodation." In the course of his oral submissions, however, Mr Algazy accepted that, as it stands, that statement (in his written skeleton argument) is something of an overstatement of the appellants' case. On analysis it seems to me that this fourth factor adds nothing to the first factor on which Mr Algazy seeks to rely.
34. Finally, Mr Algazy submits that it follows from Mr Ridgway's valuation that expenditure would not have enhanced the market value of the property. He submits that this is a further significant factor.
35. Mr Algazy puts at the centre of his submissions the twin factors that Mr Knight was, on the appellants' evidence, retained only to advise on the question of repairs, and that, again on the appellants' evidence, the appellants were, to Mr Knight's knowledge, acquiring the property for essentially commercial purposes. He submits that in those assumed circumstances it is at least arguable that the appropriate measure is the cost of repairs measure, and he invites us to allow the appellants the opportunity to argue that case at a trial.
36. Mr Algazy submits that the fact that (if their claim succeeds) the appellants will have acquired the property - with the benefit of repairs costing at least £130,000 - for a net outlay of (at most) some £200,000 - that is to say some £140,000 less than its market value in its actual condition at the date of their purchase, according to Mr Ridgway's valuation, does not mean that they have been overcompensated, given that the property is not to be regarded as simply a domestic property, but rather as a commercial acquisition. Mr Algazy relies in this connection on the evidence of Mr Biebuyck (to which I referred earlier in this judgment) to the effect that it was reasonable for the appellants to remain in the property following their purchase, rather than to resell it.
37. Finally, in his written skeleton (although this was not a submission on which he elaborates in oral argument) Mr Algazy submits that it is arguable that Mr Knight impliedly warranted that no repairs beyond those mentioned in his report would be required to the property following the appellants' purchase, and that the respondent is accordingly liable in damages for breach of that warranty, the appropriate measure being the cost of the repairs which Mr Knight impliedly warranted would not be necessary.
38. I turn next to the submissions made by Mr Henderson. On the procedural issue Mr Henderson submits that the judge was plainly acting within his powers under the Civil Procedure Rules in identifying the measure of damages issue as one which was suitable to be decided in advance of trial and in making the order which he made. Mr Henderson submits that there is no question of the judge having conducted a mini-trial; rather, the judge rightly categorised the appellants' case on the cost of repairs measure as being one which had no real prospect of success. In making the order he did, Mr Henderson submits the judge was giving effect to the purpose of the relevant rules, as expressed by Woolf MR in Swain v Hillman.
39. As to the substantive issue, Mr Henderson submits that the rule (as it was described by Ralph Gibson LJ in Watts v Morrow) is not an arbitrary one, but one designed to place a claimant so far as possible in the position he would have been in had the defendant not been negligent (see per Morris LJ in Philips v Ward [1956] 1 WLR 471 at 476). In the instant case, had the alleged negligence not occurred, the appellants would have (Mr Henderson submits) been faced with the choice of trying to negotiate a (further) reduction in the asking price or pulling out of the purchase altogether. On the evidence, submits Mr Henderson, there is no basis for the assertion that the appellants could have secured any further reduction in the asking price (which, on Mr Ridgway's valuation, was already £10,000 below the market value).
40. Mr Henderson submits that cases in which the defendant's negligence has caused damage to the property in question (for example the Harbutt's Plasticine case) are distinguishable from cases involving a negligent survey. He relies in support of this submission on a passage from the judgment of Denning LJ in Philips v Ward at 473, a passage which was cited with approval by Ralph Gibson LJ in Watts v Morrow (at 1430).
41. Mr Henderson submits that the five factors on which Mr Algazy relies as taking the instant case outside the general rule that the appropriate measure of damage is the diminution in value measure do not even arguably, and whether taken singularly or collectively, displace that rule.
42. As to the nature of the property (as alleged by the appellants) Mr Henderson points out that this is not a factor which appears in the appellants' pleading. However, he does not rest his case on any technical objection of that kind. Rather, he submits that even if one assumes that the appellants' evidence is correct, and if one further assumes that Mr Knight's evidence that he was not aware of the appellants' intentions as to the use of the property is rejected, there is no reason on that account to displace the general rule. He submits that there is no rational basis for supposing that the intended use of a property will dictate the proper measure of damages, and that no coherent attempt has been made on behalf of the appellants to explain why this should be. He submits that whilst reliance on the commercial element in the purchase may (depending on the facts and no relevant facts have been pleaded here) entitle the appellants to further damages additional to any damage disclosed by the application of the diminution in value measure, that would provide no basis for substituting the cost of repairs measure for the diminution in value measure. In this connection he relies on a passage from the judgment of Nourse LJ in the case of Patel & Another v Hooper & Jackson [1999] 1 WLR 1792 at 1801B, where Nourse LJ said this:

"So far I have referred only to the prima facie rule [that is a reference to the rule established by Watts v Morrow] which is now recognised by the defendants to entitle the plaintiffs to recover £25,000 plus £250 in respect of stamp duty. However, each case depends on its own facts and here it is said that there are special features which entitle the plaintiffs to additional damages."

43. Similarly, Mr Henderson submits that the fact (if it be a fact) that Mr Knight was not retained to provide a valuation but merely to report on the state of repair of the property does not affect the measure of damage. He submits that if the appellants had known the true extent and cost of the repairs required they would still have been faced with exactly the same choice: either to attempt to negotiate a further reduction in the asking price, or to abandon the purchase altogether. He points out that in Watts v Morrow itself the plaintiffs are plainly far more interested in the state of repair of the property than its market value.
44. Mr Henderson submits that the appellants' reliance on supposed commercial factors is, on analysis, no more than a submission that it was reasonable for the appellants to remain in the property rather than resell it. As to that he relies on a passage in the judgment of Ralph Gibson LJ in Watts v Morrow (at pages 1435-1436) in which he rejects that very argument, concluding that the reasonableness of the decision not to resell is irrelevant to the question whether recovery of the cost of repairs is justified in order to put the plaintiff in the position in which he would have been if the surveyor had not been negligent.
45. As to Mr Algazy's submission to the effect that it is arguable that Mr Knight impliedly warranted that no further repairs would be required, Mr Henderson points out in his written skeleton that this case has not been pleaded nor has it found its way into the grounds of appeal. He submits that there is no sensible basis on which it could be argued that such a warranty is to be implied in this case. If it was to be implied in this case, then, Mr Henderson submits, it would be implied virtually in all surveyors' negligence cases, and the general rule establish by Watts v Morrow and earlier authorities would be substantially and unjustifiably restricted and undermined.
46. So far as the procedural issue is concerned, in addressing the substantive issue whether the appellants' pleaded case that the appropriate measure of damages was the cost of repairs measure had any real prospect of success, the judge was, in my judgment, acting fully within his powers under the Civil Procedure Rules. In order to determine that issue he had, of necessity, to see whether there was any possible evidential basis for the appellants' case. In the event, he concluded that there was not. In so doing, the judge was not conducting a mini-trial: he made no findings on disputed issues of fact. On the contrary, he was doing precisely what the Civil Procedure Rules require. The course which he took was, in my judgment, fully in line with the underlying purpose of the relevant rule as identified by Lord Woolf MR in Swain v Hillman, namely to dispose summarily of cases which have no real prospect of success.
47. I turn, then, to the substantive issue.
48. On the substantive issue I accept Mr Henderson's submissions. In my judgment this is a straightforward case to which the general rule established by Watts v Morrow and the earlier authorities applies.
49. As has been emphasised throughout the authorities, the task of the court in awarding damages in a case such as this, as in any case where damages are awarded for breach of contract, is to place a claimant so far as possible in the position in which he would have been had the contract not been breached (see, for example, Denning LJ in Philips v Ward at 473, cited with approval by Ralph Gibson LJ in Watts v Morrow at 1434H). Equally, as Morris LJ said in Philips v Ward (at 476):

"...the plaintiff must not be place in a better position by the award of damages than he would have been in had the defendant given a proper report."

50. In my judgment, to apply the cost of repairs measure in the instant case would be to place the appellants in a substantially better position than they would have been in had Mr Knight given a proper report (assuming for present purposes that he failed to do so). As noted earlier, an award of damages which enabled the appellants in effect to carry out repairs to the property to a minimum pleaded cost of £130,000 entirely at the respondent's expense would mean that the appellants had acquired the property, with the benefit of the repairs, for a net outlay of (at most) some £200,000 - that is to say, some £130,000 less than the market value of the property at the date of purchase, according to Mr Ridgway's valuation. I cannot for my part see how an award of damages on that basis could possibly be reconciled with "the restitutionary or compensatory principle which underlies the award of damages in contract" (see per Bingham LJ in Watts v Morrow at 1444D). Rather, the application of the cost of repairs measure in the instant case would in my judgment lead to substantial injustice to the respondent.
51. Mr Algazy sought, as I noted earlier, to draw a parallel between the instant case and cases in which the defendant's negligence has caused damage to the property in question. In my judgment, however, those cases are of an entirely different character. Denning LJ referred to this difference in Philips v Ward at 473, where he said:

"We were referred to the cases where a house is damaged or destroyed by the fault of a tortfeasor. Those cases are, I think, different. If the injured person reasonably goes to the expense of repairing the house, the tortfeasor may well be bound to pay the cost of repair, less an allowance because new work takes the place of old."

52. To my mind it is not difficult to see why in such cases the application of the compensatory principle may lead to an award of damages equal to the cost of repairs to the property; the reason is that, absent the defendant's negligence, the property would not have needed repairing. In other words, had the contract been performed, the claimant would have had a property in good repair. That consideration does not, however, arise in a case such as the present.
53. Nor, in my judgment, do the various factors relied on by the appellants serve to take the instant case out of the general rule that the appropriate measure of damage is the diminution in value measure.
54. So far as the respondent's retainer is concerned, even assuming that the appellants have establish success in establishing that it was limited to advising about repairs, that cannot, in my judgment, affect the measure of damages in the absence of a warranty by the respondent to the effect that no further repairs would be required. But, as Denning LJ observed in Perry v Sidney Philips [1982] 1 WLR 1297 at 1302B:

"The surveyor gives no warranty that there are no defects other than those in his report."

55. I agree with Mr Henderson that there is no evidential basis in the instant case for an allegation (as yet unpleaded) that Mr Knight impliedly gave any such warranty. Far from such an implied term being necessary to give commercial efficacy to the contract, it seems to me that, in the context of the instant case at least, the implication of such a term would be positively unreasonable.
56. Nor, in my judgment, does the appellants' intended use of the property as an adjunct to their commercial operation in providing equestrian facilities afford any support for the proposition that the appropriate measure of damage is the cost of repairs measure, even assuming (contrary to his evidence) that Mr Knight was aware of the appellants' intentions in this respect. Leaving aside the fact that such a case has not been pleaded, what is indisputable is that Mr Knight's retainer (whatever its precise terms) was limited to reporting on the condition of the house. I have already referred in this respect to paragraph 3 in the Particulars of Claim. Moreover, there is no evidence that Mr Knight was asked to advise as to, for example, the commercial viability of using the property for or in connection with equestrian activities. Moreover, if there had been such evidence I agree with Mr Henderson that it by no means follows that the cost of repairs measure would be the right measure of damage. I agree with him that it might lead to a claim for additional damages (see Patel v Hooper & Jackson in the passage to which I referred earlier), but in the event none have been claimed beyond the cost of obtaining additional accommodation and storage costs. The same applies, in my judgment, to the fact that, in Mr Ridgeway's opinion, there was no difference in value between the property in its actual condition and the property as described in Mr Knight's report (although that fact may well be relevant to the issue of liability in so far as it appears to be consistent with the proposition that Mr Knight's report contained an accurate description of the condition of the property).
57. All in all, therefore, I am, despite Mr Algazy's submissions, wholly unable to find any arguable basis for the contention that the appropriate measure of damages in the instant case is the cost of repairs measure rather than the diminution in value measure.
58. In my judgment the judge reached the right conclusion and made the right order. I would accordingly dismiss this appeal.
59. MR JUSTICE BODEY: I agree.
60. LORD JUSTICE JUDGE: I agree with Lord Justice Jonathan Parker that on the claimant's pleaded case and the assumed facts, and in accordance with the authorities referred to in his judgment, that the claim for damages should be measured by the diminution in value of the property (if any) rather than the cost of repairs.
61. The essential fact in this case is that following the report prepared by the surveyor in accordance with his retainer, the claimants succeeded in buying their property at rather less than its true market value (that is its value subject to the defects now complained of in this litigation) at the date when the purchase took place.
62. As there is no evidence of any diminution in value and the claim is not based on any such assertion, I agree with Lord Justice Jonathan Parker and for the reasons he has given that this appeal should be dismissed.
(Appeal dismissed with costs; costs assessed at £9,000; liberty to apply).