England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(TECHNOLOGY & CONSTRUCTION COURT)
(HIS HONOUR JUDGE RICHARD HAVERY QC)

		Royal Courts of Justice Strand London WC2A 2LL Tuesday 22 May 2001

1. LORD JUSTICE PILL: This is an application for permission to appeal made by the defendants in the action, Fletcher Ramos & Company, who are chartered surveyors practising at Heswall in the Wirral. They were found liable to the claimants in the action, Republic International Trust Company Limited and Mr and Mrs Leighton, the trustees of the M J Taylor settlement, in the sum of £401,000 by reason of damage, which the judge found that the claimants had suffered as a result of a negligent report upon a property which the claimants purchased.
2. The property is Stretton Hall, Stretton, near Tilston, Cheshire. It is a distinguished building, reconstructed in 1763. It is a substantial detached country house, standing in extensive grounds. It is clear that the purchasers were anxious to buy this property and that the relevant events occurred over a short period of time.
3. The defendants submitted a substantial report on the property running to 63 pages. It is in conventional form. The judge found in certain respects that the report was negligent and that further advice should have been given to the claimants. It is common ground that they would not have purchased the property had further warnings been given.
4. The property was purchased in the sum of £1.25m, which is the sum at which the defendants valued the property. The judge found that the property was worth £775,000. It is common ground that the measure of damage is the difference between the value of what, on the basis of the report, the claimants were entitled to believe they were buying and the value it actually had in 1993 when the purchase took place. The figures I have given do not quite tie up. There is no need to go into further detail about that. There was a modest additional award for loss of use during repair work and there are other items which led to the assessment of damages.
5. The defendants seek leave to appeal against the judge's findings: first, on the finding that they were negligent; second, on the basis that, if there was any negligence it did not cause the loss; and, third, on the basis that the assessment of damages was faulty in principle. The hearing lasted for eight days and the judgment of His Honour Judge Havery QC is comprehensive.
6. On behalf of the applicants, Mr Fernyhough QC has referred to passages in the report and to warnings which were given by the defendants, including warnings in relation to dry rot. He submits that the judge has adopted the wrong test to the question of liability. He acknowledges that in two respects the judge has found that the defendants were negligent in their survey, that they made insufficient observations and drew insufficient conclusions upon a bressummer beam, a substantial beam in the premises. They also failed to detect defects in the leadwork of the parapet which has been shown to us on the photograph. Mr Fernyhough draws attention to the fact that there were findings in the defendants' favour on certain points and the detailed findings against them were limited in extent.
7. I deal first with the question of negligence with which the question of causation is tightly bound up. In paragraph 8 of the judgment, having posed the questions which he considered relevant, the judge stated:

"Thus the body of the report, before the discussion section, gave some warning of dry rot, but no indication that the house might be riddled with a massive attack. There were warnings of damp conditions, but nothing to give a purchaser who was willing to spend some money on the property (and any purchaser of such a property would be in that category) cause for anxiety about buying it. That that was the tenor of the report is borne out by the discussion section, which expresses 'some cause for concern regarding the possible long term problems that could arise from any outbreak of dry rot'. That does not in my judgement imply, and certainly does not emphasise the risk of, an existing outbreak of dry rot. The same applies to the recommendation that there was no reason why the client should not proceed with purchase of the property. The recommendation that reliable specialist investigations be undertaken is preceded by the words 'in proceeding with purchase' and is clearly intended to be complied with after purchase.

I conclude that the report contains no adequate warning of a serious risk of existing massive dry rot in the building, such as to give the client reason to doubt whether he should buy it. The body of the report, the summary and the recommendations were all to the same effect."

8. If that finding was justified, it is difficult to see that the judge could come to any conclusion other than that which he did, or that there are any arguable grounds of appeal. I see the force of Mr Fernyhough's criticism of the first question posed by the judge at paragraph 6:

"....whether the report gave due warning of the risk of existing massive dry rot."

9. The point is made that that statement is made with the benefit of hindsight. It became clear when renovation work was commenced on the property after purchase that there was indeed massive dry rot in the premises. But, it was submitted, that was not known, and could not reasonably have been known, before purchase by the surveyors. In my view, however, the judgment does not fall by reason of the question being defectively framed. In substance, it seems to me that the judge was saying that the report failed to give warning of dry rot which in the event turned out to be massive.
10. The judge made findings of fact which he set out at paragraphs 31 to 33:

"31. There were a number of features in this case suggestive of an increased risk of water penetration.

32. Mr Tytherleigh noted in his report that there was some open joint pointing to the standstone copings, and commented that some modest pointing was appropriate.

33. There were also defects in the lead of the parapet gutters. The parapet gutters were covered with duckboards. Those boards were about ten feet long and Mr Tytherleigh did not attempt to lift them. He was thus unable to see the condition of the leadwork."

11. The judge then went on to consider the evidence given by Mr Tytherleigh and concluded:

"The effect of that evidence is that Mr Tytherleigh considered it unnecessary to inspect the leadwork of the parapet gutters since he found no evidence of water penetration associated with problems with the parapet gutters. For the same reason he considered it unnecessary to state in his report that he had been unable to lift the duckboards and inspect the gutters, or to recommend that an inspection be undertaken.

34. I do not accept that that was a reasonable course of action. Prima facie, a surveyor should properly inspect the lead of the gutters. That must be a most important part of his survey, regardless of whether he has found or ought to have found evidence of dry rot. If he has found it impossible or unsafe to inspect the lead of the gutters I would expect a careful surveyor at least to say so. Indeed, Mr Tytherleigh did report on the condition of the duckboards (which he referred to as snowboards) and recommended their general replacement, yet made no mention of the danger or difficulty to him of removing them. Moreover, there would have been no danger in lifting the duckboards over the bay or adjacent to it. He did not lift those duckboards either.

35. The lengths of lead in the parapet gutters were too long by modern standards, and in consequence thermal movement was liable to cause overstress in the lead. There were indeed cracks in the lead. If Mr Tytherleigh had lifted a duckboard over the parapet gutter adjacent to the flat roof of the bay, he would have seen a tear in the lead. Mr Hawley was shown a photograph of that tear taken in 1995. He was of the opinion, which I accept, that it would have been there in 1993."

12. I would add that Mr Fernyhough accepts, as he has to, that there can be no challenge to the findings of fact in the paragraphs I have read. At paragraph 47, under the heading "Negligence", this important paragraph appears:

"I am satisfied that Mr Tytherleigh was negligent in not observing that the bressummer had been repaired. He ought to have observed that it had been repaired and to have concluded that its repair might have been necessitated by dry rot. That would have been evidence of past ingress of moisture into the building; indeed, he saw water staining on the underside of the roof boarding. He ought to have appreciated that his damp meter reading or readings in the roof space gave no assurance that the interior of the brickwork in contact with the beam was not a reservoir of moisture, let alone that it was incapable of becoming such a reservoir. He ought then to have looked again carefully at the roof. Such inspection ought at least to have revealed the crack in the lead adjacent to the flat roof over the bay. In that case, he ought to have appreciated that the condition of the fabric of the building was such as could lead, or could have led, to an outbreak of dry rot, and to have said so in his report. If he considered himself unable to inspect any of the leadwork, his report ought to have stated that fact. In either case, his report ought to have contained a warning that the client should not buy the house without carrying out investigation into possible dry rot unless the client were willing to run the risk of possibly extensive damage by dry rot."

13. The case turns on that last sentence. As with the earlier paragraphs, Mr Fernyhough is in no position to challenge the judge's findings in the earlier part of that paragraph. The defendants' case is that, in the circumstances, sufficient warning was given and the judge was wrong to find that a sufficient warning was not included in the report.
14. Reliance is placed upon sections of the report, in particular the section headed "Dry Rot" where dry rot is referred to, is detected, and in strong terms a reference is made to the risks and hazards presented. It is submitted that, since a warning was given in relation to those matters, the position was covered. Moreover, if the claimants, or those acting for them, ignored the warning given under the heading "Dry Rot" (as it was), then they would have ignored the warning given in relation to the bressummer beam and the lead flashing. In the circumstances it is submitted that causation is not established; the claimants would have purchased in any event.
15. Mr Fernyhough submits that it is for the client to decide whether to take the risks involved. If he decides to go ahead upon receipt of the report, then he cannot attempt to blame the defendants. It was submitted that it was wrong in the last sentence of paragraph 47 to find in those circumstances that there was a causative breach of contract or negligence on the part of the defendants.
16. The judge attached importance to the concluding part of the report, in particular the section of the report headed "Recommendations" which reads:

"Following the survey inspection and report general comments and recommendations, it is considered that there is no reason why you should not proceed with purchase of this property provided it does fulfil your personal requirements. You are mindful of the items that will require immediate/early attention and in view of the size and age of the property, ongoing maintenance attention will have to be anticipated as in any period property, but particularly one of such generous size.

Nevertheless this is a quite superb building and certainly appears to combine the attractions of a country house and yet be of reasonable sized maintainable proportions. Nevertheless, these points are for one of individual choice.

In proceeding with purchase it is nevertheless recommended that the following items be dealt with."

17. A number of items are then set out, the second of which relates to concern about the penetrating dampness which has affected part of the property adjacent to the rainwater downpipe. That subparagraph concludes with the statement:

"As aforementioned, an outbreak of dry rot in any part of the property could spread regardless of the condition of those timbers that could be subsequently affected."

18. The claimants knew of the insidious nature of dry rot and of the great potential for it spreading and for causing damage which is very expensive to deal with. Mr Fernyhough attached importance to the fact that those concerned on the purchasers' side read very little of the report. The chronology is such that it was available only before the purchase with which they were most anxious to proceed.
19. We have been referred to passages in the transcript. They attached importance to, and they were properly cross-examined in some detail upon the wording of, the report and to the statement in the recommendations, "it is considered that there is no reason why you should not proceed with purchase of this property provided it does fulfil your personal requirements". Mr Fernyhough says it was incumbent on the prospective purchasers to read the report as a whole. He submits that, had they done so, they could not have been unaware of the risks that dry rot presented.
20. In the passages to which I have referred, the judge found that no sufficient warning was given in the circumstances. He also found that such conversation as occurred on receipt of the report did not affect the matter one way or the other (paragraph 61 of the judgment). There is no doubt that reference is made in the body of the report to dry rot and to its potential significance. I have a good deal of sympathy for the defendants who prepared the report, helpfully, with the best of intentions, knowing of the anxiety of the proposed purchasers to proceed as soon as possible. However, I have come to the conclusion that the judge was entitled to reach the conclusion he did on the findings of fact which he made. It is not arguable that this court would reverse them if permission were to be granted.
21. Any report of a professional person is likely to be read, first, by way of a "recommendation" which appears at the end of the report. Of course that recommendation may specifically refer to earlier parts; it may qualify any recommendation by reference to what has been said before. However, in this case the property is valued as being in the condition which the surveyors believed it to be, knowing, as they did, and as they expressed, that there were certain defects in it, at the figure of £1.25 million. I regard the statement (which I have read twice) in relation to the purchase of the property as being a statement which was inappropriate to the circumstances having regard to the findings in paragraphs 31 to 35 and 47 of the judgment. Moreover, it was a statement on which the prospective purchasers were entitled to rely.
22. They received a report in which a valuation was given and which the recommendation was made that "there is no reason why you should not proceed with the purchase of this property". In my judgment the recommendation having been made in that way, it cannot be said that any sufficient warning was given of the dry rot which, as it emerged, had massively infested this property. There was negligence in failing to detect its possibility in certain respects. Had those steps been taken, had the warning been given, then a finding could not sensibly have been made against the defendants. But that was the recommendation they gave.
23. It is submitted by Mr Fernyhough that the warning which follows the paragraph I have read is a warning as to what the prospective purchaser should do before purchase. Like the judge, I cannot read the expression, "in proceeding with purchase" in that way in the context of the report, nor the expression "you are mindful of the items that will require immediate/early attention". These are likely to be construed by a reader, as indeed with respect I would construe them, as being guidance as to what should happen upon a purchase of the property and not as a warning that the property should not be purchased unless further investigations were made into it. In my judgment the judge was entitled to reach the conclusion he did. It is not arguable that his conclusion could be disturbed in this court.
24. I said at the beginning of this judgment that causation goes with the question already considered. If prospective purchasers were entitled to read the report in this way, as I have found they were, it follows that they were entitled to rely on the recommendation and to purchase the property on the strength of it. In the event, very unfortunately, the property was found to have a massive invasion of dry rot.
25. Two points are taken on quantum. The first is that the judge assessed damages by reference to dry rot which could not be attributed to the breaches of duty which the judge found to have existed. A subsidiary point was also taken under this heading, namely, that the judge had included damages for items where warnings had been given. We have, however, been referred to paragraph 90 of the judgment, which indicates that the judge did not take those matters into account; whether he should or not does not fall for consideration. This point has not been taken in the notice of appeal. It is mentioned in the skeleton argument. If the court saw any merit in it, Mr Fernyhough submitted that he would seek permission to amend the notice of appeal. I am not surprised that counsel did not put it in the notice. It is not, in my judgment, a good point. First, the measure of damage is that between the value of the property as it was stated by the surveyors to be with such defects as they recognised, and the value which in fact it had. That was the correct basis followed by the judge.
26. It was common ground that, had the warning been given, as the judge found it should have been, the property would not have been purchased. The fact that on the judge's findings the defendants had not behaved negligently in other respects does not in my judgment alter the assessment of damages. The claimants have purchased a property which, subject to point 2 on quantum, was worth £775,000 instead of the £1.25 million for which it was purchased.
27. The second point on quantum is that there was insufficient evidence to justify the judge reaching the conclusion he did as to the cost of remedying the dry rot. It was common ground, and rightly so, that the calculation in difference in value should be assessed by reference to the cost of remedial works.
28. As has been said in the course of argument, the procedure followed by the claimants when the dry rot was discovered was, by conventional standards, less than careful. One would have expected them to have employed, especially with the resources available and the character of the house, independent professional advice upon the work. Mr Fernyhough also submits that they should have made the contract with the contractors on a different basis, that there was a lack of cost control and, he submits, in the result, the judge has reversed the burden of proof in assessing the cost of repair. No proper records were kept as to the apportionment of the remedial work as between work which resulted either wholly or in part from the dry rot and other work unconnected with it.
29. A claimant who proceeds in this way is likely to be in difficulty in proving his claim because courts routinely require good records to establish the cost of work such as this. I would certainly not recommend claimants in cases such as this to proceed as these claimants did. I do not consider Miss Hannaford's (Mr Fernyhough's learned junior) use of the word "startling" in her skeleton argument to describe the lack of control which existed as inappropriate.
30. On this application, this court has to consider whether the judge was entitled to reach the conclusion he did. The contractors, Symm, are specialist contractors. Their employee responsible for the work, Mr Mortimer, also gave evidence at the trial. He referred to what was described as a Scott Schedule, although now further inquiries have been made it appears that the document is more in the nature of an invoice. It runs to 48 pages, with some pages only having a few entries others containing 25 to 30, describing items of work and the costs claimed. The basis which the claimants agreed with Symm was a cost plus rate basis. The judge did reduce the plus from 30 per cent, which had been agreed between the claimants and Symm, to 15 per cent. The valuation resulting from the claim was reduced on that basis.
31. Mr Philip Fidler, FRCS, a quantity surveyor, was jointly instructed by the parties. He too gave evidence. On the basis of the material before him, he was unable to apportion the work between that attributable wholly or in part to dry rot and other work. The most he felt able to do, and he was conscientious about it, was to have a very broad bracket beginning at £66,000, with a figure of several hundred thousand pounds at the other end of the bracket to indicate the position as he could best establish it. The defendants conceded the lower sum. They put the claimants to proof of any sum in excess of that. Mr Mortimer was cross-examined on certain points on a sample basis.
32. Mr Fernyhough has referred to limitations of time; I understand those. However, as a matter of law, the judge was, in my view, entitled to accept the evidence of Mr Mortimer. It would not have been surprising had he not done so, having regard to the absence of suitable records. The judge put it in this way:

"In the case of both wings, the timbers were substantially affected by woodworm. That factor contributed largely to the decision to re-roof at any rate the left wing. A substantial element of the cost was not related to dry rot. The timbers riddled with woodworm were removed, and those remaining were treated for woodworm and dry rot. The total cost does not appear. The budgeted approximate figure was £15,000. Miss Hannaford made the general submission that Mr Mortimer's overall figure of relevant costs in the Scott Schedule contained substantial mistakes and could not be relied on. Since it was not broken down in an intelligible way, the claimants had to prove each item of cost, over and above some items which she accepted totalled £66,000. I reject that submission. I accept Miss Sinclair's submission that the claimants acted reasonably in deciding that the dry rot works, the necessity for which was unexpected, should be carried out as the refurbishment contract progressed. Detailed contemporaneous records of the works, distinguishing between those relating to dry rot and the others, were not kept by Symm in 1995 since they had no reason to do so. The only way in which Symm could perform the necessary costing exercise was by reference to the detailed knowledge which Mr Mortimer and Mr Hooper had of the entire job, and the relative proportions and costs of the dry rot and other elements. I am satisfied that that laborious and difficult exercise was carried out honestly and skilfully, though by no means infallibly. Subject to the evidence that particular corrections are necessary, I regard Mr Mortimer's evidence of the relevant costs as the best evidence available, and broadly reliable. I shall deduct £15,000 for this item. In my judgment, that figure will not give rise to injustice to the defendants, and takes into account the fact that the burden of proof lies on the claimants."

33. Miss Hannaford made the submission that Mr Mortimer's written material was not broken down in an intelligible way, that Mr Fidler could make no sensible apportionment or evaluation on the basis of it and that the judge ought not to have done so either. The judge rejected that submission. He had the appropriate factors in mind. He was plainly aware that Symm did not keep detailed contemporaneous records; they were not required to by the claimants who had agreed that they would be paid on a somewhat informal basis. I do not say that necessarily critically, but I do understand the defendants' sense of grievance that the claimants did not see fit to keep these records. The question is whether, in the absence of records, the judge could, nevertheless, accept Mr Mortimer's evidence.
34. The key part of the passage is:

"I am satisfied that that laborious and difficult exercise was carried out honestly and skilfully, though by no means infallibly. Subject to the evidence that particular corrections are necessary, I regard Mr Mortimer's evidence of the relevant costs as the best evidence available, and broadly reliable."

35. It is clear that the judge did delete certain items and certain amounts, partly, no doubt, because of Miss Hannaford's cross-examination.
36. In my judgment, the judge was entitled to accept Mr Mortimer's figure. Mr Fernyhough does not suggest that if, for example, of six items where there was a challenge half of them were shown to be good challenges, the judge should, as a matter of rote, have halved the number of claims which Mr Mortimer could make. That would not be appropriate. The argument is that permission to appeal ought to be given so that the question of whether the judge was entitled to accept oral evidence, supported only by the detailed Scott Schedule, could properly be accepted.
37. I have set out the factors which I have in mind. The judge carefully set out the factors involved and the reason why in the particular circumstances of this case he considered it right, subject to the qualifications mentioned, to accept the evidence of Mr Mortimer.
38. I cannot see that any question of reversal of the burden of proof arises. Mr Mortimer gave his evidence. The judge was well aware that it was for him to establish the figure on behalf of the claimants. Mr Mortimer was subject to cross-examination. One appreciates the difficulties of any cross examiner on the limited material available. It cannot be said, as a matter of law, that further evidence was required or that the claimants must necessarily lose their claim by virtue of the absence of appropriate records to support the claim they have made.
39. I repeat my expression, to use a colloquialism, "the rough end of the stick" which the defendants have suffered in this case, both on the question of liability and quantum. These were issues which, had matters proceeded somewhat differently, in my judgment, are likely to have been resolved in a different way. It was their report and the claimants were entitled to rely on it in the way the judge found. I agree with his conclusions. On the question of quantum, they were liable to the extent which the judge found, once the judge, for reasons he gave, found Mr Mortimer a convincing witness and accepted his evidence.
40. For those reasons, it is not arguable that this court would allow an appeal against the judgment and I would refuse this application.
41. LADY JUSTICE ARDEN: I agree that this application must be dismissed for the reasons given by my Lord, Lord Justice Pill.
Order: Application refused with costs. Stay of execution on judgment sum awarded to the claimants imposed pending outcome of application lifted.