England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NORWICH COUNTY COURT
His Honour Judge O'Brien
Claim No: 1UC08120

		Royal Courts of Justice Strand, London, WC2A 2LL
		27th November 2013

Lord Justice Rimer :

Introduction

1. This appeal is by Noel Farrer and Farrer Huxley Associates, a firm of chartered landscape architects. Mr Farrer is a partner in the firm with his wife. Mr Farrer and the firm were defendants in the action. There is, however, no need to draw a distinction between them. The relevant contract was entered into by Mr Farrer in his capacity as a partner of the firm, and I shall refer to the appellants simply as Mr Farrer. The respondent, claimant in the action, is Susan Wiles.
2. Mr Farrer's appeal is against an award of damages of £48,521.70, plus interest, made against him and the firm by His Honour Judge O'Brien's order of 12 November 2012 in Norwich County Court. The award was made up of (a) £30,337.72, plus VAT of £6,117.54, totalling £36,455.26, being the costs of correcting defects to a property owned by Ms Wiles; and (b) consequential losses totalling £12,066.44. Mr Farrer appeals only against element (a) of the award. He asserts that, at least in part, it compensated Ms Wiles for damage she had not suffered.
3. Mr Troman represented Mr Farrer and Mr Althaus represented Ms Wiles, as they both also did before the judge.

The facts

4. In December 2001, Ms Wiles became interested in buying a 200-year old property known as Queens Arms Mews, Sands Road, Slapton, Devon. It was originally a coach house or agricultural building built into a hillside. It needed refurbishment. The asking price was £159,000. Ms Wiles's offer of £150,000 was accepted. She commissioned a survey and Mr J. Stanton FRICS produced one on 25 January 2002. He valued the property at £150,000 and identified several defects, including movement of the structure, with extensive distortion of the walls and roof. He did not consider immediate action was essential but did recommend the obtaining of an engineer's report. Other defects he identified were cracks in external walls; defective pointing; defects in roof tiles, flashings and roof verges; distorted, broken or missing gutters and downpipes; rot in the external joinery; an uneven first floor with wood beetle infestation; a substandard attic floor; distorted roof trusses; and dampness in several wall areas.
5. Ms Wiles used this survey to achieve a price reduction to £148,000. She did not take up Mr Stanford's recommendation to instruct an engineer. On 12 March 2002, she exchanged contracts to buy the property. On about 19 March, she had a meeting with Mr Farrer, whom she had known since 1992. She knew he had carried out several renovations to create holiday lets. She showed him Mr Stanton's report. She made it clear that the refurbishment works she wanted done needed to allow for, or deal with, the structural defects identified in the report. Mr Farrer understood that it was an important part of her project to use the property for holiday lets. He agreed to do the design work for her. She completed the purchase on 27 March.
6. Mr Farrer visited the property on 29 April with an assistant, Mr Boyd, an architectural technician. They carried out a survey and took measurements. They did not suggest that Ms Wiles should take up Mr Stanton's recommendation to instruct an engineer.
7. In May, Mr Farrer produced plans for the conversion of the property into a two-bedroom one. Following discussions with Ms Wiles, and agreed minor amendments, Mr Farrer sent revised drawings to her on 5 June. Ms Wiles then decided that she wanted three bedrooms and three bathrooms. On 22 August, Mr Boyd sent her revised plans and specifications. Ms Wiles sent these to a local builder, Mr Barton, and asked for a quotation for the works. On 7 September, he provided her with one of £35,000. Ms Wiles accepted it and he started work later that month.
8. On 2 November, Mr Farrer invoiced Ms Wiles £2,195 for his work. She paid him on 21 November.
9. Mr Barton completed his work in April 2003. After that, and until January 2004, the property was used by Ms Wiles and her friends. In February 2004, Ms Wiles let it on an assured shorthold tenancy. From September 2004, it was available as a holiday let through English Country Cottages ('ECC').
10. In 2005, Ms Wiles decided to upgrade the property to five-star status with ECC. A query arose in early 2006 about Building Regulation consent. Mr Barton dealt with it by liaising with the District Council and carrying out various minor works. Later in 2006, Ms Wiles decided to sell the property and gave the required 12 months' notice to ECC in October 2006.
11. Ms Wiles put the property on the market in 2007 at an asking price of £275,000. She accepted the Greens' offer in July 2007 of £250,000, but they withdrew in August 2007 because of an adverse survey. She then accepted the Potts' offer of £250,000, but they too withdrew in October 2007 because of an adverse survey.
12. At that point, Ms Wiles commissioned a survey of the property by a structural engineer, Mr Bolderson. He inspected it on 13 November 2007 and provided his report later in the month. He said:

'The building is in reasonable condition however works carried out for its conversion to a dwelling have left some structural elements and in particular the suspended timber floors and the roof structure in a below standard condition. General maintenance and standard of finishes is very good.'

He recommended that works be undertaken to strengthen the second floor structure and radical works to the roof to correct the 'racking' or leaning over. He suggested consideration be given to a complete roof replacement.

13. Ms Wiles reported this to Mr Farrer on 28 November, whose response was that any structural problems were Mr Barton's responsibility. On 28 January 2008, Ms Wiles informed Mr Farrer that she was considering suing him for professional negligence.
14. Ms Wiles moved into the property in June 2008 and has lived there ever since. In view of Mr Bolderson's report, she did not feel able to let it and she could not afford the rent on her Norwich flat without income from the property. In April 2009, she resigned from her Norwich Union employment. She complained that damp problems with the property had increased. In May 2009, she attempted to sell the property at auction. There was little interest and in July 2009, on the auctioneer's advice, she withdrew the property from the proposed sale.

Ms Wiles's claim and the judge's judgment

15. Ms Wiles issued her proceedings against Mr Farrer on 31 January 2011, claiming damages for breach of contract and tortious negligence. The judge said that in the circumstances of the case there was no significant difference between the two causes of action. The heart of her complaint was that Mr Farrer had failed to recommend the appointment of a structural engineer. She also complained that he had failed to appraise the condition of the property, failed to make or recommend investigations for upgrading its fabric, and failed to take account of its structure in his design proposals. She claimed the additional costs of remedying the original defects, the costs of remedying the damage caused by the conversion works, damages for the diminution in value, loss of rental value and wasted expenditure in her attempts to sell the property.
16. Following a single joint expert architect's report of 7 July 2009, Mr Farrer admitted all the claimed breaches of duty and did not pursue his claim that any damage was caused by Mr Barton. The report had made it clear that Mr Farrer should have paid more attention to the structural make up of the building and should have consulted, or have advised Ms Wiles to consult, a structural engineer to comment on its soundness and, in particular, its roof.
17. The primary issue at trial was that of causation: Mr Farrer's stance was that his negligence had caused no loss. His case was that the conversion works did not exacerbate the (if any, and he denied there were any) pre-existing structural defects and that it would cost no more, or not significantly more, to address any such problems in 2012 than it would have done in 2002. The judge said that the causation issue required him to consider three sub-issues: (i) whether the implementation of Mr Farrer's 2002 design caused the property to sustain damage and, if so, how much it would cost to remedy it; (ii) whether works were now required to remedy pre-existing problems and, if so, how much more would they cost in 2012 than in 2002; and (iii) what, if any, consequential damages could Ms Wiles recover. The judge had oral expert evidence from Ian Paterson, a building and engineering surveyor called by Ms Wiles; and from Kevin Isaacs, a building surveyor called by Mr Farrer. He also had reports from others, including Mr Bolderson's of November 2007.
18. Mr Paterson's opinion was that, before the carrying out of the renovation works in 2002, the property was already suffering from structural defects and that as a result of Mr Farrer's breaches of duty, these defects were not remedied by the works; and, moreover, that Mr Farrer's design, which did not have proper regard to the existing defects, had caused significant deterioration to the structural condition of the property. The judge summarised this opinion as follows:

'46. Mr Paterson's principal conclusions were that the structural fabric of the property had deteriorated as a consequence of the works undertaken under the design and supervision of [Mr Farrer] and that [Ms Wiles] has wasted money in carrying out renovation works before addressing the structural problems. In his 2010 report he calculated the damages in respect of the property attributable to [Mr Farrer] as £38,351.'

19. Mr Farrer's case, based on the opinion of Mr Isaacs, was that, before the property was renovated in 2002, it did not suffer from structural defects, and Mr Farrer's design did not cause any deterioration to the structural condition of the property after April 2003, when the works were completed. The judge summarised that opinion as follows:

'47. Mr Isaacs' opinion is that the property is not a defective building, the renovation works have not harmed it structurally and accordingly [Ms Wiles] has suffered no damage.'

20. In paragraphs 48 to 64, the judge engaged in a careful consideration of the oral evidence give by Mr Paterson; and in paragraphs 65 to 79, he carried out a like exercise in relation to Mr Isaacs' evidence. He then made these important findings, which involved a rejection of part of Mr Paterson's evidence:

'80 … I wish to make it clear that I find no satisfactory evidence that anything done in the works of 2002-3 weakened or damaged the property. Most of the problems considered in this case were identified in Mr Stanton's report in 2002. So far as the roof is concerned, Mr Stanton said that the structural defect was long standing and unlikely to be progressive. Mr Paterson had no evidence by way of mensuration that the racking had worsened since 2002. Although he thought it had worsened, he could not be sure of this. I accept [Mr Farrer's] submission that the works of 2002-3 did not cause or exacerbate structural damage to the property.

81. There is no evidence that the removal of internal walls caused any structural damage to the property. Firstly, there is no evidence of progressive damage since 2003. Secondly, the walls removed, although they have had some bracing effect on the ceiling or floor above were by no means what would normally be regarded as structural walls. The structure was supported by the external walls.'

21. The judge explained that the nub of Ms Wiles's claim was that Mr Farrer proceeded with the renovation works without first establishing what, if any, works needed to be done to the structure of the property; and he had also failed to obtain Building Regulation consent. Her case was that if Mr Farrer had acted with reasonable care, he would have advised her to appoint a structural engineer to consider the proposed development. Mr Farrer had admitted as much, and the judge found as a fact that, had he so advised Ms Wiles, she would have instructed an engineer. The judge said that the crux of the matter came at the next stage:

'84. … [Ms Wiles] submits that the structural engineer would have advised that preliminary works were carried out to safeguard the structural integrity of the property and ensured that the works complied with Building Regulations. [Mr Farrer's] case is that no such preliminary works were required because the property was not a defective building. This proposition depends solely upon the evidence of his expert building surveyor, Mr Isaacs.'

22. The judge reviewed the evidence relating to this issue, including what Mr Bolderson had said in his report of November 2007. He had referred to the conversion works as having left the suspended timber floor and roof structure in a below standard condition. He had concluded that the roof was not only well below current building standard but that it would not take much to cause at least a localised collapse. He had concluded that it needed considerable works to make it structurally sound, and he had set out what the required works were. He had also concluded that the second floor structure was under considerable strain and below current building standards, and he had also set out the works he recommended. The judge's conclusion was that:

'93. It is clear to me that on a balance of probability any competent building engineer instructed to report on the property in 2002 would have reached the conclusion that Mr Bolderson reached in 2007 in respect of works required to the structure before refurbishment.

94. … I reject [Mr Farrer's] submission that the property is not and was not defective and that there are and were no structural defects to be remedied either now or in 2002. … I cannot accept [Mr Isaacs'] opinion that the agreed racking of the roof does not constitute a defect. This is an opinion which flies in the face of all the above evidence. The fact that evidently the roof has not collapsed since 2002 does not mean that it is not at risk of imminent collapse.

95. I am further satisfied that the second floor structure, even as strengthened by Mr Barton, is inadequate and defective and requires further structural work as identified by Mr Bolderson and Mr Paterson. When the building was originally constructed as a stable or agricultural building the ceiling beams for the 1^st floor were more than 5 feet apart. No doubt this was adequate to support a ceiling which did not have a load bearing floor above it. The insertion of intervening beams by Mr Barton reduced this to about 800mm (2ft 8 inches). Modern Building Regulations require floor joists to be no more than 400 mm apart. Mr Paterson said that they should be no more than 600 mm apart. I cannot accept Mr Isaacs' view that floor joists 800 mm apart are adequate to support a load bearing living room floor.

96. On the evidence overall, I cannot believe that any engineer advising a potential purchaser would give any other advice than that these structural works are required to remedy the defects in the property. I am satisfied that the property was defective.

97. I am further satisfied by [Ms Wiles's] evidence that she would have accepted such advice and required the structural problems to be remedied before spending money on renovating the property.'

23. The judge then held that Ms Wiles's damages could be calculated fairly easily. He said:

'105. … They are shown on a Schedule of Loss put in at the end of the trial with computations agreed subject to liability. The extra costs today of correcting defects is £17,515.23 for the roof; £7,624.49 for the second floor structure; £1,000 for the first floor area; £450 for damp proofing; and £3,750 for professional fees; a total of £30,337.72 to which VAT will to be added [which was £6,117.54, thus making the total of £36,455.26, being element (a) referred to in paragraph 2 above].'

The appeal

24. Mr Farrer's case is that the consequence of the judge's rejection of Ms Wiles's case that the conversion works of 2002/2003 had caused a deterioration in the already existing (but unremedied) structural defects to the property was that her damages in consequence of Mr Farrer's failure to advise her to obtain a structural engineer's advice could not amount to more than (i) the additional cost of remedying in 2012 the defects which existed in 2002 over and above what it would have cost her to remedy them if the necessary works had been carried out at the same time as the renovation works in 2002/2003; and (ii) the losses consequential upon those remedial works being carried out in 2012 rather than in 2002.
25. It is only the head (i) claim that is in issue; and the judge's error in that respect is said to be that he did not identify this as being the correct measure. He simply awarded Ms Wiles the majority of the costs she had claimed for remedial works to the property, as reflected in the agreed Schedule of Loss that he had referred to in paragraph 105. Although on the face of what the judge there said he was doing no more than awarding Ms Wiles damages in accordance with head (i), it is said that in fact he was not.
26. That submission was developed as follows. The parties' had produced a Scott Schedule, which so far as material set out in three columns (i) the 'Description of Defect/Remedial Works Required', (ii) '[Mr Paterson's] comments and costing for remediation', and (iii) '[Mr Isaacs'] comments and costing for remediation …'. The main item the subject of an alleged structural defect existing in 2002 was the roof. Mr Paterson was of the view that this was such a defect, whereas Mr Isaacs considered it was not. In his comments in column (ii), Mr Paterson explained in paragraph (b) that works ought to have been done to the roof before the conversion works had been carried out in 2002/03, and he was there referring to the then existing structural defects in the roof. In paragraph (d), he then explained how the conversion works had worsened the roof structure and how in practice the remedying of the original defect was now a more major job. He said:

'(d) Furthermore the removal of the transom walls at first floor level which supported the second floor structure has worsened the situation causing a weakening of the overall structure and encouraging roof thrust, racking and roof spread.

Whilst these works would have been simpler at the time of refurbishment the condition has now been worsened due to the lack of support to the roof structure. Therefore in order to efficiently carry out these works the roof covering will need to be removed in places. Due to the roof covering being asbestos slate, this then means total removal of the covering.

(e) The scaffolding is required as part of the remedial works to rectify the roof and problems associated. Scaffolding would not be required had adequate works been carried and specified initially.'

27. He costed the carrying out of the necessary roof repair works at a total of £19,776.09 (including for scaffolding and for the use of tarpaulins when the roof covering was removed), adding that '[Ms Wiles] will allow a credit of £1,400 against the above items to reflect the cost of undertaking repairs had they been undertaken at the time of the original works'. He was there saying that the claim was therefore for (a) the 2012 costs of carrying out the repairs in consequence of his opinion as to the nature of the task that had to be done, less (b) the cost of doing the necessary repair works in 2002/03.
28. Although Ms Wiles had not formally pleaded a case based on Mr Paterson's opinion that the original structural defects had been exacerbated by the conversion works, that became her case at the trial. Mr Paterson was challenged about his 2012 costing of the work that he considered had to be done, and the outcome was that at the end of the trial the parties were able to agree the Schedule of Loss which the judge referred to in paragraph 105. That Schedule was headed '[Ms Wiles's] Schedule of Loss', and it stated that '[w]ith one [immaterial] exception …, all of the figures in the Computation and Total columns are accepted by [Mr Farrer] as a matter of quantum – but not otherwise.'
29. Column (i) of the Schedule then set out the claimed heads of loss, and the material one for present purposes is item 1, namely 'Cost of repairs: amount by which current cost of Remedial Works exceeds original cost of Preliminary Works'. The phrases 'Preliminary Works' and 'Remedial Works' derived from Ms Wiles's skeleton argument for the trial, the former referring to the works that she would have carried out in 2002 if so advised by an engineer, namely 'in order to safeguard the structural integrity of the property and to ensure that the property, once all the work had been done, complied with Building Regulations'; and the latter referring to the works 'now necessary' to 'place [Ms Wiles] … into the position she would have been in if the Preliminary Works had been done back in 2002'.
30. The computation column then set out seven items, of which the first, and most material, was 'Roof and related works: £17,515.23'. The following five items related to other aspects of the remedial works required. There is no dispute that the figure against each item derived from the 2012 cost estimates originally given by Mr Paterson. The reduction in the figures as compared with those he had so given simply reflected the extent to which, either by agreement or as a result of challenges in cross-examination, it was agreed that the Paterson works could be carried out more cheaply in 2012 than he had originally estimated.
31. This brought Mr Troman to identify the mistake he said the judge had made. It was that although the judge had expressly rejected Mr Paterson's evidence that the conversion works had worsened the state of the structural defects to which the property was already subject in 2002, he had nevertheless adopted the agreed schedule as identifying the 2012 costs of rectifying those defects. But as the Schedule reflected the measure of the 2012 costs by reference, inter alia, to Mr Paterson's mistaken opinion that the conversion works had worsened the nature of the original roof defect, there was no justification for awarding damages on that basis. It amounted to awarding compensation for damage that Ms Wiles had not suffered.
32. Mr Troman explained that the mistake arose because each party was running an 'all or nothing' case. Ms Wiles was saying that the property suffered from defects that existed in 2002 and should have been put right then, but that by 2012 the cost of doing so was greater because the conversion works had caused a deterioration in the structure of the property; and Mr Farrer was advancing a case that there were no structural defects in 2002, so that nothing needed to be put right then, nor, as followed, could the non-existent defects have been worsened by the conversion works. The judge reserved his judgment and found that the truth lay between these extremes, namely that there were structural defects in 2002, but that they had not been worsened by the conversion works. He had not, however, invited the parties to address him afresh on what in those circumstances was the appropriate measure of damages. He had simply, and it was said wrongly, adopted the Schedule of Loss, which in material respects included compensation for loss that he found had not been suffered. This was pointed out to the judge on an application for permission to appeal, which he refused. Unfortunately, we do not have the benefit of a transcript of his ruling on that occasion.
33. Mr Althaus, for Ms Wiles, disagreed that the judge had fallen into any error. The outcome of the trial was that the judge accepted each of the allegations of causation advanced in Ms Wiles's particulars of claim save that (contrary to Mr Bolderson's opinion) he did not accept that a structural engineer engaged in 2002 would have advised that the second floor needed levelling, and he rejected Mr Farrer's defence. He also rejected Mr Paterson's opinion that Mr Farrer's designs had made the structural defects worse than they already were. Conversely, he also rejected Mr Isaacs' opinion that there were no structural defects in the property that would have required preliminary works in 2002.
34. Turning to the pleaded cases on quantum, Ms Wiles claimed 'the cost of carrying out remedial works', whilst expressly giving credit 'in respect of the additional costs that might have been incurred by [her] at the time of the original development works, had the design been prepared so as to remedy the pre-existing defects.' Mr Farrer's pleaded response was to deny that any of the claimed loss had been suffered: any loss was limited to the 'additional costs associated with attending to the Structural Issues after the Works have been completed and which would not otherwise have been incurred. [Mr Farrer's] position was that any such costs would be de minimis in value …'. Mr Althaus said that this reflected an element of agreement with Ms Wiles's case.
35. The task facing the judge was therefore to (i) identify the works to be done in 2002/03 in order to render the property into a structurally sound condition in accordance with Mr Bolderson's recommendations; (ii) determine what it would have cost Ms Wiles in 2002 to have those works done; (iii) identify the works needed to be done in 2012 to put the property into the condition it would have been in if the necessary works had been done in 2002; (iv) ascertain the cost of carrying out those works in 2012; and (v) if the latter cost was greater than the former, award Ms Wiles the difference.
36. There was, however, no need for the judge to go through such an exercise in detail since he had been presented with a Schedule of Loss that contained computation figures that had been agreed 'as a matter of quantum'. The 'Head of Loss' column included, so far as presently relevant, the 'Cost of repairs: amount by which current cost of Remedial Works exceeds original cost of Preliminary Works'. The computation column then set out the excess costs figure against seven items, namely (1) roof and related works, (2) remedial works to second floor structure, (3) first floor area, (4) ground floor damp treatment, (5) replacement of render, (6) reset corbel, and (7) professional fees.
37. Given this agreed Schedule, the task for the judge, once he had arrived at his conclusion on liability, was simply to consider, as a matter of causation, which, if any, of the sub-heads of expenditure in the 'Computation' column Ms Wiles (a) would have incurred in 2002, and (b) still needed to incur in 2012. Once he had made his findings as to that, he did not need to inquire further into the question of quantum since the schedule provided an agreed answer. The judge went through that exercise in paragraphs 98 to 105, the net effect of which was that he allowed items (1) (roof repairs), (2) and (3) as claimed; disallowed items (5) and (6); and allowed items (4) and (7) in the reduced sums he explained. He reduced item (4) because the experts agreed that it should be reduced. He disallowed item (5) because Ms Wiles had failed to prove that this work would have been carried out in 2002. He disallowed item (6) – 'reset corbel' - which related to the 'alleged roof spread' because he had found there had never been any roof spread. He reduced item (7), professional fees, so as to reflect the reduced work in respect of which such fees would have been and would be incurred.
38. In the result, Ms Wiles's position is that this was a case in which the judge had agreed evidence as to the loss suffered on the basis of the findings that he made. Whilst he rejected Mr Paterson's evidence that the works done in 2002/03 had caused a deterioration in the pre-existing defects, the schedule was not predicated on the basis that Mr Paterson's evidence in this respect would be accepted. It was predicated simply on the basis that the court had to be satisfied that Mr Farrer's admitted breach had resulted in the 10-year deferral of the relevant sub-heads of expenditure, and Mr Paterson's evidence identified that expenditure.

Conclusion

39. I was for some time attracted by Mr Troman's argument, which I regarded as having an intuitive appeal. On the other hand, if the judge committed the error attributed to him, it was a surprising one. His judgment was a model of care. He assessed the evidence with conscientiousness and thoroughness and was in no doubt as to his finding that he should reject Mr Paterson's evidence that the original structural condition of the property had been worsened by the carrying out of the conversion works. It does not appear to have occurred to the judge that such rejection was then required to be fed into his damages assessment.
40. In my judgment, the judge made no error in this respect. Where does the rejection of that part of Mr Paterson's evidence take Mr Farrer? In my view, nowhere. All it means is that the structural defects that Mr Paterson had identified (and that Mr Isaacs had denied) were not made worse by the conversion works. It does not, however, mean that such structural defects were not the like defects that existed originally, or therefore that the agreed 2012 costing of the works required to cure them was not a sound one.
41. As Mr Althaus fairly recognised, it can perhaps be said that the consequence of the judge's rejection of Mr Paterson's opinion as to the cause of the state of elements of the structural defects probably means that Mr Paterson understated the 2002/03 cost of curing the defects. That is because, on the judge's finding, things were as bad then as now. But that point does not appear to have been argued before the judge, any more than it was argued before us. The argument before us was not that the Mr Paterson had understated the 2002/03 costs, but that he had overstated the 2012 costs. Mr Troman did not seek to change the nature of Mr Farrer's case by seeking to make capital out of this way of viewing the evidence, and there is in my view anyway no justification for allowing a new appellate tack of that nature to be adopted now.
42. In short, I have come to the conclusion that the appellant's case is founded on a fallacy. The fallacy is the failure to recognise that whilst Mr Paterson had erroneously diagnosed the cause of the state of the structural defects he saw, he had nevertheless correctly identified their nature and had produced a cost estimate for their cure in 2012 that provided a basis that the parties were either able to agree, or in respect of which, as he did, the judge was able to make appropriate findings sufficient to enable him to assess the damages to which Ms Wiles was in principle entitled. Having been provided with the agreed material as to cost that the parties had put before him, the judge proceeded to make that assessment, and I do not consider that he fell into error in doing so.
43. I would dismiss the appeal.

Lord Justice Ryder :

44. I agree.

Lady Justice Sharp :

45. I also agree.