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Hart v Large – too much information? [2021] EWCA Civ 24

  • Legal Development 8 février 2021 8 février 2021
  • Royaume-Uni & Europe

  • Assurance et réassurance

Can a surveyor’s advice on a prospective property purchase really be classified as “advice” (pursuant to SAAMCo)? Is there really such a thing as a “hybrid” of “advice” and “information”, as the Court of Appeal found – and more importantly, is this finding a concern for all professionals across the board, not just surveyors?

Hart  v Large – too much information?  [2021] EWCA Civ 24

Recap and first instance decision

Mr and Mrs Hart were the prospective purchasers of a cliff-top property in Devon, which had been recently significantly rebuilt and extended. Mr Large was retained by the Harts to provide a RICS Homebuyer’s Report, in which he largely gave the property a clean bill of health. There were discussions between him, the conveyancing solicitors and the buyers themselves around some further investigations which could have been carried out and guarantees sought over the recent renovations – but Mr Large was equivocal in his advice, and no firm recommendations were made. It could not have been further from the truth that the property was largely defect free, as he had concluded. After years of issues, mainly around damp-proofing, it was accepted that the problems were so extensive and deep-rooted that the property eventually had to be demolished and rebuilt.

The judge at first instance found Mr Large negligent for failing to recognise that there were visible indications of potential underlying defects (namely of lack of evidence of damp-proofing), which should have led him to advise, in no uncertain terms, that further steps be carried out before contracts were exchanged. In particular, the judge found that Mr Large ought to have advised the Harts to obtain a Professional Consultant’s Certificate (a “PCC”) from the firm of architects who designed the recent works, Harrison Sutton, which would have given the buyers both some assurance that the renovations had been properly supervised, and a direct right of recourse against this firm if it was found they had been negligent in issuing the PCC in any respect. Mr Large sought leave to appeal on all aspects of the first instance decision, but it was ultimately only the question of the measure of damages on which leave to appeal was granted by the trial judge himself, and is the focus of this note. On this, the Court awarded damages to the Harts to reflect the difference in value between: (i) the property free of defects (in the state as reported by Mr Large) – and (ii) the value of the Property with all of the defects which would have been uncovered and/or certified had Mr Large made the recommendations he ought to have made. Mr Large contended that he should only be liable for damages to reflect the errors he made in the Homebuyer’s report (as provided – of which there were a few), rather than those to reflect the wider defects at the property.

Court of Appeal

The Court of Appeal dismissed Mr Large’s appeal on the measure of damages, and approved the finding of the trial judge on the same reasoning, being that the Harts would have been severely under-compensated if they were only to be awarded damages to reflect the failings of Mr Large as contained in the Homebuyer’s report itself. It reiterated the finding at first instance, that had a PCC and further investigations been recommended, the purchase would have gone no further. The Court commented that it was an unusual case on the facts, and was not departing from any established principle of law in making the finding it did. The central tenet of the judgment seems to be - who bears the risk of unidentified defects? It gave due consideration to Watts v Morrow [1991] 1 WLR 1421 and seemed to draw the conclusion that a diminution in value assessment (value of the property with / without the defects he failed to spot) was a good starting point for measuring damages, but it did not go far enough to factor in the further investigations Mr Large should have recommended, but failed to do so. The Court of Appeal then looked at SAAMCo ([1997] A.C. 191 and BPE Solicitors and another v Hughes-Holland (in substitution for Gabriel) [2017] UKSC 21 and asked the question – was Mr Large giving “Information” to the Harts, or “advice”. In what looks to be a surprising departure from this line of authorities, it said it was both – a “hybrid”. The Court reasoned that Mr Hart was giving “information” (on which the Harts could base their purchase decision), but that – so crucial was his role given what was eventually unearthed – that he was also actually an “advisor”.

Comment and analysis – a worrying direction for SAAMCo?

The Court of Appeal was at pains to point out that this is an unusual case, decided on specific facts. But is that right? Claims against surveyors for failing to advise their clients that a further level of investigation would be necessary, are reasonably commonplace. The Court of Appeal’s finding that damages ought to reflect defects which would have been highlighted by further investigations does not seem to be entirely new. Surely this is just a wider application of Watts v Morrow? What is concerning, however, is that the Court of Appeal seems to reach that conclusion by interchangeably suggesting that Mr Large was providing both “information” and “advice”. A negligent provider of “advice” (pursuant to SAAMCo) has the effect of making the professional liable for the full extent of the loss suffered as a consequence of the Harts having entered into a transaction, which they otherwise would not have had Mr Large advised as he ought to have. The alternative is that the wrongdoer is providing “information” on a discrete part of the transaction as a whole, and even if the claimant can prove it would still not have proceeded had that piece of information been correct, the defendant should nonetheless only be liable for the extent of that piece of information being wrong, serving to “cap” the recoverable losses against them in line with the scope of duty owed, and to reflect by how much he or she “got it wrong.”

The Court of Appeal deciding Mr Large was giving “advice” is tantamount to it saying that he was giving the Harts overarching advice on the merits of them entering into this transaction. Granted, Mr Large should have undoubtedly made unequivocal recommendations in respect of the PCC and a full Building Survey – but saying he was giving “advice” on the transaction, in the way SAAMCo intends this dichotomy to be applied, is possibly a stretch. There would have been a whole host of other factors playing into the Hart’s decision to purchase the property, many of which were simply nothing to do with Mr Large at all. This is not to say that a surveyor could never find its advice to clients as being classified as “advice”, but rather - that this was not an example of it. This case may have been better categorised as a failure to provide an extensive piece of information correctly (i.e. on all of the defects which may have been uncovered), rather than “advice”. The Court of Appeal actually went as far as saying that there were certain aspects (of the transaction) which were outside of Mr Large’s scope – which does not sit well with him giving “advice”. If this was a true “advice” case as per the above authorities, then Mr Large would have gone down for the lot, in principle – the property ultimately had to be demolished after all, which must logically have been of greater financial impact than the diminution in value caused by the defects. But the Court found that the financial consequences of Mr Large’s negligence were the same as the financial consequences of the Harts entering into the transaction – so it concluded there was no need to consider the “Cap” anyway, and the difference between the two did not come up for discussion.

This decision undoubtedly should be a warning to surveyors who fail to advise prospective buyers on the need for further investigations when any warning signs may be present - but this aspect of the decision is nothing really novel. What is new, however, and certainly worrying, is the Court of Appeal’s willingness to find that Mr Large was giving a “hybrid” of “information” and “advice”. The ramifications for professionals from all disciplines, who thought they were just advising their client on discrete points, could be severe. We can see how the Court of Appeal reached the conclusion it did, but as a natural extension of the application of Watts v Morrow – rather than blurring the boundaries created by SAAMCo, which would give better certainty if they were kept distinct. Whilst certainly not a guarantee of avoiding liability for a “full loss” claim by any means, professionals may want to insert a caveat in their terms of business along the lines that they are only providing “information, pursuant to SAAMCo”- although any court will ultimately be interested in the substance of the advice, rather than how the bottle has been labelled.

Fin

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