Case Izzard (Frederick James)
Name: Izzard (Deborah Jean) V Field Palmer (a firm)
Freeston (Neville John)
Mead (Ian Mckinnon)
French (Benjamin Norman Aubrey)
Ministry of Defence
Casetrack Heading Property/Land Judgement Given
Professional Status Handed
Negligence Down Approved
Casetrack sub- Valuation
Outcome Appeal Dismissed
Comments Dismissed as to liability, Allowed as to quantum to limited extent
Date 30/07/99 Appellant
Division Civil Barrister Mr D. Pearce-Higgins QC
Solicitor Kennedys, London EC1Y 4TY
Case No: QBENF 1998/0478/1 Respondent
Barrister Mr P. Smith QC, Mr M. Stitcher
Solicitor Churchers, Fareham, Hampshire PO16 7BL
Judge(s) Kennedy LJ
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION (PORTSMOUTH
(MR JUSTICE SCOTT-BAKER)
Royal Courts of Justice
London WC2A 2LL
Friday 30 July 1999
LORD JUSTICE KENNEDY
LORD JUSTICE WARD
LORD JUSTICE BROOKE
1. FREDERICK JAMES IZZARD
2. DEBORAH JEAN IZZARD
1. FIELD PALMER ( A firm)
2. NEVILLE JOHN FREESTON
3. IAN MCKINNON MEAD
4. BENJAMIN NORMAN AUBREY FRENCH
5. MINISTRY OF DEFENCE
(Transcript of the Handed Down Judgement of Smith Bernal Reporting Limited, 180 Fleet Street, London EC4A 2HD Tel: 0171 421 4040 Official Shorthand Writers to the Court)
MR D PEARCE-HIGGINS QC (Instructed by Messrs Kennedy's London, EC1Y 4TY) appeared on behalf of the Appellant
MR P SMITH QC and MR M STITCHER (Instructed by Messrs Churchers, Fareham, Hampshire PO16 7BL) appeared on behalf of the Respondent
(As approved by the Court)
Friday 30 July 1999
LORD JUSTICE KENNEDY:
1. This is a defendant's appeal from a decision of Scott Baker J sitting at Winchester who, on 20th February 1998, gave judgement for the plaintiffs in the sum of £67,859.77 inclusive of interest, with costs.
The material facts are as follows - the plaintiffs are a married couple who in 1988 were minded to buy 37 Samson Close, Gosport as their first home. The property was a two storey maisonette in a four storey block built in 1967 for the Ministry of Defence as part of the Rowner Estate. The system of construction was the Jesperson 12M system which combined large concrete panels and timber cladding. In 1986 the Ministry of Defence sold off part of the estate to a developer who renovated the properties and sold them to individuals, many of them being, like the plaintiffs, first time buyers. Other properties were leased to the local authority for a relatively short term but the lease which the plaintiffs were intending to purchase was the 997 year residue of a 999 year lease. The asking price was £42,000, and the housing market at that time was buoyant. The plaintiffs needed a mortgage and approached Allied Dunbar. They discussed with Allied Dunbar the type of survey to be obtained, and were led to believe that a simple valuation report costing £69 inclusive of VAT would detect any major faults, so on 9th November 1988 the first defendant firm, in which the 3rd defendant was partner, was instructed. The letter of instruction from Allied Dunbar asked the defendants "to inspect the property as soon as possible and complete our mortgage valuation form". It was an express condition that the valuation be carried out by an Associate or Fellow of the Royal Institute of Chartered Surveyors, and the recipient of the letter was informed of the proposed purchase price and that the advance applied for was £39,000. The letter concluded by saying -
"Your comments in respect of valuation condition, repairs and retentions should be made with these details in mind".
The third defendant, Mr Mead, was a very experienced local surveyor. He had become a Fellow of the RICS in 1960, and a partner in the first defendant firm in 1966. In 1988 he was completing an average of about 25 mortgage valuations per week as well as other work. He inspected this property on 13th November 1988, and completed his report on the Allied Dunbar form the next day. On page 1 he accurately recorded the type of construction, and the services charges were noted as £200 per annum.
On page 2 three sections are worth quoting. In section 11, headed "Matters that might affect value" the question is asked -
"Is the property readily saleable at or about the valuation figure for the purpose of owner occupation."
Mr Mead answered "yes".
Section 14 is headed "General remarks" and Mr Mead wrote -
"These flats are built to the Jesperson system. They were constructed for the Ministry of Defence and occupied as married quarters until sold in 1986 when they were sold to a developer. The purchasers carried out renovations and sold the individual units. They have proved popular with first time buyers and offer spacious accommodation."
Section 15 is headed "Valuation for present purposes: value in present condition". Mr Mead entered the asking price of £42,000.
At the foot of the page, under the heading "Declaration to Allied Dunbar Mortgages Limited" Mr Mead certified, amongst other things, that "the property is suitable for mortgage purposes".
So the mortgage advance was made, some additional money was borrowed by the plaintiffs from a bank, and on 18th December 1988 they moved into their new home.
In 1991 Mr Izzard obtained a promotion at work which involved moving to Suffolk. By that time house prices had fallen, and on any view the property was worth less than had been paid for it. The plaintiffs decided to move and to try to let the property. Then, in September 1991, the metal support for an access balcony on another block in the Rowner Estate failed. A careful inspection revealed that the problem was widespread. The plaintiffs were unable to maintain payments under the mortgage, so Allied Dunbar re-possessed and in April 1993 the property was sold for £6000.
3. These proceedings
These proceedings were commenced on 26th October 1994. In paragraph 6 of the
Statement of Claim the plaintiffs asserted that the surveyor was negligent in failing to
point out that -
(c) the building had not had a detailed structural appraisal,
(d) in the absence of such an appraisal it was unsafe to proceed with the transaction given the doubts about the structural condition of large-panel system buildings and the known weatherproofing problems with these buildings,
(e) the properties were likely to be expensive to maintain because of potential problems with water penetration,
(f) there were likely to be problems with the funding of the management company in a block of maisonettes of this sort where the majority of lessees were first time buyers with modest incomes and the cost of any structural work was likely to be considerable and,
(g) by virtue of (a) to (f) above the property was worth substantially less than £42,000.
It was also asserted that the surveyor was negligent in failing to advise that it would be imprudent to buy/lend without a detailed structural appraisal by a structural engineer. Further and better particulars were sought of the allegations at (a) and (d) above, in response to which certain publications were identified as sources of information available to the defendants.
A defence was served on behalf of the first to fifth defendants inclusive, the sixth defendant not having been served with the proceedings. The defence denied negligence and drew attention to parts of the wording of the Allied Dunbar valuation form.
4. At Trial.
Before the trial judge Mr and Mrs Izzard gave evidence, and there were called on their behalf three other witnesses - Mr Wilde, Mr Ennis and Mr Godkin. Mr Wilde is a highly qualified and experienced building surveyor. He is a Fellow of the RICS, and was called to express an expert opinion as to what in 1988 Mr Mead ought to have known and what his report should have said. Mr Ennis was a surveyor who had provided a Homebuyers Standard Valuation and Survey Report in November 1988 in relation to another property in the Rowner Estate and Mr Godkin gave uncontested evidence as to what the value of 37 Samson Close would have been if no mortgage finance had been available. His figure was £14,000. The judge also had available a
number of valuations made by other surveyors in relation to other properties in the Rowner Estate which indicated that the figure of £42,000 was not out of line. However Mr Wilde, who the judge found to be an impressive arid impartial witness, asserted that-
(a) by 1988 it was known to competent surveyors that buildings such as that of which 37 Samson Close formed a part gave rise to special problems. As compared with conventional buildings there was an increase risk of structural failure which could be very expensive to put right.
(b) Those who intended to lend or borrow on the security of such buildings should not do so unless -
(i) there had been a structural appraisal of the building by an engineer, which appraisal should be repeated at intervals thereafter, and -
(ii) the arrangements for the payment of service and maintenance charges were not such as to subject the intending purchaser to a very onerous risk.
(c) Even on the best possible scenario (i.e. a clear structural appraisal and a reasonable arrangement for the payment of charges) the ongoing risks were such as adversely to affect the purchase price, but in the present case, where there was no structural appraisal and no real information as to arrangements for the payments of charges Mr Mead's report should have had advised against any advance of Allied Dunbar's funds.
In other words Mr Wilde’s evidence was broadly supportive of the allegations in the Statement of Claim, and Mr Ennis was called because in general his report (albeit a much fuller and more expensive report than the simple valuation provided by Mr Mead) raised the concerns which Mr Wilde said should have been raised. However, as Mr Pearce-Higgins for the defendants emphasized Mr Ennis's valuation figure was well in excess of the figure Mr Wilde considered to be appropriate.
5. Defence Case.
Mr Mead gave evidence for the defence, and so did Mr Powell, who is a Fellow of the RICS employed by James Harris, chartered surveyors, of Petersfield. Mr Powell was called as an expert, but, as the judge pointed out, he mistakenly approached this matter on the basis that he was dealing with a defects case. Mr Peter Smith, Q.C., for the plaintiffs, put to Mr Mead in cross-examination, and Mr Mead accepted, that the Rowner Estate represented his only experience of valuation reporting in respect of system built flats and maisonettes, and, as properties in that estate were not on the market until late 1985 or 1986 his experience of such properties was limited. Assuming his figure of £200 per annum for service charges in respect of the relevant property was correct, the obligation was, it seems, to pay 0.95% of the cost of six blocks, so the total expenditure on all six blocks was only in the region of £20,000 per annum. Mr Mead was not surprised because he said -
"The only feature of which I was aware which might cause high maintenance would have been damp penetration. But at the same time, having inspected similar properties, I had never come across damp penetration in any of the units".
In fact 37 Samson Close was adversely affected by damp penetration soon after it was occupied by the plaintiffs, and although not at the heart of this case damp penetration was a known problem in relation to system-built properties of this type.
Eventually Mr Smith asked -
"Q. Your report therefore gives, does it not, a misleading impression because it fails to anticipate or deal with potential exposure on service charges which might arise in properties like this?
Mr Smith then asked what Mr Mead did to acquire expertise in valuing system built properties and received the answer -
"Specifically I cannot answer, but the sort of actions I would have taken would have been to discuss it with other valuers and surveyors both in the firm and friends, and probably with the local authority building control officer."
Mr Mead was then asked about text books and about articles which had appeared in professional publications, such as Estates Gazette and Chartered Surveyor Weekly. He said that after the Ronan Point disaster in 1968 everyone was cautious but, from what he had read, the Jesperson System was clear. Mr Mead said that the Building Society Valuer by Richard J. Byrom was a text book with which he was familiar, and to which he referred. He then retracted that admission, and accepted that it was unfortunate that he was unaware of the recommendation in the book that –
"A building society valuer should not recommend a property with this form of
construction as suitable security unless a comprehensive and entirely satisfactory consulting civil or structural engineer's report on the building is provided."
It is worth noting in passing that the recommendation is addressed to "a building society valuer" not someone doing a full structural survey. Another text book by Malcolm Hollis, in its 1986 edition, stressed the need to investigate service charge liability, and contained this paragraph-
"From the foregoing you will have seen there are a number of likely failures within this type of building that cannot be investigated within the routine mortgage house or flat buyers report or even a structural survey ... .. unfortunately in this case it will mean that you are very restricted in the extent of identification of the defects that may be present in the building. Because of this it is important that you confirm your instructions carefully and qualify your report so that your client is also aware of the limitations of your report. You may also wish to point out the advisability of a more detailed and destructive investigation of the fabric, provided the vendor will give approval."
Mr Mead was asked -
"Q. Would it not have been better, Mr Mead, if you were embarking on a new type of property for the first time that you would have read sources like this so as to be fully familiar with problems that might affect this type of building?
A. In hindsight, yes, and if I had known of their availability.
The question of availability was then explored, and it became clear that the texts were readily available. Mr Mead was then asked about Building Research Establishment papers of which he was unaware. He said that ignorance was excusable because this was only a mortgage valuation. Mr Smith pressed for clarification -
"Q. You do not think it is necessary when preparing a mortgage valuation to warn the lender and borrower that this building does riot have the kind of appraisals as then recommended by the BRE. Is that you answer?
A. No.1 should have been aware.
Q. And you were not aware, and you did not refer to it, did you?
Mr Mead was asked to look at the Chartered Surveyors Weekly for 25th June 1987, with which he claimed to be familiar. It drew attention to the BRE papers, arid he was asked -
"Now that paragraph surely shows that you should look at those papers as part of the valuation exercise, does it not?
Q. You did not, did you?
The cross-examination continued -
"Q. Follow the BRE guidelines and then following those you can then make recommendations as to advances or not, as the case may be. That is the position, is it not?
Q. So the following of the BRE guidelines is the crucial point, is it not?
Q. You did not follow them, did you?
Both counsel and the judge explored the question of what pre-reading could be expected before undertaking a mortgage valuation and counsel asked -
"You cannot half read up on it. It leaves you half trained, does it not?
In the Chartered Surveyors Weekly for 22nd October 1987 there was another article
about LPS dwellings which Mr Mead believed he had read. It said -
"Jesperson appears to be typical of concrete systems in as much that its problems are not so much structural as psychological and aesthetic, with severe water condensation problems thrown in because of the poor insulation standards of the time."
The article continues -
"A close study of the BRE research, their guidelines on appraisal and conducting such appraisal and repair programmes as openly as possible is now the only way forward for hundreds of councils and hundreds of thousands of tenants."
Mr Mead agreed that would be equally applicable to an intending purchaser, and counsel asked -
"And none of those safeguards are applicable to this block, are they? That is right is it not?
Finally Mr Mead had his attention drawn to an article in the Estates Gazette for 18th July, 1987 headed "A Concrete Problem for a Surveyor". He accepted that he might well have read it. Early on the writer says -
"For later purchasers of former council-owned houses the importance to mortgage surveyors is the fact that if the type of construction is overlooked - even if no defects are immediately apparent - the only compensation available to a purchaser who relies on that report and proceeds to purchase lies in an action in negligence against the surveyor."
There is then a discussion of the structural problems which can arise, and a reference to the BRE studies which enabled counsel to extract from Mr Mead the admission that he really could not do his job without reading the BRE studies. The article continues -
"Depending on the extent of deterioration, the need for remedial work, together with the inconvenience to the occupier will feature large in the surveyor's report: the fact that repairs may be uneconomic will often be the advice to the prospective purchaser and his lending institution. Even if preventative measures are viable, there is no guarantee that further deterioration will not occur in other parts of the structure, while the recommendation for regular future inspections, even for houses where no defect at all is yet apparent, will hardly endear a house to prospective purchasers."
A little later the writer says -
"Purchasers considering buying one of these houses if it is offered for sale on the open market should be warned that they will acquire no rights to make the original owner, the public authority, repurchase when the defects later show through - they, or their surveyor, should have been aware of the defects. It is here that the surveyor carrying out a mortgage survey, let alone a housebuyers report, should proceed with great caution."
The article concludes -
"The building industry and politicians took much pride in the way in which the post-war housing problem was alleviated by using innovative building techniques, but the problems now arising from the design of the systems which have been examined here are now coming home to roost on the doorsteps of owners - and of their surveyors."
Mr Mead conceded that he did not proceed with caution. No doubt if he had the information which he conceded that he should have had, he would have acted differently. He was asked -
"Your report gave none of the health warnings, did it, that it should have done when considering this type of property for this type of buyer for this amount of money?
It is not surprising that in his judgement the judge said that -
"In the light of the evidence of Mr Mead there was little scope for expert evidence on the defendant's behalf. There was nothing that Mr Powell, or anyone else, could have done to assist."
Nonetheless Mr Powell was called and he too found himself in difficulties. He had apparently little experience of carrying out mortgage valuations on system-built properties and he conceded that the property in question might be affected by defects which could not be found without a detailed inspection. He too was asked to look at the literature, and he found himself facing problems to which he, like Mr Mead had no answer. Mr Smith asked -
"Q. Tell me this, Mr Powell, the fact that a building might suffer from the kind of problems that have been identified in these various reports is going to affect its value, is it not?
He was then asked –
"Q. Would you in your capacity as an expert feel that it would be appropriate for a valuation surveyor not to be aware of the recommendations of the BRE?
A. They should have been aware of them, my lord, yes."
The judge said that he found the evidence of Mr Powell less impressive than that of Mr Wilde, and that really the defendants' only point was that a great many others carrying out similar valuations on the Rowner Estate were making similar errors. That, of course, was a clear reference to the written valuations which had been placed before the judge, and which emanated from surveyors who were not asked to testify.
6. Judge's conclusions.
The judge considered the extent of Mr Mead's duty of care. He pointed out that although a building society valuation is only a limited appraisal there is still a duty to take reasonable care when carrying it out (see Roberts V Hampson (1990) 1 WLR 94). Both lender and borrower wanted to know the value of the property and, as the judge found, Mr Mead missed two factors which had a potentially significantly bearing on the value -
(2) the possible extent of maintenance charges.
Mr Mead was negligent because "he should have searched the literature or have taken other appropriate steps to obtain the necessary information to be able to make a skilled professional valuation of the property". The judge rejected the argument that Mr Mead's conduct could be excused because he was doing the same as other surveyors carrying out valuations on the Rowner Estate at the time. For reasons advanced by Mr Wilde, and clarified by the cross-examination of Mr Mead and Mr Powell, what Mr Mead did was simply not what was required of a competent surveyor. Having heard die evidence of the plaintiffs the judge was satisfied that they relied on Mr Mead's report when deciding whether to purchase, so his negligence was the cause of any recoverable loss they sustained.
Damages were awarded under four heads -
(1) loss of value, being the difference between the price paid (£42,000) and Mr Godkin's valuation of £14,000:
(2) an agreed sum of £250 for storage heaters:
(3) £476.57 being the cost of mortgage payments less credit for rent in respect of the period after the plaintiffs had moved and before the property was repossessed:
(4) the sum of £9,600 related to the bank loan. As a result of a recent decision of this court it is now common ground that damages should not have been awarded under this head.
There was also an award of interest, the amount being agreed.
7. Appeal - liability.
Mr Pearce-Higgins put forward four grounds of appeal in relation to liability.
(I) His first submission is that the judge should not have accepted the evidence of Mr Wilde as setting the standard of a reasonable competent valuer carrying out a mortgage valuation in November 1988. It is pointed out, rightly, that Mr Wilde was a building surveyor who had not carried out a mortgage valuation since about 1980. It is said that his evidence is "wholly theoretical and by reference to contemporaneous literature". No one, it is said, was produced who advised as Mr Wilde said that Mr Mead should have advised. In my judgement this ground of appeal is hopeless. Mr Wilde was clearly a witness of great experience in the relevant field as can be seen from his Curriculum Vitae. He said what a competent surveyor should have done to arm himself with the requisite knowledge, and in the end both Mr Mead and Mr Powell agreed with him. If the defendants had been able to call any witness to say that it was excusable to embark on a valuation without some knowledge of the warnings which appeared in the literature, or that in practice it was acceptable not to give effect to those warnings in a valuation report, then the position might have been different, but, in the end there was no such evidence before the judge. So, as he rightly said, "there was no evidence before me as to any alternative acceptable professional practice". Mr Pearce-Higgins submitted that such evidence could be found in, the practice of other surveyors as evidenced by their valuations, but after the judge heard the evidence of Mr Wilde and the cross-examination of Mr Mead and Mr Powell he could hardly be expected to accept that the practice of others who followed the same course as Mr Mead was an acceptable practice without hearing from any of them. In many cases what other professionals do is persuasive evidence as to what is acceptable (see, for example, Bolitho v City and Hackney HA (1998) AC 232 at 241) but such evidence cannot be conclusive, and here the weight of evidence was clearly as the judge found it to be.
(2) The second ground of appeal is that the judge "should have found, on the basis of contemporaneous literature reasonably available to a valuer such as Mr Mead that his advice was that of the reasonably competent valuer." I do not understand how, in the light of the evidence summarised above, this ground of appeal can be regarded as arguable.
(3) Then, it is said that the judge "incorrectly dismissed the evidence before him of the practice of other valuers giving mortgage valuations on properties similar to the subject property, both before and after November 1988. Those valuation reports provided the best evidence of acceptable practice at the material time." For the reasons which I have attempted to explain the judge, in my opinion, was right to regard the practice of other valuers as being in the end of little weight compared with the evidence of those who testified before him. It was certainly not the best evidence of acceptable practice at the material time.
(4) Ground four adds nothing to the preceding grounds.
8. Appeal - Quantum.
Two points are taken in relation to the award of damages. First it is said that the judge fell into error in determining that the value at the material time was £14,000, but once it was accepted that the warnings should have been given, and that in the absence of a structural appraisal and more information as to service charge liability Mr Mead should have refused to certify that the property was suitable for mortgage purposes, it would seem to follow that its only reliable value was the price it could command without support from a mortgage lender. As to that Mr Godkin’s figure of £14,000 was the only evidence. I accept that the judge, having seen and heard the witnesses, could have come to the conclusion that a reasonably competent valuer, practising in the relevant area, would have warned of the need for a structural appraisal, and of the risk of a high demand for service charges, and would have made some downward adjustment to his valuation to reflect those factors, but would not have declined to certify that the property was suitable for mortgage purposes. As can be seen from the judgement of Lord Justice Brooke, there was available to the court a body of material which could have been relied upon to support that conclusion, but, as it seems to me, the judge was entitled to prefer, as he plainly did, the evidence of Mr Wilde in relation to certification. It may be that if the emphasis at trial had been less on liability and more on quantum the judge would have been persuaded to take a different view, but I, for my part, am not persuaded that it is open to us in this court to differ from the judge's conclusions on an issue which depended so much on his evaluation of the oral evidence, and if his conclusion is maintained then, as it seems to me, his approach to the measure of damages was correct. Indeed neither side before us contended otherwise.
I accept Mr Pearce-Higgins' final submission that the award in the sum of £476.57 should not have been made for the two reasons which he gave, namely that it formed part of the loss for which the plaintiffs are properly and fully compensated by the main award, and, secondly, that the plaintiffs cannot have increased the damages which they are entitled to recover from the defendants simply because they chose to let rather than to sell the subject property in August 1991. I would therefore reduce the award made by the judge be deleting items (3) and (4). That leaves the total of £28,250 plus interest, which will need to be re-calculated, and costs.
I would therefore dismiss the appeal in relation to liability, and allow the appeal in
relation to quantum to the extent that I have indicated.
LORD JUSTICE WARD:
I have read the judgements of Kennedy and Brooke L.JJ. in draft.
As Scott Baker J. recorded, Mr Ennis described the property which he valued in these terms:-
"The property is of a type which may not be considered suitable security by some Building Societies, and as a consequence resale of flats of this type may prove difficult."
The judge regarded that evidence as important because:-
"It shows that within days of the plaintiffs' valuation another surveyor who reported on another property close by in the same complex was raising question marks about the soundness of the investment. First he questioned the willingness of some lenders to lend on this type of structure, and secondly he warned about the liability for communal charges."
If that opinion was tentative, Mr Wilde's was not as this passage from the cross-examination makes clear:-
"Q. Then, "Notice to borrowers", that is just the warning there. Then the advice at the bottom to Allied Dunbar, where they say the property is suitable for mortgage purposes, you say that they should have said it is not suitable for mortgage purposes? A. Yes.
Mr Justice Scott Baker: Sorry?
Mr Pearce-Higgins: The declaration to Allied Dunbar, "I certify the property described above has been inspected.. takes account of all matters known to me and that the property is suitable for mortgage purposes." He should not have signed that declaration?
A. I think so, yes.
Q. What else do you say he should have put in the report other than its value as £14,000 and it is not suitable for mortgage?
A. He should have advised that there is likely to be a high expenditure on maintenance, and that it has not been appraised, and unless it has been appraised--- Mr Justice Scott Baker: Just a minute. "High expenditure--"
A. On maintenance on this type of property, and that it needed an appraisal by an engineer before it could be accepted as having adequate life for the period of the mortgage.
Mr Pearce-Higgins: That is it then. In fact all of that could be completely unnecessary, because if he gives a value of £14 000 and says he will not give a certificate for mortgage purposes, that would be the end of the matter?
A. Yes, insofar as he considering the borrower reading his report as well as (sic) the Society, I think he should do that."
The judge said of this evidence:
"I found Mr Wilde to be an impressive and impartial witness, and I accept his evidence."
The evidence called by the defendants was totally discredited. Mr Mead, a palpably honest witness, admitted he had not read the relevant literature and that had he done so he would have proceeded differently. In effect he admitted his negligence. Mr Powell, the defendants' expert, had to concede that he had approached the case with a complete misunderstanding of the nature of the allegations made against the defendants and he, too, was totally discredited in the destructive cross-examination of him. There was no other evidence before the judge.
The judge's conclusions were:
"I reject the defendants' Bolam argument that Mr Mead was doing no more or less than all the other surveyors who carried out valuations on the Rowner Estate at the time. The plain fact is that there was no evidence before me as to any alternative acceptable professional practice. There is no evidence of a respectable body of professional opinion with a contrary view to that of Mr Wilde. Mr Powell failed to address the question at all, approaching the case on a defects basis. I conclude that Mr Mead failed to meet the appropriate standards."
It is obvious to me that the judge had the proper standard well in mind. The literature of which a reasonably competent surveyor ought have been aware pointed ineluctably at the risks. The incompetent do not set the standards. Neither do the experts. Nothing in the judgement suggests to me that the judge failed to address himself to the correct standard which is that of reasonable competence. This court is not entitled to reverse that conclusion merely as a result of our own comparisons and our views of the probabilities of the case. Not that I think that the judge was wrong - on the contrary, he came to the only conclusion that was available to him on the evidence and in my judgement he came, moreover, to a right conclusion.
The judge was also entitled to proceed upon a basis and by implication did proceed upon a basis that Mr Wilde was also correct in his opinion that
" In the circumstances, the true value of the property at the material time was the price that any buyers, other than those who wished to buy it with a mortgage for their occupation, would have been prepared to pay for the properties on the open market."
Mr Godkin valued on that basis. It was the correct basis. The comparables constituted by contemporary valuations for other Building Society purchasers were not comparables at all, for like was not being compared with like. The other valuers were asserting that their properties were fit to be mortgaged. This property was not. The judge was fully entitled to accept Mr Godkin's valuation: indeed it was hardly challenged. There being no dispute that the measure of damage was the difference between the price paid and the value on the limited open market, the appeal against the award of damages under this head must fail.
Accordingly I agree with Kennedy L.J. that the appeal be dismissed save to the limited extent of £476,57p
LORD JUSTICE BROOKE:
I have encountered no difficulty in concluding that on the evidence Mr Mead was negligent. I have encountered much greater difficulty than the other two members of the court in determining the appropriate measure of damages that ought to be paid as a result of his negligence. The reason is that I regarded the way that the plaintiffs put forward their claim for damages, which was accepted by the judge in a very short paragraph without any critical analysis of any kind, as wholly unreal. I therefore found it necessary to subject the evidence in the case to detailed scrutiny in order to see whether the judge's truly remarkable conclusion stood up to a suitably critical examination.
The majority of the court, with whom I have the misfortune to differ, has attached great weight to the way in which this very experienced judge accepted the evidence of Mr Wilde, whom he found to be an impressive and impartial witness. They have a good deal of authority to support them in this approach. Although this is an appeal by way of rehearing we cannot re-try the case on the transcripts (Bull V Devon AHA  4 Med LR 117 per Mustill LJ at p 142). The judge saw and heard the witnesses, including the expert witnesses, and his view as to the weight he should give to their evidence cannot be overlooked or devalued (SS Honstestroom V SS Sagaporack  AC 37 per Lord Sumner at p47; Eckersley V Binnie (1988) 18 Con LR 1 per Bingham LJ at p 77; and in relation to expert witnesses, Wilsher V Essex AHA  AC 1074 per Lord Bridge at p 1091g). As Bingham LJ said in his dissenting judgement in Eckersley V Binnie at pp 77- 78, in these circumstances a coherent reasoned opinion expressed by a suitably qualified expert ought to be the subject of a coherent reasoned rebuttal unless it can be discounted for some other good reason. In this case, the task of discounting the evidence of the plaintiffs expert is made the more formidable because the judge, in my judgement, rightly discounted the evidence of the defendant's expert.
In this judgement I set out my reasons for concluding, after a detailed analysis of the whole of the evidence, that there is "some other good reason" in this case for an appellate court, although it has not had the judge's advantage of seeing the witnesses, to depart from the conclusions the judge impliedly expressed on the appropriate measure of damages. I use the word "impliedly" because he does not explain how he thought it reasonable to conclude many years after the event, that every single valuer and every single institutional lender who was concerned with the market of buying and selling flats and maisonettes on the Rowner estate in Gosport between 1986 and 1991 was, to use Ward LJ's phrase, "incompetent". I would have expected to see some fairly rigorous analysis of the whole of the evidence before the judge readied such a remarkable conclusion on the basis of an evidence of a single expert. Since the judgement contained for all practical purposes, no such analysis at all, it appears to me that the advantage the judge had in seeing Mr Wilde is to a considerable extent discounted by his failure to show that he clearly understood the logical consequences of Mr Wilde's evidence. If he had conducted such an analysis and found these consequences to be as extraordinary as I consider them to be, this could well have led him to reconsider the extent to which he was willing to place reliance on the evidence of this single witness.
I therefore go back to first principles. In Banque Bruxelles SA v Eagle Star insurance Co Ltd  AC 191 it was held by the House of Lords that the duty of a valuer was to provide his clients with a correct valuation of the property being valued, and that a correct valuation was the figure that a reasonable valuer would have considered it most likely to fetch if sold on the open market (see Lord Hoffmann at p 221G).
The evidence before the judge showed that when Mr Mead sent his valuation to Allied Dunbar there was a very healthy market in the properties on the Rowner Estate. Mortgage finance was plentiful and the different mortgage valuers were reporting to their clients in much the same way as Mr Mead reported to his. I have collected together in Schedule I to this judgement examples of the manner in which different valuers were reporting, and the terms in which they were reporting. So far as the different valuers are identifiable I have called them A, B 1, B2, C and so on. Three different valuers, all of them Fellows of the Royal Institute of Chartered Surveyors, were involved from one firm, which carried out the majority of the valuations recorded in the papers before the court, and these I have called B 1, B2 and B3.
Although one leading Building Society was involved with more than half these transactions (and a member of its in-house staff appears to have done one of these valuations himself), two of the major clearing banks each advanced finance on two occasions, and two other building societies are also mentioned in the valuation reports that are before the court. A total of 807 dwellings on the Rowner Estate were disposed of by the Ministry of Defence between about 1984 and 1991.479 of them were eventually let to the local authority on comparatively short leases, the last such lease being executed in 1991. The other 328 were sold to developers who refurbished them and sold them on long leases, like the 999-year lease in the present case, to private purchasers. In addition to the properties whose values are set out in the schedule to this judgement, Mr Harris, the defendants' expert witness adduced evidence in a Schedule of Comparables which showed that six properties of this type were sold at prices between £38,995 and £41,000 between June and December 1998.
The judge, in effect, held that all these valuers fell below the appropriate standard of care because they failed to advise their lender clients of two matters. First, that they ought not to advance money on any of the Jesperson system-built dwellings on the Rowner Estate because they had not been subjected to a full structural appraisal. Second, that they ought to be very wary of using these properties as security for a loan because their mortgagors might default, being unable to cope with the uncertain and potentially onerous liability to pay maintenance charges on a number of system-built blocks that was required of a private lease-holder on an estate like this. In other words, they should all have asserted, in Mr Wilde's opinion, that the properties they had inspected were not fit to be mortgaged, and downgraded their valuations accordingly.
While it is always open to a judge in an exceptional case to disregard strong evidence of the contemporary practice of a number of other professional men who followed the same practice as that of their professional colleague who is charged with professional negligence, he should in my judgement be very cautious before, in effect he holds that they all fell below the standard of care that was appropriate in the circumstances simply because he is attracted by the evidence of a single expert witness, however distinguished, who has given evidence in his court on behalf of a plaintiff. It is not only all the valuers mentioned on my schedule who are being impliedly treated as having been guilty of negligence but also, inferentially, all the other valuers who advised the mortgagees who advanced mortgage finance to the remainder of the 328 private purchasers; I do not know of any evidence to the effect that any significant number of them bought without the benefit of a loan. Even Mr Ennis, who adopted a more cautious approach than other valuers, valued the property he inspected in November 1998 at £40,000, and this valuation was written off by his fellow-witness for the plaintiff as "hopelessly incorrect".
It was in these most unusual circumstances that the judge was, persuaded that he ought to assess damages on the basis that the actual market in the autumn of 1988 (and indeed the market in these properties which flourished between about 1986 and 1991) was a completely false market, peopled by many negligent valuers and, rather more surprisingly, by credulous banks and building societies lending money at a time when the problems of system-built properties were very much in the news so far as this type of institutional lender was concerned. The judge therefore felt that he had to seek, and that he was entitled to rely on, a wholly unconventional way of measuring the plaintiffs' loss. He did this in a single paragraph of his judgement which reads:
"The plaintiffs called Mr Kieran Godkin to establish the true value of the property when they bought it in 1988. Some criticism was made that his method of valuation was hypothetical. Traditionally, valuers work on comparables. That was not possible in this case. I accept his valuation of £14,000 in the absence of any alternative."
The judge was not bound to follow this approach. An award of damages is in the nature of a jury award: see Monarch Steamship Co Ltd v Karlshammer Oljefabriker (A/B)  AC 196, 232. It was therefore the duty of the judge to test the validity of the assumptions which led Mr Godkin to produce a valuation of the Izzards' property in 1988 which was only about a third of the value for which properties like theirs were passing hands at the relevant time. If he had carried out this test in an appropriately critical manner, it might have led him to revisit the basis on which he had held Mr Mead to have been negligent.
Mr Godkin was first instructed in July 1996 to prepare his valuation as at December 1988 on the basis that:
"the true value of the property at the material time was the price that any buyers, other than those who wished to buy it with a mortgage for their own occupation, would have been prepared to pay for the properties on the open market."
Mr Godkin started by producing a Schedule of Comparables which shows that between November 1995 and July 1996 properties on the estate were being sold for an average price of £11,000. He explained that these prices were generally lower than they had been at any time since the properties were first released to the public in the early 1980s, apart from the period starting in 1991 when prices had dropped following the discovery of the failure of the concrete balconies which gave access to the maisonettes on upper floors. He attributed the blight on the estate in 1996 to the non-traditional construction and limited lifespan which had caused defects and/or perceived defects, together with the high maintenance charges for leaseholders (currently fluctuating at £300-£500 per annum) and the possibility that purchasers might have to bear a share of future repair or refurbishment costs on the estate.
In July 1996 there were very few mortgage lenders who would loan money on these properties. The main body of demand was derived from speculative cash buyers who bought for the purpose of letting to tenants, a type of purchaser which did not exist in
1988. In those circumstances, Mr Godkin was constrained to rely for his valuation solely on the prices that had been achieved on recent sales to cash buyers who were presumed to be aware of the problems associated with these properties. This exercise produced a valuation of £10,000 as at July 1996, which he extrapolated back to December 1988 as a value of £14,000. He explained that the adjustments he had made included allowance for differences in the condition of the property and of the estate in general, the age of the property, given its limited life expectancy, changes in private rented sector legislation, and market demand.
In December 1997 Mr Godkin addressed the question of blight at greater length. He did not think that the wider differential in values now exhibited between these properties and those of more traditional design (as compared to the narrower differential that existed at the time of purchase) could be exclusively attributed to the failed balconies. He believed that there might still be a general perception among local people that the flats were structurally unsound, and he explained the sort of problems that generally well-informed people would take into account when making their bids - problems associated with defective external joinery and possible water penetration, for instance, and the risk that further structural defects might come to light. By December 1997 the market had picked up a bit, and Mr Godkin gave a present valuation of £14,000. He did not alter his earlier December 1988 valuation of £14,000.
In his evidence at the trial Mr Godkin explained that he had grown up in Gosport although he did not return there as a surveyor and valuer until 1989. He had never visited the Rowner Estate on a professional basis until he was first instructed to visit it in 1996 in connection with this litigation, although he remembered that in the middle of 1988 he had deterred a member of his family from buying a property on the estate because he believed that the non-traditional nature of the construction, and the fact that the flats or maisonettes were subject to service charges, might mean that they were susceptible to the vagaries of the market in the longer term. He accepted that if building societies did not deem these properties to be suitable for lending, the price of all the properties on the estate would fall dramatically. He also accepted that because of the general decline of property values in 1991, which mortgage money was still available, the value of Mr Izzard's flat in the summer of 1991, before the balconies collapsed would have gone down to about £25,000-£27,000.
It is not apparent from the transcript that any substantial dent was made on the opinion expressed by Mr Godkin. On the other hand, the basis on which he was asked to express an opinion as to value was completely artificial.
It was, indeed, so completely artificial that it led me to consider in much greater detail the evidence before the judge as to the history of system-built properties in this country between 1979 and 1988 before going on to consider the evidence of the other professional witnesses at the trial.
As Kennedy LJ has said, Mr R J Byrom, the author of "The Building Society Valuer", published in 1979, included warnings about pre-cast concrete system buildings which, he said, would normally be found in blocks of flats several storeys high. He recommended that a building society valuer should not recommend a property with this form of construction as suitable security for a mortgage unless a comprehensive and entirely satisfactory consulting civil or structural engineer's report on the building was provided. He said this because of the doubts that had been expressed about the continuing structural stability of a small proportion of properties of this type of construction.
In the 1980s the political climate changed. The Conservative Government was anxious to encourage home ownership, and during that decade many system-built dwellings were sold to owner-occupiers with the assistance of mortgage finance, whether by local authorities under "Right to Buy" schemes or by other public sector institutions like the Ministry of Defence when it sold off its system-built married quarters in Gosport.
Sometimes, when difficulties aroused the consciousness of politicians, Parliament provided special provision to protect the purchasers of such properties. One example is to be seen in the compensation scheme introduced by the Housing Defects Act 1984 (now to be seen in Part XVI of the Housing Act 1985) which in its original form had the effect of providing financial help for the 16,000 owners of about 28 different types of system-built public sector houses (as opposed to flats) that had been designed before about 1960 and were known to be "defective by reason of their design or construction" (see the 1985 Act, s 528(1)(a)). Another example is to be found in the amendments to Part V of the Housing Act 1985 (see sections 125(4 and 4A) and 125A-C) which were introduced by the Housing and Planning Act 1986. These introduced into the statutory "right to buy" scheme a requirement that a landlord's notice of purchase price must contain a description of any structural defect known to the landlord and an estimate of the likely service charges or improvement contributions likely to fall on the purchaser in the five years after he acquired ownership of the freehold or a long lease. Mr and Mrs Izzard did not benefit from any statutory provisions of this kind.
During the 1980s the Building Research Establishment ("BRE") carried out a number of studies of the problems that were affecting system-built dwellings. In 1984-5 it conducted a special investigation of Taylor-Woodrow-Anglian, the large panel system ("LPS") involved in the Ronan Point disaster in the late I 960s. At the beginning of 1986 the BRE published a 90-page report summarising the information it had received from 328 local authorities in relation to 11 types of LPS buildings. The buildings in that study were divided into those of up to four storeys and those of five storeys and more, and the report also contained preliminary information about the condition of the different systems.
In June 1996 the BRE published three Information Papers designed to assist engineers in local authorities and elsewhere in the appraisal, maintenance and repair of LPS buildings These papers were primarily concerned with the problem of ensuring weathertightness, and of detecting and remedying defects in the seals between the different concrete blocks that were a well-known cause of trouble and high maintenance costs.
In a book called "Surveying Buildings", published in 1986, the authors (Mr Malcolm
Hollis and Mr Charles Gibson), included a section on "The Inspection of Prefabricated Reinforced Concrete Dwellings". In this section the authors stressed that a surveyor must not only identify correctly the method of construction that had been used. He must also know the history of that construction. Not every method of non-traditional construction was defective, and he must ask: Is this method of construction faulty? They recommended to their readers a pamphlet published in
1984 by the Department of the Environment ("DOE") called "Housing Defects Act 1984, The Housing Defects (Prefabricated Reinforced Concrete Dwellings) (England and Wales) Designations 1984, Supplementary Information". This pamphlet showed photographs of most of the more common types. Another valuable source of information on this topic would be the local Building Inspector.
Mr Hollis and Mr Gibson pointed out that the concrete and the reinforcement were the two places in which such a building was likely to be vulnerable, although they were not the only parts that might be defective. Because surveyors were likely to be restricted in the access they were likely to have to potentially vulnerable parts, it was important that they should qualify their report so that their client was also aware of its limitations. They might also wish to point out the advisability of a more detailed and destructive investigation of the fabric of the property they were surveying, provided the vendor was willing to give approval.
In April 1987 the DOE annexed to one of its circulars some notes for building society valuers on the valuation of system-built housing which had been issued that month by the Building Societies' Association ("BSA"). The Department said that valuers had a key role to play in a building society's approach to system-built housing. It was therefore important that valuers should have the information they needed, including information about building societies' attitudes generally (a matter which was relevant to the question of marketability) and about the approach of the particular society for whom the valuation was being prepared, as well as technical information about the form of construction under consideration. This circular also gave notice that a further name had been added to the list of companies whose dwellings had "qualifying defects" under Part XVI of the Housing Act 1985.
The BSA's Notes for Valuers described clearly the problems the market was facing in 1987. It explained how for many years valuers had approached system-built housing very much in the same way as any other sort of property, and how valuations of such property were often very much in line with equivalent properties of traditional construction. In the early 1980s, however, it became known that certain types of system-built properties were likely to prove seriously defective within the term of a typical building society advance. Doubts arose as to the long term structural prospects of certain types of these properties, and there was a substantial loss of confidence in this sector of the market. [My emphasis]
The BSA said that since then an enormous amount had been done to overcome these problems. It mentioned the assistance that was available under Part XVI of the Housing Act 1985, and the investigations being undertaken by the BRE into "virtually all forms of post-war system building". It explained that these Investigations, whose results were now beginning to emerge, were not so much to give these systems a clean bill of health, since in many cases there were no real grounds for concern, but more to provide a basis for the realistic assessment of individual properties and to suggest what was required in the way of future maintenance and repair. The BSA also described how much more information was now available about system-built construction, and in particular about ways in which individual types could be identified, their geographical location, and their likely condition and lifespan.
Against this background, the BSA stressed that a building society would not expect a valuer to reject a property out of hand simply because its construction was system-built and for no other reason. Otherwise a situation might arise when a property might become unsaleable because no valuer would recommend it to a society because he believed that other societies would not lend on it whilst no society would lend on it because valuers would not recommend it.
The BSA expressed the view that it was likely that the vast majority of houses of system-built construction which had not been designated under the Housing Act 1985 would, with proper maintenance, have a life comparable to that of houses of traditional construction. Of course, each individual property had to be treated on its merits. Building societies would expect their panel valuers to be familiar with the main types of system-built construction to be found in their areas, and to have some idea, as part of their local knowledge, of the record of the particular house types. A useful source of knowledge in this respect might be the local authority. Valuers should also be familiar with the main findings of any investigations carried out by the BRE into systems prevalent locally.
Using local knowledge and experience a valuer might often be able to recommend a particular property without more ado. Or it might be proper for him to recommend a more detailed investigation, such as a full structural survey, because, for instance, the main structural members might be concealed in the wall cavity. What they should not do was to reject a house out of hand simply because it was system-built.
Although there was a time when valuers declined to proceed with a valuation as soon as they realised the property in question was system-built, that time had passed, and the BSA said that building societies and their borrowers would generally prefer valuers to proceed with a recommendation (one way of another) to the society concerned:
"As with any other type of property, the valuation of a system-built property will need to take account of all relevant factors and should reflect any specific maintenance requirements that the property may have. The aim is to arrive at a realistic valuation which will allow the society to deal with the application on the same basis as they deal with applications for mortgages in traditionally-built properties."
This, in my judgement, represented a very important source of advice available to building society valuers at the time Mr Mead carried out his valuation, reflecting as it did the expectations of building society clients at the time. They would not have thanked him for advice in the form Mr Wilde advocated at the trial. Although this important circular formed part of the evidence in the case, the judge did not refer to it, or to its appendix, in his judgement, although he did quote, without any supporting explanation, from one paragraph of the summary of the general effect of the BSA's
valuation notes which was published in the Chartered Surveyor Weekly on 25th June
In July 1997 the Estates Gazette published an article by a lecturer at Birmingham Polytechnic which was concerned almost entirely with a consideration of the defects in the concrete that was used by a number of builders of system-built property in the immediate post-war years.
In the summer of 1987 the BRE published its report on the major investigation it had conducted into LPS dwellings. Its main conclusion was that no LPS buildings had been found which showed signs of structural distress sufficient to give concern for the safety of people. In addition, no reports had been received of any LPS building having failed to sustain the loads experienced in service, including the fire loading.
The BRE had examined 15 different systems - low, medium and high-rise - which between them represented about 80% of Britain's total stock of 160,000 LPS dwellings. It published two reports: the first concerned with construction issues, and the second offering "guidance on appraisal".
Some of the systems it examined came badly out of the investigation. For instance, there was serious criticism of Bison construction, which made up about 23% of large panel systems. Cebus, HSSB and Reema also came in for criticism. Jesperson on the other hand, received a fairly good bill of health. Jesperson sites were investigated in both the south-east and the north-west of England, and the report concluded that it appeared to be typical of concrete systems in as much as its problems were not so much structural as psychological, with severe water condensation problems thrown in because of the poor insulation standards of the time.
The judge was not shown the full text of this report, and I have described it with the benefit of the summary which appeared in the Chartered Surveyor Weekly dated 22 October 1997. Instead, he was shown the very brief summary which appeared in a two-page BRE Information Paper, and ended with the passage headed "Guidance on Appraisal" to which Mr Wilde attached much importance at the trial.
This, then, was the background against which the defendants came to make the valuation of 37 Samson Close in November 1998 which is at the centre of this case. I turn to the evidence the judge received from professional witnesses.
Mr Ronald Wilde gave evidence on behalf of Mr arid Mrs Izzard. He was a chartered surveyor with immense experience, having first qualified in 1951. He had also qualified as a chartered building surveyor, and he accepted that an ordinary chartered surveyor would not know as much as he did about buildings and building techniques. He had been employed first as chief surveyor and then as technical director by a leading timber treatment company until 1970, and since, then he had been in private practice on his own account or in partnership. He headed a special unit in his practice which had been instructed to advise on many buildings of national historic or architectural importance, as well as a very large number of buildings of lesser national importance. His advice has been sought by many of the leading property-owning institutions in the land, and he has given evidence in court many times. He is a Fellow of the Academy of Experts and a Fellow of the Chartered Institute of Arbitrators, and he has been an arbitrator in many disputes relating to the condition of buildings. He has also written learned articles in professional journals and has lectured extensively.
Mr Wilde first visited the Rowner Estate in 1992 arid inspected the lzzards' property for the first time the following year. He eventually came to be instructed on behalf of 19 potential claimants on the estate. He was of the opinion that all the valuers whose reports he had seen had fallen below the standard of care reasonably to be expected of a mortgage valuer. As I have said, when asked about Mr Ennis, the witness for the plaintiffs who had performed a much more detailed survey on a property two blocks away from the lzzards', Mr Wilde asserted to the proposition that he had assessed the risk "hopelessly incorrectly". Mr Wilde had strong views, based on a lifetime's experience, which he was not afraid to express. He accepted that he knew nothing at all about values in the Gosport area, and that he had not carried out a mortgage valuation himself since 1980, although he was very well aware of the difference between such a valuation and a fuller structural survey.
The plaintiffs did not call any other expert witness who had a closer familiarity with the practice of local valuers providing mortgage valuations for a small fee in a small town like Gosport, and with the standard of care reasonably to be expected of them in the circumstances of this case, and this gap in the evidence provided a difficulty for the judge to which he did not allude in his judgement.
Mr Wilde did not criticise Mr Mead for failing to spot any defects that would have been evident on his inspection. He said he was not in a position to do so because he did not inspect the lizards' maisonette till five years had elapsed since Mr Mead's inspection. He would not have been critical of any surveyor who had failed to spot the weakness in the balcony supports that came to light in 1991. He also accepted that most buildings erected in the 1960s were not properly insulated, whether traditional or non-traditional, and he had no criticism of Mr Mead in that regard.
He told the judge that a mortgage valuer has to make a general appraisal of the property being valued, as opposed to a detailed and systematic inspection. In a case like this, the appraisal must cover the block, or all the blocks, for which the lessee will have to share the cost of repairs, and in the absence of specific instructions Mr Mead must have deduced that the liability would cover at least one block. It was common ground between Mr Wilde and Mr Mead that a low maintenance liability would be reflected in a higher valuation, and vice versa. Mr Wilde said however, that a problem about blocks like these was that maintenance tended to be expensive as the 1986 BRE paper warned, and that a low annual maintenance charge might hide the fact that the management company was not spending enough on the property, and in particular that it was not building up a proper sinking fund to cater for long-term structural or maintenance problems. He accepted that the charges of £300 per year actually levied on the lzzards during the three years in which they occupied the property were not out of the ordinary.
Mr Wilde accepted that a major building society will itself possess a lot of in-house
information, and that all the big ones employed their own staff valuers. He said that this did not relieve a valuer from the responsibility of warning his client of the known risks of a non-traditional type of construction. (Mr Mead, for his part, could not remember if Allied Dunbar had a survey department or whether he had had a telephone conversation about the lzzards' property with anyone at that company. He was aware that one or two building societies declined to lend on property on the Rowner Estate, adding that some societies would not lend on all sorts of different kinds of property.)
Mr Wilde explained that a mortgage valuation is an exercise in risk assessment, and that from the valuer's assessment of risk both the lender and the borrower can make an informed judgement. The valuer should assess the risk on the basis of the knowledge that was or should have been available to him. All surveyors come across unusual properties from time to time and if they do they have to do what they can to find out about the building they are being asked to value.
He told the judge that the properties on the list maintained under the Housing Defects Act were for the most part not LPS buildings. They were mostly concrete frame houses. The private sector had never really involved itself in building LPS flats. This was the reason why, in Mr Wilde's opinion, the flats and maisonettes at Gosport presented such a challenge to the local valuers because they had never had to value non-traditional LPS flats and maisonettes like these before.
Because this was something quite new in the domestic private housing market Mr Wilde decided that he ought to adopt a logical approach when considering the way in which the hypothetical reasonably competent valuer should undertake his task. He said that unless he happened to have a close and detailed knowledge of the nature and problems of LPS buildings, he would be obliged to conduct a search for any published technical material on the subject, and that he would have received virtually no help from the Institute of Chartered Surveyors' 1985 Guidance Notes. In 1988 this search would certainly have led him to the 1986-7 series of BRE Information Papers, even if it had taken a conversation with another valuer or surveyor to lead him to them.
The problem with valuing such buildings was that one could not detect by eye the potential or actual problems lurking in the building. Even on a fuller structural survey, a surveyor cannot actually resolve the risk.
Mr Wilde was adamant that the recommendation in the 1987 BRE paper that all LPS buildings should be subject to a full structural appraisal if they were required to exceed 25 years of service life in all should have been brought to the attention of both the lender and the borrower.
He accepted that that paper had reported that the quality of the reinforced concrete precast components in LPS buildings had been found in the BRE study not to be significantly better or worse than that of pre-cast components in other forms of construction in that period. He also accepted that the BRE investigators had visited three Jesperson sites and found nothing untoward so far as their structure, as opposed to their insulation qualities, was concerned. He also agreed that in the year after Mr Mead's inspection a firm of structural engineers had made a structural check on four blocks of flats in two of the other roads on the estate, and reported that they were structurally sound, and that the structural components of those blocks would meet the age requirements of 60-l00 years. He maintained, however, that similar clearance could not be given to any other block on the estate (including 37-48 Samson Close) unless and until an engineer had made a detailed appraisal of that block. Although the BRE report had given the Jesperson system a reasonably clean bill of health, Mr Wilde considered that such an appraisal (followed by repeated five year inspections) was mandatory, since until it was performed the potential stability of the block was not known.
Even if a satisfactory structural appraisal had been performed, Mr Wilde still believed that a mortgage valuer should have advised a prospective lender that the property should not be accepted as security for a loan because of the potentially open-ended maintenance liability. In fact the lzzards' liability represented a 0.95% share of the management company's liability in respect of their block and five similar blocks (or about £30,000 pa against individual liabilities of £300 pa).
In this context Mr Wilde was not only concerned with the potential liability if an appraisal revealed any of these blocks to be defective. He was also concerned with the known risks of water penetration through the supposedly water proof joints which joined the large concrete panels together the problem addressed in the 1986 BRE papers. Mr Wilde commented that a 1997 report with the court's papers had shown that a problem with water penetration did exist on this estate, although he did not have any evidence to show that any of the six blocks whose condition affected the lzzards' maintenance liability were troubled by this problem.
Mr Wilde said that in his opinion, the logic of the BRE's 1987 recommendation was that a valuer should not adopt the approach of advising that a system-built property was acceptable as security for a loan unless he could spot a defect. Each individual property should be treated on its own merits, and until it had been approved as a result of a full structural appraisal, money should not be lent on it. If a competent valuer advised in this way, this should have the effect of persuading the owner to have the necessary appraisal carried out.
Mr Wilde accepted that such a turn of events would have a dramatic effect on the value of all these fiats. Their current owners would have been expecting to sell for a good price and would find their property effectively worthless. Mr Wilde was not at all concerned about this likely outcome. He said that the valuer's duty is to his borrowers, and not to the body of owners as a whole.
In summary, Mr Wilde considered that Mr Mead ought to have given a warning that the lzzards' property had not had a structural appraisal, and that without such an appraisal it could not be accepted as having an adequate life for the period of a mortgage. He ought also to have advised on the high potential expenditure on maintenance. He felt that even if this block had received structural clearance, like the other four blocks on the estate did in 1989, a competent valuer still should have declined to certify it as mortgageable because the risk of the high maintenance liability make this kind of building unsuitable for people in the private sector and particularly those with low incomes.
He said that all the other 12 valuers whose reports he had read had failed to appreciate the real problem, and had got things wrong. He was unable to point to anyone who had advised in the way he considered to be appropriate. These other valuers included Mr Ennis who did not give either of the clear warnings Mr Wilde demanded. It was insufficient simply to say there was a scheme of repair in hand, and Mr Ennis ought to have warned his client it was not suitable to proceed. As I have already said Mr Wilde was scathing about Mr Ennis's assessment of the risk.
Mr Ennis gave evidence briefly at the trial, in support of the report he had prepared on 23 Samson Close on 17 November 1998. Unfortunately, as it turned out, Mr Ennis was called before Mr Wilde made his attack on the quality of his risk assessment and he was not recalled to deal with this issue. Mr Ennis counselled his then client against buying his property for £43,000 because he was not convinced that his investment would be secure and sound. After warning that the property might be of a type which would not be accepted as suitable security by some lending institutions, Mr Ennis valued it at £40,000.
Mr Mead had had 21 years experience as a surveyor and valuer in the Gosport area before he suffered the heart attack in May 1991 which led to his retirement in October 1991. He retired at about the same time as the balcony on one of the properties on the Rowner Estate collapsed, and shortly after the general collapse of values in the housing market. He told the judge that the collapse of the balcony, which led to the replacement of all the balconies on the estate, created a tremendous amount of adverse publicity. He explained to the judge that once an estate like this gets this sort of publicity, it takes years for values to be restored and that it was the balcony episode which was the main significant factor that continued to make the properties unmortgageable. In 1998 a lot of the balconies were still supported by scaffolding.
When he gave evidence, Mr Mead was obliged to try and remember events which had taken place ten years earlier. He said that in 1988 he was doing 25 mortgage valuations, three or four house-buyers reports, and two structural surveys every week. He explained that when one carried out a house-buyers' report one obviously had a far, far greater responsibility. For a mortgage valuation, he would not usually take binoculars, and he would generally spend 30 minutes at the property and then fill in the sections of the report afterwards.
He accepted that his valuations involved a fairly large proportion of first time purchasers, and he knew that they would rely on his mortgage valuation.
He believed that he had first been asked to value a property on the Rowner Estate in 1986 when they first came onto the market. He had not previously encountered system-built blocks of flats or maisonettes. He would have discussed them with other local valuers and surveyors both inside and outside his firm, and also the local authority building control officer from whom he would probably have found out that they were examples of the Jesperson system. The warnings he had read about system-built property had taught him to be cautious about such construction, but not that he should recommend a structural engineer's appraisal if such an appraisal had not been carried out.
Mr Mead regularly read the Estates Gazette and the Chartered Surveyor Weekly, and although he could not be categorical, he was sure he would have read the 1987 articles which were put to him in cross-examination. His office did not subscribe to the BRE information papers, and he did not read them. It did not have a copy of the Byrom book, and although he was familiar with the Hollis and Gibson book, he did not recall having read the passages from the 1986 edition which were put to him. He was familiar with the lists of properties on the "death list" associated with the Housing Defects Act, and would have checked that Jesperson was not on that list.
His understanding of the Jesperson system was that it described the way Laings built these properties using large concrete panels and a concrete roof. He was aware of the concerns about system-built properties after the Ronan Point collapse, and he knew that the initial reaction of the profession had been a blanket refusal to pass these kinds of properties as suitable for mortgage. However, from what he knew, the Jesperson system had been given a qualified clearance, and it was not in the list of buildings with particular problems.
He told the judge that he made an external inspection of the whole block (numbered 37-48 Samson Close) of which 27 Samson Close formed part. There was no way in which he could inspect the flat concrete roof but he had no reason to believe that it would fail. He would have looked to see if there were any cracks in the external walls: apart from studying the general state of the block, there was not much more that he could see. He would have expected that any problem would be visible. If he had seen the rusty reinforcing rods observed by Mr Ennis on 13-24 Samson Close he would have been concerned, but such defects were not visible on the block he inspected.
He was not told that any other block was included in the potential service charge liability. He would have assumed that the liability of £200 per annum related to the Izzards' share of liability for that block. He probably obtained that figure from a valuation of a similar property. He would have assumed that the figure covered repairs and general maintenance, and he did not regard it as particularly low. He could see that it did not cover an allowance for any large structural repairs, but he was not expecting any.
He was aware that damp penetration was a feature which might increase the future maintenance liability, but he had inspected similar properties on the estate and he had never encountered it. He did not suggest that there might be a need to inspect the condition of the main structural members in the block, because on his inspection he did not consider this necessary. He considered that his inspection would have given him sufficient opportunity to satisfy himself that condensation was not going to be a problem during the period of the mortgage. When it was put to him that the Izzards said that they had encountered difficulties with condensation six months after starting to live there, he said that if it had been a serious problem, he would have expected them to come back and tell him about it, as others tended to do.
He explained to the judge that he was acting as a mortgage valuer and not as an adviser to a local authority. When shown the 1987 BRE recommendation, he said he did not think one would have recommended that kind of structural appraisal every time one was instructed to do a mortgage valuation, since most clients would probably not have proceeded further because of the cost.
When he was shown the 1986 and 1987 BRE information papers and the Hollis and Gibson book, he accepted that he should have done more to familiarise himself with the information they contained. He accepted that he had not obtained information from all the requisite sources, and as a result he had not given all the requisite warnings.
If he had briefed himself properly his report would have included a warning about the potential problems he could not see from a visual inspection, so that the mortgagees and borrowers could appreciate that there might be problems with a building like this. He should have mentioned that the BRE had recommended that there should be a structural appraisal of the building. He should also have given a warning that properties like this might attract a potentially greater liability in relation to service charges, and that the current charge of £200 pa, although not abnormally low, might present a false picture.
The judge found Mr Mead to be a patently honest witness.
Mr Powell, the expert called by the defendants, gave the judge another insight into what it meant to be a surveyor and valuer on a local, as opposed to a national, scale. He had been practising in the Hampshire area since 1978. Most of his mortgage valuations were for first time buyers: he had conducted 101 such valuations in 1988. The properties on the Rowner Estate would have been at the bottom end of the market. He would not regard his knowledge of system-built blocks as extensive. He had probably first encountered them in the mid-1980s. He would have known about the Ronan Point disaster and the Housing Defects Act list, and he did not have complete ignorance of the subject.
He was not familiar with Mr Byrom's book and in any event things had moved on since 1979. He would have had access to journals and papers, and discussions with professional colleagues and competitors, who may or may not have had expertise in this type of construction. He would also look at textbooks. He did not read the BRE information papers, which were usually highly technical and were directed more towards engineers and specialist building surveyors than to surveyors in general practice or valuation surveys. He thought there was some truth in the suggestion that some general surveyors are avid readers of professional literature and others avoid it as far as they can. He thought he probably fell into the middle of that spectrum.
I need not concern myself with the detailed evidence which Mr Powell gave on the third day of the trial, because the general effect of that evidence had been undermined by Mr Mead's admissions and was rejected by the judge. Mr Powell agreed that he had approached the problem on the wrong basis. He also agreed that it was generally accepted that these properties had problems which were not discernible from a visual inspection and that all the published material suggested that a cautious approach would require an appraisal before this type of property became mortgageable. He said that he would expect the risk of potentially higher future maintenance costs to be reflected in the value. He agreed that it was no part of the duty of a mortgage valuer to be concerned about the negative impact his valuation might have on the seller. He was not aware of any publication in circulation at the time that was giving advice contrary to that given in Mr Hollis's book.
In my judgement, the general effect of all this evidence was that the plaintiffs have successfully proved that in November 1998 a reasonably careful valuer would be failing in the duty of care he owed to his clients if he did not advise them along the lines in fact adopted by Mr Ennis who wrote his report in the same month as Mr Mead. Mr Ennis told the judge that he had qualified in 1979 and had worked as a surveyor for ten years under the direction of two partners in a local firm. Over that time experience had taught him to pay particular reference to structures built in the post-war period, if they were in local authority occupation or were police houses or on Government constructed estates. Such properties were frequently of unusual pre-formed concrete construction, and Mr Ennis had learned that this information was always of considerable interest both to purchasers and prospective lenders.
Mr Ennis was self-employed at the time he wrote his report, and when he was asked to re-read it ten years later he concluded that he had given his various warnings because the difficulties for prospective purchasers and lenders, both present and future, must have been very obvious to him at that time.
The main warnings Mr Ennis gave were as follows:
(1) The property is of a type which may not be considered as suitable security by some building societies, and as a consequence resale of flats of this type may prove difficult;
(2) There are no signs of any damp penetration into the main habitable rooms but you will appreciate that dampness could be penetrating the timber framework in those areas where we cannot make a detailed examination;
(3) From a normal inspection of this building we must admit to being less than impressed with the general standard of construction;
(4) The property may be of a type which would not be accepted as suitable security by some lending institutions. In any event timber frameworks are of poor quality, and substantial redecoration and repair is required externally,
(5) Your solicitor should arrange to have sight of the management accounts. You should very carefully identify your liability in respect of communal charges.
(6) We must urge you to give very careful consideration to the contents of this report, since we are not convinced that your investment of some £43,000 will be secure and sound.
In his expert report before the trial Mr Wilde said that he believed that in this report Mr Ennis had exhibited the grasp of the essential character of these buildings and their potential problems which valuers and surveyors reporting on them should have had, whether their inspection was for a mortgage valuation or a Home Buyer's report. It was only when Mr Wilde was shown Mr Ennis's valuation of £40,000, which he had hot previously seen, that he back-tracked violently in cross-examination:
"Q. There has been no mention of an ongoing high maintenance charge, has there? A. No.
Q. And there has been no mention of a BRE assessment?
A. No, he has not mentioned a BRE Assessment.
Q. There has been no reference to any structural problems at all has there?
A. He just says there is a scheme of repair in hand.
Q. Yes. But in your view there should have been a clear warning that this sort of building is subject to very high maintenance charges?
Q. And secondly, there should have been a warning that since this building had not had its 25-year BRE assessment it is not suitable to proceed?
A. That is right. Yes."
Mr Wilde was then shown Mr Ennis's valuation.
"Q. He gives an unqualified valuation of £40,000. You would criticise him for that, would you?
A. Yes. I would.
Q. Because, as you have said in your report, making a report in these circumstances is an assessment of risk?
Q. And are you saying Mr Ennis has hopelessly incorrectly assessed the risk?
A. I think so, yes."
As I said at the outset of this judgement, this court does not have the advantage the judge enjoyed of seeing and hearing the witnesses give evidence, an advantage which is just as great when it is the evidence of an expert witness that is under consideration on an appeal. I am conscious of the fact that this very experienced judge accepted Mr Wilde's evidence and said he found him to be an impressive and impartial witness. The judge did not, however, mention the sudden volte-face in Mr Wilde's evidence which I have just described. Indeed, he said in his judgement that Mr Ennis's evidence was important for two reasons:
"First, he questioned the willingness of some lenders to lend on this type of structure, and secondly he warned about the liability for communal charges."
As Mr Pearce-Higgins QC observed, this observation completely missed the point. Mr Wilde considered that Mr Ennis was as negligent as all the other surveyors and valuers who had visited this estate between 1986 and 1991, since he did not give any warning that this kind of building was subject to the risk of very high maintenance charges, to such an extent that it should be regarded as unmortgageable.
Later in his judgement the judge said:
"I reject the defendants' Bolam argument that Mr Mead was doing no more or less than all the other surveyors who carried out valuations on the Rowner Estate at the time. The plain fact is that there was no evidence before me as to any alternative acceptable professional practice. There was no evidence of a respectable body of professional opinion with a contrary view to that of Mr Wilde.... I conclude that Mr Mead failed to meet the appropriate standard."
In reaching this conclusion the judge not only completely discounted the evidence of what a considerable number of other professional men in the same field of practice as Mr Mead were in fact doing at the time. He also overlooked, no doubt because they were not examined at any great length at the trial, the BSA's Guidance Notes to building society valuers which were published the previous year, only a few months before the BRE's final report. The BSA did not wish valuers to report to building societies in the way suggested by Mr Wilde without very good cause for the reasons set out in that document.
I have no doubt that a cautious valuer would have advised in that sense, in much the same way as it was shown in the evidence that one or two cautious building societies declined to lend on property like this, and events have proved them right. On the other side of the coin the 1997 Residents' Survey shows that this caution would have deprived a lot of people from the opportunity of living in capacious homes they could not otherwise have afforded, a matter which would have been well in the minds of those banks and building societies which were willing, with the Government's encouragement, to lend their money on the security of property like this in 1988:
"Of those residents in the properties surveyed three quarters are satisfied it meets their needs ... Satisfaction with their homes relative to facilities was generally very high ... Very few respondents recorded internal improvements they would like to make to their homes ... As far as the general environment was concerned all respondents felt the best feature of the estate was the spaciousness of their properties."
The court is concerned not with the standards of the cautious valuer but the standard reasonably to be expected of the reasonably competent valuer. In my judgement, in the light of the BSA paper, the overwhelming evidence of the contemporary practice of valuers of properties on this estate, and the other evidence to which I have referred in this judgement, the judge ought to have rejected Mr Wilde's evidence in so far as he suggested that a valuer would have been negligent if he did not express the opinion that these properties were unmortgageable for either or both the reasons he adumbrated. It is the task of the judge to determine the appropriate standard of care in the light of all the evidence, not the task of an expert witness, however distinguished.
It follows from my analysis of the evidence that in my judgement the judge ought to have found that Mr Mead was negligent because:
(1) he did not give a warning about the structure similar to that set out in Item 10 on the attached schedule;
(2) he did not give a warning that the potential service contribution could well increase, for the reasons set out in the 1986 paper and Mr Hollis's book;
(3) he did not adjust his valuation to take into account these two considerations.
On the other hand, the judge was in my judgement wrong to hold that Mr Mead should have advised that the property should be regarded as unsafe as security for a mortgage loan.
It must be remembered in this context that although there was a good deal of unrest about the quality of the concrete used in many system-built dwellings between 1945 and 1960 - a matter reflected in the enactment of the Housing Defects Act and in the Estates Gazette article in July 1988 - the evidence showed that this problem was not so serious from 1960 onwards. The BRE's major investigation made a very positive finding in this regard in relation to LPS buildings (the quality of the concrete being found not to be significantly better or worse than that found in any other forms of construction of the period), and no adverse finding was made in relation to the composition of the concrete either on the three Jesperson sites visited by the BRE investigators or by the structural engineers in relation to the four blocks they inspected on the Rowner Estate the year after Mr Mead’s visit.
The judge did not take those considerations into account. Nor did he allude to the fact that a structural appraisal of the type recommended by the BRE was not a mere structural survey by a chartered surveyor. It would involve engineers making invasive investigations into the structure of the building to satisfy themselves that the blocks were structurally sound. In 1989 the engineers carried out this work when the four blocks they examined were largely empty, and their report describes the invasive techniques they undertook. Although I appreciate the prudence of the BRE recommendation, I am unable to conclude that against this background a valuer in 1988 would have been professionally negligent if he did not advise that a 21-year old Jesperson block on the Rowner Estate at Gosport, which exhibited no outward signs of structural weakness, should be regarded as unmortgageable unless a structural appraisal was carried out.
It follows that in my judgement the plaintiffs are entitled to recover damages not on the basis of Mr Godkin's evidence but on the basis that Mr Mead's valuation ought to have taken into account the effect of the warnings I have suggested would have been appropriate. There is no evidence that warnings of the type shown in item 10 on the attached Schedule would have affected the property's value in any significant way if they had been given in 1988. It was common ground that the risk of a higher maintenance charge would be reflected in a lower valuation. Mr Mead valued this property at £42,000, the price for which the Izzards purchased it. At the same time Mr Ennis was valuing a nearby maisonette at £40,000 without taking into account sufficiently the risk of a higher future maintenance liability. In my judgement, it is reasonable to conclude on the evidence that if Mr Mead had taken these factors properly into account he should have valued the Izzards maisonette at £38,000, £4,000 less than his actual valuation and the price paid. It follows that in my judgement the plaintiffs are entitled to recover £4,000 under this head, being the difference between the price they paid and what Lord Hoffmann would describe as "the correct valuation" in December 1998.
There was a very important issue at the centre of this appeal as to whether the court should accept Mr Godkin's figure or Mr Mead's valuation as the correct measure of assessing the "true value" of the property in December 1998. The fact that Mr Smith concentrated his arguments on defending Mr Godkin's approach and did not, no doubt for wise tactical reasons, suggest to us that we ought to make a discount on Mr Mead's figure if we considered that to be the appropriate starting point cannot, in my judgement, disentitle us from doing so if we consider that the evidence warranted it, and neither side contended that we should order a new trial on this issue.
I agree with Kennedy LJ, for the reasons he gives, that the award in the sum of £476.57 should be disallowed.
For these reasons I, too, would dismiss the appeal in relation to liability. As to quantum, I would have reduced the sum awarded by the judge to £4,000 under the first head of the award, and £250 under the second head, making a total of £4,250, to which interest should be added.
Schedule of Valuers' comments (1987-1991)
1 24.6.87 £24,750
PRC Laings. Easyform system
2 20.5.88 £35,000
The flats are built of concrete panels ... These units have a steady demand but at prices somewhat below their traditionally constructed counterparts.
....constructed in non-traditional form, the walls being of precast concrete panels with a flat asphalted roof. This form of construction is known as the Jesperson system and is generally acceptable for mortgage purposes. Nonetheless values are normally somewhat less than the traditional brick equivalent.
Similar to 3.
5. 19.8.88 £39,000
Prefabricated concrete structure.
6. 1.9.88 £43,950
Similar to 3.
7. 19.10.88 £40,000
The maisonette is of non-traditional construction in that the end walls are concrete
panelled, but are considered to be suitable for mortgage purposes.
8 12.1.89 £41,500
Similar to 3.
9 26.4.89 £42,000
Similar to 3.
10 11.8.89 £36,000
The property is built of precast reinforced concrete construction using a method known as "large panel system construction ..." A report by the Building Research
Establishment recommends all buildings of this type should be subject to a full
appraisal to assess their structural condition and durability. It is believed that such an appraisal has not been carried out on this building. There may therefore be defects not apparent from the limited inspection carried out, which may come to need attention in the future. The property is however suitable for mortgage purposes and there is a reasonable market for this type of unit so long as the purchase price is less than the more traditional brick construction.
11 5.9.89 £42,250
Concrete panelled together with some timber cladding. ... non-traditional
construction ... suitable for mortgage purposes. Final sentence similar to 10.
12 20.9.89 £41,750
Similar to 10.
13 20.3.90 £35,000
The properties were originally constructed for the Ministry of Defence and have recently been converted, constructed of Jesperson pre-cast concrete which we
understand is not designated defective under the Housing Act
14 24.3.90 £29,000
Similar to 10.
Plus: Some lenders will not provide mortgage finance on this type of unit due to its
construction, and this may have an adverse effect on saleability.
15 17.7.90 £33,500
The property type is known as a Jesperson system-build and this should be made
known to the property insurers.
16 27.9.90 £31,500
Non-traditional Laing Jesperson PRC system-built Similar to 10.
Plus: It would be in the applicant's own interest to urge the landlord or person
responsible for maintenance of the building to arrange for a full appraisal in accordance with the BRE recommendations so that future maintenance requirements and likely costs can be ascertained in future.
17 26.4.91 £26,000
The building is of a non-traditional construction as the main walls are of precast
concrete panels with a flat roof... the Jesperson system. In our opinion these flats are suitable for mortgage purposes. There should be a good market for this type of flat so long as the purchase price is kept at something less than the more traditional brick equivalent.
18 5.7 91 £28,500
The type of construction is non-traditional, i.e. the Jesperson system... We know of no known inherent structural defects with this design, although the applicants should be aware there may be problems on resale due to the nature and character of the
Order: Appeal dismissed as to liability. Quantum reduced to £4,250 plus interest.
Respondents to recover 80% of costs up to 3 June 1999 after which their costs to be recovered in full. Certificate for leading counsel only. 28 days to pay.
Leave to appeal to House of Lords refused. Legal Aid taxation.