Smith v Eric S Bush (a firm) Harris and another v Wyre PDF

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Date and Time: Sunday, 18 April, 2021 4:57:00 PM MYT Job Number: 141713414

Document (1) 1. Smith v Eric S Bush (a firm); Harris and another v Wyre Forest District Council and another [1989] 2 All ER 514 Client/Matter: -NoneSearch Terms: smith v eric bush Search Type: Natural Language Narrowed by: Content Type MY Cases

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Smith v Eric S Bush (a firm), Harris v Wyre Forest District Council Overview | [1990] 1 AC 831, | [1989] 2 All ER 514, | [1989] 2 WLR 790, 87 LGR 685, 21 HLR 424, | 17 ConLR 1, | 11 LDAB 412, 133 Sol Jo 597, | [1989] 1 EGLR 169, [1989] NLJR 576, | (1989) Times, 24 April, | [1989] 17 EG 68, | 18 EG 99

Smith v Eric S Bush (a firm); Harris and another v Wyre Forest District Council and another [1989] 2 All ER 514 HOUSE OF LORDS LORD KEITH OF KINKEL, LORD BRANDON OF OAKBROOK, LORD TEMPLEMAN, LORD GRIFFITHS AND LORD JAUNCEY OF TULLICHETTLE 6, 7, 8, 9, 13, 14, 15, 16 FEBRUARY, 20 APRIL 1989 Negligence — Surveyor — Duty to take care — Surveyor making report to building society or local authority for mortgage application — Survey and valuation carried out negligently — Application form and report containing disclaimer of responsibility for condition of property — Purchaser relying on report — Surveyor knowing that purchaser likely to rely on report — Whether surveyor owing purchaser duty to exercise reasonable skill and care in carrying out valuation — Whether disclaimer reasonable — Whether disclaimer effective to exclude liability — Whether surveyor liable for negligence — Unfair Contract Terms Act 1977, s 2(2) .Contract — Unfair terms — Exclusion of liability for negligence — Surveyor — Surveyor making report to building society or local authority for mortgage application — Survey carried out negligently — Application form and report containing disclaimer of responsibility — Factors to be considered when considering reasonableness — Whether disclaimer reasonable — Unfair Contract Terms Act 1977, s 2(2) . In two cases the questions arose whether a surveyor instructed by a mortgagee to value a house owed the prospective purchaser a duty in tort to carry out the valuation with reasonable skill and care and whether a disclaimer of liability by or on behalf of the surveyor for negligence was effective. In the first case the respondent applied to a building society for a mortgage to enable her to purchase a house. The building society, which was under a statutory duty to obtain a written valuation report on the house, instructed the appellants, a firm of surveyors, to inspect the house and carry out the valuation. The respondent paid the society an inspection fee of £38·4389 and signed an application form which stated that the society would provide her with a copy of the report and mortgage valuation obtained by it. The form contained a disclaimer to the effect that neither the society nor its surveyor warranted that the report and valuation would be accurate and that the report and valuation would be supplied without any acceptance of responsibility. In due course the respondent received a copy of the report, which contained a disclaimer in terms similar to those on the application form. The report, which valued the house at £16,500, stated that no essential repairs were required. In reliance on the report and without obtaining an independent survey the respondent purchased the house for £18,000, having accepted an advance of £3,500 from the society. In their inspection of the house the appellants had observed that the first floor chimney breasts had been removed but they had not checked to see whether the chimneys above were adequately supported. Eighteen months after the respondent purchased the house, bricks from the chimneys collapsed and fell through the roof causing considerable damage. The respondent brought an action against the appellants claiming damages for negligence. The judge held that the appellants were liable and awarded the respondent damages. The Court of Appeal affirmed his decision, holding that the disclaimer was not fair and reasonable and was ineffective under the Unfair Contract Terms Act 1977. The appellants appealed to the House of Lords.

Page 2 of 3 Smith v Eric S Bush (a firm); Harris and another v Wyre Forest District Council and another [1989] 2 All ER 514

In the second case the appellants applied to the local authority for a mortgage to enable them to purchase a house. The local authority, which was under a statutory duty to obtain a valuation before advancing any money, decided to carry out the valuation themselves and for that purpose instructed their valuation surveyor. The appellants signed an application form which stated that the valuation was confidential and was intended solely for the information of the local authority and that no responsibility whatsoever was implied or accepted by the local authority for the value or condition of the property by reason of the inspection and report. After receiving the surveyor's valuation of the house at the asking price of £9,450, the local authority offered to advance the appellants 90% of that sum subject to certain minor repairs being done to the house. The appellants, assuming that the house was worth at least the amount of the valuation and that the surveyor had found no serious defects, purchased the property for £9,000 without obtaining an independent survey. Three years later they discovered that the house was subject to settlement, was virtually unsaleable and could only be repaired, if at all, at a cost of more than the purchase price. The appellants brought an action against the local authority and their surveyor claiming damages for negligence. The judge upheld their claim but the Court of Appeal reversed his decision on the ground that the notice had effectively excluded liability. The appellants appealed to the House of Lords. Held – (1) A valuer who valued a house for a building society or local authority for the purposes of a mortgage application for a typical house purchase, knowing that the mortgagee would probably, and the mortgagor would certainly, rely on the valuation, and knowing that the mortgagor was an intending purchaser of the house and had paid for the valuation, owed a duty of care to both parties to carry out his valuation with reasonable skill and care. It made no difference whether the valuer was employed by the mortgagee or acted on his own account or was employed by a firm of independent valuers since he was discharging the duties of a professional man on whose skill and judgment he knew the purchaser would be relying. Furthermore, the fact that the local authority or building society was under a statutory duty to value the house did not prevent the valuer coming under a contractual or tortious duty to the purchaser. The extent of the liability was, however, limited to the purchaser of the house and did not extend to subsequent purchasers (see p 517 f to h, p 520 a b, p 522 j to p 523 a d to g, p 526 a, p 529 f to h, p 526 c to 537 b, p 541 b c e to p 542 d and p 544 f g, post); dictum of Denning LJ in Candler v Crane Christmas & Co [1951] 1 All ER at 433–434 applied; Yianni v Edwin & Sons (a firm) [1981] 3 All ER 592 approved. (2) However, the valuer could disclaim liability to exercise reasonable skill and care by an express exclusion clause but such a disclaimer made by or on behalf of the valuer constituted a notice which was subject to the 1977 Act and therefore had to satisfy the requirement in s 2(2)a of that Act of reasonableness to be effective. In considering whether a disclaimer might be relied on, the general pattern of house purchases and the extent of the work and liability accepted by the valuer had to be borne in mind. Having regard to the high costs of houses and the high interest rates charged to borrowers, it would not be fair and reasonable for mortgagees and valuers to impose on purchasers the risk of loss arising as a result of the incompetence or carelessness on the part of valuers. It followed therefore the disclaimers were not effective to exclude liability for the negligence of the valuers, and accordingly the first appeal would be dismissed and the second appeal would be allowed (see p 517 f to h, p 524 c d f, p 526 e to h, p 527 f j, p 528 d e, p 529 j, p 531 b to j, p 532 c to e and p 543 b c, post). a

Section 2(2) is set out at p 519 j, post

Per curiam. Where a surveyor is asked to survey industrial property, large blocks of flats or very expensive houses for mortgage purposes, where prudence would seem to demand that the purchaser obtain his own survey to guide him in his purchase it may be reasonable for him to limit his liability to the purchaser or exclude it altogether (see p 517 f to h, p 528 d e, p 531 j to p 532 a and p 543 c, post). Decision of the Court of Appeal in Smith v Eric S Bush (a firm) [1987] 3 All ER 179 affirmed. Decision of the Court of Appeal in Harris v Wyre Forest DC [1988] 1 All ER 691 reversed. NotesFor the duty of care generally, see 34 Halsbury's Laws (4th edn) para 5, and for cases on the subject, see 36(1) Digest (Reissue) 17–32, 34–103.

Page 3 of 3 Smith v Eric S Bush (a firm); Harris and another v Wyre Forest District Council and another [1989] 2 All ER 514 For agreements to exclude or restrict liability for negligence, see 34 Halsbury's Laws (4th edn) para 67. For the Unfair Contract Terms Act 1977, s 2, see 11 Halsbury's Statutes (4th edn) 217. Cases referred to in opinionsAnns v Merton London Borough [1977] 2 All ER 492, [1978] AC 728, [1977] 2 WLR 1024, HL. Candler v Crane Christmas & Co [1951] 1 All ER 426, [1951] 2 KB 164, CA. Cann v Willson (1888) 39 Ch D 39. Curran v Northern Ireland Co-Ownership Housing Association Ltd (1986) 8 NIJB 1, NI CA; rvsd in part [1987] 2 All ER 13, [1987] AC 718, [1987] 2 WLR 1043, HL. George v Skivington (1869) LR 5 Exch 1. Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575, [1964] AC 465, [1963] 3 WLR 101, HL. Langridge v Levy (1837) 2 M & W 519, [1835–42] All ER Rep 586, 150 ER 863; affd (1838) 4 M & W 337, [1835– 42] All ER Rep 586, 150 ER 1458, Ex Ch. Ministry of Housing and Local Government v Sharp [1970] 1 All ER 1009, [1970] 2 QB 223, [1970] 2 WLR 802, CA. Nocton v Lord Ashburton [1914] AC 932, [1914–15] All ER Rep 45, HL. Odder v Westbourne Park Building Society (1955) 165 EG 261. Phillips Products Ltd v Hyland (1984) [1987] 2 All ER 620, [1987] 1 WLR 659, CA. Roberts v J Hampson & Co [1989] 2 All ER 504. Ultramares Corp v Touche (1931) 255 NY 170, NY Ct of Apps. Woods v Martins Bank Ltd [1958] 3 All ER 166, [1959] 1 QB 55, [1958] 1 WLR 1018. Yianni v Edwin Evans & Sons (a firm) [1981] 3 All ER 592, [1982] QB 438, [1981] 3 WLR 843. AppealsSmith v Eric S Bush (a firm) The defendants, Eric S Bush (a firm) (the surveyors), appealed with the leave of the Appeal Committee of the House of Lords given on 29 October 1987 against the decision of the Court of Appeal (Dillon, Glidewell LJJ and Sir Edward Eveleigh) ([1987] 3 All ER 179, [1988] QB 743) on 13 March 1987 dismissing an appeal by the surveyors against the decision of Mr Gerald Draycott sitting as an assistant recorder in the Norwich County Court on 17 April 1986 whereby in an action by the plaintiff, Jean Patricia Smith (Mrs Smith), against the surveyors for damages for professional negligence in relation to a survey carried out by their senior partner, Mr Cannell, in relation to 242 Silver Road, Norwich, he awarded Mrs Smith the sum of £4,379·4397 damages including interest. The facts are set out in the opinion of Lord Templeman. Harris and anor v Wyre Forest DC and anor The plaintiffs, Adam Charles Harris and Kim Harris (Mr and Mrs Harris), appealed with the leave of the Court of Appeal against the decision of that court (Kerr, Nourse LJJ and Caulfield J) ([1988] 1 All ER 691, [1988] QB 835) on 17 December 1987 allowing the appeal of the defendants, Wyre Forest District Council and Trevor James Lee, against the decision of Schiemann J ([1987] 1 EGLR 231) on 24 November 1986 whereby in an action brought by Mr and Mrs Harris against the council and Mr Lee for damages for negligence in relation to a valuation carried out by the latter in respect of 74 George Street, Kidderminster, the judge awarded Mr and Mrs Harris the sum of £12,000 damages. The facts are set out in the opinion of Lord Templeman. Anthony D Colman QC, Malcolm Stitcher and David Platt for Mr and Mrs Harris.Piers Ashworth QC and Nicholas J Worsley for the council and Mr Lee.Nigel Hague QC and Jane Davies for the surveyors.Robert Seabrook QC and Philip Havers for Mrs Smith.Their Lordships took time for consideration. LORD KEITH OF KINKEL. My Lords, I have had the opportunity of considering in draft the speeches to be delivered by my noble and learned friends Lord Templeman, Lord Griffiths and Lord Jauncey. I agree with them, and for the reasons they give would allow the appeal in Harris v Wyre Forest DC and dismiss that in Smith v Eric S Bush (a firm).

Mary Rose Plummer Barrister.

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