By continuing to use the site you agree to our Privacy & Cookies policy

It's prudent to consider all the angles when evaluating damages

legal matters

The thorny question of the measure of damages - where a client choosing a particular course of action relies on negligent information given by a professional - has been explored in these articles before, but it is worth restating the principles.

Consider a case where information is given about a house, such as a valuation or structural survey, and that information is wrong. Not knowing it is wrong, the client relies on it and decides to buy the house.The rule of thumb is that damages are assessed by looking at how much the house would have been worth had the correct position been known. Damages are the difference between the price paid and the actual value.

The difference is not necessarily the same as the cost of remedial works. If several years lapsed between the survey and the problem coming to light, remedial works might cost significantly more. If the loss was assessed at the time of trial rather than purchase, fluctuations in property values since the advice was given might have a significant impact.

The reasoning behind these rules is that the professional, let us say the valuer, usually only undertakes to exercise reasonable skill and care in providing a valuation. If they do not advise the client to buy the house, or advise as to the future vagaries of the property market, there is no reason why the assessment of damages should take into account later ups and downs in the market. If they do not warrant that the house is worth what they value it at, there is no reason why damages should be awarded for remedial works to bring it up to that value. The client's loss is simply the money that was overspent because they thought that the house was worth more than it was.

But establishing the measure of the loss is not the end of the story, as was illustrated recently in Woolfson v Gibbons , a case concerning a structural survey. The idea behind the measure of damages being assessed as the reduction in value is that the purchaser would have negotiated that much off the price. The claimant has to prove that would have happened. As Woolfson shows, that may not always be straightforward.

The Woolfsons wanted a house in Hampstead.

Over a two-year period, Mrs Woolfson looked at about 100 houses.She eventually found an 18thcentury house that needed refurbishment and redecoration, and offered just under £2 million.

The offer was said to be 'of interest' to the vendor who wanted to proceed quickly once her divorce proceedings were finalised. The Woolfsons instructed Mr Gibbons, a structural engineer, who reported favourably on the structure. The Woolfsons were happy to proceed on the basis that they would spend up to £300,000 on general refurbishment, but that no more than £3,000 needed to be spent on the structure.

Prices were rising fast. A few months later, the Woolfsons discovered the vendor now planned to sell by sealed bid.The Woolfsons bid just under £2.3 million, which was accepted, and they bought the house.

After the purchase, the Woolfsons consulted a different engineer who found serious potential structural defects. Mr Gibbons admitted he had been negligent. At trial the judge found that, had the problems been known at the time of sale, the value of the house would have been about £200,000 less.

But, argued Mr Gibbons, would the Woolfsons really have beaten the price down by that amount? They had chosen this house after an exhaustive search. They were going to carry out extensive refurbishment works anyway and would not have been put off by some structural works. The market was rising fast, and the vendor would simply have looked for other buyers if the Woolfsons had tried to negotiate.

Happily for the Woolfsons, the judge decided on the evidence that they would have succeeded in negotiating down the price. The scope and cost of the works was significant, the expert valuers were in agreement on the reduced market value, and the vendor was keen to sell once her divorce was finalised.

This case illustrates that even when there are admissions of liability and an extent of expert agreement, much time can be spent exploring evidence about what would in fact have happened.

Have your say

You must sign in to make a comment.

The searchable digital buildings archive with drawings from more than 1,500 projects

AJ newsletters