Watts v Morrow

Under an ordinary contract for a residential survey, damages for negligent reporting normally equal the difference between the price paid and the property's true value. A purchaser cannot recover a greater cost of repairs merely because it was reasonable to retain and repair the property, since that would confer the benefit of an unmade warranty as to its condition.

Damages for distress are not generally recoverable for an ordinary surveyor's breach. They are recoverable, on a modest scale, for physical inconvenience and discomfort caused by the breach, including foreseeable discomfort while necessary repairs are carried out. A survey contract is not ordinarily a contract to provide peace of mind.

The claimants bought a country house after receiving a negligent structural survey from the defendant surveyor. The report understated serious defects. The claimants later carried out repairs costing about £34,000, although the house had been worth £15,000 less than the price paid in its true condition.

His Honour Judge Bowsher Q.C. awarded the repair costs, £4,000 to each claimant for distress and inconvenience, and interest at 15 per cent. The surveyor appealed on quantum only. The central issues were whether financial loss should be measured by diminution in value or repair costs, whether distress damages were recoverable, and whether the interest rate should stand.

1. Appeal allowed in part unanimously. Ralph Gibson LJ, with whom Bingham LJ agreed and with whose conclusions the President agreed, substituted £15,000 for the £33,961.35 repair-cost award. The proper measure under the ordinary survey contract was the difference between the price paid and the property's value in its true condition.

2. The court followed Philips v Ward [1956] 1 WLR 471. Proper performance would have enabled the purchasers either to avoid the transaction or to negotiate a price reflecting the true market value. In the absence of proof of another recoverable benefit, that loss was £15,000. Retaining the property and undertaking repairs did not convert the surveyor's duty of reasonable care into a warranty that repairs would not be needed.

3. The court disapproved the reasoning in Hipkins v Cotton [1989] 2 EGLR 157 and Syrett v Carr & Neave [1990] 2 EGLR 161. A delayed discovery of defects, or a reasonable decision to retain and repair, does not itself displace the prima facie diminution-in-value measure. Different losses may be recoverable where negligent advice causes entry into, and loss on extrication from, a transaction, but that was not the basis of this claim.

4. On distress, the court substituted £750 for each claimant. An ordinary residential survey is not a contract whose object is pleasure, relaxation or peace of mind. Damages may nevertheless compensate physical discomfort and inconvenience caused by the breach, with directly related mental suffering, where it was foreseeable that the occupiers would live through necessary repairs. The award must be modest and must exclude inconvenience caused by unrelated refurbishment or litigation.

5. The 15 per cent interest rate on the financial loss remained within the trial judge's discretion. The court therefore did not disturb it.

• Court of Appeal (Civil Division): Allowed the surveyor's appeal on quantum to the extent indicated. It substituted diminution-in-value damages and reduced the awards for distress and inconvenience, but upheld the interest rate.

• High Court, Queen's Bench Division, Official Referees' Business: His Honour Judge Bowsher Q.C., on 9 November 1990, awarded repair costs of £33,961.35, £4,000 to each claimant for distress and inconvenience, and interest.