Patel v Hooper & Jackson

In a negligent survey and valuation claim, diminution in value is the prima facie measure of loss. A purchaser may recover additional reasonable costs of extricating themselves from the transaction where the property cannot reasonably be occupied and must be sold. Those costs may include alternative accommodation and moving expenses for the period reasonably required to achieve a sale. The purchaser cannot recover expenditure which would have been incurred in any event, such as mortgage interest, endowment premiums and insurance premiums payable on a substitute property. The period of recoverable accommodation costs is limited by the purchaser’s duty to mitigate. A once-and-for-all damages award is required.

The purchasers relied on a negligent house buyer’s report and valuation when buying a South London house. The surveyors accepted liability for the £25,250 diminution in value and stamp duty, but disputed further damages for mortgage interest, endowment policy premiums and household insurance.

The trial judge awarded a complex indemnity for past and future expenditure, together with general damages. The appeal concerned the proper measure of damages, the effect of the purchasers’ inability to occupy or sell the house, the period for which alternative accommodation was recoverable, and whether the form of order was permissible.

1. Appeal allowed in part. The trial judge’s complex order was discharged because the court’s powers in this claim were confined to a once-and-for-all award of damages. The court had no power to transfer the beneficial interest in the house to the defendants or to impose a continuing indemnity.
2. The prima facie measure for negligent surveying of a house for a private purchaser was diminution in value. Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 did not alter that rule, particularly where the surveyor supplied information enabling the purchaser to decide whether to proceed.
3. Following Philips v Ward [1956] 1 WLR 471 and Watts v Morrow [1991] 1 WLR 1421, a purchaser could recover the reasonable costs of extricating themselves from the purchase. Since the house was uninhabitable and the purchasers could not afford the repairs, reasonable alternative accommodation and moving costs were recoverable until they ought reasonably to have sold the house and acquired another home.
4. Hayes v James & Charles Dodd [1990] 2 All ER 815 was binding as to its decision and supported recovery of expenses incurred during resale, but it was materially distinguishable. In that case the purchasers would have bought no replacement property. Here, the purchasers would probably have bought another property and incurred similar mortgage interest, endowment premiums and insurance premiums. Those items therefore compensated expenditure that would have been incurred in any event and were wrongly awarded.
5. The purchasers acted reasonably in attempting a private sale and in delaying an auction while liability and an overall settlement were being explored. Once negotiations clearly failed on 23 June 1993, they ought to have auctioned the house, with liability for any mortgage shortfall acknowledged. A sale could reasonably be treated as completed by 30 September 1993. Additional damages were therefore limited to alternative accommodation and moving costs from 30 September 1988 to 30 September 1993.
6. The award of general damages of £2,000 to each purchaser for years of relative discomfort was affirmed, consistently with Watts v Morrow.

• Court of Appeal: The defendants’ appeal from the High Court decision was allowed in part. The complex damages order was discharged. Recoverable additional loss was limited to reasonable alternative accommodation and moving costs to 30 September 1993, while the general damages award was affirmed. [1998] EWCA Civ 1734
• High Court of Justice, Queen’s Bench Division: Mr Recorder Colin Reese QC awarded diminution in value and stamp duty, general damages, and further damages calculated by reference to mortgage interest, endowment premiums, insurance premiums and future losses.