McKinnon & Ors v E. Surv Ltd

In assessing damages for negligent property valuation, the usual comparison between the property as described and its value in the condition that should have been reported is only a prima facie rule. The overriding compensatory principle requires the award to place the claimant in the position they would have occupied absent the wrong, neither better nor worse. The court must therefore take account of reliable hindsight evidence showing the property’s true condition at the valuation date. Subsequent ascertainment that structural movement had ceased could reduce the damages, provided the evidence was sufficiently connected with the transaction and did not create a windfall for the claimant.

The claimants bought a bungalow in reliance on a negligent survey and valuation. It was agreed that the defendant had failed to identify structural defects and advise further investigations. The agreed damages differed according to whether the property was valued as potentially subject to continuing movement or as a property whose movement had ceased.

The preliminary issues asked whether the court could take account of the assumed fact that movement had ceased, although that fact could not have been established until after purchase, and what date and formula should govern the assessment.

1. Outcome. The preliminary issues were answered yes. Damages were to be assessed as at April 1999 by reference to the difference between the purchase price and the property’s open-market value in its true condition at that date.
2. The ordinary measure in surveyors’ negligence cases compares the value in the condition described with the value in the defective condition that should have been reported. That is a prima facie rule, subject to the overriding compensatory principle stated in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25.
3. Where proper advice would have prevented the claimants from buying the property, the relevant loss is the value of the money or other asset lost, less the value of the property acquired and retained. An award based on continuing movement would over-compensate claimants where the assumed facts established that movement had ceased.
4. The court must admit reliable subsequent evidence bearing on the property’s true condition at the valuation date. The Bwllfa principle requires the court to use information available when damages are assessed rather than reconstructing an earlier state of ignorance. The principle applied to surveyors’ negligence as well as other professional negligence claims.
5. The avoided-loss principle was not strictly a mitigation case, but there was no reason to exclude it from surveyors’ negligence claims. The approach in Gardner v Marsh and Parsons supported taking subsequent events into account where there was a sufficient nexus with the transaction and the event was not too remote. The contrary approach in Daisley v B.S. Hall was not accepted as authority that subsequent events were necessarily irrelevant.