Moore & Anor v National Westminster Bank

In claims arising from negligent or omitted property surveys, diminution in value is the usual measure of loss, but it is not an inflexible rule. The court may use the cost of repair to determine diminution in value where the evidence makes that the only practical indicator, or where a valuation would be speculative or unreal. The fact that the claimant would not have entered the transaction does not itself justify recovering repair costs. Nor does the distinction between a transaction case and a negligent surveyor case alter the damages analysis. The claimant must be compensated for the loss in the value of the asset acquired, without overcompensation.

The respondents purchased a flat intending to let it, using mortgage finance provided by the appellant bank. They requested a Home Buyers Report, but the bank failed to arrange the necessary survey and nevertheless made the mortgage offer. The property required extensive repairs.

Following a trial, Mr Recorder Willetts found the bank in breach of contract and awarded £115,000, representing the cost of repair. The bank appealed only against the measure of damages, contending that damages should be assessed by diminution in value, relying on the negligent surveyor authorities. The central issue was whether the cost of repair could properly be awarded or used as the measure of diminution in value.

1. Appeal dismissed. The judge was entitled to award £115,000 in damages.

2. The ordinary principle in negligent surveyor cases is that damages are assessed by diminution in value rather than cost of repair. The rationale is that the claimant owns an asset whose value must be assessed in its defective state. The cost of repair does not necessarily correspond to the asset’s diminution in value.

3. The rule is not invariable. County Personnel v Alan Pulver [1987] 1 WLR 916 showed that a different approach may be justified where a diminution valuation would be speculative or unreal and there is firm evidence of the cost of remedying the defect. The cost of repair may also provide the proper measure of diminution in value in an appropriate case.

4. The distinction between a transaction case and a negligent surveyor case was unsound. The respondents’ decision that they would not have bought the property did not distinguish the case from Phillips v Ward [1956] 1 WLR 471, where that possibility had been taken into account. The respondents had bought an asset, and their loss had to be assessed by reference to its value.

5. On the evidence, the respondents’ expert could not give a valuation, the bank’s valuation evidence was rejected as too low, and the repair costs were exceptionally high in relation to the property’s value in reasonable condition. The judge was therefore entitled to treat the repair costs as the only practical indicator of diminution in value. He was not required to remit the matter for further evidence or to adopt an intermediate figure which the appellant had not advanced as a concrete alternative.

• High Court (Technology and Construction Court): On appeal from the County Court at Birmingham, Mr Justice Birss dismissed the appeal against the judgment of Mr Recorder Willetts handed down on 6 December 2017.