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Farley v Skinner (2001) WLR 899

Farley instructed a surveyor to inspect a house which was within a 15-mile radius of Gatwick Airport and asked him specifically to ascertain whether the property was affected by aircraft noise. The surveyor stated in his report that the property was unlikely to be suffer greatly from noise from the flight path. Farley sought £70,000 by way of special damages for diminution in value as well as general damages for distress and inconvenience. The House of Lords agreed with the court at first instance which held that although negligence was established, there was no diminution in the value of the house and only awarded Farley general damages of £10,000 for distress and inconvenience. -

John D Wood Ltd v Knatchbull (2003) Times 01-16

John D Wood, as estate agent, claimed for the fee due on selling Knatchbull’s property. Knatchbull counterclaimed that the agent had failed to inform him of a nearby similar property having sold for much more. Held: The agent could not be under a duty to tell a client of every scrap of information, but did have a duty to advise on significant changes, such as this. -

Merrett v Babb (2001) EGLR 145

In 1992, a firm received instructions from a building society to inspect a property and to prepare and submit a mortgage valuation report based on that inspection. Mr Babb carried out the inspection on behalf of the firm, where he was employed as a branch manager. Although Mr Babb framed his report in the first person plural (i.e. on behalf of his firm), and a continuation sheet was written on the firm’s stationery, he gave the personal statement required by the Building Societies Act and signed both the pro-forma sheet and the continuation sheet, adding his own name and professional qualifications. The firm’s principal was made bankrupt two years after the report in question was prepared. Following this, the firm’s indemnity insurance cover was cancelled without run-off cover. After having bought the property, Ms Merrett had reason to find the valuation report was negligent and she sought redress from Mr Babb as the signatory of the report. Mr Babb accepted that the purchaser would place reliance on his report but argued that any duty he owed was to his employer and not to the purchaser, and that the latter had in fact relied on the report of the firm and not himself personally. The key question to be resolved, then, in the course of the judicial process was whether Mr Babb, as an employee of the firm which had been engaged to carry out the required work, owed a direct duty of care to Ms Merrett. It was held that Mr Babb was indeed the professional person on whom the purchaser relied to exercise proper skill and judgement. This was despite the fact that no reference to Mr Babb was made in the mortgage report supplied by the building society to the purchaser. -

Nykredit Mortgage Bank plc v Edward Erdman Ltd (No. 2) (1997), UKHL 53

In March 1990, Erdman were required to value a property on the security of which Nykredit were considering advancing money. They valued the property at £3.5 million and Nykredit advanced £2.45m to the borrower. The borrower defaulted at once, and the Nykredit obtained possession of the property and sold it, in February 1993, for £345,000, the market having fallen substantially. Nykredit brought an action against Erdman for damages in negligence and breach of contract. They maintained they would not have advanced the loan if they had known the true value of the property. The judge found that at the date of valuation the property had been worth £2million, or at most £2,375,000. He gave judgment for Nykredit for a sum including damages in respect of their loss attributable to market fall. The Court of Appeal dismissed an appeal by Erdman. The House of Lords allowed the appeal, holding that the damages should be reduced to the difference between the valuation and the true value of the property at the date of valuation, which was subsequently agreed at £2.1m. On the question of interest, the House of Lords decided that interest should run from the date of accrual of the cause of action in tort. In this case it was the date of the transaction. -

Yianni v Edwin Evans (1982) QB 438

Mr Yianni applied to a building society for a mortgage advance of £12,000 for the purchase of a property. The building society appointed an independent surveyor to undertake a valuation of the property. The surveyor reported that the property was adequate security for the mortgage. Mr Yianni did not see a copy of the report although he paid the fee for the valuation. The building society made the required mortgage advance and the purchase went ahead. It subsequently came to light that the surveyor had failed to detect serious structural defects that rendered the property virtually worthless. Mr Yianni sued the surveyor directly. The judge found the surveyor liable, even though the building society, and not the purchaser, had employed him. The surveyor knew, however, that the advance would be granted only if his report were favourable and that it was unlikely the purchaser would obtain his own survey. The surveyor was therefore held to have a duty to both Yianni and to the building society. Since this decision, lenders have made valuation surveys available to prospective purchasers, thus widening the liability of surveyors. -