Watts v Morrow [1991] EWCA Civ 9 (30 July 1991)

Mr and Mrs Watts purchased a country house relying on a negligent survey report that failed to identify significant defects. The Court of Appeal held that damages for negligent survey should be measured by diminution in value, not cost of repairs, and that damages for distress are limited to physical inconvenience and discomfort caused by the breach.

Facts

Mr and Mrs Watts, both City professionals, purchased Nutford Farm House in Dorset for £177,500 as a weekend and holiday home in 1986. They commissioned the defendant surveyor, Mr Morrow, to provide a full structural survey before purchase. The survey report indicated minor defects requiring only routine maintenance and described the property as ‘sound, stable and in good condition’. In reliance on this report, the plaintiffs proceeded with the purchase.

After taking possession, serious defects were discovered including: the roof requiring complete renewal; chimneys and walls needing repointing; lead flashings requiring installation; window casements and frames needing replacement; and first floor timbers requiring specialist treatment. A subsequent survey by Mr Wadey revealed the true condition. The cost of repairs amounted to £33,961.35. The true value of the property in its actual condition at purchase was £162,500, meaning the plaintiffs had overpaid by £15,000.

The repairs were carried out over eight months, during which the plaintiffs experienced considerable physical discomfort at weekends while staying at the property.

Issues

Primary Issue

Whether damages for a negligent surveyor’s failure to identify defects should be assessed on the basis of the cost of repairs or the diminution in value of the property.

Secondary Issue

Whether and to what extent damages for distress and inconvenience are recoverable in such cases.

Interest Rate

Whether the judge’s award of 15% interest was appropriate.

Judgment

The Court of Appeal allowed the appeal in part, substituting the cost of repairs award with the diminution in value figure and substantially reducing the damages for distress and inconvenience.

Measure of Damages

Ralph Gibson LJ, delivering the leading judgment, held that the proper measure of damages was the diminution in value of £15,000, not the cost of repairs of £33,961.35. The court reaffirmed the principle established in Philips v Ward [1956] that damages should put the plaintiff in the position they would have been in if the contract had been properly performed.

If the surveyor had carried out his contract properly, the plaintiffs would either have declined to purchase (suffering no loss) or would have negotiated a reduced price reflecting the true condition. Awarding the cost of repairs would give the plaintiffs a house worth £162,500 for £143,500 (£177,500 minus £34,000), a position they could never have achieved even with proper performance of the contract.

Bingham LJ stated:

If the plaintiff were to end up with the house and an award of £34,000 damages he would have obtained the house for £143,500. But even if the defendant had properly performed his contract this bargain was never on offer. The effect of the award is not to put the plaintiffs in the same position as if the defendant had properly performed but in a much better one.

Damages for Distress and Inconvenience

The court held that damages for mental distress are not generally recoverable in surveyor negligence cases. Such damages are only available where the very object of the contract is to provide pleasure, relaxation, peace of mind or freedom from molestation.

Bingham LJ explained:

In cases not falling within this exceptional category, damages are in my view recoverable for physical inconvenience and discomfort caused by the breach and mental suffering directly related to that inconvenience and discomfort.

The court reduced the award from £8,000 (£4,000 each) to £1,500 (£750 each), finding the original award excessive and noting that awards should be ‘restrained’ and ‘modest’.

Interest

The award of 15% interest was upheld as within the judge’s discretion.

Implications

This case establishes the definitive rule for measuring damages in negligent surveyor cases. The diminution in value rule provides that a purchaser who relied on a negligent survey can recover the difference between what they paid and what the property was actually worth in its true condition.

The decision limits recovery for distress and inconvenience to cases involving physical discomfort directly caused by the breach, excluding mere mental distress, anxiety or vexation. It distinguishes surveyor contracts from ‘holiday cases’ where the contract’s purpose is to provide enjoyment.

The judgment clarifies that a plaintiff’s decision to retain and repair a property, rather than sell, does not entitle them to recover costs exceeding the diminution in value, as there was no warranty from the surveyor that no such repairs would be needed.

Verdict: Appeal allowed in part. Damages for financial loss reduced from £33,961.35 (cost of repairs) to £15,000 (diminution in value) with interest at 15%. General damages for distress and inconvenience reduced from £8,000 total to £1,500 total (£750 per plaintiff).

Source: Watts v Morrow [1991] EWCA Civ 9 (30 July 1991)