In two decisions that will cause residential property surveyors to breathe a sigh of relief, the courts have recently dismissed two Merrett v Babb type professional negligence claims against professional surveyors in their personal capacity.
Merrett v Babb was a landmark Court of Appeal decision in 2001 that left employed professionals potentially exposed to personal liability claims in respect of advice they gave, or work they undertook, on behalf of their employer. The decision was a cause for concern for residential property surveyors as Mr Babb, a professional surveyor, was found to have assumed personal responsibility to the buyers of a house which he surveyed. This was despite the fact that the buyer never knew or met Mr Babb, and the fee for the valuation was paid to Mr Babb’s employer rather than to Mr Babb personally. In usual circumstances this claim would have been brought against the surveyor’s employer, who would have professional indemnity insurance in place to pay the claim. However in this case the employer had gone out of business and no longer carried insurance.
Case law has recently been evolving in this area, in favour of the professional as we can see from these recent decisions below.
Mavis Russell v (1) Walker & Co (2) Robert Chisnall and Others
In 2013 Mrs Russell issued professional negligence proceedings in respect of a Homebuyer’s report that had been undertaken by Mr Chisnall in 2007, whilst he was employed by Walker & Co. By the time Mrs Russell served her proceedings, Walker & Co. had become insolvent and the company no longer carried professional negligence insurance.
Mrs Russell therefore decided to pursue Mr Chisnall in his personal capacity. Mrs Russell relied upon the principles in Merrett v Babb, and alleged that Mr Chisnall, in his personal capacity, owed her a duty of care in preparing the report.
In July 2014 the Judge dismissed the claim, ruling in Mr Chisnall’s favour. This follows a similar ruling from earlier this year in the case of Matthews v Ashdown Lyons and Maldoom.
Matthews v Ashdown Lyons and Maldoom
This was also a Merrett v Babb type claim, brought against a chartered surveyor, Mr Maldoom, in his personal capacity. Relying upon the principles in Merrett v Babb, it was alleged that Mr Maldoom owed the Claimant a personal duty of care at common law, despite being employed by Ashdown Lyons at the time the allegedly negligent report was prepared.
However, in February 2014 Mr Maldoom was awarded summary judgment on the issue of personal duty, and the Claimant’s claim was dismissed.
The court recognised that Merrett v Babb was decided with very particular public policy considerations in mind; to provide a remedy to purchasers of modest means buying low value residential properties, where it was foreseeable that the purchaser would not be obtaining a survey or valuation of their own in connection with the purchase. In Matthews, the situation was very different to that in Merrett v Babb. The property in question was to be purchased for £750,000 and could not be considered ‘modest’. Further, the claimant would not be without remedy if the survey or valuation happened to be negligently performed as he still had, although less valuable, causes of action against Ashdown Lyons in contract and in negligence.
It is also important to note that in Matthews, the former employer was a limited company rather than a firm (as in Merrett). To impose on the individual a personal duty of care would have been to ignore Ashdown Lyons’ separate legal identity.
With so many surveyor businesses having folded during the downturn of recent years there has been an increasing amount of personal liability cases against surveyors in their personal capacity. These claims have repeatedly tried to stretch the Merrett v Babb principles, but to date, none have been successful.
These two cases further define the limits of Merrett v Babb and provide reassurance to surveyors that the courts will not be easily convinced to follow the decision of this landmark case.