Moore & Anor v National Westminster Bank

Factual and Procedural Background

The respondents purchased a flat in The City for £135,000, partly financed by a mortgage of £81,000 from the appellant bank. The respondents had requested a "Home Buyers Report" as part of their mortgage application, but the bank erroneously failed to produce this report. Despite this, the bank made a mortgage offer, which the respondents understood as being supported by a favourable Home Buyers Report. Subsequently, it was discovered that the property was in poor condition, requiring extensive repairs estimated at £115,000, largely due to its Grade II listed status and location in a conservation area. The respondents lacked sufficient funds to complete all repairs but had undertaken approximately £35,000 of work. The respondents brought a claim for breach of contract against the appellant. At trial, the judge found in favour of the respondents on breach of contract and awarded damages based on the cost of repair. The appellant appeals solely on the issue of the damages awarded for repair costs.

Legal Issues Presented

1. Whether the appropriate measure of damages for the appellant's breach of contract is the cost of repair or the diminution in value of the property.
2. Whether the line of authority from negligent surveyor cases, which supports awarding damages based on diminution in value rather than cost of repair, applies in this case.
3. Whether the judge erred in rejecting the appellant's expert evidence on diminution in value.
4. Whether the case should be remitted for further evidence on the diminution in value.

Arguments of the Parties

Appellant's Arguments

• The judge incorrectly awarded damages based on the cost of repair rather than diminution in value, relying on an inapplicable distinction between negligent surveyor cases and transaction cases.
• The diminution in value approach is the correct principle as established in Court of Appeal authorities such as Phillips v Ward, Perry v Sidney Phillis, and Watts v Morrow.
• The appellant's expert evidence indicated a diminution in value of £15,000, which the judge wrongly rejected.
• The respondents failed to prove diminution in value adequately, and if the court cannot determine it, no damages on that basis should be awarded.
• If an intermediate figure is to be awarded, it should be between £50,000 and £55,000 based on the appellant’s submissions.
• The case should not have been decided without further evidence on diminution in value if that approach was required.

Respondents' Arguments

• The negligent surveyor cases are not binding and do not establish an inflexible rule; the judge was entitled to award damages based on the cost of repair.
• Even if diminution in value was the correct measure, the only practical way to assess it in this case was through the cost of repair, leading to the same result.
• The case should not be remitted for further evidence on diminution in value as the issue was fully argued at trial and on appeal.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the appellant’s challenge to the damages awarded for repair costs rather than diminution in value. It confirmed that the principle from Phillips v Ward and related cases is that damages for negligent surveyor reports are generally measured by diminution in value rather than cost of repair. However, the court found that the distinction drawn by the judge between negligent surveyor cases and this transaction case was not a valid basis to depart from that principle.

The court acknowledged that while diminution in value is the usual measure, it is not an inflexible rule. The authority in Steward v Rapley and County Personnel v Alan Pulver demonstrates that cost of repair can be an appropriate measure where diminution in value is difficult to ascertain or speculative.

Given the evidence, including the respondents' expert’s inability to provide a valuation and the extensive defects requiring repairs costing approximately 85% of the property's reasonable value, the court held that the judge was entitled to treat the cost of repair as the only practical indicator of diminution in value.

The court rejected the appellant’s submission that the judge implicitly found the diminution in value was less than the cost of repair and that this undermined the damages award. The court interpreted the judge’s reasoning as a rejection of the appellant’s expert evidence and a determination that awarding damages based on the cost of repair was just and reasonable under the circumstances.

The court also noted the appellant’s failure to propose an intermediate figure for diminution in value at trial or on appeal, which limited the court’s ability to award a figure between the extremes presented. The judge’s choice of the repair cost figure was therefore not undermined by the absence of an intermediate valuation.

Holding and Implications

The court DISMISSED THE APPEAL.

The judge’s award of damages based on the cost of repair was upheld. The court confirmed that while diminution in value is generally the correct measure of damages for negligent surveyor-related breaches, the rule is not absolute and may yield to practical considerations in cases where diminution in value cannot be reliably determined. The decision affirms the trial judge’s discretion in assessing damages based on the evidential context and does not set a new precedent beyond the established principles. The direct effect is that the respondents are entitled to damages of £115,000 representing the cost of repair, and no further proceedings on this issue are warranted.