Sunley v Sunley

This is an appeal, brought with the permission of Carnwath LJ, against a decision or ruling of Mr Recorder Thorn QC on the first day of the trial of this action, 27th May 2002, by which, to my mind at least, he ruled that a draft soil report issued by RPS Technology Ltd (“RPS”) and dated October 1996 was not admissible in evidence. As a consequence of that ruling the claimants decided that they could no longer pursue their claims and submitted to judgment. In the result, the claim was dismissed and the claimants were ordered to pay the defendants' costs. In this appeal the claimants seek an order setting aside the ruling and the judgment and directing a new trial.

The claimants claim damages for negligence against the defendants, who are surveyors and valuers. On 9th July 1996 the defendants issued a mortgage valuation report on a petrol filling station in Stockton on Tees. The report expressed the opinion that the open market value of the property was about £162,500, which was the asking price. The claimants' case is that the defendants were negligent in expressing that opinion because they ought to have expressed the caveat or reservation that there should be a further independent survey to check for the presence or absence of underground contamination, having regard to the nature of the business carried on by the vendor. As a result, they were not alerted to the fact that there was contamination or that they would have to carry out substantial remedial works at a cost of up to £30,000. They say that if they had been so informed they would either have paid less or would not have bought the property at all and the property would have had a lower value than they paid for it.

The steps in their case (as it was put, or was to be put, at the trial) and the defendants' responses may be summarised shortly in this way:

3.1Although the defendants were engaged by TSB, who were the proposed mortgagees, they owed a duty to the claimants to exercise reasonable care and skill in carrying out the valuation. The defendants admit that they owed such a duty to the claimants, although they say that its scope was limited by the terms of their engagement by TSB.

3.2The defendants were in breach of that duty for the reason already stated, namely that they should have advised that a further independent survey be carried out which would, or might, affect the value. The defendants deny the alleged breach.

3.3The claimants relied upon the valuation of £162,500 in the report and bought the property at that price. I do not think that the defendants dispute this step in the claimants' case.

3.4If the defendants had not been in breach of duty they would have included the advice to which I have referred in their report, so that their opinion as to the value of the property would have been subject to the reservation to which I have referred. This is in dispute.

3.5If the valuation had included the reservation the TSB would have instructed an independent expert. Moreover, the TSB would have instructed RPS, as evidenced by the fact that it in fact did so, albeit after exchange of contracts on 6th September 1996 and before completion on 27th September 1996. The draft report of RPS was produced in October 1996, which was thus after completion. The defendants, I think, accept that that is what in fact happened, but not what would have happened.

3.6Contracts would not have been exchanged until RPS had reported. RPS would have reported much as they did. The report would thus have contained the following:

(i)The former owners and/or operators had caused significant contamination within the forecourt area of the site, most probably due to the spillage and/or leakage of diesel fuel.

(ii)The migration of petroleum hydrocarbon within the subsurface was likely to be relatively low.

(iii)So was the risk of contamination of ground water and/or surface water, so that, provided that the contamination was not due to an ongoing leak, the risk of Environment Agency enforcement was relatively low.

(iv)The greatest impact of the contamination was likely to be the cost of its removal to allow refurbishment or replacement of the underground fuel storage and distribution system and/or the future sale of the property.

(v)The estimated cost of the work was likely to add up to £30,000 depending on the circumstances.

(vi)RPS would have reported, as in fact they did, as follows:

“In summary, the options appear to be:

(1)Do nothing, or

(2)Resolve the problem caused by the hydrocarbon pollution to current standards whilst seeking to mitigate the costs by possible recourse to the former owners and suppliers of fuel.

RPS recommend that the second course of action be adopted ...”

It is in dispute as to what, if any, report would has been commissioned or indeed made.

3.7If the valuation had been subject to a reservation such as that stated above the claimants would not have purchased the property at £162,500 but for less.

3.8I think it is, or was, the claimants' case that they would have purchased for some £30,000 less; although their claim is for £35,000, which includes £5,000 expenses of one kind and another. In this regard the claimants' case depends upon the opinion of a Mr C G Brown, who is an expert surveyor and valuer instructed by them, whose opinion is based at least in part upon the contents of the RPS report.

I should note at this point that there was thought to be something in the RPS report which supported the suggestion that there was visible leakage and contamination. The claimants conceded before the Recorder that that was not part of their case. They have conceded it again today; and if this matter goes to trial they have indicated that no such allegation will form any part of their case. I can see no conceivable basis upon which they could resile in the future from that concession.

In the particulars of claim the claimants relied upon the RPS report in paragraph 11, which set out particulars of the alleged breach of the duty of care. In subparagraph (c) they quoted the part of the report which set out what should be done and the likely cost of £30,000. In subparagraph (d) they relied on the report “as evidence of the fact that the defendants have failed to observe and report that the property was contaminated by Volatile Organic Compounds and therefore they have not reported accurately on possible environmental issues”. That paragraph they do not, as I understand it, now wish to pursue. In paragraphs 12 and 13 the claimants alleged that the property was worth less than the defendants' valuation and the price paid and relied upon the report of their expert, Mr Brown, who stated that the diminution in value was about £35,000. As can be seen, the RPS report was relied upon in a very different way in the pleadings from the way indicated in my earlier summary of the claimants' case.

In the defence the defendants denied the alleged breach of duty, although they admitted paragraph 11(b) and (c) of the particulars of claim and stated that paragraph 11(d) was “noted”. On 4th September 2001 the court gave the defendants leave to amend paragraph 11 “to bring into issue the contents of the report from RPS”. In the amended defence served pursuant to that order the defendants asserted that they complied with their instructions and added:

“(b)In any event, and without prejudice to the foregoing, the Claimants have not suffered any damage. The matters set out in the draft RPS report dated October 1996 ... in relation to the storage tanks and distribution system do not establish a diminution in value as alleged or at all. The matters there described would not have the effect of diminishing the value of the relevant property as alleged or at all. They would properly amount to maintenance items.

(c)The matters set out in the Draft RPS Report in relation to the presence of VOCs in the soil samples analysed do not properly provide the basis for a finding/conclusion of contamination, whether properly falling within the scope of the Defendant's reporting duties on `environmental issues' or not.

(d)In any event, the Draft RPS Report provides no sound basis for the estimated cost of refurbishment there set out of £30,000.”

The defendants thus pleaded to the points made by the claimants in reliance on the RPS report without suggesting that it was inadmissible or that the claimants were not entitled to rely upon it. In a request for further information the defendants asked a number of questions about the report, which the claimants answered.

The claimants instructed Mr C G Brown as their expert on the question whether the defendants were negligent. In his report dated 19th December 2000 he referred to the RPS report and in particular to the fact, first, that it concluded that there was evidence of contamination and, secondly, that it estimated the cost of removal at about £30,000. He concluded that a competent valuer would have asked for further investigation to be carried out in relation to possible contamination, which would have triggered the necessity for a soil vapour survey, which would have led to the purchasers realising that they had a potential contamination cost of over £30,000. He said that, more importantly, that would have had an effect on the value of the property. He put the reduction in value at about £35,000.

Mr Brown made a further report for the purposes of exchange in the action following a site meeting on 24th August 2001 with Mr Rostron, the expert instructed on behalf of the defendants. Mr Brown expressed much the same view as in his first report. Mr Rostron also made a report, but concluded that the defendants had not been at fault and had followed their instructions. In addition, he observed that the defendants did advise in a supplementary report dated 26th September 1996 that the claimants should assess the underground storage and distribution system. He said, “This was undertaken by a soil vapour test which revealed the need to spend £30,000 in maintenance costs.” As I read the report, the reference to the soil vapour test and the need to spend £30,000 was a reference to the RPS report. His point was not so much that there was anything wrong with the RPS report, but that the £30,000 which would have to be spent was in respect of maintenance costs which the purchasers could expect to pay which, contrary to Mr Brown's view, would not affect the value of the property. However, Mr Rostron did add that the estimate of £30,000 in the RPS report was “wholly unsupported by any analysis or explanation beyond ... `recent similar projects'.”

The experts subsequently met and prepared a document entitled “Agreed statements of experts”. It showed that they had agreed to differ. Each maintained his previous view. As to the supplementary report of 26th September 1996, which is in fact a short letter, Mr Brown's view was that it did not advise the claimants to assess the state of repair of the underground system.

Before the trial began counsel for both sides prepared skeleton arguments. As I read Mr Butler's skeleton argument on behalf of the claimants, their case was put substantially as I set it out earlier. The bulk of the argument advanced by Mr Butler on behalf of the claimants was concerned with whether the defendants were in breach of their duty to exercise reasonable care and skill. The relevant part of his skeleton for present purposes is paragraph 11, where he said this:

“The claim for damages is limited to the difference in value, claimed at £35,000, on the basis of the opinion of Mr Brown which, it is submitted, is supported by the near-contemporaneous estimate in the specialist environmental report of RPS Technology Limited, belatedly required by TSB after the Claimants were already committed to purchase and produced only after the purchase was completed. It is submitted that if Mr Gowland had provided a non-negligent valuation, with appropriate reservation of valuation pending further advised investigations into environmental matters, such a report would have become available before the Claimants were so committed and the final valuation opinion would have been reduced accordingly. The Claimants would then have been able either to use the specialist report to obtain the property at suitably reduced price or would have had the opportunity to withdraw from the transaction and on either basis have suffered damage.”

In Mr Collett's skeleton argument on behalf of the defendants he too concentrated on the question of breach of duty, arguing that there was none. In short, he submitted that the defendants had complied with their instructions, that there was in any event nothing which should have made them suspicious about possible contamination and that they were told that the tanks and underground equipment had been tested. As to reliance, he said this in paragraph 28:

“Reasonable reliance cannot be made out on the facts. Cs had been told that TSB required an environmental report before completion, precisely because there was concern about the possibility of environmental contamination from petrol. Cs commissioned the RPS draft report, but decided to proceed with completion anyway, rather than await the results. TSB did not require sight of any such report before making the advances.”

Under the heading of “Loss” he said this with regard to the RPS report:

“31.The RPS draft report is unsatisfactory and unreliable. It carries neither the name nor the qualifications of the person making the recommendations. It does not give any categoric analysis of what `contamination' is present or where it came from. Most importantly, it gives no reason why any `remedial' works should be carried out anyway: there is no proposal for change of use of the land, and the VOC levels allegedly recorded do not have any impact on the operational capacity of the petrol station or any other reason to carry out any works (other than to provide work for RPS). There is absolutely no reason why the matters allegedly found would have any impact on value for the property as a functioning petrol station.

32.Mr Brown's figure of £127,500 is not supported by any comparables in his first report. It seems to be the case that he would accept D's case on the valuation by reference to the comparables (ie £162,000), but he then deducts £35,000, being the RPS estimate of £30,000 plus some figure for loss of profits. (NB There are no figures available for loss of profits: the only figures provided merely show turnover, not net profits.)”

It is plain that as at the beginning of the trial the claimants intended to rely on the RPS report and the defendants had not objected to their doing so. As I see it, each party was content to treat the RPS report as part of the evidence before the court and to ask their respective experts, and no doubt other witnesses so far as appropriate, to comment upon it. It seems to me that the materials before the court suggest that the claimants intended to do so principally in this way. First, they intended to rely upon the fact that the RPS report was made and the fact that it expressed the view both that there was contamination within the forecourt area of the site and that the cost of work caused by the contamination would have been up to £30,000. As I indicated earlier, the claimants said that if the defendants had not been negligent and had given proper advice RPS would have been instructed and would have reported as they did, and that the existence and contents of the report would have affected the view formed by the valuers and, indeed, what was done. In particular, they said that a fair valuation of the property would have been less than £162,000 and that the claimants have suffered loss as a result either because they would have agreed a lower price or because the value of the property which they bought was less than it otherwise would have been. A second basis upon which the claimants appear to have relied upon the report, at any rate in the pleading, was as evidence of opinion and perhaps of fact.

At the commencement of the trial the Recorder expressed concern as to the status of the RPS report. I will return in a moment to what in fact happened at the trial, but consider first what would have happened if the Recorder had not intervened.

It is to my mind clear that if the Recorder had not raised the problems which he saw as arising out of the RPS report, the RPS report would have been put before the court as part of the evidence without objection. The claimants would have relied upon it in the first of the two ways to which I have referred. I also think it likely that in the course of the trial it would in fact have been relied upon in the second of the two ways, depending upon how the evidence emerged, and that the defendants would have been content to call evidence from Mr Rostron and to make submissions as to the reliability of the report, as indeed they did in the skeleton argument to which I have referred. The claimants would not have taken the point that the report was inadmissible or, indeed, that no Civil Evidence Act notice had been given in respect of it.

At the very outset of the trial the Recorder expressed concern about the status of the report and indicated that the claimants had significant problems on causation and quantum. His concerns about the report and the claimants' claim in the light of the report included the following:

Mr Butler accepted during the course of the discussion that no Civil Evidence Act notice had been served, that the claimants were not saying that there was visible leakage or contamination which the defendants should have noticed and that he was not relying upon the RPS report in order to prove any facts or, indeed, as itself being expert evidence.

The defendants' position changed somewhat in the course of the discussion. At the outset Mr Collett said that the defendants were not going to take the point that the report was inadmissible in its entirety. He correctly recognised that the defendants had pleaded to it in the amended defence. When he was asked whether the Recorder might treat it as though a Civil Evidence Act notice had been served and apply such weight to it as was appropriate, he said that he had not applied his mind to it, but he accepted that that was a proper analysis of it. He said that (putting it colloquially) he could live with that. However, after some discussion, during much of which I think it is fair to say that the Recorder was making the running, Mr Collett submitted that the report was inadmissible. It is clear from the transcript, and indeed from what Mr Collett has told us this afternoon, that his principal concern was that the Recorder had observed that the RPS report appeared to support a case that there was visible leakage and contamination, as indeed the pleading asserted. Mr Collett was concerned about that because that was not the way in which the claimants had in fact put their case in their skeleton argument. He was concerned that there was a risk that the Recorder might investigate a case which was not part of the claimants' case. However, as I indicated earlier, that concern was subsequently alleviated by the concession made by Mr Butler on behalf of the claimants.

As I read the transcript, the Recorder ultimately ruled that the report was inadmissible. Mr Collett has submitted this afternoon that that is not a fair reading of the transcript. However, for my part I would not accept that submission. The Recorder noted that Mr Butler was not relying upon the report as evidence of contamination or quantum, but to my mind the Recorder clearly ruled that the report was not otherwise admissible. He thus, in effect, rejected Mr Butler's submission, which Mr Butler stated on a number of occasions, consistently with the case which I outlined earlier: see, for example, page 301, line 2; page 304, line 19; page 312, line 1; and page 313, lines 9 to 18. The difficulty which, for my part, I have with the Recorder's approach is that, as Mr Collett accepts, there is nowhere in the discussion on the transcript any clear statement of the reasons which led the Recorder to rule that the RPS report was not admissible on the basis upon which Mr Butler submitted that he was entitled to put it before the court. The Recorder took the view that the RPS report was of no value to the claimants unless it was evidence which tended to prove the fact of contamination and the figure of £30,000, which he said it did not. Indeed, he said (correctly by that stage) that Mr Butler was not seeking to rely upon the report as hearsay evidence of those facts.

Before considering admissibility, I note in passing that I do not understand the defendants to challenge the authenticity of the RPS report. They could scarcely do so, having given no notice of such an intention in accordance with the principle stated in CPR rule 32.19. Although paragraph 31 of Mr Collett's final skeleton which I have quoted says that the draft report is unsatisfactory and unreliable and that it carries neither the name nor the qualifications of the person making the report, not surprisingly Mr Collett does not challenge its authenticity. For my part, I can see no reason why the trial judge should not be able to assess the reliability of the report with the assistance of the experts on either side, even though I recognise that those experts are surveyors and valuers and not geotechnologists.

I can see no reason why the report was not admissible on the first of the bases I identified earlier. Once it is accepted as genuine, I can see no reason why the claimants should not rely upon the fact that it was made and upon the fact that its contents were as set out in the report. In my opinion the Recorder should have admitted the report in support of the following steps in the claimants' argument. If the defendants had not been negligent an independent survey would have been commissioned, probably from RPS, who would probably have issued a report in substantially the terms of the draft report which they in fact issued. If RPS had produced such a report the property would have been valued at less than £162,500, probably about £30,000 less. That is so whether the contents of the report can be shown to be objectively true or not.

The question is not whether the contents of the report were objectively true, but how professional valuers would have reacted to such report in forming a view as to the appropriate valuation of the property. Mr Brown says that he would have valued the property at £30,000 or so less. Mr Sunley says, as I understand it, that he would have paid substantially less for the property. Mr Rostron says that it would have had no effect on the value. It appears to me that it is likely that if this matter goes to trial both Mr Rostron and the defendants' surveyor who is alleged to have been negligent will be asked what their approach would have been to such a report if it had been made available. It is likely that they will be asked what effect it would have on their valuations.

Mr Collett submits that the evidence of causation and, in particular, quantum is so thin that the claimants' case is fanciful or doomed to failure. I appreciate of course that Mr Collett challenges most of the steps in the claimants' argument and that Mr Rostron will indeed give evidence in relation to several. There may be difficulties, perhaps substantial difficulties, in the claimants' way. But I can see no reason why the RPS report should not be deployed in evidence in support of an argument along the above lines.

It appears that at the end of the discussion, having recited Mr Butler's concession that he was not relying upon the report as evidence of the facts stated into it and that it was not an admissible document as to its truth or accuracy and without proof of its truth and accuracy no allegation of negligence (by which I think he must have meant causation and quantum) gets off the ground, the Recorder added:

“There is no evidence of quantum because no witness, lay or professional, can give such an opinion without reliance on the [inadmissible] document, it seems to me.”

In my opinion that is to go too far.

No application for summary judgment under Part 24 was made and to my mind any such application would fail. I recognise that in Mr Collett's skeleton argument and in his respondent's notice he gives a number of reasons why the claimants' case on causation and quantum will fail. For example, he says that when an environmental survey (that is the RPS survey) was commissioned, neither the lender nor the appellants waited to see it before completing, so that the effect of commissioning one was nil. Mr Collett further submitted that that meant that the highest that the claimants' case could be put is that the valuer was negligent. Had he made such a recommendation an environmental survey of some sort would have been commissioned, but the claimants cannot say if they would have waited to see such a report before completing. That is contrary to the claimants' case and is contrary to what, as I understand it, is likely to be the first claimant's evidence. To my mind, we cannot resolve those issues on this appeal. They are matters which will have to be tried.

Finally, there is nothing in the CPR which to my mind should have prevented the claimants from advancing their case based upon the RPS report and the evidence of Mr Brown as put forward by Mr Butler. Section 1 of the Civil Evidence Act 1995 provides:

“(1)In civil proceedings evidence shall not be excluded on the ground that it is hearsay.

(2)In this Act -

(a)

`hearsay' means a statement made otherwise than by a person while giving oral evidence in the proceedings which is tendered as evidence of the matters stated; and

(b)references to hearsay include hearsay of whatever degree.

(3)Nothing in this Act affects the admissibility of evidence admissible apart from this section.

(4)The provisions of sections 2 to 6 ... do not apply in relation to hearsay evidence admissible apart from this section, notwithstanding that it may also be admissible by virtue of this section.”

CPR rule 33.1(a) defines hearsay in the same way. Rule 33.2 provides for an appropriate notice, previously called the Civil Evidence Act notice, to be served.

Mr Butler submits that, deployed in the way that he has indicated, the RPS is admissible apart from the Civil Evidence Act 1995. However, assuming that that is not the case, although the claimants have not formally given notice under CPR rule 33.2, in the circumstances of this case no reasonable tribunal could have excluded the RPS report on the ground that no such notice had been given. Quite apart from in the pleadings, the RPS report was relied upon in Mr Brown's report, commented upon in Mr Rostron's report and referred to in the skeleton arguments of both parties, as I have already indicated. In all the circumstances justice required that the report be admitted.

In any event, paragraph 27.2 of Practice Direction 32 provides:

“All documents contained in bundles which have been agreed for use at a hearing shall be admissible at that hearing as evidence of their contents unless -

(a)the court orders otherwise; or

(b)a party gives written notice of objection to the admissibility of particular documents.”

It is fair to say that that paragraph only came into force on 25th March 2002, just two months before the date for trial, and I frankly concede that I had not heard of it before. I understand that neither had either counsel at the time of the trial. However that may be, it appears to me that that paragraph supports the view that I have reached. As I have indicated, this is not a case in which the defendants gave written notice of objection to the admissibility of the report. Mr Collett submits in a supplementary skeleton argument that this is a case in which the court ordered otherwise within the meaning of subparagraph (a). However, the Recorder was certainly not purporting to exercise any such power and, for the reasons I have given, I would hold that he would have been plainly wrong to do so.

I would just like to add this. I recognise that the line between relying upon a document as containing a fact and relying upon a document in support of the truth of a fact, or indeed the validity of an opinion stated in a document, may be a narrow one. Here the parties had proceeded on the basis that the RPS report and its contents should go before the court for what it was worth. It was a matter for the trial judge to decide what it was worth after hearing all the evidence, including that of Mr Brown and Mr Rostron. As I have indicated, the defendants have not sought judgment under Part 24. In these circumstances it appears to me that the claimants should have been permitted to go to trial and that they should now be permitted to go to trial. I have already indicated that it will not be open to them to resile from their concession in relation to the earlier suggestion that there was visible contamination.

However, the question does arise whether they should be permitted to resile from the concession made in the course of the argument that they would not rely upon the RPS report in order to prove the contamination or the figure of £30,000. Mr Butler recognises that his concession perhaps went too far, especially in the light of the practice direction and the provisions of the Civil Evidence Act and the rules to which I have referred. He also recognises that the reason why he made the concession was (as I understand it) that the RPS report was unsigned, provisional and a draft, and he was not able to identify the maker. However, to my mind those are matters which essentially go to weight. Given the fact that for the reasons I have given it will be difficult to draw the line between the different usages which may be made of a report like this, it appears to me that at the trial it ought to be open to the claimants to rely upon the statements in relation to contamination other than visual contamination and upon the figures. What weight to give to them will be a matter for the trial judge, who will be in the best position to decide when he has heard the evidence of the witnesses, including the two expert valuers, in relation to them. I would therefore permit the claimants to resile from that concession.

Finally, I agree with the Recorder that the way the claim developed was far from satisfactory. He was struck by the unsatisfactory nature of the pleaded case. I entirely agree. It was based upon a misapprehension and has never been amended. However, while I sympathise with the problems the Recorder faced, I have reached the clear conclusion that he arrived at the wrong conclusion and that he should not have ruled the report inadmissible and should have held that the various points relied upon by the defendants go to weight, not admissibility. For these reasons I would allow the appeal and order a new trial.

I would like to add that nothing I have said in the course of this judgment is intended to be a criticism of the way the defendants, their solicitors or counsel acted before the Recorder.

I agree. There is nothing I wish to add.