Smith v Eric S Bush

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					Smith v Eric S. Bush [1990] 1 AC 831 House of Lords Facts: A prospective purchaser applied for a building society mortgage and the building society instructed the defendants to value the property. The applicant signed a form containing a disclaimer which stated that neither the building society nor its surveyor warranted that the report and valuation would be accurate, and the report and valuation were supplied without any acceptance of responsibility. The report also contained a similar disclaimer. The valuation stated that no essential repairs were required. It was negligently prepared and the purchaser claimed damages in tort from the defendants. The defendants argued that the disclaimer was effective to protect them and was not subject to UCTA s 2(2) because it was not a clause which excluded liability. Holding: RD 1: Based on Harris v Wyre Forest DC, the Court of Appeal held that the Act does not apply to “negligent misstatements where a disclaimer has prevented a duty of care from coming into existence”, per Nourse LJ, at p 848. The valuer owed a duty to exercise reasonable skill and care in his inspection and valuation. If he had been careful in his work, he would not have made a “negligent misstatement’ in his report. A duty of care was owed by the valuers to the prospective purchaser. Not fair and reasonable for mortgagees (such as the building society) and valuers to impose the risk of loss due to their incompetence or carelessness on purchasers. RD 2: The disclaimer of liability made by the council on its own behalf in the Harris case and by the Abbey National on behalf of the appellant surveyors in the Smith case constitute notices which fall within the UCTA 1977 and must satisfy the requirement of reasonableness. The disclaimer was subject to UCTA 1977 s2 in that the last part of s13 (1) stated that s2 applied to clauses which purported to prevent

the duty ever arising. ie. Whether exclusion of liability contained in the disclaimer satisfies the requirement of reasonableness provided by s 2(2) of the Act. Following matters must always be considered (Lord Griffiths): 1. Were the parties of equal bargaining power? 2. It would have been reasonably practicable to obtain the advice from an alternative source taking into account considerations of costs and time. (But in the present case it is urged on behalf of the surveyor that it would have been easy for the purchaser to have obtained his own report on the condition of the house, but the purchaser would reply that he would then be required to pay twice for the same advice and people buying at the bottom end of the market are likely to be under considerable financial pressure without the money to go paying twice for the same service.) 3. How difficult is the take being undertaken for which liability is being excluded. A valuation should present no difficulty if the work is undertaken with reasonable skill and care. 4. What are the practical consequences of the decision on the question of reasonableness. This must involve the sums of money potentially at stake and the ability of the parties to bear the loss involved, which, in its turn, raises the question of insurance. Bearing the loss will be unlikely to cause significant hardship if it has to be borne by the surveyor but it is, on the other hand, quite possible that it will be a financial catastrophe for the purchaser who may be left with a valueless house and no money to buy another. The result of denying a surveyor, in the circumstances of this case, the right to exclude liability will result in distributing the risk of his negligence among all house purchasers through an increase in his fees to cover insurance, rather than allowing the whole of the risk to fall upon the one unfortunate purchaser. OD: If the property is not a modest dwelling house (as in this case), the burden shifts, so that it will be more reasonable for a valuer to exclude his liability in these circumstances and more reasonable to expect the purchaser to obtain an independent survey.

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