In Moore v National Westminster Bank Plc the High Court upheld an award of damages awarded for breach of contract by the lender when it failed to arrange a Home Buyers Report. Costs were awarded for the cost of repairs rather than the diminution of value.
Camilla Hegelund and Martin Moore bought a flat in Bideford, Devon for £135,000, secured in part with a mortgage for £81,000 from National Westminster Bank. The couple intended to let the property and asked the bank to commission a Home Buyers Report, a more extensive survey that would identify any significant problems.
The bank went on to lend the required sum, leading the buyers to assume that the Home Buyers Report they had commissioned had been a favourable one.
The property was found to be in poor condition and in need of extensive remedial work, the cost of which exacerbated by its Grade II listed status and the fact that it lay in a conservation area. The cost was far in excess of the £35,000 available to the couple for repairs, and the total bill was estimated to be in the region of £115,000 – equivalent to around 85% of the price of the property.
The extent of the work necessary on the property would have been identified in a Home Buyers Report and a surveyor would recommend a more detailed survey that would further identify the costs. A value could not be placed on the property until the extent of repairs had been established. However, it was established that the bank had neglected to carry out the survey and had not produced the Home Buyers Report, so the respondents brought a claim for breach of contract against Nat West, which at trial was found in their favour.
The respondents claimed the cost of repairs was a correct and fair measure of their loss, as they would not have purchased the property in the knowledge that this would be £115,000. However, the appellant argued that the correct measure of damages should be the sum equal to the diminution in value of the property.
On the value of diminution, experts for the parties disagreed. The appellant’s surveyor valued the diminution as £15,000 while the respondents’ surveyor said the value of the property could be taken as the mathematical result of subtracting the cost of repairs from the purchase price, i.e, £20,000, although he agreed £20,000 could not be taken as the actual value of the property and suggested it should be between £20,000 and £135,000.
The judge found in favour of breach of contract and awarded damages of £115,000, explaining that an award of £15,000 would not adequately compensate the respondents who would not otherwise have bought the property.
The appellant did not appeal the findings but contended the level of damages, arguing that the sum should be equal to the diminution in value of the property rather than the repair costs, that the value of the property should be around £80,000-£85,000 and so the diminution in value should be around £50,000-£55,000.
The judge held that the purchase price of £135,000 was the most that would normally be paid for the property if it had it been in a reasonable condition and the bank did not challenge the finding.
In his final summary Mr Justice Birss concluded that, as no submission had been proposed by the appellant as a viable sum for award, other than £15,000, the judge had had no other concrete figure to go on than the £115,000 that was accepted as the cost of repair. The costs were upheld at £115,000.
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