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RICS secures victory in personal duty of care case

26 February 2014

Working closely with the Royal Institution of Chartered Surveyors (RICS), Browne Jacobson has successfully defended a Merrett v Babb-type claim against an RICS member formerly employed by the collapsed chartered surveying business, Ashdown Lyons. Judgment in the case of Matthews v Ashdown Lyons and Maldoom was handed down in the Central London County Court on 14 February 2014.

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.

On instructions from the claimant, Ashdown Lyons had undertaken a building survey of a Clapham townhouse in May 2008. The claimant went on to purchase the property for £750,000 in July 2008.

Ashdown Lyons entered administration in 2009 and it transpired soon after that there were problems with the companys professional indemnity insurance cover.

In July 2011, the claimant started professional negligence proceedings against the individual Ashdown Lyons employee who had carried out the survey, Mr Maldoom. 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.

Following an application made by Browne Jacobson on his behalf, Mr Maldoom was awarded summary judgment on the discrete issue of personal duty and the claimants claim was dismissed.

The Court in Matthews recognised that Merrett v Babb was decided with very particular public policy considerations in mind. The policy aim was to afford a remedy to purchasers of modest means, buying low-value residential properties, where it was foreseeable that those purchasers would not reasonably be paying for or arranging a survey or valuation of their own in connection with the purchase. The backdrop was quite different in Matthews, however:

  1. at £750,000, the subject property for purchase could hardly be described as modest;
  2. by instructing Ashdown Lyons directly, the claimant here had specifically engaged a surveyor for his own benefit (in contrast to the Merrett v Babb scenario);
  3. the claimant would not be without remedy if the survey or valuation happened to be negligently performed.

In Matthews, the claimant still had causes of action open to him against Ashdown Lyons in contract and in negligence. The fact that those remedies were less valuable to him - because of Ashdown Lyons insolvency and PI insurance difficulties - were merely normal commercial risks that any client had to expect to assume. In themselves, those factors were an insufficient policy justification for imposing a personal duty of care upon Mr Maldoom.

It was also important in Matthews that the former employer-business involved (Ashdown Lyons) was a limited company, rather than a firm (as in Merrett). This meant that the main authority to apply was the House of Lords decision in Williams v Natural Life Health Foods. To fix the employed surveyor with a personal duty of care in these circumstances would have been to ignore Ashdown Lyons separate legal personality. On an objective analysis, in Matthews, there was nothing that Mr Maldoom had done to assume a personal responsibility to indemnify the claimant against the risk of loss in purchasing the subject property. Even if there had been any such assumption of responsibility on the part of the individual surveyor, the claimant would still have needed to reasonably rely on that assumption in order to crystallise the personal duty of care.

The decision has been welcomed by the Royal Institution of Chartered Surveyors. Eve Pienaar, RICS Legal Director, said:

"RICS set up the Member Support Service in response to the Merrett v Babb case, to mitigate the risk for its members of facing the stress and expense of defending claims of this nature, where it was felt that case law was uncertain. Browne Jacobson has provided valuable advice to those of our members who qualified for financial assistance from this discretionary fund."

Browne Jacobson Financial & Professional Risks partner Nik Carle, who acted for Mr Maldoom in these proceedings, said:

"With so many surveyor services businesses having folded during the downturn of recent years, we have seen a spike in personal liability cases against RICS members individually. Generally, these claims have attempted to stretch Merrett v. Babb beyond its limits but to date, none has succeeded.

"The decision in Matthews gives comfort to surveyors, valuers and other employed professionals that they will not easily find themselves saddled with personal duties of care unless the public policy concerns behind Merrett v Babb are featuring prominently."

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Lakhbir Rakar

Lakhbir Rakar

PR Manager