Valuation of property by defendant – Plaintiff making non-status loan to purchaser of property on basis of valuation – Purchaser defaulting – Property sold at loss – Whether valuation negligent – Whether building society contributorily negligent in making non-status loan – Judge holding valuation negligent – Judge finding plaintiff failing to protect its interests – Judgment for plaintiff
On July 17 1989 a partner in the defendant firm, an experienced professional surveyor with a good knowledge of the area, valued a property at 243 Upper Richmond Road, Putney, London, at £325,000. The property, a typical Victorian town house at the end of a terrace, was set back from a busy road had an unusual internal lay-out. In reliance on the valuation the plaintiff lent £243,750 to Mr and Mrs P who granted as security a mortgage of the property.The plaintiff, adopting a practice common among its competitors at the time, advanced loans on the borrowers’ own certification of income and made no further inquiries beyond a credit search. Mr and Mrs P fell into arrears and possession was obtained on July 19 1991. On July 6 1992 the property was sold for £145,000. The plaintiff contended that the property was only worth £250,000 at the time of valuation and claimed damages against the defendant on the grounds of negligence.
Held Judgment was given for the plaintiff.
1. The property recession had started to affect the housing market by the date of inspection and a valuer, exercising reasonable care and skill, should have been aware that the prevailing market conditions were difficult and exercised caution by avoiding optimistic valuations at that time. The defendant had also failed to give proper weight to the undesirable location and the unusual internal design of the property. Applying a reasonable margin of error of 12%, and finding that the correct valuation was £250,000, the highest figure for the valuation would have been £284,090. Therefore the defendant was negligent in providing a valuation of £325,000.
2.The damages which resulted were £75,000 being the difference between the valuation given and the correct valuation of £250,000.
3. The plaintiff had fallen below the standard of a reasonably competent financial institution at the time in accepting a non-status loan since the cushion of 75% loan to value ratio was insufficient to justify such acceptance. The plaintiff had therefore failed to take reasonable care to protect its own interest but that did not lead to any reduction in its damages. There was a distinction between a duty to provide information and a duty to provide advice and the plaintiff’s contributory negligence was not causative of the damage which it was entitled to recover: see Interallianz Finanz AG v Independent Insurance Co Ltd [1997] PLSCS 164; [1997] EGCS 91 and Alliance & Leicester Building Society v Wheelers January 23 1997
4. Interest ran from the date of realisation of the security at the LIBOR rate.
Mark Anderson (instructed by Wood Glaister Partnership, of Solihull) appeared for the plaintiff; Andrew Nichol (instructed by Reynolds Porter Chamberlain) appeared for the defendant