Surveyor – Valuation – Appellant surveyor agreeing to value property – Whether appellant being obliged to value property to which instructions related – Whether appellant undertaking to do no more than exercise skill and care expected of reasonably competent surveyor – Appeal dismissed
The appellant was a surveyor and valuer and the respondent was a mortgage lender. H approached the respondent for assistance in obtaining a loan, which was to be secured by a mortgage on a property, 1 Bakers Yard, that was still under construction. The appellant had previously been asked to value the property in connection with a loan from another company, but had been misled by H into inspecting 5 Bakers Yard a nearby plot upon which stood a house that was nearing completion. That loan was refused but the same valuation report was used for an application for a loan with the respondent.
The valuer’s report contained the following certificate: “Declaration… this valuation is for the benefit of [the respondent], its successors, assignees and transferees… I certify that the property offered as security has been inspected by me and that the above valuation is a fair indication of the current open market valuation for mortgage purposes… .”
In reliance upon that report, the respondent advanced the sum of £154,495. H failed to make the payments due under the loan agreement and the respondent repossessed the property in order to realise its security. At that point, the valuation error was discovered. By then, the amount outstanding on the loan account stood at £184,951.68. The property was sold for £154,506.99 after the costs of sale were deducted, leaving a shortfall of £30,444.69.
The respondent brought proceedings against the appellant to recover its loss. The judge concluded that if a surveyor accepted instructions to inspect a particular property, he assumed an unqualified obligation to inspect that particular property. Accordingly, judgment was given in favour of the respondent. The appellant appealed.
Held: The appeal was dismissed (by a majority).
In the normal retainer of a surveyor to inspect and value a property, there was an inherent absolute obligation to inspect and value the correct property, such that an inspection and valuation of a completely different property constituted a breach of contract, notwithstanding the surveyor’s care.
Although there was a presumption that those providing professional services normally did no more than undertake to exercise the degree of care and skill to be expected of a competent professional in the relevant field, there was nothing to prevent them from assuming an unqualified obligation with regard to particular aspects of their work. Whether a professional person had undertaken an unqualified obligation would depend upon the terms of the contract under which he had agreed to provide his services: Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 2 EGLR 81; (1975) 235 EG 823 and Midland Bank plc v Cox McQueen (a firm) [1999] Lloyd’s Rep Bank 78 considered.
In circumstances such as those in the instant case, it was not helpful to ask whether the professional person promised to answer for the fraud of a third party, where that was the origin of the eventual loss, since in most cases neither party would have had that particular risk in mind. It was more appropriate to ask whether, having regard to the facts and matters known to both parties when the instructions were accepted, the professional person assumed an unqualified obligation in respect of the matter in question. It did not follow that the duty was simply to exercise reasonable skill and care: Zwebner v Mortgage Corporation plc [1998] PNLR 769 and Barclays Bank plc v Weeks Legg & Dean [1998] 3 EGLR 103; [1998] 40 EG 182 considered.
Although the court should be cautious about holding that a professional person had undertaken an unqualified obligation in the absence of clear words to that effect, there was no reason not to give effect to the language of the contract where it was clear.
Per Sir Anthony Clarke MR (dissenting): Absent an express term of the contract that the valuer was undertaking an absolute obligation in respect of the whole or part of his instructions, or an implied term to that effect, there was no breach of contract unless he failed to exercise reasonable skill and care. If commercial institutions such as banks wished to impose liability on members of a profession, they should do so in clear terms so that those members would be in a position to appreciate the extent of the obligation that they were accepting.
Thomas Grant and Alex Winter (instructed by Walker Morris, of Leeds) appeared for the appellant; Clifford Payton and Ben Hubble (instructed by Glenisters) appeared for the respondent.
Eileen O’Grady, barrister