Claim for negligent survey — Whether court entitled to find negligence on evidence — Judgment for the surveyors
The plaintiffs, who were a licensed moneylender, claimed against the defendant surveyors for an alleged negligent valuation of a house as security for a loan. The borrowers were Mr and Mrs G, who borrowed against 84 Paddock Mead, Harlow, Essex. The sum actually lent on the property was £37,000. The loan was effected in 1989 at the height of the property boom and the house was valued at a forced sale value of £215,000. The lenders’ policy was that for loans between £30,000 and £50,000 they would advance up to 70% of the valuation, which appeared to be safe margins. The defendant surveyors were approached by brokers and not by the plaintiffs and were asked for a quick valuation. The fee was £50. The borrowers defaulted and the house was eventually sold at the bottom of the market at £110,000 by which time it had been repossessed and had fallen into disrepair. The plaintiffs alleged, inter alia, that if they had received a true valuation, their lending criteria were such that there would have been a lesser loan or no loan at all. The defendants argued, inter alia, that they owed no duty of care to the plaintiffs as their instruction for valuation had come from the broker and not the plaintiff.
Held Judgment for the defendant.
1. As in so many cases the valuation had been given at or near the height of the property boom in early 1989, at a time when it seemed that property prices — while they might stagnate — were always going to press on upwards. The sudden sharp decline in property values which supervened was the essential reason why the security became insufficient.
2. If the defendants knew the purpose of the valuation for which they were being paid was for a loan on property, they owed a duty of care to the lender, who envisaged making the loan. That identity was easily ascertainable. It might have been different if the valuation had passed from hand to hand until a lender could be found, though if the same brokers had been involved, sufficient proximity would still have existed.
3. The fee of £50 implied that nothing more than a quick market valuation was looked for, but there was no reason why a professional valuer, paid to value a property for a prospective lender, should not come under a duty of care to use such skill in his assessment as was reasonable in the circumstances.
4. While £215,000, even at the height of the property boom, as the figure given on forced sale value for that house in that location might raise eyebrows a little, that was a long way from the court being satisfied that the valuation was an error.
5. It was a serious matter to impugn the skill and judgment of a defendant valuer and the court could not accept a finding of negligence on the evidence before it. Some authorities suggested that liability could only be established if the valuer could be shown to have failed to take some relevant matter into account or to have made some positive error. Others suggested that it was permissible to find a central accurate valuation and to establish a percentage above and below it which was the non-negligent zone. Anything outside that zone would be prima facie negligent valuation. In the instant case, the court would have been entitled to adopt the latter approach, but there was no adequate evidence of the proper valuation. In the absence of such evidence the action inevitably failed.
Stephen Lennard (instructed by Lehrer Segal, of Edgware) appeared for the plaintiffs; Daniel Pearce-Higgings (instructed by Kennedys) appeared for the defendant surveyors.
