Valuation for mortgage — Property subsequently repossessed — Sold for low price — Whether valuer negligent — Whether valuation within acceptable bracket — High Court holding that valuer not negligent as valuation within acceptable bracket
The plaintiff’s business was giving loans on domestic property. In January 1989 it received an application for a mortgage loan on 44 Stone Road, Edgware, Middlesex, for £225,000. The purpose of the application was to pay off two existing loans on that property totalling £194,000 and to raise additional capital of £31,000 for the applicant, who had purchased and lived in the property since 1972. The plaintiff needed a valuation before deciding whether to grant the mortgage and instructed the defendants, who were chartered surveyors based in Edgware, to value it. The property was valued at £300,000, which would rise to £310,000 if certain repairs and redecoration were carried out. The plaintiff granted the mortgage on the basis of that valuation. Problems were experienced in getting the first interest payment from the mortgagor, who thereafter defaulted. The plaintiff obtained a possession order in 1991. The property was then valued at £145,000 and eventually sold for £137,000. The plaintiff had advanced £225,000 and received only two interest payments. It sought to recover the loss suffered from the defendants contending that their original valuation was negligent since the figure given was one which no reasonably competent valuer would have provided, the proper value on the open market being £220,000. It was said that no mortgage would have been granted at all if the proper valuation had been made.
Held The plaintiff’s claim failed.
1. It was common ground that the defendants owed the plaintiff a duty of care. The primary issue was whether the plaintiff had established a breach of that duty, the onus being on it to do so.
2. A valuation by a competent, qualified, professional man acting carefully was an estimate of the amount of money for which a property could be sold on the open market. It was not necessarily something precise and exact.
3. For the plaintiff to succeed on the primary issue it had to show on the balance of probabilities that the valuation of £300,000 was one which could not properly be reached by a valuer using proper skill and care and that the figure fell outside the acceptable margin of error.
4. In Singer & Friedlander Ltd v John D Wood & Co (1977) 243 EG 212, the court held that the permissible margin of error was 10%, but it did not follow that 10% was necessarily the normal starting figure. That varied from case to case: see Mount Banking Corporation Ltd v Brian Cooper & Co [1992] 2 EGLR 142.
5. A valuer had to consider all the evidence including the price of similar properties in the area, features peculiar to the property, his own experience and knowledge of the area, any other valuations of the property and the general state of the market. He should then decide the likely open market value.
6. On the evidence the defendants had taken all the relevant matters into consideration. Their evidence was supported by that of other experienced valuers and, considering that the lending policy of institutions at that time was based on the fact that house prices were high with no indication that they were likely to fall, it could not be said that any breach of duty had been proved.
Richard Lynagh (instructed by Cameron Markby Hewitt) appeared for Hirani Watson; Nigel Thomas (instructed by Vizards) appeared for Axa Equity & Law Home Loans Ltd.
