[2014] EWHC 2217 (TCC)
[2014-07-22] PLSCS 219
Negligence
Surveyor
Bank of Ireland v Faithful & Gould Ltd
Technology and Construction Court
Edwards-Stuart J
10 July 2014
Negligence – Valuation – Contributory negligence – Law Reform (Contributory Negligence) Act 1945 – Defendant settling claim for damages concerning alleged negligent valuation – Defendant seeking contribution from third party engaged by claimant to value property as security for loan – Whether claimant relying on third party’s market valuation of property — Contribution claim dismissed
In 2008, the claimant lost more than £8m when a developer to whom it had lent money to build a tower block in Manchester containing 130 residential apartments went into administration. It sued the defendant, a quantity surveying and project management practice, which had been engaged by the claimant to advise it in relation to the development. The defendant joined the third party whom the claimant had engaged to value the property as security for its loan.
The claimant alleged that the defendant had advised it that the developer had provided materials for the development which were stored off-site within the UK to the value of about £4.5m when no such materials to anything like that value existed. In January 2014, the defendant paid to the claimant £3.35m plus costs in settlement of its claim. The defendant then brought a claim for contribution under the Civil Liability (Contribution) Act 1978 against the third party in respect of its liability to the claimant. It claimed that, since the third party also owed a duty to the bank, it was liable for the “same damage” within the meaning of section 1(1) of the 1978 Act as that for which the defendant had been found liable.
The outstanding issue for the court was whether the claimant had relied on the third party’s valuation of the market value of the site which contributed towards its loss.
Held: The contribution claim was dismissed.
(1) The relevant test to be applied in relation to causation in cases such as the present, it sufficed if the advice played a real and substantial, though not by itself a decisive part, in inducing the claimant to act as they had. As long as a misrepresentation played a real and substantial part, though not by itself a decisive part, in inducing a plaintiff to act, it was a cause of his loss and he relied on it, no matter how strong or how many other matters played their part in inducing him to act. Where a client retained and paid a professional adviser to provide advice a rebuttable presumption would arise that, having sought, paid for and obtained such advice, the client had relied upon it: Capita Alternative Fund Services (Guernsey) Ltd v Drivers Jonas (a firm) [2011] EWHC 2336 (Comm) [2011] PLSCS 225 applied.
In the present case, the third party’s assessment of the market value of the site was a factor which might have been taken into account by the claimant, the court was unable to say what weight, if any, the decision makers in the claimant had attached to it. Accordingly, the defendant had failed to prove that the third party’s valuation of the market value of the site had played any real or significant part in its decisions to advance money to fund the development or that it had relied on the third party’s valuation.
(2) Although the third party had produced a wrong valuation of the gross development value (GDV) of the project which played a real and significant part in the claimant’s decisions, the claimant had sustained no loss as a result of the valuation of the GDV being wrong. Whilst the two valuations were interconnected, they should be treated as separate valuations so that the fact that the claimant relied on the third party’s valuation of the GDV did not mean that it had relied also on the market valuation of the site. Since the claimant had sustained no loss as a result of the third party’s valuation of the GDV being wrong, it had no claim under that head. In those circumstances, the defendant’s claim for contribution against the third party failed.
(3) Had the claim succeeded, the damage for which the defendant and the third party would have been liable was £3.6m. So far as any liability for the site valuation was concerned, the third party’s scope of duty and potential liability was limited by the principle in South Australian Asset Management Company v York Montague [1997] AC 191; [1996] EGCS 107, i.e. the only part of the basic loss for which the third party could be liable was the amount represented by the difference between the true value of the site and its value as represented by the third party (£8.9m less about £3.5m (which the court had assessed to be the correct value of the site on the basis on which the third party had valued it, namely £5.4m. Taking into account contributory negligence on the part of the claimant, the defendant had overpaid £1.73m in the settlement. Therefore, had the court found in its favour on contribution, it would have been entitled to recover that sum from the third party: Platform Home Loans Ltd v Oyston Shipways Ltd [1999] 1 EGLR 77; [1999] 13 REG 119 and Nationwide Building Society v Dunlop Haywards Ltd [2009] EWHC 254 (Comm); [209] PLSCS 64 applied.
The claimant did not appear and was not represented; Sean Brannigan QC and Jennie Gillies (instructed by Watson Burton LLP) appeared for the defendant; Simon King (instructed by Clyde & Co LLP) appeared for the third party.
Eileen O’Grady, barrister
