Valuation of properties for loan purposes — Valuation above sale price — Claim in negligence against valuer — Measure of damages — What damages was lender entitled against negligent valuer — Whether fall in market values to be compensated for — Court of Appeal holding that lender entitled to damages for loss incurred on sale of property — Fall in market not a new intervening cause of loss — Appeal to House of Lords allowed
Five appeals raising claims in negligence against valuers and one against a solicitor were heard together. The complaint made in each case was that the valuers had negligently overvalued land and that the lenders would not, but for these valuations, have entered into the transactions at all. The question was the amount of damages which would be payable by the valuer if negligence were established.
Held Four appeals allowed; two dismissed.
1. Where a lender advanced money to a borrower on the security of property which had been negligently overvalued and would not have entered into the transaction at all but for the valuation, he was entitled to recover damages from the negligent valuer for losses incurred. These included the loss additionally suffered by a fall in the property market when he sold the property on the borrower’s default.
2. Once it was established that the valuer’s negligence led the lender to make a loan he would not otherwise have made, the lender was entitled to be compensated for all the damage he had suffered: see Baxter v FW Gapp & Co Ltd [1939] 2 All ER 752.
3. The appeal by Eagle Star, insurers of BBL, was allowed. Phillips J had denied a claim in damages against property valuers, John D Wood Commercial, for a sum representing the loss occasioned by market fall when on the borrower’s default, the bank sold property secured against its loan: see [1994] 2 EGLR 108.
4. The appeal by Prudential Property Services was dismissed. Gage J had awarded United Bank of Kuwait damages which included an award for loss caused by market fall: see [1994] 2 EGLR 100.
5. The appeal by Edward Erdman Group from Judge Byrt QC was dismissed. The judge had concluded that Nykredit Mortgage Bank was entitled to recover damages in respect of market fall.
6. The appeals by BNP were allowed against the judgment of Judge Fox-Andrews QC, who awarded damages against Key Surveyors Nationwide and Goadsby & Harding ([1994] 2 EGLR 169) disallowing sums in respect of market fall.
7. An appeal by Mortgage Express was allowed from the judgement of Arden J who, in an action against solicitors, declined to award damages in respect of market all: see [1994] 2 EGLR 156.
Michael Lyndon-Stanford QC, Mark Hapgood QC and Richard Morgan (instructed by Lovell White Durrant) appeared for Eagle Star; John D Wood Commercial did not appear and was not represented; Roger Toulson QC and Daniel Pearce-Higgins (instructed by Clifford Chance) appeared for United Bank of Kuwait; Ronald Walker QC and Vincent Moran (instructed by Cameron Markby Hewitt) appeared for Prudential Property Services; Michael Briggs QC and David Blayney (instructed by Clifford Chance) appeared for Nykredit; Michael de Navarro QC and Jonathan Ferris (instructed by Williams Davies Meltzen) appeared for Edward Erdman Group; Romie Tager (instructed by Eversheds Phillips & Buck, of Cardiff) appeared for BNP; Michael Harvey QC and Simon Brown (instructed by Davies Arnold Cooper) appeared for Key Surveyors Nationwide; Walter Aylen QC and Nigel Jones (instructed by Eversheds Phillips & Buck, of Cardiff) appeared for BNP; Christopher Gibson and Fiona Sinclair (instructed by Davies Arnold Cooper) appeared for Goadsby & Harding; Nicholas Patten QC and Timothy Harry (instructed by Rosling King) appeared for Mortgage Express; Genevra Caws QC and Ben Patten (instructed by Pinsent & Co, of Birmingham) appeared for Bowerman & Partners.
