Sale of land — Mortgagee suffering financial loss due to alleged negligence of solicitors and surveyors’ valuation — Claim for damages — Proceedings against solicitors settled — Claim against surveyors as third party assigned to solicitors — Claim for indemnity against or contribution towards settlement against surveyors — High Court holding valuation negligent
In January 1990 D applied to the building society for a loan of £168,000 to buy a 99-year leasehold interest in a basement flat at 4, Peto Place, Albany Road, London NW1, at a purchase price of £198,000. In February 1990 the building society engaged a valuation firm (“the third party”) to inspect the basement flat. They valued the flat at £198,000. On the basis of that report, D was advanced the sum of £168,683. D’s solicitor was the first defendant in this action. The sale was intended to include the lease of a car-parking space for the benefit of the flat and the solicitors accepted that they were negligent in failing to secure any charge over such a lease. That failure reduced the value of the flat in the event of a resale, and thus the value of the society’s security.
D made no payments due under his mortgage. The society repossessed the flat and sold it without the benefit of the car-parking space in 1993 for the sum of £62,500. The society had the benefit of an insurance policy under which they were entitled to be indemnified for part of their loss. The society started proceedings against the solicitors claiming damages for breach of contract and negligence. They joined the third party as a defendant claiming damages against them on the same basis. The solicitors conceded negligence and reached a settlement. The claim against the third party was assigned to the solicitors who claimed an indemnity against, or contribution towards, the society’s claim.
Held The valuation was negligent.
1. A valuer must use his own judgment fortified by his experience and the knowledge of current market conditions, which he must have to make reasoned assessment of the value of a property. The use of evidence of comparable transactions was only one part of the valuation process. There was no evidence that any account was taken of market conditions when the valuation was made. On the evidence it had been established that the third party was negligent in making the valuation for the society.
2. The building society had recovered the sum of £39,524.14 under the terms of the policy. It was settled law that the proceeds of insurance were to be disregarded when assessing damages: see Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1994] 2 EGLR 108.
3. In this case it did not accord with established principle or justice that the third party should be entitled to reduce the extent of their liability to the society for the losses caused by their breach of duty. The effect would be that part of the society’s loss would have to be borne by the insurers rather than the wrongdoer. The third party had no interest in the contract between the insurers and the society which was made solely for the benefit of the latter.
4. Accordingly, the sum paid to the building society by the insurers should not be deducted from the society’s loss.
5. In all the circumstances the solicitors and the third party should share the building society’s loss equally. The solicitors had accepted that they alone must accept responsibility for the loss of the value of the parking space on resale of the flat.
Thomas Dumont (instructed by Browne Jacobson, of Nottingham) appeared for the first defendant; the second defendant did not appear and was not represented; Mark Cannon (instructed by Reynolds Porter Chamberlain) appeared for the third party.
