Plaintiff lender alleging negligent valuation – Defendant valuer applying for leave to amend defence to include allegations of failure by plaintiff to properly assess borrower’s ability to service loan – Whether contributory negligence could be alleged in negligent valuation action – Application for leave refused
The plaintiff building society employed the defendant valuer to value a property. Subsequently a dispute arose and the plaintiff issued proceedings alleging that the defendant had been negligent in its valuation of the property. In its defence the defendant alleged contributory negligence on the part of the plaintiff in failing to make sufficient inquiries before lending to the borrower. The defendant applied for leave to amend the defence to make further allegations of contributory negligence relating exclusively to alleged failures on the part of the plaintiff to make proper investigations into the borrower’s ability to service the loan.
The issue was whether an allegation of contributory negligence could be entertained as a matter of law in an action alleging negligent valuation. The plaintiff contended that the failure to make proper investigation into the borrower’s ability to serve the loan was not negligence relevant to the loss attributable to the negligent valuation, that there was therefore no prospect of the allegations succeeding and the amendments should be disallowed as irrelevant. The defendant contended that leave should be granted since it was inappropriate for the court to attempt to break down the different aspects of contributory negligence and compartmentalise them, and accordingly, in the circumstances, it was appropriate for the court to adopt a broad brush approach to any negligence attributable to the plaintiff.
Held The defendant’s application was refused.
The damage relied on by the plaintiff was not alleged to have been incurred by entering into the loan but by reason of the undervalued security. The plaintiff had based its decision to lend the money on the security, as it understood it to be, as a result of the negligent valuation. The advice tendered by the defendant only related to the amount of the security, not to the advisability of entering into the loan, and therefore the argument that the plaintiff had failed properly to investigate the creditworthiness of the borrower amounted to an argument that if the loan had not been made the lender would have incurred no loss. That argument had no causal connection with the undervaluation of the security, and the allegations of contributory negligence were therefore doomed to failure: Interallianz Finanz AG v Independent Insurance Co Ltd [1997] EGCS 91 followed.
Thomas Grant (instructed by Addleshaw Booth & Co, of Leeds) appeared for the plaintiff society; Neil Berragan (instructed by Dibb Lupton Alsop, of Manchester) appeared for the defendant valuer.
