Valuation – Negligence – Building society making loan on basis of valuation – Back-to-back sale – Mortgagee defaulting – Valuers giving over-valuation and providing false certification – Solicitors to building society failing to disclose subsale – Solicitors compromising claim – Contribution proceedings between valuers and solicitors.
The second defendant, a firm of solicitors, claimed a contribution from the first defendant, the valuers, who provided the plaintiff building society with a valuation for mortgage purposes of £1.55m on a property which the judge had already found to have had a true value of £880,000. The action was pursued by the building society’s former solicitors who admitted liability in that they did not inform the building society of the existence of a back-to-back sale for £880,000. The building society lent £1.25m to a Mr M who subsequently defaulted on his mortgage.The solicitors paid £610,000 to the building society in a settlement which included an assignment of the cause of action against the valuers.
In the light of the judge’s finding of the true value of the property, it was agreed that an unqualified employee of the valuers had been negligent in valuing the property at £1.55m. It was also accepted that the valuers were negligent in providing the valuation under the false certification of a partner in the firm, and that the building society had relied on the valuation report. The solicitors claimed under the Civil Liability (Contribution) Act 1978 and the valuers raised two questions, namely contributory negligence based on alleged imprudent lending by the buiding society to Mr M, and the respective responsibilities of the valuers and the solicitors.
Held Judgment for the second defendant
1. On the evidence, the conduct of the building society amounted to contributory negligence partly due to a mistake at a low management level regarding the holding of an interview with the mortgagee, which would have been remedied before higher approval was sought for the loan had the general manager been aware of the deficiency.The negligence of both valuers and solicitors was far-reaching. There had been gross over valuation compounded by false certification by the valuer, and the solicitor had been admittedly negligent in failing to inform the plaintiffs of the back-to-back sale as well as presiding over the dissipation of the plaintiffs’ mortgage funds for purposes other than those for which they were intended, without informing the plaintiffs that he had instructions to do so. However the blameworthiness of the building society was far less than the total blameworthiness of the valuers and the solicitors, and the contributory negligence would be assessed at 25%.
2.In the contribution proceedings, considering the respective proportions of responsibility of the valuers and solicitors inter se, in the case of the solicitors (see Mortgage Express v Bowermann & Partners (a firm)[1996] 1 EGLR 126 at p128) although they were not retained in order to underwrite the transaction for the building society, as soon as something occurred that clearly raised grave doubts as to the bona fides of the transaction, the solicitor acting should at least have sought permission to notify the building society or ceased to act if such permission was not forthcoming.The solicitor was also wrong to have authorised the transmission of part of the advance monies to inappropriate payees. Such negligence was far more than a mere oversight in a busy pressured world.The valuers had been negligent in their over valuation of the property, which was coupled with the false certification. The judge referred to Bristol & West Building Society v Christine & Butcher (unreported, February 15 1996) and concluded that the substantial negligence of the solicitor equated with the compounded negligence of the valuers, and that they were both equally responsible for the losses of the building society.
The plaintiffs did not appear and were not represented; Timothy Sewell (instructed by Williams Davies Meltzer) appeared for the first defendant; Patrick Lawrence (instructed by Pinsent Curtis ) appeared for the second defendant.