Court considers duty of surveyors to value correct property

The Court of Appeal has reserved judgment in a case that concerns whether surveyors are under a strict duty to value the correct property for standard mortgage valuations. Sir Anthony Clarke, Rix and Moore-Bick LJJ are considering the matter in a dispute between Britannia Building Society’s intermediary lender, Platform Funding, and the former Halifax Bank’s valuation arm Colleys. In November 2002, Colleys was instructed to provide a standard mortgage valuation for a house at 1 Bakers Yard, Spalding, Lincolnshire, which was owned by builder David Hewes. Colleys was informed that Hewes would meet the valuer at the site to show him around the property. However, as a result of an alleged fraud by Hewes, the valuer was shown a different property, namely 5 Bakers Yard. Apparently, no 1 was an empty shell without a roof whereas no 5 was nearing completion. Accordingly, Colleys valued the property at £230,000, when the true value for no 1 was £95,000. Subsequently, on the basis of Colleys’ valuation, Platform loaned Hewes £154,495. In August 2004, Hewes defaulted on the loan and the property was sold, leaving Platform with a shortfall of £30,000. Platform sued Colleys, alleging negligence and breach of contract. In Central London County Court, Judge Collins found that although Colleys had not been negligent when it valued the wrong property, it was liable for breach of a strict contractual duty to value the correct property. Thus, as a result, despite having taken reasonable care, it was liable to Platform. On appeal, Thomas Grant, counsel for Platform, argued that “although it is legally possible for a valuer to agree to provide a warranty that it will value the precise property to be taken as security, it is the case that such a warranty will arise only in exceptional circumstances, where the clearest words are used in the contract between valuer and lender. “Otherwise, in the normal context of a standard valuation for mortgage purposes, no such warranty will arise.” He added: “There is no principle of law or policy that places the risk of borrower fraud upon a valuer in this situation. The lender was far better placed to assess such matters and to take steps to guard against it.”