Period of limitation — Mortgage — Surveyors’ report prepared for mortgagee — Alleged overvaluation — Action brought outside limitation period — High Court holding that action brought outside special time-limit
On July 6 1987 the borrowers, Mr and Mrs S, purchased 5 Priory Road, London NW6, for £420,000. They borrowed £380,000 from Target Home Loans Ltd (now Southern Mortgage Corporation Ltd). That company became mortgagee of the property and registered proprietor of the legal charge. After corporate restructuring it held the legal charge as trustee for Finance for Mortgages Ltd, the plaintiffs. The defendants were a firm of chartered surveyors who, in 1987, valued the property for mortgage purposes. The plaintiffs sought to recover damages from the defendants on the basis that their valuation report was compiled negligently, resulting in a significant overvaluation.
The borrowers fell into arrears with their repayments and disappeared in 1989. The police investigated a suspected mortgage fraud and, on January 16 1990, a representative of the plaintiffs signed a witness statement as part of the prosecution case against the borrowers. No suggestion was ever made that the defendants were in any way implicated in the fraud. The plaintiffs finally obtained vacant possession on February 4 1993. On July 28 1993 the plaintiffs commenced proceedings (the first action) against both the defendants and the solicitors’ firm which had acted for the plaintiffs and the borrowers in 1987. The validity of the writ in the first action was extended until December 29 1993. On December 20 1993 the plaintiffs purported to serve the writ on the defendants. That service was set aside. On April 18 1994 the court held that there had been no proper grounds for extending the validity of the writ and that an extension might deprive the defendants of a limitation defence.
On April 20 1994 the plaintiffs commenced these proceedings against the defendants (the second action). A preliminary issue arose as to whether the action was statute-barred. The primary limitation period expired on July 6 1993, ie six years after completion of the purchase and mortgage transaction. The second action could only proceed on the basis of the special time-limit in section 14A(4)(b) of the Limitation Act 1980.
Held The action was statute-barred.
1. For the purposes of establishing when a cause of action accrued under the Limitation Acts, the issues should be approached in a broad common-sense way: see Spencer-Ward v Humberts [1995] 06 EG 148.
2. When a mortgagee obtained vacant possession of mortgaged property on which large arrears had accumulated it was normal and reasonable to expect the mortgagee to proceed to an early current valuation to move towards the sale of the property.
3. By January 16 1990 the facts observable and observed by the plaintiffs by January 16 1990 as to the state of the account and the police investigation were such that any reasonable mortgagee would have commenced possession proceedings by that date. If they had done so it was probable that they would have obtained vacant possession by January 31 1991.
4. Had they proceeded to an early current valuation, alarm bells would have been rung by the adverse reports by Mid-March 1991 at the very latest. However, approximately six months elapsed from receiving the current valuations in July/September 1991 to receiving the retrospective valuations.
5. The three-year special time-limit pursuant to section 14A(4)(b) therefore began to run and had expired by, at the very latest, March 31 1994. The present action, commenced on April 20 1994, was therefore statute-barred.
Nicholas Patten QC and Andrew Goodman (instructed by Lightfoots, of Thame) appeared for the plaintiffs; Stephen Rubin (instructed by Russell-Cooke Potter & Chapman) appeared for the defendants.
