Mortgage — Development — Valuation of lease following development — Moneys advanced in reliance on valuation in July 1983 — Lenders subsequently alleging valuation negligent — Action commenced for damages in March 1990 — Valuers alleging action outside six-year time-limit — High Court holding action barred by Limitation Act — Court of Appeal reversing that decision — Appeal allowed
The plaintiffs provided finance to enable a company to develop land at West Quay Road, Southampton, which was to be leased from Southampton City Council, the advances to be secured (among other things) on the lease. Under that agreement they advanced £2.6m in reliance upon a valuation of what the lease would be worth when the development was completed, which had been provided at their request by the defendant valuers in May 1983. The valuation was in the sum of £4.4m. The plaintiffs alleged: that that valuation was negligent; that a proper valuation would have been only £2.7m; and that if a proper valuation had been made they would not have entered into the loan agreement or made any of the advances. The borrowers became insolvent and the security taken for the advances proved insufficient to recoup the amounts owed by the borrowers.
The plaintiffs issued a writ against the defendants on March 20 1990. They claimed that that was within the limitation period stipulated by section 14A of the Limitation Act 1980, since that date was either less than six years from the date when their cause of action accrued or, if not, less than three years from the earliest date on which they first had both the knowledge required for bringing an action for damages in respect of the relevant damage and right to bring such an action, within the meaning of the section. The High Court held that the plaintiffs were barred by limitation from bringing an action in tort for negligence against the defendant. The plaintiffs appealed.
Held The appeal was allowed.
1. It was clear that if there had been no breach the plaintiffs would not have entered into the transaction at all.
2. The prima facie measure of damages in a case where the advance would not have been made if a proper valuation had been given was the difference between the amount advanced and the amount that would have been advanced. Since the latter was nil, prima facie the whole advance could be claimed, less any recoveries actually made. If the lender could show that he has sustained other losses those were also recoverable. Thus, given evidence, the lender could claim lost expenditure, what he would have made on other deals, or the interest that would have been earned by putting the money on deposit, or the value of lost opportunities to invest the money elsewhere: see Swingcastle Ltd v Alastair Gibson (a firm) [1990] 2 EGLR 149 (CA); [1991] 1 EGLR 157 (HL).
3. Though the starting point for calculating any loss was the date of the first advance in July 1983, the plaintiffs could not have proved that they had suffered any actual loss until some date subsequent to March 1984. Thus, in March 1984 the security (calculated at the true figure of £2.7m) still exceeded the aggregate sums advanced.
4. The writ was issued within the six-year period stipulated in section 14A(4)(a) of the Limitation Act 1980.
James Townend QC and Clive Newton (instructed by Stewarts) appeared for the plaintiffs; Michael Lewer QC and David Tucker (instructed by Kennedys) appeared for the defendants.