Residential property — Valuation report carried out by the defendant firm — Plaintiffs advancing money to borrower on basis of report — Plaintiffs having to repossess and sell at considerably less than original valuation after borrower’s default — Plaintiffs alleging negligence in valuation — Judgment for the defendants
The plaintiffs, a finance company, were approached by M in July 1990 for a mortgage to be secured on 8 Vicarage Road, St Agnes, Cornwall. The defendant firm of chartered surveyors were instructed by the plaintiffs to prepare a written mortgage valuation following their inspection. The property was valued on an open market valuation at £75,000 and the plaintiffs advanced to M the sum of £48,750. M defaulted and was unable to meet the mortgage instalments. The property had to be repossessed and was sold in 1993 for £35,500.
The report had stated that the property was in reasonable condition and that there were parking facilities available. It also stated that the property would be reasonable mortgage security and “with potential”. It was in a shopping area on a road leading into the town. The surveyor took into account that it was a particularly attractive village with a commercial life and that properties there commanded a higher price than in the surrounding area. He also consulted a local estate agent to produce comparables of properties which were for sale at the time and the asking prices for those, which he established, confirmed his view that £75,000 was a reasonable figure.
Held Judgment for the defendants.
1. The plaintiffs had to show that no reasonably competent surveyor would have valued the property at £75,000 and that they had suffered loss as a result of the alleged negligent valuation.
2. Valuation was not a mathematical process and there had to be leeway on either side. The property, and those of the comparables, were of comparatively small value, but the conditions for valuing property in St Agnes were very variable, depending on: fluctuations in seasons, the tourist industry and, it could be said, even whether the sun was shining.
3. That was to be contrasted with a situation of a perfectly ordinary building site in town where there were rental values as a yardstick and development value could be more readily assessed.
4. Local knowledge was an important matter and should be emphasized, therefore, in a case such as the present. It was quite plain that open market value would rarely be the same, whoever the valuer was, as it would depend on whether he was making the valuation for the buyer or the seller, lender or borrower.
5. It was open to a judge to consider that expert witnesses for either side had not got the figures quite right. However, that was not a sensible view and it was for the court to establish which of the witnesses’ evidence it found the more acceptable.
6. Asking prices were not invariably a bad guide; moreover, actual sale prices were not invariably a helpful guide as buyers and sellers were not experts in the field. Many considerations went into the fixing of the price, eg a buyer could beat down a vendor.
7. The court concluded that the surveyor knew his own business and had taken a proper and practical view and the figure reached did not include any change of use or “hope value”. The evidence of the defendants was to be preferred.
Francis Treasure (instructed by Brindley Twist Tafft & James of Coventry) appeared for the plaintiffs; Jason Evans-Tovey (instructed by Fishburn Boxer) appeared for the defendant surveyors.
