Alleged negligent valuations – Valuer addressing reports to small consortium of companies without identifying plaintiff company as prospective lender – Whether parties in sufficient proximity to give rise to a duty of care
Pursuant to an “Operating and Agency Agreement” concluded in September 1989, three companies collaborated in the provision of mortgage finance secured on residential property. The processing of applications from borrowers was entrusted to Castlegate Securities Ltd (CG) who then called for funds from Consumer Loans Co Ltd (CLC) . Each transaction was so arranged that the borrower obtained a mortgage loan from the plaintiff company (Nightingale) which was wholly owned by CLC (itself wholly owned by National Home Loans Holdings plc) and created specifically to serve as a vehicle for such transactions. The moving of funds from CLC to Nightingale depended upon the prior approval of A who was a director of both companies. In the processing of applications received over the first two years, numerous properties were valued by the defendant firm of surveyors who were on the National Home Loans panel. Almost all the valuations were headed “Consumer Loans Company Survey and Valuation Report”. Following the collapse of CG, and heavy losses sustained by Nightingale, proceedings were taken by Nightingale against the defendant alleging various instances of negligent over valuation. As the parties had never stood in a contractual relationship, a preliminary issue arose as to whether their relationship was sufficiently proximate to place the defendant under a duty of care for the purpose of establishing liability in tort. The defendant argued that such a duty should not extend beyond the case (as instanced by Smith v Eric S Bush (a firm) [1989] 1 EGLR 169) where the report was intended to be passed to a particular person who was likely to rely on it.
Held Judgment was given for the plaintiff.
The principal constraint on the duty, first recognised in Hedley Byrne & Co Ltd v Heller & Partners [1964] AC 465, was that it should not extend to a large and indeterminate class of plaintiffs. No such extension was contended for. By addressing his valuations to what was effectively an umbrella organisation, the defendant must be taken to have been aware that it was likely to be relied upon by one or more members of a limited class. It was accordingly immaterial that the defendant may not have been able to identify Nightingale as the prospective lender: see per Millet J in Al Saudi Banque v Clarke Pixley[1990] 1 Ch 313, at p336; and per Lords Bridge and Oliver in Caparo Industries plc v Dickman [1990] 2 AC 605, at pp621 and 638.
Michael De Navarro QC and Sarah Vaughan-Jones (instructed by Wragge & Co, of Birmingham) appeared for the plaintiff; Justin Fenwick QC (instructed by Fishburn Boxer) appeared for the defendant.
