Loan made in reliance on negligent valuation – Judge finding lender contributorily negligent – Whether damage overall transaction loss or part of overall loss attributable to negligent valuation – Law Reform (Contributory Negligence) Act 1946, section 1(1)
In August 1990 the first and second defendants (the valuers) each independently valued 9 Carpenter Road, Edgbaston, Birmingham, the property of H, at £1.5m. The plaintiff lender, Platform, lent to H £1,050,195 secured by a first charge on the property. H defaulted; Platform obtained possession and sold the property in 1994 for £435,000. Platform brought proceedings to recover from the valuers damages for negligence for having over valued the property. The measure of damages claimed was the amount of the advance together with interest and the costs charges and expenses incurred less, inter alia, the proceeds of sale of the property. As a result of South Australia Asset Management Corporation v York Montague Ltd [1996] 2 EGLR 93 (SAAMCO), it appeared that the measure of damages applied by Platform was wrong. The judge found that both valuers had been negligent and that the true value of the property in August 1990 was £1m. He applied SAAMCO, and reduced the valuers’ liability because of Platform’s contributory negligence in two respects, one of which was Platform’s imprudent lending policy, and the total contribution at 20%. Platform appealed contending that imprudence in their lending policy could not constitute contributory negligence so as to reduce the liability of the valuers, and that the relevant damage was that which they had sustained in consequence of the valuers’ breach of duty. The valuers also appealed contending that section 4 of the Law Reform (Contributory Negligence) Act 1945 distinguished between “damage” and “damages”, that the relevant damage was the overall transaction loss sustained by Platform, part of which was caused by Platform’s lending policy and part by their own negligent valuations, and that therefore the court should reduce the damages recoverable from them as compensation for the damage sustained by Platform having regard to its share in the responsibility for the damage.
Held The valuers’ appeal was allowed and judgment entered for Platform in the sum of £400,000; Platform’s appeal was dismissed
1. A negligent valuer was “responsible only for the consequences of the information being wrong” and the damages recoverable from him were an element in or part of the overall transaction loss incurred by the lender from making the loan.
2. Platform’s decision to lend was sufficiently imprudent to amount to fault and therefore the damages for which the valuer was liable fell to be reduced. Section 1(1) of the Act applied and the court was entitled to apportion the damages by reference to the lender’s share in the responsibility by comparing “(a) the amount of money lent by (the plaintiff), which he would still have had in the absence of the loan transaction, plus interest at a proper rate, and (b) the value of the rights acquired, namely the borrower’s covenant and the true value of the over valued property”: per Lord Nicholls of Birkenhead in SAAMCO (supra). Therefore the damage for the purposes of section 1(1) of the Act was the overall transaction loss sustained by the lender in consequence of the loan, rather than that part of the overall loss consequent on and so attributable to the negligent valuation.
Simon Berry QC (instructed by Williams Davies Meltzer) appeared for the appellant first defendant; Patrick Lawrence (instructed by Dibb Lupton Alsop, of Birmingham) appeared for the appellant second to fourth defendants; Nicholas Patten QC and Andrew PD Walker (instructed by Rosling King) appeared for Platform.