The first thing to ascertain is the scope of your duty to your client. There is a difference between (1) a duty to provide information for the purpose of enabling the client to decide upon a course of action; and (2) a duty to advise the client as to what course of action it should take.
Extent of liability
If your duty to the pension fund was to advise whether the purchase of the office block was a wise investment, then you would have to take reasonable care to consider all the potential consequences of that course of action. If you were negligent in giving that advice, then you would be liable for all the foreseeable loss which is a consequence of that course of action. It is certainly arguable that this would include the extra loss which the client suffered due to the fall in the property market.
If your duty was only to supply information, then your obligation was to take reasonable care to ensure that the information was correct and, if you were negligent, you would be responsible for all the foreseeable consequences of that information being wrong. You will not be responsible for losses which would have occurred even if the information which you provided, ie the valuation, had been correct. Thus the loss arising from the drop in the property market would not be your responsibility and the loss for which you may be liable would simply be the £200,000 over-valuation. This is the principle which has become known as the SAAMCo principle: see South Australian Asset Management Corporation v York Montague Ltd [1996] 2 EGLR 93.
In the more recent decision of Astle and others v CBRE Ltd [2015] EWHC 3189 the court said that the correct way to apply the SAAMCo principle was as follows:
λ Stage 1 required the court to ascertain the basic loss, which in that case was the loss sustained by the claimant by reason of the fact that it made an investment which was worthless and which it would not have made had it been informed as to the true value of the asset.
λ Stage 2 then required the court to assess the maximum amount of the loss capable of falling within the duty of care. In the case of a negligent valuer who owes a duty to a mortgage lender, the loss attributable to the inadequate valuation will normally be limited to the difference between the valuation and the true value.
When the loss is assessed
As a general rule, damages are assessed at the time of the breach, which is when you carried out the valuation in December 2015. However, there are no strict rules in negligence cases (see Veitch and another v Avery [2007] EWCA Civ 711; [2007] PLSCS 176) and as you accept that you have been negligent, the loss could be assessed at another date if this would give effect to a more appropriate level of compensation for the fund.
The basic compensatory principle is that the measure of damages will be the difference between the price the fund paid for the property and its actual value. There are three possible dates at which the loss could be assessed:
(i) Because the fund invested in the property relying on your negligent valuation, the first date for assessing damages would be December 2015, when you say the property was worth £200,000 less than your valuation. However, in Hooper v Oates [2013] EWCA Civ 91; [2013] 1 EGLR 93, the date of the breach was held to be the right date for assessment of the damages if there was an immediately available market for the sale (or purchase) of the property. Expert evidence would be required to show, first, that the fund could readily have sold the property at a fair value, and second, that it would have been reasonable for the fund to sell the property in December 2015.
(ii) If there was no immediate market for the sale of the property at the date of the breach, the Court of Appeal held in Hooper that the date for assessing the loss would be a later date on which the seller’s attempts to sell the property had failed; if the fund tried and failed to find a buyer for the property, damages would be assessed at that date.
(iii) Finally, in Gestmin SGPS SA v Credit Suisse (UK) Ltd and another [2013] EWHC 3560 (Comm) the Commercial Court suggested a third date for assessing the loss could be the date of any trial: so, if proceedings are issued against you, and the fund still owns the office block at the date of the trial, the loss could be assessed at that date.
Rachel Morrish is a solicitor in the property litigation team at Charles Russell Speechlys LLP and Stephanie Jarron is a barrister at Enterprise Chambers
