House owned jointly by husband and wife — Remortgage — Property allegedly overvalued for mortgage purposes — Part of loan applied to husband’s business — Business failed — Plaintiff claiming damages against valuers for loss from negligent valuation — Action struck out as disclosing no cause of action — High Court allowing appeal against striking out — Court of Appeal allowing appeal against the decision — Valuers not liable in negligence to person in position of plaintiff — Judgment for defendants
In 1980 the plaintiff and her husband jointly purchased a freehold property, 135 Glapthorne Road, Oundle, Northamptonshire. In September 1989 they applied for a loan to be charged on the property. The defendants were instructed to value the property for the purposes of assessing the security for the proposed loan. The property was valued at £350,000. In reliance on that valuation the plaintiff and her husband executed a mortgage which secured an advance of £175,000. The sum of £75,000 discharged the existing mortgage and the remaining £100,000 was advanced to the husband to invest in his business.
The business failed and the plaintiff brought an action against the defendants claiming damages for the loss she had suffered as a result of the defendants’ negligence. It was said that in October 1989 no competent valuer would have valued the property in excess of £205,000. A district judge struck out the plaintiff’s claim as disclosing no cause of action. The High Court allowed an appeal against that decision. The defendants appealed.
Held The appeal was allowed; the decision of the district judge was restored.
1. The court had to consider not only the foreseeability of the damage and whether the relationship between the parties was sufficiently proximate. It also had to ask whether in this situation it was fair, just and reasonable that the law should impose on the defendants the duty of the scope suggested for the benefit of the plaintiff: see James McNaughton Paper Group Ltd v Hicks Anderson & Co [1991] 2 QB 113.
2. The acceptance of a loan could not, of itself, be described as a loss causing damage. If the acceptance of a loan was not a loss causing damage; nor could be the giving of security for the loan by the person to whom the loan was made.
3. The claim in this case disclosed no cause of action. The only damage pleaded was the execution of a mortgage as security for a loan of £175,000, of which £75,000 was used to discharge an existing liability of the plaintiff herself. the remaining £100,000 was advanced to the husband and that was lost, but it was apparent that that advance could only have been made at the direction and with the consent of the plaintiff. Any subsequent loss resulted from the use to which the loan moneys were put, which could not be attributed to the defendants.
4. If the alleged damage was merely the creation of a mortgage as security for a loan, there was no damage. If the alleged damage was the subsequent loss of the £100,000, it was not of a kind which the defendants could or should have foreseen. To make the defendants liable for that loss would be unfair, unjust and unreasonable.
5. If there had been a breach of duty by the defendants in over-valuing the property it did not cause the loss of £100,000; at most it gave the opportunity for that loss to occur: Smith v Eric S Bush (a firm) [1989] 1 EGLR 169 and Forster v Outred & Co [1982] 1 WLR 86 distinguished.
Harold Burnett QC and Derek Holwill (instructed by Browne Jacobson, of Nottingham) appeared for the appellant/defendants; Ian Karsten QC and Oliver Wise (instructed by Hannah & Co, of Peterborough) appeared for the respondent/plaintiff.