Over valuation — Loan granted on basis of valuation — Borrowers fell behind with repayments — Property repossessed — Sold for less than purchase price — High Court holding valuation negligent — Valuer in breach of duty of care — Judgment for plaintiffs
This was a claim by the plaintiff money lenders against the defendant surveyors and valuers in respect of an alleged over valuation of The Stables, Damary, Gloucestershire, as a result of which the plaintiffs lent £200,987.50 on September 27 1990. The borrowers fell into arrears with their payments in February 1991 and the property was repossessed and sold in May 1993 for £107,000. The defendants originally valued the property at £250,000. This was later raised to £275,000 and it was stated that generally the premises afforded good security for mortgage purposes.
The property consisted of a long run of buildings at the bottom of a steep bank, which had formerly been the stables of the house standing on top of the bank. There was a garage which did not belong to the property although the defendants’ valuer mistakenly included it in his valuation. The plaintiffs claimed damages on the basis of a negligent over valuation of the property which resulted in the plaintiffs suffering loss.
Held Judgment for the plaintiffs.
1. It was conceded on all sides that the property was an unusual house and difficult to value. There were no houses exactly comparable. Therefore the permissible margin either side of a valuation figure was wider than it would otherwise have been. Where individual properties were valued, a margin of 10% either side of the valuation figure was often allowed: here to take into account the exceptional nature of the property, it would be fair to set a margin of 15%.
2. On the evidence a true valuation of the property in good repair at the relevant time was £185,000. The defendants failed to discharge the necessary duty of care as well as being negligently high in their valuation. They knew that this was a market which had come off the boil and was falling, a circumstance which should have made them cautious. The valuer: failed to spot that the garage was not part of the property, despite obvious signs that it was not; failed to check with any other valuer about a property which was obviously unusual; raised the valuation to £275,000 for no good reason; and yet refused to accept that by doing so he had raised the bracket of valuation as well.
3. On the facts, damages should be calculated on the basis of a transaction that would have gone ahead, albeit at the lower calculation. The borrowers were in financial difficulty, but were out for what they could get. There would still have been an advantage to them in reducing their own level of debt, and that of their company, and no doubt they would have done just that.
4. The proper starting point for the calculation of damages was the correct valuation figure. The bracket of valuation or margin of error had nothing to do with the quantum of the plaintiffs’ loss. It was a tool to be used to assess whether a valuer had been negligent; it was a yardstick from which to assess liability; it did nothing to assist in assessing quantum and had nothing to do with quantum: United Bank of Kuwait v Prudential Property Services Ltd [1994] 30 EG 103 followed.
Hugh Evans (instructed by Blake Lapthorn) appeared for the plaintiffs; Henry de Lotbiniere (instructed by Kennedys) appeared for the defendants.
