Principal lender instructing agent – Agent required to obtain valuation of properties offered as security – Agent instructing defendant to value property – Borrower defaulting – Agent selling property for price below valuation – Whether defendant owing duty of care to undisclosed principal – Whether defendant entitled to rely on disclaimer accompanying valuation report – Judgment for defendant
The plaintiff was a lending company which offered loans based on the value of the applicants’ property offered as security rather than the applicants’ earnings. In 1988 the plaintiff entered into a brokerage deed with Allied Dunbar Mortgage Ltd (ADM). ADM was required, inter alia, when dealing with applications, to obtain a valuation of the property offered as security. In 1989 ADM engaged the defendant, a major building society with its own property valuation department, for residential valuations.
Subsequently Mr and Mrs Y (the borrowers) applied to ADM for a loan of £340,000 to be secured over a property in Mill Hill. ADM sought a valuation report from the defendant. The report valued the property at £640,000 and was given by the defendant on ADM’s standard form of mortgage valuation report. The report contained a disclaimer. ADM duly issued a loan offer of £340,000, which stated that the lender was to be the plaintiff. The borrowers accepted the offer. Subsequently the borrowers defaulted. When the property was sold it fetched a much lower price than the valuation. The plaintiff issued proceedings alleging that the defendant’s valuation had been negligent. A hearing was ordered of the preliminary issues whether the defendant owed the plaintiff a duty of care in relation to its valuation report on the property and whether, if there was a duty of care, the defendant could rely on its disclaimer notice to avoid liability.
Held Judgment was given for the defendant.
1. The defendant had not known, nor ought to have known, that the plaintiff or anyone other than ADM would rely on the valuation report. The mere possibility that someone might do so was not enough to give rise to a duty of care and there was no reason in principle, as to proximity and fairness, which required the imposition of such a duty in the circumstances: see Caparo Industries plc v Dickman [1990] 2 AC 605 applied.
2. It would be a wholly unjustifiable extension of the professional man’s duty of care that he should be regarded as insurer to all those who might rely on his report even though he had not, and could not be expected to have, any knowledge of their existence or use of his report. Therefore there was no basis for any incremental extension of the law: see McNaughton Ltd v Hicks Anderson & Co [1991] 2 WLR 64, applied.
3. If the defendant had owed the plaintiff a duty of care the disclaimer would not have protected the defendant from liability. The disclaimer had been addressed to the borrower and the words were incapable of being construed as also being adressed to ADM.
Gerald Rabie (instructed by the solicitor to Household Mortgage Corporation) appeared for the plaintiff; Jason Evans-Tovey (instructed by Kennedys) appeared for the defendant.
