The Supreme Court will give judgment next week in a surveyors’ negligence appeal that could have an important impact on the extent to which lenders are able to place reliance on valuations – less than a month after the appeal was heard.
The judgment will be handed down on Wednesday 29 November in an appeal in which a Mayfair firm of chartered surveyors is seeking to avoid a full trial of a negligence claim brought against it.
Lady Hale, Lord Kerr, Lord Sumption, Lord Hughes and Lord Briggs are to decide how the “but for” test for causation is to be applied as between an allegedly negligent valuer and lender in a refinancing situation.
Following the hearing earlier this month, Neil Franklin, partner at law firm TLT, said that the decision would be an influential one.
Franklin said: “The decision could make important new law on the extent to which lenders are able to place reliance on valuations, where there has been some form of refinance post the original lending decision.
“Defendant valuers have been trying to suggest that any form of refinance post the original lending breaks the chain of causation. On this basis, the lender is not able to rely on the original valuation for any ensuing losses.
“In my view, this is a fact-sensitive issue based on the terms of the valuer’s retainer and any refinance agreement, which means that whatever the Supreme Court decides, this will not be the final word on the subject.”
In July last year, the Court of Appeal overturned a summary judgment ruling in favour of De Villiers Chartered Surveyors, in a dispute with a bridging loan lender over an allegedly negligent valuation.
Lender Tiuta International blames all of its losses of a £3m-plus loan on an allegedly negligent valuation by De Villiers, but in the High Court Timothy Fancourt QC ruled that Tiuta’s claim failed the “but for” test as it had already loaned £2.5m before the valuation was carried out.
Tiuta had claimed that it had redeemed the original loan, and entered into the new £3,088,252 loan in reliance on the valuation. But the judge ruled that Tiuta’s losses were attributable to existing indebtedness and were not caused by any alleged negligence in the November 2011 valuation. He granted summary judgment in favour of De Villiers.
However, by a two to one majority, the Court of Appeal allowed Tiuta’s appeal. Lord Justice Moore Bick ruled that, based on certain assumptions made during the appeal, correct application of the “but for” test would mean that De Villiers was liable.
Final determination of any liability would require a full trial, but De Villiers hopes to have persuaded the Supreme Court to once again grant summary judgment in its favour, defeating the claim.
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