Damages — Negligent valuation — Liability to mortgagees admitted — Loan providing for contractual rates of interest — Higher interest payable on default of borrowers — Mortgagors defaulting — Mortgagees lost payments of interest at contractual rates — Whether mortgagees entitled to loss of payments of contractual interest — Whether mortgagees entitled to contractual benefit with mortgagors — Appeal by defendant allowed
In January 1985 the appellant, Alastair Gibson FRICS, provided a mortgage valuation of a house at 36 North Road, Audenshaw, Manchester. He valued it for a firm of mortgage brokers at £18,000. The respondent company lent the owners of the property £10,000 secured on the property; the total interest was £23,000 over a term of 10 years being 36.51% rising to 45.619% in the event of any default. The mortgagors did default and the property was sold in February 1987 for £12,000. The respondents obtained judgment in Westminster County Court (May 19 1989) where His Honour Judge Harris QC awarded the sum of £7,136, being the balance of principal, interest and other disbursements due after the proceeds of sale.
In dismissing the appellant’s appeal, the Court of Appeal held ([1990] 2 EGLR 149; [1990] 34 EG 49) that they were bound by Baxter v F W Gapp & Co Ltd [1939] 2 KB 271 and decided that damages should be assessed on the basis that the respondents were entitled to unpaid interest on the loan to the mortgagors. The appellant appealed submitting that the loss should have been assessed on the basis that the mortgagees were entitled to be put in the position they would have been in if they had received a competent report from the valuer and had consequently made no loan.
Held The appeal was allowed.
The decision in Baxter v F W Gapp & Co Ltd is not an attractive precedent; it does not exemplify the proposition contended for by the mortgagees and the approach seems contrary to principle. The principles adumbrated by Oliver J (as he then was) in Radford v De Froberville [1977] 1 WLR 1262 are, notwithstanding that that was a contract case and the present action is founded in tort, apposite. The respondents were not entitled to claim that by the appellant’s negligence they had been deprived of the interest payments because of the mortgagors’ default. The respondents were entitled to look to the property for security and could not look to the appellant as guarantor for the interest payments at the contract rates.
It was for the respondents to furnish evidence to prove their case on the correct basis. Having regard to the fact that they did not appear at the hearing of the appeal, judgment would be entered for the appellant in the county court.
Roger Toulson QC and Roger Stewart (instructed by Reynolds Porter Chamberlain) appeared for the appellant. The respondents did not appear and were not represented.
