Building society mortgage — Mortgage payments fell into arrears — Possession order obtained against mortgagor — Valuation report obtained by society for mortgage purposes alleged to be negligent — Whether mortgagor entitled to rely on valuation in action for damages against society — Society’s general conditions expressly disclaiming liability for condition of property — Report specifically stating to be confidential to society — High Court refusing to allow application to appeal out of time against possession order — Court of Appeal dismissing appeal
The defendants bought Foley Lodge, Prestwood, near Stourbridge, in June 1989 for £250,000 with the assistance of a mortgage provided by the plaintiff building society. The mortgage was £125,000 with monthly repayments of £1,500. When the mortgage payments fell into arrears the plaintiff obtained an order for possession in January 1992. The defendants applied to the county court for leave to appeal out of time against the possession order. The basis of the application was that the defendants had a case against the building society involving a damages claim based, so it was said, on a negligent valuation of the property by a valuer. They said that they were induced to enter into the mortgage by reason of the valuation which gave the then value with vacant possession as £250,000 and £180,000 for insurance purposes. It was accepted for the purposes of the proceedings that that valuation was too high and that the property suffered a number of defects. The defendants argued that: (1) the report was sent to them in circumstances such that they thought the building society had adopted the report as though it were their own; and (2) as a result of their claim they were likely to be able, within a reasonable time, to pay off the arrears. The court refused to grant the leave sought. The defendants appealed.
Held The appeal was dismissed.
1. The defendants had to satisfy the test indicated in section 36 of the Administration of Justice Act 1970, whether it was likely that within a reasonable period a mortgagor would be able to pay the sums due. That meant whether it was likely that they would succeed in their cross-action against the building society based on the disputed valuation report.
2. The building society would not be liable unless it could be said to have assumed responsibility for the valuation report: see Smith v Eric S Bush [1989] 1 EGLR 169. In that case it was clear that whatever might be the position as far as the valuer, the building society (ie the mortgagee) would not be liable unless the building society could be said to have assumed some responsibility for the report.
3. Condition “L” of the society’s general conditions relating to offer of mortgage advances provided that the valuer’s report was confidential to its directors and that the society accepted no responsibility for the workmanship, construction or condition of the property. However, in Beresforde v Chesterfield Borough Council [1989] 39 EG 176, the point was seen as arguable that a valuer might be deemed to be the building society’s agent.
4. In answer to the question whether there had been an assumption of responsibility for the valuation report by the building society vis-a-vis the mortgagors in the present case, the wording of condition “L” was a strong pointer against an assumption of responsibility for the valuation report by the building society.
5. In those circumstances the test which section 36 contemplated could not be satisfied.
Colin Challenger (instructed by Shakespeares, of Birmingham) appeared for the appellant/defendants; Timothy Lloyd QC and Keith Rowley (instructed by Church Adams Tatham & Co) appeared for the respondent/plaintiffs.
