Valuation – Property taken as security for loan not including whole of property valued by valuer – Valuer unable to give evidence at trial – Judge finding valuation negligent and lender contributorily negligent – Lender and valuer appealing – Appeals dismissed
The plaintiff bank made a number of loans between 1986 and 1993 to D, a property developer. In November 1988 D and the bank agreed a loan of £1m to be secured on Old Bridwell, part of the Bridwell Estate, to assist with the development of holiday cottages. The loan was to be made in three tranches, the first of £500,000 or 45% of the forced sale valuation of the current development, the second and third each of £250,000 or 45% of the increase in the forced sale valuation. There was to be a detailed survey and valuation by the bank’s valuers at the date of each payment. Before the third tranche was paid, the bank required a “good valuation” before the facility became long term. D instructed S, a partner in the defendant firm, to provide the valuation to the bank. The final paragraph of the valuation report stated that the “forced sale value of the entire development of 14 cottages with vacant possession” would be “£2.2m to £2.3m” on completion of two unfinished units. The valuation did not include one of the properties, the largest, to be developed. D failed to pay the instalment due to the bank in December 1992 and the bank gave notice of default in May 1992. A receiver was appointed in May 1993. In December 1995 Old Bridwell was sold for £570,000.
The bank brought proceedings against the valuer claiming damages for negligence. The transactions between the parties had the following unusual features: (i) the property taken as security for the loan did not include the whole of the property which was valued by the valuer; (ii) the bank sought to recover damages from the valuers not only for the loss on the loan for which the valuation was prepared but also on loans which were made both prior to and months after the date of the valuation; and (iii) the borrower and valuer, S, who had suffered a severe stroke, did not give evidence, so that there was very limited evidence available relating to the instructions which were given to the valuer as to the precise purpose for which the valuation was required. The judge found, inter alia, that S’s valuation was negligent and the bank’s own negligence was 20% responsible for the damage from the advance of the third tranche of £230,000. He gave judgment for the bank in the sum of £230,000 less a deduction of 20% for its contributory negligence. The bank appealed. On their cross-appeal, the valuers contended that because of the difference between the property which was the subject of the valuation and the property which was the subject of the security, they were under no liability to the lender in respect of any of the loans.
Held The appeal and cross-appeal were dismissed.
1. The outcome of the appeal depended upon the proper inference to be drawn from the primary facts found by the judge with which the Court of Appeal would not interfere unless it came to the conclusion that the judge had been wrong to draw the inference he did: see Benmax v Austin Motor Co Ltd [1955] AC 370. On the facts and in the circumstances, the judge’s conclusions were not wrong and the court was satisfied that his overall decision met the justice of the case.
2. The valuers had argued, inter alia: (a) that the difference between the properties meant that what was accepted to have been a negligent valuation was not causative of the loss; and (b) that the fact that the property the subject of the valuation was larger than the property the subject of the security meant that the chain of causation was broken. Despite the differences in property sizes, the necessary relationship of proximity remained and it was still reasonable to impose liability. The court would not interfere with the decision of the judge that “the purpose for which S intended his valuation to be used was not so different from that from which it was used and that the actual use was outside the ambit of his duty to the bank”: see South Pacific Manufacturing Co Ltd v New Zealand Security Consultants and Investigations Ltd [1992] 2 NZLR 282 per Cooke P at p294.
Christopher Gibson QC and Charles Douthwaite (instructed by Laytons, of Bristol) appeared for the appellant;
Simon Berry QC and Julian Matthews (instructed by Barlow Lyde & Gilbert) appeared for the respondent.
