Site icon swarb.co.uk

Banque Bruxelles Lambert Sa v Eagle Star Insurance Co Ltd and Others Appealsz: CA 24 Feb 1995

admin

References: Times 24-Feb-1995, Gazette 22-Mar-1995, Times 21-Feb-1995, [1995] QB 375, [1995] 2 All ER 769
Coram: Sir Thomas Bingham MR
Ratio: The plaintiffs were mortgagees. The defendants were valuers. The defendants negligently over-valued properties and the plaintiffs then accepted mortgages of the properties. Later the property market collapsed and the various borrowers defaulted and on sale the plaintiffs obtained substantially less than the sums they had advanced. The relevant question was whether the plaintiffs could include in their damages the difference in the value of the properties between the time of entering into the mortgages and the sale of the properties.
Held: Damages payable to a secured lender for a negligent valuation included losses attributable to general market. Discussing liability where two causes contributed to the damages: ‘the event which the plaintiff alleges to be causative need not be the only or even the main cause of the result complained of: it is enough if it is an effective cause’
Sir Thomas Bingham MR described the valuer’s task: ‘In the absence of special instructions, it is no part of V’s duty to advise L on future movements in property prices, whether nationally or locally. The belief among buyers and sellers that prices are likely to move upwards or downwards may have an effect on current prices, and to that extent such belief may be reflected by V in his valuation. But his concern is with current value only. He is not asked to predict what will happen in the future. His valuation is not sought to protect L against future decline in property prices. In no sense is he a guarantor of L’s investment decision.’
He spoke also as to the measurement of damages: ‘where a mortgage lender would not, but for the negligent valuation, have entered into the transaction with the borrower he could recover the net loss he had sustained as a result of having done so; that a fall in the market was foreseeable, and since, in such a case, the lender would not have entered into the transaction but for the valuer’s negligence and could not escape from it unless and until the borrower defaulted, that negligence was the effective cause of his loss, and a fall in the market was not to be treated as a new intervening cause breaking the link between the valuer’s negligence and the damage sustained; accordingly on the assumed facts the mortgagees were entitled to recover damages in respect of the loss they had sustained which was attributable to market fall.’
. . And: ‘In a no-transaction purchase case, it seems clear on English authority that effect will be given to the restitutionary principle by awarding the buyer all that he has paid out less what (acting reasonably to cut his losses including selling the property) he has recovered. In no case before [the present case] has any head of foreseeable damage been excluded from the calculation.’
. . And: ‘In no-transaction mortgage lending cases it has been the practice since Baxter v Gapp [1939] 2 AER 752 to award the lender the net loss sustained as a result of entering into the transaction, which may be expressed as the difference between what the lender advanced and what the lender would have advanced if properly advised (which is always nil). Thus related expenses of sale and realisation less sums recovered. … Should a rise in the market have contributed to [a full recovery] then, as in the successful transaction case, that contribution will not be ignored so as to treat the lender as sustaining a financial loss which in fact he has not sustained. If in such a case a fall in the property market between the date of the transaction and the date of realisation contributes to the lender’s overall loss sustained as a result of entering into the transaction, it would seem to us, on a straight forward application of the restitutionary principle, that the lender should be entitled to recover that element of his loss against the negligent party.’
. . And :’Where a buyer is claiming damages for negligence in a successful transaction case the diminution in value rule ordinarily provides an adequate measure of the buyers loss. As the cases show, to award, for example, the full cost of repairs will usually lead to over-compensation. This assessment will ordinarily be made as at the date of breach, for there is no other appropriate date. The same rule will usually be applied where the buyer decides to keep the property with knowledge of its defective condition or over-valuation even if, with that knowledge, he would not have bought in the first place. In such a case no account is taken of later fluctuations in the market, for he remains the owner of the property as a result of his own independent decision and not of the negligence of the valuer or surveyor.’
This case cites:

(This list may be incomplete)
This case is cited by:

(This list may be incomplete)

Last Update: 31 July 2018
Ref: 78174

Exit mobile version