A surveyor’s negligent valuation had led to the plaintiff obtaining what turned out to be inadequate security for his loan. A cause of action against a valuer for his negligent valuation arises when a relevant and measurable loss is first recorded. Earlier decisions of the house had settled the liability for damages and the amount to be awarded. This present judgment concerned principally the question of interest.
Held: The section allowed the award of interest for all or any part of the period following the date on which the cause of action arose. That date varied according to whether the action was in contract or in tort. In this case it was the date of the transaction. It was wrong to ante-date the award of interest on costs. In this case it was right to award interest on money ordered to be repaid after earlier orders were overruled.
Lord Nicholls, with the concurrence of the rest of the Appellate Committee, described the two stages of the inquiry. The first stage, where the lender would not have entered into the transaction but for the breach of duty, was to compare the position had he not entered into it with his actual position. This meant comparing the amount of the loan with the value of the real and personal rights obtained. As to the second stage, he said: ‘However, for the reasons spelled out by my noble and learned friend, Lord Hoffmann, in the substantive judgments in this case [1997] AC 191, a defendant valuer is not liable for all the consequences which flow from the lender entering into the transaction. He is not even liable for all the foreseeable consequences. He is not liable for consequences which would have arisen even if the advice had been correct. He is not liable for these because they are the consequences of risks the lender would have taken upon himself if the valuation advice had been sound. As such they are not within the scope of the duty owed to the lender by the valuer.’
Lord Hoffmann again with the concurrence of the rest of the Committee, explained that the true measure of damages was the loss attributable to the information being wrong and: ‘It is of course also the case that the lender cannot recover if he is, on balance, in a better or no worse position than if he had not entered into the transaction at all. He will have suffered no loss. The valuer does not warrant the accuracy of his valuation and the lender cannot therefore complain that he would have made more profit if the valuation had been correct. But in order to establish a cause of action in negligence he must show that his loss is attributable to the overvaluation, that is, that he is worse off than he would have been if it had been correct.’
and . . ‘It is axiomatic that in assessing loss caused by the defendant’s negligence the basic measure is the comparison between (a) what the plaintiff’s position would have been if the defendant had fulfilled his duty of care and (b) the plaintiff’s actual position. Frequently, but not always, the plaintiff would not have entered into the relevant transaction had the defendant fulfilled his duty of care and advised the plaintiff, for instance, of the true value of the property. When this is so, a professional negligence claim calls for a comparison between the plaintiff’s position had he not entered into the transaction in question and his position under the transaction. That is the basic comparison. Thus, typically in the case of a negligent valuation of an intended loan security, the basic comparison called for is between (a) the amount of money lent by the plaintiff, which he would still have had in the absence of the loan transaction, plus interest at a proper rate, and (b) the value of the rights acquired, namely the borrower’s covenant and the true value of the overvalued property.’
Lord Goff of Chieveley, Lord Jauncey of Tullichettle, Lord Slynn of Hadley, Lord Nicholls of Birkenhead, Lord Hoffmann
Gazette 08-Jan-1998, Times 03-Dec-1997, [1997] 1 WLR 1627, [1997] UKHL 53, [1998] 1 EGLR 99, [1998] 1 ALL ER 305, [1998] PNLR 197, [1998] Lloyd’s Rep Bank 39, [1998] CLC 116, [1998] 1 Costs LR 108
Bailii, House of Lords
Supreme Court Act 1981 35A, Judgments Act 1838 17 18
England and Wales
Citing:
Approved – Forster v Outred and Co CA 1981
A mother signed a mortgage deed charging her property to H as security for a loan to her son. She claimed the solicitor had been negligent in his advice. The solicitor replied that the claim was out of time. The loss accrued not when demand for . .
Cited – Wardley Australia Ltd v Western Australia 1992
(High Court of Australia) A claim was based on a statutory trade indemnity scheme. The insurers claimed damages from Wardley, on the basis that its alleged deceit induced them to grant an indemnity, which was subsequently called on.
Held: . .
Approved – D W Moore and Co Ltd v Ferrier CA 1988
The company took in a new director and shareholder, and relied upon their solicitors to draft a covenant to restrain him competing within a set time of leaving the company. The covenant turned out to be ineffective. The defendant solicitors replied . .
Cited – UBAF Ltd v European American Banking Corporation CA 1984
The defendant invited the plaintiff to take part in a syndicated loan. The defendant’s assistant secretary signed a letter to the plaintiff making representations, now claimed to be fraudulent. The defendant succeeded at first instance arguing that . .
Cited – Hunt v R M Douglas (Roofing) Ltd HL 1990
The plaintiff had an order ‘That the Defendants do pay to the Plaintiff his costs of this action . . to be taxed . . failing agreement’ and the House was asked as to the time from when he was entitled to interest.
Held: A litigant who has been . .
Disapproved – Kuwait Airways Corporation v Iraqi Airways Corporation (No 2) CA 20-Jan-1994
A successful appeal on a costs award should be backdated to the original order. . .
Approved – Belgian Grain and Produce Co Ltd v Cox and Co (France) Ltd CA 1919
Although the Court had jurisdiction, ‘it ought to be exercised with great caution, which indicates that there must be something exceptional in the facts to justify the making of the order’. . .
Affirmed – South Australia Asset Management Corporation v York Montague Ltd etc HL 24-Jun-1996
Limits of Damages for Negligent Valuations
Damages for negligent valuations are limited to the foreseeable consequences of advice, and do not include losses arising from a general fall in values. Valuation is seldom an exact science, and within a band of figures valuers may differ without . .
Cited by:
Cited – Khan v R M Falvey and Co (a Firm) CA 22-Mar-2002
The claimant sought damages from his former solicitors for failing to act to avoid his case being struck out. The second action was itself delayed, and the defendants asserted that the cause of action occurred not when his claim was actually struck . .
Cited – Hatton v Messrs Chafes (A Firm) CA 13-Mar-2003
The defendant firm appealed against a refusal to strike out the claimant’s claim for professional negligence, asserting that the judge should have considered the limitation issue in the light of Khan v Falvey.
Held: By the time that the . .
Cited – Platform Home Loans Ltd v Oyston Shipways Ltd and others HL 18-Feb-1999
The plaintiffs had lent about 1 million pounds on the security of property negligently valued at 1.5 million pounds. The property was sold for much less than that and the plaintiffs suffered a loss of 680,000 pounds. The judge found that the . .
Cited – The Law Society v Sephton and Co and others CA 13-Dec-2004
The Society appealed dismissal for limitation of its claim against the defendant firm of accountants arising from alleged fraud in approval of a solicitor’s accounts.
Held: The liability did not arise until the Society decided to make . .
Cited – Polley v Warner Goodman and Streat (A Firm) CA 30-Jun-2003
A cause of action in negligence is complete once the claimant has suffered loss as a result of the negligence, even if the existence of the loss (and indeed of the negligence) is not, and could not be, known to him, and even where that loss is much . .
Cited – Iqbal v Legal Services Commission CA 10-May-2005
The claimant had been a partner in a firm of solicitors. They came to be suspected by the respondent of overclaiming legal aid payments and sums were withheld. For this and other reasons the practice folded, and the claimant became insolvent. He . .
Cited – Law Society v Sephton and Co (a Firm) and Others HL 10-May-2006
A firm of solicitors had a member involved in a substantial fraud. The defendant firm of accountants certified the firm’s accounts. There were later many calls upon the compensation fund operated by the claimants, who sought recovery in turn from . .
Cited – Watkins and Another v Jones Maidment Wilson (A Firm) CA 4-Mar-2008
The claimants alleged professional negligence by the defendant solicitors in advising them to agree to a postponment of a completion. The defendants raised as a preliminary issue the question of limitation. The claimant said that the limitation . .
Cited – Pegasus Management Holdings Sca and Another v Ernst and Young (A Firm) and Another ChD 11-Nov-2008
The claimants alleged professional negligence in advice given by the defendant on a share purchase, saying that it should have been structured to reduce Capital Gains Tax. The defendants denied negligence and said the claim was statute barred.
Cited – Pegasus Management Holdings Sca and Another v Ernst and Young (A Firm) and Another ChD 11-Nov-2008
The claimants alleged professional negligence in advice given by the defendant on a share purchase, saying that it should have been structured to reduce Capital Gains Tax. The defendants denied negligence and said the claim was statute barred.
Cited – Spencer v Secretary of State for Work and Pensions, Moore v Similar CA 1-Jul-2008
Frankovich claim – arises with measurable loss
Each claimant sought Frankovich damages alleging a failure to implement European law leading to a loss.
Held: Such a claim was available against the government after it had failed to implement the Directive so as to provide them with the . .
Cited – BPE Solicitors and Another v Hughes-Holland (In Substitution for Gabriel) SC 22-Mar-2017
The court was asked what damages are recoverable in a case where (i) but for the negligence of a professional adviser his client would not have embarked on some course of action, but (ii) part or all of the loss which he suffered by doing so arose . .
Cited – Tiuta International Ltd (In Liquidation) v De Villiers Surveyors Ltd SC 29-Nov-2017
Allegation of professional negligence. The claimant sought damages against the defendant surveyors for negligently valuing a partially completed residential development over which it proposed to take a charge to secure a loan. On an initial . .
Cited – Tiuta International Ltd v De Villiers Surveyors Ltd CA 1-Jul-2016
Appeal against an order giving summary judgment for the respondent, De Villiers Surveyors Ltd, on one issue relating to the claim by the appellant, Tiuta International Ltd, for damages for professional negligence.
Held: The appeal succeeded . .
Lists of cited by and citing cases may be incomplete.
Professional Negligence, Damages
Leading Case
Updated: 29 November 2021; Ref: scu.158928