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 plaintiffs had been contributorily negligent in failing to note that the borrowers had not completed part of their own form which required a statement of the original purchase price, and in lending too high a proportion of the valuation. The judge found that the 680,000 pounds figure should have been reduced by 20% making about 489,000 pounds. Since that figure exceeded the amount of the overvaluation the whole of it was recoverable.
Held: The reduction of damages for contributory negligence in professional negligence valuation cases was to be calculated once and before limiting the damages to the lenders overall loss. To do otherwise could result in the contribution being applied twice. The right answer on the application of section 1(1) of the Act of 1945 is to be arrived at by applying the traditional percentage reduction to the lender’s basic loss before making any further deduction on account of the SAAMCO principle.
Lord Hobhouse said that the damages: ‘are confined to that part of the plaintiffs’ basic loss caused by the defendants’ negligence which can be equated in money terms to the amount of the defendants’ overvaluation.’
Where the contribution of the defendant is to supply material which the client will take into account in making his own decision on the basis of a broader assessment of the risks, the defendant has no legal responsibility for his decision. Lord Hoffmann spoke of SAAMCO: ‘The principle approved by the House was that the valuer owes no duty of care to the lender in respect of his entering into the transaction as such and that it is therefore insufficient, for the purpose of establishing liability on the part of the valuer, to prove that the lender is worse off than he would have been if he had not lent the money at all. What he must show is that he is worse off as a lender than he would have been if the security had been worth what the valuer said.’
and: ‘It is important to emphasise that this is a consequence of the limited way in which the House defined the valuer’s duty of care and has nothing to do with questions of causation or any limit or ‘cap’ imposed upon damages which would otherwise be recoverable. It was accepted that the whole loss suffered by reason of the fall in the property market was, as a matter of causation, properly attributable to the lender having entered into the transaction and that, but for the negligent valuation, he would not have done so. It was not suggested that the possibility of a fall in the market was unforeseeable or that there was any other factor which negatived the causal connection between lending and losing the money . . Nor, if one started from the proposition that the valuer was responsible for the consequences of the loan being made, could there be any logical basis for limiting the recoverable damages to the amount of the overvaluation. The essence of the decision was that this is not where one starts and that the valuer is responsible only for the consequences of the lender having too little security.’
Lloyd of Berwick, Lord Cooke of Thorndon, Lord Hope of Craighead, Lord Hobhouse of Wood-borough, Lord Millett
Gazette 10-Mar-1999, Times 19-Feb-1999, [1999] UKHL 10, [2000] 2 AC 190, [1999] 1 All ER 833, [1999] 2 WLR 518
House of Lords, Bailii
Law Reform (Contributory Negligence) Act 1945 1(1)
England and Wales
Citing:
Applied – 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 . .
Appeal from – Platform Homes Limited v Oyston Shipways Limited and others CA 19-Dec-1997
A lender’s imprudent lending policies could be taken into account and set off against damages for negligent valuation as contributory negligence. . .
Cited – Drinkwater v Kimber CA 1952
The female plaintiff had been injured in a collision caused by the concurrent negligence of her husband and the defendant. She could not succeed in a negligence action against her husband, so the defendant could not recover under the Law Reform . .
Cited – Nykredit Mortgage Bank Plc v Edward Erdman Group Ltd (No 2) HL 27-Nov-1997
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. . .
Cited – Froom v Butcher CA 21-Jul-1975
The court asked what reduction if any should be made to a plaintiff’s damages where injuries were caused not only by the defendant’s negligent driving but also by the failure of the plaintiff to wear a seat belt. It had been submitted that, since . .
Cited – Hadley v Baxendale Exc 23-Feb-1854
Contract Damages; What follows the Breach Naturaly
The plaintiffs had sent a part of their milling machinery for repair. The defendants contracted to carry it, but delayed in breach of contract. The plaintiffs claimed damages for the earnings lost through the delay. The defendants appealed, saying . .
Cited – Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd (The Wagon Mound No 1) PC 18-Jan-1961
Foreseeability Standard to Establish Negligence
Complaint was made that oil had been discharged into Sydney Harbour causing damage. The court differentiated damage by fire from other types of physical damage to property for the purposes of liability in tort, saying ‘We have come back to the plain . .
Cited – County Ltd v Girozentrale Securities CA 1996
The plaintiff bank had agreed to underwrite a share placement. The defendant brokers made representations to potential investors outside and in breach of the terms of the engagement letter. The bank failed to check on the status of indicative . .
Cited – Caparo Industries Plc v Dickman and others HL 8-Feb-1990
Limitation of Loss from Negligent Mis-statement
The plaintiffs sought damages from accountants for negligence. They had acquired shares in a target company and, relying upon the published and audited accounts which overstated the company’s earnings, they purchased further shares.
Held: The . .
Cited – Smith v Eric S Bush, a firm etc HL 20-Apr-1989
In Smith, the lender instructed a valuer who knew that the buyer and mortgagee were likely to rely on his valuation alone. The valuer said his terms excluded responsibility. The mortgagor had paid an inspection fee to the building society and . .
Cited by:
Cited – Nationwide Building Society v Dunlop Haywards (HLl) Ltd (T/A Dunlop Heywood Lorenz) and Cobbetts ComC 18-Feb-2009
The claimant had leant money on a property fraudulently overvalued by an employee of the now insolvent first defendant. A contribution order had been agreed by the solicitors. The court heard applications by the claimants and the solicitors against . .
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 . .
Lists of cited by and citing cases may be incomplete.
Damages
Leading Case
Updated: 09 November 2021; Ref: scu.158993
