Swingcastle Ltd v Alastair Gibson: HL 1991

A lender made a claim against a surveyor after a negligent survey. the lender would have made no loan at all, there would have been no transaction, if it had known the true position. At first instance and in the Court of Appeal the Claimant’s loss was held to include the contractual interest it would have earned from the transaction mainly on the basis that it was bound by the Court of Appeal decision in Baxter v Gapp [1939] 2 KB 271.
Held: This was incorrect. Lord Lowry analysed the decision in Baxter v Gapp, and continued: ‘The approach of the valuer in this case and the analysis of Neill LJ . . seem to me to be correct. What the lenders lost, in addition to their other damages, was the use of the pounds 10,000 while it was perforce locked up in the loan. I say ‘perforce’ because I do not overlook the duty of the injured party to mitigate his loss or the fact that, once the borrowers had well and truly defaulted, the lenders had access to their remedy and thereby to their money.
There is, as Neill L.J. perceived, no cut and dried solution to calculating the amount of damages in cases of this kind. It depends on the evidence.
After considering the figures in relation to the loan and realisation, he continued: ‘In the absence of any evidence as to how the lenders financed the loan or evidence showing how the money, if not lent to the borrowers, could have been profitably employed, I consider that 12 per cent interest, which would correspond to the 9 per cent. allowed by Ralph Gibson J. in Corisand Investments Ltd. v. Druce and Co., 248 E.G. 315, is the proper rate at which to recompense the lenders for being deprived of their pounds 10,000. The actual time was two years, which would yield a result of pounds 2,400, but one may ask whether it was reasonable for the tortfeasor to bear the liability up to the date of sale in February 1987, possession of the property having been surrendered on 30 June 1986. Moreover, it is not clear how a calculation of damages would be affected by the incidence of tax or whether this is a case in which it would have been reasonable for the court to contemplate partial recovery by the lenders against the borrowers: see London and South of England Building Society v. Stone [1983] 1 WLR 1242.
It was for the lenders to furnish the evidence by which to prove their case on the correct basis.
Lord Lowry
[1991] 2 All ER 353, [1991] 2 WLR 1091
England and Wales
Not FollowedBaxter v Gapp (FW) and Co Ltd CA 1939
Where there would have been no transaction (loan) but for the valuers’ negligence, it was held that the plaintiff was entitled to recover the actual loss suffered, rather than the difference between the real value of the property at the date of . .

Cited by:
CitedBPE 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 . .

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Updated: 12 February 2021; Ref: scu.640549