Old law, new tricks

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A recent High Court case on fairly common facts has thrown up tricky issues as to how established surveyor negligence and summary judgment principles should be applied. The judgment will be of interest to lenders, surveyors and legal advisors and professional indemnity insurers alike.

The law
In order to succeed in a negligence claim against a surveyor, a claimant must establish causation. It must prove, on the balance of probabilities, that but for the surveyor’s negligence, the claimant would not have suffered any loss. Applying the well-established but for test involves comparing the claimant’s position with the no negligence position (i.e. the position it would have been in if the surveyor had valued correctly). That is trite law following the Nykredit [1] case.

Where a subsequent loan fully redeems an earlier loan, no loss is suffered and so no cause of action subsists. In these circumstances, a claimant would only be able to pursue a claim if it had suffered loss and if that loss was caused by surveyor negligence, if any, in the valuation upon which the subsequent loan was founded. That principle derives from the Preferred Mortgages [2] case where it was found that there could be no claim against the first valuer once a remortgage had completed since no loss arose from that valuation following redemption of the original loan. There the lender should have pursued the second valuer.

The facts
In Tiuta v De Villiers Surveyors [3] the surveyor valued a part-built residential development on two separate occasions: once in February 2011 and later in November of the same year. The lender advanced loans to a borrower on the basis of each valuation, with the second loan fully redeeming the first. No allegations were made that the February valuation was negligent in any way, but following that initial valuation and loan, the borrower was indebted to the claimant lender for around £2.5m. The claimant lender subsequently sued the valuer on the basis of valuation given in November, which was allegedly a negligent overvaluation, and the defendant valuer sought summary judgment.

The claimant accepted that if the traditional but for test were to be applied, it would have no case. In comparing the actual circumstances with the no negligence position, the claimant would have been exposed to the existing indebtedness loss following the initial loan, regardless of the subsequent loan and any negligence. The “negligence caused the claimant to lend all the money under the new facility, but it did not cause loss.” [4]. The claimant therefore argued that the approach in Preferred Mortgages meant that the usual but for test should not apply. The claimant would otherwise be left having suffered loss and without a remedy despite alleged negligence in November 2011. The claimant also argued that the applicability of the but for test to cases where a subsequent loan had redeemed an earlier facility was a novel point of law in an area of developing jurisprudence, which should not be dealt with by summary judgment [5].

The decision
The judge acknowledged the unattractiveness of a causation test which would allow a defendant to take into account a claimant’s existing exposure that that defendant negligently caused when the defendant can no longer be sued for that negligence. However that was not the case here. No allegation was made in this case that the February 2011 valuation was wrong.

  • The judge therefore agreed with the defendant that any loss was attributable to the existing indebtedness and was not caused by alleged negligence in November 2011 but left open for the claimant to amend its claim to argue that the February 2011 valuation was negligent.

In addition, the judge felt that it was acceptable to deal with the case by summary judgment.

  • The facts of the case were all either uncontroversial or assumed in favour of the claimant;
    the conclusion formed was in accordance with orthodox rules of causation in valuer negligence claims;
  • the area was not one of developing jurisprudence. Rather, this was a case of applying established jurisprudence from the highest levels of authority to particular (albeit tricky) facts;
  • the residual amount of loss (taking into account estimated sale proceeds, etc.) was small; and
  • whilst this was a summary judgment application, the judge had had the benefit of detailed written and oral submissions from Counsel for both parties. He was therefore confident all relevant arguments had been advanced.

WM Comment
This case is a good example of the court applying both established principles and a measure of proportionality and common sense, to resolve issues of causation following redemption of an earlier loan. It clarifies that the but for test does apply in a valuer’s negligence claim where loan monies have been used to redeem an earlier loan. The case also clearly demonstrates the circumstances in which it will be appropriate to dispose of a case summarily.

The argument raised by the valuer was effectively that, as there was an original indebtedness which was then remortgaged, the lender’s loss was not caused by the second valuation in November – the loss would have been suffered anyway. The court had some sympathy for the lender’s position as it left open the ability for the lender to amend its claim to then argue that the original February valuation was negligent and that loss had been caused by it making the first loan, which it subsequently remortgaged.

For lenders, the significance of this case should not be overstated. It does not mean that where a borrower remortgages an original loan the lender cannot bring a claim arising from the new loan against either the valuer or the solicitor involved. The case is distinguishable on its facts. Here the same lender had made the original loan and the remortgage loan. The same valuer had also acted. In most remortgage cases a different lender remortgages an original loan and different valuers are used.

Preferred Mortgages confirms that the lender cannot pursue the original valuer but leaves open a claim against the second valuer – that is common sense given the decision to lend is based on the second valuation. If the original valuation was correct but the second valuation was wrong then in the no negligence world the lender would still have a claim as it would not have made the remortgage loan had it known that the second remortgage was wrong, and thus not exposed itself to loss at all.


[1] Nykredit Mortgage Bank plc v Edward Erdman Group Ltd [1997] UKHL 53
[2] Preferred Mortgages Ltd v Bradford & Bingley Estate Agencies Ltd [2002] EWCA Civ 336
[3] Tiuta International Ltd (in liquidation) v De Villiers Surveyors Ltd [2015] EWHC 773 (Ch)
[4] Tiuta v De Villiers Surveyors, para 12
[5] J D Wetherspoon v Van de Berg & Co Ltd [2007] EWHC 1044 (Ch)