Surveyors negligently valuing properties for refinancing purposes will potentially only be liable for any ‘top-up’ to the original loan rather than the whole advance following a Supreme Court ruling.  The decision overturns a Court of Appeal judgement which granted a lender the right to recover the full amount of a loan.

Valuation surveyors and their professional indemnity insurers, who had faced potentially huge losses following the Appeal Court hearing, will welcome the Supreme Court’s decision.  The long-running dispute was previously reported in Brunel News (August 2016).

De Villiers Surveyors had originally been appointed to provide a valuation on a residential development in Berkshire in 2011.  Based on this valuation lender Tiuta International advanced over £2 million to the developer.  Later the developer asked Tiuta for a further loan and De Villiers was again asked to provide a valuation. Following this Tiuta made a further advance, which combined both loans into a new facility of just over £3m.

The developer failed to repay the loan and Tiuta appointed receivers to recover its loss.  The sale of the residential property only realised £2.1m and Tiuta started proceedings against De Villiers for negligent valuation to recover the shortfall.

In the first hearing, the High Court decided that De Villiers’ liability was limited to the amount of the ‘top-up’ loan.  It said that the firm’s second valuation had not caused the loss attributable to the original loan.  The Court of Appeal overturned this decision and concluded that De Villiers was liable for the whole loan. Now the Supreme Court has reversed the Appeal Court’s ruling confirming the original High Court ruling.

Explaining the Supreme Court’s unanimous decision, Lord Sumption said: “If the valuers had not been negligent in reporting the value of the property for the purpose of the second facility, the lenders would not have entered into the second facility, but they would still have entered into the first … There being no allegation of negligence in relation to the first facility … the lender’s loss is limited to the new money advanced under the second facility”.

James Burgoyne, Director – Claims & Technical, Brunel Professions says that the decision will be welcomed by professional indemnity insurers. “Surveyors and their professional indemnity insurers will be relieved that the final decision leaves them less exposed to negligent valuation claims.  However it should be noted that lenders may revise their operating practices or instructions to valuers going forward in order to try to preserve claims in relation to earlier loans.” he said. 

Reports of the case have been published by Out-Law, Hailsham Chambers, Debenhams Ottaway and Kennedys.

Brunel provides a wide range of Professional Indemnity Insurance broking services to property professionals.  Click here to find out more, or call Mark Sommariva on 0203 475 3275.