Emmet Thomas Scullion v Bank of Scotland Plc
| Jurisdiction | England & Wales |
| Judge | Mr. Richard Snowden,Richard Snowden QC,RICHARD SNOWDEN QC,MR. RICHARD SNOWDEN QC |
| Judgment Date | 08 October 2010 |
| Neutral Citation | [2010] EWHC 2253 (Ch),[2010] EWHC 572 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC 07C 02463 |
| Date | 08 October 2010 |
[2010] EWHC 2253 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand. London. WC2A 2LL
Mr. Richard Snowden QC
(sitting as a Deputy Judge of the High Court)
Case No: HC 07C 02463
Philip Noble (instructed by Miller Rosenfalck) for the Claimant
Tom Leech QC (instructed by Walker Morris) for the Defendant
Hearing dates: 25 May 2010 and 6 September 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr. Richard Snowden QC
Introduction
On 18 March 2010 I handed down a judgment in this case, [2010] EWHC 572(Ch), finding that the defendant firm of valuers, Colleys, had breached duties of care that they owed to the claimant, Mr. Scullion, in relation to a valuation report concerning Flat 17. Fieldgate Court, 42 Portsmouth Road, Cobham, Surrey. I adjourned for further argument all questions relating to causation, quantum and contributory negligence. For reasons that I will elaborate below, I heard argument on two dates, 25 May and 6 September 2010. I now give judgment on those remaining issues.
The Facts in Outline
The facts are set out at length in my earlier judgment and I shall not repeat them. A summary will suffice. I shall adopt the same abbreviations in this judgment as in my earlier judgment.
Mr. Scullion was a self-employed builder who was engaged in property maintenance. He decided to enter the buy-to-let market to supplenlent his pension and, with the assistance of an organisation called Portfolios of Distinction ("POD"), he bought Flat 17 in October 2002. His intention was to let it for an amount which would have enabled him to pay the mortgage and outgoings on the flat and to obtain some extra income. He also hoped in due course to make a capital profit by selling the flat.
Colleys were engaged to value Flat 17 for the mortgage lender, Mortgages plc; though in the usual way the money to pay their fee was provided by Mr. Scullion. Colleys produced a Valuation Report which gave the open market value of the flat as £353,000. This was just above at the price of £352,950 which Colleys had been told by the mortgage broker: a Mr. Garvin of Affinity; that Mr. Scullion would be paying for the property. Colleys' Valuation Report also stated that Flat 17 could be expected to achieve a rental of £2,000 per calendar month: in their instruction letter they had been told by Mr. Garvin that the "rental coverage" which was required for the buy-to-let mortgage was £1,600 pcm.
In my first judgment I held that having regard to appropriate comparables a careful and competent valuer would have valued the property at £300,000 with a permissible "bracket" of between £270,000 and £330,000. I also held that if he had sought information from local letting agents, a carefull and competent valuer would have advised that Flat 17 could olllp be expected to achieve a rental of about £1,100 per calendar month, with an upper limit to the bracket of about £1,350 pcm. I found that Colleys had acted negligently in over-stating both the capital value of the flat and the expected rental income.
One of the notable features of this case is that because of discounts which POD negotiated with the developers, the "headline" purchase price of £352,950 which had been notified to Colleys and Mortgages plc was not in fact the price which Mr. Scullion ended up paying for Flat 17. The contract included a "gifted deposit" of 15% and a term as to deferred payment of a further 10%. with the result that Mr. Scullion in fact agreed to buy Flat 17 for a total of £300,007.50, of which £35,295.00 was deferred for a year with interest. In the event, Mr. Scullion resisted paying the developers the full amount of the deferred price and interest, and in 2004 he finally paid the developers a total of £32,500.00 in settlement of his deferred payment obligations.
After the purchase of Flat 17 completed in October 2002, Mr. Scullion found that POD were unable to find a tenant for the flat as he had envisaged, and on consulting local agents he discovered that it could not be let for anything like the amount predicted by Colleys, or indeed, the amount of the rental coverage required to meet the payments due under the mortgage. Mr. Scullion eventually managed to let Flat 17 in April 2003 for a rent of only £1,050 pcm.
Thereafter Mr.Scullion sought to sell the flat. Although he had some interest from a prospective purchaser at a price of £322,500 in August 2004, that interest fell away when it was discovered that Mr.Scullion's solicitors had not properly registered the title. In the end, Mr.Scullion managed to sell the flat in May 2006 for £270,000 and Mr.Scullion paid the mortgage lender about £260,000 on 1 June 2006. In my earlier judgment I stated that this left a balance outstanding to Mortgages plc of £61,932. 15 as at 1 June 2006. In fact, a more up-to-date mortgage statement which was provided to me by Mr.Scullion after oral argument on quantum had been concluded, shows that he was refunded an early repayment charge a few days later. On this basis, the true balance outstanding from Mr.Scullion to Mortgages plc after sale of the flat was £59,795.37.
As I shall explain later in this judgment, the amounts which Mr. Scullion has paid under his mortgage have been increased by various administration charges and other fees which Mortgages plc levied on Mr. Scullion after he encountered difficulties meeting the interest payments due and in respect of the outstanding balance since June 2006. The most recent statement from Mortgages plc shows that the amount owing has been increased by the addition of numerous items of legal fees so as to amount to £70,863.16 as at 24 May 2010.
Mr. Scullion's Claims
Mr. Noble argued that Mr. Scullion was entitled to damages to reflect the two respects in which Colleys had been negligent—namely the inaccurate capital valuation and the inaccurate rental valuation.
Under the first heading, Mr. Noble accepted that Mr. Scullion had in fact paid very slightly less for Flat 17 than the amount which I have held was its "true" value. Taking into account fees of £2,587.50 for Mr. Peakall, an adviser who assisted in negotiating a reduction in Mr. Scullion's deferred payment obligations, Mr. Scullion ended up paying a total of £299,800 for Flat 17 as against its "true" value of £300,000.
Never the less Mr.Noble argued that Mr.Scullion was entitled to damages to reflect the fall in value of the property between the date upon which it was purchased and the date upon which it was sold(i.e. £300,000-£270,000 = £30,000). Mr.Noble suggested that Mr.Scullion had only bought the flat on the basis of Colleys' excessive valuation, and that it was foreseeable that if the valuation was inaccurate, he would be forced to sell and might do so at a loss if the market fell in the meantime.
Under the second heading, Mr. Noble submitted that Mr. Scullion would not have bought Flat 17 if he had been infornled by Colleys that the rental which it would generate would not be enough even to cover the interest payments on the mortgage, still less other costs and outgoings, so that the transaction would not be self-financing. He contended that as a consequence, all of the payments and expenses which Mr. Scullion incurred in relation to the purchase, under the mortgage and in respect of the outgoings on Flat 17 were recoverable, subject to giving credit for the rents actually received from letting the property.
In his initial written submissions, Mr. Noble also suggested that Mr. Scullion should recover the valuer's fee charged by Colleys and interest which Mr. Scullion had had to pay as a result of the late completion of the purchase, but he accepted in argument that neither of those amounts were recoverable, because they were not losses caused by the deficiencies in the valuation. He also accepted that £10,000 paid under Mr. Scullion's contract with POD were not attributable to Colleys' negligence and hence were not recoverable.
Scope of duty and recoverable losses
Any discussion of the correct measure of recoverable loss in this type of case must start with a consideration of the decision of the House of Lords in South Australia Asset Management v. York Montague Limited [1997] AC 191 ("SAAMCO"). In SAAMCO: Lord Hoffmann drew attention to the connection between the scope of the duty which the law imposes on a defendant and questions of causation of loss. In a well-known passage at page 213C-F; Lord Hoffmann observed,
"Rules which make the wrongdoer liable for all the consequences of his wrongful conduct are exceptional and need to be justified by some special policy. Normally the law limits liability to those consequences which are attributable to that which made the act wrongful. In the case of liability in negligence for providing inaccurate inforination, this would mean liability for the consequences of the information being inaccurate.
1 can illustrate the difference between the ordinary principle and that adopted by the Court of Appeal by an example. A mountaineer about to undertake a difficult climb is concerned about the fitness of his knee. He goes to a doctor who negligently makes a superficial examination and pronounces the knee fit. The clinlber goes on the expedition, which he would not have undertaken if the doctor had told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee.
On the Court of Appeal's principle, the doctor is responsible for the injury suffered by the mountaineer because it is...
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