Paratus Amc Ltd and Another v Countrywide Surveyors Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 14 December 2011 |
| Neutral Citation | [2011] EWHC 3307 (Ch) |
| Date | 14 December 2011 |
| Court | Chancery Division |
| Docket Number | Claim No. 1LS30137 |
[2011] EWHC 3307 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY
Leeds Combined Court Centre
Oxford Row
Leeds LS1 3BG
His Honour Judge Keyser Q.C.
Sitting as a Judge of the High Court
Claim No. 1LS30137
TIMOTHY HARRY (instructed by Eversheds LLP of 1 Callaghan Square, Cardiff, CF10 5BT) for the Claimants
HUGH EVANS (instructed by Beachcroft LLP of 7 Park Square East, Leeds, LS1 2LW) for the Defendant
Hearing dates: 19 th, 20 th, 21 st and 22 nd September 2011
H.H. Judge Keyser Q.C. :
Introduction
At the time to which these proceedings relate, the first claimant, Paratus AMC Limited, carried on the business of providing loans secured on residential properties. Until 28 th January 2011 the first claimant was called GMAC RFC Limited. I shall refer to it as "GMAC".
The second claimant, RMAC 2005 NS1 Plc ("RMAC"), is a Special Purpose Vehicle, created by GMAC for the purpose of buying packages of secured loans from RMAC. I shall set out some details of the arrangement below.
The defendant, Countrywide Surveyors Limited ("Countrywide"), carries on the business of surveyors and valuers specialising in the valuation of residential property. At all times material to these proceedings Countrywide was on GMAC's panel of valuers and provided valuation services to GMAC pursuant to the terms of a master agreement dated 7 th July 1998.
In these proceedings GMAC and RMAC complain that they have suffered loss and damage as a result of a negligent valuation of residential property carried out on GMAC's instructions in July 2004 by Mr John Foster MRICS, a valuer employed by Countrywide.
I shall set out the basic facts giving rise to the claim before identifying and discussing the issues that fall to be determined.
The Basic Facts
On 16 th July 2004 Mr David Mark Stockton ("the Borrower"), who gave his address as 25 Hither Chantlers, Langton Green, Tunbridge Wells, Kent, TN3 0BL, made a mortgage application to GMAC. The application form was submitted by independent brokers called The Mortgage Shop. It stated that the required loan was £166,500 over a term of ten years, on an interest-only basis, to be secured by a remortgage of a residential property at Flat 9, Fulford Place, Hospital Fields Road, York ("the Property"), which was described as a first-floor flat with two bedrooms. The application form stated that the Property had been originally purchased on 2 nd September 2003 for a price of £166,500 and that the estimated value of the Property was £185,000.
Fulford Place was a development of purpose-built flats, which had been built by Taylor Woodrow Developments Limited and completed in stages by late 2003 or perhaps early 2004. It comprised five blocks, each on three or four storeys, and a link block through which ran the access road. The Property was in a four-storey block called Lendal House. Lendal House is shown in the upper photograph on page 616b of the trial bundle and is the block marked as "block 5" on the floor plan on page 616c of the trial bundle, and the layout and position of the Property is the same as that of the flat in the north-west corner of block 5 on page 616c. The Property is shown again in the plan on page 616j, where its floor area is shown as 65.5m 2.
GMAC instructed Countrywide to provide a mortgage valuation report in respect of the Property. By reason of the master agreement between the parties, Countrywide was required to prepare the report on a standard form provided by GMAC and to advise as to the open-market value of the Property as between a willing seller and a willing buyer on an arm's length basis, as to the nature of the property and any factors likely to have a material effect on its value, as to its reinstatement cost for insurance purposes, and as to whether the Property constituted an adequate security for the advancement of money by GMAC by way of residential mortgage.
Mr Foster inspected the Property on 19 th July 2004 and provided a Mortgage Valuation Report on 20 th July 2004. The report recorded that the Property was a purpose-built, second-floor flat on the second floor of a block of sixteen similar units. It stated that the Property did not have lift access, that it had two bedrooms and one bathroom, that it had been built in 2003, and that demand for that type of property was good. Section 14 of the report confirmed that the Property was suitable security for mortgage purposes. Section 17 stated that the market value of the Property was £185,000. I shall mention other features of the report later in this judgment, but shall here observe that it recorded the floor area of the Property as 62m 2. One of Mr Foster's working papers shows how that calculation was arrived at. It was common ground at trial that the probable floor area of the Property was in fact 65.5m 2, as shown in the developer's floor plan, and I am satisfied that the Property had the same floor area as other properties that are shown on another of Mr Foster's working papers as having a floor area of 65m 2.
On 12 th August 2004 GMAC made a mortgage offer to the Borrower in the sum of £166,500 plus £395 in respect of fees. The Borrower accepted that offer. On 30 th September 2004 GMAC made a net advance of £166,430 to the Borrower and the remortgage was completed.
GMAC asserts, and I find, that it made the offer and the advance in reliance on Mr Foster's valuation.
By a Mortgage Sale Agreement dated 2 nd March 2005, GMAC sold to RMAC the beneficial ownership of a package of mortgage loans and their related security; these included the loan to the Borrower and the mortgage over the Property. Some of the details of the transaction will be relevant in considering issues of loss and damage. For present purposes it suffices to say that the transaction was part of GMAC's repackaging of its portfolio and that at law GMAC remained the mortgagee of the Property and entitled to receive from the Borrower the payments in respect of the loan.
The Borrower made the payments falling due in respect of the loan until the late summer of 2007, when he fell into arrears. In May 2008 GMAC obtained possession of the Property, and in September 2008 it sold the Property for a price of £123,500. After repossession and sale fees were deducted, GMAC received net sale proceeds in the sum of £118,103.20.
The Issues
The main issues that arise for determination are as follows:
(1) What was the value of the Property in July 2004?
(2) Was the valuation of the Property negligent?
(3) Has either GMAC or RMAC suffered recoverable loss?
(4) Should the award of damages be reduced on account of contributory negligence?
I have not had to consider a further issue that at one stage seemed likely to arise, namely whether Countrywide owed a duty of care to RMAC, because on behalf of the claimants the claim was advanced solely on the basis that Countrywide had been in breach of a duty of care owed to GMAC.
First Issue: Valuation
At trial, expert valuation evidence was given in writing and orally by two chartered surveyors: Mr John Hornsby MRICS for the claimants, and Mr Peter Walker FRICS for Countrywide. Both experts have considerable experience of valuing residential properties in York, including properties of the same kind as the Property. I shall summarise the opinions which they advanced, before considering the major points to emerge in the course of their respective cross-examinations and then turning to a consideration of the valuation issues.
Mr Hornsby's Opinion
Mr Hornsby said that the best indication of the value of a property was often the price at which it had been purchased, at least if the purchase were relatively recent and at arm's length. As well as considering that information, the accepted practice was to take a dual approach to the valuation process: the valuer should consider comparable properties, having regard either to sale prices recently achieved or, in the absence of sales evidence, to the asking prices for similar properties currently on the market; and he should also speak to local estate agents to obtain information concerning the state of the local market for such properties.
Contrary to what the Borrower had stated in his remortgage application form, the price at which he had purchased the Property in November 2003 was £139,400. Mr Hornsby considered that the market had risen by approximately 10% between November 2003 and July 2004 and that accordingly the original purchase price of the Property would suggest a value of approximately £153,340 in July 2004.
As for comparable properties, Mr Hornsby first considered the comparables used by Mr Foster in the preparation of his valuation report. The standard form on which the valuation report had been written required particulars of three comparable properties. Mr Foster gave particulars of three two-bedroom flats at Fulford Place that had been sold since late 2003; the report does not identify the precise addresses of the three flats, but a list of properties on Mr Foster's file makes clear that they were numbers 69, 24 and 72 Fulford Place. The report shows the respective sale prices of the flats as £184,450, £182,750 and £168,000, but the evidence suggests that the actual sale prices were £189,875, £182,750 and £178,500. On the list of properties on his file, Mr Foster had marked two further properties at Fulford Place, namely number 28, which was sold in November 2003 for £177,650, and number 71, which was sold in November 2003 for £179,350.
Mr Hornsby's opinion was that all five of the properties known to have been considered by Mr Foster as comparables differed from the Property in at least three material respects. First, Mr Foster's comparables were all substantially larger than...
To continue reading
Request your trial
-
Webb Resolutions Ltd v E. Surv Ltd and Another
...agreed by the experts in BNP Mortgages v Barton Cook and Sams. 28 Two more recent cases were drawn to my attention. In Paratus AMC Limited v Countrywide Surveyors Limited [2011] EWHC 3307 (Ch) HHJ Keyser QC identified a bracket of 8%, whilst in Platform Funding Limited v Anderson and Associ......
-
Barclays Bank Plc v Christie Owen & Davies Ltd (trading as Christie & Co)
...of contributory negligence in this case is therefore higher. (7) Contrary to Barclays' stance, the present case is comparable to Paratus v Countrywide Surveyors [2011] EWHC 3307 (Ch); [2012] PNLR 12, or is an example of worse contributory negligence. In Paratus, the lender was criticised f......
-
Titan Europe 2006-3 Plc v Colliers International UK Plc ((in Liquidation))
...priorities, does not affect the incidence of the basic loss but is a consequence of contracts involving third parties" ( Paratus AMC Ltd v Countrywide Surveyors Ltd [2012] PNLR 12 at [62(4)], Judge Keyser QC). As Colliers says, the point was considered in the context of the originator of th......
-
Aurora Leasing Limited v Colliers International Belfast Limited
...his eyes to any obviously unsatisfactory characteristics of the proposed borrower.” [40] In Paratus AMC v Countrywide Surveyors Limited [2011] EWHC 3307 liability for a valuation in advance of a loan was not established but contributory negligence was considered. While rejecting the submiss......
-
Quelle horreur!
...to have been two fold. Firstly, Mr Justice Blair was content to apply previous case law in Paratus AMC Ltd. v Countrywide Surveyors Ltd. [2012] PNLR 12 in which it has been established that the contractual spreading of loss did not affect that incident of the basic loss arising in itself an......
-
Quelle horreur!
...to have been two fold. Firstly, Mr Justice Blair was content to apply previous case law in Paratus AMC Ltd. v Countrywide Surveyors Ltd. [2012] PNLR 12 in which it has been established that the contractual spreading of loss did not affect that incident of the basic loss arising in itself an......