Platform Home Loans Ltd v Oyston Shipways Ltd
| Jurisdiction | England & Wales |
| Judge | LORD LLOYD OF BERWICK,LORD COOKE OF THORNDON,LORD HOPE OF CRAIGHEAD,LORD HOBHOUSE OF WOODBOROUGH,LORD MILLETT |
| Judgment Date | 18 February 1999 |
| Judgment citation (vLex) | [1999] UKHL J0218-2 |
| Date | 18 February 1999 |
| Court | House of Lords |
And Others
[1999] UKHL J0218-2
Lloyd of Berwick
Lord Cooke of Thorndon
Lord Hope of Craighead
Lord Hobhouse of Wood-borough
Lord Millett
HOUSE OF LORDS
My Lords,
I have had the advantage of reading in draft the speeches prepared by my noble and learned friends, Lord Hobhouse of Woodborough and Lord Millett. For the reasons which they have given I would allow the appeal.
My Lords,
The scheme of the Law Reform (Contributory Negligence) Act 1945 is that where damage has been caused by fault on the part of both defendant and plaintiff, the court may in its discretion apportion responsibility between them. The Act was passed to overcome the common law principle that a plaintiff who has contributed to his damage by his own fault was totally debarred from recovering damages from a defendant whose fault had also contributed. It was no part of the purpose of the Act to impose any liability on a defendant whose fault had not contributed to the plaintiff's damage. It is in these commonplaces that, as I see it, the answer to the present case is readily to be found.
Section 1(1) of the Act states its basic provision as just summarised and is complemented by section 1(2) whereby, when damages are recoverable subject to reduction by virtue of the first subsection, the court is required to find and record the total damages which would have been recoverable if the claimant had not been at fault. In full the material part of section 1(1) reads:
"(1) Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage: …"
A relatively early and well-known authority on the Act is Drinkwater v. Kimber [1952] 2 Q.B. 281. The female plaintiff had been injured in a collision caused by the concurrent negligence of her husband and the defendant. As the law then stood the wife would not have succeeded in a negligence action against her husband, so the defendant could not recover under the Law Reform (Married Women and Tortfeasors) Act 1935 any contribution to the damages awarded against the defendant to the wife. To overcome this difficulty, by a counter claim against the husband the defendant sought contribution under the Act of 1945. It was held that the defendant could not recover under the Act of 1945, because that Act gave the defendant no claim against the husband in respect of the wife's injuries and the defendant's liability to the wife was not "damage" suffered by him within the meaning of section 1(1). Morris L.J. said at pp. 292-294 that the Act did not give the defendant a cause of action against the husband; it did not purport to create any new variety of claim; it seemed clear that the word "damage" referred to that which was suffered and for which a "claim" might be made and for which "damages" are recoverable. Both he and Singleton L.J. at pp. 294 and 290 respectively, pointed out that, if the section applied, the court would have to record the total damages which would have been recoverable by the defendant from the husband if the defendant had not been at fault. If the defendant had not been negligent the total damages recoverable would have been nil. As Morris L.J. put it, to award £135, being the contribution claimed from the husband, would have been "a strange phenomenon of contraction."
Similarly in his Joint Torts and Contributory Negligence (1951) Glanville Williams said at p. 118 that in short the word "damage" in section 1(1) "comprises any item of loss that would have been recoverable as damages at common law apart from the claimant's own fault." He repeated the proposition at p. 317.
The present case calls for the application of these familiar provisions to a claim by a lender against a valuer who has negligently overvalued the property taken as a security as a result of the valuation. The lender and the borrower agreed in September 1990 on a loan of £1,050,195 secured by a first registered charge on the property. In 1993 the borrower fell into difficulties in making repayments. The lender sold the property on 12 February 1994 for £435,000. A bankruptcy order was subsequently made against the borrower; apparently his covenant was worthless except to the extent that he had in fact made payments to the lender. After allowing for the payments made by the borrower and £40,000 for certain failures by the lender to mitigate its loss, it is accepted that the lender's overall loss in the transaction was in round figures £611,748. On the facts of this case, that is the loss proved by what Lord Nicholls of Birkenhead calls "the basic comparison": Nykredit Mortgage Bank Plc. v. Edward Erdman Group Ltd. (No. 2) [1997] 1 W.L.R. 1627, 1631H.
Although in a sense that full loss was caused by the negligent overvaluation, it is now established in English law, by the decision of your Lordships' House in South Australia Asset Management Corporation v. York Montague Ltd. [1997] A.C. 191, confirmed and applied by the House in Nykredit (supra), that a negligent valuer is not necessarily liable for the whole of the loss in such circumstances. The correct approach has been held to be to ascertain what element of loss suffered as a result of the transaction was attributable to the inaccuracy of the information supplied by the valuer. For this purpose the valuation negligently provided is to be compared with the figure which a reasonable valuer, using the information available at the relevant time, would have put forward as its most likely open market value. Thus the valuer may escape liability for a subsequent fall in market values. Typically, as Lord Nicholls of Birkenhead says in Nykredit at p. 1632A, the valuer's liability is limited to the extent of the overvaluation.
The architect of this development of English law has been Lord Hoffmann. For an authoritative explanation of it, one can do no better than quote a substantial passage from his speech in Nykredit at pp. 1638-1639:
"In order to decide when the cause of action arose, it is first necessary to recall, by reference to your Lordships' earlier judgment, precisely what the cause of action was. It was for breach of the duty of care owed by the valuer to the lender, which existed concurrently in contract and in tort. Your Lordships identified the duty as being in respect of any loss which the lender might suffer by reason of the security which had been valued being worth less than the sum which the valuer had advised. The principle approved by the House was that the valuer owes no duty of care to the lender in respect of his entering into the transaction as such and that it is therefore insufficient, for the purpose of establishing liability on the part of the valuer, to prove that the lender is worse off than he would have been if he had not lent the money at all. What he must show is that he is worse off as a lender than he would have been if the security had been worth what the valuer said. It is of course also the case that the lender cannot recover if he is, on balance, in a better or no worse position than if he had not entered into the transaction at all. He will have suffered no loss. The valuer does not warrant the accuracy of his valuation and the lender cannot therefore complain that he would have made more profit if the valuation had been correct. But in order to establish a cause of action in negligence he must show that his loss is attributable to the overvaluation, that is, that he is worse off than he would have been if it had been correct.
"It is important to emphasise that this is a consequence of the limited way in which the House defined the valuer's duty of care and has nothing to do with questions of causation or any limit or 'cap' imposed upon damages which would otherwise be recoverable. It was accepted that the whole loss suffered by reasons of the fall in the property market was, as a matter of causation, properly attributable to the lender having entered into the transaction and that, but for the negligent valuation, he would not have done so. It was not suggested that the possibility of a fall in the market was unforeseeable or that there was any other factor which negatived the casual connection between lending and losing the money. There was, for example, no evidence that if the lender had not made the advance in question he would have lost his money in some other way. Nor, if one started from the proposition that the valuer was responsible for the consequences of the loan being made, could there be any logical basis for limiting the recoverable damages to the amount of the overvaluation. The essence of the decision was that this is not where one starts and that the valuer is responsible only for the consequences of the lender having too little security.
"Proof of loss attributable to a breach of the relevant duty of care is an essential element in a cause of action for the tort of negligence. Given that there has been negligence, the cause of action will therefore arise when the plaintiff has suffered loss in respect of which the duty was owed. It follows that in the present case such loss will be suffered when the lender can show that he is worse off than he would have been if the security had been worth the sum advised by the valuer. The comparison is between the lender's actual position and what it would have been if the valuation had been correct.
"There may be cases in which it is possible to demonstrate that such...
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