Platform Home Loans Ltd v Oyston Shipways Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MORRITT,LORD JUSTICE THORPE,LORD JUSTICE POTTER |
| Judgment Date | 19 December 1998 |
| Judgment citation (vLex) | [1997] EWCA Civ J1219-16 |
| Docket Number | CHANF 96/1215/B |
| Court | Court of Appeal (Civil Division) |
| Date | 19 December 1998 |
[1997] EWCA Civ J1219-16
Lord Justice Morritt
Lord Justice Thorpe
Lord Justice Potter
CHANF 96/1215/B
CHANF 96/1219/B
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(Mr Justice Jacob)
Royal Courts of Justice
The Strand
London WC2
MR N PATTEN QC and MR A WALKER (Instructed by Messrs Rosling King, London EC4A 3DL) appeared on behalf of the Respondent/Plaintiff
MR S BERRY QC (Instructed by Messrs Dibb Lupton Broomhead, Birmingham B2 5LF) appeared on behalf of the Appellant/2nd & 4th Defendants
MR P LAWRENCE (Instructed by Messrs Williams Davies Meltzer, London EC4A 1AB) appeared on behalf of the Appellant/1st Defendant
Friday 19th December, 1997
In South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191 ("SAAMCO") the House of Lords decided that the liability to a lender of a valuer who negligently values the intended security for the loan is limited to such part of the loss sustained by the lender as falls within the scope of the valuer's duty of care. The part of the loss falling within the scope of such duty of care is, usually, the difference between the amount of the valuation and the true value of the property at the time when the valuation was made. These appeals from the order of Jacob J, made on 29th July 1996, raise issues of some general importance as to the application of the Law Reform (Contributory Negligence) Act 1945 in the assessment of the liability of the valuer. Jacob J considered that the imprudence of the lender in deciding whether to make the loan at all was capable of amounting to contributory negligence so as to reduce the liability of the valuer for the consequences of his negligent overvaluation. The lender claims that he was wrong to do so. In accordance with that conclusion Jacob J assessed the damages payable by the valuers by reference to the date of the sale of the security, deducted therefrom 20% for the contributory negligence of the lender and added to the balance interest from the date of the sale of the security to the date of his judgment. In accordance with those calculations the amount for which he held the valuers liable was £585,723.22. After his order had been drawn up the House of Lords decided the issues in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No.2) [1997] 1 WLR 1627 ("NYKREDIT") adjourned for further consideration after the decision in SAAMCO with which NYKREDIT had been heard, namely, when the cause of action against the valuer accrued and the time from which statutory interest was payable. All parties are agreed that the assessment of damages by Jacob J by reference to the date of the sale of the security was not in accordance with this, subsequent, decision. Accordingly, it is agreed, the assessment of damages should be remitted to the judge for determination in accordance with NYKREDIT. The only issue in that respect is whether on such reassessment the judge will be entitled to adopt different rates of interest from those used on the original assessment.
The relevant facts lie within a small compass. The first and second defendants ("the Valuers") are valuers, the third and fourth defendants being partners in the second defendant. Mr Manzoor Hussain owned 9 Carpenter Road, Edgbaston, Birmingham ("the Property"). In August 1990 each of the Valuers independently valued the Property at £1.5m. On 12th October 1990 the plaintiff ("Platform") lent to Mr Hussain £1,050,195 secured by a first charge on the Property. From early 1993 Mr Hussain failed regularly to pay the full amounts due from him to Platform under the mortgage. On 16th February 1994 Platform, having obtained possession on 8th December 1993, sold the Property for £435,000. By a writ issued on 6th January 1995 Platform sought to recover from the Valuers as damages for negligence for having over-valued the property the sum of £680,174. The measure of damages claimed was the amount of the advance together with interest on the amount thereof outstanding from time to time at a rate representative of the cost to Platform of the money lent to Mr Hussain and the costs charges and expenses incurred by Platform in connection with the loan to Mr Hussain less the amounts paid by Mr Hussain in respect of the loan and the proceeds of sale of the Property. The decision of the House of Lords in SAAMCO given on 6th June 1996 indicated that the measure of damages applied by Platform was wrong.
By his judgment given on 29th July 1996 Jacob J, applying SAAMCO, found that both Valuers had been negligent and that the true value of the Property in August 1990 was £1m. He also held that Platform had failed to mitigate its loss so as to preclude it from recovering £40,000. None of those findings is now challenged.
The Valuers also sought to reduce their liability in reliance on various matters alleged to constitute contributory negligence. Jacob J upheld two of them. The first related to the lending policy of Platform. They lent on the basis of what are known as status loans and non-status loans. In the case of the former, but not the latter, they took account of the ability of the borrower to service the mortgage. In order to do so they required more information from the borrower and were prepared to lend a higher proportion of the value of the security. The loan to Mr Hussain was a non-status loan. The proportion of the value of the Property, as valued, which Platform was prepared to lend in accordance with its standard terms was 70%. Jacob J held that it was imprudent to make a non-status loan of 70% of the value of the security if that produced a loan of £1m. He added
"I therefore propose to hold [that] the plaintiffs themselves contributed to the loss that they claim was caused by the valuers. By how much it is difficult to say but a judge must come to a figure. I propose to do so on an overall basis. I think [Platform] were negligent in one further regard in making the advance. But the major cause of contributory negligence is the lending of money on the basis of two valuations which [Platform's] own policies must have recognised had a considerable degree of uncertainty about them."
The second aspect of contributory negligence, as found by Jacob J, arose from the fact that the application form required Mr Hussain to state the date of his original purchase and the price he paid; yet he failed to complete that section of the form. Platform made the loan he sought just the same when, as the judge said, the information
"has obvious relevance. It may operate as a cross-check on the valuations. Here answers would have revealed that Mr Hussain only purchased the house two years earlier for £375,000 (at the top of the market in 1989) and yet he was estimating its current value at £1.5m. It surely would have raised questions to be asked of the valuers. I think there was contributory negligence in allowing the mortgage to go ahead without requiring [Platform's] own form to be completed in this regard."
The judge assessed both findings of contributory negligence together and assessed the total contribution at 20%. He observed that "the real determining factor" for the level of the loan was the valuations themselves.
Platform does not dispute that the judge was entitled to find contributory negligence in the second respect, namely making the loan without having obtained from Mr Hussain the information required by its own form. It is suggested that the contribution in that respect might fairly be assessed by this court at 5%. But, Platform contends, no perceived imprudence in their lending policy could constitute contributory negligence so as to reduce the liability of the Valuers.
At common law fault on the part of the claimant contributing to the damage of which he complained frequently operated as a complete defence to the whole of the claim. It was to remedy this consequence that the law was amended by the Law Reform (Contributory Negligence) Act 1945. So far as material it provides:
1. (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:…
…….
4. The following expressions have the meanings hereby respectively assigned to them, that is to say —
"damage" includes loss of life and personal injury;
"fault" means negligence, breach of statutory duty or other act or omission which gives rise to a liability in tort or would, apart from this Act, give rise to the defence of contributory negligence;
The submission for Platform, by reference to and in consequence of the decisions of the House of Lords in SAAMCO and NYKREDIT, is simple. It is submitted that the relevant damage is that sustained by Platform in consequence of the Valuers' breach of duty in respect of which Platform sued. If that is right then, it is contended, that damage could not have been sustained partly because of the fault of Platform in pursuing an imprudent lending policy for such a policy had nothing to do with the overvaluation. Platform contrasts the second aspect of contributory negligence as found by the judge which, it accepts, did affect the negligent over-valuation because it failed to alert the Valuers to a cross-check casting doubt on their figures.
This is disputed by the Valuers. They contend that the section...
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