Preferred Mortgages Limited V. Robert Thomson Shanks+mark Robert Shanks+andrew F Dewar
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young |
| Neutral Citation | [2008] CSOH 23 |
| Court | Court of Session |
| Published date | 07 February 2008 |
| Year | 2008 |
| Date | 07 February 2008 |
| Docket Number | CA3/06 |
| OUTER HOUSE, COURT OF SESSION [2008] CSOH 23 | |
| CA3/06 | OPINION OF LORD DRUMMOND YOUNG in the cause PREFERRED MORTGAGES LTD Pursuers; against (FIRST) ROBERT THOMSON SHANKS; (SECOND) MARK ROBERT SHANKS; and (THIRD) ANDREW F. DEWAR Defenders: ________________ |
Act: McIlvride; Anderson Fyfe LLP
Alt: Haldane; Brechin Tindal Oatts
7 February 2008
[1] The pursuers provide secured loans for the purchase of heritable property. In 2001 they advanced funds to enable three individuals to purchase a housing development at Hurlet Hill Court, Barrhead Road, Glasgow. Before advancing funds the pursuers obtained a valuation of the development from Robert Thomson Shanks, the first defender, who practised as a chartered surveyor. The second defender was brought into the action on the basis that he was the first defender's partner at the material time, but that contention turned out to be incorrect and the pursuers ultimately accepted that only the first defender acted as a surveyor at the time of the transaction; on 10 July 2007 the second defender was assoilzied from the conclusions of the summons. The third defender is a solicitor, and it is a matter of agreement that he acted for the pursuers in the lending transaction with which the present action is concerned.
[2] The borrowers defaulted in payment, and thereafter the pursuers raised the present action, in which they have alleged that the first and third defenders were both liable to them for breach of contract and professional negligence. In the summons the pursuers concluded for two distinct sums, which amounted in total to £501,820.81. The first conclusion was framed against the defenders jointly and severally and was for payment of the sum of £316,000 with interest. The second conclusion was against the present third defender alone and was for payment of the sum of £185,820.81.
[3] Following sundry procedure, the pursuers settled their claim against the first defender (the second defender having already been released from the action) in return for payment of the sum of £50,000; the result was that on 12 September 2007 the first defender was assoilzied from the conclusions of the summons. Thereafter the action proceeded against the third defender alone. The pleadings were adjusted further to take account of the settlement with the first defender. In the amended summons the pursuer concludes for payment of the sum of £451,820.81; it is a matter of agreement that that amount represents the original sum sued for, £501,820.81, less the £50,000 paid by the first defender. In addition to that sum the pursuers conclude for interest on the sum of £50,000 at the London Inter Bank Offer Rate ("LIBOR") from 9 November 2005, the date when the pursuers' loss was calculated, until 12 September 2007, the date when the settlement with the first defender was effected.
[4] The pursuers' detailed averments regarding the transaction are as follows. In June 2001 three named individuals, John Jackson, Wendy Jackson and James Jackson, approached the pursuers for funding for the purchase of 12 flats at Hurlet Hill Court. The borrowers proposed to buy the properties from the then owner, WJ Jackson Construction Ltd, and thereafter to let the properties to tenants. The development had been constructed by WJ Jackson Construction Ltd. The pursuers agreed in principle to lend funds to the borrowers. That agreement was conditional on the borrowers' providing the pursuers with valid and enforceable standard securities over the properties and on the pursuers' being satisfied that the value of properties provided sufficient security for the repayment of the sums to be advanced. The proposed loans were to be made on a "non status" basis; that indicates a loan made by a lender in reliance on the value of heritable security without inquiry into the value of the borrower's personal covenant to repay.
[5] The pursuers obtained a valuation of the properties from the first defender, who was also asked to report on their condition. The first defender advised the pursuers that the aggregate open market value of the properties was £1,240,000. The pursuers aver that the value of the properties was materially overstated in the first defender's reports and valuations. In reliance on those reports and valuations the pursuers agreed to lend a total of £935,942 to the borrowers. That agreement, it is said, was conditional on the pursuers' being provided with valid and enforceable securities over the properties,
[6] The third defender acted as solicitor for the borrowers in the purchase of properties. By letters dated 3 July 2001 the pursuers instructed him to act on their behalf in the constitution of the proposed standard securities over the 12 properties. The pursuers aver that with their letters of instruction the pursuers enclosed a copy of their "Instructions to solicitors". These required the solicitor to contact the pursuers if there were any defects in the title which adversely affected their position; they also required that, if the property were less than 10 years old, the solicitor should obtain either appropriate NHBC documentation or an appropriate architect's certificate. The pursuers aver that on 4 July 2001 the third defender provided the pursuers with a written report on title on each property. In each report the third defender confirmed that the pursuers would at settlement have a good, valid and marketable title to each property. On the following day, 5 July, the third defender advised the pursuers that he held 12 standard securities executed by the borrowers and that he had had sight of a suitable architect's certificate relating to the development. In fact the relevant architect's certificate bore to have been issued for the benefit of the company which carried out the development, WJ Jackson Construction Ltd, and Northern Rock PLC. The third defender had stated to the solicitors acting for WJ Jackson Construction Ltd, Messrs Dallas McMillan, that he required an amended certificate addressed to the pursuers, but no further architect's certificate was ever provided by Dallas McMillan. No architect's certificate was exhibited by the third defender to the pursuers. Nevertheless, in reliance on the third defender's reports on title and written confirmation dated 5 July 2001, the pursuers on 9 July 2001 advanced the loans to the borrowers, making payment to the third defender's client account.
[7] The pursuers aver that the borrowers subsequently defaulted in payment. The pursuers then called up their standard securities. When they took possession of the properties they discovered that the development had never been completed. In particular, the sanitary and other fittings in the properties had not been fully installed; the garages for eight of the properties had not had their doors fitted; the boundary fence around the development had not been completed; nor had the landscaping of the common ground surrounding the properties. The roads and footpaths within the development had not been fully dressed, and the road providing access to the development from the public road had not been completed. That road was being constructed on a route required to conform to the planning permission granted by the local authority. The land on which that road was to be constructed, however, was not owned by the borrowers, and the borrowers had no servitude right of access over the route. Nor did the borrowers own any land over which access could be provided to the development conform to the conditions of the planning permission. I was informed, and I do not understand the matter to be in dispute, that the particular problem was that the local authority required a bell mouth to the access road and the borrowers did not own the land required to configure the access in that way. In addition, the pursuers aver that, although the properties were less than 10 years old, there was no NHBC documentation; moreover, the third defender had not obtained an architect's certificate relating to the properties.
[8] The pursuers' case against the first defender was framed in both contract and delict; the pursuers averred that the first defender knew that the pursuers intended to rely on the value and marketability of the properties to ensure repayment of the proposed loans in the event of default, and knew that the pursuers would rely on his valuation in that respect. The first defender had overvalued the properties; he gave advice that the aggregate open market value of the properties was £1,240,000, whereas, it is averred, the true aggregate open market value at the material time was £924,000. In addition, the first defender failed to advise the pursuers that the installation of internal fittings and garage doors had not been completed and that there were problems with the formation of roadways and the common ground around the development.
[9] The pursuers' case against the third defender is likewise framed in both contract and delict. It is averred that the third defender was under a duty to investigate the title to the properties in accordance with current best conveyancing practice and to do everything that a competent solicitor would regard as necessary to report on the title to the pursuers. It was further the third defender's duty to deal with any other matters relevant to the transaction in accordance with best conveyancing practice; in particular it was his duty to advise if there were any defects in the title which adversely affected the pursuers' position or any planning notices or orders which adversely affected the marketability of the properties. It is averred in particular that it was the third defender's duty to advise the pursuers that planning permission for the development was conditional on an access road over ground not owned by the borrowers and over which there was no servitude right of access. It was further the third defender's duty to advise the pursuers that neither appropriate NHBC...
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