Charles B Lawrence & Associates v Intercommercial Bank Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Lady Rose,Lord Burrows,Lord Kitchin,Lord Briggs,Lady Arden |
| Judgment Date | 22 November 2021 |
| Neutral Citation | [2021] UKPC 30 |
| Docket Number | Privy Council Appeal No 0127 of 2019 |
| Court | Privy Council |
[2021] UKPC 30
Privy Council
Lord Briggs
Lady Arden
Lord Kitchin
Lord Burrows
Lady Rose
Privy Council Appeal No 0127 of 2019
Appellant
Ramesh L Maharaj SC
Robert Strang
(Instructed by BDB Pitmans LLP (London))
Michael Hylton QC
Prakash Deonarine QC
(Instructed by Myers Fletcher & Gordon (London))
Heard on 5 October 2021
Lord Burrows and (with whom Lord Briggs, Lady Arden and Lord Kitchin agree)
This is a case about the loss recoverable by a lender consequent on a valuer's negligent valuation. The valuation was of land that the borrower's guarantor was providing as security, by means of a mortgage over the land, for the loan. The famous case of South Australia Asset Management Corpn v York Montague Ltd (“ SAAMCO”) [1997] AC 191 laid down that a valuer is not liable in the tort of negligence (or in contract) for loss caused by the valuer's negligence that falls outside the scope of the valuer's duty of care. This is the “scope of duty principle” (or “SAAMCO principle”) which has recently been explored and explained by the Supreme Court of the United Kingdom in Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20; [2021] 3 WLR 81 and Meadows v Khan [2021] UKSC 21; [2021] 3 WLR 147 in the context of negligent advice or information given by an auditor and a doctor respectively. In this case, there is an interesting twist on the usual facts of a negligent valuation case because, as it transpired, the guarantor had no legal title to the land that was being mortgaged so that the land was of no value to the lender. That is, the security was worthless. The lender has recovered a substantial sum of damages by way of settlement of its claim against its attorneys for negligence in relation to the guarantor's defective title to the land. In assessing the damages for the negligent valuation, the central question we are asked to decide is how precisely the scope of duty principle applies on these unusual facts.
The claimant lender, and the respondent in this appeal, is Intercommercial Bank Ltd (“the Bank”). It was approached for a loan by Singapore Automotive Trading Ltd (“Singapore”). Rafferty Development Ltd (“Rafferty”) was to be the guarantor of the loan and there was to be a mortgage of land owned by Rafferty as security for the loan. Rafferty instructed the defendant valuer, Charles B Lawrence & Associates (“Lawrence”) – the appellant in this appeal – to provide a valuation of land at Nos 60 to 69, San Fernando Bypass Road (“the Land”) for the purposes of the proposed mortgage. Lawrence produced a report dated 10 December 2008 in which the Land was valued at $15m. Lawrence made clear in the report that the valuation assumed, amongst other matters, that a good marketable title could be shown, that planning permission would be granted for commercial development of the Land, and that the Land was free from all encumbrances with vacant possession. In February 2009, in reliance on that valuation report, the Bank loaned $3m to Singapore with Rafferty as guarantor and with a mortgage of the Land as security for the loan.
Both Singapore and Rafferty defaulted on the loan without making any repayments. As a result, the Bank appointed a receiver to enforce the security but the highest bid it received in July 2010 was for only $2m. On 23 March 2012, the Bank issued a claim against Lawrence seeking damages in the tort of negligence for a negligent valuation report.
Subsequently, the Bank found out that Rafferty did not in fact have good title to the Land. The mortgage of the Land was therefore of no value. On 25 January 2013, the Bank brought an action against its own conveyancing attorneys, Lex Caribbean, for negligent failure to investigate title properly. In March 2014, that claim was settled for $2.4m.
In the High Court of Trinidad and Tobago, the judge, Madam Justice Jones, decided, amongst other matters, as follows (CV No 2012-01258):
(i) Applying Caparo Industries Plc v Dickman [1990] 2 AC 605, a duty of care was owed by Lawrence to the Bank in relation to the valuation report even though the Bank was not the client of Lawrence.
(ii) There was a breach of that duty of care by Lawrence in two respects. First, Lawrence valued the Land on the basis that it could be developed commercially whereas it should have been valued on the basis that it could only be developed for residential use. According to the evidence of the expert witness preferred by the judge, the value of the land for residential development, as at December 2008, was $2,375,000. Secondly, Lawrence failed adequately to draw attention to the fact that there were occupiers on the Land so that it was not a cleared site.
(iii) All the loss suffered by the Bank in having entered into the loan agreement was factually caused by Lawrence's breach of duty and, subject to deducting the loss recovered in the settlement with the Bank's attorneys, was recoverable as damages from Lawrence. Moreover, there was no contributory negligence by the Bank.
The judge assessed the damages as being $2,361,636.70 as at 14 March 2014 (which is the date she took as the date of payment of the settlement sum in respect of the Bank's claim against its attorneys). This was worked out as: the loan paid ($3m) plus the contractual rate of interest of 15.75% up to 14 March 2014 minus the settlement sum of $2.4m. She therefore awarded damages of $2,361,636.70 plus the contractual rate of interest from 14 March 2014 until the date of judgment which was 16 October 2014.
Lawrence appealed to the Court of Appeal of Trinidad and Tobago on several grounds. These included that the judge's findings as to Lawrence's negligence should be reversed, that the awarding of the contractual rate of interest was incorrect, and that there should have been a deduction from the damages for the Bank's contributory negligence.
The Court of Appeal (Rajkumar JA, with whom Archie CJ and Smith JA agreed) (Case No 318 of 2014) dismissed the appeal and upheld the findings and decision of the judge subject to two points. First, the Court of Appeal decided that the appropriate rate of interest to be added was the statutory rate of 12% (per annum) not the contractual rate of interest of 15.75% (per annum). Secondly, there should have been a 20% reduction for the Bank's contributory negligence in not sending its own officers to inspect the Land as that inspection would have revealed the presence of the occupiers.
According to the Court of Appeal, therefore, the damages to be awarded were the loan paid of $3m, plus interest at the rate of 12% from the date that the loan was paid until the date of judgment of the High Court, minus the settlement sum of $2.4m. From that sum, there should be a deduction of 20% for the Bank's contributory negligence. Although the Court of Appeal did not itself specify what sum of damages was thereby arrived at, there is no dispute that that sum was $2,070,379. Interest on that sum would then accrue (under section 25 of the Supreme Court of Judicature Act (Trinidad and Tobago)) at the rate of 12% from the date of judgment before the High Court (16 October 2014) to the date of payment.
Lawrence has appealed, as of right, to the Board. The central submission of Ramesh L Maharaj SC, counsel for Lawrence, is that the decision of the Court of Appeal (and of the trial judge) is incorrect as a matter of law because it is contrary to the “scope of duty principle” established in SAAMCO and recently explained in Manchester Building Society v Grant Thornton UK LLP and Meadows v Khan. He submits that the loss suffered by the Bank can, and should properly, be split into two distinct losses. First, the loss suffered because the Land was overvalued as being for commercial use rather than residential use (assuming that there was good title to the Land); and, secondly, the loss suffered because the title to the Land was defective. He submits that the second loss was outside the scope of Lawrence's duty of care and therefore irrecoverable. It was outside the scope of Lawrence's duty of care because it was no part of the job of Lawrence to investigate title to the Land. That was the job of the conveyancing attorneys.
Consequent on that submission as to the correct law, Mr Maharaj submits that the correct calculation of the damages should be as follows. One should take the loan sum paid of $3m and deduct the residential value of the land at the date of the loan (assuming that there was good legal title to the Land) which was $2,375,000. That gives a sum of damages for the loss claimed by the Bank of $625,000. One should then deduct from that the 20% contributory negligence of the Bank. Applying section 25 of the Supreme Court of Judicature Act (Trinidad and Tobago), one should then add interest of 12% on the damages from the date of the loss to the date of judgment. According to Mr Maharaj, that would yield a sum of $833,204 which differs from the Court of Appeal's assessment (of $2,079,379) by $1,246,175. Interest on the sum of $833,204 would then accrue at the applicable rate (of 12%) from the date of judgment before the High Court (16 October 2014) to the date of payment.
Mr Maharaj points out that, in the Court of Appeal, Rajkumar JA correctly stated, at para 59d, that “[Lawrence] is not responsible for the value of the security in this case being zero”. But, he submits, Rajkumar JA failed to go on to apply the logic of that reasoning to the assessment of the damages.
In contrast, Michael Hylton QC, counsel for the Bank, submits that the Court of Appeal's...
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