South Australia Asset Management Corpn v York Montague Ltd (also known as Banque Bruxelles Lambert S.A. v Eagle Star Insurance Company Ltd)

JurisdictionEngland & Wales
JudgeTHE MASTER OF THE ROLLS
Judgment Date20 February 1995
Judgment citation (vLex)[1995] EWCA Civ J0220-1
Docket NumberQBCMF 94/0395/B
CourtCourt of Appeal (Civil Division)
Date20 February 1995
Banque Bruxelles Lambert Sa
Plaintiff
and
Eagle Star Insurance Company Limited & Others
Defendants
and
Mortgage Express Limited
Plaintiff
and
Bowerman And Partners (A Firm)
Defendants
and
The United Bank Of Kuwait Plc
Plaintiff
and
Prudential Property Services Limited
Defendant
and
Nykredit Mortgage Bank Plc
Plaintiff
and
and
Edward Erman Group Limited
Defendants
and
Bnp Mortgages Limited
Plaintiff
and
Key Surveyors Nationwide Limited
Defendant
and
Bnp Mortgages Limited
Plaintiff
and
Goadsby And Harding Limited
Defendant

[1995] EWCA Civ J0220-1

Before:

The Master of The Rolls

(Sir Thomas Bingham)

Lord Justice Rosea

and

Lord Justice Morritt

QBCMF 94/0395/B
CHANF 94/0836/B
QBENF 94/0146/C
QBENF 93/1593/C
QBENF 94/1050/B
QBENI 94/1504/B
QBENI 94/1005/B

In The Supreme Court of Judicature

In The Court of Appeal (Civil Division)

On Appeal from The High Court of Justice

MR. M. LYNDON-STANFORD Q.C. AND MR. M. HAPGOOD Q.C. AND MR. R. MORGAN (instructed by Messrs. Lovell White Durrant, Chancery Lane, London) appeared on behalf of the First Defendant.

MR. N. PATTEN Q.C. AND MR. T. HARRY (instructed by Messrs. Rosling King, London WC2) appeared on behalf of the Plaintiff.

MISS G. CAWS Q.C. AND MR. B. PATTEN (instructed by Messrs. Pinsent & Co, Birmingham) appeared on behalf of the Defendants.

MR.R. TOULSON Q.C. AND MR. D. PEARCE-HIGGINS (instructed by Messrs. Clifford Chance, London WC2) appeared on behalf of the Plaintiff.

MR. R. WALKER Q.C. AND MR. V MORAN (instructed by Messrs. Cameron Markby Hewitt, London EC1) appeared on behalf of the Defendant.

MR. M. BRIGGS Q.C. AND MR. D. BLAYNEY (instructed by Messrs. Clifford Chance, London WC2) appeared on behalf of the Plaintiff.

MR. M DE NAVARRO Q.C. and MR. J.FERRIS (instructed by Messrs. Williams Davies Meltzer, London WC2) appeared on behalf of the Defendants.

MR. R. TAGER AND MISS I NEWMAN (instructed by Messrs. Eversheds Phillips & Buck, Cardiff) appeared on behalf of the Plaintiff.

MR. M. HARVEY Q.C. AND MR. S. BROWN (instructed by Messrs. Davies Arnold & Cooper, London WC2) appeared on behalf of the Defendant.

MR. W. AYLEN Q.C. AND MR. N JONES (instructed by Messrs. Eversheds Phillips & Buck, Cardiff) appeared on behalf of the Plaintiff.

MR. C. GIBSON Q.C. AND MR. F. SINCLAIR (instructed by Messrs. Davies Arnold & Cooper, London WC2) appeared on behalf of the Defendant.

THE MASTER OF THE ROLLS
1

THE MASTER OF THE ROLLS: This is the judgment of the Court, to which all three members have substantially contributed.

2

The Court is concerned in these cases with a very familiar, everyday transaction : the lending of money by a commercial lender to a borrower on a mortgage of real property. In such a transaction the lender looks to the borrower to repay the principal sum lent, with interest sufficient to give the lender a commercial return. Before entering into the transaction the prudent lender will take steps to satisfy himself that the borrower will be able to repay. But the lender does not rely on the borrower's payment covenant alone. He obtains additional security by taking a charge on the land itself. Before advancing money he will wish to satisfy himself that the land provides acceptable security for the loan to be made. To that end the lender will ordinarily turn to a professional valuer for his opinion on the value of the land.

3

In five of the cases before the Court the relevant claim is a claim in negligence against a valuer. (The sixth claim is against a solicitor). In each case the complaint is the same : that the valuer negligently over-valued the land in question. In each case in which there has been a decision that complaint was upheld; in one of them that finding is challenged, but the appeal against that finding is not now before us. (A finding of negligence was also made in the solicitor's case; and there also it is challenged.)

4

So the question arises : to what damages is the lender

5

entitled against the negligent valuer ? The general answer given by authority is clear. If the claim is in contract it is given by Parke B in Robinson v Harman (1848) 1 Exch 850 at 855:

“The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed”.

6

If the claim is in tort the answer is given by Lord Blackburn in Livingstone v Rawyards Coal Co [1880] 5 App Cas 25 at 39:

“I do not think there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation”.

7

It is not suggested that for present purposes there is any practical difference between these two tests.

8

In British Westinghouse Electric and Manufacturing Company Limited v Underground Electric Railways Company of London Limited [1912] AC 673 at page 688 Viscount Haldane LC said :

“In order to come to a conclusion on the question as to damages thus raised, it is essential to bear in mind certain propositions which I think are well established. In some of the cases there are expressions as to the principles governing the measure of general damages which at first sight seem difficult to harmonize. The apparent discrepancies are, however, mainly due to the varying nature of the particular questions submitted for decision.

The quantum of damage is a question of fact, and the only guidance the law can give is to lay down general principles which afford at times but scanty assistance in dealing with particular cases. The judges who give guidance to juries in these cases have necessarily to look at their special character, and to mould, for the purposes of different kinds of claim, the expression of the general principles which apply to them, and this is apt to give rise to an appearance of ambiguity.

Subject to these observations I think that there are certain broad principles which are quite well settled. The first is that, as far as possible, he who has proved a breach of a bargain to supply what he contracted to get is to be placed, as far as money can do it, in as good a situation as if the contract had been performed.

The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps. In the words of James LJ in Dunkirk Colliery Company v Lever (1878) 9 Ch.D 20 at page 25, “The person who has broken the contract is not to be exposed to additional cost by reason of the plaintiffs not doing what they ought to have done as reasonable men, and the plaintiffs not being under any obligation to do anything otherwise than in the ordinary course of business”.

As James LJ indicates, this second principle does not impose on the plaintiff an obligation to take any step which a reasonable and prudent man would not ordinarily take in the course of his business. But when in the course of his business he has taken action arising out of the transaction, which action has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account even though there was no duty on him to act.”

9

These unimpeachable statements of principle are the necessary point of departure in considering any novel issue of damages in contract or tort not involving fraud or intentional

10

wrongdoing. But their practical application calls for observance of other rules. An injured claimant may be compensated only for loss which is held, on investigation of the facts, to have been effectively caused by the breach. He may not be compensated for losses which though caused by the breach are too remote, as being outside the reasonable contemplation of the parties at the relevant time as a consequence of the breach. And there are certain heads of damage which, even if they satisfy the tests already listed, are treated by law as irrecoverable : the innocent victim of a breach of contract cannot, for example, be compensated in the ordinary way for the anguish or vexation he suffers as a result of the breach, however direct and foreseeable these consequences may be.

11

In order to analyse the questions which arise in these appeals, and before turning to the facts of the particular cases, it is convenient to assume some hypothetical but not unrepresentative facts :

12

(1) A Valuer (V) negligently advises a Lender (L) that the value of a property is £1 million.

13

(2) L's policy is to lend 80% of valuation on mortgage.

14

(3) So L lends the Borrower (B) £800,000 in reliance on the valuation on terms that it is repayable on default or at some future date or over some future period with interest payable in the meantime.

15

(4) In fact the market value of the property at the date of valuation was £500,000.

16

(5) Had V so advised no loan would have been made.

17

(6) B defaults in repayment and L repossesses and sells the land.

18

(7) By this time there has been a sharp fall in the property market.

19

(8) L sells for the best available price : £300,000.

20

What is...

To continue reading

Request your trial
165 cases
  • CTI Group Inc. v Transclear SA (The Mary Nour (No. 2))
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 17 October 2007
    ...to recover and therefore these losses are irrecoverable from the sellers. He referred to Lord Hoffmann's speech in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 where at p. 212 Lord Hoffmann said: A plaintiff who sues for breach of a duty imposed by the law (whethe......
  • Watts v Bell & Scott
    • United Kingdom
    • Court of Session
    • Invalid date
  • Preferred Mortgages Limited V. Robert Thomson Shanks+mark Robert Shanks+andrew F Dewar
    • United Kingdom
    • Court of Session
    • 7 February 2008
    ...... YOUNG in the cause PREFERRED MORTGAGES LTD Pursuers; against (FIRST) ROBERT THOMSON ... properties from the first defender, who was also asked to report on their condition. The first ... have been issued for the benefit of the company which carried out the development, WJ Jackson ... [19] In South Australia Asset Management Corporation v York ... Asset Management Corporation v York Montague Ltd was concerned with advice given by valuers ... possession of the property, they must have known that, as a result of their report, the pursuers ......
  • Milner and Another v Carnival Plc T/A Cunard
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 20 April 2010
    ...I am not sure I can improve upon it. 28 It is always useful to bear in mind the observations of Lord Hoffmann in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] A.C. 191, 211A: “Before one can consider the principle on which one should calculate the damages to which a plain......
  • Request a trial to view additional results
4 books & journal articles
  • Contributory Negligence Applied to Economic Loss: Platform Home Loans and Fancy and Jackson
    • United Kingdom
    • The Modern Law Review No. 62-2, March 1999
    • 1 March 1999
    ...Taylor Ltd [1997] 1 PNLR 37 (obiter).28 The reduction applied by Phillips J in Banque Bruxelles Lambert SA vEagle Star Insurance Co Ltd[1995] 2 All ER 769. See also Midland Bank Plc vDouglas Allen (unreported, July 1997).29 Bristol & West Building Society vKramer & Co [1995] NPC 14; Cavendi......
  • Negligent Valuations and a Drop in the Property Market: the Limits of the Expectation Loss Principle
    • United Kingdom
    • The Modern Law Review No. 61-1, January 1998
    • 1 January 1998
    ...contractual duty, thenature and extent of the liability is defined by the term the law implies. As in the case of any3 (1848) 1 Ex 850.4 [1995] QB 375, 401.5ibid 405.6 n 1 above, 211. The expectation principle in Robinson has usually been seen as defining the kind ofloss for which the defen......
  • Variance in commercial property valuations for lending purposes: an empirical study
    • United Kingdom
    • Journal of Property Investment & Finance No. 19-3, June 2001
    • 1 June 2001
    ...and Murdoch (1997) reviewed the case between Banque BruxellesLambert SA v. Eagle Star Insurance Co. Ltd [1994] 2 EGLR 108 and [1995]1 EGLR 129, which provided evidence of third-party pressure. Although theEagle Star representative was not satisfied with the valuation of the propertythe tran......
  • DAMAGES IN NEGLIGENT VALUATION ACTIONS
    • Singapore
    • Singapore Academy of Law Journal No. 1998, December 1998
    • 1 December 1998
    ...40 At 433F. 41 At 434F. 42 At 436D—F. 43 At 439B—D. 44 [1994] 1 All ER 261. 45 At 439D—440C. 46 Eg at first instance in the BBL case [1995] QB 375. 47 See HIT Finance v Lewis & Tucker Ltd[1993] 2 EGLR 231 per Wright J and Alliance & Leicester Building Society v Wheelers (unreported, 1997) p......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT