E.Surv Ltd v Goldsmith Williams Solicitors
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Stephen Davies |
| Judgment Date | 10 April 2014 |
| Neutral Citation | [2014] EWHC 1104 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 2MA30075 |
| Date | 10 April 2014 |
[2014] EWHC 1104 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Manchester Civil Justice Centre,
1 Bridge Street West, Manchester M60 9DJ
His Honour Judge Stephen Davies
SITTING AS A JUDGE OF THE HIGH COURT
Case No: 2MA30075
Shail Patel (instructed by DWF LLP, Solicitors Manchester) for the Claimant
Paul Mitchell (instructed by Reynolds Porter Chamberlain LLP, Solicitors, London) for the Defendant
Hearing dates: 5, 14 March 2014
In this case the claimant surveyors E.Surv Limited ("the surveyors"), seek contribution under the Civil Liability (Contribution) Act 1978 from the defendant solicitors Goldsmith Williams ("the solicitors"), in respect of monies paid to a mortgage lending company, The Mortgage Business ("the lender"), in settlement of its claim for damages for negligent over-valuation of a property known as Quarnford Lodge, near Buxton ("the property").
The surveyors' case is that the solicitors failed, in breach of the express and implied terms of its contract with the lender, to advise the lender that the would-be borrower, a Mr David Gayler ("the borrower"), had been registered as proprietor of the property for less than 6 months and that the price he had paid for it as disclosed on the office copy entries, £390,000, was significantly less than the surveyors' valuation as stated in the mortgage offer, £725,000. The surveyors' case is that had the solicitors done so then the lender would have requested the surveyors to reconsider their valuation in the light of that information, that at that point the surveyors would have realised that the borrower had misinformed them about the purchase price, and would have: (a) produced a significantly reduced valuation; and/or (b) informed the lenders about this misinformation, with the result in either case being that the lender would have declined to lend to the borrower and, thus, avoided the loss which it in fact incurred.
Whilst the surveyors accept that they cannot recover all of their loss from the solicitors, they do claim that they are entitled to a substantial contribution from them against the total amount paid in settlement, which was £200,000.
The solicitors defend the claim on the following basis:
(1) Although they admit breach of an express obligation to inform the lender that the borrower had been the registered proprietor for less than 6 months, they deny that they were obliged to inform the lender as to the purchase price paid.
This raises the question as to whether or not what is known as the "Bowerman" duty (the duty on a solicitor to report to his lender client matters relevant to the valuation of the property offered as security for a loan) is ousted by the terms of the Lenders Handbook issued by the Council of Mortgage Lenders.
(2) They deny that the lender would have acted differently had this information been provided because the borrower had, in his application form, already informed the lender that he had purchased the property for £450,000 in October 2005, that information provoking no apparent concern with the lender. Whilst they accept that the true position was that he had purchased the property for £390,000 in September 2005, they say that in the context of an application made in late December 2005 for a loan of £580,000 based on a valuation of £725,000 there is no basis for concluding that the lender would have regarded the differences as material.
(3) They deny that, even had the lender asked the surveyors whether this information affected their valuation, the surveyors would have revised their valuation downwards, either at all or to any significant extent, and they also deny that the surveyors would have had cause to report to the lender that the information provided by the borrower to them as to the purchase price was materially different to the true position.
(4) In short, they deny any causative effect as between any breach on their part and the lender's decision to lend. A major plank of their case in this regard is what they contend is the surveyors' failure to adduce any relevant or admissible evidence from the lender's underwriting team as to the impact that this information would or might have had on the lending decision.
(5) Finally, and alternatively, they contend that so far as any apportionment is concerned their share should be modest.
I have heard evidence from 3 witnesses called by the surveyors, Mr Michael Beal, Mr Craig Smith and Mr Colin Davison. The solicitors did not adduce any witness evidence. So far as those three witnesses are concerned, my assessment is as follows:
Mr Beal is employed by the surveyors as the head of panel management. His evidence was directed to the issue as to what the surveyors would have done had the lender notified them of the actual purchase details. He came across to me as an honest and reliable witness in relation to matters of fact, and I accept his evidence of fact. Insofar as in his witness statement and evidence he expressed opinions as to what would have happened in the hypothetical circumstances that the lenders had approached the surveyors notifying them of the actual purchase details, I am unable to place any great weight on that evidence.
Mr Smith is employed by the surveyors as a residential area valuer, working from their Sandbach office valuing properties in the Buxton and High Peak areas. His evidence was directed to the valuation of the property which he undertook in November 2005, and also as to what he would have done had he been asked to re-consider his valuation in the light of the actual purchase price.
He came across to me as an honest and broadly reliable witness notwithstanding that he had through failure to refer to all of the contemporaneous documents when providing his witness statement failed, until the morning of trial, to note or to correct what was potentially a significant error in his contemporaneous site notes. I should emphasise however that there was no attack on his honesty and, in particular, there was no suggestion put to him that he was complicit with the borrower in deliberately producing an overstated valuation. In my judgment there would have been no proper basis for doing so in any event.
In short, I accept his evidence as to the circumstances in which he had come to produce his valuation, and as to what he would have done had he been asked to reconsider it by the lender by reference to the actual purchase details.
Mr Davison was employed by the lender as a national account manager. He was called by the surveyors to give evidence as to the operation of the lender's underwriting team and how they would have responded to being provided by the solicitors with the information about the actual purchase details. Mr Mitchell for the defendant invited me to strike out certain parts of his witness statement as containing inadmissible and/or irrelevant opinion evidence but I refused to do so, holding that I would need to hear Mr Davison give evidence before I could reach a conclusion as to the extent to which such evidence was admissible and/or relevant, and as to the extent to which it assisted me in deciding the issues.
Having heard Mr Davison, my conclusion is that whilst he was an honest and reliable witness of fact, he had insufficient knowledge or experience of the particular mortgage underwriting team who dealt with this application to provide me with very much assistance as to how they would have dealt with the application had the solicitors provided the actual purchase details.
I will address the key issues in the following order: (1) breach; (2) causation; (3) apportionment, but before doing so I will refer to the relevant circumstances and make any necessary findings of fact
The property
Quarnford Lodge is a substantial detached property, located on the main road from Buxton to Leek. It was built in the late 1970's, with a view to being operated as a small hotel and restaurant or similar. It had 4 reception rooms, 7 bedrooms and 5 bathrooms. It was apparently being operated as a bed and breakfast establishment before being acquired by the borrower. The photographs show that it did rather look more like a purpose built bed and breakfast type establishment than a converted dwellinghouse. That impression was fortified by its position right up against the road and its lack of garden or grounds. As at November 2005 it appears to have been in reasonable condition, but no more than that.
The borrower
Mr Gayler was a local man, with his own local property business. He had a track record of acquiring property in the Buxton area for buy-to-let purposes with the benefit of secured finance. Mr Smith accepted that he had valued properties where Mr Gayler was the borrower on 2 or 3 previous occasions.
In late December 2005 he applied to the lender for a remortgage, seeking a loan of £580,000, on the basis of self-certified details of his earnings from his self-employment. He completed the application form on the basis that he was, and intended to continue, occupying the property as his own residence, rather than for business purposes.
I should make it clear that notwithstanding the apparent discrepancies in relation to the purchase details as provided by Mr Gayler no evidence has been put before me, nor submission advanced to me, that he acted dishonestly as regards this transaction. The information provided by him on the application form as to the purchase details was not so significantly different from the actual purchase details as would dictate that conclusion. Moreover, once Mr Smith had clarified his witness statement when giving evidence in chief, the discrepancies between the actual purchase details and what he had told Mr Smith...
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