Tiuta International Ltd ((in Liquidation)) v De Villiers Surveyors Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Sumption,Lady Hale,Lord Kerr,Lord Lloyd-Jones,Lord Briggs |
| Judgment Date | 29 November 2017 |
| Neutral Citation | [2017] UKSC 77 |
| Date | 29 November 2017 |
| Court | Supreme Court |
[2017] UKSC 77
Lady Hale, President
Lord Kerr
Lord Sumption
Lord Lloyd-Jones
Lord Briggs
Appellant
Alexander Hickey QC
Robert Scrivener
(Instructed by Reed Smith LLP)
Respondent
Joanna Smith QC
Edwin Peel
Niranjan Venkatesan
(Instructed by Rosling King LLP)
Heard on 6 November 2017
( with whomLady Hale, Lord Kerr, Lord Lloyd-JonesandLord Briggsagree)
The claimant, Tiuta International, was a specialist lender of short-term business finance, until it went into administration on 5 July 2012. These proceedings were brought by Tiuta in support of a claim against the defendant surveyors for negligently valuing a partially completed residential development over which it proposed to take a charge to secure a loan. The present appeal raises a question of principle concerning the quantum of damages. Since it arises out of an application for summary judgment, it has to be determined on facts some of which are admitted but others of which must be assumed for the purposes of the appeal. They are as follows.
On 4 April 2011, Tiuta entered into a loan facility agreement with Mr Richard Wawman in the sum of £2,475,000 for a term of nine months from initial drawdown, in connection with a development in Sunningdale by a company called Drummond House Construction and Developments Ltd, with which Mr Wawman was associated. Advances under the facility were to be secured by a legal charge over the development. The facility agreement was made on the basis of a valuation of the development by De Villiers. They had reported that the development was worth £2,300,000 in its current state and that if completed in accordance with all current consents and to a standard commensurate with its location it would be worth about £4,500,000. The initial advance was drawn down on 8 April 2011 as soon as the charge had been executed. Other advances under the facility followed.
On 19 December 2011, shortly before the facility was due to expire, Tiuta entered into a second facility agreement with Mr Wawman in the sum of £3,088,252 for a term of six months in connection with the same development. Of this sum, £2,799,252 was for the refinancing of the indebtedness under the first facility and £289,000 was new money advanced for the completion of the development. A fresh charge was taken over the development to secure sums due under the second facility agreement. On 19 January 2012, Tiuta advanced £2,560,268.45, which was paid into Mr Wawman's existing loan account, thereby discharging the whole of the outstanding indebtedness under the first facility. Between that date and 8 June 2012 further sums were drawn down under the second facility amounting to £281,590 and presumably spent on the development. The advances under the second facility were made on the basis of a further valuation of the development by De Villiers. There were three iterations of the further valuation. On 8 November 2011, De Villiers had valued the development in its current state at £3,250,000 and upon completion at £4,900,000. The current state valuation was subsequently revised on 22 December 2011 to £3,400,000 and on 23 December 2011 to £3,500,000. The second facility agreement expired on 19 July 2012, a few weeks after Tiuta went into administration. None of the indebtedness outstanding under it has been repaid.
It is common ground that there can be no liability in damages in respect of the advances made under the first facility. This is because (i) there is no allegation of negligence in the making of the valuation on which the first facility agreement was based; and (ii) even if there had been, the advances made under that facility were discharged out of the advances under the second facility, leaving the lender with no recoverable loss. This last point is based on the decisions of the Court of Appeal in Preferred Mortgages Ltd v Bradford & Bingley Estate Agencies Ltd [2002] EWCA Civ 336 and of this court in Swynson Ltd v Lowick Rose LLP (in liquidation) [2017] 2 WLR 1161. It is not challenged on this appeal.
The present claim is concerned only with the liabilities arising out of the valuation which De Villiers made for the purposes of the second facility. It is alleged, and for present purposes must be assumed, that the valuations given for the purposes of the second facility were negligent, and that but for that negligence the advances under the second facility would not have been made. In those circumstances, the valuers contend that the most that they can be liable for by way of damages is the new money advanced under the second facility. They cannot, they say, be liable for that part of the loss which arises from the advance made under the second facility and applied in discharge of the indebtedness under the first. If (as has to be assumed) Tiuta would not have made the advances under the second facility but for the valuers' negligence, the advances under the first facility would have remained outstanding and would have remained unpaid. That part of their loss would therefore have been suffered in any event, irrespective of the care, or lack of it, which went into the valuations prepared for the purposes of the second facility. On that ground, the valuers applied for a summary order dismissing that part of the claim which arose out of the refinancing element of the advances under the second facility.
In my opinion the result of the facts as I have set them out is perfectly straightforward and turns on ordinary principles of the law of damages. The basic measure of damages is that which is required to restore the claimant as nearly as possible to the position that he would have been in if he had not sustained the wrong. This principle is qualified by a number of others which serve to limit the recoverable losses to those which bear a sufficiently close causal relationship to the wrong, could not have been avoided by reasonable steps in mitigation, were reasonably foreseeable by the wrongdoer and are within the scope of the latter's duty. In the present case, we are concerned only with the basic measure. In a case of negligent valuation where but for the negligence the lender would not have lent, this involves what Lord Nicholls in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627, 1631 called the "basic comparison":
"It is axiomatic that in assessing loss caused by the defendant's negligence the basic measure is the comparison between (a) what the plaintiff's position would have been if the defendant had fulfilled his duty of care and (b) the plaintiff's actual position. Frequently, but not always, the plaintiff would not have entered into the relevant transaction had the defendant fulfilled his duty of care and advised the plaintiff, for instance, of the true value of the property. When this is so, a professional negligence claim calls for a comparison between the plaintiff's position had he not entered into the transaction in question and his position under the transaction. That is the basic comparison. Thus, typically in...
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