Lender not liable for common law negligence where there is no advisory duty

Where there is no advisory duty, the mere provision of lender-addressed valuations to a borrower does not give rise to a common law duty on the lender to reasonable care in relation to such estimated valuations. The court has rejected a claim to the contrary in striking out claims in Mr Shokrollah-Babaee v EFG Private Bank Ltd [2023] EWHC 3270 (Ch). The parties were introduced in 2007 when the claimant was interested in refinancing existing borrowing secured on various assets, including a substantial four-storey villa in Chiswick. The property was valued on behalf of the bank at £6.65m. In 2012 there were further negotiations and the claimant told the bank the property was worth £8.5m. This was subsequently confirmed by a valuation obtained by the bank for loan security purposes. The claimant received a copy of the valuation. In August 2012 the bank loaned the sum of £5.95m on a two-year term secured inter alia against the property. It was not in dispute that the bank had informed the claimant that it was not providing advice in relation to the transaction and it was a matter for him whether he accepted the mortgage or that the estimated value of the property was £8.5m. In 2014, extensions to the loans were discussed and the property was again valued for the bank at £8.5m and the claimant received a copy of the valuation. Again, the claimant was informed that the bank was not advising on the transaction. The facility was extended to June 2018 when the claimant failed to repay the loans. The bank subsequently presented a petition for the claimant’s bankruptcy. The claimant claimed that from 2012 onwards he invested £3.5m in speculative residential property development which he would not have done but for the bank’s breaches of duty, which included overstating the value of the property by an estimated £3m. The claimant’s claims for breaches of Mortgage Conduct of Business rules were statute-barred but claims based on common law negligence were not. However, there was no basis for such a claim. The valuation reports were provided to the bank for its own lending purposes and were addressed only to the defendant. Without more, the provision of the reports did not rise to a duty of care on the bank [Rehman v Santander UK plc [2018] EWHC 748 (QB)]. The claimant accepted there was no advisory duty and so a common law duty could not arise as a result of breach of statutory duties which were statute-barred [Green v Rowley [2013] EWCA Civ 1197]. Louise Clark is a property law consultant and mediator