UCB Corporate Services plc v Halifax (SW) Ltd (in liquidation)
Bank instructing surveyor to value property – Surveyor’s report giving open market value and 90-day mortgagee sale value as same amount – Bank advancing loan – Borrower defaulting – Bank claiming negligent valuation – Whether surveyor negligent in giving open market and 90-day mortgagee sale as same amount – Claim dismissed
In March 1990 Bootes Products (Richmond) Ltd applied to the claimant bank for a loan in the sum of £550,000 to enable it to purchase two light industrial units on a small industrial estate near the centre of Kingston-upon-Thames. The estate had been completed in September or October 1989. By April 1990, two of the 12 units had been sold, with a further two units under offer. In April 1990 the bank offered to lend the company the lesser of £532,000 or 80% of the value/purchase price of the property. The bank then instructed the respondent surveyor to value the property. The respondent’s mortgage valuation report for the bank gave both the open market value and the 90-day mortgagee sale value as £665,000. As a result, the transaction proceeded and the company purchased the property with the aid of a loan of £532,000 from the bank.
The company subsequently went into liquidation and the bank sought possession of the property, which was eventually sold for £325,000. The bank commenced proceedings against the surveyor claiming damages for negligent valuation. A trial was ordered to hear the issue of liability only. The judge held that the proper approach was to establish the true open market value of the property and then to determine what reduction, if any, should be made to produce the 90-day mortgagee sale value. He found that the open market value was £644,000 and that no reduction was required to produce a 90-day mortgagee sale value. In making the latter finding, the judge relied in particular upon the facts that: (i) there had been a lull in the market before and after Christmas and a post-Christmas impetus could be expected; (ii) the two units were the most desirable on the estate; (iii) at the date of the valuation, the demand for small business units of a good quality and in a good position could be expected to hold up; and (iv) six units had been sold or were under offer in the six or seven months since completion of the development. The appellant appealed, contending that the judge should have found that the 90-day mortgagee sale value was 10% less than the open market value.
Bank instructing surveyor to value property – Surveyor’s report giving open market value and 90-day mortgagee sale value as same amount – Bank advancing loan – Borrower defaulting – Bank claiming negligent valuation – Whether surveyor negligent in giving open market and 90-day mortgagee sale as same amount – Claim dismissed In March 1990 Bootes Products (Richmond) Ltd applied to the claimant bank for a loan in the sum of £550,000 to enable it to purchase two light industrial units on a small industrial estate near the centre of Kingston-upon-Thames. The estate had been completed in September or October 1989. By April 1990, two of the 12 units had been sold, with a further two units under offer. In April 1990 the bank offered to lend the company the lesser of £532,000 or 80% of the value/purchase price of the property. The bank then instructed the respondent surveyor to value the property. The respondent’s mortgage valuation report for the bank gave both the open market value and the 90-day mortgagee sale value as £665,000. As a result, the transaction proceeded and the company purchased the property with the aid of a loan of £532,000 from the bank.
The company subsequently went into liquidation and the bank sought possession of the property, which was eventually sold for £325,000. The bank commenced proceedings against the surveyor claiming damages for negligent valuation. A trial was ordered to hear the issue of liability only. The judge held that the proper approach was to establish the true open market value of the property and then to determine what reduction, if any, should be made to produce the 90-day mortgagee sale value. He found that the open market value was £644,000 and that no reduction was required to produce a 90-day mortgagee sale value. In making the latter finding, the judge relied in particular upon the facts that: (i) there had been a lull in the market before and after Christmas and a post-Christmas impetus could be expected; (ii) the two units were the most desirable on the estate; (iii) at the date of the valuation, the demand for small business units of a good quality and in a good position could be expected to hold up; and (iv) six units had been sold or were under offer in the six or seven months since completion of the development. The appellant appealed, contending that the judge should have found that the 90-day mortgagee sale value was 10% less than the open market value.
Held: The appeal was dismissed.
Although there would usually be a difference between the open market value and the 90-day mortgagee sale value, it depended upon the market conditions at the time of the valuation. Where there was sufficient demand, the values would be the same. There had been a great deal of evidence before the judge, which he had been entitled to accept or reject, and it was clearly within the permitted ambit for the trial judge to accept the surveyor’s expert view that, as at April 1990, the demand for small business units could be expected to hold out. It had been fully argued before the judge that the expert’s optimism was not justified; however, he had considered that, on the evidence, it was. There had been sufficient evidence before the judge to justify that conclusion, and, accordingly, his decision could not be interfered with.
David Phillips QC (instructed by Speechly Bircham) appeared for the claimant; Edwin Johnson (instructed by Williams Davies Meltzer) appeared for the defendants.
Thomas Elliott, barrister
