Platform Home Loans Ltd v Oyston Shipways Ltd

In a negligent valuation claim, contributory negligence is assessed against the lender’s overall basic loss from the transaction. It is not automatically assessed against the damages remaining after the scope-of-duty limitation. The scope limitation identifies the maximum loss within the valuer’s duty. Statutory apportionment makes a separate just and equitable reduction for the claimant’s share in the damage.

Ordinarily, the court should reduce the basic loss by the assessed percentage and then apply the scope limitation, awarding the lesser figure. It must account for irrecoverable loss already borne by the claimant and avoid a double deduction. If the claimant’s fault contributed directly to the overvaluation, a reduction of the overvaluation may also be appropriate.

Platform Home Loans Ltd v Oyston Shipways Ltd concerned a lender which advanced £1,050,195 on property negligently valued at £1.5 million when its true value was £1 million. Following default and sale of the security, the lender’s agreed basic loss was £611,748.51. The trial judge found 20 per cent contributory negligence and awarded £489,398.81.

The Court of Appeal, in [1998] Ch. 466, instead deducted 20 per cent from the £500,000 scope-of-duty limit derived from the overvaluation, producing damages of £400,000. The central issue was how section 1(1) of the Law Reform (Contributory Negligence) Act 1945 interacts with the limitation upon a negligent valuer’s liability established by the SAAMCO principle.

1. Appeal allowed by a majority of four to one. Lord Hobhouse of Woodborough and Lord Millett delivered the principal majority speeches. Lord Lloyd of Berwick and Lord Hope of Craighead agreed with both. The trial judge’s award of £489,398.81 was restored.

2. Per Lord Hobhouse and Lord Millett, the “damage” for section 1(1) of the Law Reform (Contributory Negligence) Act 1945 was the lender’s overall basic loss of £611,748.51. The £500,000 overvaluation was not an element of that loss. It represented the maximum amount capable of falling within the valuers’ duty under South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191 and Nykredit Mortgage Bank Plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627.

3. The assessment therefore required two distinct calculations. The court first ascertained the loss caused by entering the transaction. It then identified the maximum loss within the scope of the valuer’s duty, ordinarily the amount of the overvaluation. Recoverable damages were limited to the lesser amount. The second calculation concerned scope of duty rather than factual causation.

4. Section 1(1) required a just and equitable assessment having regard to the claimant’s share in responsibility for the damage. It did not require the same percentage to be deducted mechanically from the already limited sum. The court had to recognise any irrecoverable part of the loss which the claimant already bore. Otherwise the claimant’s fault could be counted twice.

5. In the ordinary case, the practical approach is to apply the contributory-negligence percentage to the basic loss before applying the SAAMCO limitation. Here, 80 per cent of £611,748.51 was £489,398.81. Because that figure was below £500,000, it fell wholly within the valuers’ duty. Neither item of the lender’s fault had caused or contributed to the overvaluation. Lord Millett added that a reduction of the overvaluation itself may be appropriate where the claimant’s negligence directly contributes to it.

6. Lord Cooke of Thorndon dissented. He considered that “damage” under section 1(1) extended only to loss within the defendant’s duty. He would therefore have deducted 20 per cent from £500,000 and dismissed the appeal. The question of statutory interest remained remitted for determination in accordance with Nykredit.

• House of Lords: In Platform Home Loans Ltd v Oyston Shipways Ltd [2000] 2 AC 190, the House allowed the lender’s appeal by a majority of four to one and restored damages of £489,398.81.
• Court of Appeal: In [1998] Ch. 466, the court reduced the award to £400,000 by deducting 20 per cent from the £500,000 scope-of-duty limit. It also ordered a remission concerning statutory interest.
• High Court: Jacob J found the valuers negligent and the lender 20 per cent contributorily negligent. He awarded £489,398.81.