DNB Mortgages v Bullock & Lees

In a negligent valuation claim, loss accrues when the lender is financially worse off than it would have been had the valuation been correct. The comparison is between the money advanced, with appropriate interest, and the true value of the property together with the borrower’s covenant. The date of first loss is fact-sensitive. It need not be the date of realisation or first default. Satisfactory payments do not create a rigid rule postponing accrual. Once the claimant shows an apparent accrual within the limitation period, the defendant must show that it is misleading and that loss arose earlier. A new point on appeal should not be permitted where its determination depends on factual investigation and the evidence does not establish its factual basis beyond doubt.

DNB Mortgages sued Bullock & Lees, chartered surveyors, in negligence for allegedly overvaluing a house used as security for a 1990 remortgage. The surveyors succeeded on a preliminary limitation issue before Deputy Judge Marriott QC in the Queen’s Bench Division, who held that the cause of action had accrued before 8 May 1990. DNB appealed, challenging the legal approach to accrual, the burden of proof and findings concerning the property and the borrower’s covenant. It also sought to raise a new argument based on the falling market. The central questions were when actionable loss occurred and whether that new argument should be entertained.

1. Appeal dismissed. The order was appeal dismissed with costs. The cross-appeal attracted no order as to costs, and permission to appeal to the House of Lords was refused.
2. The cause of action in negligence accrued when DNB suffered relevant loss. Applying the basic comparison in Nykredit Mortgage Bank v Edward Erdman Group (No 2) [1997] 1 WLR 1627, the court compared the amount lent with the value of the rights acquired, comprising the true value of the property and the borrower’s covenant. The date when that comparison first disclosed loss was a question of fact.
3. There was no rigid rule that loss arose only on realisation of the security or on default. Satisfactory performance of the covenant might make early loss difficult to prove, but did not postpone accrual as a matter of law. The covenant was valued on the evidence concerning the true facts.
4. The initial burden lay on DNB to show accrual within the six-year period. The status mortgage and continued instalment payments raised a rebuttable presumption that the covenant was good until January 1991. The burden then shifted to the surveyors to show that the apparent in-period accrual was misleading and that loss had accrued earlier.
5. DNB was not permitted to raise its new falling-market argument. The appeal court lacked necessary findings and could not be satisfied that further investigation would establish the point beyond doubt.

• Court of Appeal (Civil Division): dismissed DNB’s appeal from the preliminary limitation judgment of Deputy Judge Marriott QC in the Queen’s Bench Division. Permission to appeal to the House of Lords was refused.