Preferred Mortgages Ltd v Countrywide Surveyors Ltd

A retrospective valuation must assess the figure that a reasonable valuer, using information available at the relevant date, would have reached. Later sale prices and valuations cannot ordinarily be de-valued backwards to establish historic value, since that risks misuse of hindsight. A valuation falling within an appropriately assessed tolerance bracket will not ordinarily be negligent where the valuer’s methodology was careful and competent. The appropriate bracket depends on the nature and difficulty of the property and the availability of comparable evidence. Contributory negligence may arise where a lender advances an excessive proportion of the valuation for an unusual property whose saleability is expressly limited.

The claimant mortgage lender commissioned the defendant surveyor to prepare a report and valuation before advancing mortgage funds secured on a converted former chapel. The borrower later defaulted, the property was repossessed and sold at a loss. The claimant alleged that the valuation was negligently prepared in contract and tort.

At trial, the claimant accepted that the surveyor could not be liable for failing to identify that the property lacked mains electricity, water and foul drainage. The central issue was whether the valuation, assessed on the agreed assumption that those services existed, was negligent. The claimant relied principally on a substantially lower retrospective valuation and on later valuations and the eventual sale price.

1. Retrospective valuation. The proper question was the value at the date of the report, assessed by reference to information available at that date. Later valuations and sale prices could not reliably be de-valued backwards, particularly where the property’s condition, market context and possession status had changed. The approach risked importing hindsight and producing a retrospective historical fiction. The principles in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 and Halifax Mortgage Services Ltd v Simpson (1999) 64 Con LR 117 supported that conclusion.
2. Valuation and tolerance bracket. The property was unusual and difficult to value, with no direct comparables. A tolerance bracket of 15% was appropriate. The true value in the property’s deemed condition was £57,000, making the defendant’s £65,000 valuation high but still within the bracket. Applying Legal & General Mortgage Services v HPC Professional Services [1997] PNLR 567 and Merivale Moore v Strutt & Parker [2000] PNLR 498, the claimant failed to establish negligence or breach of contractual duty.
3. Disposition. The claimant established no cause of action in contract or tort against the defendant. The claim therefore failed.
4. Alternative observations. Had liability been established, the court would have treated the case as a “no transaction” case. It also considered that the lender would have been contributorily negligent, on the specific facts, in lending more than 80% of the surveyor’s valuation because the report identified the property as unusual and potentially difficult to sell. These findings were not necessary to the dismissal.
5. The court further stated, obiter, that mortgage-loan interest would not ordinarily be recoverable as damages, though simple interest under section 35A of the Supreme Court Act 1981 could have been awarded from the borrower’s first default.