Scullion v Bank of Scotland Plc (t/a Colleys)

A negligent valuer supplying information is liable only for loss attributable to the inaccuracy of that information, not for every consequence of the claimant’s decision to proceed with the transaction. For an overstated property valuation, the ordinary measure is the difference between the price paid and the property’s true value. Market falls and anticipated capital profits are outside the scope of the duty. Where the valuer knows that rental income is critical to a buy-to-let transaction, losses representing the shortfall between rental income and mortgage payments and ordinary property outgoings may be recoverable. Contributory negligence requires the claimant’s conduct to have caused or contributed to the particular loss claimed.

The claimant, a self-employed builder entering the buy-to-let market, purchased a flat after the defendant valuers reported an overstated open-market value and attainable rental. In an earlier judgment, the court found breaches of duty in relation to both valuations and adjourned causation, quantum and contributory negligence.

The claimant sought damages for the fall in the flat’s value, transaction costs, mortgage liabilities and property outgoings, less rent received. The defendant disputed the scope of duty, causation and contributory negligence. The issues concerned the losses attributable to each inaccurate valuation and the appropriate consequential orders.

1. Scope of duty. Applying South Australia Asset Management v York Montague Ltd [1997] AC 191, the defendant’s duty was limited to providing accurate information about the flat’s capital value and attainable rental. The defendant was not engaged to advise generally whether the claimant should enter the transaction.
2. Capital valuation. Loss attributable to the overstatement of capital value was limited to the difference between the price paid and the true value. The claimant had paid slightly less than the true value, so he suffered no recoverable capital loss. A subsequent market fall, capital profit, purchase costs and other expenditure were outside the scope of the duty.
3. Rental valuation. The defendant knew, or ought to have known, that the rental figure was important to the buy-to-let purchaser and lender. The claimant could recover the shortfall between rental income and the mortgage liabilities and ordinary outgoings attributable to the deficient rental valuation. The award was not damages for anticipated rental profit.
4. The involvement of other persons who may have misled the claimant did not break the causal connection. The defendant remained responsible for the limited consequences attributable to its own inaccurate information.
5. There was no reduction for contributory negligence. The claimant’s conduct in signing the mortgage application without checking it did not cause or contribute to the rental shortfall, which resulted from the defendant’s own rental assessment.
6. The recoverable rental-related loss was £72,234.54. Interest was awarded on the agreed basis. The claimant received his costs on the standard basis, with an interim payment of £100,000. Permission to appeal was granted only on whether a tortious duty was owed and whether the duty extended to the rental-valuation losses.

The judgment determined outstanding issues following the court’s earlier decision finding breaches of duty: [2010] EWHC 572 (Ch). The defendant was ordered to pay damages, interest and costs. Permission to appeal was granted on two identified points of law.