Paratus AMC Ltd & Anor v Countrywide Surveyors Ltd

A valuer’s duty is to exercise the care and skill of a reasonably competent valuer. Whether a valuation is negligent depends on the facts of the particular case; the acceptable margin of error is not itself a rule of law. For standard residential property, the court may use a bracket of permissible values informed by comparable evidence, market conditions and the property’s features. A valuation outside that bracket establishes an evidential case requiring explanation. A lender’s high-risk lending model is not, merely because it involves high loan-to-value or self-certified lending, necessarily negligent. However, the lender must properly investigate matters of central importance, including material discrepancies in disclosed liabilities and income. Contributory negligence may reduce damages by reference to the entire loss, subject to a just and equitable assessment.

The claimants alleged that Countrywide Surveyors Ltd negligently overvalued a residential flat in July 2004, causing GMAC to advance excessive mortgage finance. GMAC later transferred the beneficial ownership of the mortgage loan to RMAC as part of a securitisation arrangement, while retaining legal title.

The court determined the property’s true value, whether the valuation fell outside the range reasonably open to a competent valuer, and whether recoverable loss had been suffered. It also considered, hypothetically, the effect of the securitisation and the lender’s alleged contributory negligence.

1. Claim dismissed. The property’s true value in July 2004 was £175,000. The court rejected a primarily arithmetical price-per-square-metre method. Floor area was only one factor among many and did not generate a reliable correlation with value. Comparable evidence, the state of the market, specification, aspect and other relevant features had to inform the valuer’s judgment.
2. The acceptable margin of error was a factual matter, not a legal rule. Having regard to the buoyant and volatile market, the inconsistency of the comparables and the nature of the development, the permissible range was assessed as £160,000 to £190,000, approximately 8% around the court’s valuation. The valuation of £185,000 therefore fell within the permissible range and was not negligent.
3. Hypothetically, the court would have rejected the argument that the securitisation prevented recovery. No legal assignment of the cause of action had occurred under the Mortgage Sale Agreement. In any event, the loss remained legally recoverable notwithstanding the contractual allocation of the securitisation losses through the cascade.
4. Hypothetically, GMAC would have been contributorily negligent. A high loan-to-value, self-certified lending model was not by itself negligent, but GMAC had failed to investigate substantial discrepancies in the borrower’s disclosed liabilities and income. Proper enquiries would probably have shown that the declared income could not be verified and that the borrower was dishonest. A 60% reduction would have been made against the entire loss.
5. The remaining issues were unnecessary to the disposition because the valuation claim failed.