Webb Resolutions Ltd v E.Surv Ltd

A professional valuer’s duty is ordinarily to provide a valuation of current market value, not a predicted resale value, unless the retainer contains special instructions. The court should focus primarily on whether the valuation figure fell outside the permissible margin of error, although the valuation method may be relevant when assessing contributory negligence. A valuer cannot allow a “tick box” form to prevent disclosure of information necessary to comply with contractual, tortious or professional obligations. In assessing a lender’s contributory negligence, the relevant standard is that of the reasonably competent lender operating in the relevant market. Common market practice is relevant but is not conclusive. A 95 per cent loan-to-value mortgage, combined with substantial defaults and unsupported income, was negligent lending.

GMAC RFC Limited assigned claims against its surveyor, E.Surv Limited, to Webb Resolutions Ltd. The claims concerned allegedly negligent mortgage valuations of a Birmingham flat and a house in Whitstable. E.Surv relied on valuation figures which exceeded the figures later found to be correct. Webb also defended allegations that GMAC had failed to mitigate its losses or had acted contributorily negligently in making the loans.

The central issues were the scope of E.Surv’s contractual and tortious duties, the appropriate valuation margins, whether the two valuations were negligent, whether GMAC had failed to mitigate, and whether the lending decisions warranted a deduction for contributory negligence.

1. Valuation duty. The ordinary professional standard required a reasonably skilled and competent surveyor. The contractual references to prudence, skill, care, competence and diligence did not impose a more onerous obligation. The valuations were to reflect current market value, not a presumed resale value following borrower default, because the retainer contained no special instruction to that effect. This was consistent with Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1995] QB 375 and Singer and Friedlander Ltd v John D Wood and Co [1977] 2 EGLR 84.
2. Forms and RICS guidance. Where the valuer could not comply with the contractual or tortious duty without adding information to a tick-box form, the valuer had to add the information or provide a covering letter. The form could not justify a false declaration or omission of material information.
3. Methodology and margin. The court focused on the valuation result, following the approach identified as the ratio of Merrivale More PLC v Strutton Parker [2000] PNLR 498. Errors in methodology nevertheless remained relevant to contributory negligence. For both properties, a 5 per cent margin was appropriate because they were ordinary residential properties with numerous meaningful comparables.
4. Ali valuation. The valuer had failed to inspect the flat, failed to investigate incentives, relied on unreliable comparable data and worked backwards from the asking price. The valuation of £227,995 was negligent. The correct valuation was £204,658, producing damages of £22,842 plus interest, subject to exclusion of interest for a four-month mitigation delay.
5. Bradley valuation. The valuer worked backwards from the borrower’s proposed figure, improperly added a margin of tolerance, and failed to account for the railway line and nearby council estate. The valuation of £295,000 was negligent. The correct valuation was £260,000.
6. Contributory negligence. GMAC’s lending model was not negligent in the Ali case. In the Bradley case, however, the combination of a 95 per cent loan-to-value ratio, significant defaults and unsupported income meant that a reasonably competent centralised lender would not have made the loan. Responsibility was equally shared, requiring a 50 per cent reduction in the agreed loss to £25,609.62 plus interest.
7. The parties were directed to agree interest calculations and draw up a consequential order. Costs were not determined.