Bateson & Anor v Savills Private Finance Ltd

A mortgage broker advising on an unregulated product owes a tortious duty to exercise the reasonable care and skill expected of a competent provider. That duty includes obtaining, or warning the client to obtain, information about likely early redemption penalties where the information may affect whether remortgaging is financially viable. Where an unusual aggregate mortgage is recommended, the broker should explain its general nature and direct the client to obtain legal advice about its consequences.

Proof of breach does not establish liability for subsequent property losses. The claimant must prove that the breach caused the loss and that the loss fell within the scope of the relevant duty. Later financial difficulties, inability to meet instalments and adverse market conditions may be the true causes of repossession and shortfall.

Mr and Mrs Bateson claimed damages in professional negligence against Savills Private Finance Ltd. The defendant had arranged an aggregate remortgage over seven investment properties in 2005, enabling the claimants to release capital and obtain revised interest-rate terms.

The claimants alleged that the broker failed to warn them about early redemption penalties on their existing mortgages and failed to explain that all seven properties would secure the aggregate borrowing. They claimed the loss of their equity and the shortfall remaining after the mortgagees repossessed and sold the properties.

The central issues were whether the defendant breached its duty of care and, if so, whether either breach caused the claimed losses.

1. Claim dismissed. The defendant owed the claimants a duty in tort to exercise reasonable care and skill. The applicable standard was that expected of a competent provider of the relevant mortgage-broking services. The distinction between advice and information was not material on these facts.
2. The broker should have asked about likely early redemption penalties, or warned the claimants to make that enquiry and ascertain the amount and expiry date. The absence of any record of such an enquiry, warning or advice established breach of duty.
3. The broker also breached duty by failing to mention that the recommended product was an unusual aggregate or portfolio mortgage. The proper scope of the duty was to explain the feature in general terms and advise the claimants to consult their solicitor about its legal meaning and consequences. A mortgage broker was not required to give legal advice.
4. On causation, the court applied the ordinary but for test, considering each breach separately. By 11 July 2005 the claimants had received clear information from their solicitor and redemption statements identifying the penalties. They nevertheless proceeded and increased the borrowing. The redemption-penalty breach therefore did not cause the subsequent losses.
5. The aggregate-mortgage breach also did not cause the losses. On the evidence, the claimants would probably have proceeded even if they had been told of the aggregate security. Their later losses principally resulted from business disruption, rental arrears, inability to meet substantial instalments, the financial crisis and falling property values. The claimants did not prove that separate mortgages would have enabled them to retain properties or avoid the same enforcement consequences.
6. The court considered the scope-of-duty analysis in South Australia Asset Management Corp v York Montague Ltd [1997] AC 191 and the subsequent discussion in Rubenstein v HSBC Bank Plc [2012] EWCA Civ 1184. Although the remortgage provided an opportunity for loss, the pleaded losses were not shown to be consequences of either breach within the relevant scope of duty.
7. The damages claim was also unsupported by adequate evidence. There was no reliable basis for valuing any properties that might hypothetically have been retained or for calculating the mortgage shortfall apart from sale and possession costs.

First instance decision. No earlier or appellate decision is stated in the judgment.