Mortgage Express v Countrywide Surveyors Ltd

In a deceit claim, the representor must have made a false representation knowingly, without belief in its truth, or recklessly. Mere negligence is insufficient. Honest belief is assessed objectively in context, and a bare assertion of belief need not be accepted.

A continuing misrepresentation is corrected only by sufficiently clear communication. Whether a correction is effective depends on the meaning reasonably conveyed to the representee, considered against the transaction’s factual and commercial context. The representee’s negligence or failure to investigate does not prevent reliance if the representation remained operative at completion.

Mortgage Express claimed damages for deceit arising from rental valuations supplied by Countrywide Surveyors Ltd’s employee for flats at Macquarie Quay, Eastbourne. The valuations stated rents of approximately £1,300 to £1,540 per month, although the parties accepted that the true rental values were substantially lower.

The claim concerned 41 mortgage transactions divided into four categories according to when the loans completed and whether the properties appeared on a list sent to Countrywide for reassessment. The central issues were whether the employee acted fraudulently and whether subsequent communications corrected or withdrew the representations before completion.

1. Mental element. The claim in deceit succeeded on the first issue. Applying Derry v Peek (1889) 14 App Cas 337, the court held that the rental valuations were made without honest belief in their truth, or at least recklessly. The evidence showed that the figures were supplied to meet the requirements of the broker. Gross negligence alone would not have been enough, but the court was entitled to reject the valuer’s evidence of honest belief.
2. Reliance and correction. A representation may continue until withdrawn or modified. The burden of proving correction rests on the representor, and the correction must be sufficiently clear in the circumstances. Written communications are construed objectively, taking account of the factual matrix and the characteristics of the representee. The approach in Briess v Woolley [1954] AC 333 was applied.
3. The email of 19 July 2005 merely referred to possible overstatement and requested an opportunity to review the advice. It did not clearly withdraw the valuations or state that they should not be relied upon. The later request for reassessment created a reasonable period for Countrywide to revalue the properties, but that period had expired before the Category B completions.
4. The email of 25 August 2005 corrected the valuations for the properties on the Vaughan List. It therefore prevented reliance in the Category C claims. It did not correct the valuations for the Category D properties, nor warn Mortgage Express against further reliance on them. The fact that Mortgage Express might have been negligent in continuing to lend was irrelevant under Redgrave v Hurd (1881) 20 ChD 1.
5. Mortgage Express succeeded in Categories A, B and D. The Category C claims failed. Quantum was left for agreement.