Shokrollah-Babaee v EFG Private Bank Limited

A claim under Financial Services and Markets Act 2000, section 138D, is a claim for breach of statutory duty and does not constitute an action for damages for negligence under section 14A of the Limitation Act 1980. Loss may be actionable when a borrower enters a disadvantageous mortgage and becomes bound to repay, even if consequential investment losses arise later. A lender’s use of a valuation obtained for its own security purposes does not, without more, create a common law duty of care to the borrower. Regulatory rules do not themselves create a co-extensive common law duty where no advisory duty exists. A claim form cannot generally be expanded by particulars of claim where the claim form contains no ambiguity or clerical error.

The claimant alleged that mortgage offers made by the defendant in 2012 and 2015, and valuations obtained from Savills for the defendant’s lending purposes, breached FCA mortgage conduct rules and a common law duty of care. He claimed losses arising from borrowing and subsequent property development activities.

The defendant applied to strike out the claim under CPR r.3.4(2)(a) or (b), alternatively for reverse summary judgment under CPR r.24.2. It argued that the claims were time-barred, outside the scope of the claim form, legally unavailable, and unsupported by a realistic case on breach, reliance or causation.

1. The statutory claims were statute-barred. The claimant suffered actionable loss when he entered the 2012 mortgage and became bound to repay the borrowings and subject the property to the mortgage. The later failure of property ventures did not postpone accrual. The same reasoning applied to the 2015 extension.
2. Section 14A of the Limitation Act 1980 did not apply to claims under section 138D of the Financial Services and Markets Act 2000. Following Shore v Sedgwick Financial Services Ltd and supported by Société Commerciale de Reassurance v ERAS International Ltd and Laws v Society of Lloyd’s, the relevant question was the nature of the cause of action, not whether negligence was alleged in the particular case. The common law negligence limitation issue could not properly be determined on the application because fuller evidence was required.
3. No common law duty of care was established. The lender-addressed valuations were prepared for the defendant’s own lending purposes. Their provision to the claimant, even if it occurred, did not create a duty without additional circumstances. The regulatory requirements did not create a co-extensive common law duty in the absence of an advisory duty. The claim therefore had to be dismissed.
4. The claim form did not include the wider MCOB or APR claims. The brief details referred only to alleged duties concerning the Savills valuations. There was no ambiguity or clerical error permitting the claim form and particulars of claim to be read together for that purpose. The APR claim was new and did not arise from the same facts as an existing claim. The additional MCOB claims were struck out.
5. In any event, there was no realistic case of breach. For the purposes of MCOB 5.6.6R, it was reasonable for the defendant to rely on an apparently reliable valuation from an appropriate chartered surveyor. The defendant had not subcontracted its regulatory obligation and was not strictly liable for any error by Savills. The APR allegations and the alleged negligence in relying on the reports were also unsupported.

The claims were struck out and dismissed.