DAMAGES IN NEGLIGENT VALUATION ACTIONS

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1 10 S.Ac.L.J. Damages in Negligent Valuation Actions 217 DAMAGES IN NEGLIGENT VALUATION ACTIONS 1. INTRODUCTION This article focuses on the position of valuers and solicitors in the particular context of mortgage lending. The particular reason for this approach is that the recent English case-law has in large part involved disputes arising out of the last property market crash between lenders and their professional advisers. The period of the late 1980s was one when the market price of domestic property in the United Kingdom was rising steeply and there was a widely-held belief that prices could only continue to rise and that a failure to get onto the bandwagon would make it difficult, if not impossible, to enter the housing market. From a lender s viewpoint, the rising market enabled him to recover any bad loans out of the proceeds of realised security. But when the market began to collapse during 1991, the realisation proceeds frequently left a shortfall which was irrecoverable from the borrower. In these circumstances, lenders began to look to other potential sources of recovery, specifically the solicitors who acted for them in the advancing of the purchase monies and the taking of the security and the valuers who prepared valuations of the property intended to be mortgaged. 1 The title of this article is in several senses misleading because its subjectmatter extends more widely. First, it is not limited to dealing with the liability of valuers but also addresses the liability of solicitors. Secondly, it goes beyond dealing with liability for breach of a contractual or tortious duty of care but also addresses the liability of a solicitor for breach of trust. Thirdly, it goes beyond dealing with claims for damages because the remedies for breach of trust are different and more extensive. It is not the purpose of this article to recite what is established law in the field. Instead, it seeks to highlight the latest developments in the caselaw and attempts to grapple with some of the issues to which they give rise. Particular attention will be given to two difficult House of Lords rulings, those in South Australia Asset Management Corporation v York Montague Ltd 2 and in Target Holdings Ltd v Redferns 3, which in some ways raise more questions than they answer. l 2 3 See the discussion in the judgment of Chadwick J in Bristol & West Building Society v May May & Merrimans and Others [1996] 2 All ER 801, 804f 805b. [1997] AC 191. [1996] AC 421.

2 218 Singapore Academy of Law Journal (1998) 2. VALUERS 2.1 Generally Valuation is a prime example of a professional activity which cannot produce answers of absolute precision. The valuer gives his opinion, not a definitive and absolute statement; the exercise is an art, not a science. It follows that the fact that the property valued is sold at a higher or lower figure than the valuation does not of itself establish negligence on the part of the valuer, although the extent of the difference between the sale price and the valuation figure will obviously be relevant. Although it will usually be surveyors who carry out property valuations, there is a clear difference firmly recognised by the courts between a valuation and a survey 4. However, a valuer is not free to ignore structural defects which affect the valuation and so a degree of inquiry into the structure is required from him The valuer s duty of care In Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd (the case which, in the House of Lords, became known as the South Australia case) Sir Thomas Bingham MR defined the duty owed by a valuer to a mortgage lender as a duty: to take reasonable care to give a reliable and informed opinion on the open market value of the land in question at the date of the valuation. In the ordinary way [the valuer] does not warrant that the land would fetch on the open market the value he puts on it, any more than a medical practitioner warrants that he will cure a patient of illness. In determining the existence and scope of the valuer s duty of care, many factors must be borne in mind and different factors will hold sway in each case. For example, the valuer may not always be in possession of all the relevant facts and the parties concerned may have particular reasons for concluding a sale at a different figure. The prudent valuer will always state the basis upon which his valuation is made. Also, in most cases, there will be a range of values which might properly be put on the property rather than a single correct figure. 6 The bulk of authority seems to take the view that professional practice recognises that the valuation Sutcliffe v Sayer (1987) 281 Estates Gazette Eg Stevenson v Nationwide Building Society (1984) 272 Estates Gazette 663. Eg in the South Australia case, at 221G, Lord Hoffmann observed that valuation is seldom an exact science and...within a band of figures valuers may differ without one of them being negligent.

3 10 S.Ac.L.J. Damages in Negligent Valuation Actions 219 figure may vary according to the purpose for which the valuation is required Measuring the damages for a negligent valuation The existence and scope of the valuer s duty of care has excited considerably less interest in the recent case-law, no doubt because it is relatively well settled, than the contentious issue of the extent of the negligent valuer s liability to pay damages. In the South Australia case, that issue came to a head after surfacing in a number of earlier cases. 8 The House of Lords was concerned with three appeals where valuers had been required by mortgage lenders to value properties on the security of which they were considering the advance of purchase monies on mortgage and had considerably overvalued the property. The loans were made in circumstances where they would not have been had the lenders known the true value of the property. The borrowers later defaulted and, in the meantime, the property market had fallen, greatly increasing the lenders losses. Lord Hoffmann, with whose speech all the other members of the House of Lords agreed, laid down the general principle that: A person under a duty to take reasonable care to provide information on which someone else will decide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong. The House of Lords therefore held that valuers whose negligent valuations had been relied on by lenders in deciding to grant loans on the security of the properties in question could not be liable for all the foreseeable consequences of the lenders proceeding with the loans. The Court of Appeal had been wrong to hold the valuers responsible for the whole of the loss suffered, including the loss arising out of the fall in the property market. They were only liable for that part of the lenders loss that was attributable to the inaccuracy of the valuations. One therefore compares the loss actually suffered by the lender with what his position would have been if he had not entered into the transaction and asks what element of this loss is attributable to the inaccuracy of the information. Put another way, the lenders could recover 7 8 Kenney v Hall, Pain & Foster (1976) 239 Estates Gazette 355, 429 per Goff J, Corisand Investments Ltd v Druce & Co (1978) 248 Estates Gazette 315, Predeth v Castle Phillips Finance Co Ltd (1986) 279 Estates Gazette 1355; cf Singer & Friedlander v John D Wood & Co (1977) 243 Estates Gazette 212, Gordin v Mom and Captain W Dunsford Ltd [1971] NZLR 526. Eg Swingcastle v Gibson [1991] 2 AC 223, Hayes v James and Charles Dodd [1990] 2 All ER 815.

4 220 Singapore Academy of Law Journal (1998) for so much of their loss as did not exceed the difference between the actual valuations given and the correct values of the property at the time of the valuations. In reaching this conclusion, the House of Lords relieved what was widely regarded as the unfair burden placed on the valuer in consequence of the Court of Appeal s decision. In any case where it was found as a fact that, but for the negligent valuation, the lender would not have made any loan at all, it is easy, starting from the Court of Appeal s point of departure of asking what damages the lender was entitled to against the negligent valuer, to reach the conclusion that the valuer was liable for the full loss on the transaction. But the inherent unfairness of that approach lies in the consideration that the valuer was not being asked at all to forecast the value of the property at a future time when the lender might resort to it but only to value the property at the date of the valuation. It could readily be anticipated that the value of the property would later go up or down. Yet the effect of the Court of Appeal s decision was that the valuer was to be treated as if he had given a warranty that if and when the property came to be sold by the lender as mortgagee it would fetch a particular figure. The House of Lords found the Court of Appeal s approached to be flawed in that any consideration of the measure of damages had to be preceded by a consideration of what were the kinds of loss for which the lender was entitled to compensation. 9 Whilst there is no reason in principle why a wrongdoer should not be made liable for all the consequences of his wrongful act, such a rule is exceptional. The advance by the mortgage lender might flow from the negligent valuation but it is not in law a relevant consequence because the valuer is not there to advise the lender on whether or not to make the advance but only as to the value of the security. Lord Hoffmann s justification for limiting the valuers liability in this way seems to be that a person should not be entitled to recover a greater amount of damages for the negligent provision to him of information than if the information were the subject of a contractual warranty. 10 The House of Lords clearly believed that this was the result it was achieving by its decision, so avoiding what it otherwise regarded as a paradox [1997] AC 211, 218. Ibid, at 213F 214A. Commentators have written extensively on this aspect. One commentator has suggested that the paradox that much more can be recovered for a breach of a duty of care than for breach of a warranty remains is not solved by the House of Lords decision, see McLaughland, Negligent Valuer Liability: The Paradox Remains?, (1997) 113 LQR 421. Another commentator has suggested that there may well be no such paradox in the first place, see Stapleton Negligent Valuers and Falls in the Property Market (1997) 113 LQR 1.

5 10 S.Ac.L.J. Damages in Negligent Valuation Actions 221 In the context of a negligent valuation, Lord Hoffmann considered that the only relevant consequence in the assessment of damages of the wrong valuations was that the lenders had less security than they thought. 12 However, it is far from clear that the outcome of the three cases decided by the House of Lords in the South Australia case reflects that view. 13 Also, selecting as the only relevant consequence the fact that at the date of the loan the lender had less valuable security than he was led to believe is unsatisfactory: it provides no obvious causal link between the negligence and the recoverable loss. As one writer has pointed out, 14 the error can be illustrated by considering the case where the lender s solicitor negligently reports to the lender that the borrower has executed the mortgage, and in reliance on the report the lender advances the purchase monies. In that situation, the lender s loss is limited to the shortfall in recovery, suffered by reason of the absence of security at the time when the lender would otherwise have resorted to it. It is illogical that the liability of the valuer who overvalues the security should be greater than that of the solicitor whose negligence results in there being no security at all. Where does this lead? It is submitted that the same writer is correct in suggesting that, in any consideration of the measure of damages, the relevant consequence is that: as a result of the negligent overvaluation the lender has exposed himself to a risk that if and when after default by the borrower he resorts to the property as security for repayment of the secured debt, he will find it less valuable than it would have been if the property had had the reported value at the outset. If, as will usually be the case, damages fall to be assessed after enforcement of the security, this will usually involve a comparison between (i) the value which the property would have had if it had had the reported value at the outset and (ii) the actual proceeds of realisation. 15 Although its application may prove to be more restrictive than the initial furore about it may suggest 16, there can be little doubt that the South Australia case will not prevent difficult questions of quantification arising in future cases. Some have already arisen [1997] AC 211, 222. For an interesting discussion of this issue see Davidson, BBL and damages: some problems in applying the ratio decidendi, Professional Negligence, Vol. 13, No. 3, 1997, 89. Ibid, at 92. Ibid, at 92. See McGregor on Damages, 16th edition 1997, paragraph Eg Platform Home Loans Ltd v Oyston Shipways Ltd [1996] 2 EGLR 110 (concerning the relationship between the South Australia case and contributory negligence); cf Coventry Building Society v William Martin & Partners (unreported) 20 June 1997; Bristol and West Building Society v Fancy & Jackson [1997] 4 All ER 583 (solicitors).

6 222 Singapore Academy of Law Journal (1998) It is also noteworthy that in Australia a jurisdiction which has in the past led the way in developments of the law of negligence that have later been adopted in England the South Australia case has been criticised and not followed by the Federal Court of Australia on the ground that it effectively has redefined the duty of valuers so as to foreclose questions of causation, remoteness and the measure of damages. 18 This may be an overstatement of the position but it is a viewpoint for which one can have some sympathy. 3. SOLICITORS 3.1 The solicitor s duty of care: recent case-law The common practice of a mortgage lender retaining the borrower s solicitors to investigate title for both and to hold the loan monies on trust has given rise to a number of recent cases of note. That a solicitor in general owes his client a contractual and a tortious duty of care is not in doubt. In an appropriate case, a duty of care may also be owed to a person who is not his client if a special relationship exists between them. 19 One recent illustration in the present context is Woodward v Wolferstans, 20 where a solicitor retained to act in the purchase of a property and execution of a mortgage by the guarantor of that mortgage was held to owe a duty of care to the purchaser and principal mortgagor of the property The Mortgage Express case The dangers for a solicitor in the situation where he is retained by both the mortgage lender and the borrower are illustrated by the Court of Appeal s decision in Mortgage Express Ltd v Bowerman & Partners 21. There, the lender instructed the defendant firm of solicitors to act on its behalf in respect of an application by the proposed borrower, a client of the defendants, for a loan of 180,150 towards the purchase of a property for 220,000. The plaintiff enclosed with its letter of instruction a professional valuation of the property in question which valued it at 199,000. The defendants knew that the vendor of the property to the borrower was himself buying the property for 150,000 and selling it on simultaneously at a profit to the borrower. The defendants drew the borrower s attention to the discrepancies between the purchase prices of 150,000 and 220,000 and the valuation figure of 199,000 but failed to mention in their written report on title to the lender the simultaneous Kenny & Good Pty Ltd v MGICA (1992) Ltd [1997] 743 FCA. While v Jones [1995] 2 AC 207, Judgment of 20 March 1997, The Times, 8 April [1996] 2 All ER 836.

7 10 S.Ac.L.J. Damages in Negligent Valuation Actions 223 purchase of the property by the vendor for 150,000. The lender advanced the purchase monies and the sales were completed but the borrower defaulted and the property was repossessed and sold for 96,000. The Court of Appeal upheld the lender s claim for damages for negligence against the defendants for their failure to draw attention to the fact that there was a simultaneous sale of the property at a figure 50,000 below the valuation on which it was relying and 30,000 below its proposed advance. The case decides that if, in the course of investigating title, a solicitor discovers facts which a reasonably competent solicitor would realise might have a material bearing on the valuation of the lender s security or some other ingredient of the lending decision, then it is his duty to point this out. 22 Two further points require to be mentioned. First, that duty does not involve the solicitor having to second-guess the valuer by investigating whether the valuation obtained by the lender was reliable or not. 23 Secondly, the case raised no issue of any breach of confidence on the part of the solicitor in imparting information supplied by one client to another client: the duty of a solicitor acting for a purchaser was not only to investigate the vendor s title on his behalf but also to deduce it to the lender s solicitor. 24 It should be added that Mortgage Express has recently been distinguished by the Court of Appeal in National Home Loans Corporation plc v Giffen Couch & Archer 25. There, it was held that information casting doubt on the borrower s ability to repay the loan did not have to be passed on to the lender, in the absence of specific instructions to that effect The Bristol and West case Another recent case where solicitors acted for both the proposed mortgagee and the mortgage lender is the decision of Chadwick J in Bristol and West Building Society v May May and Merrimans and Others 26. This was a test-case brought by the building society against several firms of solicitors retained in transactions between 1988 and One of the three main issues which arose in the case was again the extent to which solicitors were obliged to disclose to the lending institution facts which they would have been unlikely to know if not also acting for the borrower. The Judge formulated the solicitor s duty in such circumstances if anything f per Sir Thomas Bingham MR. 840j 841a per Sir Thomas Bingham MR. 845a b per Millett LJ. [1998] 1WLR 207. [1996] 2 All ER 801.

8 224 Singapore Academy of Law Journal (1998) in slightly wider terms than those of the Court of Appeal in Mortgage Express: Information obtained in the course of investigating title or in the course of preparing for completion which is not confidential and which a reasonably competent solicitor would realise might be of significance to his client, as lender, ought to be disclosed to him. 27 In Bristol and West, unlike in Mortgage Express, no valuation report had been supplied to the solicitor by the lender. Chadwick J held that this did not affect the existence of the duty of care which the solicitor owed but it was a relevant factor evidentially in that, where the solicitor did not know what valuation advice the lender had received, it might be more difficult to say that the solicitor ought to have realised that knowledge of the particular fact might have caused the lender to question the valuation Measuring the damages for solicitor s negligence At the time Mortgage Express was decided, the House of Lords had yet to decide the South Australia case and so the last word on the subject of the measure of the plaintiffs damages was Banque Bruxelles Lambert in the Court of Appeal, according to which the solicitors would, like the valuers, be liable for all the loss, including loss attributable to the fall in the market after the loan was made. However, as already stated, that is no longer the law. Where negligence on the part of the solicitor is established, it is sufficient for the lender to prove that he relied on the negligent advice or information; it is not necessary for him to prove that he would not have acted as he did if he had been given the proper advice or the correct information. However, it does not follow that the whole of the lender s loss is recoverable. The proper measure of damages is only that part of the loss, if any, which is proved by the lender to be properly attributable to the negligence. 29 The starting point is to compare the lender s position as a result of entering into the transaction with what it would have been if he had not entered into the transaction at all. But it is then necessary to go on to determine the extent of the loss, if any, properly attributable to the inaccuracy of the information. Where the lender would have suffered the same loss even if the information had actually been accurate, he has suffered no recoverable loss h. 813g j. Eg Bristol and West Building Society v Mothew [1997] 2 WLR 436. In Bristol and West Building Society v May May & Merrimans (No. 2) [1998] 1 WLR 336, decided after the South Australia case in the House of Lords, Chadwick J had to consider whether the plaintiffs were required to give credit to the solicitors for insurance payments received under mortgage indemnity guarantees and held that they did not.

9 10 S.Ac.L.J. Damages in Negligent Valuation Actions Breach of trust The Bristol and West case also raises the question of the fiduciary duties owed by solicitors. A common feature of the actions was that the building society made no direct payment to the proposed mortgagee but paid the amount of the advance to the solicitor for the purpose of enabling the purchase of the property to be completed. The issues which arose on this aspect were, first, whether the solicitors committed a breach of trust by paying over funds on completion in circumstances where the completion had taken place following a failure by the solicitors to disclose to the building society some fact which he ought to have disclosed; and, secondly, whether the building society had to establish not only that there had been a failure to disclose some fact which the solicitor ought to have disclosed before completion but also that, if it had been disclosed, the building society would either not have authorised the advance or else would have withdrawn its offer of advance When is a breach of trust committed? On the first question, the court accepted that it was beyond doubt that a solicitor stands in a fiduciary relationship to his client 31 and that the fiduciary duty of one party to a contract was defined by the contractual terms of the retainer. 32 The duty is to avoid any conflict of interest, whether as between his own interests and those of his client or as between the interests of different clients and it is immaterial that the solicitor does not stand to profit from the transaction in question. 33 The duty cannot be cut down (in the absence of an express term in that retainer) by the fact that the solicitor, to the knowledge of the lender, acts also for the borrower: A solicitor who acts for two parties in the same transaction is not released from his obligations to the one by the fact that, in performing those obligations, he may be in breach of those obligations to the other. The solicitor who puts himself in the position in which he cannot advance the interests of one client without failing in his duty to another has only himself to blame In a situation where a solicitor who is acting for both the borrower and the lender misrepresents to the lender some fact which he knows, or must be taken to know, will or may affect the lender s decision to proceed with the loan, then he breaches his fiduciary duty to the lender. In general, a payment made by the solicitor to the vendor at a time when the solicitor Nocton v Lord Ashburton [1914] AC 932. See Kelly v Cooper [1993] AC 205, 215 per Lord Browne-Wilkinson. See Commonwealth Bank of Australia v Smith (1991) 102 ALR 453, 457. [1996] 2 All ER 801, 815g h.

10 226 Singapore Academy of Law Journal (1998) knows of a matter which ought to be reported to the lender will prima facie be in breach of trust. Equity will give the lender a remedy in respect of any loss which it has suffered as a result of its payment of funds in reliance on the misrepresentation, if necessary in the form of imposing a constructive trust on the monies to enforce the solicitor s obligation to return them to the lender. In contrast, where the solicitor knew nothing prior to receipt of the funds which ought to have led him to qualify the report on title submitted to the lender, no breach of trust occurs. To a significant extent, the impact of the Bristol and West case on the circumstances when a breach of trust is committed by a solicitor has since been reduced by the Court of Appeal s decision in another case involving the same building society, Bristol and West Building Society v Mothew, in which it allowed an appeal from Chadwick J. 35 In that case, the Court of Appeal emphasised the distinction between the situation where, on the one hand, the solicitor deliberately concealed from the lender the arrangements made by the borrower or consciously intended to mislead the borrower from that where, on the other hand, the provision of incorrect information by the solicitor must be taken to have been due to an oversight. In such a case, the solicitor s breach of duty is unconscious and his conduct ought not to be treated as involving a breach of trust or misapplication of trust monies. 36 As Millett LJ pointed out: 37 The defendant knew that he was a trustee of the money for the society; but he did not realise that he had misled the society and could not know that his authority to complete had determined (if indeed it had). He could not be bound to repay the money to the society so long as he was ignorant of the facts which had brought his authority to an end, for those are the facts which are alleged to have affected his conscience and subject him to an obligation to return the money to the society. Accordingly, the solicitor was not in breach of trust Causation of loss The second question is really one of causation of loss. Basing himself on the Privy Council s decision in Brickenden v London Loan and Savings Co 38, Chadwick J held, adopting a somewhat deterrent approach, that [1997] 2 WLR 435. Ibid, at 447F H per Millett LJ. The judgment contains an interesting discussion of the scope and concept of fiduciary duty. Ibid, at 454H 455A. [1934] 3 DLR 465.

11 10 S.Ac.L.J. Damages in Negligent Valuation Actions 227 where a lender has suffered as a result of its payment of funds in breach of trust by the solicitor, the question what the lender would have done if it had been told the true facts by the solicitor, in particular whether it would have altered its decision to proceed with the transaction, was not relevant. Thus, unlike the negligent valuer, solicitors are almost certainly liable for any losses due to subsequent market falls where, in breach of trust, they have made a misrepresentation to the mortgage lender. It is necessary here to refer to the important decision of the House of Lords in Target Holdings Ltd v Redferns, on which the solicitors in Bristol and West sought unsuccessfully to rely. The Target case involved an application for summary judgment. Target was a client of the defendant firm of solicitors. Target instructed Redferns to act for it in the provision of a loan as mortgagee of a commercial property to a proposed mortgagor. The proposed mortgagor also instructed Redferns and told Target that the property had been valued at 2 million. In fact, unknown to Target, the proposed mortgagor was paying only 775,000 for the property. Target gave Redferns over 1.5 million to be held on a bare trust and then released to the mortgagor once the property had been purchased and charges over the property executed by him in Target s favour. In admitted breach of trust, Redferns released most of the monies before the mortgagor had bought the property and given any charges. The property was thereafter in fact charged to Target, the mortgagor became insolvent and the property was sold by Target as mortgagee for only 500,000. The question of law which arose for decision was whether a trustee who committed a breach of trust was liable to compensate the beneficiary not only for losses caused by the breach but also for losses which the beneficiary would, in any event, have suffered even if there had been no such breach. In the Court of Appeal, it was held by a majority that Redferns breach of trust was a cause of Target s loss, even though the negligent valuation of the land could be described as the real cause of that loss and so the court awarded summary judgment against Redferns. But the House of Lords reversed the Court of Appeal s ruling, holding that, on the express assumption that the lender had sustained no compensatable loss (because the property had in fact subsequently been charged), Redferns were entitled to conditional leave to defend. 39 Just as in the South Australia case the House of Lords took the view that the Court of Appeal had failed to precede any consideration of the measure of damages by a consideration of what were the kinds of loss for which the lender was entitled to compensation, so too in Target the House of Lords took the view that the Court of Appeal had been wrong 39 As the trial judge, Warner J, had originally ordered.

12 228 Singapore Academy of Law Journal (1998) to concentrate on the equitable rules for the quantification of the compensation payable for a breach of trust without first considering whether the trustee in breach was under any liability at all to the beneficiary. 40 Although the common law rules of remoteness and causation did not apply, nevertheless there had to be some causal connection between the breach of trust and the loss to the trust estate for which compensation was recoverable. 41 The House of Lords held that to import into the trust in cases of the present kind an obligation to restore the trust fund once the transaction had been completed, as opposed to prior to completion of the underlying commercial transaction, would be entirely artificial. 42 In reaching this conclusion, Lord Browne-Wilkinson, with whose speech all the other members of the House of Lords agreed, distinguished the unreported decision of Hoffmann J in Alliance and Leicester Building Society v Edgestop Ltd (18 January 1991), relied on by the Court of Appeal in support of its stop the clock approach, on the ground that the court in that case had made a finding that, if the building society had known of the true facts, it would not have made the advance (one of the facts that had to be assumed in Target). 43 This is certainly a fine, if not tenuous, distinction. Lord Browne-Wilkinson also distinguished another decision relied on by the Court of Appeal, namely its decision in Bishopsgate Investment Management Ltd (in liquidation) v Maxwell (No. 2) 44, where the court did not consider it relevant to liability what would have happened if Mr Ian Maxwell had refused to sign the transfer of the property in breach of his fiduciary duties. 45 The reasoning in these passages in Target suggest that if the mortgage lender can prove that the loan would not have been made, a solicitor acting in breach of trust will, unlike the negligent valuer, still be liable for any losses arising from a subsequent market fall, despite the South Australia case. However, returning to Bristol and West, in that case Chadwick J was not prepared to give Target that effect: although there were difficulties in reconciling the Brickenden principle with the passages in question, the House of Lords could not be taken to have overruled Brickenden, to which its attention had not been drawn, by a side-wind. In cases where the breach of trust lay in the giving of a false warranty or representation At 433F. At 434F. At 436D F. At 439B D. [1994] 1 All ER 261. At 439D 440C.

13 10 S.Ac.L.J. Damages in Negligent Valuation Actions 229 for the purpose of obtaining the advance cheque, the Brickenden principle applied. It was only in the case where the breach of trust lay in paying over money in breach of instructions that it was necessary to hold, in the light of Target, that the question what the lender would have done if, in accordance with his instructions, the solicitor had asked for authority to proceed to completion, was a relevant question. It is clear, therefore, that the courts have taken a strong line against solicitors representing both the borrower and the mortgage lender in a transaction. Even in Target, where the solicitors won, they did so only on the narrow issue of causation where the only fault was a breach of the instructions on disbursement. And the decision is, with respect, open to some doubt in the light of Brickenden, which was not cited to the House of Lords and which is to be preferred. 4. POSSIBLE SOLUTIONS 4.1 Valuers In the case of a negligent valuer, short of some effective exclusion clause or other provision in his retainer, it is difficult to see how liability can be avoided. However, that does not mean that the liability cannot be reduced. In this regard, and leaving aside here questions of causation and remoteness and also the lender s duty to mitigate its loss (for example by the proper realisation of the security), the valuer s primary line of defence may well be to argue contributory negligence on the part of the lender. This allegation may take many forms, for example imprudent or inadequate lending criteria, awareness of other information which ought to have cast doubt on the accuracy of the valuation 46 or a failure to investigate adequately the borrower s financial position. 47 In probably exceptional cases, it may be that the valuer will be entitled to contribution by statute 48 from other professionals with whom he is sued. 4.2 Solicitors Similar considerations apply to the negligent solicitor. They might try to restrict their liability to mortgage lenders to the investigation of title or else make it clear to the borrower that all information will be passed on to the lender and then ensure that this occurs. They may also seek to rely on the defence of contributory negligence, although it is likely to be much less readily available than to a valuer, and to rely exceptionally on Eg at first instance in the BBL case [1995] QB 375. See HIT Finance v Lewis & Tucker Ltd [1993] 2 EGLR 231 per Wright J and Alliance & Leicester Building Society v Wheelers (unreported, 1997) per Carnwarth J. In England, under the Civil Liability (Contribution) Act 1978.

14 230 Singapore Academy of Law Journal (1998) the 1978 Act. It must be remembered, however, that contributory negligence is no defence to an allegation of breach of trust, giving the lender a legitimate tactical reason for making that allegation in an appropriate case. The only complete solution may therefore be for solicitors no longer to act for both sides in a mortgage lending transaction but this too may be impractical and would certainly have costs implications for the borrower. STUART ISAACS QC* * 4 5 Gray s Inn Square, London.