The English Court of Appeal recently made a significant ruling concerning the level of damages which lenders who advance monies on foot of negligent valuations can recover.
The Court of Appeal reversed a High Court decision in favour of a defendant valuer and found that a lender who had advanced monies on foot of an allegedly negligent valuation could recover the full amount of that loan (some £2.8 million), notwithstanding that a significant proportion of it (£2.6 million) was used to pay off a pre-existing loan made by the same lender to the borrower. The valuer had argued that as that portion of the lender’s loss was not caused by the allegedly negligent valuation, the lender could not recover it.
The Court of Appeal disagreed however, finding that the valuer accepted instructions to provide the valuation knowing that it would be relied upon by the lender in deciding whether to lend the monies to the borrower. How that loan was to be structured or the purpose to which it was to be put was of no interest or relevance to the valuer. The transaction was entirely separate from the earlier loan advanced.
The case is a significant victory for lenders and bad news for valuers, and indeed other professionals who are sued by lenders who sought their advice.
Whilst of no effect in this jurisdiction, an Irish Court would no doubt carefully consider the decision should a similar action come before it. Such actions are rare here, with the most recent decision dating back to 2013.
The decision is under appeal to the UK Supreme Court. In the meantime, it is incumbent on valuers providing valuations to lenders that they limit their liability in respect of the re-financing of loans as best they can.
Lenders will be able to recover significantly larger amounts when suing over negligent property valuations after a landmark court ruling that is forecast to have wide implications for professional advisers.