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Tiuta International Ltd (In Liquidation) (Respondent) v De Villiers Surveyors Ltd (Appellant) [2017] UKSC 77, 29 November 2017

The Supreme Court considered the proper approach to the quantum of damages in a professional negligence claim where the lender had entered into a secured loan facility agreement in reliance on the negligent valuation to refinance existing lending made by the lender against the same security. Reversing the Court of Appeal’s decision, the Supreme Court concluded that where a negligent valuation is provided for refinance purposes, the quantum of damages that lenders can claim is limited to the amount of any additional lending and cannot include damage flowing from the original loan that was repaid as a consequence of the refinance.


The claimant lender, Tiuta, entered into a loan facility agreement to be secured over a residential development, in reliance on a valuation carried out by the defendant valuer, De Villiers. Before the loan expired, the lender entered into a second loan facility agreement, on the basis of a further valuation by the same valuer. The majority of the second loan was to be used to repay the first loan and an additional sum was to be lent to finance the completion of the development. A fresh charge was taken over the development as security for the second loan. The term of the second loan expired with the full balance outstanding; there was a shortfall when the lender enforced its security.

The lender issued proceedings against the valuer, claiming that the second valuation had been negligent. There was no allegation of negligence in respect of the first valuation. The valuer applied for summary judgment contending that they could only be liable for damage relating to any new funds advanced under the second loan and not the sum that was used to refinance the first loan.

Summary judgment was granted by the High Court in favour of the valuer. The court’s conclusion was that, had the valuer not been negligent in its second valuation, the lender would not have entered into the second loan, but they would still have entered into the first and would have suffered the consequences of that. Accordingly, the lender’s loss was limited to the additional funds advanced under the second facility.

The Court of Appeal overturned the High Court’s decision, and held instead that the valuer was liable to the lender for the entire loss resulting from the second loan, including the funds used to repay the first loan.

The Supreme Court’s decision

In its unanimous decision of 29 November 2017 in favour of the valuer, the Supreme Court disagreed with the Court of Appeal and restored the High Court’s decision. The Supreme Court established that the facts of the case turned on ordinary principles of the law of damages, where “the basic measure of damages is that which is required to restore the claimant as nearly as possible to the position that he would have been in if he had not sustained the wrong”.

Reversing the Court of Appeal’s decision, it was held that “it does not follow from the fact that the advance under the second facility was applied in discharge of the advances under the first, that the court is obliged to ignore the fact that the lender would have lost the advances under the first facility in any event”. Had the lender not made a second loan, it would not have lost the additional funds advanced under that loan, but it would have suffered damage having made the first loan (for which there was no allegation of negligence against the valuer). Therefore, the monies from the second loan used to repay the first loan were not recoverable.

In reaching that conclusion, the court applied the “basic comparison” approach in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] UKHL 53 to assess the lender’s losses. Following this approach, where a claimant lends money, and but for a negligent valuation would not have done so, the basic comparison is typically between: (a) the amount of money lent by the claimant plus interest, and (b) the value of the rights acquired under the loan agreement plus the true value of the overvalued property. The basic comparison assumed that, but for the negligent valuation, the claimant would still have had the money which the negligent valuation caused them to lend. In this case, however, the lender would not have had that money, because they had already lent it under the first loan.

The lender argued that the use of the monies advanced under the second loan to discharge the indebtedness under the first was a collateral benefit which needed not be taken into account when calculating their loss. This contention was rejected by the court. Generally, where a claimant has received some benefit attributable to events that caused their loss, it must be taken into account when assessing damages unless the benefit is collateral, i.e. arising independently of the circumstances that gave rise to the loss.

The court held that the discharge of the existing indebtedness out of the advance made under the second loan did not amount to a collateral benefit. This was for two reasons: (a) its effect was neutral and so did not confer a benefit on the lender; and (b) even if there were a benefit arising from the discharge of the indebtedness under the first loan, it was not collateral as the discharge was actually required by the terms of the second loan.

Relevance for lenders

This judgment provides clarification on the legal position where the same lender has entered into successive loan facility agreements on the basis of valuations of security by the same valuers. In cases where the lender has structured secured lending so as to pay off the existing indebtedness owed to it under a previous loan, the recoverable loss is likely to be limited to the amount of any additional lending.

The court emphasised, however, that the decision was sensitive to the facts, in particular the assumption that the first valuation had not been negligent. It concluded that “different considerations might arise were it to be alleged that the valuers were negligent in relation to both facilities”. The court’s decision leaves some uncertainty with regard to a scenario where the valuer who prepares the first valuation is also negligent, or where the valuer in the refinance is different from the original loan facility.

Obiter dicta in this judgment suggest that, had the valuers acted negligently in respect of the first facility, “the lenders" loss in relation to the second facility might at least arguably include the loss attributable to the extinction of that liability which resulted from the financing of the existing indebtedness”. It is therefore possible to assume that, where both valuations are negligent, the lender could potentially have a claim for the lost opportunity to sue in respect of losses caused by the first negligent valuation.

Dunfermline Building Society v CBRE Ltd [2017] EWHC 2745 (Ch), 14 November 2017

The High Court had to decide, in a professional negligence claim against a valuer, whether a valuation of a development site fell within the permissible margin of error allowed to a reasonable competent valuer (“the bracket”).


A building society brought proceedings against a valuer alleging it had negligently overvalued a development site and was in breach of an implied contractual term to exercise reasonable care and skill. The building society had instructed the valuer to assess the market value of the property, so as to determine whether it would provide suitable and adequate security in respect of loan facilities to be provided to the purchaser who intended to acquire and develop the site.

The valuer carried out a valuation appraisal using the residual value method of valuation and reported a market value of £17.5 million in April 2007. Contracts were exchanged for the purchase of the property after the valuation date, but before the date of the valuation report. In reliance on the valuation, the building society advanced over £8.7 million to the purchaser, who subsequently defaulted on the loan agreement. Receivers were appointed and the property was sold for £3.75 million in February 2012.

The building society claimed that the market value of the property at the valuation date was £15 million.

Therefore, it was alleged that the valuer had overstated the property’s market value by £2.5 million (a 16.66% margin of error), which was outside the margin of error permitted to a reasonably competent valuer. The building society argued that it had relied on the valuer’s report and, but for the valuer’s negligence and breach of duty, it would not have entered into the loan agreement. The valuer contended that the building society had not relied upon the report, as the loan had been approved before it was instructed.


The claim was dismissed. The court applied the approach to the determination of a professional negligence claim against a valuer set out in Capita Alternative Fund Services (Guernsey) Ltd v Drivers Jonas (a firm) [2011] EWHC 2336 (Comm). It therefore considered that, to establish that a valuation is negligent, the claimant must normally show that the valuer fell in some way below the standards to be expected of a reasonably competent professional, and that the valuation fell outside the permissible margin of error within which a reasonably competent valuer could have valued the asset (“the bracket”).

The court concluded that the property’s market value on the valuation date was about £16.2 million (and not £15 million as alleged by the Claimant), and that the appropriate bracket in this case was 15%. The court reached this conclusion considering that a focus on the inputs in a residual appraisal was merely one way of determining the overall value. It underlined that residual appraisals were “very complex exercises” and “very sensitive to their inputs”, some of which could not be determined objectively.

The court further considered that the uniqueness of the development and the property made the comparison method of valuation of only limited utility. As there were no comparable properties, save to the extent that it was appropriate to take into account purchase offers for the property, the comparison method was of no assistance in this case.

In respect of the valuer’s argument that the building society had not relied on its report in lending to the purchaser, the court was satisfied that any loan approval given prior to instructing the valuer had only been given in principle and was subject to the property’s market valuation report. It was held that the building society had in fact relied on the valuer’s report, which it believed to be correct, and played a real and substantial part in the lending decision.

The major area of disagreement of the experts instructed by both parties related to whether the comparable evidence should be adjusted for movement in the residential market. The court reasoned that, considering the relevant property market had continued to move upwards in the year to the valuation date, a reasonably competent valuer would have adjusted the comparable evidence upwards for market movement. It therefore found in favour of the valuer in deciding that it was right in this case to make such an adjustment when determining the £ per square foot.

The court decided that the valuer’s valuation of £17.5 million was within 15% of what the court determined to be the property’s market value on the valuation date. Consequently, despite the fact that there were flaws in the valuer’s assessment, the court dismissed the claim by applying the approach to liability discussed in Capita.


The High Court has reasserted in this decision the correct approach to the determination of a professional negligence claim against a valuer. To succeed in such a claim, the claimant will need to demonstrate not only that the valuer’s valuation fell outside the range of valuations which a reasonably competent valuer could reach, but also that the valuer somehow fell below the standards of a reasonably competent professional.

In addition, the decision makes clear that in cases where the relevant property market oscillates to a noticeable extent before the valuation date, a reasonably competent valuer would be expected to adjust the comparable evidence for market movement accordingly when assessing the £ per square foot.

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