Mortgage Corporation v Lambert & Co & Thomas Stanbury (2000)
In considering the time at which a lender was to be imputed to have knowledge of negligent overvaluation of a property for the purposes of s.14A Limitation Act 1980, the question was the time at which it would have been reasonable for a prudent lender to have sought a retrospective valuation of the property and, on the facts of the case, there was no evidence that that time should have been before the lender obtained possession of the property.
Defendant's appeal from the order of Mr David Oliver QC made 19 July 1999 on the hearing of a preliminary issue that, under s.14A Limitation Act 1980, the claim for damages for professional negligence was not statute-barred. On 30 April 1990 the second defendant (a partner in the first defendant firm) produced a written report and valuation in respect of a property for the purposes of a mortgage advance by the claimant mortgagee ('MC'). The report valued the property at #250,000 as was, and at #275,000 upon completion of certain works that were being carried out. On or about 25 June 1990 MC advanced #176,160 to the mortgagors. From the outset, the mortgagors failed to make payments due, although, against a background of possession proceedings and suspended warrants for eviction, they did make sporadic payments on account of arrears, the first of which was on 5 October 1990, the last on 5 June 1995. Total sums actually paid amounted to just over #104,000. In connection with anticipated eviction MC obtained status reports from debt-collection agents which variously valued the property at ranges from #275,000 on 31 December 1991 to #150,000 in June 1993. In April 1996, other valuers appointed by MC submitted a retrospective valuation for April 1990 of #150,000. Eventually MC obtained possession and realised its security by sale. A shortfall in the debt remained and on 15 October 1996 MC commenced proceedings against the valuers alleging negligent overvaluation and that but for the overvaluation MC would not have made the advance it had. It was common ground that the six-year contractual limitation period had expired before issue of the writ. MC contended that it could rely on a claim in tort and that, in respect of that claim, the cause of action had not arisen until MC had sustained loss. Alternatively, it was contended that: (i) the facts relevant to a cause of action were not known when the cause of action accrued; (ii) the special time limit in s.14A of the Act applied; and (iii) the starting date for reckoning the period of limitation under s.14A(4)(b) was a date after 15 October 1993 (the date three years before issue of the writ). The judge had held that but for s.14A MC's claim in tort would have been statute-barred, but the effect of s.14A was that the writ had been issued in time.
(1) By the date of sale of the property MC knew that it had suffered damage which was sufficiently serious to justify proceedings. But it did not follow from the fact that MC was unable to quantify its loss until after the sale, that the starting date for reckoning the period of limitation under s.14A(4)(b) was postponed to the date of sale.
(2) The relevant question under s.14A(6)(a) and s.14A(7) was not whether (or when) MC could quantify its damage but whether (and when) MC had knowledge of "such facts about the damage" as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify instituting proceedings. A mortgagee who, following a mortgagor's default, was taking steps to enforce its security, knew that there was likely to be a substantial shortfall and that the mortgagor's covenant was probably useless, would be unable to say that it did not have knowledge "of the material facts about the damage" for the purposes of subsections (6)(a) and (7).
(3) The damage was said to have been attributable to the valuation in April 1990 being a gross overvaluation. The relevant question was not "when did (MC) have knowledge that the valuation was negligent" (see s.14A(9)) but "when did (MC) have knowledge that the true value of the property as at 30 April 1990 was substantially less than the value which had been attributed to it by the valuers".
(4) The answers to both relevant questions under points (2) and (3) above were not determined solely by the actual knowledge of MC but included knowledge imputed to MC under s.14A(10): knowledge which (MC) might reasonably have been expected to have acquired from facts it could have ascertained, including facts which it could have ascertained with appropriate expert advice which it was reasonable for it to have sought.
(5) Where relevant knowledge included a value of the property the enquiry might have been whether, and if so when, in the light of what MC knew, would it have been reasonable for it to have sought expert advice as to the historic or current value of the property.
(6) The relevant question was as to the state of MC's actual or imputed knowledge prior to 15 October 1993. Unless the starting date for reckoning the limitation period under s.14A(5) was a date before 15 October 1993, MC's writ would have been issued in time. Without a retrospective valuation in the present case there would have been no material on which MC could have had the requisite knowledge. If there was nothing that ought to have led MC to have obtained a retrospective valuation before 15 October 1993 there was no basis upon which to impute to MC the knowledge that it would have acquired had such a valuation been carried out.
(7) Although the estimates of value given by the debt-collection agents (which could not be explained by a general drop in the market) might have put a prudent mortgagee on enquiry as to whether the original valuation had been excessive, the real question was whether it would have been reasonable for such a mortgagee to have obtained a retrospective valuation at that stage. On that question there had been no evidence before the judge. By June 1993 MC had obtained a possession order, which it was actively seeking to enforce. There was no evidence that in such a situation a prudent mortgagee would have taken the step of obtaining a retrospective valuation, the only basis for which would be to found a claim against the valuers. It was not self-evident that a prudent mortgagee would not have acted reasonably in the circumstances if it had decided to have waited until it had obtained possession before instructing valuers.
(8) In the absence of evidence as to the need for a mortgagee in the position of MC to have instructed valuers to make a retrospective valuation in this case before possession had been obtained, knowledge of overvaluation could not be imputed to MC before 15 October 1993.
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