Residential valuers will breathe a sigh of relief to hear that the Courts have just dismissed another Merrett v Babb personal liability claim against a valuer. The judgment in Mavis Russell v (1) Walker & Co (2) Robert Chisnall & Others was handed down on 25 July in Southend County Court. The claimant, relying on legal principles in the 2001 Merrett v Babb case, had pursued the valuer, Mr Chisnall, personally. This was after Walker & Company Surveyors Ltd, the firm for whom Mr Chisnall was working when he carried out the 2007 Homebuyers Report for the claimant, became insolvent. District Judge Mulnew dismissed the claim, rejecting the claimant’s case that Mr Chisnall could be held personally liable to her even though he was an employee at Walker & Co when the advice was provided.
The District Judge stressed that the facts of the matter could not be reconciled with the 2001 Merrett v Babb case. In Merrett v Babb, the claimant purchaser, who was not wealthy, had bought a low value residential property which she alleged had been overvalued by Mr Babb’s firm. The Court held that the claimant was entitled to pursue Mr Babb, the valuer, personally, after his firm became insolvent. Mr Babb had to compensate the claimant personally from losses arising from his negligence. A major concern for surveyors was the fact that Court made its decision in spite of the claimant purchaser never having met Mr Babb – along with the fact that the fee for the report was paid to Mr Babb’s employer rather than to Mr Babb personally. Public policy was, however, a major contributor to the Court’s decision as the claimant had no other recourse other than pursuing Mr Babb personally.
This is the second rejection of a case based on Merrett v Babb principles this year. In February, a similar decision was handed down in Matthews v Ashdown Lyons & Maldoom. This case related to an allegedly negligent valuation of a Clapham property. Mr Maldoom had provided the valuation work in 2008 whilst working at Ashdown Lyons, which subsequently went into administration in 2009. The claimant brought proceedings against Mr Maldoom personally, accusing him of overvaluing the property. As with the recent Russell v (1) Walker & Co (2) Robert Chisnall case, the Court found that the facts were distinguishable and rejected the claimant’s arguments that Mr Maldoom was personally liable. The Court recognised that the decision in Merrett v Babb had been made with very clear public policy issues in mind. Of key importance in Merrett v Babb was that the property was low value and the claimant was of “modest means”.
In such circumstances, it was held reasonably foreseeable that the claimant would not obtain a further valuation report and would instead rely upon the valuation produced for the lender.
In contrast, in the Matthews case the Court found that, on an objective assessment of the facts, the valuer had not done anything to assume a personal responsibility to the claimant. Instead, the claimant was of reasonable means (the value of property being £750,000); had appointed a separate surveyor for his own benefit; and, crucially, still had causes of action against Ashdown Lyons in contract and negligence (even if these were less valuable in light of Ashdown’s insolvency). The Court also stressed the importance of the fact that Ashdown Lyons was a limited company – ie a separate legal entity – whereas Merrett v Babb involved a firm (of which Mr Babb was the sole director). The Court was very clear that in these circumstances there was not sufficient justification on grounds of policy to impose a duty of care on the individual valuer.
In light of the hardships facing surveyors in the post-recession years, a considerable number of firms have been forced to cease trading and there has been an increase in claims brought personally against individual valuers. News of this second success story this year, and the rolling back of the Merrett v Babb principles, will, therefore, be welcomed.