Summary: In Tiuta International Ltd (in liquidation) v De Villiers Surveyors Ltd, the Court of Appeal held that a lender can recover all of its loss on a refinance loan from a negligent valuer.

Facts of the case

The Respondent valuer (De Villiers) had been instructed in February 2011 by the Appellant lender (Tiuta) to value a residential property in Sunningdale, Berkshire. In reliance on that valuation, Tiuta provided a loan facility to its borrower, advancing just over £2.5 million which was secured against the property.

Later that year, the borrower sought an increase in the facility. Tiuta instructed De Villiers to prepare a fresh valuation of the property, which it did in December 2011. On the basis of this higher valuation, Tiuta agreed to provide additional funds and did so by refinancing the facility rather than simply varying the original facility agreement.

A fresh (second) loan facility was therefore entered into. Part of the funds advanced under this facility were used to redeem the first loan in full, and the remainder was made available to the borrower to draw down from time to time.

When the term of the second facility expired, the loan had not been repaid. Tiuta appointed receivers to enforce its security however the sale proceeds were insufficient to cover the outstanding loan – there was a shortfall of around £700,000.

Tiuta brought a claim against De Villiers on the basis that the December valuation had negligently overvalued the property which had caused them to suffer a loss (the shortfall) they would otherwise not have incurred.

Summary Judgment

De Villiers applied for summary judgment on the basis that the quantum of Tiuta’s claim should be limited to the amount of the “top up” (just under £300,000) advanced under the second loan facility. It was assumed for the purposes of the application that the Decemeber valuation had been negligent.

The court applied the usual “but for” test and found that the only loss attributable to the negligent December valuation was the top up advanced pursuant to the second loan facility. This decision was based on the court’s conclusion that the original loan facility would have been in place in any event.


Tiuta appealed and the majority the Court of Appeal disagreed with the lower court on the basis it had misapplied the “but for” test.

Central to argument in both courts was the decision in Preferred Mortgages Ltd v Bradford & Bingley Estate Agencies Ltd [2002] in which two loans were provided in reliance upon two negligent valuations. The second loan refinanced the first loan. A claim to recover loss caused by the first negligent over-valuation was dismissed on the grounds that the refinancing had discharged the first loan in full and, therefore, no loss flowed from that valuation.

The Court of Appeal in this case concluded that in order to determine what loss was attributable to De Villiers’ over-valuation, it was necessary to identify the exact nature of the transaction and the part De Villiers played in it.

The starting point was that Tiuta relied upon the December valuation and was, resultantly, willing to enter into a new loan facility. The fact that part of this facility was used to repay the original loan was of no relevance to De Villiers. The lower court had misapplied the “but for test” by failing to acknowledge that the loan under the second facility effectively released De Villiers from any potential liability in respect of the first February valuation. If the second facility had been provided by a lender of another identity there would have been no question that De Villiers was liable for the full extent of the loss rather than merely the “top up” funds. The second loan facility had to be treated separately and the loss calculated by reference to the difference between the value of the loan and the value of the security.


De Villiers knew that Tiuta would rely upon its valuation. If the valuation had not been negligent, Tiuta would not have entered into the transaction and suffered loss. De Villiers was liable for the whole loss flowing from the December valuation.

This decision will be welcomed by lenders after the Preferred Mortgages case and will provide much needed authority on this contentious issue.