The High Court has held that, where a defendant valuer had already been found liable for damages caused by their overvaluation of a number of properties, the claimant bank lender was not entitled to compound interest as damages which had been claimed on the basis of its lost opportunity to use the money it had lent to make alternative loans. Applying Swingcastle, Behrens J ruled that the burden was on the claimant to show that it would have made alternative loans and that the claimant had “not come within a measurable distance of succeeding in that task.” Importantly, Behrens J found that the claimant was able to fulfil all of the acceptable mortgage applications it was receiving in the relevant period and was therefore able to distinguish the case from Parabola Investments where it was held that there would have been profitable alternative trading. 


Liability had already been decided in this case before Behrens J in the High Court, with an assessment of damages now being necessary. Damages were to be assessed in accordance with the House of Lords' decision in Swingcastle Ltd v Alistair Gibson (a firm) (1991), i.e. the amount loaned added to the cost of funding minus both the sale price of the property and any repayments actually made by the borrower. This formula was not contentious, however the current dispute was in relation to the interest payable over and above these sums. The claimant averred that interest as damages should be assessed on a compound basis at the 3 month LIBOR rate from the date of the advance of the loan until the date of each property’s sale, minus any actual repayments in the quarter they were made. In addition, simple interest under section 35A of the Senior Courts Act 1981 was claimed at LIBOR plus 1% on all damages from the date of each property’s sale until judgment. The defendant, on the other hand, contended that there should be no award of interest as damages at all and that the claimant should be entitled to simple interest only under section 35A of the Senior Courts Act 1981 at LIBOR from the date of the cause of action until judgment, with the date of the cause of action being the date of default as opposed to the date of the loan. The defendant contended that this statutory interest should be limited to LIBOR only as the cost of borrowing was at the rate of LIBOR. 

In a claim that was otherwise worth c.£1.65 million, the difference in the parties’ position was very significant with the claimant’s position being that the total claim was just under £3.4 million and the defendant’s position being that the total claim was just under £1.85 million. 


Behrens J considered three leading cases of relevance, being Swingcastle Ltd v Alistair Gibson (a firm)(1991), Nykredit v Edward Erdman No 2 (1997) and Sempra Metals v IRC (2008) when deciding on the interest as damages and also quoted Grant & Tomlinson on Lender Claims (2010) noting that “…the lender will have to show that there was an unsatisfied demand for loans from persons meeting its lending criteria. This may be unlikely, particularly given the profligate rate of lending at the time which is relevant to most lender claims.” 

Whilst the claimant argued that they would have entered into alternative loans with other borrowers on the same or similar rates to the loans in question, Behrens J agreed with the defendant that there was no evidence of a pool of prospective borrowers that the claimant could not satisfy. The claim for interest as damages therefore failed. 

The other interest claim was for statutory interest on damages. Whilst this is at the discretion of the court, the general convention is that LIBOR plus 1% will be used. Behrens J held that a rate of LIBOR plus 0.5% should be ordered from the date of default. With LIBOR being at such a low rate since 2009, increasing this by 1% was thought too high and, in the absence of worked examples, 0.5% was chosen.


This judgment will be welcomed by valuers and their insurers. It re-affirms that in order to receive compound interest as damages from the court in respect of interest that the bank lender might have earned on alternative loans, bank lenders need to show both that alternative lending would have been made and, crucially, that the alternative lending could not happen as a result of the loan(s) in question going ahead. Valuers will, therefore, want to continue to adopt a robust stance in such claims by putting claimant lenders to proof by pressing for full records of credible loan applications they have been unable to fulfil in order for the court to consider their claims for compound interest as damages. 

Further reading: 

Mortgage Express v Countrywide Surveyors Ltd [2016] EWHC 1830 (Ch)

Swingcastle Ltd v Alistair Gibson (a firm) [1991] 2 AC 223

Nykredit v Edward Erdman No 2 [1997] 1 WLR 1627

Sempra Metals v IRC [2008] 1 AC 561

Parabola Investments v Browallia Ltd [2011] QB 477