The High Court finds valuers liable for wide range of consequential losses flowing from negligent overstatement of expected rental income - Emmet Thomas Scullion v Bank of Scotland Plc (T/A Colleys) [08.10.10]

This case concerned the purchase of a buy-to-let property (“the Property”) in October 2002. A firm of valuers, Colleys, were engaged to value the Property on behalf of the mortgage lender. Their valuation put the capital value of the Property at £353,000 and the rental income at £2,000 per calendar month.

The Claimant, Mr Scullion, was the purchaser of the Property; although he went on to sell it for £270,000 in May 2006, after being unable to let it for enough to meet his mortgage payments. He subsequently brought a negligence claim against Colleys.

In an earlier judgment handed down in March 2010, the Judge had already found that Colleys owed and breached duties of care to Mr Scullion. He found that the capital value of the Property should have been £300,000, with a rental income of £1,100 per calendar month. Accordingly, the Judge held the Defendant negligent for overstating both the capital value and expected rental income.

In this judgment, the Judge considered what losses were recoverable due to the breach of duties.


With regard to the overstatement of the Property’s market value, the Judge found that Mr Scullion could only recover the difference between the price actually paid (£299,800) and its true value. As Mr Scullion had ultimately paid just £200 less than its true value, he had suffered no loss. Applying SAAMCO [1997], the Judge also rejected Mr Scullion’s claim in respect of the £30,000 fall in the value of the Property due to market movements between the purchase and re-sale in 2006.

The Judge then proceeded to find that Mr Scullion was entitled to damages flowing from the negligent overstatement of the anticipated rental income. As Mr Scullion had a mortgage, he had committed to periodic payments to the lender and other outgoings that a landlord would usually expect to pay and, as he had been planning to cover these expenses from rental income, he was entitled to recover the shortfall between actual rental receipts and the rental income predicted in the valuation.

The Judge further held that Mr Scullion was entitled to recover various costs of ownership, such as service charges, and charges attributable to cash-flow difficulties, including direct debit rejection fees, monthly arrears administration charges and legal fees, which he would not have faced had the Property been generating the expected rental income. These costs contributed significantly to the damages of £72,234.54 plus interest awarded.


This case has extended what is recoverable in relation to valuers’ negligence claims beyond the simple diminution in rental income. A claimant in such a case can now expect to recover many associated costs of ownership.

With the current housing market still uncertain, and with a large claims market already in existence for the 2007/2008 sub-prime losses, this case could open up a new swathe of litigation against valuers, as investors may see this decision as an alternative route to recoup losses. It is important to emphasise that the court considered in detail the losses that could flow from the negligent valuation and we would expect the court would not award increased damages due to, for example, a fall in the rental market, even if the valuation was negligent.

Insurers should be aware of the additional liabilities this places on their insured valuers. Both the number of claims and quantum (as the amount awarded was over double the rental diminution value) may increase. Increased premiums for valuers seeking professional indemnity insurance are possible, as it will be hard to exclude this risk. Indeed, it may make such cover uneconomical or impossible to find, in particular for sole practitioners or small firms.

Leave to appeal has been granted on both the extension of duty and consequential loss aspects of this decision.