Webb Resolutions Ltd v E.Surv Ltd [2012] EWHC 3653 (TCC)

Webb sought damages from E.Surv, a firm of valuers, in respect of the alleged negligent valuation of two properties for mortgage purposes. Webb had taken an assignment of the claims from GMAC, the original mortgage provider.

In the first case, the valuer valued the property at the asking price of £277,995. The judge found that the true value was £204,658. He considered that this was a routine valuation of a residential flat for which there was ample comparable evidence and, as such, a margin of error of just 5% was appropriate. The difference between the two valuations was therefore outside of this margin and was considered negligent. The judge was also in no doubt that the valuer had been negligent in his conduct of the valuation, having failed to inspect the property internally despite certifying that an inspection had been carried out in accordance with RICS guidance. He had essentially derived a valuation to justify the asking price of the property.

In the second case, the property was valued at £295,000. The judge found that the true value was £260,000. Again, the judge applied a margin of error of 5% and on that basis the valuation was negligent. Once more, the judge was critical of the valuer’s approach, which was to make the valuation fit the asking price.

In both cases the valuers alleged that GMAC was contributorily negligent in its lending processes and that damages should be reduced accordingly. The valuers were particularly critical of the highly automated decision-making process in place at GMAC, which allowed for little discretion or human judgement and the high loan to value ratios of 85% and 95% respectively, which had applied to the loans. The judge held that the correct standard to be applied in assessing GMAC’s own conduct was the standard of a “reasonable centralised lender” rather than that of a traditional bank. Applying that standard, the judge considered that the allegations of contributory negligence were not made out in the first case, but in the second case he applied a discount to the claimant’s damages of 50%. In particular, he considered that a 95% loan to value ratio was not reasonable at the time and that GMAC had been negligent in its failure to carry out basic checks which would have revealed the borrower’s history of credit defaults.