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E.Surv Ltd v Goldsmith Williams Solicitors [2014]

June 20, 2014

In E.Surv Ltd v Goldsmith Williams Solicitors [2014] EWHC 1104 (Ch) the claim concerned proceedings brought under the Civil Liability (Contribution) Act 1978 by valuers who valued a property against solicitors that acted for the lender in relation to a remortgage by the borrower.

The Defendant Solicitors were instructed to act on a mortgage of a property, acting for both lender and client in accordance with the Council of Mortgage Lenders handbook (CML).

The client/borrower subsequently failed to make repayments on its mortgage whereupon the Mortgagee, as a consequence, incurred loss.

The Surveyor, instructed by the Mortgagee, had originally valued the property at £725,000 for mortgage purposes. It however transpired that the borrower had only recently bought the property, less than six months before. The CML handbook required ownership to be for more than 6 months and therefore this would be a matter to be reported to the Lender, the Borrower had informed the surveyor that he purchased the property for £600,000.When the Solicitors carried out their searches in accordance with the transaction, it transpired that the purchase price at the time the Borrower originally bought the property, less than 6 months before, had been £390,000.

The Lender, because of the loss suffered by them, sued the Surveyors. It was agreed to settle the matter for £200,000. Consequently, the Surveyors sued the Solicitors to recoup part of the settlement amount paid to the Lender.

In the Surveyors case against the Solicitors, the Surveyors cited that the Solicitors did not act in accordance with the Lenders instructions, thus being in breach of their contract with the Lender under the CML Handbook, as they should have let the Surveyors know, when they investigated title, anything revealed which would have affected the valuation they had given.

In response the Solicitors said that the CML Handbook excluded any duty they might have in that regard as the particular clause referred to, being 4.1.1.1, under the heading of describing the property valued by the Surveyor, did not fall in the same category as their duty to report to the Lender on matters of title which would adversely affect the property and its valuation, not on matters relating to security.

In his Judgment, Judge Davies said that the wording in the CML Handbook did not exclude the Solicitors from carrying out their obligations to the Lender in respect thereof. He indicated it was their remit to report to the Lender not only on all title matters but also on matters relating to any impact on the valuation of the property gathered from information they had seen in the title documentation and, that, if the Surveyor had been informed of the purchase price of £390,000 he would have had the opportunity to reassess his valuation of that figure.

The High Court therefore found the Solicitors jointly liable with the Surveyors and ordered them to pay half of the £200,000 settlement amount to the Surveyors.