LONDON, July 1, 2016 /PRNewswire/ --
Decision Changes Long-Held Legal Precedent of the "But For" Test
The Court of Appeal today issued a landmark judgment in a professional negligence case that will have wide-ranging ramifications across the lending industry. The decision also sets a new precedent, in that it changes the legal principle of causation.
Banks, building societies, asset based lenders and surveyors will be affected by the eagerly-awaited decision that means lenders can recover all of their losses from a negligent valuer arising out of a refinance loan. The effect of the case goes well beyond both the lending and valuation industries as it refines the way in which the Court will apply the long established "but for" test to assess what loss flows from a breach.
Solicitors Rosling King (RK) acted for the Liquidators of bridging lender, Tiuta International Limited, against De Villiers Surveyors Limited in a case involving the valuation of a property development in Sunningdale, Berkshire.
Tiuta sought to recover from De Villiers the £890,500 loss it suffered arising out of a refinance loan, claiming the valuation report significantly and negligently overvalued the property.
In an earlier hearing in the Chancery Division, the Court ruled that Tiuta's loss should be limited to the amount lost in 'topping up' the original loan (c£272,700).
However, the Court of Appeal has now overturned that decision.
Georgina Squire, head of Dispute Resolution at Rosling King, said: "This is a resounding win for lenders on an important point of law. Not only does it have wide ramifications for claims against professional advisers, but it also has a much wider impact as it changes the way in which parties have to assess their loss under the "but for" test."
"Lenders will welcome this decision as it settles a contentious issue in relation to how much of their loss they can recover having refinanced. They can now be certain that they may recover their full loss in the event the valuation was negligent, not being restricted to the amount by which the refinance exceeds the original loan."
De Villiers Surveyors were instructed by Tiuta to value the property in Sunningdale, which was a former nursing home undergoing substantial redevelopment into four three storey mid-terraced houses.
In reliance upon De Villiers' valuation report, Tiuta advanced funds to its borrower.
The borrower later approached Tiuta to request an increase in the loan facility. De Villiers was instructed to prepare a second valuation report, in reliance upon which Tiuta redeemed the existing loan and advanced further funds to the borrower by way of a refinance. It is the refinance loan that is the subject of the claim.
About Rosling King
RK LLP is a UK-based law firm specialising in serving the needs of financial institutions and private equity, real estate and construction clients. http://www.rkllp.com
SOURCE Rosling King LLP