The decision is likely to have significant implications for professional advisers.
The decision in Tiuta International Ltd (in liquidation) v De Villiers Chartered Surveyors Ltd  EWCA Civ 661 (1 July 2016) has helped clarify the “but for” test in situations where a lender provides security on the strength of a negligent valuation and then later provides further finance on a subsequent negligent valuation.
The Court of Appeal allowed the appeal by bridging loan specialist Tuita International against the dismissal of their claim for Summary Judgment. Tuita alleged that De Villiers surveyors’ two valuations had substantially overvalued a complex which they were financing, where Tuita lent in reliance on those valuations.
A key to recovering compensation is to prove the surveyor’s negligence caused the claimant to suffer loss. “Causation” must be shown, i.e. “but for” the defendant’s lack of care, the claimant would not have suffered any loss
Calculating the loss involves comparing:
-what the claimant’s position would have been “but for” the defendant’s negligence
-the claimant’s actual position.
Originally, applying the “but for” test, the High Court dismissed Tuita’s application for summary judgment, deciding that the lender could only recover the amount involved in the second round of lending. Under that common approach defendants in negligence cases can divide up elements of a deal and limit their liability. The judge decided that any loss attributable to the first loan was not caused by any negligence in the second valuation
The Court of Appeal took a different view in applying the “but for” test and allowed the appeal. The Appeal judges held that the test should be applied in the context of the second loan being entirely independent from the first loan. They concluded that, assuming De Villiers’ second valuation was negligent, it would be liable for any losses arising from the whole of the two-stage loan agreement, based on that valuation.
Paul Sykes is a Director in our Disputes Management department. For further information regarding professional negligence and business disputes contact Paul.Sykes@lf-dt.com
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