The recent Capita -v- Drivers Jonas decision seems to have been largely missed by the mortgage trade press despite receiving some coverage in valuation related publications. However, in our view, the decision (unless overturned on appeal) has significant ramifications for lenders (residential and commercial) as well as for valuers.
The claim related to a substantial commercial property and the Court found that there was an over valuation by £18m, ordering that Drivers Jonas pay this sum by way of damages, plus interest. In ruling that the valuation of the property was negligent, Mr Justice Eder dismissed the Defendants suggestion “that the Claimants knew…of their lack of expertise in any event.” The Claimants allegation that the Defendants owed them a duty (both as part of the duty of care in tort and/or as an implied term of the retainer) to decline to act appears to have been accepted.
As long ago as 1994 (around the start of the last boom in lending litigation) a Monopolies and Mergers Commission report into the supply of residential property valuations found that, many lenders had “tightened their procedures for selecting valuers”.
If the current round of lending litigation has not caused lenders to rationalise their valuation panel this decision will make all lenders think again. The important question for them is how they ensure that their valuers (and other suppliers or advisers) possess the appropriate level of expertise to give sound advice.
It would appear that more due diligence will apply in future, as we don’t think lenders will rely on their suppliers declaring themselves unable to act.