High Court finds that lender suffered no loss despite negligent valuation of security

The High Court has dismissed a lender’s claim against a valuer for breach of contract and/or negligence in relation to the valuation of security for a loan, finding that the lender had suffered no actionable loss despite the valuer’s admitted negligence: Hope Capital Ltd v Alexander Reece Thomson LLP [2023] EWHC 2389 (KB).

This decision provides further clarity on the application of the “SAAMCO” principle, as established in South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191 and expanded upon in Hughes-Holland v BPE Solicitors [2017] UKSC 21 and Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20 (see blog post here).

Following Manchester Building Society, the scope of the duty of care assumed by a professional adviser is governed by the purpose of the duty, judged on an objective basis by reference to the reason why the advice is being given. The court looks to see what risk the duty is supposed to guard against and then at whether the loss suffered represents the fruition of that risk. The historic distinction between “advice” and “information” cases has been dispensed with.

In the present case, the court was satisfied that the purpose of the valuation was to protect the lender in relation to the value of the security, and not all other foreseeable risks of entering into the transaction, particularly the consequences of unlawful acts of the borrower or dramatic collapses in the property market. In the court’s view, it was also clear on the evidence that the loss of value in the security was caused by a combination of factors out of the control of the valuer (such as the conduct of the borrower and the Covid-19 pandemic). Accordingly, the lender had suffered no actionable loss.

For more information see this post on our Banking Litigation Notes blog.