A firm of surveyors has escaped an accusation of negligent overvaluation after the lender missed the deadline to make its claim. The Limitation Act sets a six year limit on the time allowed for parties to make a claim for breach of contact. Valuers and their insurers will be pleased that the Courts have shown their willingness to throw out cases where the six year time limit has been breached, rather than insist on a full trial.
The case centres on a firm of surveyors, Toombs, which was appointed to value a property by Bridging Loans Limited (BLL) in 2006. Based on Toombs’ valuation of £750,000, BLL advanced a £502,000 bridging loan to the borrower. The borrower failed to make any repayments on the loan. When BLL repossessed the property it found it was unable to sell it for sufficient to repay the debt.
BLL sued Toombs for negligent valuation in 2013. The solicitors acting for Toombs applied to have the case struck out as it exceeded the six year limitation period. The application was rejected by the Master hearing the case. His decision was based on whether the value of the property plus the value of the borrower’s ability to repay the loan (the “borrower’s covenant”) was greater than the total debt. He concluded that it was not possible to tell in 2007 whether the value of the borrower’s covenant had been reduced, since there still an opportunity for the lender to repay the debt at that time. As a result the limitation period did not start until the lender took steps to repossess the property.
Toombs successfully appealed the decision and the case was struck out. The appeal judge decided that the borrower’s covenant was worthless at the outset as it had failed to make any repayments. He also decided that BBL had sufficient information to make a claim for negligent valuation against Toombs far earlier, but had failed to do so. As a result the limitation period had expired by the time BBL brought its claim in 2013.
“Claims against surveyors for negligent valuation after the financial crisis are tailing off. The six year limitation period means that many are now time-barred which is positive news for surveyors and their insurers,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “It is gratifying that the courts are taking a strong line on striking out claims which exceed the limitation period.”
The case has been reported by law firms RPC, DWF and Eversheds.