It was alleged that the defendant carried out a fraudulent mortgage valuation on a flat in Thamesmead.
Background
The flat formed part of a larger development consisting of flats sold predominantly by means of same day sub-sales and/or with significant incentives. The transaction itself was also part of a wider mortgage fraud.
In carrying out his valuation, the defendant had used comparables from the same development, despite the fact that by the time of the valuation the RICS Red Book required surveyors to consider comparable properties outside the immediate development. On the face of it, therefore, the valuation was negligent.
Causation
It was held that even if the surveyor had taken appropriate care, given the extent of mortgage fraud in the area and the inherent difficulties in providing an accurate valuation as a result of this, the valuation would have been the same. Further, the Court considered that it was the mortgage fraud itself which was the sole cause of the claimant's loss.
Conclusion
The case is likely to provide some comfort to surveyors. The defendant valuer was assisted by virtue of the fact that the criminal trial in respect of the various perpetrators of the fraud had already taken place, so the extent of their fraudulent activity was known to the Judge.
The judgement in this case may lead to surveyors arguing that where a transaction was part of a wide ranging mortgage fraud, the chain of causation between an alleged negligent valuation and a lender's loss will be broken.
As indicated above, this defendant was assisted by the criminal investigation and conviction of the fraudsters. Often this will not be the case and so whilst this judgement is helpful, proving such frauds in many cases will involve huge amounts of investigation, and therefore expense.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
