Tiuta International Limited v De Villiers Surveyors Limited
 EWCA Civ 661.
This case concerns a common situation where a borrower required
additional funds to complete a development. De Villiers
Surveyors Limited had been instructed by the lenders Tiuta to value
a partly completed residential development in February 2011.
They valued it at £3.25 million in its then state of
development and £4.9 million on completion. Tiuta
advanced funds of just over £2.5million. In November
2011 the developer sought an increase in the loan to
£3,088,252 on the same security. De Villiers prepared a
fresh report and valued the property at £3.25 million and
£4.9 million on completion. In a further valuation
carried out in December 2011 the property was valued at £3.5
million in its then condition and £4.9 million on
completion. Additional funds were advanced. The loan
was not repaid and the property was sold resulting in a loss to
Tiuta of the order of £700,000.
Tiuta raised an action alleging that the valuation of December
2011 had negligently overstated the value of the property and that
it had suffered loss as a result. There was no allegation
that the earlier valuations had been negligent.
De Villiers argued that if the later valuation had been
negligent their liability should be restricted to the increase in
indebtedness. Titua argued that the second transaction was a
separate transaction, unrelated to the earlier one, and had to be
The case proceeded on the assumption that the first loan was
discharged and a new loan was advanced and that the valuation in
December 2011 was negligent. The court held that where a lender is
considering making a fresh loan, part of which is to be used to
repay an existing loan, the purpose to which the new loan is to be
put is of no legal interest or relevance to the valuer. The
repayment of the first loan by the second loan meant that De
Villiers was released from any potential liability in respect of
the first valuation. The fact that the same lender was
involved did not alter the legal position.
There are clear implications for surveyors in assessing the
extent of their exposure to liability when providing a valuation in
relation to additional lending. In order for surveyors to
properly assess their exposure they will require to understand the
structure of the re-financing transaction. The later
valuation from De Villiers lead to further lending of just
under £162,000 but an exposure to losses of
£700,000. There may be no legal interest but there is a
clear commercial interest for a surveyor to understand the details
of the re-financing.
Surveyors and their insurers need to be able to assess and price
their exposure correctly. This could be done at the time
instructions are given by the lender when the surveyor could ask
the lender about the use of the additional funds and seek to
restrict liability for losses within the terms of their contract
with the lender. It is perhaps unlikely that lenders would
find that acceptable. In that event insurers will require to
elicit sufficient information from surveyors through the proposal
form for professional indemnity insurance to properly understand
the extent of exposure. It is the total extent of the lending
that will be relevant rather than simply the additional
advance. It can be expected that will lead to an increase in
premiums to reflect this additional risk.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).