The UK Court of Appeal recently handed down its decision
in Tiuta International Ltd (in liquidation) v De Villiers
Surveyors Ltd, where the question before the Court was whether
a lender could recover all its loss from a negligent valuer in
connection with a refinance loan or if the lender was limited to
the amount lost in topping up the original loan.
In February 2011, the appellant lender in Tiuta
International Ltd (in liquidation) v De Villiers Surveyors
Ltd instructed the respondent surveyor to value a
property and relying on that valuation, lent £2,560,168.45 to
a third-party property developer. The property developer
subsequently asked the lender to top-up the facility and the lender
did so, relying on a second valuation provided by the surveyor in
December 2011. When the term of the facility expired, a balance of
£2,840,000 was outstanding. The loan was not repaid and the
lender appointed receivers to enforce its security. The property
was sold for an amount that was 30 – 40% lower than the
surveyor's valuation, and so the lender brought proceedings in
the UK High Court to recover its loss.
The surveyor argued that as the lender provided the additional
funds to the property developer by refinancing the original
facility, rather than by simply varying the original agreement, it
had already sustained the majority of its alleged loss when it made
the original loan and the alleged negligent December 2011 valuation
had only caused the lender to make a much smaller top-up loan. The
Court agreed and ruled that the lender's loss should be limited
to the amount lost in topping-up the original facility. Summary
judgment was granted.
On 1 July 2016, in a majority of two to one, the UK Court of
Appeal allowed the lender's appeal against the summary
judgment, holding that the surveyor should be held liable to the
lender for the whole of the loss flowing from the second negligent
The Court noted that:
"it is inherently unfair that, where both parties are
commercial organisations, a negligent valuer could use an attack on
the legitimate working practices and systems of the appellant as a
means of escaping part of the consequences of his or her
The Court further noted that:
"the respondent valued the property in the expectation
that the appellant would advance funds up to its reported value in
reliance on the valuation".
As it was not a matter that could be determined on a summary
application, the case proceeded on the assumption that the second
valuation was negligent. The respondent may yet avoid liability if
it is found at trial that the second valuation was not
It should be noted that this is a UK decision and as such, is of
persuasive authority in Ireland only. However, we don't see any
reason why a similar action could not be brought in Ireland as the
ruling by the Court of Appeal was decided on common law principles
and was not statute-based. It is a welcome decision for lenders as
it is now arguable that a lender may recover its full loss in the
event that a valuation given for the purpose of a refinancing was
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
On March 7, 2017, it will be one year since the U.K. Financial Conduct Authority's senior managers and certification regime came into force, heralding a new era of personal accountability in the financial sector.
On January 31, 2017, the FCA published a final notice issued to Deutsche Bank AG and fined the bank £163 million for failing to maintain an adequate AML control framework between January 1, 2012 and...
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).