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Professional negligence and Valuation: Scullion v Bank of Scotland [2010]

10 November 2010

In this article (first appearing in FM World magazine), Beverley Vara looks at a case in which the Court considers the question of how to quantify damages in the case of an inaccurate property valuation.

The Facts

This case concerned a claim for professional negligence against the Defendant firm of valuers, Colleys, who the Judge had previously found had breached their duty to Mr Scullion in relation to a valuation report for a property that he had bought on a buy-to-let basis. Colleys gave a valuation for the capital value of the property and also the rental which Mr Scullion could expect to receive from it. Both values were in excess of that which the Judge found to be the true value. Mr Scullion argued he was entitled to damages to reflect the fall in the value of the property between the date on which it was purchased and the date upon which it was eventually sold. He claimed that he had only bought on the basis of Colleys' excessive valuation and that it was foreseeable that if the valuation was inaccurate he would be forced to sell and might do so at a loss if the market fell. The reason Mr Scullion argued the case in this way is because he had managed to negotiate a substantial discount on the purchase price and so actually paid slightly less for the property than its true value. If one therefore considered the difference between the amount he had paid and the value of the property, he had suffered no capital loss as a result of their negligence albeit he had suffered a loss as a result of the inaccurate rental valuation figure.

What did the Court say?

The Court considered this argument in light of the important decision of the House of Lords in a case known as SAAMCO. In that case Lord Hoffman drew attention to the connection between the scope of the duty which the law imposes on a defendant and the questions of causation of loss. He explained that normally the law limits liability to those consequences which are attributable to that which may be wrongful. There is a difference between a duty to provide information for the purpose of enabling someone else to decide upon a course of action and the duty to advise someone as to what course of action to take.

Applying these principles in this case, the Judge found that Mr Scullion could not recover any compensation for any fall in the value of the flat due to market movements in the period between the purchase and its eventual sale.

What does this mean?

Plainly companies that engage professionals are entitled to rely on their advice and it is right that they should have the facility to sue them when things go wrong. Such actions are increasingly common at the moment because of market conditions, and often substantial recoveries can be made. However, it is important to bear in mind that the entire loss suffered is not necessarily the same as the amount recoverable from the professional.

Scullion v Bank of Scotland Plc (Trading as Colleys) [2010] EWHC 2253 (Ch)