A significant amount of publicity arose out of the Court’s decision at first instance in this case, arguably seen as an opportunity for Buy to Let investors (“BTL”) to pursue Buy to Let claims against valuers for negligence where the investors had failed to obtain a valuation report of their own and instead relied upon the report produced by their lender’s valuer.
Colleys, who was the valuer engaged by Mr Scullion’s lender and the Defendant in this case, appealed the decision.
On 17th June 2011 the Court of Appeal handed down its’ decision and disagreed with the Court at first instance. The Court of Appeal held that a valuer, instructed on behalf of a lender, owed no duty of care to a BTL investor.
It had been held, prior to the Court of Appeal’s ruling, that a negligent valuer did owe a duty of care to a Buy to Let investor in respect of both a capital and rental valuation.
In 2002 Mr Scullion bought a two bedroom flat on a Buy to Let basis. Colleys was instructed to produce a capital and rental valuation to Mr Scullion’s lender and the valuer was paid £35 for doing so, although importantly no contractual relationship existed between Mr Scullion and Colleys.
Exchange of Contracts took place on Mr Scullion’s purchase before the valuation report had been shown to Mr Scullion and it later transpired that the valuation report over-valued both the capital value and the likely rental income of the property.
As a result Mr Scullion brought a claim for negligence against the valuer, seeking damages caused by the over-valuation of the report because he was ‘out of pocket’ on the rental income and was successful.
Colleys denied liability throughout, claiming no duty of care existed and causation was disputed on the grounds that Mr Scullion only received the valuation report post exchange of contracts.
Colleys appealed the decision.
Colleys argued that no duty of care arose in the absence of a contract between the parties and further that a Buy to Let investor was not an ordinary residential purchaser and could therefore be distinguished from cases such as Smith v Bush which Mr Scullion had sought to rely upon.
The Court at first instance had held that Mr Scullion was not “in no sense a professional property developer”. The Court of Appeal disagreed. They held the case did not involve an “ordinary domestic householder purchasing his home” and it was not therefore foreseeable that Mr Scullion would rely upon the valuer’s report as opposed to obtaining his own.
The Court of Appeal’s decision is likely to have an impact upon Professional Negligence claims arising out of Buy to Let investments and it will make it significantly more difficult for such investors to pursue Buy to Let claims against valuers in the absence of a contractual relationship.