Damages – contributions

Citation

Waterson, G. and Lee, R. (2000), "Damages – contributions", Property Management, Vol. 18 No. 5. https://doi.org/10.1108/pm.2000.11318eab.001

Damages – contributions

Damages – contributions

In the recent case of Howkins & Harrison (a firm) v. Tyler and Another (2000) The Times, 8 August, the Court of Appeal appears to have allowed a lender to be compensated for its loss by both the negligent valuer and the borrower. The facts of the case are fairly simple. In 1990 the Alliance and Leicester Building Society advanced £498,000 to Court Estates, a property development company and a further £112,135 in 1992 to the defendants who were directors of Court Estates. Both loans were made in reliance on a negligent valuation of a property in Rugby by the claimant valuers. The borrowers defaulted on the loans and the property was sold by the society for £250,000. The society commenced proceedings against the claimants (the valuers) for the full amount of the loss. This claim was settled in November 1997 for £400,000 in full and final settlement.

The claimants then sought a contribution from the defendants (the borrowers) towards the £400,000 pursuant to the 1978 Act as they had been responsible for some of the loss suffered by the society. In other words, had the borrower been sued by the society it would have been liable "in respect of the same damage". Counsel for the valuer argued that the borrower and the valuer were both liable to the lender in respect of the same damage because a lender only loses money if the borrower defaults and the security was overvalued. The argument for the defendant, both in the Chancery Division (see: [2000] EGCS 30) and before the Court of Appeal, was that the damage suffered by the society for which the claimants were liable was the loan of the money to the defendants which, but for the negligent valuation, they would not have lent. However, the damage for which the defendants were liable was not the same. It arose from their failure to repay a debt to the society. Accordingly, the claimants could not claim a contribution under the 1978 Act. According to the Vice-Chancellor, who delivered the unanimous judgement of the court, the Act was intended to deal with cases where damage suffered by the victim could be remedied by one of two defendants. Thus there was a simple test to see whether the 1978 Act applied:

If A and B were liable to C, then if is A paid to C a sum of money in satisfaction of his liability would that sum, ipso facto, reduce B's liability to C?

Second, if B paid a sum in satisfaction of his liability would that reduce A's liability?

Both questions must be answered in the affirmative for the Act to apply.

In the instant case, his Lordship decided, the society could sue the defendants for the sum due under the debt without giving credit for any part of the sum received by the claimants. The appeal was dismissed. Thus, it appears that lenders are free to pursue their rights against the borrower, even if this indirectly results in overcompensation.

Geoffrey WatersonRosalind Lee

The law is stated as it is understood to be up to 1 August 2000.