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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Platform Home Loans Ltd v. Oyston Shipways Ltd and Others [1999] UKHL 10; [2000] 2 AC 190; [1999] 1 All ER 833; [1999] 2 WLR 518 (18th February, 1999) URL: http://www.bailii.org/uk/cases/UKHL/1999/10.html Cite as: [1999] CLC 867, [1999] 1 EGLR 77, [1999] PNLR 469, [1999] NPC 21, [1999] 1 All ER 833, [2000] 2 AC 190, [1999] UKHL 10, (1999) 1 TCLR 18, [1999] 2 WLR 518, [1999] EG 26, [1999] 13 EG 119

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Platform Home Loans Ltd v. Oyston Shipways Ltd and Others [1999] UKHL 10; [2000] 2 AC 190; [1999] 1 All ER 833; [1999] 2 WLR 518 (18th February, 1999)

LORD LLOYD OF BERWICK

My Lords,

      I have had the advantage of reading in draft the speeches prepared by my noble and learned friends, Lord Hobhouse of Woodborough and Lord Millett. For the reasons which they have given I would allow the appeal.

LORD COOKE OF THORNDON

My Lords,

      The scheme of the Law Reform (Contributory Negligence) Act 1945 is that where damage has been caused by fault on the part of both defendant and plaintiff, the court may in its discretion apportion responsibility between them. The Act was passed to overcome the common law principle that a plaintiff who has contributed to his damage by his own fault was totally debarred from recovering damages from a defendant whose fault had also contributed. It was no part of the purpose of the Act to impose any liability on a defendant whose fault had not contributed to the plaintiff's damage. It is in these commonplaces that, as I see it, the answer to the present case is readily to be found.

      Section 1(1) of the Act states its basic provision as just summarised and is complemented by section 1(2) whereby, when damages are recoverable subject to reduction by virtue of the first subsection, the court is required to find and record the total damages which would have been recoverable if the claimant had not been at fault. In full the material part of section 1(1) reads:

 "(1) Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage: . . ."

      A relatively early and well-known authority on the Act is Drinkwater v. Kimber [1952] 2 Q.B. 281. The female plaintiff had been injured in a collision caused by the concurrent negligence of her husband and the defendant. As the law then stood the wife would not have succeeded in a negligence action against her husband, so the defendant could not recover under the Law Reform (Married Women and Tortfeasors) Act 1935 any contribution to the damages awarded against the defendant to the wife. To overcome this difficulty, by a counter claim against the husband the defendant sought contribution under the Act of 1945. It was held that the defendant could not recover under the Act of 1945, because that Act gave the defendant no claim against the husband in respect of the wife's injuries and the defendant's liability to the wife was not "damage" suffered by him within the meaning of section 1(1). Morris L.J. said at pp. 292-294 that the Act did not give the defendant a cause of action against the husband; it did not purport to create any new variety of claim; it seemed clear that the word "damage" referred to that which was suffered and for which a "claim" might be made and for which "damages" are recoverable. Both he and Singleton L.J. at pp. 294 and 290 respectively, pointed out that, if the section applied, the court would have to record the total damages which would have been recoverable by the defendant from the husband if the defendant had not been at fault. If the defendant had not been negligent the total damages recoverable would have been nil. As Morris L.J. put it, to award £135, being the contribution claimed from the husband, would have been "a strange phenomenon of contraction."

      Similarly in his Joint Torts and Contributory Negligence (1951) Glanville Williams said at p. 118 that in short the word "damage" in section 1(1) "comprises any item of loss that would have been recoverable as damages at common law apart from the claimant's own fault." He repeated the proposition at p. 317.

      The present case calls for the application of these familiar provisions to a claim by a lender against a valuer who has negligently overvalued the property taken as a security as a result of the valuation. The lender and the borrower agreed in September 1990 on a loan of £1,050,195 secured by a first registered charge on the property. In 1993 the borrower fell into difficulties in making repayments. The lender sold the property on 12 February 1994 for £435,000. A bankruptcy order was subsequently made against the borrower; apparently his covenant was worthless except to the extent that he had in fact made payments to the lender. After allowing for the payments made by the borrower and £40,000 for certain failures by the lender to mitigate its loss, it is accepted that the lender's overall loss in the transaction was in round figures £611,748. On the facts of this case, that is the loss proved by what Lord Nicholls of Birkenhead calls "the basic comparison": Nykredit Mortgage Bank Plc. v. Edward Erdman Group Ltd. (No. 2) [1997] 1 WLR 1627, 1631H.

      Although in a sense that full loss was caused by the negligent overvaluation, it is now established in English law, by the decision of your Lordships' House in South Australia Asset Management Corporation v. York Montague Ltd. [1997] AC 191, confirmed and applied by the House in Nykredit (supra), that a negligent valuer is not necessarily liable for the whole of the loss in such circumstances. The correct approach has been held to be to ascertain what element of loss suffered as a result of the transaction was attributable to the inaccuracy of the information supplied by the valuer. For this purpose the valuation negligently provided is to be compared with the figure which a reasonable valuer, using the information available at the relevant time, would have put forward as its most likely open market value. Thus the valuer may escape liability for a subsequent fall in market values. Typically, as Lord Nicholls of Birkenhead says in Nykredit at p. 1632A, the valuer's liability is limited to the extent of the overvaluation.

      The architect of this development of English law has been Lord Hoffmann. For an authoritative explanation of it, one can do no better than quote a substantial passage from his speech in Nykredit at pp. 1638-1639:

  "In order to decide when the cause of action arose, it is first necessary to recall, by reference to your Lordships' earlier judgment, precisely what the cause of action was. It was for breach of the duty of care owed by the valuer to the lender, which existed concurrently in contract and in tort. Your Lordships identified the duty as being in respect of any loss which the lender might suffer by reason of the security which had been valued being worth less than the sum which the valuer had advised. The principle approved by the House was that the valuer owes no duty of care to the lender in respect of his entering into the transaction as such and that it is therefore insufficient, for the purpose of establishing liability on the part of the valuer, to prove that the lender is worse off than he would have been if he had not lent the money at all. What he must show is that he is worse off as a lender than he would have been if the security had been worth what the valuer said. It is of course also the case that the lender cannot recover if he is, on balance, in a better or no worse position than if he had not entered into the transaction at all. He will have suffered no loss. The valuer does not warrant the accuracy of his valuation and the lender cannot therefore complain that he would have made more profit if the valuation had been correct. But in order to establish a cause of action in negligence he must show that his loss is attributable to the overvaluation, that is, that he is worse off than he would have been if it had been correct.

  "It is important to emphasise that this is a consequence of the limited way in which the House defined the valuer's duty of care and has nothing to do with questions of causation or any limit or 'cap' imposed upon damages which would otherwise be recoverable. It was accepted that the whole loss suffered by reasons of the fall in the property market was, as a matter of causation, properly attributable to the lender having entered into the transaction and that, but for the negligent valuation, he would not have done so. It was not suggested that the possibility of a fall in the market was unforeseeable or that there was any other factor which negatived the casual connection between lending and losing the money. There was, for example, no evidence that if the lender had not made the advance in question he would have lost his money in some other way. Nor, if one started from the proposition that the valuer was responsible for the consequences of the loan being made, could there be any logical basis for limiting the recoverable damages to the amount of the overvaluation. The essence of the decision was that this is not where one starts and that the valuer is responsible only for the consequences of the lender having too little security.

  "Proof of loss attributable to a breach of the relevant duty of care is an essential element in a cause of action for the tort of negligence. Given that there has been negligence, the cause of action will therefore arise when the plaintiff has suffered loss in respect of which the duty was owed. It follows that in the present case such loss will be suffered when the lender can show that he is worse off than he would have been if the security had been worth the sum advised by the valuer. The comparison is between the lender's actual position and what it would have been if the valuation had been correct.

  "There may be cases in which it is possible to demonstrate that such loss is suffered immediately upon the loan being made. The lender may be able to show that the rights which he has acquired as lender are worth less in the open market than they would have been if the security had not been overvalued. But I think that this would be difficult to prove in a case in which the lender's personal covenant still appears good and interest payments are being duly made. On the other hand, loss will easily be demonstrable if the borrower has defaulted, so that the lender's recovery has become dependent upon the realisation of his security and that security is inadequate. On the other hand, I do not accept Mr. Berry's submission that no loss can be shown until the security has actually been realised. Relevant loss is suffered when the lender is financially worse off by reason of a breach of the duty of care than he would otherwise have been."

      The decision of this House in the case known variously as South Australia Asset Management or SAAMCO has been controversial. In the Federal Court of Australia it was not followed by Lindgren J. in MGICA (1992) Ltd. v. Kenny & Good Pty Ltd. (1996) 140 A.L.R. 313, 362-374. It was criticised in a note by Professor Stapleton in (1997) 113 L.Q.R. 1. But before the Appellate Committee in the present case counsel for the lender took the position that he could not seek to persuade your Lordships to depart from it, and it is on that footing that the case must be approached.

      The relevant facts as to overvaluation and contributory negligence are simple enough. The respondent valuer valued the property at £1.5m. The trial judge, Jacob J., found that the true market value at the time (which was treated as the figure at which a reasonable valuer would have arrived) was £1m. But the loan was for as much as £1,050,195, being 70 per cent. of the valuation. Further the lender had not required the borrower to answer the question in the lender's application form "Purchase price £ . If already owned, please state date of purchase: ." In fact the borrower had purchased the property two years earlier, in dilapidated condition, for £375,000. The judge found that the cumulative effect of lending as high a percentage and not insisting on being informed of the earlier purchase price was that the lender was contributorily negligent to the extent of 20 per cent. of responsibility for the damage "across the board." By that I understand him to have found that whatever damages would be recoverable otherwise by the lender from the valuer were to be reduced by 20 per cent; the appeal to your Lordships' House was argued on the basis that such was his finding.

      On these facts and applying the principles already stated, the short answer to the case appears to me to be that, by English law as declared in SAAMCO and Nykredit, apart any question of contributory negligence, the valuer is not liable to the lender for the full loss of £611,748 but only for £500,000, being the difference between the negligent valuation of £1.5m. and the figure which a reasonably careful valuation would have produced, £1m. That £500,000 is the damage suffered as the result partly of the lender's fault and partly of the valuer's fault. On the recent authorities the balance of the loss, £111,748 was not suffered, even in part, as a result of the valuer's fault, because of the limited way in which this House has defined the valuer's duty of care. In other words, the balance of the loss was not "damage" within the meaning of section 1(1) of the Act of 1945 and does not fall to be apportioned. As in Drinkwater v. Kimber, this is brought out very clearly when section 1(2) is considered. If the whole £611,748 were apportionable, the court would have to record that amount as the total damages which would have been recoverable if the claimant had not been at fault. But to say as much would be flatly contrary to SAAMCO and Nykredit.

      The damages to be reduced are therefore £500,000, so the amount for which it is just and equitable that the lender should have judgment is £400,000 together with appropriate interest. This is the figure arrived at by the Court of Appeal, albeit by a more complicated route including some steps with which I am unable to agree. It would not conduce to simplicity to lengthen this speech by embarking on an analysis of a line of reasoning which I am not adopting.

      As to the result, regrettably I differ from my noble and learned friends, Lord Hobhouse of Woodborough and Lord Millett, whose speeches I have had the advantage of reading in draft. I hope that my reasons sufficiently appear from what I have already said. Perhaps it should be repeated, however, that in my view the "damage" referred to four times in section 1(1) of the Act of 1945 is the damage for which, but for the Act, the claimant's action would be defeated by reason of his own fault: it does not extend to damage for which his claim would be defeated by reason of a limit upon the other person's duty of care. The Act of 1945 does not enlarge the scope of a defendant's duty of care. If any anomalies or inequities be thought to arise from approaching the present case in this way, they will be attributable to the limit of a valuer's duty of care, and consequent liability, imposed by your Lordships' House in SAAMCO and Nykredit, decisions which your Lordships were not asked to reconsider on this occasion.

      For these reasons I would dismiss the appeal.

LORD HOPE OF CRAIGHEAD

My Lords,

      I have had the advantage of reading in draft the speeches which have been prepared by my noble and learned friends, Lord Hobhouse of Woodborough and Lord Millett. I agree with them, and for the reasons which they have given I also would allow the appeal.

LORD HOBHOUSE OF WOODBOROUGH

My Lords,

      Section 1(1) of the Law Reform (Contributory Negligence) Act 1945 provides:

 "Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage . . . ."

The question raised by this appeal concerns the application of that provision to cases of professional negligence in the context of the principles laid down by your Lordship's House in the Banque Bruxelles litigation, reported under the name South Australia Asset Management Corporation v. York Montague Ltd. [1997] AC 191 (apparently known to the legal profession by the acronym SAAMCO), and Nykredit Mortgage Bank Plc. v. Edward Erdman (No. 2) [1997] 1 WLR 1627.

      Typically the plaintiff is a mortgage lender and the defendant is a surveyor or valuer who has advised the plaintiff upon the value of a property which is to be taken as security for a loan to a borrower. If the property has been negligently overvalued that may affect the conduct of the lender. Often, without the overvaluation, no loan would have been made to the borrower or, if there were a loan, it would have been smaller and on different terms. Later, if the borrower defaults, the property quite probably will be an inadequate security for the obligations of the borrower. The inadequacy of the security may meanwhile have been exacerbated by falls in the market. Thus the loss eventually suffered by the lender may be attributable not only to the original negligence of the valuer but also to the subsequent fall in market values. Whether this situation should qualify the right of the lender to recover his loss in full from the valuer was the subject of the SAAMCO case.

      The present case injects an additional factor, contributory negligence on the part of the lender. There has been a wide divergence of judicial opinion on the significance of this point. In the present case there was a difference of opinion between the trial judge, Jacob J., and the Court of Appeal. In his judgment in the Court of Appeal (agreed to by Thorpe and Potter L.JJ.) reported at [1998] Ch. 466, Morritt L.J. refers to the division of opinion amongst first instance judges (p. 474). Your Lordships have not been referred to those cases, some of which are not reported, as it is recognised that the answer to the present appeal must be found in a proper understanding of the speeches in the SAAMCO and Nykredit cases in conjunction with a proper application of section 1(1) of the Act of 1945.

      In the Nykredit case, Lord Nicholls of Birkenhead summarised the effect of the SAAMCO decision at pp. 1631-1632:

  "It is axiomatic that in assessing loss caused by the defendant's negligence the basic measure is the comparison between (a) what the plaintiff's position would have been if the defendant had fulfilled his duty of care and (b) the plaintiff's actual position. Frequently, but not always, the plaintiff would not have entered into the relevant transaction had the defendant fulfilled his duty of care and advised the plaintiff, for instance, of the true value of the property. When this is so, a professional negligence claim calls for a comparison between the plaintiff's position had he not entered into the transaction in question and his position under the transaction. That is the basic comparison. Thus, typically in the case of a negligent valuation of an intended loan security, the basic comparison called for is between (a) the amount of money lent by the plaintiff, which he would still have had in the absence of the loan transaction, plus interest at a proper rate, and (b) the value of the rights acquired, namely the borrower's covenant and the true value of the overvalued property.

  "However, for the reasons spelled out by my noble and learned friend, Lord Hoffmann, in the substantive judgments in this case [1997] AC 191, a defendant valuer is not liable for all the consequences which flow from the lender entering into the transaction. He is not even liable for all the foreseeable consequences. He is not liable for consequences which would have arisen even if the advice had been correct. He is not liable for these because they are the consequences of risks the lender would have taken upon himself if the valuation advice had been sound. As such they are not within the scope of the duty owed to the lender by the valuer.

  "For what, then, is the valuer liable? The valuer is liable for the adverse consequences, flowing from entering into the transaction, which are attributable to the deficiency in the valuation. This principle of liability, easier to formulate than to apply, has next to be translated into practical terms. As to this, the basic comparison remains in point, as the means of identifying whether the lender has suffered any loss in consequence of entering into the transaction. If he has not, then currently he has no cause of action against the valuer. The deficiency in security has, in practice, caused him no damage. However, if the basic comparison throws up a loss, then it is necessary to inquire further and see what part of the loss is the consequence of the deficiency in the security.

  "Typically, the answer to this further inquiry will correspond with the amount of the loss as shown by the basic comparison, for the lender would not have entered into the transaction had he been properly advised, but limited to the extent of the overvaluation. This was the measure applied in the present case. [The plaintiff] suffered a loss, including unpaid interest of over £3m. Of this loss the amount attributable to [the defendant's] incorrect valuation was £1.4m., being the extent of the overvaluation."

      Thus, the first step is to establish what was the basic loss of the lender. The second step is to see whether that basic loss exceeds the amount of the overvaluation and, if it does, the lender's right of recovery from the valuer is limited to the extent of the overvaluation. The issue in the present case is whether the reduction in the plaintiffs' damages on account of their contributory negligence, here as usual expressed as a percentage, should have been applied to the plaintiffs' basic loss or to their loss as limited by the application of the SAAMCO principle (Lord Nicholls's second step). It will be appreciated that in all cases where the SAAMCO principle is applicable because the plaintiffs' basic loss exceeds the amount of the defendants' overvaluation, the point is not academic and may have substantial financial consequences. In the present case Jacob J. found that there was 20 per cent. contributory negligence but held (because of the way he allocated interest) that it did not affect the outcome of the SAAMCO calculation. The Court of Appeal held that the SAAMCO calculation must be done first and the plaintiffs' recoverable damages then be reduced by a further 20 per cent.

The Facts:

      The plaintiffs in the present action, the appellants in your Lordship's House, are Platform Home Loans Ltd. Their business was to advance money upon the mortgage of real property. In 1990, in common with a number of other lenders, they were operating a system of "non status" loans. As described by the judge, the general idea was to lend against the security of the subject property alone without making any substantial investigations into the status of the borrower. The theory was that provided one did not lend too high a proportion of the value then the loan would be recoverable out of the proceeds of sale even if the borrower defaulted. Thus, given enough of a "cushion", (i.e. a low enough loan to value ratio, "LTV"), the ability of the borrower to service the loan was not treated as significant as compared with the standard mortgage. If the borrower paid, then the lender would make his profit. If he did not, then the lender would get his money back, including interest and expenses, by repossession and sale.

      In June 1990 a Mr. Hussain proposed to the plaintiffs a remortgage transaction for his home at 9 Carpenter Road, Edgbaston, Birmingham. He had exhausted the limit of what his existing mortgagees were prepared to lend him and therefore he approached the plaintiffs with a view to obtaining from them a loan of sufficient size not only to pay off his existing mortgage but leave him a worthwhile surplus on top so as to justify the new transaction. Mr. Hussain said that his property was worth £1.5m. The normal percentage which the plaintiffs were prepared to lend on a non status loan was 70 per cent. of the value of the property. A loan £1,050,000. was sufficient for this purpose and he asked the plaintiffs to lend him that sum.

      It was the practice of the plaintiffs, where non status loans were proposed, to obtain independently from two valuers separate valuations of the relevant property. The defendants in the action were the two firms of valuers instructed by the plaintiffs to give them valuations. Each of the defendants valued the property at 9 Carpenter Road at £1.5m. The judge held that these valuations were negligent and that the true value of the property at the relevant time in August 1990 was £1m. only. If they had valued the property at £1m., the maximum amount which the plaintiffs would have lent to Mr. Hussain would have been £700,000. The judge found that Mr. Hussain would not have proceeded with the transaction if the plaintiffs had only been prepared to lend him £700,000. He therefore held that it was what is called a 'no transaction' case: the result of the defendants' negligence was that the plaintiffs entered into a transaction which the plaintiffs would not otherwise have entered into.

      On 12 October 1990 the transaction was completed. The plaintiffs advanced to Mr. Hussain a sum totalling £1,050,195 secured by a first registered charge over the property. The liability of Mr. Hussain under the loan contract was to make periodic payments of interest. He had difficulty in making these payments and by early 1993 had fallen seriously into arrear. The plaintiffs commenced proceedings against Mr. Hussain and, having obtained possession, exercised their power of sale in February 1994. The price obtained was £435,000. The issues at the trial included factual issues of the assessment of the plaintiffs' loss. The figures which the judge found were set out in a schedule. They correspond to Lord Nicholls's basic loss. The plaintiffs had borrowed money on the market in order to finance their loan to Mr. Hussain. They therefore included in their computation the cost to them of borrowing this money and set off against it the aggregate of the interest payments which Mr. Hussain had in fact made between 1990 and 1993. On the debit side of the account, the sum of the loan made (£1,050,000) plus interest expended and costs came to £1,419, 073. On the credit side, the payments made by Mr. Hussain and the net proceeds of the sale of the property, came to £651,748. The judge, for reasons which it is not necessary to elaborate and which are not now challenged, held that the plaintiffs had failed adequately to mitigate their loss and that, if they had taken the proper steps in mitigation, their loss would have been reduced by £40,000. Accordingly he arrived at the figure of £611,748.51 to represent the plaintiffs' basic loss through having entered into the transaction. This appeal has been argued upon the basis, agreed to by both sides, that this figure is the plaintiffs' basic loss.

      On the judge's finding, the overvaluation of the property by the defendants amounted to £500,000. Applying the SAAMCO principle, the plaintiffs' recoverable damages fall to be reduced to £500,000. The judge made a finding of 20 per cent. contributory negligence. The basic loss less 20 per cent. is £489,398.81, i.e. less than £500,000. But, £500,000 less 20 per cent. is £400,000. The Court of Appeal held that the plaintiffs' damages should be reduced pursuant to the Act of 1945 to £400,000. It is against that decision that the plaintiffs have appealed.

The Trial:

      It is necessary to refer to two things which went wrong at the trial. The first was the treatment of contributory negligence by the judge. Instead of making his findings in what might be regarded as a logical order, starting with the allegations of negligence against the defendants and the question of causation, he started with the issues of contributory negligence. He found that want of reasonable care on the part of the plaintiffs was proved in two respects. The first was that Mr. Hussain had not fully filled in his application form and had failed to say how much he had purchased the property for. He had in fact purchased it two years previously in a dilapidated condition for £375,000. The judge held that plaintiffs ought to have followed up the omission and that the disclosure of the purchase price would have put them on inquiry as to the value of the property in 1990. The second aspect involved the criticism of the plaintiffs' policy of lending 70 per cent. of the value of the property. The judge found that this was an unreasonably incautious approach where high values were involved. He made no finding as to what would have been a reasonable percentage.

      Thus, the judge did not make complete findings as to the seriousness of the faults of the plaintiffs nor did he make findings which identified properly their causative relevance. This deficiency is most easily appreciated in relation to the lending policy point. Suppose the judge's view was that two thirds would have been a prudent lending policy in the circumstances, the causative effect of the difference between advancing 70 per cent. and advancing two thirds would have been capable of further elucidation and could have been expressed in money terms. Instead the judge, who at this stage of his judgment had yet to consider what, if any, findings of fault he was going to make against the defendants and what findings of causation he was going to make, contented himself with saying:

 "Taking both findings of contributory negligence together I assess the total contribution at 20 per cent. There remains the fact that the real determining factor for the level of the loan was the valuations themselves." (Transcript p. 12)

The problems which this approach creates for the proper application of section 1 of the Act of 1945, if not already obvious, will become apparent from what I say later in this speech.

      The second aspect where the trial went wrong was in the treatment of interest. The judge in a way which the plaintiffs did not seek to defend in the Court of Appeal or before your Lordships, engaged in an exercise of adding interest to the plaintiffs' basic loss and to the SAAMCO figure. He apparently did this for the purpose of seeing whether or not there was a SAAMCO limit applicable to the plaintiffs' claim. The result of his exercise was that there was not and he therefore arrived at a figure which corresponded to the plaintiffs' basic loss less 20 per cent (the £489,398.81 figure).

      A further complication then arose with regard to the award of statutory interest. At the time that Jacob J. gave his judgment the decision in your Lordships' House in the Nykredit case had not been delivered. That decision required a different approach to the calculation of interest to that adopted by the judge. Therefore, when the case got to the Court of Appeal, it was agreed that a remission was necessary in order to correct this error. We are not concerned with that aspect on this appeal and I need say no more about it.

The Court of Appeal:

      The position in the Court of Appeal was complicated by the fact that both sides appealed. Leaving on one side the interest point to which I have just referred, the plaintiffs appealed contending that, on a proper construction of the Act of 1945, the contributory negligence should have been left out of the account altogether or, if it was to be taken into account, it should have been confined to a percentage, say 5 per cent., which the plaintiffs suggested was an appropriate figure in respect of the application form point. They submitted that the lending policy point was irrelevant since it arose from matters outside the scope of the duty owed by the valuers to the plaintiffs: since the plaintiffs could only recover in respect of that part of their loss which fell within the scope of the defendants' duty of care, that is to say within the limit of the £500,000 overvaluation, the relevant damage for the purposes of section 1 of the Act of 1945 did not extend so as to make such fault on the part of the plaintiffs relevant.

      A major part of the judgment of Morritt L.J. is taken up with discussing and rejecting this argument. He accepted the submission of the defendants that the use in the subsection of the word "damage" on four occasions must be distinguished from and contrasted with the reference to "damages" in that part of the subsection which provides for their reduction. Jacob J. had accepted this argument and so did Morritt L.J. It was effectively covered by a number of previous Court of Appeal decisions, in particular that in Froom v. Butcher [1976] QB 286. That case concerned the question of what reduction if any should be made to a plaintiff's damages whose injuries had been caused not only by the defendant's negligent driving but also by the failure of the plaintiff to wear a seat belt. It had been submitted that, since the defendant was not responsible for the failure of the plaintiff to wear a seat belt, the question should be looked at purely as a matter of causation not as a matter of contributory negligence. Lord Denning M.R. pointed out that the section was not drafted by reference to some incident, such as an accident or a collision, but rather by reference to the damage suffered by the plaintiff. He said, at p. 292:

 "The question is not what was the cause of the accident. It is rather what was the cause of the damage. . . . . The damage is caused in part by the bad driving of the defendant, and in part by the failure of the plaintiff to wear a seat belt. If the plaintiff was to blame in not wearing a seat belt, the damage is in part the result of his own fault. He must bear some share in the responsibility for the damage: and his damages fall to be reduced to such extent as the court thinks just and equitable."

      Morritt L.J. also rejected the plaintiffs' submission based upon a sub-division of the plaintiffs' loss so as to purport to identify some distinct part of it which was solely caused by the plaintiffs' lending policy and not by the defendants' fault. On this argument, the "contributory negligence" (say, 15 per cent.) attributable to this part of the plaintiffs' loss would also be excluded and the corresponding reduction of the plaintiffs' SAAMCO damages likewise avoided. The difficulty with this submission was that both Lord Hoffmann and Lord Nicholls in SAAMCO and Nykredit recognised and affirmed that the whole of the plaintiffs' loss was caused by the defendants' fault. The plaintiffs' appeal was dismissed.

      The reason why the Court of Appeal awarded to the plaintiffs a lower sum than that awarded by Jacob J. was that the Court of Appeal allowed the appeal of the defendants that the 20 per cent. reduction should be applied to the reduced sum of damages which the plaintiffs could recover after taking into account the SAAMCO principle. The judgment of Morritt L.J. does not separately address this point and it only emerges in a later section of his judgment, dealing primarily with the question of interest, that he considers that the sum upon which interest should be calculated is £400,000 not £500,000. He says that in order to ascertain the date from which statutory interest should be calculated in accordance with the Nykredit decision, it is necessary to ascertain "when the loss to the lender reaches the limit of the valuers liability" he continues, at p. 480:

 "The limit is the difference between the amount of the valuation and the true value, namely £500,000. At that point the liability of the valuers is crystallised at £500,000. From that figure 20 per cent. is deducted for the contributory negligence of [the plaintiffs]. To the resultant figure of £400,000 statutory interest is added from the date of crystallisation to the date of judgment."

It would appear that Morritt L.J. considered that this conclusion followed from his earlier decision upon the correct construction of the Act of 1945.

The Appeal to Your Lordships' House:

      The plaintiffs have appealed. They put their case in three ways. The first is that the contributory negligence is wholly irrelevant where a limitation is being imposed under the SAAMCO principle. Secondly they submit that, if it is relevant, it should be confined to the "application form" point, to which they would give a significance of 5 per cent. at most, and that therefore their recoverable damages should be assessed at £475,000. A third way in which they put their case is that, if the whole of the contributory negligence is to be taken into account against them, the appropriate figure is the £489,398 awarded by the judge, the contributory negligence being deducted before applying the SAAMCO cap.

      The first and second ways of putting their case deploy the same arguments as were fully discussed in the Court of Appeal. I consider that the Court of Appeal was right to reject them: they misconstrue the Act of 1945 and fail fully to reflect the decision of the House of Lords decision in the SAAMCO case. The point which requires consideration is their third point. For this purpose it will be necessary to look more closely at the SAAMCO principle and how it affects the application of the Act of 1945. Once this exercise has been undertaken, it will, in my judgment, provide the answer to the dispute between the parties to this appeal. The respondents to this appeal submit that the £400,000 figure should be upheld.
 

The Banque Bruxelles Litigation:

      This litigation, by the time it got to the Court of Appeal, involved a number of separate actions (including the Nykredit case). The Banque Bruxelles case was the lead case. That action was tried by Phillips J. and his judgment is reported at [1995] 2 All E. R. 769. Phillips J. attempted to evaluate in money terms the extent to which the plaintiffs' losses were attributable to the defendants' negligence on the one hand and the collapse of the market on the other. He thus approached the problem by making a causative attribution arrived at not by applying any legal principle but on the facts by an examination of the evidence. This could be described as a scientific approach.

      In the Court of Appeal [1995] Q.B. 375, the lenders challenged the scientific approach as commercially unrealistic. They pointed out the complexity of the situation, at p. 407:

 "It is one transaction and one loss. If, in the case of commercial property, V overvalues the land he is likely to over value the revenue which B will draw from it. In the case of domestic property V's overvaluation will have the result that B commits himself to pay more by way of interest than he otherwise would. If, in either case, the overvaluation is such that L, even after deducting a percentage from the valuation figure, advances more than the sale price, B may be able to avoid committing any of his own funds to the purchase of the land. In any of these events, the risk of default by B is enhanced, the protective effect of any deduction made by L in advancing his loan is reduced and the prospective loss to L, in the foreseeable event of a market fall, increased."

As part of their disagreement with Phillips J., the Court of Appeal (at pp. 421-422) rejected the scientific approach which attempted to analyse the causation factually. They pointed out the complexity of any such treatment of causation, particularly where more than one adviser was involved. It appears that they accepted the argument of the lender to which I have referred.

      In the House of Lords (by which time the Banque Bruxelles and the Eagle Star Insurance Co. had settled their differences and dropped out of the litigation) it does not seem that any attempt was made to resurrect the scientific approach. It certainly received no support from Lord Hoffmann who gave the judgment with which the other members of the House agreed. At the outset of his speech, at p. 210, he identified the two common features of the cases:

 "The first is that if the lender had known the true value of the property, he would not have lent. The second is that a fall in the property market after the date of the valuation greatly increased the loss which the lender eventually suffered."

At pp. 216 and 221 he affirmed that the premise from which the debate proceeds is that the causation test has been satisfied and that there is a basic loss caused by the plaintiff having entered into the relevant transaction which satisfies the prima facie criteria for recoverability. I have already quoted from the summary of Lord Nicholls in the Nykredit case. And in the same case Lord Hoffmann at p. 1638F reaffirmed that the SAAMCO principle "has nothing to do with questions of causation".

      I have stressed this aspect of the Banque Bruxelles litigation and the way in which it arrived at your Lordships' House because it shows that the SAAMCO principle is not derived from any application of mathematics. The loss suffered by a lender in the event of a market fall may not be directly proportionate or equivalent to the original overvaluation. The SAAMCO principle is essentially a legal rule which is applied in a robust way without the need for fine tuning or a detailed investigation of causation.

      The other feature of the Banque Bruxelles litigation to which I wish to draw attention is the fact that the question of contributory negligence was raised by the facts of one of those cases but was not thought to give rise to any special problem or to the legal issues which have been debated in the present case.

      At the conclusion of his speech at p. 222, Lord Hoffmann applied his statements of the law to the individual cases. Taking first the SAAMCO case itself, he said:

 ". . . the lenders on 3 August 1990 advanced £11m. on a property valued at £15m. May J. found that the actual value at the time was £5m. On 5 August 1994 the property was sold for £2,477,000. May J. quantified the loss at £9,753,927.99 and deducted 25 per cent. for the plaintiff's contributory negligence. The consequence of the valuation being wrong was that the plaintiffs had £10m. less security than they thought. If they had had this margin, they would have suffered no loss. The whole loss was therefore within the scope of the defendants' duty. It follows that the appeal must be dismissed."

It is to be observed that this approach applies the percentage reduction in the lender's damages to the lender's basic loss, the £9,753,927.99, not to the cap. Arithmetically the two approaches did not give the same answer in the SAAMCO case. The judgment which was upheld was for the sum £7.3m: 25 per cent. off £10m. would be £7.5m. The point was not argued but it is not insignificant that both the parties and Lord Hoffmann assumed that the right way to take into account contributory negligence was to apply the reduction to the basic loss which, apart from the SAAMCO principle would be the damages recoverable by the lender.

The SAAMCO principle:

      As emphasised by Lord Hoffmann and Lord Nicholls, and as I have already observed, the SAAMCO principle does not involve any question of factual causation. It involves a question which arises subsequent to the ascertainment of the lender's basic loss arising from the valuer's breach of duty. Further, as I also observed, it does not involve an approach of scientific apportionment. Although the speeches of Lord Hoffmann include the word "attributable," it is not used as a factual concept but as a legal one. If an analogy is required, one can be found in the concept of remoteness of damage, for example the damages recoverable under the rules in Hadley v. Baxendale (1854) 9 Exch 341 for breach of contract. As has been pointed out in a number of cases (eg County Ltd. v. Girozentrale [1996] 3 All E.R. 834; and see McGregor on Damages 16th ed., (1997), para. 241 et seq), there is a close relationship between the application of such concepts as remoteness, contributory negligence and causation (and, for that matter, scope of duty of care). The same result can often be justified or formulated in any of these three ways.

      The principle drawn upon by Lord Hoffmann in the SAAMCO case is stated in terms of, and defined by reference to, the scope of the duty of care. This is a distinct legal concept but is sometimes referred to in the language of remoteness of damage. The decision of the Privy Council in Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co. Ltd. (The Wagon Mound) [1961] AC 388, is commonly referred to as having revised and restated the law of remoteness of damage in the tort of negligence (disapproving In re Polemis and Furness Withy & Co. [1921] 3 K.B. 560). But the actual decision from which this consequence flowed was expressed in terms of the scope of the tort of negligence. In that case the defendant had been responsible for a spillage of oil which had caused some damage which was foreseeable and some which was not. It was held that the defendant was only liable in the tort of negligence for the foreseeable damage. In the words of the head note:

 "There is not one criterion for determining culpability (or liability) and another for determining compensation; unforeseeability of damage is relevant to liability or compensation--there can be no liability until the damage has been done; it is not the act but the consequences on which tortious liability is founded."

Thus it is the scope of the tort which determines the extent of the remedy to which the injured party is entitled.

      This approach was developed in the speech of Lord Oliver in Caparo Industries Plc. v. Dickman [1990] 2 AC 605. That was the case in which it was held that the statutory auditor of a company did not owe a duty of care to investors. That it was forseeable that investors might place reliance upon the auditor's certificate and suffer a loss as a result did not suffice to establish liability to them in the tort of negligence since that was outside the scope of the function which statutory auditors were performing. (c.f. Smith v. Eric S. Bush [1990] 1 AC 831.) Lord Oliver of Aylmerton said, at p. 654:

 "To widen the scope of the duty to include loss caused to an individual by reliance upon the accounts for a purpose for which they were not supplied and were not intended would be to extend it beyond the limits which are so far deducible from the decisions of this House."

Lord Oliver adopting a statement of the law by Brennan J. in the High Court of Australia in Sutherland Shire Council v. Heyman, (1985) 60 A.L.R. 1 at 48, which followed The Wagon Mound, said, at p. 651:

 "It has to be borne in mind that the duty of care is inseparable from the damage which the plaintiff claims to have suffered from its breach. It is not a duty to take care in the abstract but a duty to avoid causing to the particular plaintiff damage of the particular kind which he has in fact sustained."

It was on statements such as this that Lord Hoffmann founded his reasoning in the SAAMCO case. (See particularly [1997] AC 191 at 211-212.)

      The development of this reasoning in the SAAMCO case was that Lord Hoffmann, instead of applying it to kinds or categories of damage, applied it to the quantification of damage. Lord Hoffmann said, at p. 212:

 "The scope of the duty, in the sense of the consequences for which the valuer is responsible, is that which the law regards as best giving effect to the express obligations assumed by the valuer: neither cutting them down so that the lender obtains less than he was reasonably entitled to expect, nor extending them so as to impose on the valuer a liability greater than he could reasonably have thought he was undertaking.

 What therefore should be the extent of the valuer's liability?"

He answered this question by formulating the principle, at p. 213:

 "Normally the law limits liability to those consequences which are attributable to that which make the act wrongful. In the case of liability in negligence for providing inaccurate information, this would mean liability for the consequences of the information being inaccurate."

It was by this route that he arrived at the point which made it necessary to ask "what element of this loss is attributable to the inaccuracy of the information". (p. 216E). The effect of his decision was that in the ordinary case there would be a "cap" on the amount of the damages which the lender could recover from the valuer being the amount of the overvaluation. However, Lord Hoffmann was at pains to explain that he was not adopting a theory which simply had placed a "cap" on the lender's recoverable damages. He said at pp. 219-220

  "An alternative theory was that the lender should be entitled to recover the whole of his loss, subject to a 'cap' limiting his recovery to the amount of the overvaluation. This theory will ordinarily produce the same result as the requirement that loss should be a consequence of the valuation being wrong, because the usual such consequence is that the lender makes an advance which he thinks is secured to a correspondingly greater extent. But I would not wish to exclude the possibility that other kinds of loss may flow from the valuation being wrong and in any case, as Mr. Sumption said on behalf of the defendants York Montague Ltd., it seems odd to start by choosing the wrong measure of damages (the whole loss) and then correct the error by imposing a cap. The appearance of a cap is actually the result of the plaintiff having to satisfy two separate requirements: first, to prove that he has suffered loss, and, secondly, to establish that the loss fell within the scope of the duty he was owed."

A result of this reasoning is that the damages which, in the present case, the plaintiffs can recover are confined to that part of the plaintiffs' basic loss caused by the defendants' negligence which can be equated in money terms to the amount of the defendants' overvaluation.

The SAAMCO Principle and Contributory Negligence:

      As I have already pointed out, in the SAAMCO case itself, it was not thought that this question of application gave rise to any separate problem. Nor, in my judgment should it. Section 1(1) of the Act of 1945 can be divided into three parts. The first part identifies a situation: where a claimant suffers damage as the result partly of his own fault and partly of the fault of another. The second part provides that that fact shall not defeat the claim of the former against the latter. The third part provides that the damages recoverable by the claimant in respect his damage shall be reduced to such an extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage. As previously explained, I do not accept the plaintiffs' argument that the damage, their basic loss, falls to be sub-divided. In accordance with the decisions of the judge and the Court of Appeal in the present case, Froom v. Butcher (sup) and the formulation of Lord Hoffmann, the totality of the plaintiffs' loss was partly caused by the defendants' fault and therefore the present case comes within the scope of section 1(1) of the Act of 1945. But that is not the end of the matter. It is still necessary to consider the third part of the statutory provision.

      The third part of section 1(1) requires the court to form a view as to what it thinks is just and equitable having regard to the plaintiffs' share in the responsibility for the damage and to reduce the plaintiffs' recoverable damages accordingly. It is at this point that the court has to ask itself whether and, if so, to what extent a further reduction in the plaintiffs' basic loss is to be made beyond that already required by the application of the SAAMCO principle.

      Is it just and equitable that plaintiffs who have suffered damage in the sum (using round figures) of £612,000 partly as a result of the defendants' fault and partly as the result of their own should have their recoverable damages reduced below the sum of £500,000? The answer which I give to this question in accordance with the findings of contributory negligence which were made by the judge at the trial is that there should be a further reduction in the plaintiffs' recoverable damages. Assume that the overvaluation had been of the order of £615,000: the SAAMCO principle would on the figures have been irrelevant but the plaintiffs' recoverable damages would nevertheless have fallen to be reduced by 20 per cent. so as to arrive at the figure, £489,000. On the judge's findings as to contributory negligence, the plaintiffs would not recover more than that figure under the Act of 1945.

      The next question is: does it make a difference that the starting point exceeded the amount of the overvaluation? The answer that I would give to this question, on the facts of this case, is that it does not. It is not just and equitable to make any further reduction. The resultant figure is within the scope of the duty of care which the judge has found that the defendants have breached. This approach in effect accommodates and recognises the arguments which the plaintiffs have advanced in criticism of the decision of the Court of Appeal. It is not just and equitable that the plaintiffs' recoverable damages be reduced to £400,000 on account of contributory negligence which is already fully taken into account by reducing them to £489,000. The primary element in the judge's assessment of contributory negligence, the overlending point, is something which can, both mathematically and logically, be said to have made a different contribution to the plaintiffs' overall loss to that made by the defendants' overvaluation.

      It is easy to demonstrate that the decision of the Court of Appeal can give rise to unacceptable results. My noble and learned friend Lord Millett whose speech I have read in draft already comments on this feature. It can also be said that their decision departs from the approach of Lord Hoffmann adopted by your Lordships' House in the SAAMCO and Nykredit cases and would attempt to revert to something akin to the scientific approach of Phillips J. which was not adopted by the Court of Appeal or the House of Lords in the SAAMCO case. The decision of the Court of Appeal in the present case in effect makes the same deduction twice over. The SAAMCO principle already involves an exercise of attribution in relation to the extent of the defendants' legal responsibility for the plaintiffs' basic loss. That fact must be taken into account in deciding what further, if any, reduction in the plaintiff's recoverable damages is just and equitable.

      My conclusion therefore is that just as Lord Hoffmann has formulated a general principle which is easy of application in all save exceptional cases, so also will the right answer on the application of section 1(1) of the Act of 1945 be arrived at by applying the traditional percentage reduction to the lender's basic loss before making any further deduction on account of the SAAMCO principle. I stress that these are rules of thumb; to adopt the language of Lord Nicholls, the principle has to be translated into practical terms. They do not aspire to mathematical precision nor is it desirable that any attempt be made in the ordinary run of cases to make them mathematically precise since the data (the evidence) will not normally, given the complexity of the situation, be sufficient to justify such precision. (See the Court of Appeal in Banque Bruxelles [1995] Q.B. 375.) The task of the court is to make a just and equitable assessment.

      In my judgment this appeal should be allowed. It was not just and equitable for the Court of Appeal to reduce the plaintiffs' recoverable damages to £400,000. The just and equitable figure was £489,398.81. The question of what statutory interest should be added to that figure in accordance with the judgment of your Lordships' House in the Nykredit case will have to be considered by a judge in compliance with the remission ordered by the Court of Appeal.

LORD MILLETT

My Lords,

      In 1990 the appellant advanced £1,050,000 on the security of land valued by the respondents at £1,500,000. The advance represented 70 per cent. of valuation. The judge found that the land had been negligently overvalued, and that the true value of the land at the date of the advance was only £1,000,000. In 1994, following a catastrophic collapse of the property market, the appellant realised its security for £435,000, thereby incurring a loss of £615,000. After taking into account interest paid by the appellant and payments received from the borrower together with a sum of £40,000 which the appellant conceded was deductible because of a failure on its part to mitigate its loss, the overall loss on the transaction amounted to £611,748. The amount of the overvaluation (£500,000) was less than this, and accordingly this latter sum would have represented the amount of damages recoverable by the appellant in the absence of contributory negligence on its part: see South Australia Asset Management Corporation v. York Montague Ltd. [1997] AC 191 and Nykredit Mortgage Bank Plc. v. Edward Erdman Group Ltd. (No. 2) [1997] 1 WLR 1627 ("Nykredit").

      The judge made two findings of contributory negligence. He found that the appellant was negligent in making the loan without having obtained from the borrower information required by its own form. The judge also found that the appellant was imprudent in advancing as much as 70 per cent. of valuation. He did not make any finding on the amount which a prudent mortgage lender would have advanced, whether 65 per cent. or 60 per cent. of valuation, but he expressed himself in terms which showed that, of the two items of contributory negligence, he considered the overlending to be much the more potent cause of loss.

      Having found that the appellant had itself contributed to the loss, the judge applied a broad brush to the assessment of damages. Taking both findings of contributory negligence together, he assessed their combined contribution to the loss at 20 per cent. There is no appeal from this assessment, though it is to be observed that, in respect of the second and more serious finding of contributory negligence, there was no need to apply a broad brush; the consequences of advancing too high a proportion of valuation can be precisely calculated. 5 per cent. of £1.500,000 is £75,000; for every 5 per cent. of valuation which the appellant advanced in excess of what was prudent it increased its loss by that amount.

      Having thus found that 20 per cent. of the loss or damage (£611,748) which the appellant had suffered as a result of the transaction was the result of its own fault, the judge awarded damages of £489,398. This figure represented 80 per cent. of £611,748 and, being less than the amount of the overvaluation, represented a loss which was entirely within the scope of the respondents' duty of care.

      The Court of Appeal rejected the appellant's argument that no imprudence in their lending policy could constitute contributory negligence, and held that the judge was entitled to find that the appellant was partly responsible for the overall loss of £611,748 which it had incurred on the transaction. It accepted the judge's assessment of the contribution which the appellant's own negligence made to the loss at 20 per cent. and held that he was entitled to apportion the damages accordingly. But it varied the order made by the judge. Instead of awarding the appellant damages of £489,398, representing the 80 per cent. of the overall loss of £611,748 which was not attributable to its own fault, as the judge had done, it reduced the award to £400,000, being 80 per cent. of the respondents' overvaluation of £500,000. The remarkable consequence is that, if the award stands, the appellant will bear more than one third of a loss for which it was only 20 per cent. to blame.

      It is necessary to recapitulate what this House has laid down in relation to the assessment of damages in cases of the present kind. Two calculations are required. The first is a calculation of the loss incurred by the lender as a result of having entered into the transaction. This is an exercise in causation. The main component in the calculation is the difference between the amount of the loan and the amount realised by enforcing the security.

      The second calculation has nothing to do with questions of causation: see Nykredit at p. 1638 per Lord Hoffmann. It is designed to ascertain the maximum amount of loss capable of falling within the valuer's duty of care. The resulting figure is the difference between the negligent valuation and the true value of the property at the date of valuation. The recoverable damages are limited to the lesser of the amounts produced by the two calculations.

      It is to be observed that neither amount is an element or component of the other. Either may be the greater, for they are the results of completely different calculations. In mathematical terms, they bear the same relationship to each other as a-b does to c-d. The figure produced by the second calculation is simply the amount of the overvaluation. It is not the loss or any part of it, and cannot be equated with the amount of the loss sustained by the lender in consequence of the overvaluation. The two are the same only in a case where the lender has advanced 100 per cent. of valuation.

      Section 1(1) of the Law Reform (Contributory Negligence) Act 1945 applies "where any person suffers damage as the result partly of his own fault and partly of the fault of another". The appellant submits that, as a result of the respondents' negligent overvaluation, it suffered damage of £500,000, and that it is inappropriate to reduce the damages in order to reflect fault on its part which played no part in their breach of duty.

      Now if the premise were correct, viz. that the £500,000 represented all or any part of the damage suffered by the appellant, then the conclusion would follow. But, as I have already pointed out, it is not correct. The £500,000 is merely the amount of the overvaluation. The damage which the appellant suffered as a result of the transaction which they entered into in consequence of the overvaluation is not £500,000 but £611,748. This is the damage referred to in section 1(1). This damage was due to the insufficiency of the security. The sufficiency of any security, however, depends on a combination of two factors: the value of the security and the amount of the advance. If the respondents had given a lower valuation, or if the appellant had lent a lower proportion of valuation, then in either case the appellant's loss would have been less. Accordingly, the loss of £611,748 which the appellant suffered was partly as a result of its own fault and partly of the fault of the respondents within the meaning of section 1(1) of the Act.

      Where the subsection applies, "the damages recoverable in respect" of that damage are to be reduced "to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage." In the present case, the damage in question was £611,748, the appellant's share in the responsibility for that damage was 20 per cent., and the damages which would have been recoverable if there had been no contributory negligence would have been £500,000. The Court of Appeal seem to have assumed that, if the appellant was 20 per cent. responsible for the damage of £611,748, it must be just and equitable to reduce the amount of the damages that would otherwise be recoverable to the same extent. Normally, no doubt, that is so; but then normally the amount of the damages which would otherwise be recoverable and the amount of the damage are the same. But in the present case this ignores the fact that the result of the appellant's own imprudence has been to cause it to suffer a measure of irrecoverable loss. This ought to be reflected in the apportionment of the overall loss. Deeper analysis shows that it may be appropriate to do this by first reducing the amount of the irrecoverable damages until they are exhausted, and only then reducing the amount of the recoverable damages.

      As I have already pointed out, 5 per cent. of £1,500,000 is £75,000. It follows that if a prudent lender would have advanced only 65 per cent. of valuation instead of 70 per cent., it would have suffered a loss of (£611,748-75,000) = £536,748, and would have recovered damages of £500,000. It cannot be right to award damages of £500,000 to a lender who prudently lends 65 per cent. of valuation and yet reduce the damages to £425,000 to a lender because he has imprudently lent more than 65 per cent. of valuation. It is sufficient that he should bear the whole of the additional loss of £75,000 himself. Likewise, it cannot be right to award damages of (£611,748- 150,000) = £461,748 to a lender who has prudently lent only 60 per cent. of valuation and yet reduce the damages to £350,000 to a lender because he has imprudently lent more than 60 per cent. of valuation. In each case the lender has lent too much and he must bear the whole of the resulting additional loss himself. This may result in his suffering a reduction in the amount of the damages which can be recovered from the valuer, but it need not do so.

      Where the lender's negligence has caused or contributed directly to the overvaluation, then it may be appropriate to apply the reduction to the amount of the overvaluation as well to the overall loss. Where, however, the lender's imprudence was partly responsible for the overall loss but did not cause or contribute to the overvaluation, it is the overall loss alone which should be reduced, possibly but not necessarily leading to a consequential reduction in the damages. When the consequences of the lender's imprudence cannot be calculated, the judge will have to do the best he can to assess the parties' respective contributions. But the court should not speculate when it can calculate.

      In the present case the appellant was found to be at fault in two respects. Neither of them caused or contributed to the overvaluation. The judge assessed the appellant's share in the responsibility for the overall damage at 20 per cent. and reduced the damages to £489,398 accordingly. In my opinion this was the right approach. The amount of damages which the judge awarded properly reflected the 80 per cent. of the overall loss for which the respondents have been found to be responsible and which, being less than the amount of the overvaluation, fell wholly within the scope of their duty of care.

      I would allow the appeal and restore the award of damages made by the judge.