The Court of Appeal has reversed the first instance decision in the case of Emmet Thomas Scullion v Bank of Scotland Plc (trading as Colleys), in which it was held that a residential valuer owed a duty of care to a buy to let investor.

The facts

In 2002, Mr Scullion purchased a new build flat in Cobham, Surrey, as a buy to let investment.   He intended to let out the flat for an amount that would be sufficient to cover the mortgage and other outgoings and also provide him with some extra income.  In due course he also hoped to make a capital profit by selling the flat.  Mr Scullion’s mortgage lender, Mortgages plc, engaged Colleys to value the flat and, in the usual way, Mr Scullion provided the money to pay Colleys’ valuation fee. 

Colleys valued the flat at £353,000 on an open market basis and stated that it would be expected to achieve a rental of £2,000 per calendar month.  However, following completion of the purchase, Mr Scullion had difficulty finding a tenant and when he did manage to let out the flat some six months later it was for a monthly rental of only £1,050, significantly less than the figure stated in Colleys report.  The tenant vacated after a year and Mr Scullion sold the flat for £270,000 in 2006.  Mr Scullion subsequently issued proceedings against Colleys for negligence in over-stating both the capital value of the flat and the expected rental income.

The High Court decision

At first instance, it was held that Colleys were not liable in damages to Mr Scullion for over-stating the capital value of the flat, as the purpose of the valuation and hence the scope of Colleys duties did not extend to advising either Mortgages plc or Mr Scullion as to the wisdom of entering into the transaction generally or the possibility that the market value of the flat might fall after purchase.   It should also be noted that there were incentives offered at the time of the original purchase and also difficulties with registration, both of which had a bearing on the capital value of the flat and the difference between the price that Mr Scullion paid and the price he achieved on sale in 2006.

However, in terms of the anticipated rental value, the Court held that Colleys owed Mr Scullion a duty of care and were liable in damages to compensate him for the losses caused by the fact that he was unable to achieve a monthly rental that was sufficient to cover the mortgage and other outgoings for the flat.  It was held that Colleys knew Mr Scullion was a buy to let purchaser and, as such, they ought to have appreciated that the statement of attainable rental value was critical for him to ensure that, when committing to monthly mortgage payments and other outgoings relating to the flat, he was doing so on the basis that he could expect to receive sufficient rental income to discharge those liabilities. 

The Court of Appeal decision

In giving the leading judgment on appeal, Lord Neuberger MR said that the transaction was essentially commercial in nature as it concerned a buy to let investment property.  As such, he distinguished it from cases that involved an ‘ordinary domestic householder purchasing his home’.  In view of this underlying feature of the transaction, Lord Neuberger considered that it was not sufficiently clear on the evidence available that it would have been foreseeable to Colleys that Mr Scullion would rely on the valuation report, rather than obtaining his own advice from an estate agent or valuer.  Nor did he consider it sufficiently clear that the relationship was one of proximity or that it would be ‘just and equitable’ for Colleys to be held liable to Mr Scullion for any damage he suffered as a result of their negligence in assessing the rental value of the flat when preparing and submitting the report to Mortgages Plc. 

It was therefore held that Colleys did not owe a duty of care to Mr Scullion.  Accordingly the appeal was allowed and Mr Scullion’s claims were dismissed.

Conclusion

In overturning the High Court’s decision to extend the scope of residential valuers’ duties, the judgment of the Court of Appeal will no doubt be welcomed by valuers’ and their insurers.   However, valuers should be mindful that the Court of Appeal’s decision was based on the facts of this particular case and the outcome may well have been different had slightly different facts applied. 

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

For further information, please contact Catherine Connolley at or Caroline Seaton at