Analysis of Platform Funding Ltd v Bank of Scotland Plc [2008]

An analysis of the recent Court of Appeal decision concerning surveyor's duties in Platform Funding Ltd v Bank of Scotland Plc [2008]

Background

This ruling of the Court of Appeal has established that a surveyor’s duties under his retainer are not necessarily limited to carrying out an inspection and valuation with reasonable skill and care. A retainer can include contractual obligations which are effectively unqualified. In the event that the surveyor fails to discharge those obligations he will be in breach of contract even if he exercised reasonable skill and care in carrying out his instructions.

Facts:

In this case the surveyor was instructed to carry out an inspection and valuation of a partially constructed dwelling for mortgage purposes. The lender told the surveyor to contact the borrower to arrange to view the property. The property was one of several which were under construction on the same site.

At the time of the inspection, the borrower deliberately led the surveyor to view the wrong property. Based on the resulting valuation, the lender made an advance which was secured on the property that the surveyor was intended to value and not upon the property which he actually valued. As the latter was worth more than the former, the valuation figure provided to the lender was wrong. These facts were discovered when the borrower defaulted on the mortgage and the property was repossessed.

The outcome of the appeal.

Notwithstanding that the surveyor had exercised reasonable skill and care in carrying out his valuation, he was held to be liable to the lender for the loss which it suffered on realization of the security. The Court of Appeal’s decision was based on two findings:

(1) A surveyor is subject to an inherent obligation to inspect and value the correct property; and
(2) The valuation certificate signed by the surveyor included the following statement:
“I certify that the property offered as security has been inspected by me.”
On the facts, the property which had been valued was not the property which had been “offered as security”. Accordingly, there was a breach of contract.

Conclusion:

It is conceivable that the inadvertently misleading valuation certificate was enough to determine this case against the surveyor. However, the majority of the Court of Appeal (Rix & Moore-Bick LJJ) went further and effectively imposed an absolute obligation on the surveyor to locate, inspect and value the correct property. The exercise of reasonable skill and care in discharging that particular function was not sufficient even though the lender’s instructions were to contact the borrower to arrange the viewing. It may be thought that this is a harsh result.

By contrast, Sir Anthony Clarke MR, in a dissenting judgment observed:

“In my opinion, it is improbable that, if the parties had been asked after the telephone conversation in which [the surveyors] accepted instructions whether [the surveyors] had assumed an unqualified obligation as to the identity of the property but not as to the valuation, they would have said no. They would surely have contemplated that the same duty would apply to the execution of all their instructions.

In my opinion there was no clear term imposing an absolute obligation on [the surveyors] to locate the property.”

Perhaps this reasoning sits more easily with the commercial reality of the relationship between the lender and surveyor. In this respect it should be remembered that the valuation fee was a mere £250 whereas the liability incurred for the breach of contract was in excess of £30,000.
Notwithstanding their disagreement as to the outcome of this particular case, all the members of the Court of Appeal did agree with respect to four general principles as to the basis of liability in cases involving professional advisers. They were that:
(1) the default obligation is limited to the taking and exercise of reasonable care; and
(2) that it requires special facts or clear language to impose an obligation stricter than that of reasonable care; and
(3) that a professional man will not readily be supposed to undertake to achieve a guaranteed result; and
(4) if he is undertaking with care that which he was retained or instructed to do, he will not readily be found to have warranted to be responsible for a misfortune caused by the fraud of a third party.