Andrea Ball v Victoria Mutual Building Society

• Jurisdiction: Jamaica
• Judge: Laing, J
• Judgment Date: 29 November 2017
• Neutral Citation: [2017] JMSC Civ 171
• Docket Number: CLAIM NO. 2011HCV06792
• Court: Supreme Court (Jamaica)
• Date: 29 November 2017

[2017] JMSC Civ. 171

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

IN THE CIVIL DIVISION

Laing, J

CLAIM NO. 2011HCV06792

Between

Andrea Ball

Claimant

and

Victoria Mutual Building Society

1 ^st Defendant

and

David Thwaites & Associates Ltd

2 ^nd Defendant

and

Karen Thomas

3 ^rd Defendant

Between

Victoria Mutual Building Society

Ancillary Claimant

and

Andrea Ball

Ancillary Defendant

Mrs Marvalyn Taylor-Wright and Mr Anwar Wright instructed by Taylor-Wright & Company, Attorneys-at-Law for the Claimant

Mr Emile Leiba and Mr Jonathan Morgan instructed by DunnCox, Attorneys-at-Law for the 1 ^st Defendant

Mr Kwame Gordon instructed by Samuda & Johnson, Attorneys-at Law for the 2 ^nd Defendant

Ms Cavelle Johnston and Ms Kaysian Kennedy instructed by Townsend, Whyte & Porter Attorneys-at-Law for the 3 ^rd Defendant

Cases Mentioned:

Hedley Byrne & Co v. Heller & Partners Ltd [1964] AC 465 – Michael and other v. Miller and others [2004] EWCA Civ 282 – Cuckmere Brick Co. Ltd v. Mutual Finance Ltd [1971] Ch. 949 – Moses Dreckett v. Rapid Vulcanising Co. Ltd (1998) 25 JLR 130 – Kwong Lam v. Wong Chit Sen (1983) 1 W.L.R. 1349 – Davy v. Garrett (1878) 7 Ch. D. 473.

Mortgages — Duty of care of Mortgagee in exercising power of sale — Whether reliance can be placed on price achieved at auction — Whether price obtained at auction was due to fault of Mortgagee

Negligence — Duty of care of valuer in valuing property

OPEN COURT

THE CLAIM

1 This dispute concerns property located at Lot 2, Liguanea Villas, 11 Liguanea Avenue, Kingston 6, in the parish of St. Andrew. The duplicate certificate of title shows that it is registered at Volume 1401 Folio 775 of the Register Book of Titles and reflects transfer No. 1438623 registered on the 1 ^st November 2006 to the Claimant, Ms Andrea Ball, for a consideration of One Million Five Hundred Thousand Dollars ($1,500,000.00). It is not disputed that this purchase price was in respect of the land only and that a townhouse (the “Townhouse”), was subsequently erected on the property. The land and townhouse will collectively be referred to in this judgment as (“the Property”).

2 The 1 ^st Defendant, Victoria Mutual Building Society (“VMBS”), is a building society incorporated in Jamaica under the provision of the Banking Societies Act. VMBS granted a number of loans to the Claimant. Among these loans was a loan in the sum of Fourteen Million Dollars ($14,000,000.00) to the Claimant on the security of the Property which is evidenced by mortgage No.1469732 registered on the 2 ^nd May 2007. VMBS also granted a loan on the security of the Property in the sum of Eight Hundred and Ninety Five Thousand Dollars ($895,000.00) evidenced by Mortgage number 1505020 registered on the 20 ^th November 2007.

3 Ms. Ball fell into arrears with her monthly payments to VMBS and VMBS exercised its Power of Sale contained in the Mortgage. A public auction was conducted by DC Tavares Finson on the 6 ^th March 2011 and the Property was purchased by the Third Defendant, Ms Karen Thomas (“Ms. Thomas”) for a consideration of $12,750,000.00 (“the Sale Price”).

4 Ms. Ball seeks a declaration that she is entitled to the equity of redemption in the Property and damages against VMBS for breach of the equitable duty to act in good faith and to take reasonable care to obtain a proper price at the date of the sale in exercise of the mortgagee's power of sale. She also claims damages against the 2 ^nd Defendant, David Thwaites and Associates Ltd (“DTA”) fraud and/or negligence arising from a valuation report it prepared dated 2 March 2011 (the “Thwaites Valuation Report”) and claims against Ms Thomas for fraud.

5 VMBS has also filed an ancillary claim against Ms. Ball, claiming the sum of Four Million Seven Hundred and Fifty-one Thousand Four Hundred and Eighty-five Dollars and Twenty-one Cents ($4,751,485.21) which it asserts is the balance due and owing to VMBS as at April 22, 2013 in respect of her loan accounts with that institution.

6 In this judgment I will first assess the claims in fraud and/or negligence against DTA and in doing so make a finding as to the market price of the Property. I will then assess the claim against VMBS and decide whether VMBS took reasonable steps to obtain the market price for the Property and whether if in doing so it discharged its duty as mortgagee.

Ms. Ball's case against DTA

7 Ms. Ball claims against DTA for fraud and negligence. She complains that the Thwaites Valuation Report was prejudiced, erroneous and misleading and accordingly did not disclose a true market value of the Property. It was pleaded by Ms. Ball that by not inspecting the interior of the Townhouse on the Property, DTA failed to include the following features of value:

• (1) Loft with balcony, bedroom with closet and own unfinished bathroom;

  • (ii) Porcelain tiles and parquette floor; and

  • (iii) Floor area of 209.45 square metres (2,260 square feet) instead of 128.60 square metres (1,384.25 square feet).

Ms. Ball asserts that by preparing the Thwaites Valuation Report without inspecting the interior of the Property and providing it to VMBS knowing that it was intended to be used to inform the sale of the Property, DTA failed to conform to the standard of care owed by professionals in its field.

Did DTA owe a duty of care to Ms Ball

8 Following the developments in the law of tort since Hedley Byrne & Co v Heller & Partners Ltd [1964] AC 465, it is now settled law that a professional such as a valuer owes a duty in contract and in tort to his client and the duty in tort may extend to third parties with whom there is no contractual relationship depending on the degree of the proximity between them. This is founded on the principle that the duty of such a person “ extends to all those persons, who would be so closely and directly affected by his acts and his omissions that he ought reasonably to have them in his contemplation”. Mrs Taylor Wright on behalf of Ms. Ball relied on a number of cases including Diana Eileen Merrett v John R.H. Babb [2001] EWCA Civ 214 in support of the correctness of this principle. That case concerns slightly different facts but is helpful in that the English Court of Appeal reviewed a number of cases and traced the history of the development of the duty of care as it relates to certain professionals.

9 It was submitted by Mr Gordon on behalf of DTA that the cases relied on by Ms. Ball as supporting the existence of a duty of care all deal with instances where sufficient proximity between the claimants and the valuer had been established. Counsel submitted that in this case DTA could only be said to owe a duty to Ms. Ball, she being a third party, if it can be shown that DTA had reason to believe that the valuation of the Property was going to be relied and acted upon by her. Counsel of course argued that it was not contemplated that Ms. Ball would have relied on the Thwaites Valuation Report. I must admit that I find Counsel's submission on this issue to be unduly restrictive to the point of being inaccurate. DTA ought to have appreciated that the purpose of the report was to guide VMBS in the sale process and in determining what price it was prepared to accept. The fact that the sale was intended to be by auction would not eliminate the importance of the report. In those circumstances, DTA ought to have appreciated that Ms. Ball, as Mortgagor, was a person who would be so closely and directly affected by its acts and its omissions that it ought reasonably to have had her in its contemplation when it was assessing the market value of the Property. In the premises I find that DTA did owe a duty of care to Ms. Ball.

10 Mr Gordon submitted that if the Court finds that a duty of care is owed, then DTA would only be negligent if Ms. Ball proved that:

• a. the 2nd Defendant's opinion of value was wrong in that it was outside the range permitted to a non-negligent valuer; and

• b. the 2nd Defendant failed to act in accordance with the standards or practices which are regarded as acceptable by a respectable body of opinion in its profession

There is authority which supports this position. By way of example, in Craneheath Securities v. York Montague Ltd [1996] 1 EGLR 130 at 132 Balcombe LJ (with whom Otton and Aldous LJJ agreed) said as follows:

“Since Craneheath did not establish that the figure of £5.25m was wrong, then I agree with Mr Stow that Craneheath's action must fail. It would not be enough for Craneheath to show that there have been errors at some stage of the valuation unless they can also show that the final valuation was wrong. If authority be needed for so self-evident a proposition, it can be found in Mount Banking Corporation Ltd v. Brian Cooper & Co [1992] 2 EGLR 142 at pp. 144–5, 149.”

11 However, in many of the authorities the test does not appear to be so clearly defined. The earlier cases tended to favour the reasonable standards element referred to above and this has often been termed the conduct test. In contrast, the more recent cases, which perhaps started with Singer & Friedlander v. John D Wood & Co [1977] 2 EGLR 84, have tended to focus on the final figure as opposed to the process employed by the valuer in reaching it. The final figure is then usually assessed in relation to the level of variance with what the court determines to be a bracket of correct value and is termed the margin of error or bracket approach. This bracket approach recognizes that every valuation has a subjective element and that differences do not necessarily mean that someone is negligent. This recognition is aptly discussed in the case of Singer v Friedlander where Watkins J said:

“The valuation of land by trained, competent and careful professional men is a task which rarely, if ever, admits of precise conclusion. Often beyond certain well-founded facts so many imponderables confront the...