U C B Bank PLC v. David J Pinder PLC, Hepherd Winstanley & Pugh [1998] EWHC Technology 320 (14th May, 1998)

JUDGMENT Introduction 1. At the beginning of March 1991 a Mr and Mrs Western applied to the Plaintiff bank for a mortgage advance of £140,000, to be secured on a public house at Portsmouth at which they were trading. The First Defendant, a company carrying on the profession of a surveyor and valuer, was engaged by the Plaintiff to provide a valuation and on 11 March 1991 did so, reporting that the value of the property with vacant possession, existing use rights and licence was £185,000 and that the value of the property and business on a fully operational basis was £260,000. 2. On 4 April 1991 the Plaintiff offered to advance the sum of £140,000 to the Westerns and shortly afterwards it engaged the Second Defendants as its solicitors in the transaction. 3. On 16 August 1991 the mortgage transaction was completed, the Plaintiff advancing the sum of £140,000 and obtaining a first Legal Charge over the property. There was also a second Legal Charge in favour of brewers. 4. The borrowers defaulted on their obligations under the mortgages and on 23 October 1991 the second mortgagees appointed receivers. On about 7 March 1992 the Plaintiff took possession of the property as mortgagee and as such it then sold it, the sale being completed on 27 April 1993 and yielding net proceeds of £92,807.22. 5. The Plaintiff sued both Defendants for breach of contractual and common law duties of care causing, it alleged, the loss and damage suffered by the Plaintiff by reason of making the mortgage advance. The claim against the solicitor Second Defendants was discontinued and I am not concerned with it. The claim against the valuer First Defendant was pursued and defended, but on 20 March 1998, shortly before the trial fixed for 30 March, the First Defendant went into creditors' voluntary liquidation. The liquidator, who was aware of the proceedings, did not choose to instruct solicitors or counsel on behalf of the company, which was therefore unrepresented at the trial and took no part in it, although a director attended and observed the proceedings. 6. In the circumstances the Plaintiff attended simply to prove its case, which it did to my satisfaction, and but for one feature I should have said so without further formality and directed judgment to be entered accordingly. What caused me instead to reserve this judgment was the submission advanced by Mr Wardell, for the Plaintiff, as to the way in which I should deal with the allegations of contributory negligence pleaded by the First Defendant in its Defence. I propose, therefore, first to record very briefly my findings on the matters which the Plaintiff requires to prove on the other issues in the action and then to address that one question in more detail. Issues other than contributory negligence 7. The background facts are set out in paragraphs 1 to 4 above. They were all either admitted on the pleadings or established by the Plaintiff's evidence, and I find them proved. 8. It is admitted by the Amended Defence that the First Defendant owed to the Plaintiff the contractual and common law duties of care and skill alleged in the Amended Statement of Claim. There is one pleaded issue of significance as to the scope of those duties. It is alleged by the Plaintiff and denied by the First Defendant that the valuation of the property was to be "subject to a 90 day sale period", that is to say was to be of the price for which the property might reasonably be expected to be sold on the open market (itself defined in the usual way), given that period in which to offer it and negotiate a sale. The Defence admits that the Plaintiff's instructions to the First Defendant dated 7 March 1991 contained such a requirement but relies on a latter from the First Defendant to the Plaintiff dated 18 December 1990 as displacing that requirement as a term of the engagement. I was taken by Mr Wardell to those documents and through the relevant correspondence of which they formed part. I also heard evidence on this point from Mr Rainer, the Plaintiff's director and general manager for investment property and social housing. I find that the First Defendant had regularly valued for the Plaintiff on the "90-day" basis, that at the end of 1990 it had raised with the Plaintiff the question of altering this to a longer period, that in March 1991 negotiations between them on that question were in progress or in prospect but had reached no conclusion, and that the instructions of 7 March 1991 requiring a "90-day" valuation were accepted and acted upon without any qualification bearing on the present issue. In those circumstances the "90-day" basis was clearly a term of the contract, and I so find. 9. A number of allegations of negligence are pleaded, but I need consider only the first, which is that the true value of the property with vacant possession on the required basis was only £90,000. The Plaintiff's valuation expert witness, Mr Willis, gave evidence to that effect as part of a full report, and I accept it. In response to a question from me he gave it as his opinion that for a property of this kind, at the relevant date, he would expect any reasonably competent and careful valuer to have arrived at a valuation not more than 10% away from the true value. I accept that evidence also. I therefore find the allegation of negligence proved. 10. Causation is pleaded by the Plaintiff in the form of an allegation that had it known that the property was worth £120,000 at most (a figure apparently left unaltered by oversight when the pleaded true value was reduced to £90,000, but if the case is made out on the pleaded £120,000 it would be true a fortiori for the other figure) it would not have lent the sum of £140,000 or any sum to the borrowers. That is denied by the Amended Defence, but Mr Rainer gave evidence of reliance on the First Defendant's valuation as a condition of the decision to make the advance. I accept that evidence and therefore find causation proved. 11. There remain to be considered in this section the issues of damages and interest. I accept Mr Rainer's evidence in support of calculations of the Plaintiff's actual losses, which show that they were well in excess of £95,000 (the difference between the First Defendant's valuation of £185,000 and the true value of £90,000), which Mr Wardell rightly accepts is the limit of the Plaintiff's entitlement to damages on the authority of Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 . I find that that limit was reached by 11 June 1996, so that the Plaintiff is entitled to statutory interest from that date in accordance with Nykredit Mortgage Bank PLC v Edward Erdman Group Ltd [1997] 1 WLR 1627 . Whether the Plaintiff is entitled to judgment for those sums in full is of course subject to the issue of contributory negligence, which as already indicated I have postponed for separate consideration. Contributory negligence - the law 12. Mr Wardell's submission was that since the First Defendant took no part in the trial it was not open to the court to make any finding of contributory negligence against the Plaintiff. 13. He relied in the first instance on three authorities. The first is Fookes v Slator [1978] 1WLR 1293. That was a personal injuries claim arising out of a collision at night between the plaintiff's car and the defendant driver's unlit parked trailer. The defendant served no defence, was in breach of an order that he do so or be debarred from defending, and was not present or represented at the trial. The trial judge nevertheless, while finding him negligent, found the plaintiff one third to blame and reduced the damages accordingly. The Court of Appeal allowed the plaintiff's appeal. Sir David Cairns, with whom Orr and Stamp LJJ agreed, said that there appeared to be no direct English authority upon the question whether, in the absence of a pleading of contributory negligence, the court had jurisdiction to make a finding that there was such negligence on the part of the plaintiff (page 1295G). After citing the Law Reform (Contributory Negligence) Act 1945, which changed the status of such fault from that of an absolute defence to one operating only to reduce damages, he referred to a Scottish case in which the Sheriff-Substitute had directed a jury that since a plea of contributory negligence had been, in effect, withdrawn, they could not give effect to it and to extra-judicial and obiter comments in the same sense by Asquith J and Denning LJ and continued: It appears to me that .... it was not right in this case to treat the matter as if there were a plea of contributory negligence before the court. That seems to me to be the rule in relation to procedure. (page 1297H) 14. It is clear, in my view, that although the defendant in that case was indeed not present at the trial the ratio decidendi of the decision was not that fact but the absence of any issue of contributory negligence on the pleadings. In fact the words "as if there were a plea of contributory negligence before the court" imply, albeit obiter, that if there had been such a plea it would have been open to the trial judge to give effect to his finding. 15. The next authority is from New Zealand: Brown v Heathcote County Council (No 2) [1982] 2 NZLR 618. The plaintiffs' riverside house suffered from flooding and they sued both the County Council and the Drainage Board. The council pleaded and argued contributory negligence but the board did not. The plaintiffs succeeded against the board but failed against the council on the basis that the council owed no relevant duty. The council's plea of contributory negligence did not therefore fall to be determined, but Hardie Boys J had in his first judgment provisionally expressed the view that if that defence were open to the board he would reduce the plaintiffs' damages by two thirds on that account. He had reserved for further argument the question whether it was open to him to give effect to that view. He came to the conclusion that it was not. He referred to Fookes v Slator , which he held to be direct authority for the proposition that contributory negligence must be pleaded, rejecting the argument that it should be distinguished on the basis that the determining factor there had been that the defendant had been debarred from defending (page 620/35). He reviewed the subsequent New Zealand cases (some of which had followed Fookes v Slator and some not), the literature and authorities in other jurisdictions and concluded that Fookes v Slater was the authority he ought to follow, supported as it was in his view by the cases and texts he had referred to (page 623/12). 16. In the third case to which Mr Wardell referred me, Arab Bank PLC v John D Wood (Commercial) Ltd (unreported - 20 March 1998), the point before me was raised and argued on facts with striking similarities to those before me, the plaintiff bank having advanced money on mortgage in reliance on negligent valuations by two separate bodies of defendant valuers, contributory negligence having been pleaded by all defendants, and one of those defendants having gone into liquidation and not appeared at the trial. Wright J, however, took the course of dealing first with the issue of contributory negligence on the facts (which had been fully explored by those defendants who had appeared), and having found it not established he came to no conclusion on the objection in law taken there, as here, by the plaintiff against the absent defendant. He said: In the light of those findings, it is unnecessary for me to consider the interesting point raised by Mr Talbot QC to the effect that even if contributory negligence was established against the Plaintiff bank by the third and fourth Defendants, it would not be open to the first and second Defendants, in view of their non-attendance at the trial, to receive any advantage from such a finding. He referred to Fookes v Slator [1978] 1 WLR 1293; on consideration of that authority it seems to me that he may well be right in his contention, but it is not necessary for me to decide the point. (transcript, page 32) 17. I am clear that these authorities establish the necessity of pleading contributory negligence before it can be considered, but do not touch the issue whether, if it is pleaded, effect can be given to it in the relevant defendant's absence from the trial, provided of course it is made good on the evidence (being, ex hypothesi, evidence called by some other party who will often, as here, be the plaintiff). Mr Wardell's helpful researches suggest that there is no authority on that issue, which therefore falls to be decided on principle. 18. Mr Wardell made a number of submissions. He first sought to derive such comfort as he could from the last sentence of the above extract from the judgment in Arab Bank v John D Wood , but I do not consider it fair to Wright J to treat that as a considered opinion, obiter as it would in any event have been. He quite plainly and explicitly disclaimed any intention of deciding the point, and his attention does not seem to have been drawn to the treatment of Fookes v Slator in Brown v Heathcote CC or to any of the other reasons for understanding it to turn on the necessity of pleading the defence rather than on the defendant's absence. 19. Next, and perhaps most strongly, Mr Wardell submitted that the Fookes v Slator line of authority should be applied by way of analogy, in other words that failure to attend trial should be treated as equivalent to failure to plead. I do not find that persuasive. The function of pleadings is to establish what matters are in issue between the parties. That is in their hands; they are not obliged to plead any cause of action on the one hand or any defence on the other against their will. The rule applied in Fookes v Slator , that if they choose not to do so the court should not itself pursue unpleaded issues, follows naturally from those considerations. (It may be, of course, that it has exceptions, but that possibility does not affect the present discussion.) Once issues have been joined, however, the converse situation normally obtains: they have to be disposed of - usually by decision of the court on the merits, although there are other means, such as striking out and formal abandonment. There is no apparent reason why a defendant who does not appear at trial should be treated as if his pleaded defences had been abandoned or struck out - in fact he plainly is not so treated, for it is not in doubt that the plaintiff must still "prove his case"; it follows that at least all defences which leave the onus on the plaintiff must still be alive. That is not to say, of course, that a defendant's absence is of no consequence; far from it, since the practical results of his inability to call evidence, cross-examine or argue are commonly decisive. 20. Perhaps recognising the implausibility of identifying a defendant's absence with a failure to plead, in the face of the plaintiff's need to prove his case in the former situation but not the latter, Mr Wardell next rested his submissions on the fact that on the issue of contributory negligence the defendant bears the onus of proof. I do not see how that can help him. In civil litigation, in which the standard of proof is the balance of probability, onus can be determinative of substantive issues in two situations only: the first is that in which there is no evidence on the issue in question and the second that in which the evidence is equally balanced. In each of those situations the party on whom the onus lies loses; in all others the issue is decided by the preponderance of evidence and no need to resort to considerations of onus arises. Since the question of principle before me arises only on the basis that evidence called by another party, in particular the plaintiff, may go to support a plea of contributory negligence the existence of the first alternative cannot help towards finding the correct answer, while the latter arises only if the evidence has been weighed, which is precisely what Mr Wardell says cannot happen. 21. Finally, Mr Wardell submitted that the adversarial nature of the common law system of litigation required that an absent defendant be penalised in the way he advocated. But in my understanding "adversarial" is simply a convenient adjective by which to characterise certain distinctive features of typical common law systems (themselves not uniform or unchanging) from more "inquisitorial" traditions prevalent elsewhere. Neither approach is monolithic; there is a spectrum, not a black and white dichotomy. Neither is an end in itself; the object of the one is not to promote contention for its own sake any more than that of the other is to promote inquisition. Each exists the better to promote justice and its details can be defended only so far as they serve that end. Where a disputed issue of fact arises justice is more likely to be done, and certainly the court has a better chance of arriving at the truth, if all the admissible evidence bearing on that issue is taken into account. I do not therefore consider that this feature of our system requires that evidence germane to the defence in question be excluded from consideration. 22. Accordingly I do not find that any of those arguments inclines me to exclude the issue of contributory negligence from consideration in limine, and I must therefore turn to broader reasons of principle and policy. I have touched on two in paragraphs 19 and 21 above - the desirability that all issues raised on the pleadings and not formally abandoned or struck out be determined on their merits and the danger that justice will not be done, or the court forced into finding facts on the basis of assumptions which it knows to be false, if relevant evidence on pleaded issues is ignored. 23. A further consideration of policy is the undesirability, and indeed futility, of requiring parties to litigation to incur unnecessary and pointless expense. Of course, if a defendant wishes to adduce evidence himself or to cross-examine the plaintiff's witnesses he will have to attend. The present question arises, ex hypothesi, only if he is content to let the issue be decided on the other parties' evidence, usually the plaintiff's, or cannot afford to do otherwise, or considers the potential advantage of attendance or representation outweighed by the financial loss or expense. I see no way in which the cause of justice is served by compelling him in such circumstances to instruct solicitors and counsel or, if an individual, to attend in person (the second option is not available to a corporate party), under threat that if he does not do so a defence which he has pleaded and which is (for instance) established by the plaintiff's own evidence will be disregarded. Avoidable proliferation in the expense of litigation is not an end to be pursued in its own right; on the contrary it is simply a waste of resources and a blot on any system which requires it. 24. To take an example, suppose that a motorist is slightly injured in the course of braking violently in order to avoid a collision with an allegedly negligent cyclist, who is uninsured. The motorist sues. The cyclist denies liability and in the alternative pleads contributory negligence by failure to wear a seat-belt. The motorist's witness statement includes cogent evidence of the cyclist's fault but admits his own failure to wear a seat belt, and his medical report is such that the injuries will obviously sound in very modest damages. No other loss is claimed. If the cyclist is content to accept the consequences of that evidence and is satisfied that it will all be tendered why should he have to pay lawyers or lose a day's income by attending court to say and do nothing or, in his absence, the court be compelled to proceed on the knowingly false assumption that there is no evidence in support of the seat belt defence? 25. These considerations persuade me that Mr Wardell's submission is unsound and that I must therefore consider whether the defence of contributory negligence is made out on the evidence, the onus being on the Defendant. 26. Only that defence is before me, apart from the purely negative denials of the Plaintiff's case with which I have already dealt, but the principles which I have canvassed would clearly apply equally, if I am right in my conclusion, to any defence on the merits. I do not have to decide whether the same would be true of defences which do not touch the merits, and I do not do so. A prime example is limitation of time, and it so happens also that by the nature of that plea the plaintiff may not be able to establish a cause of action without by the same evidence supporting the defence by proving when the cause of action arose. On the one hand it might well be argued that the same considerations apply and should have the same result. On the other hand I can see the possibility of arguments for a distinction on the basis that limitation is a very reluctantly conceded defence, so that for example even the assertion of facts in a statement of claim showing that the claim is statute-barred does not suffice if the issue is not specifically pleaded by the defendant, and late amendments to raise it may be refused in circumstances in which others might well have been allowed. Contributory negligence - the evidence 27. Ten substantial lever-arched files were lodged in preparation for the trial. I am obviously not concerned with witness statements or experts' reports except so far as actually put in by the Plaintiff, but I enquired of Mr Wardell as to the status of the document bundles. He submitted that they were not evidence except so far as he made them so, and I think that that is right. The modern practice, at least in this court, of ordering bundles to be lodged does not of itself alter the rule that it is for the parties to decide at trial what evidence to adduce. So far as the need for any safeguard when one party is absent is recognised by current practice it is afforded by the advocate's professional duty not to mislead the court. I do not, therefore, consider that I am under any duty to investigate the documents not put in evidence by the Plaintiff. I need not consider, and do not decide, whether the position would differ if the only party present were in person, so that the rules of professional conduct did not apply. 28. The Plaintiff had come to court relying on the success of the submission set out in paragraph 12 above and called evidence on that basis. When I came to the conclusion that I should require that submission to be argued, and would probably need to reserve judgment on it, I offered the Plaintiff an adjournment and the opportunity to call further evidence against the possibility that I might reject the submission, as in the event I have done. The Plaintiff declined that offer and elected to call no further evidence. Contributory negligence - the allegations 29. I preface my consideration of the allegations of contributory negligence by observing that the standard of prudence to be expected of a reasonable lender operating in a particular market and concerned with loans to borrowers of a particular type secured on property of a particular category is in principle a topic upon which expert evidence from witnesses familiar with the practices prevailing in those circumstances may be material. Leave is commonly given for such evidence and such leave was given in this case. Both parties obtained reports from such experts, prepared after extensive research into the Plaintiff's files, but in the absence of the First Defendant neither report was put in evidence. I therefore have no help, and the First Defendant's allegations have no support, from that source. That is not to say that there cannot in principle be other forms of evidence which can provide such support, nor that some acts or omissions may not self-evidently be imprudent, but without such help I ought not too readily to form adverse judgments about a lender's conduct in a field in which I have no personal expertise. 30. There are 18 numbered particulars of contributory negligence, but there is a good deal of overlap and repetititon and they can conveniently be considered in groups. 31. The first group, comprising particulars (1), (2), (3), (4) and (6), arises out of alleged inconsistencies or ambivalences in the information given by the borrowers, and in the Plaintiff's treatment of the application, as to whether the loan was for the purpose of purchasing the property and business, or was for a re-mortgage to discharge a secured loan obtained for an already effected purchase. It is alleged that the Plaintiff should have taken steps to resolve that point and would in the process have learned that the proposal was unacceptably risky. In fact, as I find, the Plaintiff knew at the outset or established before completion the true situation, which was that the borrowers had exchanged contracts for the purchase, had been admitted into possession pending completion and been trading for some months but had not yet completed the purchase, and did require the proposed advance for the purposes of completion. Because of the significant period of trading the Plaintiff's responsible executive nevertheless decided that the appropriate criteria were those for a re-financing loan. There was no evidence that that was an imprudent approach, and I see no reason to find that it was. 32. Particulars (5), (7) and (14) allege deficiencies in the Plaintiff's investigation of the borrowers' ability to meet their obligations under the proposed mortgage, or in its conclusions from such investigations as it did make. There is no pleaded allegation as to what would have emerged from the allegedly omitted enquiries, and there was no evidence to support the allegations that the conclusions which were reached or the actions taken or omitted in consequence were negligent. 33. Particular (8) alleges failure to inform the First Defendant of relevant facts about the terms of the borrowers' contract for purchase and of the price at which the property had been put on the market in December 1989. There is no allegation that the Plaintiff knew the facts in question, and there was no evidence that it ought to have known them. Moreover, as to the last point at least, even if those omissions had been made good I should not have been prepared in the absence of evidence of good practice to find any need for the Plaintiff to inform the First Defendant. 34. Particular (9) alleges infringement of the Plaintiff's own lending criterion that the limit of an advance of the relevant kind should be 75% of the lower of valuation or cost. Mr Rainer's evidence on that point, which I accept, was that the 75% was a guideline, not a rigid limit, that the relevant comparison in this transaction produced a figure of 76% and that the lending officer responsible for such decisions, in this case a Mr Plater, had authority to exceed the guideline where the excess was de minimis, as this plainly was, and had properly exercised that authority. 35. Particulars (10), (11), (12) and (13) all arise out of the fact that the Plaintiff's original offer was on condition that the borrowers should find any further cash required from their own resources, without recourse to other borrowings. In the event, as is alleged and as the Plaintiff's own evidence shows, the borrowers obtained a further advance (in fact £65,000) on second mortgage from brewers. Moreover, as again appears from evidence put in by the Plaintiff, the details of this borrowing, even when disclosed by the borrowers, were initially inaccurate, or at best misunderstood. This is undoubtedly the most circumstantial of the allegations of contributory negligence. The Plaintiff's evidence, however, is that well before completion of the advance it was in possession of full and accurate information in this respect, that that information was considered carefully at more than one level of management in accordance with its established procedures, in particular in relation to the borrowers' apparent ability to service both loans, and that the decision to proceed was appropriately authorised within those procedures. In the absence of evidence that by the ordinary standards of practice that was an imprudent course I do not consider that I can or should find that it amounted to contributory negligence. 36. Particulars (15) to (18) consist of miscellaneous further allegations which are in my view little more than makeweights; it is sufficient to say that there is self-evidently nothing in (16) and that in the other items there was no evidence that the acts or omissions alleged were in any way imprudent. 37. I conclude that none of the allegations of contributory negligence is made out individually or when taken in the above groups. I have considered whether a different result would ensue from assessing all the allegations cumulatively; in my judgment it would not. I therefore find that the First Defendant has not established that defence and is entitled to no deduction from the damages proved by the Plaintiff. © 1998 Crown Copyright BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII