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When a loan is made on the basis of a negligent valuation of the security, but it is mostly used to refinance the lender’s previous loan to the same borrower, can the lender recover all of its loss on the second loan from the valuer? Joanna Smith QC, of Wilberforce Chambers, examines the Supreme Court’s approach to this question in Tiuta v De Villiers.
Tiuta International Ltd (in liquidation) v De Villiers Surveyors Ltd  UKSC 77,  All ER (D) 202 (Nov)
The Supreme Court allowed a valuer’s appeal and held that, assuming the appellant's valuation of a development property had been negligent, the respondent financier, which had loaned money to the developer on the basis of the valuation, could not recover in damages that proportion of the loan which the developer had used to discharge his debt under a previous loan facility provided by the respondent. The court held that the measure of damages was the difference between the respondent’s actual loss and the loss it would have suffered had it not made the second loan as a result of the appellant's assumed negligence. In this case, the respondent would not still have had most of the money which the appellant’s valuation had induced it to lend, because it had already lent that amount under the first loan facility. Therefore, the respondent’s loss was limited to just the new money advanced under the second loan facility.
The respondent was a lender of business finance and had entered into a loan facility agreement with a property developer, based on a valuation of the development property by the appellant firm of surveyors. Advances under the facility were secured by a charge over the property. The respondent and the developer later entered into a second facility agreement under which most of the loan was to refinance the developer’s
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1. Banking and finance lawyer with particular experience in asset finance
2. Likes Wales, wine, sport and anything else that means he doesn’t have the time to have to write personal information about himself
3. Thinks the law is a far broader topic than any of his family and friends who do not work in law
Neil specialises in banking and asset finance transactions with a particular emphasis in finance for shipping, aviation and renewable energy, as well as providing corporate transactional support. He trained and qualified at TLT LLP and spent a further four years working as a finance solicitor, acting for borrowers and lenders before joining the Asset Finance team at DLA Piper (UK) LLP.
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