PROVING THINGS BY EVIDENCE: ANOTHER EXAMPLE OF AN ABSENCE OF EVIDENCE LEADING TO A CASE FAILING
The case of Goldsmith Williams -v- E.Surv Limited  EWCA Civ 1147 will, no doubt, be discussed as a professional negligence case and it may have some impact on the duties of conveyancing solicitors. However the appeal, at heart, relates to a simple failure to adduce evidence.
“It was for the Surveyors to establish that the Solicitors’ breach of duty was a cause of the Lender’s loss. It was of course open to the Solicitors to adduce such evidence as they considered appropriate on the issue of causation, but it could not be held against them that they did not do so. It was for the Surveyors to secure the evidence they required, if necessary by the issue of a witness summons”
The appellant solicitors had been ordered to pay £100,000 as a contribution towards damages the respondent had paid following a negligent valuation. They appealed to the Court of Appeal.
THE ISSUE IN RELATION TO EVIDENCE
The Court of Appeal upheld the judge’s findings that the solicitors had been negligent and in breach of duty in failing to report the purchase price and date of purchase of the property to the lender. However the case failed on causation. Sir Stanley Burton held:
“This facts of this case are unusual in that the Lender was already in possession of information strongly suggesting that the valuation of the property was excessive. The borrower had stated in his application that he had bought the property as recently as October 2005 at the price of £450,000. It was highly unlikely that at the date of his application its value had increased by almost £300,000. Why then did the Lender approve the loan, even in principle? That information was not materially different from that which the Solicitors should have reported to the Lender.
In the absence of evidence from at least one of the underwriters making the decision for the Lender, and without any lending manual that might have indicated what action should be taken when information such as that in the present case comes into the possession of the Lender, the Judge was driven to speculate what would have happened if the Solicitors had informed them of the date and price of the borrower’s purchase of the property. He rightly rejected as conjecture Mr Davison’s evidence that the underwriter must have missed the information that had been given by the Borrower. He recorded the parties’ submissions as follows:
“Mr Patel invited me to conclude that the lender would undoubtedly have referred this information to the surveyors’ PVQ team with a view to seeing whether or not it affected the valuation. Mr Mitchell submitted that based on the information before the court it was simply not possible to reach such a conclusion on the balance of probabilities. He submitted that in the absence of hard evidence, either from the mortgage underwriting guidelines or from a member of the mortgage underwriting team who would actually have been involved in this process, that this is what would have happened there is no basis for so concluding. He submitted that since the contemporaneous evidence shows that no such query was raised even though the purchase details as reported in the mortgage application form were not materially different from the actual purchase details, and even when the evidence shows that at least one if not more of the members of the mortgage underwriting team must have seen and read the mortgage application form, the only safe conclusion which can be drawn is that the lender was indifferent to such details in the context of this particular application made by this particular lender for this particular product, most probably because all that the lender was interested in was the strength of the borrower’s personal covenant and the valuation.”
Counsel for the Surveyors, Mr Patel, submitted that the inference to be drawn from such evidence as was before the Court was that the underwriters had simply failed to pick up the discrepancy between the information in the mortgage application form and the value ascribed to the property. The Judge rejected this submission. He said:
“So far as Mr Patel’s first point is concerned, I am not satisfied that there is a proper evidential platform for drawing that conclusion. As Mr Mitchell submits, it is reasonably clear from the documentary evidence that at least one of the underwriters must have scrutinised the mortgage application form before the application was approved. This was not an application which went through at some speed. It clearly went through a number of stages. If the mortgage underwriting team’s practice, either because of what was in the mortgage underwriting guidelines or because it was settled practice, was to check any discrepancy such as there was in the instant case between the reported purchase price and the valuation with the valuer, then in my judgment it is unlikely that it would not have been done in this case.”
This conclusion begged the question: if a reported price of £450,000 shortly before the date of the mortgage application was not of concern to the underwriters, why should reported price of £390,000 have concerned them? It was not suggested that the difference between £450,000 and £390,000 was material. The solicitors had not been provided with a copy of the application form completed by the borrower (for no good reason that I can think of), and so would not have known that the information provided by him was misleading (c.f. clause 5.1.2 of the Handbook).
“75. … Although the solicitors rely on the surveyors’ failure to produce the mortgage underwriting guidelines, had the solicitors wanted to adduce a positive case to the effect that it would have been standard practice for an approving underwriter to conduct a thorough check including cross referring all of the information in the mortgage application form against the valuation, it would have been as open to them as to the surveyors (if not more so, given that they were not subject to the terms of the settlement agreement) to seek such information, whether by application for third party disclosure against the lender or subpoena against a relevant witness or otherwise.”
This was in effect to reverse the burden of proof. It was for the Surveyors to establish that the Solicitors’ breach of duty was a cause of the Lender’s loss. It was of course open to the Solicitors to adduce such evidence as they considered appropriate on the issue of causation, but it could not be held against them that they did not do so. It was for the Surveyors to secure the evidence they required, if necessary by the issue of a witness summons against a relevant witness. It also seems to me that the Judge’s finding that there was no evidence of a standard practice for an approving underwriter to conduct a thorough check including cross referring all of the information in the mortgage application form against the valuation sits ill at ease with his earlier positive finding that an underwriter had scrutinised the information provided by the Borrower and nonetheless approved the loan in principle.
Ultimately, my view is that the Judge did not have the evidence before him that enabled him to answer the question I referred to at paragraph 47 above. In my judgment, the Surveyors did not prove that the Lender would have reacted to the information that the Solicitors should have provided on the purchase price and date of purchase of the property, which was not materially different from the information given to them by the borrower. I would allow the appeal on this ground.”
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