For a RICS-regulated surveyor, the question of who can sue when a valuation turns out to be wrong is rarely answered by the retainer alone. The instructing party is usually the lender, but the people who actually rely on the figure can include the borrower or a subsequent purchaser. The framework that decides which of those relationships gives rise to a duty of care in tort is the tripartite test in Caparo Industries plc v Dickman [1990] 2 AC 605: reasonable foreseeability, sufficient proximity, and whether it is fair, just and reasonable to impose a duty. The mechanics are set out in the three-stage test entry; this entry looks at how the courts apply them to valuers.
The leading authority remains Smith v Eric S Bush and the conjoined appeal Harris v Wyre Forest DC [1990] 1 AC 831. A surveyor instructed by a lender produced a valuation of a modest residential property. The borrower paid the lender's valuation fee, received the report or a summary, and relied on it. The House of Lords held that the valuer owed a duty of care in tort to the borrower as well as to the lender. Proximity was established because the valuer knew, or ought to have known, that a borrower at the bottom of the market would rely on the lender's valuation rather than commission a separate survey. The disclaimers were struck down as unreasonable under section 2(2) of the Unfair Contract Terms Act 1977.
The duty is not open-ended. In First National Commercial Bank plc v Loxleys [1996] EWCA Civ 1383 the Court of Appeal made clear that the reasoning in Smith v Eric S Bush is tied to the modest-value, owner-occupied residential context. Where the property is commercial, or the purchaser sophisticated, the courts have been more willing to give effect to disclaimers and to find the proximity limb of Caparo unsatisfied.
The line was drawn again in Scullion v Bank of Scotland plc (t/a Colleys) [2011] EWCA Civ 693. Mr Scullion was a buy-to-let purchaser who relied on a lender's valuation. The Court of Appeal declined to extend Smith v Eric S Bush to him: a buy-to-let investor is treated as a commercial actor who can reasonably be expected to obtain independent valuation advice, so the proximity required by Caparo was not made out.
Where a duty is established, a valuer cannot necessarily contract out of it. Section 2(2) UCTA and section 62 of the Consumer Rights Act 2015 subject any exclusion to a reasonableness or fairness test. Smith v Eric S Bush shows that a printed disclaimer in a mortgage valuation, addressed at a consumer borrower, is unlikely to clear that hurdle.
The Supreme Court in Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4 confirmed that Caparo is not a universal test to be applied from scratch. Courts proceed incrementally by analogy with established categories. For valuers that means starting from the Smith v Eric S Bush line for low-value residential mortgage work, and from Scullion and Loxleys for everything outside it.
Scenario A. A surveyor values a £250,000 owner-occupied house for a high-street lender. The buyer pays the valuation fee through the lender, receives the report, and proceeds without a separate homebuyer survey. If the valuation is negligently high and the buyer suffers loss, both the lender and the buyer can in principle bring a claim under the Smith v Eric S Bush line.
Scenario B. The same surveyor values a £2 million buy-to-let property for the same lender. The borrower is an experienced landlord with several existing investment properties. Following Scullion, the surveyor's duty is owed to the lender; the borrower is expected to take independent advice, and proximity to the borrower is not made out.
For the loss-cap point that sits alongside the duty question, see SAAMCO for valuers and surveyors. Sector pillar guides covering the PI position are Apex's surveyors PI guide, the quantity surveyors PI guide, and the property managers PI guide.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.