England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY
ON APPEAL FROM DISTRICT JUDGE GILES

		22/05/2013

Her Honour Judge Belcher :

1. This is an appeal by the Defendant, Jones Lang Lasalle Limited against the Order of District Judge Giles ("DJ Giles") made on 11 December 2012 dismissing the Defendant's application for summary judgment against the Claimants, Mr Rehman and Mrs Shaikh, and dismissing the alternative application for an order striking out their Claim under CPR 3.4(2). DJ Giles refused permission to appeal, but such permission was granted by His Honour Judge Gosnell on 21 January 2013. If successful in this appeal, the Defendant also seeks the costs of this appeal and of the hearing below. For ease of reference I shall refer to the parties in this Judgment as the Claimants and Defendant and not as Respondents and Appellant. References to the Appeal Bundles will be by capital B, followed by the Bundle number, the tab and the relevant page, for example: B1,Tab 7, page 60.

The Facts

2. The Claimants in this action are brother and sister and each owns a dwelling house in Heaton, Bradford. In 2004 the Claimants, (or at least Mr Atique Rehman), were interested in purchasing a large warehouse and industrial site known as the Alpine Cold Store Complex, Estate Road, 7 Humberside Industrial Estate, Grimsby ("the Property"). The property was owned at that time by Alpine Cold Stores Limited ("Alpine"), a company which was interested in selling the freehold with a leaseback to Alpine from the ultimate purchaser. The Claimants and Alpine were customers of Bank of Scotland ("the Bank").
3. The Claimants' case is that the original intention was that they should purchase the property in their own names. However, at the suggestion of Mr David Booth, a manager at the Bank, a special purchase vehicle was formed to be the purchaser. The special purchase vehicle was Greenhammer Investments Limited ("Greenhammer") which was incorporated in September 2004. The Claimants were the shareholders and directors of Greenhammer.
4. The Defendant provided two valuation reports in connection with the proposed purchase, one in July 2004 ("the First Report") and one in November 2004 ("the Second Report"). The First Report valued the Property at £7M on the special assumption that the Property is let with the benefit of a standard institutional 20 year lease to Alpine at an initial rent of £600k with upwards only rent reviews (Bundle 1, Tab 7, pages 79-80). The Second Report valued the Property at £7M with the same special assumption save that the length of lease was 21 years, rather than 20. In addition a valuation of £4M was provided on the special assumption that the Property is vacant but having regard to the occupational arrangements of four existing named occupiers ("the Vacant Possession Valuation") (B1, Tab 7, pages 132-133).
5. There is no dispute that the Second Report was provided for the Bank. There is a significant dispute as to whom the First Report was provided for, a matter I shall come back to when considering the Grounds of Appeal in relation to the issues of duty of care and disclaimer. There is also a significant dispute as to whether there could, as a matter of law, be any duty of care owed by the Defendant to the Claimants in respect of the Second Report which was plainly not addressed to them.
6. Both Reports (First Report at B1, Tab 7, page 80; Second Report at B1, Tab 7, page 133) expressly state as follows:

"Finally, and in accordance with our normal practice, we confirm that this Report is confidential to the party to whom it is addressed for the specific purpose to which it refers. No responsibility whatsoever is accepted to any third party….."

In addition, in relation to the First Report, the Defendant's letter of 12 July 2004 (B1, Tab 7, page 204) addressed to Falcon Finance ("Falcon"), enclosed the Defendant's standard terms and conditions which include the following (B1, Tab 7, page 206) :

"Jones Lang LaSalle owes no duty of care and has no liability to anyone but its client, unless specifically agreed in writing by Jones Lang LaSalle. No third party is intended to have any rights under the Agreement unless agreed in writing."

At paragraph 32 of his Judgment, the District Judge states that the same standard terms and conditions apply to the Second Report (B1, Tab 3, page 38). I have not been referred to, nor can I find, any evidence to support that. However I consider it adds nothing to the disclaimer in the covering letter for the purposes of this case.

7. On 17 January 2005 Greenhammer purchased the Property for £3,250,000 plus VAT of £568,750 (B1, Tab 7, page 211), and the Property was then leased back to Alpine. The Claimants each entered into personal guarantees with the Bank and gave charges over their respective homes. The guarantees were limited to £600k in the case of Mr Rehman, and £400k in the case of Mrs Shaikh.
8. On 4 June 2007 Alpine was wound up. Greenhammer was one of its creditors (B1, Tab 7, page 227). The Claimants' case is that in July 2009 the Bank informed them it was seeking a revaluation of the Property. The Claimants assert that GVA Grimley provided the Bank with a valuation dated 28 August 2009 which they believe put a value on the Property of between £1.5M and £2M (Witness Statement of Atique Rehman: B1, Tab 8, page 256, paragraph 4). Despite numerous requests from the Defendant, a copy of this valuation has never been provided to them. For the purposes of the present application, the fact of the provision of the GVA Grimley report must be assumed in the Claimants' favour. It is the Claimants' case that this valuation put them on notice for the first time that the Defendant's valuations in 2004 may have been carried out negligently. By a report dated 7 October 2012 Mr Gareth Morgan of Aitchison Rafferty, on behalf of the Claimants, has provided a further valuation of the Property as at 30 July 2004 in which he concludes that the correct valuation of the freehold of the Property on the special assumption that it was let on a lease to Alpine at a rent of £600k with upwards only rent reviews was £4M and not £7M as stated in the Defendant's 2004 Reports (Tab 8, pages 282 – 294).
9. These proceedings were issued by the Claimants on 19 July 2012. The Claimants seek damages for their losses arising as a result of the Defendant's alleged negligence in providing the First and/or Second Reports on which the Claimants relied in (i) causing Greenhammer to purchase the Property and (ii) in entering into personal guarantees with the Bank and (iii) in executing charges over their homes in favour of the Bank (Particulars of Claim, paragraph 17: B1, Tab 5, page 47-48).

Striking Out a Statement of Case – Legal Principles

10. Under CPR 3.4(2), the Court may strike out a statement of case if it appears:

"(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;

(b) that the statement of case is an abuse of the court's process or otherwise likely to obstruct the just disposal of the proceedings; or

(c) that there has been a failure to comply with a rule, practice direction or court order"

Summary Judgment- Legal Principles

11. CPR 24.2 provides that the Court may give summary judgment against a Claimant or Defendant on the whole of a claim or on a particular issue if

(a) it considers that –

(i) that claimant has no real prospect of succeeding on the claim or issue; or

(ii) that defendant has no real prospect of successfully defending the claim or issue; and

(b) there is no other compelling reason why the case or issue should be disposed of at trial.

In the course of argument Mr Berkley repeatedly addressed me as to whether certain matters were arguable and should therefore proceed to trial. Miss Day reminded me that the test is not whether something is arguable, but whether there is a real prospect of success on the relevant issue. Whilst a summary judgment application is not and should not be a mini trial, it is not uncommon for an application under Part 24 to give rise to a short point of law or construction. Such a point of law or construction is capable of decision at a summary stage in a suitable case where the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument. Plainly if the Claimants' case is bad in law, they will have no real prospect of succeeding on their claim.

12. Mr Berkley referred me to Swain v Hillman [2001] 1 All ER 91 CA in which Lord Woolf MR (as he then was) said

"The words "no real prospect of succeeding" do not need any amplification, they speak for themselves. The word "real" distinguishes fanciful prospects of success or…..they direct the court to the need to see whether there is a "realistic" as opposed to a "fanciful" prospect of success" (B3, Tab 23, page 590).

Mr Berkley also referred me to Three Rivers District Council v Bank of England (No 3)[2001] 2 All ER 513 HL ("Three Rivers"), and in particular to the following passage in the speech of Lord Hobhouse (B3, Tab 24, page 644):

"The important words are "no real prospect of succeeding". It requires the Judge to undertake an exercise of judgment. He must decide whether to exercise the power to decide the case without a trial and give a summary judgment. It is a "discretionary power", ie one where the choice whether to exercise the power lies within the jurisdiction of the judge. Secondly, he must carry out the necessary exercise of assessing the prospects of success of the relevant party. If he concludes that there is "no real prospect", he may decide the case accordingly."

Appeals – Legal Principles

13. Under CPR r.52.11(3) the appeal court will allow an appeal where the decision of the lower court was wrong or unjust because of a serious procedural or other irregularity. Mr Berkley reminded me that an appeal is not a rehearing, but rather a review of the judgment below. Miss Day referred me to the notes at page 1750 in Volume 1 of the 2013 White Book which summarise the judgment of May LJ in E. I. Du Pont Nemours & Co v S. T.Du Pont [2003] EWCA Civ 1368 as to what a review is in these circumstances. The note at (iii) states as follows:

"…."review" is not to be equated with judicial review……The review will engage the merits of the appeal. It will accord appropriate respect to the decision of the lower court…..tempered by the nature of the lower court and its decision making process. There will also be a spectrum of appropriate respect depending on the nature of the decision of the lower court which is challenged. At one end of the spectrum will be decisions of primary fact reached after an evaluation of oral evidence where credibility is in issue and purely discretionary decisions. Further along the spectrum will be multi-factorial decisions often dependent on inferences and an analysis of documentary material."

14. Mr Berkley submitted that the proper approach here, in the light of Lord Hobhouse's speech in Three Rivers and the exercise by me of an appellate jurisdiction, is that I should be slow to interfere with the way the District Judge dealt with the matter. He submitted that the District Judge recognised that the case called for full pleadings and evidence and that nothing prevents the issues in this appeal being decided by way of preliminary points in due course. He further submitted that the District Judge was carrying out a gate-keeper function and did not go beyond the bounds of what he could reasonably decide such as to require this court to intervene.
15. Mr Berkley submitted that DJ Giles is a very experienced Judge and that I should not interfere with his discretion lightly. That is undoubtedly right, but in my judgment the Defendant's challenges to DJ Giles decision as set out in the Grounds of Appeal go much further than seeking to challenge any exercise of his discretion. The grounds of the appeal are that DJ Giles was wrong as a matter of fact and in law in relation to the 4 areas comprising Grounds 2-5 in the Grounds of Appeal. Whilst each ground challenges aspects of the Judgment as being wrong "..as a matter of fact and/or in law and/or discretion..", the argument before me at no stage addressed any challenge to the exercise of a discretion by the District Judge. Indeed, in her reply to Mr Berkley's submissions, Miss Day stated that her case is that the District Judge failed to apply the correct tests and is, therefore, wrong, and that this is not a discretion type of case. I accept that submission since, as already indicated, the arguments before me did not address any particular exercise of discretion by the District Judge. The issues in this appeal are whether the District Judge was wrong as a matter of fact and/or law. This is quite distinct from the exercise of a discretionary judgment of the type envisaged in Lord Hobhouse's speech in Three Rivers.

The Grounds of Appeal

16. The Grounds of Appeal (B1, Tab 1, pages 9 -11) contain 5 Grounds of Appeal. The first ground is an overarching ground encompassing the more particular Grounds 2-5 and both Counsel addressed me on the 4 issues covered by Grounds 2-5. I propose, therefore, to ignore Ground 1 save to comment that I reject any suggestion that DJ Giles ruled that as a matter of law none of the issues raised in the application could be considered on a strike/out or summary judgment application. In my judgment he plainly recognised that the issues could be dealt with summarily or by strike out if appropriate, but he found that neither was appropriate in this case.

The Limitation Ground

17. This is Ground 2 of the Grounds of Appeal (B1, Tab 1, page 10, paragraph 2). There is no dispute in this case that the primary limitation period had expired before these proceedings were issued. In those circumstances the Claimants rely on Section 14A Limitation Act 1980 and they claim that the earliest date which might represent the "date of knowledge" for the purposes of that section was in August 2009 when GVA Grimley provided the Bank with a further valuation which assessed the open market value of the Property as £2M (Particulars of Claim, paragraph 25: B1, Tab 5, page 52).
18. This issue was dealt with by DJ Giles at paragraphs 10 – 25 of his Judgment (B1, Tab 3, pages 35-37). He found that this was not an issue suitable for summary judgment. He concluded that the issue of limitation in this claim is a mixed question of law and fact, the factual issues being as to what actual knowledge the Claimants had directly or through their agent, and the issue of law including the question of what knowledge is to be imputed to the Claimants. He found, therefore, that the limitation issue was more appropriate for the trial Judge once all the evidence was available to see what information the Claimants had and at what point, and full argument has taken place on the authorities, so as to determine the Claimants' knowledge and any additional knowledge they may be fixed with (Paragraphs 24 and 25: B1,Tab 5, page 37). I understand the reference to additional knowledge which the Claimants may be fixed with, to refer to the issue of constructive knowledge as opposed to the Claimants' actual knowledge.
19. Miss Day submitted that the District Judge had failed to grapple with the points the Defendants had asked him to consider. Whilst acknowledging that in many circumstances, Section 14A points may be dealt with as a preliminary issue, she submitted that in this particular case, summary judgment is appropriate. She submitted that constructive knowledge is a matter of law based on what the Claimants ought to have known and not on what they in fact knew, and can therefore be determined at this stage. She further submitted that actual knowledge is not an issue on the facts of this case in that once the Claimants knew in June 2007 that Alpine had gone under, that was sufficient to fix the Claimants with actual knowledge, such that by the time these proceedings were issued in July 2012, the claim was statute barred.
20. Mr Berkley submitted that the District Judge dealt with this issue impeccably. He submitted the correct tests were set out in his Judgment, that he set out the competing submissions and that he was right to conclude that there are a number of issues arising in relation to actual and constructive knowledge which were not appropriate for summary determination.
21. I agree with Mr Berkley that the law is correctly set out in the District Judge's judgment and the parties' submissions are accurately recorded. However, I regret that the particular issues addressed by Miss Day before the District Judge, and again before me, do not appear to have been properly explored in his Judgment. They are set out, but there is no analysis to support the conclusion he reached that this issue is properly a matter to be determined on the evidence at trial. In those circumstances I consider it incumbent upon me to undertake that analysis in order that I can assess whether the conclusion the District Judge reached is a proper decision in all the circumstances.
22. The effect of Section 14(4)(b) Limitation Act 1980 is that the limitation period for negligence claims (other than personal injury claims) is extended by a period of 3 years from "the starting date" if that is a date which falls after the expiry of the primary limitation period. Section 14(5) defines the starting date as

"the earliest date on which the plaintiff…first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action "

By Section 14A(6) "the knowledge required for bringing an action for damages in respect of the relevant damage" means knowledge both

"(a) of the material facts about the damage in respect of which damages are claimed; and"

(b) of the other facts relevant to the current action as mentioned in subsection (8).."

By Section 14A(7) the material facts about the damage are

"such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgement"

So far as relevant for this Judgment, S14A(8) provides that the "other facts" referred to in S14A(6)(b) are

"that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence"

23. Miss Day submitted that the Witness Statement of Atique Rehman addresses the wrong test in relation to this issue. She referred me to paragraph 4 at B1, Tab 8, page 256 in which Mr Rehman states that he had no reason to doubt the valuation opinion provided by the Defendant or the methodology used in the reports until July 2009 when Paul Eyre of the Bank informed Mr Shafiq Rehman (of Falcon) that the Bank intended to seek a revaluation of the Property. He further states that GVA Grimley provided the Bank with a valuation dated 28 August 2009 which he believes valued the Property at between £1,500,000 and £2,000,000. Miss Day submitted that this paragraph addresses the witness' knowledge of having a cause of action which is not the correct test as is clear from Section 14A(6). She submitted that the real issue for limitation purposes is the Claimants' knowledge of the material facts about the damage. Her case is that as soon as Alpine went into liquidation in June 2007, the loss was staring these Claimants in the face and that they then had knowledge of the material facts for the purposes of Section 14A. She pointed to the fact that Mr Rehman's Witness Statement does not address at all the state of his knowledge at the time of Alpine's liquidation. There is no dispute about the Claimants knowledge of that liquidation, but they give no explanation as to why that was not sufficient knowledge.
24. Miss Day referred me to the House of Lords decision in Hayward v Fawcetts [2006] 1WLR 682. She referred me to the speech of Lord Nicholls at paragraph 9 where he referred to valuable guidance given by Lord Donaldson MR in Halford v Brookes [1991] 1WLR 428 that knowledge does not mean knowing for certain and beyond possibility of contradiction. It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice, and collecting evidence: "Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice". Lord Nicholls added "In other words, the claimant must know enough for it to be reasonable to begin to investigate further". At paragraph 12 of his speech, Lord Nicholls made it clear that by reason of S14A(9) Parliament has drawn a distinction between facts said to constitute negligence and the legal consequences of those facts. Knowledge of the former (the facts) is needed before time begins to run, knowledge of the latter (the legal consequence of the facts) is irrelevant. (B2, Tab 9, pages 298 and 299).
25. Miss Day submitted that the Claimants should not have waited for the Bank to revalue the Property. She said the Claimants should have been trying to get another tenant or to otherwise get value from the property and that another valuation should have been obtained at that point. She acknowledged that if these Claimants had waited say 6 months after Alpine's liquidation before investigating the valuation issues, that might raise fine distinctions better addressed by way of a preliminary issue. However, she suggested that does not arise here where these Claimants, in effect, say that they did not need to investigate this until 2009. She pointed out that even when considering actual knowledge, the court has to look at what a reasonable person in the Claimants' position would have done, not at what these Claimants in fact did.
26. Miss Day further referred me to paragraphs 23 and 24 of Lord Nicholls' speech in Hayward v Fawcetts (B2, Tab 89, page 301). In paragraph 23 Lord Nicholls commented that the evidence of the claimant in that case was addressed to when he first knew he might have a claim for damages, and not to the proper issue which was when he first knew enough to justify setting about investigating the possibility that the accountant's advice was defective. Miss Day submitted the same criticisms apply to Mr Rehman's evidence in the present case. At paragraph 24, Lord Nicholls found that the disparity between the accountant's advice and the company's disastrous losses stared the claimant in the face long before December 1988 (which was the relevant date for the purposes of that case), notwithstanding the investigation into the possibility that the advice was defective did not begin until May 1989.
27. Miss Day submitted that the loss in the present case was staring these Claimants in the face from the moment Alpine went into liquidation. She reminded me this is not a case of a "little old lady in a home", but a case of guarantors of a £4M investment with their own personal properties at risk. She submitted that the Claimants therefore had actual knowledge in June 2007 when Alpine went into liquidation.
28. In the alternative, if I am against her on actual knowledge, she submitted that this is a very, very clear case of constructive knowledge. She referred me to Section 14A(10) which provides a person's knowledge for these purposes includes any knowledge he might reasonably have been expected to acquire from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek. Miss Day submitted that once Alpine was in liquidation, it was reasonable to expect the Claimants to take advice on the property and the situation they found themselves in and not sit back and wait until 2009 when the Bank did so. She submitted that such advice would have included the value of the property at that time, including both capital and rental valuations which, if significantly different from the Report figures, would have put the Claimants on enquiry.
29. Miss Day also referred me to the case of Finance for Mortgages Limited and Southern Mortgage Corporation Limited v Farley & Company(A Firm) [1998] PNLR 145 ("Finance for Mortgages Limited v Farley") (B2, Tab 10, page 342 et seq). In that case a mortgagee bank took possession of a residential property and then did not take proper steps to dispose of the property for some 18 months. On sale the property sold for £170,000 as against a valuation given by the defendants to the bank for the purposes of the mortgage of £420,000. Kay J found that when a mortgagee obtains vacant possession of a mortgaged property in respect of which large arrears have accumulated, it is normal and reasonable to expect that the mortgagee will proceed to an early current valuation so as to move towards the sale of the property. Such valuations would have led them to question the original valuation advice. Accordingly, Kay J held the mortgagee bank was fixed with constructive knowledge from the date which the court found was the date when, acting as prudent mortgages, the bank should have first obtained possession and then obtained the valuations.
30. Miss Day suggested the situation in the present case is similar and that these Claimants simply did nothing until the Bank got the report from GVA Grimley in August 2009. She drew my attention to the fact that the pleaded allegations of negligence relate not only to the value of the property but also to the advice as to the financial viability of the tenant, Alpine (B1, Tab 5, page 49, paragraph 19(5) and 19(6)). She submitted that once Alpine was in liquidation, the vulnerability of the tenant was obvious and that (i) a reasonable person would have embarked on the preliminaries and so the Claimants had actual knowledge of the material facts, or (ii) it was starting them in the face that they needed to get some advice as to where they stood, such that a reasonable person would have sought expert advice and so the Claimants had constructive knowledge of the material facts.
31. Mr Berkley submitted that when Alpine went into liquidation, the Claimants were entitled to assume there was still the underlying value of £7M. He referred me to the Witness Statement of Atique Rehman which refers to the purchase of the Property by Greenhammer in January 2005 and states "At the time the only valuation evidence relied upon by Greenhammer and its directors [that is the Claimants] were the two reports provided by the Defendant referred to in the Particulars of Claim. I considered that the Reports were disclosed to Greenhammer on the basis that reliance would be placed upon them and that no further valuation would be commissioned independently by Greenhammer…..I can confirm that my sister and I relied upon the …..valuations and as a result believed the property was worth £7M" (B1, Tab 7, page 256).
32. I consider this evidence is wholly unsustainable and I reject the submission based upon it. The First Report gave a valuation of £7M based on a special assumption as to an income yield from a 20 year lease to Alpine with upwards only rent reviews, an assumption which the Defendant was expressly instructed to make. However, the Claimants plainly had knowledge of the contents of the Second Report which they say was disclosed to them and to Greenhammer, irrespective of whether or not they are entitled to rely on it as they claim (and which I consider below). Nowhere in his evidence does Mr Rehman suggest that part only of the Second Report was disclosed to the Claimants and/or Greenhammer. It follows that the Claimants knew that the Property was valued by the Defendant in the Second Report at £7M with the special assumption and at £4M with vacant possession subject to certain existing occupants but without Alpine.
33. The Second Report also makes it clear that there are limited opportunities in the market for this specialist property (cold store and ancillary warehousing) and it could take a considerable length of time to dispose of (B1, Tab 7, page 166). Similarly if all the space were to become vacant at once, the Second Report identifies an unproven demand for this type of premises, a possibly prolonged marketing period, likely long rental voids, and unlikely that one tenant would be prepared to take a lease of the entire space which would have a negative impact on the investment value of the property as many investors would find a multi-let property on short term leases not as attractive as a single let property on a long lease (B1, Tab 7, page 138-139).
34. Mr Berkley submitted that the first time any alarm bells were caused to ring was with the GVA Grimley valuation in August 2009. I suggested to Mr Berkley that on any view the Claimants must have known from the Second Report that once Alpine had gone, the £7M valuation had fallen away and the £4M valuation was now the relevant one. In response to that, Mr Berkley did not seek to persuade me that was incorrect, but instead submitted that there was no evidence that the Claimants would have found another tenant, even if they had tried. I pointed out to him that this tended to supported Miss Day's argument that the Claimants should have considered this as an option and obtained valuations at the time which would have disclosed the relevant material facts and fix his clients with constructive knowledge. His response to this was that these are all issues of fact which need to be resolved after a trial of facts and that there are no grounds to interfere with District Judges Giles decision. I regret to say I consider that answer appeared to me to rather duck the issue.
35. I accept Miss Day's submission that the Claimant's evidence is not addressed at all to the correct issue which is the date of knowledge of material facts, but is incorrectly addressed to the date of knowledge that they might have a cause of action. However, I do not consider the Finance for Mortgages v Farley case provides a suitable parallel for the facts in this case. In Finance for Mortgages v Farley the court was considering the actions of a prudent mortgagee who, by definition, took the mortgage as security for a loan and with a view to satisfying the loan by possession and sale of the property should that become necessary. Once there were significant arrears it was reasonable for a prudent mortgagee to take possession and sell, the latter step inevitably requiring a current valuation.
36. What was the position in the present case? On Alpine going into liquidation, the Claimants knew that the value of the Property, at least by reference to the time of the reports in 2004 had dropped from £7M to £4M. These Claimants had caused Greenhammer to purchase the Property for close to £4M (£3,818,750 inclusive of VAT; See Office Copy Entries at B1, Tab 7, page 21), had themselves entered into personal guarantees secured on their own personal homes (£600k for Atique Rehman and £400k for Tahira Shaikh) and had invested (unparticularised) monies in Greenhammer which they seek to claim by way of losses. Even if they had no knowledge of the detail in the Second Report set out in paragraph 31 above (and there is no evidence either way on this), in my Judgment the liquidation of Alpine put them on notice that the value of the Property had dropped by some £3M and was then at a level close to the purchase price paid by Greenhammer. Greenhammer was set up as a special purchase vehicle for this particular Property. On the liquidation of Alpine, Greenhammer was immediately deprived of its principal source of income, the rental income from Alpine of £600,000 per annum, income which I assume would be used to service the borrowing from the Bank. The Claimants have not provided any evidence to suggest the contrary. Nor have the Claimants explained if any borrowing was repaid between July 2007 and August 2009 and, if it was, how that was financed.
37. The burden of proof here is on the Claimants. It is not sufficient, in the face of an application for summary judgment, to say that there are factual issues which ought to be resolved at trial (or on preliminary issue) without at least providing an evidential basis for those issues. For example, if there was evidence that the Claimants had been able to re-let the Property or some part of it at a significant rental yield such that the underlying value ascribed to the rental yield from Alpine was at least protected in part, and they were not immediately exposed to the value with vacant possession, that might well raise issues of fact requiring evidence to be evaluated at trial or as a preliminary issue. There is no evidence of that sort or even close to that. The evidence simply addresses reliance on a £7M valuation (which on any view had fallen away in favour of the lower Vacant Possession Valuation), and then addresses the date of the GVA Grimley report to the Bank, evidence which addresses knowledge of a possible cause of action which is plainly not the correct test. I would have expected detailed evidence as to exactly what (if anything) happened between June 2007 and August 2009 and as to why those matters support the assertion that the date of knowledge for S14A purposes was postponed until August 2009.
38. The Claimant's case on this issue seems to me, in reality, to amount to this: let this case be fully pleaded and go to trial and when all the facts are known, then the court can sort this out. In the face of an application for summary judgment, that is not sufficient. I have to decide this application on the basis of the evidence before me, not on the basis of evidence which might be put before another Judge at trial or on a preliminary issue, unless there is a sufficient evidential basis before me to at least raise a factual matter which itself merits fuller investigation. On the basis of the evidence and the facts that are before me, in my judgment the liquidation of Alpine and, with it, the immediate loss of the rental income of £600k plainly put these Claimants on notice that their investment, via Greenhammer, at a sum at or close to the Vacant Possession Valuation of the Property was such that they were exposed to serious risks in the absence of the 20 or 21 year lease to Alpine with the rental stream at £600k per annum with upwards only rent reviews. This was a commercial purchase of industrial property, apparently as an investment. Whatever the Claimants' prior experience, if any, in commercial property transactions, in my judgment it does not require a sophisticated level of knowledge to appreciate the potential financial implications of losing Alpine and its rental income with the resultant impact on the Property's value. If the Claimants were in fact lacking in previous experience or knowledge (another matter on which there is no evidence), in my judgment, that would have made it all the more likely that, acting reasonably in all the circumstances, they would have sought professional advice.
39. That raises the question of what that advice would or should reasonably have encompassed. These Claimants were investors in this property. Their position is not necessarily the same as the prudent mortgagee in Finance for Mortgages v Farley where the valuation advice to be sought would inevitably be addressed to the current market valuation since the very purpose of the mortgage and taking possession was a prelude to sale of the property to recover its value. At the very least, in my judgment, these Claimants should have sought advice on re-letting the Property. Miss Day submitted that they should have sought advice on the capital value as well. I accept that submission given that the Claimants knew that the value had dropped significantly, bringing with it an obvious risk that the capital value might no longer be sufficient to cover the borrowing/investment position, thereby putting the Claimants' guarantees and homes at risk. Even if it would have been reasonable for the Claimants initially to seek advice only on rental values and prospects of re-letting, the evidence before me leads to the conclusion that the advice would have been that re-letting prospects were poor (certainly of the whole and at that rental stream) and I consider that in a fairly short space of time the Claimants should reasonably have been seeking further advice on capital values. The Claimants cannot in my view begin to justify the period of 2 years in this case during which they apparently did nothing.
40. Even if the limitation issue had been based purely on the £7M valuation (and no knowledge by the Claimants of the £4M vacant possession valuation) I consider the result on the evidence otherwise before me in this application would have been the same. The Claimants would have had a valuation which was wholly dependent on the special assumption of the lease to Alpine and its rental stream. The liquidation of Alpine would in those circumstances have led a reasonable person in the position of these Claimants to take expert advice to enable them to assess the impact of that on their investment. In my judgment, that advice would have addressed both rental and capital values.
41. It follows, in my judgment, that the claim is statute barred and that I must allow the appeal on this ground and either strike out the claim or give judgment for the Defendant. Whilst that is sufficient to dispose of this Appeal, mindful of the sums of money involved and that the Claimants may therefore wish to attempt a second appeal, I think it right that I should address the other Grounds of Appeal in this judgment.

The Duty of Care Ground

42. The duty of care ground is Ground 3 of the Grounds of Appeal (B1, Tab 1, page 10, paragraph 3). The Defendant's case is that DJ Giles was wrong as a matter of fact and/or law to decide that no assessment could be made at a summary stage as to whether there was a real prospect of the Claimants establishing a duty of care was owed to them. It is their case that the claim should have been struck out in the light of the Court of Appeal decision in Scullion v Bank of Scotland [2011] 1 WLR 3212 ("the Scullion case").
43. The duty of care issue is addressed by DJ Giles in paragraphs 26 – 41 of his Judgment at B1, Tab 3, pages 37-39. DJ Giles sets out the relevant facts (paragraphs 26-33), then each side's arguments (paragraphs 34 -40) and concludes in paragraph 41 as follows:

"I accept Mr Berkley's submission that each case depends on its facts. The Court may then apply policy considerations in coming to its conclusions. The issue is therefore not suitable for summary judgment."

44. Both the Duty of Care Ground and the Disclaimer Ground (considered below) are directed to the issue as to who the Defendant's client was for the purposes of each report. Only once that is determined can it be considered whether the disclaimer relied upon by the Defendant prevents these Claimants from relying on the First and/or Second Report. Miss Day submitted that the District Judge's conclusion on the duty of care (as set out in paragraph 16 above) suffers from a fundamental misunderstanding set out in the original draft judgment which has been partially, but not wholly, eliminated in the final Judgment, despite being drawn to the District Judge's attention prior to handing down. In her skeleton she sets out that the initial draft judgment claimed that Mr White's Witness Statement accepted that the Defendant owed a duty of care to the Claimants in respect of the First Report. The Witness Statement in fact asserts the opposite. The obvious error was drawn to DJ Giles' attention and the specific passage in question was removed. Miss Day submitted, however, that this coloured DJ Giles' decision as to duty. It certainly explains the final sentence of paragraph 39 of his Judgment which made no sense to me when I first read it, precisely because it appeared to assume a duty for the First Report without that issue being addressed in the Judgment. At Paragraph 39 of his Judgment the District Judge states "…it may be that when the circumstances of the First Report are added that it should be inferred the Defendant owed the Claimants a duty of care for the Second report as well as the First". I accept the submission that the issue in relation to whether a duty of care was owed in relation to the Second Report does appear to have been coloured by a misunderstanding on the part of DJ Giles that a duty was conceded in relation to the First Report. It is perhaps unsurprising, in those circumstances, that his Judgment does not address at all the issue of the duty of care in relation to the First Report. Further it appears that he failed to revisit his conclusions once the error in relation to the First Report was pointed out to him.
45. Other criticisms are made of the Judgment including the reference at paragraph 30 where the District Judge states that he cannot find the words there quoted by him from Mr White's Witness Statement, anywhere in the documents. Miss Day pointed out the words are in the letter at B1, Tab 7, page 79, a letter she tells me the District Judge was taken to in the course of the hearing, and the reference to which was provided to him prior to formal handing down. I understand Miss Day's obvious concerns in this respect but I also note that whilst the District Judge said he could not find those words in the documents, he proceeded on the basis that "the quotation is in there somewhere". However, he then went on to say that he did not know the context of the quoted words, something which he plainly could have established.
46. Miss Day submitted that having rehearsed each side's arguments in relation to whether or not a duty of care was owed, the District Judge simply went on to conclude that this was not an issue for summary trial without addressing the arguments and stating which was correct as a matter of law. Of course it would have been open to the District Judge to conclude that the issues of law were not clear and/or were not capable of being properly resolved before a trial to resolve evidential issues. By inference, that appears to be the conclusion reached given his reference to each case depending on its facts. However, in my Judgment, there is no proper analysis of the legal arguments which one would expect to preface any such conclusion.
47. In relation to the Scullion case, the District Judge seems to suggest that because the present facts were not identical to those in Scullion, this matter should be allowed to proceed to trial. The Judgment is less than clear in this respect, but it appears that DJ Giles determined that there were reasonable grounds for departing from the principles set out in Scullion on the basis that the valuer in Scullion did not specifically know that his report would be relied on. When reading paragraphs 37 – 39 of DJ Giles' Judgment it appears that the reasoning in relation to this issue is supported, at least in part, by the erroneous assumption as to the concession as to a duty of care in relation to the First Report which is incorporated into the final sentence of Paragraph 39.
48. I am forced to conclude that the duty of care issue has not been properly addressed in the District Judge's Judgment. Before addressing the arguments put before me on this issue, I need to address the factual issues surrounding the instructions given and the delivery of the Reports. The factual issues as to who was entitled to rely on the First and/or Second Reports inform both this Ground of Appeal and Ground 4, the Disclaimer Ground. The Defendant was instructed in relation to the First Report by Mr Shafiq Rehman of Falcon. A copy of the instructions is at Appendix 2 of the First Report and appears to comprise pages 114 -117 in B1, Tab 7. I put the matter in that way since the appendices to the report are not labelled as appendices and/or given numbers (at least not in the copy provided in the Bundle) and the faxed letter pages at pages 115 -117 seem, by reference to the fax header on B115, to be three only of twenty four pages apparently sent. The submissions before me proceeded on the basis that those documents did form the letter of instructions and I proceed on the same basis.
49. Those documents do not identify Falcon's client. They are silent in that respect. The fax at B114 refers to various "telecons" and it may be that there was discussion at that time as to the identity of Falcon's client. However, there is no evidence before me which suggests that any client was so identified. The Claimants' case is that they were (or at least Mr Rehman was) the intended purchaser at that time (Witness Statement of Atique Rehman: B1, Tab 8, page 257, paragraph 7). Greenhammer was not incorporated until September 2004 and so cannot have been the client (either of Falcon or of the Defendant) for the purposes of the First Report.
50. The Defendant's case is that the client they reported to is Alpine. They rely firstly on their letter of 12 July 2004 addressed to Falcon which refers to a telephone conversation on 9 July 2004 and states "I confirm your instructions, on behalf of Alpine Cold Stores limited, to provide a valuation report…..for secured lending purposes. We will in the first instance be reporting to yourselves, however the report will be re-addressed to a bank once you provide us with the relevant contact information" (B1, Tab 7, page 204). Secondly, they rely on the First Report itself which states as follows: "We have pleasure in reporting to you…. Our valuation is required by the borrower (current owner), for the purposes of securing loan finance" (B1, Tab 7, page 79). There is no dispute in this case that the current owner at that time was Alpine. Miss Day submitted that these documents were conclusive proof that the Defendant reported to Alpine and to no-one else.
51. At first sight that appears an attractive argument. However, Alpine was to be the vendor and was not going to be the borrower for the purchase of the freehold. It is hard to see why Alpine would want any valuation report to be re-addressed to the Bank. Falcon's instructions do not identify their principal and on their face amount, in my judgment, to instructions on behalf of either an undisclosed principal, or more probably for a disclosed principal (the borrower) who is unidentified. Whilst Alpine could have sought valuation advice as to the appropriate marketing and/or selling price, the Defendant's letter of 12 July recognises that advice is sought for secured lending purposes. This must relate to the proposed purchaser/borrower. When I pointed these matters out to Miss Day she submitted that the case is pleaded on the basis that Greenhammer is the borrower. That, it seems to me, does not really assist her as Greenhammer was indeed the borrower in fact when the transaction went through in January 2005. The issue is who was the "borrower" in July 2004 and on the facts presently available to me, it would seem that can only have been the Claimants, or Mr Atique Rehman alone.
52. Miss Day submitted the Claimants' pleading was inadequate and did not plead this point. I do not agree. At paragraph 3 of the Particulars of Claim, it is expressly pleaded that Falcon Finance was appointed to be the Claimants' agent. At Paragraph 8 of the Particulars of Claim it is expressly pleaded that the Defendant owed a duty of care to the Claimants in respect of the First Report. Paragraph 9 pleads the point of there being a disclosed but unidentified principal. (B1, Tab 5, pages 45 and 46).
53. On stronger ground, Miss Day also took me to Mr Berkley's skeleton for the hearing below, in particular, paragraph 8 in which he asserts that the First Report was provided for the borrower, which in this case was ultimately, Greenhammer (B1, Tab 8b, page 294m). The Witness Statement of Atique Rehman further muddies these waters by referring to the circumstances in which Greenhammer relied on both Reports (B1, Tab 8, page 256, paragraph 3), albeit he later goes on to say that he would be surprised if Mr Preston and Mr Ward of the Defendant were not aware of "my" relationship as intended purchaser (B1, Tab 8, page 257, paragraph 7). Interestingly, the Heads of Agreement dated 13 August 2004 (some two weeks after the First Report) show Atique Rehman only as the purchaser (B1, Tab 7, page 185). Miss Day submitted that the case has never been put on the basis of a primary contractual relationship between the Claimants and the Defendant. If it had been it would follow that there would be a concurrent duty of care in tort and, she submitted, this point would not have formed part of the case.
54. Miss Day told me the case before the District Judge was not argued on that basis and she pointed me to Paragraph 35 of his Judgment where he said "There is no evidence of any agreement that either Greenhammer or the Claimants were specifically permitted to rely on the First Report" (B1, Tab 4, page 38). That point ignores the context of paragraph 45 which was setting out Miss Day's arguments on disclaimer as is clear if the paragraph is read as a whole, and it ignores the express reference to Paragraph 3 of the Particulars of Claim at paragraph 289 of the Judgment.
55. However, paragraphs 9 and 10 of Mr Berkley's skeleton below support Miss Day's assertion that no direct contractual relationship was argued. Paragraph 9 describes it as highly significant that Falcon was acting as agent of the Claimants and, at Paragraph 10, whilst appearing to concede that Alpine was identified as the borrower, points to the fact that the valuation was to be relied upon by the person seeking finance. These points appear to be being made to support the assertion that the Claimants were entitled to rely on the First Report, rather than asserting that the First Report was obtained for them as unidentified principals. Miss Day suggested there should have been a cross appeal on this issue if I proposed to consider it. However, when I pressed her on this, she accepted I should address this in my Judgment although she reserved her position as to costs on this issue.
56. In my Judgment it is plainly properly arguable that there was a direct contractual relationship between the Claimants, or at least the First Claimant, and the Defendant in relation to the First Report. That is an argument which I consider has a real prospect of success. Much may depend on exactly what conversations took place between Mr Shafiq Rehman of Falcon and the Defendant's employees prior to the letter of instruction. That is plainly a matter for evidence at trial. It follows that this is an issue which is not, in my judgment, suitable for summary disposal.
57. I now turn to consider the duty of care issue in relation to the Second Report. The position here is very different. There is no dispute that the instructions for the Second Report came from the Bank. The letter of instruction, dated 29 September 2004, expressly states that "The valuation report is required by the Bank to enable it to determine whether the property will provide suitable and adequate security for the facilities to be provided by the Bank and to assess the validity of the customer's proposal in relation to the property". (B1, Tab 7, pages 178 -183, at page 178). The Second Report, dated 9 November 2004, is addressed to the Bank and states "We have pleasure in reporting to you in accordance with your letter of instruction dated 29 September 2004".
58. The Claimants' pleaded case is that in providing the Second Report, the Defendant owed a further duty of care to the Claimants since the Defendant well knew that the Bank would pass on the Second Report to the Claimants and that they would rely on it, particularly as it came from the same source as the First Report. (B1, Tab 5, Particulars of Claim, paragraph 13).
59. Miss Day submitted that the effect of the decision in Scullion is that this part of the Claimants' claim must fail. As set out at Paragraph 45 above, it appears that DJ Giles determined that there were reasonable grounds for departing from the principles set out in Scullion on the basis that the valuer in Scullion did not specifically know that his report would be relied on, whereas the factual position in this case would allow for an argument as to whether or not the Defendant knew the Claimants would be relying on the Second Report. In those circumstances DJ Giles decided this issue involved matters of fact which would need to be resolved at trial and, once resolved, policy considerations could then be applied to those facts.
60. Miss Day attacks the District Judge's reasoning on the basis that the decision in Scullion was not based on whether the valuer knew his report would be relied on. Indeed it is clear from the headnote (B2, Tab 11, page 350) and from paragraph 43 in the Judgement of Lord Neuberger MR that the Judge at first instance made express findings of fact that the valuer knew or ought to have known that there was a very high probability that the lender (to whom the valuation report was addressed) would show the report to Mr Scullion; that Mr Scullion relied on the report when deciding to proceed with the purchase of the property; and that the valuer knew that Mr Scullion would have paid for the report by reimbursing the mortgagee (B2, Tab 11, page 361). Despite those findings, no duty of care to Mr Scullion was imposed on the valuer. Lord Neuberger MR referred to the fact that Mr Scullion was not an "ordinary domestic householder purchasing his home". On the contrary it was the purchase of a residential unit for the purpose of an investment (a "buy to let" arrangement). In those circumstances it was held that it is not sufficiently clear that it would have been foreseeable to the valuer that Mr Scullion would rely on the report, rather than obtaining his own advice. (B2, Tab 11, pages 361-362, paragraph 46 and 47).
61. Miss Day referred me to paragraphs 49 - 52 of Lord Neuberger's Judgment (B2, Tab 11, pages 362-362) for the reasons for the decision which are

i) The transaction was essentially commercial in nature, which whilst not decisive, colours the issue…..people who buy to let can….be regarded as more likely to obtain, and more able to afford, an independent valuation or survey.

ii) There was no evidence that anything like 90% of buy to let purchasers relied on valuations prepared by a valuer instructed by their mortgagees, rather than obtaining their own valuation. (Thereby distinguishing Smith v Eric S Bush [1990] 1 AC 831 ("Smith v Bush") dealing with domestic purchasers of domestic property for their own occupation where there was such evidence)

iii) As any valuer would appreciate, the purchaser buying a buy to let would be interested in matters other than simple capital vale, such as rental value, the rental market in terms of ease of letting, any rent free periods, marketing an management fees, the likely length of any tenancy and probable period of any voids. Thus, the valuer would expect the buy to let purchaser to obtain his own advice on important matters not covered in the valuer's report on capital value

iv) The valuer instructed by the lender would appreciate that his client is primarily interested in capital value and its sufficiency to support the security and repayment if necessary.

Miss Day submitted that Scullion is a clear policy decision that purchasers in the situation of these Claimants are not entitled to the law's protection if they choose not to get their own independent reports, and the valuer providing a valuation for the lender owes the purchaser no duty of care. Miss Day also reminded me that as a decision of the Court of Appeal, Scullion is binding upon me.

62. Miss Day submitted that factually this case clearly falls within the principles and reasoning outlined in Scullion. This was a commercial transaction involving the purchase of a large industrial site, which even on the Claimants' case was worth £4M. Whilst some matters such as the prospects of re-letting and voids are dealt with in the Second Report, Miss Day submitted that does not alter the principle that the valuer must be entitled to assume that his report will not be relied on by the purchaser without any independent enquiries. Miss Day further drew my attention to the fact that in Scullion the report also covered rental value. In this case, however, the Defendant was instructed to assume a rental value of £600k per annum. Miss Day submitted that the Defendant was entitled to assume that the purchaser would take its own advice on whether Alpine could pay £600k and, indeed, whether £600k was a reasonable rental valuation. This would also be relevant to the likelihood of finding another tenant at that rental level if Alpine ceased paying rent. Finally, Miss Day pointed out that the Claimants are not even the borrower. Greenhammer was the borrower and the Claimants, as guarantors, are a further step removed from the Defendant. As such, Miss Day submitted, they were never in reasonable proximity with the Defendant.
63. Mr Berkley submitted that it is clear from Scullion that the fact of the transaction being commercial in nature may not be decisive in itself. He submitted Lord Neuberger's language is not prescriptive and does not lead inevitably to the conclusion that either because the transaction is commercial, or because the purchaser is wealthy and commercially astute, there cannot be a duty of care. He submitted it is question of calibration: taking all relevant factors into accounts, including what he recognised was a persuasive factor, the purchase of a £4M property, but also issues such as whether the Claimants were in fact commercially astute. There is no evidence before the Court as to whether the Claimants were commercially astute and therefore, he submitted, the factual matters are such that this is not a suitable case for summary Judgment. Pausing there, it is up to the Claimants to put in the relevant evidence and they cannot simply say that there is no evidence on an issue at present and therefore the matter must go to trial. This argument suffers from the same problems as the Claimants' case on the limitation issue.
64. Mr Berkley referred me to Beaumont v Humberts [1990] EGLR 166. (B3, Tab 32), a case involving valuation for a lender for mortgage purposes of a substantial dwelling house which the borrower wished to purchase. This was a decision of the Court of Appeal in which the three Lord Justices reached different conclusions. Staughton and Taylor LJJ agreed that this was not a Smith v Bush type of case because Mr Beaumont was an intelligent and sophisticated businessman and not a humble purchaser of a house of modest value. Dillon LJ considered it unnecessary to explore that. Staughton LJ held that the valuer owed no duty of care to Mr Beaumont. Taylor LJ held there was a duty of care, but no breach of it. Dillon LJ held there was a duty of care and there was a breach of it. Mr Berkley pointed out that the majority view was that there was a duty of care. Mr Berkley relied on the fact that the Judgments supporting a duty of care did so on the basis that Mr Beaumont had previously instructed this surveyor to do a structural survey and the surveyor had reported directly to Mr Beaumont. When he applied for a mortgage to purchase the property some 5-6 months later, Mr Beaumont was reluctant to incur the expense of another full structural survey, and he suggested that the bank instruct the same surveyor to do the mortgage valuation. Mr Beaumont wrote direct to the valuer to advise he would be receiving additional minor queries from the bank and saying he would be grateful if the valuer would assist.
65. On these facts Taylor LJ held that it was clear to the valuer, because of the close relationship stemming from that history, that Mr Beaumont would rely on it. At page 12 in the Judgment (B3, Tab 32, page 871) Taylor LJ stated "In my judgment, the test of proximity here is whether when [the valuer] gave his valuation it was clear that, because of the close relationship stemming from the history…Mr Beaumont was likely to rely on that valuation……..There was no question here of the bank getting a valuation from a surveyor unknown to Mr Beaumont who might or might not therefore have placed reliance on it. Here there had been a contractual relationship between [the valuer] and Mr Beaumont over the structural survey and in a sense the valuation had come as an addendum to that survey, paid for by Mr Beaumont, albeit solicited by the bank and reaching Mr Beaumont via the bank".
66. Dillon LJ saw no reason to explore distinctions between purchasers of lower end properties in humble circumstances, as opposed to sophisticated persons buying a considerably more expensive house, given that the valuer was first instructed by Mr Beaumont, rather than the by the bank. Dillon LJ thought the obvious reason why Mr Beaumont got the bank to instruct his own surveyor, rather than some other surveyor of the bank's choice, was that Mr Beaumont did not want to pay the bills of two surveyors. Dillon LJ said "The position of proximity which [the valuer] accepted when he agreed to accept the Bank's instruction is thus essentially the same as the position in Smith v Bush and the consequence is that Mr Thomas owed a duty of care to Mr Beaumont as well as to the Bank in making his valuation" (B3, page 873-874).
67. It is clear that both Taylor LJ and Dillon LJ, albeit based on slightly different analyses, considered that the facts in Beaumont v Humberts were such as to place the valuer in a position where it was eminently foreseeable that Mr Beaumont would rely upon his report addressed to the Bank.
68. Mr Berkley submits that an analysis of the facts in this case is capable of supporting a similar conclusion. Whilst recognising this case involves industrial premises worth, on the Claimants' case, £4M Vacant Possession Valuation, he points to the fact that when reporting to Falcon with the First Report, the Defendant expressly acknowledged that they were reporting to Falcon in the first instance but that the report would be re-addressed to a bank once they are provided with the relevant contact information (B1, Tab 7, page 204). It is noteworthy that in Falcon's letter of instruction (B1, Tab 7 page 114), the Lender's Name is marked "TBA". Mr Berkley also sought to rely on the history of a close relationship between Falcon and the Defendant and he submitted that in this case there is evidence which is capable of supporting a finding that the Defendant knew the Second Report would also be relied on by the borrower. He further submitted that the factual position here is not dissimilar from Beaumont v Humberts and that his client should not be deprived of the opportunity to prove facts to support a duty of care simply because this was a commercial transaction involving industrial property.
69. In response to this Miss Day submitted that Beaumont v Humberts does not assist these Claimants. That case was not a commercial situation and she submitted that it does not permit these Claimants to fall outside the rule in Scullion in relation to commercial transactions where the valuer is entitled to assume that the borrower will be obtaining its own independent report. She referred me to the final paragraph in the Judgment of Taylor LJ at B3, page 870, where he states "The present case does not concern a valuation at the lower end of the market. Nor, however, was it in the "very expensive" category alongside blocks of flats and industrial properties to which Lord Griffiths referred [in Smith v Bush]. It is important, therefore, to look at the specific circumstances, the probabilities and expectations of the parties". Miss Day submitted that everything in the authorities suggests that reliance is not something which by itself is sufficient.
70. I entirely accept that reliance by itself is not sufficient to support the finding of a duty of care. Nor could the simple fact of a close relationship between valuer and financial agent alone support the imposition of a duty of care as suggested by Mr Berkley. However, I am not persuaded that it follows from Scullion that there could never be a situation involving a commercial transaction of valuable industrial property where a valuer reporting to the Bank did not also owe a duty to the borrower. It would certainly only arise in an unusual case, and would not be the norm, for the very reasons identified by Lord Neuberger MR in his judgment in Scullion and set out in paragraph 61 above. However there may well be situations where the expectations of the parties, based on all the factual circumstances, would support a duty of care. Here the Defendant issued its First Report in the clear knowledge that it would be reissued to the Lender in due course. Whilst the Second Report went further that the First Report because the Bank raised other enquiries, the factual matrix in this case, once fully explored at trial, may support the finding of a duty of care. Indeed Lord Neuberger makes clear in his Judgment that on the facts of Scullion, it was not sufficiently clear that it would have been foreseeable to the valuer that Mr Scullion would rely on the report, rather than obtaining his own advice (B2, Tab 11, page 362). I accept that he reached that conclusion notwithstanding the finding that there was a high probability the report would be shown to Mr Scullion. That, it seems to me is different from a case in which a court might find, that there was or should have been an expectation not merely that the borrower would see the report, but that he would rely on it. Such a finding would need particular facts to support it since the norm, as is clear from Scullion, is that the valuer reporting to the bank in commercial transactions involving industrial properties, will normally be entitled to assume that the borrower will be relying on his own independent advice.
71. The answer to this question in this particular case will depend upon the trial Judge's finding as to who the client was for the purposes of the First Report. Any duty owed by the Defendant to someone other than the Bank in relation to the Second Report on the facts of this case could only be to the person who was the Client for the First Report. If the Claimants, or one of them only, was the client for the purposes of the First Report, I consider it cannot be said that the Claimants have no realistic prospect of succeeding on the duty of care issue in relation to the Second Report. It follows that the appeals fails in relation to the duty of care ground.

The Disclaimer Ground

72. The disclaimer ground is Ground 4 of the Grounds of Appeal (B1, Tab 1, page 10, paragraph 4). The Defendant's case is that the District Judge failed to give any consideration at all to the issue of whether any duty of care had been disclaimed in the light of the decision in Omega Trust v Wright Son and Pepper [1997] PNLR 424 ("the Omega case"). Miss Day submitted that had the District Judge considered this case, the claim would have been dismissed.
73. Nowhere in his Judgment does the District Judge address the issue of disclaimer in relation to the Omega case. The fact of the disclaimer clause is covered in paragraphs 28, 32 and 35 of the Judgment but it nowhere addresses the arguments as to the impact of the disclaimer clause. I am forced to conclude that the disclaimer issue has not been properly addressed in the District Judge's Judgment.
74. The disclaimer clause in respect of the First Report will only be relevant if a trial court finds that the Claimants were not the Defendant's client in respect of that Report. The disclaimer clause is designed to exclude liability to third parties. If the Claimants were in fact the Defendant's client, they are not third parties for the purposes of the disclaimer provisions. If one Claimant only was the client for the First Report, then the disclaimer provisions will have relevance for the other Claimant. It could be said that the disclaimer issue in relation to the First Report, if still relevant, should more properly be addressed by the trial judge once the factual issues as to who was the Defendant's client for the purposes of the Reports has been resolved. However, it plainly needs to be addressed for the Second Report and the same issues arise if the clause becomes relevant for the purposes of the First Report.
75. In the Omega case the issues were whether the valuer owed a duty of care to an undisclosed lender (the report being addressed to the disclosed lender who chose to divide or syndicate the loan and not disclose that fact), whether the disclaimer notice negatived a duty of care, and whether the disclaimer notice was ineffective by reason of Section 11 Unfair Contract Terms Act 1977 ("UCTA"). The Court of Appeal did not decide the duty of care issue, regarding it as hypothetical as it found that the disclaimer was good and effective (B2, Tab 12, page 370).
76. Miss Day submitted that what the Court of Appeal did do was to draw a distinction between commercial situations and domestic ones in the context of disclaimers. She submitted that Omega makes it clear that a valuer in the situation of the Defendants is entitled to refuse to assume liability, even to someone who is known to them. She referred me to the Judgment of Henry LJ (B2, Tab 12, page 372) where he said as follows

"It seems to me that this professional valuer, valuing expensive properties in a commercial context, was entitled to know who his client was and to whom his duty was owed. He was entitled, it seems to me, to refuse to assume liability to any unknown lender, indeed, I would go further and say that he was entitled to refuse to assume liability to any known lender to whom he had not agreed."

The Court found that it was fair and reasonable in all the circumstances for the valuer to rely on the disclaimer.

77. In relation to this issue Mr Berkley submitted that this defendant, rather than plead out the issues in a Defence, has chosen to issue this application. He submitted that if the issue of disclaimer had been pleaded in a Defence, the Reply would have raised the issue of whether the disclaimer satisfied the requirements of reasonableness under UCTA. He submitted this would be arguable on the facts as to how these things came about between these parties. He submitted, therefore, that it would be wrong on an appeal to interfere with the decision of the District Judge and enter Judgment on the basis that the Claimants are prevented from advancing the claim due to the disclaimer. Mr Berkley pointed out that these matters could still be dealt with by way of preliminary issues once the case is fully pleaded. In response to that argument, Miss Day pointed out that UCTA could and should have been raised in response to this application. It was not. The Claimant's evidence in response does not address the issue at all.
78. In my Judgment, Henry LJ's judgment, set out at Paragraph 48 above, clearly applies to the facts of this case. Whatever the relationship with the Claimants or one of them is in relation to the First Report, the Second Report goes further, reporting on particular issues raised by the Bank. This was a professional valuer valuing an expensive property in a commercial context. Whether or not the Claimants were sophisticated in commercial property does not in my Judgment alter the general proposition. Something most unusual would be required to upset that general proposition. Nothing is put forward in evidence on behalf of the Claimants which in any way throws that general proposition into doubt in this case. This appears to be another example of an assertion that relevant facts need to be determined at trial but without any evidence put in to support the factual basis which it is suggested must be left to a trial.
79. In all the circumstances, in my Judgment, the Defendant is entitled in relation to the Second Report to rely on the disclaimer to negative any duty of care which might otherwise arise to the Claimants or either of them in respect of that Report. It follows that the Defendant is entitled to Summary Judgment and/or the claim should be struck out insofar as it relates to the Second Report.

The Losses/ Reflective Damages Ground

80. The Claimants' case is that had they known that the true value of the Property was only £3M (as they now allege), then they would not have allowed Greenhammer to purchase the Property and incur borrowings, which they guaranteed to the Bank (Particulars of Claim, paragraph 9: B1, Tab 5, page 52). As a result they claim to have suffered losses as particularised in paragraph 10 of the Particulars of Claim (B1, Tab 5, page 52) as follows:

i) Alpine and Greenhammer are now insolvent and the Bank has called upon the Claimants under their guarantees.

ii) The Claimants have lost their entire investment in Greenhammer following insolvency of Alpine and the enforcement action by the Bank, details of which will be provided once accountancy evidence has been obtained.

iii) The Claimants seek to be indemnified in respect of their respective liabilities to the Bank.

81. Miss Day submitted that these claimed losses amount to reflective damages and are therefore irrecoverable as a matter of law. She said that the District Judge ducked this issue as being all too difficult such that it should go to trial. She further submitted that this is a point of law which is not going to be affected by the evidence at trial and that it should properly be determined at this stage. She submitted that the Claimants' losses as guarantors are irrecoverable being simply reflective of Greenhammer's losses. She relied on the Court of Appeal decision in Webster v Sandersons Solicitors [2009] EWCA Civ 830 ("the Webster case") which she submitted made it clear that the claim as guarantors cannot succeed and is purely reflective of Greenhammer's losses. She said there is no reason why Greenhammer could not have pursued these claims. To the extent that the Claimants are seeking to recover the value of the company, she submits this is Greenhammer's claim and not a proper loss to be claimed by these Claimants.
82. Before turning to the Webster case, I consider it sensible to look at the underlying basis for the principle that reflective losses are not recoverable. It is usefully summarised by Blackburne J in Gardner v Parker [2003] EWHC 1463 (Ch). At Paragraph 28 of his Judgment Blackburne J refers to House of Lords decision in Johnson v Gore Wood& Co (a firm) [2002] 2 AC 1, noting that "Fundamental to the application of the principle as expounded by the House of Lords in Johnson is the co-existence of causes of action in both the shareholder and the company". He goes on to quote from the Judgment of Lord Bingham who plainly distinguishes three different situations:

i) Where a company suffers loss, a claim will not lie with the shareholder to make good a loss which would be made good if the company's assets were replenished through action against the party responsible for the loss, even if the company has declined or failed to make good that loss

ii) Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so) even though the loss is a diminution in value of the shareholding

iii) Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by breach of the duty owed to it, but neither may recover loss caused to the other by breach of duty owed to that other. (B 2, Tab 15, page 459-460).

83. Blackburne J goes on to say at paragraph 29 that Lord Millet observed in Johnson that where a company suffers loss as a result of an actionable wrong done to it, the cause of action is vested in the company alone and no action lies at the suit of the shareholder suing as such, apart exceptionally from where he is permitted to bring a derivative action on the company's behalf and, correspondingly, that if the shareholder suffers loss as a result of an actionable wrong to him, then prima facie he alone can sue and the company cannot. Lord Millet further observed in Johnson that non recoverability of reflective losses extends beyond the diminution in value of the shares and extends to the loss of dividends and all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds. Miss Day submitted this extends to the Claimant's claim for the loss of the value of their investment in Greenhammer.
84. Johnson v Gore-Wood was followed in Giles v Rhind [2002] EWCA Civ 1428 (B2, Tab 22) which qualified it to the extent that a shareholder may bring a claim for personal losses where by reason of the wrong done to it, the company is unable to pursue its claim against the wrongdoer. Miss Day submitted that the Claimants cannot rely on Giles v Rhind as Greenhammer is still in existence and there is no explanation as to why Greenhammer cannot bring a claim. Miss Day referred me to the Webster case as authority for the propositions (i) that where there is no reasonable doubt that a loss claimed is merely a reflective loss, the court can properly act in advance of trial to strike it out (B2, Tab 13, page 383); (ii) the shareholder's personal guarantee to the bank in that case was a purely reflective loss (B2, Tab 13, page 386). She invited me therefore to strike out all the claimed losses in this case and to enter summary judgment for the Defendant.
85. Mr Berkley in reply submitted that on one view of the facts the Claimants were intending to purchase in their own names and were owed a duty of care such that their losses were personal losses rather than reflective losses. He then relied on Giles v Rhind in the alternative on the basis that the evidence is that Greenhammer is likely to be dissolved shortly and there will be no double recovery.
86. In my Judgment this is not a case where the damages claim can or should be struck out as being a clear case of reflective losses. For the losses to be reflective of the company's losses, it is clear that the company itself must have a claim. Greenhammer did not exist at the time of the First Report and it is hard to see how it could have a claim based on that Report. In any event Miss Day's arguments in relation to the disclaimer provisions would preclude Greenhammer bringing a claim in respect of either Report. In my Judgment, the Claimants' losses here, assuming they are the Defendant's clients for the purposes of the First Report (or possibly Mr Rehman only if the trial court were to find he alone was owed a duty of care) would arguably, and with a reasonable prospect of success, fall within the second of Lord Bingham's scenarios as set out in paragraph 82 above. It follows that the Appeal fails on this Ground.
87. In the light of the above conclusions I invite the parties to agree a form of Order if possible, failing which that can be considered when this Judgment is handed down.