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Wilson v. Messrs DM Hall & Son [2004] ScotCS 268 (17 December 2004)

OUTER HOUSE, COURT OF SESSION

A11/00

OPINION OF LADY PATON

in the cause

RONALD EVAN WILSON (A.P.)

Pursuer;

against

MESSRS D.M. HALL & SON

Defenders:

________________

Pursuer: Haddow, Q.C.; D. Davidson, Advocate; Drummond Miller, W.S.

Defenders: R.N. Thomson, Advocate; Simpson & Marwick, W.S.

17 December 2004

Introduction
[1] In this action a property developer, Ronald Wilson, sues Messrs D.M. Hall & Son, Chartered Surveyors. The ground of action is alleged professional negligence in the form of an over-valuation of newly-built residential property in Fernieside, Edinburgh. The valuation was prepared on the instructions of a commercial lending bank by a chartered surveyor with expertise in commercial property. One contentious issue is whether in such circumstances D. M. Hall owed any duty of care to the pursuer.

[2] The newly-built property consisted of six flats. The flats were marketed at certain prices during 1995 and 1996, but none sold. They were ultimately re-possessed by the lending bank.

Pursuer's decision to build flats
[3] The pursuer had experience of interior design and refurbishing. He ran a company called Waverley Contract Interiors Limited, with an office in the former club-house of Edinburgh Southern Harriers at Fernieside Avenue, Edinburgh.

[4] As managing director of Waverley Contract Interiors Limited, the pursuer was involved in a wide range of projects, including refurbishing Port Stanley Hospital in the Falklands, and refurbishing pubs, clubs, and hotels in the United Kingdom.

[5] In the early 1990s, the pursuer's business suffered a decline. There was a significant overdraft with the Bank of Scotland, ranging from £55,000 to £70,000. In 1992, all company work ceased. Workmen formerly employed by the company became self-employed.

[6] In an effort to remain gainfully employed and to clear his debts, the pursuer undertook a building project. He decided to demolish the club-house, and to use the cleared site to construct a 6-flat development to be known as "The Harriers". He hoped to sell the flats at a profit, thus reducing his debt. He also hoped to carry out similar developments in the future.

Initial steps in 1992
[7] In 1992 the pursuer instructed Messrs Norman Gray and Partners, Architects, to prepare a plan for the project. The project engineers were to be Harley Haddow. The pursuer's solicitors recommended a marketing agent, Lister Estate Agents. The pursuer accordingly called on Mr Macmillan of Lister Estate Agents ("Lister") in St. John's Road, Corstorphine. They discussed the proposed development.

[8] Mr Macmillan had no formal qualifications in the valuation of property. He nevertheless had experience of the housing market in Edinburgh, particularly newly-built housing. The services which Mr Macmillan offered the pursuer were: views on value, based on experience of the market; marketing services (including advertising); signage; dealing with enquiries and marketing to the public; and generally endeavouring to achieve a successful sale. Against that background, Mr Macmillan stated in evidence that he expected a client such as the pursuer to have taken advice from qualified property valuers.

[9] Mr Macmillan inspected the drawings, visited the site, checked the specification, considered market conditions (including recent sales in the immediate area) and then, in conjunction with the pursuer, estimated reasonable sales prices.

[10] As at 17 November 1992, Mr Macmillan and the pursuer envisaged prices as follows (number 7/8/17 of process):

Four 2-bedroom flats @ £46,000 £184,000

Two 1-bedroom flats @ £40,000 £ 80,000

£264,000

[11] Subsequently, the pursuer personally re-drew the plan for the project. He changed the specification to six 2-bedroom flats, thus adding £12,000 to the value of the development and bringing the total value to about £276,000.

Funding the project: valuation in 1993 for bank lending purposes
[12] The project required funding. The pursuer and a business friend compiled a schedule showing total projected costs of £137,009.51. One cost which the pursuer decided not to incur was the fee of £6,000 for registering the six flats with the National Housebuilders Council (NHBC). In taking that decision, the pursuer was assisted by advice from Messrs Norman Gray and Partners.

[13] The pursuer learned of the existence of a venture capital company, Corporate Capital Limited. He approached them for funding. Corporate Capital wrote to a bank, Dunbar Bank plc, describing the project and inviting them to assist the pursuer.

[14] Dunbar Bank were interested. They instructed George Nisbet of Messrs D.M. Hall & Son, Chartered Surveyors, to inspect the site. They requested his opinion on the current open market value for bank mortgage purposes. They also requested general advice on the feasibility of the proposed development, including comments on marketability and the likely costs of construction. Mr Dalby, a director of Dunbar Bank, confirmed in evidence that a potential borrower such as the pursuer would have to pay any costs incurred in setting up the loan, including surveyors' fees. Surveyors were aware of that fact. Dunbar Bank usually passed a copy of the valuation to the client, and might discuss the valuation with the client.

George Nisbet: chartered surveyor and partner of D.M. Hall
[15] Mr Nisbet, F.R.I.C.S., was a chartered surveyor and a partner of D.M. Hall. When he joined D.M. Hall in 1986, he was employed as a residential mortgage adviser, based mainly in Edinburgh. From November 1990 until late 1994 he was based in Glasgow, still involved in residential mortgage valuation, but also doing some commercial work. He then returned to Edinburgh, where he worked in D.M. Hall's commercial department in Melville Street. He was involved in the valuation, appraisal, sale and letting of commercial property of all types. The majority of his instructions emanated from lending banks concerned with commercial loan transactions. The range of properties included shops, hotels, public houses, caravans, and residential nursing homes.

[16] Over the years, Mr Nisbet built up a relationship with a particular commercial bank - Dunbar Bank. The relationship began in the early 1990s, when Dunbar Bank opened an office in Glasgow. At that time, the majority of the bank's lending was to developers undertaking residential development projects. Dunbar Bank sent Mr Nisbet regular instructions. The bank regarded Mr Nisbet as their point of contact at D.M. Hall. Many instructions related to the funding of residential developments. When giving evidence, Mr Nisbet stated that he was doing more work relating to commercial loans for residential developments than many other chartered surveyors.

[17] Dunbar Bank expected a full appraisal in relation to commercial loans for property developments. Thus Mr Nisbet would ingather information such as the developer's intended plans, specifications and other information. He would visit the site; carry out due diligence (i.e. carry out investigations into each element of the proposed development); consult with in-house building surveying colleagues in relation to building costs; and then provide the bank with a full report.

[18] Mr Nisbet covered the whole of Scotland. He gave reports about properties in Aberdeen; Muir of Ord; Glasgow; Clydebank; Edinburgh; Galashiels; and other places. As a result, he could not have in-depth knowledge of residential values throughout the whole of Scotland. When necessary, he consulted a residential mortgage colleague in the area where the property was situated. Mr Nisbet confirmed in evidence that he had consulted Ian Gray in relation to The Harriers development.

[19] D.M. Hall regarded commercial appraisals as specialist reports. They were undertaken by partners specialising in commercial work, with assistance from their residential partners. When Mr Nisbet was instructed in relation to The Harriers development in 1993, he had been asked to provide Dunbar Bank with an appraisal of the residential development as forming the basis of a commercial loan.

Mr Nisbet's valuation report dated 12 March 1993
[20] By report dated 12 March 1993, Mr Nisbet advised the bank that in his view, the construction costs (allowing for some up-grading of the specifications) were more likely to be about £150,000 than the figure of £137,009.51 given in the schedule of projected costs. Under the heading Opinions of Value, he estimated the open market value on completion to be in the order of £42,500 per flat, i.e. a total of £255,000. That valuation was lower than the total asking price value of £276,000 estimated by the pursuer and Mr Macmillan, as outlined in paragraph [11] above.

[21] Page 8 of the report contained the following disclaimer:

"The report is provided for the stated purposes and for the sole use of the named client [Dunbar Bank]. It is confidential to the client and his professional advisers.

The valuer accepts responsibility to the client alone that the report will be prepared with the skill, care and diligence reasonably to be expected of a competent chartered surveyor, but accepts no responsibility whatsoever to any person other than the client himself. Any such person relies upon the report at his own risk."

[22] Mr Nisbet's report was sent to Dunbar Bank. Mr Nisbet did not know whether the bank would pass his report to the pursuer. On the evidence, the bank did not forward that report to the pursuer. Nevertheless the bank verbally advised him that the valuation of the ground was satisfactory, and also advised him of the valuation figures.

[23] Dunbar Bank decided to provide funding for the project. After some initial negotiations in 1993, the bank sent the pursuer a letter dated 11 March 1994, offering a loan of £114,000 on certain terms, including the granting of a first ranking standard security over the ground at Fernieside Avenue, taking priority over a standard security in favour of the Bank of Scotland.

[24] In May 1994 the pursuer duly granted a standard security to Dunbar Bank. A facility account was opened. The pursuer also received financial assistance in the form of smaller unsecured loans from his wife (who had received an inheritance) and relatives. The project proceeded. Construction began. Stage payments were supervised by Jim Moir, a building surveyor in D.M. Hall's building surveying department.

Further funding and further valuation in 1995 for bank lending purposes
[25] As construction progressed, the specifications for the interiors were up-graded. On the evidence, it was not clear why. The pursuer stated that he had been instructed to up-grade by the bank, who did not want basic apartments. However Mr Dalby, a director of Dunbar Bank, denied any such instruction. A letter from Dunbar Bank to the pursuer dated 15 March 1994 expressly referred to the pursuer's own intention to up-grade the interior specification.

[26] At all events, at the beginning of 1995, the pursuer approached the bank, seeking a further loan of £30,000 in the light of upgrading which he had by then carried out. What was said during his meeting with Mr Dalby was the subject of dispute. The dispute and relevant ruling are set out in paragraphs [98] to [107] below.

[27] By letter dated 13 January 1995, Dunbar Bank instructed Mr Nisbet to visit the site again, and to give his opinion of the value of the properties as a result of the improved specification.

[28] By report dated 27 January 1995, Mr Nisbet described the subjects as providing, on completion, "good quality, well proportioned and finished residential units for which we would anticipate there being a good demand". He valued the three ground floor flats in the order of £50,000 per flat, and the three upper flats in the order of £52,000 per flat, resulting in a total gross development value (i.e. achievable sale prices) of £306,000. Mr Nisbet did not know whether Dunbar Bank would pass his report to the pursuer.

[29] Mr Nisbet explained in evidence that his valuation had increased from £255,000 (March 1993) to £306,000 in January 1995 because the specification of the flats had been improved, and the development struck him as being far more attractive than he had anticipated.

[30] The final paragraph of the report dated 27 January 1995 read:

"For the avoidance of doubt, this brief letter should be read in conjunction with and as forming part of our original valuation, being subject to the same qualifications, assumptions and limitations as set out therein, where appropriate."

[31] On this occasion, Dunbar Bank sent the pursuer a copy of the valuation dated 27 January 1995. Their covering letter dated 30 January 1995 stated:

"...As you will see, our valuer has increased the value of the total property to £306,000 from the original figure of £255,000, which is obviously very satisfying.

I understand from our solicitor at Bird Semple that he has still to hear from your own solicitor with regard to obtaining an updated search and a letter from the Bank of Scotland consenting to continue to rank behind Dunbar Bank in view of the proposed increase to your facility. Hopefully, the increased valuation for the development will give the Bank of Scotland added comfort in consenting to the ranking terms.

I would be obliged if you could contact your solicitors and request that they supply Bird Semple with the necessary information ..."

[32] The pursuer stated in evidence that he had been "cockahoop" over the new valuation. It was a lovely surprise. He had passed a copy of the report to the Bank of Scotland, who were also delighted.

[33] The pursuer further stated that Mr Nisbet, when on site for the re-valuation in January 1995, seemed pleased with the project. Mr Nisbet did not suggest to the pursuer that he should obtain an independent valuation. Mr Nisbet had given the pursuer verbal advice to add £1,000 to the value placed on each flat in his report, to allow for requests by prospective purchasers for carpets, curtains, legal fees and so on. However Mr Nisbet in his evidence denied giving that advice. This further conflict in evidence is dealt with in paragraphs [109] to [115] below.

Pursuer's pricing and marketing of the flats: 1992-1996
[34] In November 1992, the pursuer and his estate agent Mr Macmillan of Lister initially envisaged sales prices totalling £264,000, subsequently increased to £276,000, as set out in paragraph [11] above. The pursuer did not advise Mr Macmillan about D. M. Hall's subsequent valuation of £255,000 in March 1993.

[35] In July 1994, while the flats were under construction, the pursuer and Mr Macmillan decided on pre-completion fixed prices for the flats as follows (number 7/6/3 of process):

Ground left £47,950

Upper left £48,950

Ground mid £48,950

Upper mid £49,950

Ground right £49,950

Upper right £50,950

Total £296,700

[36] Mr Macmillan stated in evidence that he could not recollect where those figures came from. He could only assume that, with the passage of time since 1992, he and the pursuer had allowed for some form of capital appreciation. Also he might have taken new soundings. He could not recollect taking into account any question of up-grading.

[37] The pursuer for his part stressed that at such an early date (1994) the project was "barely off the ground". No active marketing was taking place. The figures were projected figures rather than sales figures. The flats had not been "priced by a surveyor". If someone had come along and bought a flat at a pre-completion price, he and Mr Macmillan would have been delighted.

[38] On 31 October 1994, the pursuer and Mr Macmillan placed an advertisement in the estate agents' fortnightly gazette, the REAL magazine. The cheapest flat in the development was priced at £48,500 (i.e. £550 more than the July 1994 price of £47,950). If it were to be assumed that the price of each flat had been increased by the same amount (£550), the total of the sales prices fixed by the pursuer and Mr Macmillan in October 1994 was about £300,000.

[39] In January 1995, the flats were nearing completion. On 11 January 1995, the pursuer had the meeting with Mr Dalby of Dunbar Bank, referred to in paragraph [26] above. The conflict of evidence relating to that meeting is dealt with in paragraphs [98] to [107] below. For present purposes, it is sufficient to note that in the light of evidence which I accepted, the pursuer at that stage considered the realisable value of the project (i.e. total sales prices) to be in the region of £312,000.

[40] Subsequently Mr Nisbet of D.M. Hall revisited the development, and gave Dunbar Bank his valuation dated 27 January 1995 with estimated sales prices as follows: ground flats: in the region of £50,000 each; upper flats: in the region of £52,000 each; total sales prices: in the region of £306,000. A copy of that report was sent to the pursuer, as outlined in paragraph [31] above.

[41] In about March 1995, the completed flats were put on the market. The pursuer expected them to sell within a few months. At that stage, the sale prices were £52,950 for the upper flats, and £50,950 for the lower flats (a total of £311,700). The flats were advertised in a Lister sales brochure; in the window of Lister's Corstorphine branch in St. John's Road, Edinburgh; in the Real magazine; and by radio.

[42] The pursuer explained that the 1995 sales prices were based on D.M. Hall's 1995 report, with the addition of £1,000 (in fact £950) per flat as suggested verbally by Mr Nisbet. The pursuer described his estate agent Mr Macmillan as being surprised by the level of prices. However according to the pursuer, Mr Macmillan had concluded that D.M. Hall would know more than he did. When asked whether he had ever obtained his own valuation of the flats, the pursuer replied that he knew of D.M. Hall and held them in high esteem. He had used them when purchasing the ground at Fernieside Road. If he had decided to obtain his own valuation, he would have instructed D.M. Hall.

[43] Mr Macmillan, for his part, stated in evidence that the finalised prices of £50,950 and £52,950 were the prices which the pursuer "required", and which he "wished Lister to place against the properties in the light of other advice which he had received". The pursuer told Mr Macmillan that he had been assured that he could obtain greater prices than those Lister indicated were available. The pursuer had not shown Mr Macmillan any report. The addition of £950 to the round sums of £50,000 and £52,000 did not reflect Mr Macmillan's normal practice. Mr Macmillan had no recollection of any intended incentive involving curtains, carpets or legal fees. In cross-examination, Mr Macmillan agreed that it would be unusual to increase the price of a property without telling the public what the incentive was supposed to be.

[44] Prospective purchasers viewed The Harriers. On the evidence, they were enthusiastic about the flats. However by letter to the pursuer dated 18 April 1995, Dunbar Bank noted that there had been no sales. The bank recommended a more aggressive marketing agent, but the pursuer nevertheless continued to employ Mr Macmillan.

[45] As at May 1995, two flats were reserved for prospective purchasers. In addition, the upper middle flat was reserved for the pursuer's son, Simon, who duly moved in.

[46] By June 1995, the pursuer arranged for further advertisement in the Edinburgh Solicitors Property Centre (ESPC).

[47] In July 1995 the pursuer dispensed with Lister's services, and turned to GA Property Services. The pursuer told GA Property Services about the D.M. Hall valuation. GA Property Services knew D.M. Hall, and did not question the figures. Accordingly the sales prices remained the same.

[48] In September 1995, GA Property Services advertised the flats in the Lothian Times, Scotsman, REAL magazine, and General Accident property magazine. An incentive of "£1,000 cash back" was included.

[49] In October 1995, the flats were advertised in the REAL magazine; the East Lothian Courier; the Dalkeith Advertiser; the Evening News; and on Radio Forth.

[50] By letter to Dunbar Bank dated 30 October 1995, D.M. Hall advised that there was nothing of a physical nature which would prevent sales, adding:

"We did note however that the asking prices are slightly in excess of our own recommendations and in the local market this relatively modest overpricing would nonetheless, in our view, be sufficient to discourage prospective purchasers particularly in the current market conditions."

The pursuer was not sent a copy of that letter.

[51] In late 1995, Mr Crozier of the Bank of Scotland suggested lowering the prices to £48,000 and £45,000. The pursuer rejected that suggestion, commenting in evidence that he had the benefit of a surveyor's report with valuations of £50,000 and £52,000. He did not see why he had to lower the price.

[52] Dunbar Bank also suggested to the pursuer that he should reduce the sales prices. The pursuer refused to do so. He explained in evidence that a bank manager was not a surveyor. The pursuer had the benefit of a valuation by a reputable surveyor, and did not welcome the bank manager's interference.

[53] In February 1996, the pursuer employed solicitors, Messrs Cochran Sayers & Cook, to market two flats, while retaining GA Property Services to market the other four.

[54] No sales materialised. Some prospective purchasers found that they were unable to sell their own homes, and as a result did not wish to proceed further. Others discovered that the Halifax Building Society had a policy not to lend on a block of more than four flats if there was no NHBC certificate.

[55] Consideration was given to letting the flats, or selling them at auction. The pursuer's wife and relatives continued to provide financial support. For example, they assisted with payments of interest charged by the Bank of Scotland and Dunbar Bank. The pursuer's wife paid for materials and for the main doors to the flats.

Further valuations in early 1996
[56] In March 1996, the Bank of Scotland were considering making a loan to the pursuer's son Simon to enable him to purchase the upper middle flat which he was occupying. The bank instructed Messrs McNeill, Maguire & McCreath, Surveyors, Edinburgh, to provide a valuation for residential mortgage purposes. By report dated 12 March 1996, Mr Maguire valued the upper middle flat at £45,000, but further recommended that the maximum which the bank should lend on the flat should be £40,000.

[57] In evidence, Mr Maguire explained that he had a copy of GA Property Services sales price list with an asking price of £52,950 for Simon's flat. However he prepared his valuation on the evidence of comparables, available to him on the office computer. He looked at local authority house sales and also private developers' properties of the same nature as The Harriers. Mr Maguire's recollection was that residential developments known as Double Hedges and Upper and Lower Craigour offered reasonably suitable comparators. Mr Maguire confirmed that the residential housing market in Edinburgh during the early to mid 1990s was sluggish, almost static. He considered Mr Nisbet's valuation of £52,000 to be very high, a figure which he personally would not be able to justify. Mr Maguire had been aware that the five other flats had not sold during the year following upon completion. He gave careful consideration to the valuation of Simon's flat. The valuation had been a difficult one, because of the location. The flat itself was perfectly satisfactory.

[58] Simon gave his father (the pursuer) a copy of the report. The pursuer said in evidence that he could not believe the report, because he had a very reputable firm, D.M. Hall, giving him other information upon which he had relied. He telephoned D.M. Hall saying that he had a valuation which frightened him. Ian Gray of D.M. Hall then called to inspect the flats. Mr Gray's report dated 19 March 1996, addressed to the Bank of Scotland and copied to the pursuer, valued Simon's flat for mortgage purposes at £50,500. The pursuer contacted D.M. Hall and asked why there had been an apparent decrease in value from £52,000 (plus £1,000) to £50,500. He was told that his son's occupation of the flat meant that there would have to be re-decoration. It was no longer a brand-new flat, and that fact had to be reflected in the valuation.

[59] All six flats remained unsold. By letter dated 30 May 1996, Dunbar Bank requested repayment of the loan from the pursuer. On 3 June 1996, Dunbar Bank served a calling-up notice on the pursuer.

[60] In mid-June 1996, the pursuer instructed two further valuations of the flats from independent chartered surveyors Andrew Warren of Messrs O'Neill, and George Brewster of Messrs Shepherd. He told the court that he instructed those two further valuations because he "had to take a lot of convincing that the flats were not at the level [of value] given by D.M. Hall". The new valuations were respectively £46,000 and £44,000 for the upper flats, and £45,000 and £42,000 for the lower flats. The pursuer then reduced the asking prices to £45,000 and £42,000.

[61] In evidence, the pursuer stated that he was devastated by those valuations. He commented that he had spent all that time marketing at higher prices. As he put it, at the lower values quoted, a first-time buyer could get not only a lovely home but a brand new car with his money.

Bank's repossession
[62] On 26 September 1996, Dunbar Bank repossessed the flats. They permitted the pursuer's son to remain in occupation until December 1996. The bank took over the marketing of the flats. The conduct of the marketing is the subject of another litigation raised by the pursuer in the Court of Session.

Action of damages for alleged professional negligence
[63] In the pursuer's view, the flats should have been sold within about three months of appearing on the market, i.e. by July 1995. Had they sold by July 1995, he would not have incurred certain costs and expenses during the period from 1 August 1995 to 26 September 1996, when the bank repossessed the flats.

[64] The pursuer took legal advice. He raised the present action, seeking to recover those costs and expenses. He alleges professional negligence on the part of the defenders in over-valuing the flats in January 1995.

Proof before answer
[65] A proof before answer took place during 11 to 14 and 18 to 21 May 2004.

[66] Evidence was led from the pursuer (60); Leonard Maguire (63), Chartered Surveyor with Messrs McNeill, Maguire & McCreath; Grant Williams (46), Chartered Surveyor with Messrs Murray & Muir, giving evidence as an expert; and David Macmillan (55), principal of Lister Estate Agents, St. John's Road, Edinburgh. Mr Macmillan had been unable to find any files relating to The Harriers. In his evidence, he had to rely upon other people's correspondence and records.

[67] The pursuer also tendered three joint minutes, numbers 23, 24, and 25 of process.

[68] On behalf of the defenders, evidence was led from George Nisbet (46) of Messrs D.M. Hall & Son; and John Dalby (58), director of Dunbar Bank. The defenders had intended to lead a third witness, a chartered surveyor named Duncan Penman. However his name did not appear on the defenders' witness list. Counsel for the pursuer objected to Mr Penman's name being added to the witness list and to his evidence being led. The matter was debated on Friday 14 May 2004. In the exercise of my discretion, I refused to allow Mr Penman's name to be added to the defenders' witness list.

[69] During the proof before answer, contentious issues included an objection to a passage of the pursuer's evidence given in re-examination; two disputed matters of fact; the question whether in the circumstances Messrs D.M. Hall & Son owed the pursuer a duty of care, and if so, whether the formal disclaimer excluded liability to the pursuer; whether there had been a breach of any duty of care owed to the pursuer; whether any breach caused or contributed to the pursuer's loss and expense; contributory negligence; and quantification of loss.

[70] I shall deal with each of these matters in turn. But at this stage, I give a brief outline of the evidence given by Grant Williams, the pursuer's expert witness.

The pursuer's expert witness, Grant Williams
[71] Grant Williams (46) B.Sc., F.R.I.C.S., of Messrs Murray & Muir, Chartered Surveyors, stated that he had been a fellow of the Royal Institute of Chartered Surveyors in Scotland since 1987. His experience since 1980 had been predominantly in the residential market in Edinburgh and surrounding areas. For that reason, he stated that he would not try to value properties in Glasgow, as he did not have the necessary experience of that market.

[72] During the years 1993 to 1996, Mr Williams had been valuing about 750 to 1000 properties each year. In 1993-94, he had been chairman of the General Practice Division of the RICS. He was a member of various residential working parties, and had sat for four years on the disciplinary panel of the Institute. He was familiar with the high test set for professional negligence, as the concept had been discussed in working parties and in the course of other court cases.

[73] Mr Williams stated that he had been approached in 1998 by the pursuer's then agents, Messrs Haig-Scott & Co., W.S., and asked to give advice about The Harriers. His views were set out in a letter dated 14 April 2004 addressed to the pursuer's present agents Messrs Drummond Miller, W.S. (number 6/11 of process) as follows:

" ... I previously provided a report and valuation on behalf of the pursuer dated 28 September 1998.

... An initial valuation was prepared by Messrs D.M. Hall towards the end of 1994 providing a gross development value for the six flats of £255,000. This would give an average value for each flat to be in the region of £42,500. I have not seen this valuation report but it is confirmed in a letter to the pursuer from Dunbar Bank dated 30 January 1995. An updated valuation was carried out by Messrs D.M. Hall on 27 January 1995 increasing the gross development value to £306,000 and providing individual values for the ground floor flats in the region of £50,000 and the first floor flats in the region of £52,000. This report is signed by George Nisbet FRICS on behalf of D.M. Hall. The valuation report is made out to Dunbar Bank plc and not to the pursuer.

Fernieside Avenue and the surrounding streets comprise mainly local authority properties. These are a mixture of houses and flats some of which have a similar layout to the Harriers Development. A large number of the properties in the area have been purchased by sitting tenants and have subsequently been re-sold on the open market.

The surrounding properties are in the main of traditional construction similar to the Harriers Development although the roof construction varies throughout the estate and comprises a mixture of flat and pitched roofs with coverings ranging from tiles to copper sheeting. The quality of the finishing both internally and externally to the Harriers Development was of a significantly higher standard than the surrounding former local authority properties.

In preparing my valuation in 1998 I analysed the re-sale evidence for similar sized flats in the area between 1994 and 1996. The sales prices ranged from £32,000 for a two bedroom flat up to £45,000 for a three bedroom semi detached house. I would point out that these figures were for re-sales and not sales to sitting tenants.

As I stated previously there is no doubt the quality of finish both internally and externally of the Harriers Development was of a far higher standard than the surrounding properties. There would also have been a new build premium paid for properties within the development.

I have enclosed as an addendum to this report a list of the comparable evidence that was available at the time.

Taking into account the above I am of the opinion that the open market value of the ground floor flats in 1995 would have been fairly stated in the capital sum of £42,000 and that the value of the first floor flats at the same time would have been fairly stated in the capital sum of £45,000.

It is my view that the valuations of £50,000 for the ground floor flats and £52,000 for the first floor flats provided by Messrs D.M. Hall in 1995 are overstated and could not be reasonably supported by the market evidence available at that time.

I am firmly of the view that no reasonably competent surveyor with experience of the residential property market in Edinburgh at the material time would have valued the individual flats at the level which the defenders did in their report of the 30 January 1995 ..."

[74] An addendum to Mr Williams' letter dated 14 April 2004 listed ten villas and flats in Ferniehill. The relevant sale prices achieved during the period 1993 to 1996 ranged from £34,600 to £46,000.

[75] Mr Williams explained that during 1994 to 1996, the housing market had been quite sluggish, indeed stagnant. As stated in his report, Mr Williams valued the ground floor flats in The Harriers development at £42,000, and the upper floor flats at £45,000. He was clear that no reasonably competent surveyor with experience of the residential property market in Edinburgh at the material time would have given valuations of £50,000 and £52,000. He had seen Messrs McNeill, Maguire & McCreath's valuation, but not the valuations given by Messrs Shepherd (ground flat: £42,000; upper flat: £44,000) and Messrs O'Neill (ground flat: £45,000; upper flat: £46,000). When asked about the variations in valuation, Mr Williams commented that valuing properties was not an exact science. There would always be variations. The Harriers development presented a problem in that it was a new-build development situated in a large estate of local authority properties. There was no direct comparator.

[76] Mr Williams confirmed that Mr Maguire of Messrs McNeill, Maguire & McCreath, Mr Brewster of Messrs Shepherd, and Mr Warren of Messrs O'Neill, each practised in the same area of chartered surveying as he did (the residential market in Edinburgh and its environs). By contrast, George Nisbet of D.M. Hall was experienced in the commercial market, not in the residential market.

[77] Mr Williams could not estimate how quickly a particular house might sell in the mid-1990s. There was no direct correlation between the sluggish market and the time it took to sell a house. It was impossible to say whether one house would sell faster than another. A property was regarded as slow to sell when it had been on the market for longer than three months.

[78] In cross-examination, Mr Williams accepted that some of the property prices in his addendum post-dated Mr Nisbet's valuation, and would not have been available to Mr Nisbet when he was valuing the flats. Mr Nisbet would however have had access to the Paisley University Sasines Records system, which provided about 200 comparators. Mr Williams had taken a broad sample from the 200. He had chosen similar traditionally-built properties. Mr Williams accepted that the examples which he had included in his addendum were post-war council houses, of poorer build quality, in private ownership at the date of the sale. They might or might not have been properly maintained. He had adjusted his valuation to take account of the fact that The Harriers development was brand new; but one of the main issues was the location of the development. When shown a letter from Messrs Cochran, Sayers & Cook dated 6 February 1996 referring to other similar properties selling at higher prices, Mr Williams pointed out that location was very important. Compared with those properties, The Harriers development was more proximate to council or ex-council properties. Fernieside was classed as "poor local authority" because of the tenants, not the housing. Thus although some of the estates referred to by Messrs Cochran, Sayers & Cook were the same type of build, they were wholly different environments. Yet other estates referred to comprised bungalows, again a very different environment. The Harriers development was almost unique. The importance of location could be illustrated by the fact that a two-bedroom property in Murrayfield could sell for £800,000, whereas a similar property two miles away might fetch £150,000. Mr Williams had been unable to find an exact comparator for The Harriers, namely a small new-build development of flats constructed within a large council estate. Accordingly Mr Williams accepted that the property was difficult to value, and that there might be a wider range of values than would normally be the case. Opinions might vary to some extent, because there was no easy comparator.

[79] Mr Williams accepted that in the residential valuation field, it was recognised (as a result of developments in practice and case-law) that a prospective purchaser would be likely to rely upon the bank or building society surveyor's valuation. "Open market value" was the best price anticipated where there was a willing seller, a willing purchaser, and no special difficulties or interests.

[80] Mr Williams, with his expertise in residential mortgage valuation, felt unable to comment on surveying practice in relation to a commercial bank instructing a surveyor with commercial expertise to value a property development. He stated that whenever he personally had been involved in the appraisal of such a development, his contribution had related to the residential value, the "end value".

[81] Mr Williams agreed that a property developer would be expected to know the sales prices at which he wished to sell the flats, before any visit from a commercial surveyor instructed by a bank considering making a business or commercial loan. It was almost inconceivable that the developer would not have views about the sales prices. It would be difficult for the developer (whether experienced or not) to carry out the development if he did not know the "end figure". Mr Williams agreed that the surveyor inspecting the property on behalf of the bank with a view to the bank making a commercial loan would work on the basis of the lending criteria established with the bank. The property developer would already have gauged what sale prices he could expect. Mr Williams agreed that in such a situation, the developer was not having to decide whether to purchase the land, and accordingly the surveyor would not expect any reliance by the developer on the valuation prepared for the bank. Equally where the development was part-built, and the developer had already spent an additional £30,000 on an up-grade, the surveyor would not expect the developer to be relying upon the surveyor's advice to the lending bank. Mr Williams agreed that the situation in the pursuer's case was therefore wholly different from residential mortgage valuations, where the surveyor was aware that the prospective purchaser might rely upon the advice the surveyor gave.

[82] Mr Williams reverted to the state of the market during 1994 to 1996. He commented that, because of the stagnant conditions, the market changed from the traditional "Buy, then sell" approach to a "Sell, then buy" approach. In other words, prospective purchasers of property wished to be sure that their own property was sold before purchasing the new property. That change had slowed down the market, and made it fickle. It was difficult to predict the price at which a sale would be achieved. It was not possible to say that if a price were reduced, a buyer would be found. An estate agent was always reluctant to lower the price, as the public often responded by assuming that there was a problem with the property. In the present case, even if the prices had been reduced to be more in line with Mr Williams' valuations, it was not possible to know when the flats would have been sold. They might well have remained on the market for many months, as had many properly-priced properties at the time.

[83] In re-examination, Mr Williams confirmed that a property developer could be expected to have made his own enquiries about pricing. He might have an estate agent. The estate agent might not have access to the databases which surveyors' firms used, but would nevertheless be able to draw comparisons with similar properties. Further the developer might have a firm of surveyors carrying out a market appraisal. If the developer was a large concern, there might be an in-house surveyor. Alternatively a developer might rely on a cross-section of views from a number of agents. Mr Williams had some experience of smaller developers. They tended to be individuals who had in the past refurbished properties and then wished to move up to the "next band" in the property and construction world.

[84] Mr Williams confirmed that the disclaimer clause in the reports by D.M. Hall represented the standard phraseology expected by chartered surveyors' insurers. The insurers insisted on surveyors incorporating such a clause in their reports.

[85] In response to questions relating to any verbal advice which might be given to a developer by a surveyor instructed by a lending bank, Mr Williams indicated that he would not expect the surveyor to suggest to the developer that when he received the valuation, he should add £1,000 to each flat because purchasers would ask for carpets and fees. In any event, if any verbal advice was given, a surveyor would generally repeat that advice in writing.

[86] Finally, Mr Williams stated that the reason why surveyors had to bear in mind reliance on their valuation advice by non-client prospective purchasers in the residential mortgage context was simply as a result of a series of decisions in the courts.

[87] I now turn to the contentious issues which arose during the proof before answer.

Objection to evidence
[88] In re-examination of the pursuer, senior counsel sought, for the first time, to obtain from the pursuer evidence about what he would have done in January 1995 had D.M. Hall given a valuation of £255,000, rather than £306,000. Objection was taken by counsel for the defenders, on the ground that the issue had not been raised during the pursuer's evidence-in-chief; neither had it arisen out of cross-examination.

[89] In response, counsel for the pursuer referred to a passage in cross-examination. The pursuer had been asked by the defenders' counsel about his understanding about current valuations in January 1995 when he approached Dunbar Bank to request the further loan of £30,000. He had also been asked about his views and intentions at that time.

[90] Counsel for the pursuer submitted that the question which he had put to the pursuer in re-examination arose directly from that passage in cross-examination. Counsel for the defenders contended that it did not.

[91] At the time, I allowed the question to be put, reserving all issues of competency and relevancy. The pursuer then gave evidence to the effect that if he had received information in January 1995 that D.M. Hall valued the property at £255,000, he would have "marketed accordingly", and would have finished the project. He commented that his family were not wealthy, but they would have "put things together". His wife had received an inheritance. He repeated that they would have marketed accordingly. They would not have fixed the asking prices at the levels which they had.

[92] During the hearing on evidence, counsel for the defenders renewed his objection. He invited the court to sustain the objection, and to rule inadmissible that part of the pursuer's evidence summarised above. He submitted that the evidence in re-examination touched on an area which had not been canvassed in evidence-in-chief. It was new matter, raised for the first time in re-examination. While counsel for the defenders had been given an opportunity to ask some further questions, that had not cured the prejudice which had arisen. The defenders' entire cross-examination of the pursuer had been conducted in the knowledge that the pursuer had not given evidence on that crucial matter. Had the pursuer given such evidence in chief, the defenders' counsel would have cross-examined in a different way. As it was, counsel had been left with a very limited opportunity to question the pursuer further, by putting to the pursuer that he (the pursuer) had his own ideas about market value, his own expectations about what prices he could achieve, and that he would have continued to market the flats at his own prices, regardless of any valuation of £255,000 by D.M. Hall. That question brought a short response from the pursuer along the lines of "Ridiculous".

[93] Counsel for the pursuer, on the other hand, submitted that the passage in cross-examination permitted the putting of the question in re-examination. In cross-examination, the line of questioning was directed to a forceful suggestion that the pursuer had not relied upon D.M. Hall's valuation of £306,000. Counsel contended that, arising from that cross-examination, he was entitled to ask the pursuer what he would have done if he had not had the valuation of £306,000 to rely upon. If cross-examination was directed to non-reliance on the valuation of £306,000 for a number of reasons, a final question (such as that put by the pursuer's counsel in re-examination) was clearly permissible.

[94] As indicated above, I allowed the question at the time, reserving all matters of competency and relevancy. Having considered the evidence and the submissions, I concluded that the defenders' objection should be sustained, and that the challenged part of the pursuer's evidence should be ruled inadmissible. I reached that view for the following reasons: -

[95] While there was some force in the pursuer's argument, I consider that the issue sought to be raised was a significant one, which (a) went beyond the proper purpose of re-examination; and (b) was an issue which should have been fully addressed in evidence-in-chief, thus allowing the defenders fair notice of the pursuer's position and an opportunity thoroughly to test that position in cross-examination. I accordingly rule that part of the pursuer's evidence inadmissible.

[96] I should add that, even if I had ruled the passage admissible, the resultant evidence from the pursuer on such an important matter was in my view too brief and too vague. For the pursuer to say that he would have "marketed accordingly", and that he would not have gone to the level of asking price which he had, left many important questions unanswered. For example, it left unanswered the question at what prices he would have marketed the flats, and (crucially for the question of causation) whether the prices selected would have resulted in any of the flats being sold within a particular time. In my view therefore, even if the contested passage of evidence were to be treated as admissible, it would have provided limited assistance to the pursuer's case, possibly merely emphasising or illustrating the pursuer's assertion that he did, as a matter of fact, rely upon the valuation of £306,000.

Disputed matters of fact
[97] Two significant disputed matters of fact arose in the course of the proof before answer.

The source of the valuation figure of £312,000 discussed during the pursuer's meeting with the bank manager when requesting a further loan of £30,000
[98] The pursuer's evidence was that the meeting occurred shortly before Christmas 1994. He said that he called at Dunbar Bank's Glasgow office. He found most of the staff wishing to leave the office in order to attend a Christmas lunch. As a result, matters had been dealt with quite hastily. The pursuer said that he approached the bank with no valuation figure in mind. He asserted on several occasions that, at the time, he had no idea of the value of the project. All that he had to work on was a verbal report of D.M. Hall's 1993 valuation (i.e. a total value of £255,000).

[99] However Mr Dalby's memorandum recording the meeting was in the following terms:

"To: Lynn McWilliams From: John Dalby

Date: 11 January 1995

Subject: Ronald Wilson - Harriers Development

I have just interviewed Mr Wilson and the houses that he has been working on since April last year are now complete. We had estimated the sales proceeds to be £255,000 but the client as it happens has improved the works quite a bit and the sales proceeds are now estimated to be £312,000. There has been some extra expense to improve these properties and the client is asking in the short term if he can recoup some of this. I am therefore happy to agree a further £30,000 to be drawn down.

The client also wishes to pay us 100% of sale proceeds so we should be out of the development fairly rapidly as they are on the market next Monday. Obviously you will have to check with D.M. Hall but can you please make arrangements."

[100] When the memorandum was put to the pursuer by his own counsel, he stated that he had never seen it before. Without waiting for his counsel's question, he immediately commented that the figure of £312,000 was not information which he had given the bank. He said: "That's their own figure". He asserted that the bank would know of that figure through their surveyor. He brushed aside any suggestion that the bank's surveyor (Mr Nisbet of D.M. Hall) did not in fact inspect the property for the purpose of the further loan until about two weeks after the meeting between the pursuer and Mr Dalby. He stated that the memorandum was utter nonsense, and that it had been fabricated. He described the memorandum as "very convenient", and stated that he was disgusted by the tactics.

[101] The director of Dunbar Bank, Mr Dalby, gave evidence for the defenders. During the years from 1993 to 1995, he had been involved mainly in lending money to property developers and investors. The bank's business comprised loans for residential developments, residential investments, the letting of flats, commercial developments, and commercial investments. The bank was not in the habit of making loans to home-buyers.

[102] Mr Dalby stated that he could not, some nine years later, remember the date or detail of the meeting. However as was his practice, he had prepared the memorandum shortly after the meeting. When Mr Dalby was asked whether the memorandum was genuine, his astonishment was obvious. He stated that it was his practice to take notes during a meeting, and then to dictate a memorandum. By the phrase "just interviewed" he meant that he had "just done it". Accordingly, his evidence was that the meeting had taken place on 11 January 1995, and not in December 1994. The source of Mr Dalby's information that the "houses ... were now complete" was the pursuer. The memorandum then recorded that the bank had estimated the sales proceeds at £255,000, but that the client (the pursuer) had improved the works. The source of the information about the improvement and about the sales proceeds being estimated at £312,000 was the pursuer. Mr Dalby ruled out the possibility that the source of the figure of £312,000 might have been Jim Moir of D.M. Hall, pointing out that Mr Moir did not have the necessary expertise to give a sales valuation. Mr Moir was a building surveyor.

[103] The memorandum mentioned Mr Dalby's assistant making the necessary arrangements for a further valuation survey. Those arrangements resulted in Mr Nisbet's visit to the site later in January 1995, and his valuation dated 27 January 1995 of £306,000.

[104] Obviously the differing accounts of the meeting and of the source of the valuation of £312,000 gave rise to issues of credibility and reliability. Having considered the witnesses and their evidence, I was unable to accept that the memorandum was fabricated, or that it was inaccurate. Mr Dalby was a busy senior bank director, dealing with many projects and transactions, carrying heavy responsibilities, and having good, efficient work practices. He was in my view wholly credible and reliable. A suggestion that he had fabricated the memorandum for some obscure reason, thus recording that the pursuer had given the value of £312,000 when in fact the valuation had come from another source, was in my view untenable. I preferred and accepted Mr Dalby's evidence.

[105] I found additional support for that conclusion in the evidence of Mr Macmillan of Lister Estate Agents. In the course of Mr Macmillan's dealings with the pursuer, the total of the asking prices for the flats had progressively increased as follows:

17 November 1992 £264,000

Shortly thereafter £276,000

21 July 1994 £296,700

31 October 1994 about £300,000

[106] Mr Macmillan had not been told about D.M. Hall's valuation in 1993 (which, at £255,000, was lower than Lister's projected sales total as at November 1992 of £264,000). Mr Macmillan agreed that advice given by the pursuer to Mr Dalby that the development was valued at £312,000 would not be inconsistent with the pattern of increasing prices fixed by the pursuer.

[107] Having assessed all the evidence relating to the meeting between the pursuer and Mr Dalby of Dunbar Bank, I was unable to accept the pursuer's evidence that he did not provide the bank with the valuation figure of £312,000. I was satisfied that the pursuer gave Mr Dalby the estimate of £312,000.

[108] It should be noted that, in cross-examination, Mr Dalby was asked whether the pursuer was in the class of smaller developers catered for by the bank who needed to have his hand held to a greater extent than other larger, more experienced, developers. Mr Dalby replied in the negative. Dunbar Bank would not lend unless the borrower had proven development experience. The pursuer must have satisfied the bank that he had the ability to complete the project.

Whether in January 1995 Mr Nisbet advised the pursuer to "add £1,000" in relation to each flat
[109] The second major factual dispute was whether Mr Nisbet had, in January 1995, verbally advised the pursuer to "add £1,000" to the valuation figure for each flat to allow for potential requests for carpets, curtains, legal fees and the like.

[110] The pursuer gave evidence that Mr Nisbet of D.M. Hall gave him certain verbal advice during the valuation site visit in January 1995. That advice was to add £1,000 to the valuation figure for each flat. The pursuer gave evidence along the following lines:

"He [Mr Nisbet] said "Add £1,000 to each flat. People will ask for carpets, curtains, legal fees." It was not an instruction, but advice ... I appreciated the advice. It was not something I'd have known to have done."

[111] However a letter from Mr Nisbet to the bank dated 30 October 1995 (number 7/8/3 of process) commented:

It was suggested to the pursuer that the letter was inconsistent with any alleged recommendation by Mr Nisbet to add £1,000 to the asking price for each flat. The pursuer's response was that he did not accept the letter, which he described as "another convenience".

[112] When Mr Nisbet gave evidence, he stated that he had only a vague recollection of the site inspection in January 1995. He did not recall meeting the pursuer at the premises. It would be unusual to meet a developer. When preparing his report, Mr Nisbet had not expected the developer to take any action in reliance upon the report. The report was not for the developer, it was for the bank. Mr Nisbet expected the property developer to undertake his own due diligence in relating to pricing (i.e. to have made his own investigations so far as pricing was concerned) long before D.M. Hall were instructed by Dunbar Bank, because a developer had to know that he would be able to emerge with a profit before incurring all the professional fees, costs and liabilities.

[113] Mr Nisbet's evidence was that the likelihood of his making a comment along the lines of "add £1,000 to the valuation figure for each flat" was remote in the extreme. First, he was acting on the instructions of the bank. Any discussion with the borrower could be prejudicial to his client. Secondly, he had to report to the bank on the best price (i.e. the open market value). In such circumstances, he would be highly unlikely to suggest adding some entirely arbitrary figure onto the best price. Thirdly, making such a suggestion (about adding £1,000 to the price) was not the practice in the residential market at that time. Mr Nisbet ultimately asserted that he would not have made such a comment.

[114] Mr Macmillan of Lister Estate Agents stated in evidence that he had no recollection of any suggestion that a particular price had been chosen to allow for purchasers' requests for curtains, carpets, and legal fees. He had no recollection that something was built into the price to meet such an eventuality. In cross-examination, he agreed that it would be unusual and unwise to increase the asking price to a level above what might be thought attainable in the open market without letting members of the public know what incentives were included. There was a risk of losing potential purchasers.

[115] Having weighed up all the evidence, I was not satisfied on a balance of probabilities that Mr Nisbet gave the pursuer any advice about adding £1,000 to the valuation figure for each flat.

[116] It will be seen therefore that I was unable to find the pursuer a wholly credible and reliable witness.

Whether any duty of care owed by the defenders to the pursuer
Submissions on behalf of the pursuer: whether duty of care owed to the pursuer
[117] Senior counsel for the pursuer contended that the defenders owed the pursuer a duty of care when carrying out the valuation in January 1995. Reference was made to Smith v Bush [1990] 1 AC 831; BCCI v Price Waterhouse [1998] P.N.L.R. 564, at pages 582 et seq., 586B-588D; and Merrett v Babb [2001] QB 1174.

[118] Adopting the incremental approach outlined by Sir Brian Neill at page 586B-D of BCCI v Price Waterhouse, counsel submitted that the duty of care recognised in Smith v Bush should be extended to the circumstances of the present case. What was being considered was the ability in law of an individual to rely upon the skill and care exercised by a professional person, in this case a chartered surveyor. Both the identity of the individual, and the identity of the professional person, had to be taken into account. D.M. Hall were a national firm, the largest firm of chartered surveyors in Edinburgh. They were perceived by the pursuer as having a high repute. All the circumstances surrounding the obtaining of the valuation, including the means of the borrower, had to be taken into account. The pursuer's case was stronger than that of the plaintiffs in Yianni v Edwin Evans & Sons [1982] Q.B. 438, as the pursuer had been given no advice to obtain an independent survey.

[119] The "assumption of responsibility" test was a test to be applied by the courts on the basis of the facts. Whether a person was doing something willingly or even knowingly was not necessarily decisive. Public policy considerations played a part in assessing whether a duty was owed. As Lord Griffiths pointed out in Smith v Bush (quoted in Merrett v Babb) there could be a whole range of circumstances. At one end, there were people of modest means; at the other, there were industrial undertakings, large blocks of flats, expensive housing, developments worth millions of pounds. People in the latter category often had their own in-house advice, or alternatively they had the means to instruct their own advice. Lord Griffiths therefore recognised the existence of a wide range of circumstances. He was not to be construed as ruling out circumstances such as prevailed in the present case. The whole evidence in the present case demonstrated that the pursuer would be likely to rely upon the valuation.

[120] Lord Clyde's statement at pages 674H-675A of Phelps v Hillingdon London Borough Council [2001] 2A.C.619 (quoted at paragraph 39 of Merrett v Babb) was widely framed. He did not limit the circumstances in which liability might arise to the classic situation of the purchase of a modest home. The question in each case was whether the law recognised that there was a duty of care: cf. dicta of Sir Brian Neill in BCCI v Price Waterhouse, at page 586F. The three paths referred to by Sir Brian Neill should be applied to each particular case, against a background of public policy.

[121] Counsel then referred to Scottish authorities Martin v Bell-Ingram, 1986 S.C. 208, at pages 217-220; Hadden v City of Glasgow District Council , 1986 S.C. 157; Smith v Carter, 1995 S.L.T. 295, at pages 296-297.

[122] Against the background of the authorities, counsel invited the court to consider the facts of the present case relevant to the question of a duty of care from four different viewpoints: that of the pursuer; Dunbar Bank; D.M. Hall; and a general policy point of view.

[123] Facts referred to included the following: the pursuer's limited means and experience; the fact that he had in effect paid D.M. Hall's fee through Dunbar Bank; the additional expense of obtaining an independent valuation, which would merely replicate D.M. Hall's advice; a lack of advice about obtaining an independent valuation; the failure to draw the disclaimer (a clause instigated by insurers) to the pursuer's attention; Dunbar Bank's practice of giving the borrower a copy of the valuation advice and then discussing it with him, a practice said to be known to surveyors; D.M. Hall's expertise in valuing, whether for a lender or a borrower, residential developments such as The Harriers, including assessing the open market value; the fact that a finding of liability against the defenders would have a limited effect on a concern as large as D.M. Hall, with no liability being visited upon an unsuspecting employee; and, from a public policy point of view, the parallel to be drawn with purchasers of residential property who had been held in law to be able to reply on valuation reports given to the lender.

[124] When it was suggested to senior counsel for the pursuer that a decision in the pursuer's favour in the present case would open the door to a new class of potential claimants, namely developers, counsel responded that it was easy to place the present pursuer in a category different from that of prospective purchasers of homes relying on a building society survey. But that was not a principled approach. The third path referred to by Sir Brian Neill in BICC v Price Waterhouse was an incremental approach. No doubt there were people within the category of prospective purchaser of a home to whom no duty was owed. Similarly there would be developers quite unlike the pursuer to whom no duty was owed. Reference was made to the dicta of Lord Griffiths in Smith v Bush, cit. sup., and of Lord Clyde in Phelps v Hillingdon London Borough Council [2001] 2A.C.619 at pages 674H-675A. There was no reason in principle supporting the contention that there could be no duty of care owed by a surveyor in Mr Nisbet's position to a borrower in the pursuer's position. The only reasons which could be put forward would be purely pragmatic and convenient, and quite unprincipled. If a decision were to be made against the pursuer on that basis, such a decision would give special weight to the category of persons who purchased a house as a home, and would thus give protection to the purchaser of a house worth £2 million (contrary to the dicta of Lord Griffiths).

[125] Counsel reiterated that, in the particular circumstances of the present case, D.M. Hall owed the pursuer a duty of care.

Submissions on behalf of D.M. Hall: whether duty of care owed to the pursuer.
[126] Counsel for the defenders submitted that no duty of care was owed to the pursuer in relation to the valuation carried out in January 1995. Responding to the various viewpoints in the pursuer's submissions, counsel contended that Dunbar Bank's point of view was irrelevant. In answer to the facts relied upon by senior counsel for the pursuer, counsel for the defenders submitted inter alia that there was no evidence that D.M. Hall had known that the pursuer was a man of limited means and experience; property developers paid for their own advice on sales prices; the pursuer was a commercial property developer, not a prospective domestic purchaser (contrast with Smith v Bush); it was irrelevant that a borrower had to bear the costs involved in setting up a loan, including the cost of any valuation prepared for the lending bank; the bank (and not D.M. Hall) had passed the valuation report to the pursuer, and then only for the purpose of giving another bank comfort in relation to ranking of securities; the pursuer had used the valuation for a purpose entirely different from that which it had been prepared; there was no universal practice in circumstances such as the pursuer's whereby a bank would pass a copy of the valuation to the borrower, nor, on the evidence, were surveyors aware of any such practice; so far as the disclaimer was concerned, the pursuer should have obtained a copy of the 1993 report referred to in the 1995 report: he would then have seen the disclaimer clause; there might be good public policy reasons for protecting residential purchasers of modest means hoping to acquire a home, but property developers seeking to make a profit were a different matter; and finally, in the context of liability being visited on an employee, it could not be said what would happen to Mr Nisbet if the court were to find against D.M. Hall.

[127] Counsel contended that the rebuttals to the pursuer's points illustrated the lack of proximity between the pursuer and the defenders. There was no duty of care owed to the pursuer. The single most fundamental point was the commercial nature of the transaction and what was in the contemplation of the surveyor. The nature of the bank's instructions to the surveyor, and the work which had to be done by the surveyor, were more complex and wide-ranging than the instructions and work in a simple residential mortgage valuation. Surveyors who were primarily residential mortgage valuers did not carry out that type of work. It was not in the contemplation of the surveyor that the borrower would use anything produced by the surveyor for the bank as a basis for fixing asking prices for the property. Matters might conceivably be different if the pursuer had not owned the property (although counsel would still contend that no duty of care was owed). The present case had to be contrasted with the residential mortgage context. It was well recognised that purchasers at the lower end might rely on the bank or building society lending survey. The pursuer's circumstances were very different. Mr Williams had drawn a clear distinction between domestic purchasers and property developers. Property developers were expected to make their own enquiries. Mr Williams' evidence on that matter had not been challenged.

[128] There were two particular features in the present case pointing away from a duty of care. (i) Assuming that the pursuer's evidence about the additional £1,000 was disbelieved, there had been minimal discussion between the pursuer and Mr Nisbet. (ii) All the evidence suggested that a surveyor in the circumstances would anticipate that the sale price had already been decided upon by the developer, with or without the advice of an estate agent or other adviser. There was nothing in the present case to make it out of the ordinary.

[129] In any event, the pursuer had been alerted to conditions in the earlier valuation which he ought to have read. He chose not to investigate the earlier valuation. If he had so investigated, the disclaimer would have put him on his inquiry. He would then have questioned his position in relation to D.M. Hall's valuation.

[130] Turning to the reported cases, counsel submitted that there was an absence of authority on the point in issue. Reference was made to BCCI v Price Waterhouse, cit. sup. and to the first path. Any expansion of the traditional view (that a professional such as an auditor was in general unlikely to owe a duty of care to a non-client) focused upon what the advice was to be used for. In the present case, the use which the pursuer made of the valuation was not foreseeable, let alone reasonably foreseeable. There was no proximity between the pursuer and Mr Nisbet. There were no special circumstances giving rise to proximity and thus a duty of care. Nor would it be just and reasonable to find that the defenders owed a duty of care of the scope claimed.

[131] In relation to the second path (the assumption of responsibility test), counsel referred to the dicta of Lord Goff quoted in BCCI v Price Waterhouse at pages 584-85. There was no general assumption of responsibility in the present case. There was no basis for such an assumption of responsibility: for example, no conversation; no exchange of questions and answers between the pursuer and Mr Nisbet; and no knowledge on the part of Mr Nisbet that there might be reliance in certain circumstances. The task in hand was not what the selling prices should be. The task was a valuation for a completely different purpose. It had not been shown that the surveyor should have known or should have contemplated the decision which the pursuer might take. There had been no involvement in the affairs of the pursuer. Thus the case failed on the second path.

[132] The third path was a restrictive test. Counsel referred to the observations of the High Court of Australia, quoted at page 586C of BCCI v Price Waterhouse. An incremental extension was a gradual extension. What the pursuer proposed in the present case was a very radical departure from a well-understood position. The pursuer's case accordingly did not fit the third path.

[133] Counsel submitted that the proper application of the three paths brought the same result, namely, no duty of care owed to the pursuer.

[134] Further, applying the factors outlined by Sir Brian Neill at page 587-588 of BCCI v Price Waterhouse cit. sup., the pursuer and the bank's valuer had been on different sides of the fence. There had been no contract or relationship between them. The bank (and not the valuer) had given the valuation to the pursuer, not for the purpose of assisting the pursuer to fix selling prices, but for the purpose of providing comfort to the Bank of Scotland in connection with the ranking of heritable securities. D.M. Hall were in fact unaware that the valuation had been passed to the pursuer. D.M. Hall did not know of, and could not reasonably have anticipated, the extent and purpose of the pursuer's reliance upon the valuation.

[135] Counsel accepted that there was a recognised practice in domestic purchases that a purchaser might rely on the valuer's report to the lender, and might not seek separate advice. But that practice did not arise in the present case. The evidence of the pursuer's expert Mr Williams made it clear that a surveyor in Mr Nisbet's position would reasonably assume that the pursuer would use his own advisers (whether surveyors or others) to obtain a valuation and advice on sales prices and selling tactics: cf. Sir Brian Neill, page 588D-E.

[136] The particular facts in Merrett v Babb, cit. sup., were very different from the facts in the pursuer's case. There was a significant difference between a residential purchaser, and a property developer. Referring to the dicta of Lord Oliver at page 638 D-E in Caparo Industries plc v Dickman [1990] 2 AC 605, counsel submitted that D.M. Hall could not have known, whether actually or by inference, that the valuation would be likely to be acted upon by the pursuer. In Saddington v Colleys Professional Services [1999] LLRPN 140, Balcombe L.J. at page 143 col.1 pointed out that in his view and in Lord Griffiths' view a case such as Smith v Bush represented a high-water mark, and the courts should be slow to go beyond the ambit of that case. Referring to Reeman v Department of Transport [1997] 2 Lloyd's Rep 648, counsel conceded that it was a very different case from any case involving a chartered surveyor. Nevertheless the decision was useful in that it provided an illustration of the necessity of using a statement for the same purpose for which it was supplied.

[137] Counsel then focused on the question whether there had been reliance upon the 1995 valuation. He submitted that the pursuer had not relied upon the 1993 valuation of £255,000: why then should he be believed when he claimed that he relied upon the 1995 valuation (total value £306,000). The whole background of the pursuer's pricing of the project, culminating in the meeting with Mr Dalby on 11 January 1995 to discuss the property then valued at £312,000, was inconsistent with any reliance by the pursuer on D.M. Hall's valuation dated 27 January 1995 of £306,000. Counsel suggested that prospective purchasers had been enthusiastic about the development, and that the pursuer had relied on such positive responses, all tending to detract from the notion that the pursuer had relied on the D.M. Hall valuation. The whole purpose of the development had been to enable the pursuer to make as much money as he could.

[138] Turning to the reasonableness of any reliance by the pursuer, counsel submitted that the pursuer could not demonstrate that it was reasonable for him to rely upon the 1995 report without familiarising himself with the 1993 report. Also it was unreasonable to rely upon the 1995 report with its reference to open market value, as there was no evidence that the pursuer knew that such a concept represented the best price to be expected. In any event, the pursuer had taken the open market value, and had added a sum of money to it: that did not demonstrate reasonable reliance (if it amounted to reliance). If someone had been advised of the best price he could expect, yet asked for more, it was unreasonable of him to consider himself relying on the advice when the property ultimately did not sell.

Opinion: whether duty of care owed to the pursuer
[139] As Lord Clyde observed at pages 674H-675A of Phelps v Hillingdon London Borough Council [2001] 2A.C.619:

"Where a professional person is employed by one person to advise him, it is a question of circumstances whether there will also be a duty owed to other persons."

[140] At page 587 of BCCI v Price Waterhouse [1998] P.N.L.R. 564, Sir Brian Neill summarised circumstances which might be taken into account when deciding whether a duty of care is owed.

[141] It is now well-settled that surveyors may owe non-client prospective purchasers a duty of care in the context of residential mortgage valuations: Smith v Bush, cit. sup. One of the underlying policy considerations is the fact that surveyors are aware that many prospective purchasers at the lower end of the market rely upon valuations instructed by a bank or building society in place of any valuation which they themselves might instruct. The courts have therefore recognised that the surveyor's duty of care may extend not only to the instructing client (i.e. the bank or building society expected to lend money secured on the property) but also to the third party, namely the prospective purchaser and borrower, where the latter's reliance upon the surveyor's report was within the reasonable contemplation of the surveyor.

[142] In my view, however, very different considerations of policy and principle apply in the context of a property developer who builds a number of flats for sale at a profit: cf. the observations of Lord Griffiths in Smith v Bush, cit. sup. at page 859:

"It must, however, be remembered that this is a decision in respect of a dwellinghouse of modest value in which it is widely recognised by surveyors that purchasers are in fact relying on their care and skill. It will obviously be of general application in broadly similar circumstances. But I expressly reserve my position in respect of valuations of quite different types of property for mortgage purposes, such as industrial property, large blocks of flats or very expensive houses."

[143] In the present case, the pursuer presented himself as a businessman of some experience, a property developer, undertaking a commercial development for profit. He was assisted in the project by reputable professionals such as Harley Haddow, engineers, and Norman Gray and Partners, architects. With the help of Corporate Capital Limited, he approached a commercial lending bank, whose main business comprised loans for residential developments, residential investments, the letting of flats, commercial developments, and commercial investments, but not loans to home-buyers. The pursuer's project was accordingly entirely commercial.

[144] In such a context, pricing and marketing strategy was on the evidence considered by all involved to be very much a matter for the property developer in consultation with his own professionals. The evidence of Mr Williams, Mr Dalby, and Mr Nisbet, made it clear that a property developer in the pursuer's position was expected to have taken his own valuation, marketing and sales advice from his own advisers, and to have worked out a sales price and marketing strategy. A commercial surveyor inspecting and valuing the property in order to ascertain whether it was suitable for security for a commercial bank's loan purposes would not, on the evidence, expect the property developer to base his sales price and marketing strategy on the valuation carried out for the bank.

[145] Further, in my view there was insufficient evidence of any established, widely-recognised practice on the part of commercial banks and lenders of passing valuation reports commissioned by the bank or lender to potential borrowers such as property developers. Certainly I was not satisfied that chartered surveyors instructed by commercial lenders ought to assume that their reports would be passed to the potential borrower. Although Mr Dalby confirmed that Dunbar Bank tended to pass its valuation reports to clients, it was not clear how widely the practice of the bank was known to surveyors. Mr Nisbet stated in evidence that he had been unaware that any report which he prepared on the instructions of Dunbar Bank would be passed to the pursuer. Dunbar Bank did not give the pursuer a copy of the 1993 report; and while Dunbar Bank gave the pursuer a copy of Mr Nisbet's valuation report dated 27 January 1995, the bank did so for a particular purpose, namely to give the Bank of Scotland some comfort in relation to their second-ranking security.

[146] Accordingly applying the first path outlined by Sir Brian Neill in BCCI v Price Waterhouse, it cannot in my view be said that it was within the reasonable contemplation of Mr Nisbet or the defenders that reliance would be placed by the pursuer on the valuation report prepared for the commercial lending bank. Nor in my view would it be fair and reasonable in those circumstances to impose a duty of care owed to the pursuer.

[147] In the context of the second path, bearing in mind all the circumstances, and the conclusion (in paragraph [115] above) that there was no on-site verbal advice to the pursuer from Mr Nisbet to the effect that £1,000 should be added to the valuation figure for each flat, there was in my view no assumption of responsibility by the defenders, and insufficient proximity between the pursuer and the defenders.

[148] Finally, I do not consider that the third path referred to by Sir Brian Neill in BCCI v Price Waterhouse, namely the incremental approach, can assist the pursuer, standing the conclusions reached in relation to the first two paths, and bearing in mind the caveats expressed in the authorities: see for example the views of Balcombe L.J. in Saddington v Colley Professional Services [1999] LLRPN 140 at page 143 col.1:

"In my judgement [Smith v Bush] represents the high water mark in this field ... Lord Griffiths clearly took the view that Smith v Bush was at the outer limit. (See his remarks at pages 862H and 864H to 865E.)"

Lord Griffiths' remarks included the following:

"[page 865D-E] ... I would certainly wish to stress that in cases where the advice has not been given for the specific purpose of the recipient acting upon it, it should only be in cases when the adviser knows that there is a high degree of probability that some other identifiable person will act upon the advice that a duty of care should be imposed. It would impose an intolerable burden upon those who give advice in a professional or commercial context if they were to owe a duty not only to those to whom they give the advice but to any other person who might choose to act upon it ..."

[149] In all the circumstances, therefore, I am not persuaded that the defenders owed the pursuer a duty of care. That conclusion is sufficient for the disposal of the case, and I shall grant the defenders decree of absolvitor.

[150] Obiter, it seems to me that, had the defenders owed the pursuer a duty of care, the formal disclaimer would have had no effect, for two reasons.

[151] First, notice of the disclaimer was not given to the pursuer. He was unaware of it. I do not accept that the pursuer had a duty to search for a disclaimer. It was the defenders' responsibility to give the pursuer clear notice of the terms of any disclaimer: cf. dicta of Lord Justice-Clerk Ross in Martin v Bell-Ingram, 1986 S.C. 208 at page 220.

[152] Secondly, as was observed by the Court of Appeal in BCCI v Price Waterhouse, cit. sup., at page 588D-E:

" ... the general trend of authorities makes it clear that liability will depend not on intention but on the actual or presumed knowledge of the adviser and on the circumstances of the particular case. Indeed, elsewhere in his judgement in Caparo, Lord Oliver, having referred to Smith v Bush (supra) made it clear that an expressed intention that advice shall not be acted upon by anyone other than the immediate recipient "cannot prevail against actual or presumed knowledge that it is in fact likely to be relied upon in a particular transaction without independent verification": see page 639A."

[153] Accordingly, had I found that the defenders owed the pursuer a duty of care, I would have held that the terms of the disclaimer did not exclude liability.

Whether breach of any duty of care
[154] Although I have concluded that the defenders did not owe the pursuer a duty of care, I shall for completeness give a view on the question of any breach of duty of care, on the assumption that (contrary to my view) a duty of care was owed to the pursuer.

Submissions on behalf of the pursuer: whether breach of any duty of care
[155] Senior counsel for the pursuer submitted that it was plain on the evidence that the defenders' valuation figures were so far away from those reached by competent surveyors that there had been professional negligence. The valuation reports and evidence of Mr Maguire and Mr Williams, together with the valuation reports of Mr Warren and Mr Brewster, demonstrated that there was no justification for a total valuation of £306,000. No evidence had been led to support the defenders' valuation figure. Mr Nisbet had not sought to justify his figures as being correct, nor had the proposition that the figures were appropriate been put to Mr Maguire or Mr Williams. Counsel submitted that, on the evidence, no surveyor of ordinary competence would have reached the figures contained in D.M. Hall's report dated 27 January 1995.

Submissions on behalf of D.M. Hall: whether breach of any duty of care
[156] Counsel for D.M. Hall submitted that Mr Williams had not replicated the exercise carried out by Mr Nisbet. Mr Williams had used a greater number of comparators, over a longer period. As for Mr Maguire, it had not been clear what information he had when he compiled his report in March 1996. He spoke of taking other comparators into account, but Mr Williams had described The Harriers development as unique. Accordingly Mr Maguire's reference to comparators did not sit very easily with Mr Williams' evidence. Furthermore Mr Maguire might have been influenced by the fact that the flats had remained unsold for a year without a sale (as indeed might Mr Brewster and Mr Warren). It was also important to bear in mind that estate agents such as Lister Estate Agents and GA Property Services had quite happily marketed the flats at the price level reflected in Mr Nisbet's valuation. Although not surveyors, they were interested in property and had knowledge and experience of appropriate prices for flats. There had been other factors which might have prevented sales: for example the lack of an NHBC certificate and the policy of the Halifax Building Society; and the fact that certain purchasers who wanted to buy could not, because they could not sell their own property. Also there had been no suggestion from prospective purchasers (or from anyone else such as GA Property Services when they took over the marketing) that the flats were overpriced. Accordingly the court might take the view that the pursuer's case was based on a fair amount of hindsight. It was easier to give a lower valuation once property had remained on the market for 11/2 years. Ultimately, the issue of professional negligence was one for the court, but it was submitted that the circumstantial evidence was not very compelling.

Opinion: whether breach of any duty of care
[157] In every profession, there are different areas of expertise. In cases of alleged professional negligence, it is usually necessary for the court to hear evidence from a practitioner or practitioners in the same or similar area of practice or expertise as those criticised, before reaching a view whether or not someone has acted or failed to act as "no ordinarily competent professional" in the particular area of expertise, acting with reasonable care and skill, would have acted (or failed to act).

[158] In the present case, the pursuer's expert witness Mr Williams emphasised the degree of specialist knowledge and expertise required in residential mortgage valuation work carried out by chartered surveyors in Edinburgh and surrounding areas. For example, Mr Williams explained that he personally would not undertake valuations for residential mortgage purposes in Glasgow or the west coast, such was the degree of specialist knowledge and expertise required. Mr Williams confirmed that Mr Maguire of Messrs McNeill, Maguire & McCreath, Mr Warren of Messrs O'Neill, and Mr Brewster of Messrs Shepherd, were in the same field of practice as he was (i.e. residential mortgage valuation in Edinburgh and surrounding areas). However Mr Williams was clear that Mr Nisbet of D.M. Hall was not, at the relevant time, a practitioner in that field: Mr Nisbet was experienced in commercial valuations, and at the time had little or no experience of residential mortgage valuations in the Edinburgh area.

[159] Mr Williams' evidence also established that a residential mortgage valuer such as himself, or Mr Maguire, Mr Warren, and Mr Brewster, would be well aware that legal precedent had established that the valuer, when valuing property for residential mortgage purposes, might owe a duty of care to the potential purchaser. Accordingly when valuing a home-buyer's property for lending institutions such as a building society or a bank, the valuer had to bear in mind the fact that the hopeful purchaser might rely upon that valuation.

[160] The potential importance of hearing evidence from a truly equivalent comparator in the surveying profession became apparent after I had taken the case to avizandum and had an opportunity carefully to consider all the evidence. While I accept that it might be arguable that open market value ought to be a fairly objective measure which should not vary markedly depending upon the type of surveying expertise called upon, it seemed to me that (i) the purposes for which the valuation was carried out, (ii) the recipients anticipated, and (iii) the range of acceptable valuations (particularly relating to a rather unique newly-built block of flats situated in a large council estate) might vary depending upon the relevant type of chartered surveying expertise called upon for the exercise.

[161] It is also important to note that Mr Williams' opinion was quite specific in its focus. It was that "no reasonably competent surveyor with experience of the residential property market in Edinburgh at the material time would have given valuations of £50,000 and £52,000". The words italicised may be significant, in that Mr Nisbet may not, at the relevant time, have fallen within that category, whereas Mr Williams, Mr Maguire, Mr Warren, and Mr Brewster, did. Furthermore, the task or exercise undertaken by Mr Nisbet on behalf of D.M. Hall was not a valuation for the purpose of a residential mortgage, but a valuation on the instructions of a commercial bank considering whether or not to accept the property as security for a commercial loan made to a commercial property developer.

[162] Accordingly, had the question of breach of duty of care been the crucial determining issue in this case, I would have put the case out By Order in order to be further addressed on the matter. However as the case is to be disposed of on two other bases (see paragraph [149] above, and paragraph [190] below), I shall simply reserve my opinion on the question of breach of any duty of care. If the case proceeds further, no doubt there will be an opportunity for counsel to address the court.

Whether breach caused any loss
[163] For completeness, I give a view on causation.

[164] I consider that the pursuer, in order to succeed in his claim, must demonstrate on a balance of probabilities not only (i) that he in fact relied upon D.M. Hall's 1995 valuation when fixing the sales prices for the flats, but also (ii) that those sales prices caused or materially contributed to the failure to sell the flats.

Submissions on behalf of the pursuer: causation
[165] Senior counsel for the pursuer suggested that the court might wish to test the facts by asking the question: Did the pursuer rely upon the valuation advice in Mr Nisbet's report dated 27 January 1995 in such a way as to be productive of the losses suffered.

[166] Counsel submitted that the result of the advice was, on the pursuer's evidence, that the pursuer kept marketing the flats at prices only marginally higher than the values given by Mr Nisbet (i.e. in each case, £950 higher). If counsel had understood the pursuer, the £950 margin was capable of being negotiated to nil. Counsel contended that it was reasonable and correct for the court to conclude that the flats had not sold because the price for each flat was hugely in excess of its value.

[167] Counsel accepted that the competing possibilities underlying the flats' failure to sell appeared to be: too high a price; the lack of an NHBC certificate; and finally, a generally stagnant market. Dealing with the latter two in turn:

[168] The lack of an NHBC certificate: Counsel submitted that, although the lack of an NHBC certificate appeared to have affected people wishing to borrow from the Halifax Building Society, that was not determinative. On the evidence, only the Halifax was restricted by such a policy. On the pursuer's evidence, other lenders were not. No-one had suggested that it was a general problem. Moreover D.M. Hall's valuation had been given in the knowledge that there was no NHBC certificate.

[169] A stagnant market: Counsel referred to the evidence of Mr Dalby and Mr Nisbet. They appeared to expect the flats to be sold within about three months, despite market conditions. While the possibility that the sluggish market had prevented sales could not be dismissed out of hand, one had to look at the balance of probabilities. The pursuer had put the matter most graphically when he described his realisation that a potential purchaser could have the same standard of flat as The Harriers in a different location, and a car in addition, all for the same price. It was within judicial knowledge that people did not buy things which were overpriced when they could buy a similar thing elsewhere at a lower price.

[170] Turning to the question whether the pursuer in fact relied upon the advice contained in Mr Nisbet's report of 27 January 1995, senior counsel accepted that issues of credibility and reliability arose. He submitted that there was no question of deliberate lying, either on the part of the pursuer or Mr Nisbet. The pursuer was an emotional witness, whose outburst in relation to Mr Dalby's memorandum was perhaps explicable by the pursuer perceiving himself as having been dealt a "bad hand" by fate in relation not only to The Harriers development, but also to his personal life (as he had been found to be suffering from cancer). As for Mr Nisbet, there had been some discrepancies in his evidence, which suggested that he was not an entirely reliable witness.

[171] On the evidence, there was a particular reliance by the pursuer on D.M. Hall's January 1995 valuation of £306,000. At earlier stages, it was plain that Mr Macmillan of Lister been involved with the figures. But in the pursuer's eyes, any advice from Mr Macmillan was far outweighed by advice from D.M. Hall. The pursuer had the 1993 valuation of £255,000. There then came the advice to upgrade. In January 1995, D.M. Hall considered the specification to be much improved. The pursuer described his reaction to the January 1995 valuation of £306,000 as being "cockahoop". He had been very pleased. As he explained in examination-in-chief and in re-examination, he would not have tried to sell the flats at £50,000 or £52,000 but for D.M. Hall's valuation. It was because of the respect which he accorded to D.M. Hall that he marketed as he did, at prices marginally above the D.M. Hall valuations. He continued marketing at those prices. When the pursuer saw Mr Maguire's lower valuation in March 1996, his response had been not to believe Mr Maguire, but to take the matter up with D.M. Hall. When his son's upper flat was thereafter valued at £50,000 by Mr Gray of D.M. Hall, the pursuer contacted D.M. Hall. He accepted their explanation that his son's flat could no longer be regarded as new, and that it would require redecoration.

[172] Counsel accordingly submitted that the evidence established that the pursuer relied on D.M. Hall's valuation. The evidence established a causal link between the negligent advice and the pursuer's loss.

Submissions on behalf of D.M. Hall: causation
[173] Counsel for D.M. Hall submitted that the pursuer would have acted in the same way, whether or not he had known of D.M. Hall's January 1995 valuation of £306,000. But the crucial point was that the pursuer had failed to prove that if he had acted any differently, the flats would have sold more quickly. The pursuer had not proved that the reason that the flats did not sell was the price. There were other reasons: for example, prospective purchasers who were unable to sell their own properties; problems with the Halifax over the lack of an NHBC certificate; a stagnant market. There was ample evidence that properties which had been appropriately priced were sticking on the market for many months. Mr Williams had been quite clear that in 1995 and 1996 it had been difficult to predict which properties would sell, and which would not. Also in a stagnant market, some sellers would be obliged to cut their price more quickly and more radically than others, which would divert purchasers from The Harriers. The pursuer had taken Mr Nisbet's estimate of the best price which could be expected, and had added about £1,000 to each price: that would have the same effect of driving potential purchasers away. Accordingly the evidence did not justify the pursuer's contention that, had the properties been priced more in line with Mr Williams' valuations, they would have sold within three months.

Decision: causation

(i) Reliance
[174] In my view, the weight of the evidence demonstrated that, throughout the project, the pursuer was constantly fixing and re-fixing prices at levels which he personally thought could be achieved, in order to maximise the return from the development and to clear his debt. The prices set in November 1992 (totalling £264,000), July 1994 (totalling £296,700), and October 1994 (totalling about £300,000) showed a determined upward movement. Those prices bore little relation to the D.M. Hall 1993 valuation of £255,000. The final prices fixed (totalling £311,700) seemed to be in effect the figure which the pursuer had in mind when he approached Mr Dalby of Dunbar Bank on 11 January 1995 (namely £312,000), all as described in paragraph [98] et seq., above. Accordingly having considered the evidence, I concluded that the pursuer, assisted to some extent by Mr Macmillan of Lister, did indeed have very clear personal views about the sales prices at which it would be appropriate to market the flats.

[175] However, that conclusion does not necessarily exclude reliance by the pursuer upon Mr Nisbet's valuation dated 27 January 1995 of £306,000. On the contrary, it seemed to me that the pursuer felt vindicated, supported, and reassured, by Mr Nisbet's valuation. As the pursuer explained in evidence, he had been brought up in Fernieside. He was conscious that he might be more attached to that area than others, and that his enthusiasm required to be tempered by a professional view. In such circumstances, I consider that an independent valuation from a professional firm such as D.M. Hall whom the pursuer respected, carried considerable weight with the pursuer, and was relied upon by him when marketing the flats. In the pursuer's particular circumstances, I do not consider that such reliance was unreasonable: see paragraph [194] et seq. below.

[176] It is true that the pursuer did not in fact use the precise figures given by D.M. Hall, namely £50,000 for each lower flat, and £52,000 for each upper flat. He set prices of £50,950 and £52,950 (bringing out a total of £311,700). As indicated in paragraph [115] above, I do not accept the pursuer's evidence that Mr Nisbet advised him to "add £1,000" to the valuation of each flat. Nevertheless I formed the view that the pursuer, having read Mr Nisbet's 1995 report, relied upon that valuation in that he felt confident about marketing the flats at the level he did, and he took a chance in the hope of maximising his return (and clearing more debt) by adding what must have seemed like a fairly minor amount to each asking price.

[177] The pursuer's subsequent refusal to lower the sales prices in the face of advice further illustrates the extent of his faith in D.M. Hall's valuation. As outlined in paragraph [42] above, when the pursuer's own estate agent, Mr Macmillan, indicated that the prices seemed high, the pursuer responded by referring to "other advice" which he had received. As Mr Macmillan put it:

"These were the finalised prices. These were the prices [the pursuer] wished us to place against the properties in the light of "other advice" he had received ... We were told by him that he'd been assured that he could get greater prices than those we'd indicated were available."

In re-examination, Mr Macmillan said that the pursuer had told him "he had figures from D.M. Hall, and these were greater than the figures hitherto for the development".

[178] A further illustration of the pursuer's reliance on the D.M. Hall valuation arose in the context of the suggestions by the bank managers of the Bank of Scotland and Dunbar Bank that the pursuer should lower his prices. The pursuer refused to accept those suggestions, referring in evidence to the fact that bank managers were not surveyors, and that he was in possession of a valuation by a very reputable firm of surveyors, D.M. Hall.

[179] Finally, when the pursuer transferred his instructions to GA Property Services, the fact that they were content to accept sales prices based on a D.M. Hall valuation may have provided further reassurance to the pursuer in his reliance upon that valuation.

[180] Only on receipt of a very different valuation from another firm of surveyors (Messrs McNeill, Maguire & McCreath) did the pursuer's confidence in D.M. Hall's valuation begin to waver.

[181] Accordingly, I was satisfied on the evidence that the pursuer relied upon D.M. Hall's 1995 valuation figures when conducting the marketing of the development.

(ii) Whether the sales prices caused or materially contributed to the flats remaining unsold
[182] On the evidence, the residential housing market during the period 1995 to 1996 was stagnant. The pursuer's expert Mr Williams stated that it was difficult during that period to predict whether properties would sell, and within what time-scale. Some properties remained on the market for months, even when properly priced.

[183] In addition to the slow and unpredictable market, there were other factors referred to in evidence which I consider might have inhibited the sale of the flats. For example: -

The way in which the property was initially advertised and marketed
[184] Initially, sale particulars for the flats were displayed in Lister's branch in Corstorphine, an area of Edinburgh some distance from Fernieside. Advertisements were placed in the REAL magazine (the estate agents' fortnightly gazette), and on the radio (Forth FM). It is possible that the initial marketing was not sufficiently main-stream or aggressive. Certainly Dunbar Bank's letter to the pursuer dated 18 April 1995 (number 7/5/8 of process) noted that

"Jim Moir [of D.M. Hall] recommended that you now employ a more aggressive marketing agent to make the most of the current market conditions and achieve sales as quickly as possible".

The pursuer ultimately changed marketing agents when he instructed GA Property Services and a firm of solicitors.

The lack of an NHBC certificate
[185] In the course of trying to sell the flats, the pursuer discovered that the Halifax Building Society had a policy not to lend on a development involving more than four flats which had not been registered under the NHBC scheme. The pursuer took the matter up with the Halifax, but without success. While of course there were many other lenders, it appeared from the evidence that at least some prospective purchasers had been unable to proceed with a purchase because of the Halifax policy.

The market had become a "sell, then buy" market
[186] The evidence established that, traditionally, the housing market had been a "buy, then sell" market. In other words, people wishing to move would complete the purchase of a new house before selling their existing home. However in the sluggish and unpredictable conditions in 1995 and 1996, the market changed. Potential purchasers wished to be sure that they could sell their own home before undertaking obligations in respect of a new home. In relation to The Harriers, some prospective purchasers withdrew on finding it impossible to sell their existing home.

The location of the flats
[187] The newly-built private flats were situated in a large council estate, where some houses had been bought by sitting tenants. It is possible that some prospective purchasers were deterred by the location.

Suspicions about property which has not sold
[188] The evidence established that once a property had been on the market for some time, there might be a degree of suspicion on the part of someone viewing the property. The obvious question a prospective purchaser would ask was: "Why have these flats not sold?"

[189] Against that background, I am not satisfied, on a balance of probabilities, that the sale prices fixed for the flats caused or materially contributed to the failure to sell all or any of the flats. That conclusion is supported by the fact that there was no evidence that members of the public considered the flats too expensive or over-priced. Nor was there any evidence to suggest that a lower price would have resulted in any or all of the flats being sold within the period prior to the bank's repossession. On the contrary, the pursuer's expert Mr Williams confirmed that no such assumption could be made, and that the market could be fickle.

[190] Accordingly I am not satisfied that causation has been proved. For that reason also, I would grant absolvitor.

Contributory negligence
[191] While there were averments on record of alleged contributory negligence on the part of the pursuer (to the effect that he was the author of his own losses in that he had a duty to instruct and obtain his own valuation advice, and to reduce asking prices promptly), neither counsel placed much emphasis on that aspect of the case.

[192] Counsel for the pursuer contended that any evidence on the matter simply assisted with the question whether or not a surveyor in Mr Nisbet's position owed the pursuer a duty of care.

[193] Counsel for the defenders confirmed that contributory negligence was not a major part of the defence. The issues focused in the pleadings were really directed to the existence or otherwise of a duty of care, and whether there had been reasonable reliance by the pursuer. The only aspect of the evidence which could perhaps be said to reflect contributory negligence was the pursuer's persistent pricing of the property at a certain level, despite lack of sales, and despite the bank managers' suggestions that the prices be reduced.

[194] In my view, the pursuer was not contributory negligent. In reaching that conclusion, I took into account the following factors (many of them pointed out by the pursuer himself):

[195] D.M. Hall were chartered surveyors with a good reputation, experts in the valuation of property. By contrast, the bank managers, and Mr Macmillan of Lister Estate Agents, were not chartered surveyors. The terms of D.M. Hall's disclaimer clause had not been drawn to the pursuer's attention. There was no evidence that the pursuer was aware that he should obtain his own valuation, nor was there evidence that he was advised to obtain such a valuation. Estate agents such as GA Property Services accepted the D.M. Hall valuation without demur. There was no evidence that any prospective purchaser complained that the flats were over-priced.

[196] Against that background, I was not persuaded that there was any contributory negligence on the pursuer's part.

Quantification of damages
Submissions on behalf of the pursuer: damages
[197] Senior counsel for the pursuer submitted that there was sufficient evidence to support the proposition that if the flats had been advertised at their true value, all six flats would have been sold by the end of July 1995. As a consequence of the flats remaining unsold for a protracted period (1 August 1995 until 26 September 1996 when Dunbar Bank repossessed the flats), the pursuer incurred outlays and expenses which he would not otherwise have incurred, as follows:

Dunbar Bank loan interest: Interest continued to run on the loan account. In terms of paragraph 1 of Joint Minute number 24 of process, the loan interest charged by Dunbar Bank from 1 August 1995 until 26 September 1996 was £20,586.96.
Bank of Scotland overdraft interest: The pursuer had the overdraft with the Bank of Scotland, which he was unable to pay off as a consequence of the flats remaining unsold. In terms of paragraph 2 of Joint Minute number 24 of process, the overdraft interest charged by the Bank of Scotland from 1 August 1995 until 26 September 1996 was £11,856.44. Senior counsel for the pursuer accepted that the court might take the view that, even if the flats had sold within three months, it might not have been possible for the pursuer to pay off the entire overdraft with the Bank of Scotland. The court might therefore wish to assume that about one half of the overdraft would have been cleared, resulting in damages under this head of £5,928.22.
Dunbar Bank loan renewal fee: As the pursuer had been obliged to request Dunbar Bank to renew the loan, he incurred a loan renewal fee on 3 August 1995. In terms of paragraph 3 of Joint Minute number 24 of process, the loan renewal fee was £1,440.
Management fees: In terms of paragraph 4 of Joint Minute number 24 of process, those fees amounted to £250 (14.12.95) and £250 (29.5.96).
Additional insurance premiums: The pursuer had been obliged to pay additional insurance premiums. In terms of paragraph 5 of Joint Minute number 24 of process, those premiums totalled £2,021.30.
Additional advertising charges: The pursuer had been obliged to pay additional advertising charges. In terms of Joint Minute number 25 of process, those charges amounted to £1,137.50.

[198] In addition, the pursuer claimed in respect of the cost of his services on site. The pursuer had been on site every day during the period when the flats had not sold. He had attended to maintenance and security. He had drawn £120 per week as remuneration. He had prepared a Schedule of Losses number 6/7 of process, which estimated the claim in respect of his on-site work at £10,550. No vouching was available at the date of the proof. In relation to this head of claim, senior counsel for the pursuer accepted that it might be necessary to apply a broad axe. The court might wish to award something in the region of £5,000 under this head.

[199] Senior counsel for the pursuer invited the court to grant decree for damages reflecting the above heads of claim. Interest should run on the total at 4 per cent during the period 1 August 1995 until March 1996, representing a mid-stage point, and thereafter at 8 per cent until the date of decree. Judicial interest would thereafter accrue on the principal sum awarded in the decree. Reference was made to Boots the Chemist Ltd v G.A. Estates Ltd., 1992 S.C. 485.

Submissions on behalf of D.M. Hall: damages
[200] Counsel for D.M. Hall did not dispute quantification in respect of bank interest and other expenses. He did however challenge the claim of £10,550 for the pursuer's time, labour and expense. That head of claim had not been properly proved. The pursuer's unvouched evidence was insufficient to establish any loss.

Decision: damages
[201] It was accepted that, even if all six flats had sold within three months, it was unlikely that the pursuer would have been able to pay off the whole of his overdraft with the Bank of Scotland. I would accordingly allow one half of £11,856.44, namely £5,928.22.

[202] I agree with counsel for D.M. Hall that there was insufficient evidence to support the pursuer's claim for the costs of on-site maintenance and security (valued at £10,550, with a suggested award of £5,000). I accordingly award no damages under that head.

[203] In relation to interest, I consider that interest should run at 4 per cent during the period from 1 August 1995 until the bank's repossession of the property on 26 September 1996. Thereafter interest should run at 8 per cent until the date of decree.

[204] Had I found in favour of the pursuer, I would have awarded damages as follows:

Dunbar Bank loan interest (1.8.95 to 26.9.96)	£20,586.96
Bank of Scotland overdraft interest (1.8.95 to 26.9.96): 1/2 of £11,856.44	£ 5,928.22
Dunbar Bank renewal fee (3.8.95)	£ 1,440.00
Management fees (14.12.95 and 29.5.96)	£ 500.00
Additional insurance premiums (14.12.95, 24.5.96, and 29.5.96)	£ 2,021.30
Additional advertising charges (4.9.95 to 4.12.95)	£ 1,137.50
Personnel and security expenses	NIL
Total	£31,613.98
Interest on £31,613.98 @ 4% 1.8.95 to 26.9.96 (1 year 2 months)	£1,474.47
Interest on £31,613.98 @ 8% 27.9.96 to date (8 years 3 months)	£20,865.15
Total inclusive of interest to date	£53,953.60

Conclusion
[205] For the reasons given in paragraphs [149], [190] and [194] above, I shall repel the pursuer's first and second pleas-in-law, repel the defenders' fifth and sixth pleas-in-law (relating to sole fault and contributory negligence), sustain the defenders' third, fourth, and seventh pleas-in-law, and grant the defenders absolvitor. I reserve the question of expenses to enable parties to address me on that matter.