Magnificent Seven – case notes from 2008

As the year draws to a close, Laurence Katz of Holman Fenwick Willan looks back at some of the notable cases to have occupied the English courts in 2008.

Laurence Katz, Partner, Holman Fenwick Willan may be contacted on tel: +44 (0)20 7264 8000, email: laurence.katz@hfw.com

Overvaluation, deceit and dishonesty

Cheshire Building Society v Dunlop Haywards Limited

(Commercial Court, January 2008) concerned a mortgage fraud. The claim, for the tort of deceit, arose from loans made by Chelsea Building Society (CBS) in 2005. CBS claimed against the valuers and the solicitors who acted for it in relation to an initial advance of UK£10.5 million and a further advance a few months later of UK£1 million. CBS was informed that the loan was to be used to fund the purchase of a property for UK£14.5 million and understood that after the purchase, the property was to be occupied by three business tenants taking new leases at favourable rental levels. McGarry, a director of the valuers, purported to value the property at UK£16 million with the benefit of the new leases and at UK£10.5 million with vacant possession. In reliance on the valuation, CBS advanced UK£10.5 million. When asked to advance the further sum of UK£1 million a few months later, CBS asked the valuers to confirm whether or not the valuation figure still applied and McGarry confirmed that it did. The further advance was then made. Shortly thereafter, CBS discovered that it had been the victim of mortgage fraud. The borrower subsequently defaulted on the loan.