On 19 June 1996 the House of Lords handed down adecision which has significant implications for conveyancing solicitors.

At issue was whether professionalsshould be liable not only for tenders' losses arising fromnegligence but also from those attributable to the fall inthe property market.The Lords' decision in Asset Management Corporation vYork Montague Ltd which, with two other cases, is knownas 'the BBL appeal' after Banque Bruxelles Lambert SA vEagle Star Insurance Co Ltd (see [1996] The Times 24June), related to three appeals from the Court ofAppeal.The Court of Appeal had given six judgments: fiveinvolving negligent valuations, where the surveyor wasthe defendant, and one case of negligence against asolicitor, who allegedly had failed to pass on to thelender information which cast doubt on the accuracy ofthe valuation on which the lender was relying.

Three ofthe valuers (but not the solicitor) appealed to the Houseof Lords.In all three appeals it was accepted that the loanwould not have been made had the lender been aware ofthe true value of the property.At first instance, Mr Justice Phillips, in BBL, held thatlenders could not recover that part of their loss whichwas attributable to the fall in the property market.

TheCourt of Appeal, Sir Thomas Bingham MR providing theleading judgment, held unanimously that, once it hadbeen established that there was a breach of duty by thevaluer (or solicitor), and that the transaction would nothave proceeded had that valuation been accurate, thevaluer would be liable for the whole loss suffered by thelender, including the part caused by the decline in theproperty market.

There was no policy reason why thelender should not recover this element of loss.The Court of Appeal's decision was controversial.

Ineffect, it made the professionals the underwriters oflenders' losses.

The decision had a substantial effect onprofessional negligence claims brought by lenders whohad advanced money on the security of properties.

Inmany cases, non-allowance of loss sustained by reasonof the fall in the property market would have reducedthe lender's claim sub stantially, often to zero.

It wasagainst this background that solicitors awaited the outcome of the House of Lords appeal.The House of Lords' decision only deals with three valuer appeals from the Court of Appeal; it does not deal with a solicitor defendant.

However, the points of principle addressed by the decision would appear to cover the general issue of recoverable damages.

The decisiondistinguishes between a duty to provide information forthe purpose of enabling a lender to decide upon a courseof action, and a duty to advise a lender as to what courseof action it should take.

A valuer clearly falls into thefirst category, as, it is arguable, does a solicitor.The House of Lords allowed two of the appeals; onewas dismissed.

The decision was unanimous, with theleading judgment being provided by Lord Hoffmann.

Heused the example of a mountaineer, about to undertakea difficult climb and being concerned about the fitnessof his knee.The climber visits a doctor who negligently makes asuperficial examination and pronounces the knee fit.

Hegoes on the expedition, which he would not have undertaken if the doctor had told him the true state of hisknee.

He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing todo with his knee.Lord Hoffmann stated that, applying the principleoutlined by the Court of Appeal, the doctor would beresponsible for the injury suffered by the mountaineerbecause it was damage which would not have occurred ifhe had been given correct information about his knee.The mountaineer would not have gone on the expeditionand therefore would have suffered no injury.

LordHoffman suggested that the doctor should not be liable.The injury had not been caused by the doctor's badadvice; it would have occurred even if the advice hadbeen correct.

This principle was applied to the facts ofthe cases under appeal.In calculating quantum, Lord Hoffmann assesseddamages on the basis that they would be limited to theconsequences of the information, ie the negligent valuation.

This would mean that the tender did not have thesecurity that he thought.

Applying that theory, thequantum of damages would, in almost all cases, be nomore than the difference between the valuer's negligentvaluation of the property and the actual value of theproperty at the time the advance was made.Using the facts of one of the appeal cases, if the negligent valuation of the property was £15 million, whereas the actual value was £15 million, then the tender had£10 million less security than it thought.

This would bethe upper limit of quantum of damages.LORD HOFFMANN SAID-- 'Rules which make the wrongdoers liable for all the consequences of his wrongful conductare exceptional and need to bejustified by some special policy.'-- 'A duty of care which imposesupon the informant responsibilityfor losses which would haveoccurred even if the informationwhich he gave had been correct,is not fair and reasonable asbetween the parties.'-- 'A person under a duty to takereasonable care to provide information on which someone elsewill decide upon a course ofaction is, if negligent, not generally regarded as responsible forall the consequences of thecause of that action.'-- 'The damages should have beenlimited to the consequences ofthe valuation being wrong, whichwere that the lender had...lesssecurity than he thought.'