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Be careful what you plead: Court of Appeal upholds limitation defence raised by valuer

In Bridging Loans Ltd v Toombs [2017] EWCA Civ 205, the Court of Appeal has dismissed a lender's appeal against summary judgment granted in favour of a valuer in the High Court.

The lower courts had considered the lender's arguments concerning the primary limitation period in tort (applying Nykredit) and s14A (secondary limitation).

On the facts of this case, the lender had failed to establish any evidence to show that the borrower's covenant had value. This could not therefore 'bridge the gap' between the alleged true value of the property and the outstanding debt owed to the lender.

On appeal, the lender argued that the property's true value might be higher than it had itself pleaded and so, accordingly, it was not appropriate to order summary judgment. The Court of Appeal unsurprisingly rejected this argument.


The key facts are:

  • In November 2006, the lender advanced £502,750 to its borrower in relation to a development site. The loan was for six months. It was made in reliance on a valuation of £730,000 provided in September 2006.
  • By 3 May 2007, the borrower had failed to repay the sums due to the lender and, on 11 May, the lender made formal demand for £541,654.40. The lender obtained possession later that year.
  • In December 2007, the lender's solicitors sent a Preliminary Notice to the valuer. In September 2009, a Letter of Claim was served on the valuer.
  • On 16 May 2013, the lender issued proceedings against the valuer. The valuer applied for summary judgment and strike out on the basis that the claim was statute barred. Master Kay QC dismissed the valuer's application but gave permission to appeal.

The first appeal was heard before HHJ Seymour QC. The valuer's application was successful and summary judgment was granted. The Judge confirmed that in order to determine when the cause of action accrues, one needs to ascertain when the lender first sustains measurable relevant loss. This is the point in time when the combined value of the borrower's covenant, and the value of the security, is less than the amount outstanding to the lender.

In this case, the borrower had failed to repay the loan when due. It was therefore for the lender to adduce some evidence to show that the borrower's covenant had some value. The lender failed to do so and it was held that the claim was outside the six year primary limitation period in tort.

As for s14A (secondary limitation), this did not assist the lender because it had actual knowledge of the relevant facts more than three years before the claim was issued. There could be little doubt about this – a Preliminary Notice had been served back in 2007. Therefore, the lender's claim was dismissed.

Court of Appeal

On 14 February 2017, the lender's appeal was heard in the Court of Appeal.

The crux of the lender's argument was that, in cases of this type, it is not uncommon for the court to find a true retrospective value somewhere between the parties' contended positions. As such, it was argued that the appeal should be allowed, as the property's true value may reveal that the lender was within the limitation period.

This argument was firmly rejected. The court held that it was appropriate to give summary judgment on this issue by reference to the lender's pleaded case, which was supported by the lender's expert evidence. The lender had not adduced any evidence to show that the property's true value might have been higher.


On the lender's own case, the property was worth less than the debt outstanding at all times. Given that the borrower had not made any repayments and the lender had not adduced any evidence to show that its covenant had value, this outcome is not surprising.

This decision should not dissuade lenders from pursuing meritorious claims in reliance on Nykredit or s14A limitation arguments, but they should take note of the pitfalls to be aware of. The main issues to consider are:

  • Be very careful what 'true' retrospective values are asserted in claims, when relying on Nykredit.  To succeed with negligence, lenders need to show that a valuer's report was undertaken without the necessary skill and care, with the final result falling outside the range of values that could reasonably be attributed to a property. Paradoxically though, by asserting an overly pessimistic figure, this could make it difficult for a lender to successfully rely on a Nykredit case.
  • Care should be taken to ensure that expert retrospective values are obtained at relevant key points when running a Nykredit case. These values will obviously need to fit together, and so lenders should think carefully about how their case is pleaded. It may be appropriate to plead a range of values.
  • Consider the borrower's covenant. Is there any evidence that can be obtained to show that the covenant did in fact have value? Consider what papers are held, what investigations can be undertaken and whether the borrower might even be able to assist (although often they may be reluctant to do so).
  • S14A remains a good way to extend limitation in appropriate cases and professionals faced with negligence claims will struggle to obtain summary judgment unless the case obviously has no merit (such as the present case).

When outside the limitation period in contract, it is always prudent to seek to enter into a standstill agreement as early as possible. This preserves the limitation position as at that date and limits the scope for future dispute over limitation.

If you have any limitations, please do not hesitate to contact Neil Franklin or Sam McCollum in TLT's Financial Disputes and Investigations team. 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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