Claimants Fall Foul of Time Bar Restrictions in Lender Overvaluation Case
In Howard and another v Bank of Scotland plc  a claim by borrowers alleging that their lender negligently overvalued their property, was struck out by the High Court last month, the Court deciding that the claim was time-barred under the Limitation Act 1980 (“Act”).
In October 2007, Mr Howard and Ms Pate (“Borrowers”) purchased a property for £310,000. They applied to the Lender for a mortgage loan of £248,999.
In July 2012, the property was re-valued at a lower value of £250,000. Subsequently, when it came to renegotiating the mortgage terms, the Lender believed that this new valuation was not sufficient to make a further mortgage offer. The Borrowers informed the Lender about their concern that the property now had “insufficient value to cover the mortgage” and that they intended to stop making further payments towards it.
The mortgage fell into arrears and the Lender commenced legal proceedings against the Borrowers for possession of the property.
The Borrowers filed a detailed defence in April 2013 in which they asserted that the valuation carried out by the Lender in 2007 represented an overvaluation of the property, something that they had suspected for some time.
The property was later sold for £150,000 in April 2014 by the Lender. This left around a £120,000 shortfall in the mortgage account.
The Act provides for special rules in respect of latent damage.
Section 14A of the Act applies where at the time the claimant’s cause of action accrues, the claimant does not have knowledge of all material facts. In such a case, the limitation period is the later of either six years from when the cause of action accrued (that is, the date damage is caused) or three years from the date when the claimant had the knowledge required to bring an action for damages.
The Lender submitted that the Borrowers’ claims were time-barred, arguing that by the time the Borrowers had filed their defence to possession proceedings in 2013, the Borrowers had the knowledge required by section 14A of the Act and therefore could not bring themselves within the special three year limit.
The Borrowers argued that that the date of damage was April 2014 (when the property was sold by the Lender) and the date of their knowledge was in fact March 2017 when they received additional information about the property which the Lender had concealed and therefore the three year limit ran from this date. As such, they argued their claim was within the time limits under the Act.
The High Court in Birmingham (HHL Worster) concluded that the Borrowers had suffered actual loss when they bought the property in 2007, and they were therefore time-barred from bringing their claim within the three year time period conferred by section 14A of the Act.
Although the Court acknowledged that the Borrowers may not have thought they had sufficient knowledge and proof to evidence the overvaluation in legal proceedings, the Judge believed they had the “broad knowledge” required by section 14A by the time they filed their defence to the lender’s possession claim in April 2013, and certainly by April 2014 when the property was sold.
This decision will serve to positively reinforce to lenders and to PI insurers that there are still only limited circumstances where claimants can bring a claim long after the cause of action has accrued.