Bank's action not time barred LAW REPORTS

First National Commercial Bank plc v Humberts.

Court of Appeal (Lord Justice Neill, Lord Justice Waite and Lord Justice Saville).

13 January 1995.

Where a claimant entered into a transaction, which through a breach of duty owed to the claimant, provided the claimant with less rights than should have been secured, the claimant's cause of action did not arise at the date of the transaction unless the transaction then and there caused the claimant quantifiable loss.

The Court of Appeal allowed an appeal by the bank from the decision of Judge David Smith QC that the bank's action against the defendant valuers was statute barred.

In July 1983 the bank agreed to make advances of £2.6m secured on land valued by the valuers in the sum of £4.4m. The borrowers were now insolvent and the security proved insufficient to recoup the amounts owed by the borrowers. The bank issued a writ against the valuers on 20 March 1990, alleging that the valuation was made negligently and if a proper valuation, which would have been £2.7m, had been made it would not have made any advance. The preliminary issue raised was whether that date was less than six years from the date when the bank's cause of action accrued.

Although the amounts recovered exceeded the amounts advanced and expended under the financing deal the bank contended it had suffered loss if losses from the profits it would have made by lending the outlay to others or the costs of borrowing the money were included. The bank submitted that up to March 1984 its outlay, plus the cost of borrowing or the notional profit that could have been obtained elsewhere, was less than the value of the security and until after March 1984 it could not show a cause of action against the valuers.

James Townend QC and Clive Newton (Stewarts) for the bank; Michael Lewer QC and David Tucker (Kennedys) for the valuers.

LORD JUSTICE SAVILLE said that a cause of action for the tort of neligence only arose when there had been a breach of duty resulting in actual, as opposed to potential or prospective loss or damage. The submission that the plaintiff sustained an actual loss in 1983, represented by the difference in value between a transaction secured on property worth £4.4m and one worth £2.7m, was incorrect. Had there been no breach of duty the bank would not have entered into the transaction at the lower valuation.

The prima facie measure of damages where the advance would not have made was the whole advance, less any recoveries made. If the lender could show that he had sustained other losses, those were also recoverable. The lender could claim lost expenditure, what he would have made on other deals or the interest that would have been earned by putting the money on deposit or the value of the loss opportunity to invest the money elsewhere. The loss allegedly sustained by the bank was of the kind legally recognised.

The advance prima facie represented the measure of loss. The first advance made by the bank was in July 1983. That did not mean, however, that the advance or any part of it was actually lost at that time. The prima facie loss did not necessarily occur when the advance was made, for when the advance was made there might be readily available means of recouping it. As at July 1983 and until after March 1984 the bank would have been unable to establish that it had lost the whole or any part of its advance, since the security exceeded the advances.

The advances themselves could not be treated as creating an actual loss sustained more than six years before the issue of the writ. The same conclusion followed with regard to the costs of borrowing or alternative lending claims.

The writ was issued within the six-year period stipulated in the Limitation Act 1980. LORD Justice Neill concurred and Lord Justice Waite agreed.

Ying Hui Tan, Barrister

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk