Surveyors resist bank's negligence claim due to jurisdiction clause
The contract between a bank and a firm of surveyors it instructed to value property for the purposes of a loan was constituted when the bank relied on the surveyor's report, and a standard term that the contract was governed by English law and the English courts had sole jurisdiction had to be given effect, a judge has ruled.
Lord Woolman gave the decision in the Court of Session in an action by Bank of Ireland against surveyors Knight Frank LLP. The bank had agreed to lend £2.35m to a property development company and the defenders reported that the site in question was worth at least £4.25m. The development did not take place; the borrower was unable to repay; and the Bank stated that development of the security subjects was not viable and they were properly valued at about £170,000, being their worth for agricultural purposes. The liability of a guarantor for the company was limited to £250,000.
Seeking damages for negligence, the bank averred that no reasonable surveyor could have arrived at the valuation provided by the defenders. The action was defended on the merits, but in addition the defenders pled that the Scottish court had no jurisdiction, a question that came before Lord Woolman as a preliminary issue.
The bank instructed the defenders, who were on its approved panel, by formal letter. The defenders did not, as was their normal practice, ask the bank for written confirmation in advance that the standard terms formed part of the contract, but replied with a valuation report that included their standard terms.
The bank claimed that the defenders' standard terms did not form part of the contract. It argued that the defenders accepted the offer comprised in the bank's instruction when they delivered their report to the bank, and it was then too late to introduce new terms. This analysis meant that the contract was formed by communication between parties, rather than at some unspecified point. The defenders contended that delivery of the report constituted a qualified acceptance, and the bank accepted the counter offer when it relied on the report.
Lord Woolman said it was agreed that the bank’s letter of instruction constituted an offer, and that the contract was concluded by means of conduct. The difference was as to which conduct amounted to acceptance. He preferred the defenders' analysis.
An objective approach had to be applied to discern the parties’ intention. The bank's officer had not read the terms or taken advice on them. The bank was not entitled to “cherry pick” the document and accept the survey and valuation elements of the report shorn of the standard terms.
Had it been necessary to do so, he would also have held that the defenders' standard terms were incorporated into the contract with the bank by means of a course of dealing.
The case was put out by order for further discussion in light of the opinion.