Any lender bringing professional negligence claims against solicitors or surveyors will face allegations of contributory negligence by professionals seeking to limit their exposure to claims. However, there have been no recent cases on contributory negligence, and it is important for those representing lenders to remind the professional’s advisers that the current “credit crunch” cases were underwritten in a very different economic environment to that of the late 1980s/early 1990s.

In our experience the negligent professional will routinely allege that lending which involved a loan-to-value ratio of over 75%, or where the borrower self-certified their income, was imprudent.  In the decided cases from the late 1990s, it is fair to say that lenders faced criticism from the judges (and corresponding deductions from their claims) where either or both of these factors were present.

If we look in detail at the 1990s cases however, lending more than 75% of a property’s value was considered to be imprudent because interest rates were then in excess of 10% per annum (and so the mortgage debt would quickly escalate in the event of default), and the property market was falling.  In the majority of the cases currently being pursued, the opposite is true.

Similarly, the negligent professional’s advisers will allege that self certified lending was inherently risky.  However, they need to be reminded that in 2004/2005, the FSA reviewed the practice of self-certified lending, and found that the prudential risks in genuine self-certified lending were not significant.

Lenders need to be realistic about potential deductions from damages for contributory negligence – but negligent professionals should be put through the hurdle of proving how any alleged shortcomings actually caused the loss which is the subject of the claim, and should be made to look at the situation in context.