The Court of Appeal has recently allowed an appeal against a summary judgement by Helmsley Acceptances Ltd (“Helmsley”). Essentially, the matter concerned whether a claim against a valuer arising out a valuation report (commissioned by Helmsley) of a property that was used as security for a loan could be pursued by Helmsley, notwithstanding the fact that Helmsley had syndicated the majority of its loan to other investors.


In 2007 Red Lion 80 Ltd (“Red Lion”) entered into negotiations with Helmsley for a loan to purchase, among other things, a property in Berkshire (the “Property”). Before advancing monies to Red Lion, Helmsley instructed Lambert Smith Hampton Group Ltd (“LSH”) to value the Property and provide them with a valuation report (the “Report”). In the instructions to LSH, Helmsley expressly stated that:

“[Helmsley] is in the business of granting mortgages, but it also ‘sells’ these mortgages to other interested parties. These parties assess the viability of such purchases on a number of factors, one of which is the valuation that [Helmsley] has obtained….”

LSH duly valued the Property at £2.5 million, or if only 9 months were available for disposal, a value of £2.25 million. The Report also contained a clause purporting to limit LSH’s liability to Helmsley only and not to “…any other person.” Further, the valuation report went on to state that:

“Neither the whole or any part of this [Report] nor any reference hereto may be included in any published documents, circular, or statement, or published in any way, without [LSH’s] written approval…”

Further to the receipt of the Report Helmsley advanced a loan to Red Lion of £1.25 Million (the “Loan”), to enable Red Lion to purchase the Property on 9 March 2007. Prior to the drawdown of the Loan, Helmsley syndicated the Loan to a number of investors. The effect of the syndication was that Helmsley only actually lent £10,000 of the Loan to Red Lion. The Loan was due to be repaid on 6 September 2007. Red Lion subsequently defaulted and the Property was sold for £264,069.97, thus leaving a considerable shortfall.

The Claim

Helmsley claimed that the entire loss was attributable to LSH due to its breach of contract and/or duty of care. This was countered by LSH who argued that, as Helmsley had only lent £10,000 following the syndication of the Loan, LSH was effectively capped from claiming any further monies; the remainder of the loss related to the syndicate members and not Helmsley. Helmsley put forward the following arguments:

(1) Helmsley’s contract with LSH was made as agent on behalf of the syndicated members; or
(2) Helmsley were trustees of the cause of action against LSH, which intimately related to the securities of which they were express trustees; or
(3) Helmsley could rely on the “Albazero exception” to the general rule that a claimant can only recover his own loss, not loss suffered by others.

The “Albazero exception” applies where it can be said that it was in the contemplation of the parties that an owner may transfer proprietary interests after a contract had been entered into. In such a case, the original party to the contract is treated as having entered into the contract for all persons who had or may acquire a proprietary interest and is therefore entitled to recover damages for the actual loss suffered by those for whose benefit the contract was entered into.

LSH disagreed with Helmsley’s submissions, as they believed them not to be correct in law, and applied for summary judgement. At the hearing, the judge, HHJ Langan agreed with LSH and granted summary judgement, effectively holding that Helmsley could only sue for that part of the loss for which it suffered and not the remainder.

The Appeal

Helmsley appealed HHJ Langan’s decision, this time joining the other syndicate members as co-claimants and dropping the agency argument as noted above.  Lord Justice Longmore, giving the leading judgement in the Court of Appeal, noted that as matters stood following the successful summary judgement application, Helmsley would not be able to advance the trust and “Albazero exception” arguments at trial. The question in the Appeal to be considered then was “…whether [Helmsley] should be entitled to advance those arguments as an alternative to the claim in tort now pursued by the syndicate members in their own right.”

Longmore LJ went on to note that for the purposes of LSH’s application for summary judgement, the court had to assume that they had been negligent and may have caused substantial loss; which LSH maintained was capped at £10,000. He further noted that as LSH are also arguing that they are not liable to the syndicated members in contract or tort, the claim could be said to disappear down a legal “black hole”.  Longmore LJ commented that the previous case law in this area demonstrated the courts’ willingness to ensure that wrongdoers do not escape from their liabilities by reference to the general principle that a person can only recover for his own loss because the cause of action lies in the hands of someone other than the person who had suffered loss; the courts are concerned to see that justice is done between the parties (Technotrade Ltd v Larkstore Ltd [2006] EWCA Civ 1079).

Longmore LJ further noted that it was also arguable that even if the investors, now joined to the action, fail for any reason to recover damages in respect of their loss, that loss could still be recoverable either because Helmsley constituted themselves as trustees of the securities (i.e. as security trustee) and by implication, the rights associated with those securities, or because Helmsley could also rely on the “Albazero exception”. It was therefore held by the Court of Appeal that Helmsley had an arguable case which should be allowed to go to trial.


The Court of Appeal’s judgement is welcome news for syndicated lenders and investors in securitised loans. Although the case will now proceed to trial and the outcome is therefore still in issue, Longmore LJ’s comments will provide comfort to participants and investors in syndicated and securitised loans. As defendants and their insurers continue to raise questions concerning the ability of lenders, servicers and issuers to bring claims on behalf of other investors and syndicated lenders, the willingness of the Courts to see justice done between the parties is good news for claimants and bad news for defendants and their insurers.

For further information please contact James Walton or the Partner with whom you usually deal