Court of Appeal Accepts Errant Valuation Not Negligent

Property valuers will breathe a collective sigh of relief following the decision of the Court of Appeal to overturn a ruling by the High Court that a December 2005 valuation of €135 million by a firm of valuers was overstated by more than €30 million.

The case was brought when a major German property development that was being financed by Credit Suisse ran into problems. It resulted in an allegation that the valuation was negligent and that the bank had based its decision to lend on the negligent valuation.

When the High Court found the valuers negligent, they appealed, arguing that the valuation was within the acceptable range of valuations (normally regarded as being within 15 per cent above or below the correct value) and that at the first hearing the judge had failed to give enough weight to the recent history of similar property deals around the time that the valuation was done. The Court of Appeal found that the “true” value of the property was 118 million euros which was within 15% of the original valuation.

One other aspect of interest was that the bank’s loan had been sold on to another firm and securitised.  The Court of Appeal ruled that the eventual owners of the securitised debt were entitled to proceed with a claim for damages on the ground that the price they had paid to buy the debt was too high. The valuers had argued that the owners of the securitised debt could not sue because they had suffered no loss as a result of the valuation, which was not done for them, be it negligent or not. That argument was rejected.

(Titan Europe plc v Colliers International UK plc) 

Rex Cowell