Valuer — Duty of care — Sale of land at undervalue — Calculation of loss — Whether alleged loss fell within duty owed by defendant — Whether claimant contributorily negligent — Whether claimant properly advised by Part 20 solicitor prior to transfer of land — Claim allowed
The claimants, as trustees of a Rugby Union football club, brought an action for damages against the defendant, a company of surveyors and valuers, for breach of contract and negligence arising from a valuation of the club’s ground in March 1996. The valuation of £832,500 was obtained prior to the transfer to L plc of the claimant football club’s assets and liabilities in return for shares in that company. L plc subsequently sold the ground, with outline planning permission, for a substantially higher figure.
The claimants contended that the defendant’s 1996 valuation had been negligent because it had failed to make proper planning enquiries and to appreciate the possibility of obtaining residential planning permission. They asserted that, as a result, the defendant had substantially undervalued the property. Shortly before the trial, the defendant admitted that it had been negligent, because the valuation should have been an open market, and not a depreciated replacement cost (DRC) valuation.
The claimants’ primary argument was that, had they been properly advised about the value of the ground and the prospects of obtaining planning permission, they would have retained the ground and sold it for a higher price at a later date. The defendant joined the claimants’ solicitor as a Part 20 defendant, claiming a contribution to any liability to the claimant.
Held: The claim was allowed.
The defendant was in breach of its duty to the claimants in that it had failed to address the planning prospects for the ground in March 1996. The claimants had consequently disposed of the ground for less than it was worth and had failed to negotiate a transaction that would have secured its true value. The claimants had not been contributorily negligent because they had no reason to believe that the ground had an enhanced value or development potential. They had been entitled to rely upon the valuation received: County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916 and Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 considered.
It could not be said that the solicitor was negligent as it had not been retained or instructed to advise on commercial matters or on the valuation of the ground. There was no evidence to suggest that it was either good or usual conveyancing practice to seek to secure a share in any enhanced value of land sold, and there was no reason to doubt the solicitor’s evidence to the contrary. The claimant had no right of veto over the subsequent sale of the land and, in any event, the solicitor’s advice was not open to criticism: Platform Home Loans Ltd v Oyston Shipways Ltd and others [2000] 2 AC 190, South Australia Asset Management Corp v York Montague Ltd [1997] AC 191 and Aneco Reinsurance Underwriting Ltd (in liquidation) v Johnson & Higgins Ltd [2001] UKHL 51 considered.
Accordingly, the claimants were entitled to damages of £2,417,500 (that is, the difference between the true valuation of £3.25m and the actual valuation of £832,500) together with interest to be assessed.
David Railton QC and Jeffrey Chapman (instructed by Nicholson Graham & Jones) appeared for the claimants; Simon Berry QC and Edwin Johnson (instructed by WHCG) appeared for the defendant; David Waksman QC (instructed by Nicholson Graham & Jones) appeared for the Part 20 defendant.
Eileen O’Grady, barrister
