Bank urgently requiring confirmatory valuation of extensive industrial estate let under a wide variety of tenancies – Earlier valuation of £22m – Defendant valuing at £19m as against “correct” figure of £16m – Discrepancy largely due to over-optimistic assessment of future rents – Negligence claim dismissed
On or about June 2 1989 the plaintiff bank made a conditional offer to advance £19.8m to D Ltd, a company formed for the express purpose of acquiring the 93-acre Lingfield industrial estate on the outskirts of Darlington. The offer followed receipt of a £22m valuation submitted by the first defendant (JDW), it being calculated that, after taking certain additional securities, the net exposure would not exceed 70% of the valuation. Anticipating a call for a confirmatory valuation, JDW approached the third defendant, Weatherall Green & Smith (Weatheralls), whose senior partner, the fourth defendant, K, agreed to act on the understanding that, although he would inspect the estate, he would not carry out detailed surveys and would rely solely upon information supplied by JDW as regards floor areas and tenancies. At a meeting with K on June 21, officials of the bank accepted that, for reasons of urgency, K would not be able to provide a stand alone report and that his work was confined to a review of the JDW valuation. In a letter of the same date, the bank formally requested K to “review [the JDW report] and provide your opinion as to the reasonableness of the valuation within acceptable variances”. At about the same time K received an adverse report from the bank’s solicitors on the quality of many of the 30 tenancies to which the property was subject. Armed also with the site visit notes of a colleague, K reported on June 23 that “the valuation applied by [JDW] was full, and we would prefer a figure of £19 million”. The advance was made as offered. On the subsequent failure by D to repay the loan, the bank appointed a fixed charge receiver on December 2 1991.
In the bank’s action for negligence, both against JDW (in liquidation) and Weatheralls, the judge, having put a reasonable 1989 valuation at £16m, concluded that JDW had been negligent . The 34-day hearing was largely concerned with the liability of Weatheralls.
Held The action against Weatheralls and the fourth defendant was dismissed.
1. It was clear that Weatheralls were entitled to take the basic assumptions adopted by JDW, subject only to their consideration whether their own experience led them to disagree with any of the parameters adopted.
2. Given the peculiarities of the Lingfield estate and the almost desktop nature of the task undertaken, the permissible deviation from the notionally correct figure should be as great if not greater than 15%.
3. The fact that a valuation fell within that bracket did not excuse a valuer if it was shown, for example, that he had significantly miscalculated. The dispute centred on expected yields. From the “astonishing variation in valuations” tendered by the expert witnesses, it was probable that K had in fact erred in so far as his assessment of the potential for enhancing rent was over optimistic. However, in valuing a large and complex estate under conditions of urgency, K had not been guilty of negligence.
Patrick Talbot QC and John Wardell (instructed by Frere Cholmeley Bischoff) appeared for the plaintiffs; Justin Fenwick QC and Ian Holtum (instructed by Fishburn Boxer) appeared for the third defendants, Weatherall Green & Smith, and the fourth defendant, Terence Gordon Knight; the first and second defendants did not appear and were not represented.