A High Court judge has warned CB Richard Ellis Hotels of the cost implications of pursuing part of its defence to a £7.5m damages claim over valuation advice that it gave in 2005 on the acquisition of eight Ibis hotels.
The warning came during a preliminary ruling on the claim, which was brought by a group of Danish investors. They alleged that CBRE Hotels was negligent with regard to valuation reports that it produced for their lenders, West Bromwich Building Society and Alliance & Leicester, for the £41m acquisition of the hotels from London & Regional.
The investors claim that CBRE Hotels overvalued the buildings by £5.1m and is suing for that sum, together with purchase costs of £2.4m.
As an alternative, they claim that by comparing the price they paid with the non-negligent valuation produces a total damages claim of £6.7m.
The preliminary issue concerned CBRE Hotels’ allegation in its defence to the alternative claim that the price paid for the hotels included an 8% payment to property location agent ESL Properties. It alleged that this was an attempt to evade tax in
On Friday, Coulson J refused the investors’ application to strike out that part of the defence as being without legal foundation. He said that although it was “very likely to fail” and may be “extremely expensive” to investigate, it would not be proportionate to strike out the allegation at such an early stage.
He gave the investors 14 days in which to decide whether to pursue the alternative claim. If they decide not to do so and if CBRE Hotels maintained their illegality defence CBRE Hotels may have to pay the costs of the investigation in advance of a trial.
K/S Lincoln and others v CB Richard Ellis Hotels Ltd Technology and
Anthony Speaight QC (instructed by Stockler Brunton) appeared for the claimants; Patrick Lawrence QC (instructed by Reynolds Porter Chamberlain LLP) appeared for the defendant.
