Plaintiff purchasing property with intention to develop – Plaintiff obtaining first valuation of development when complete – Plaintiff obtaining second valuation from defendant – Plaintiff using defendant’s valuation to raise finance for development – Development making loss – Whether defendant’s valuation negligent – Whether defendant’s valuation relied on by plaintiff – Judgment for plaintiff with nominal damages only
The plaintiff was a property development company which in 1988 was interested in acquiring development sites in the Cotswold area. In 1987 they met a property consultant who introduced them to a vendor of property at Cockbury Court, Winchcombe, Gloucestershire, (the property). The plaintiff decided to buy the property with the intention of developing it into cottages. Planning permission was obtained for the erection of six cottages, subject to the condition that, inter alia, the development was to be for holiday units only, not let for more than two months in one year to one person. The plaintiff decided to build three cottages on the property believing that on the open market, once completed, they would fetch £330,000. The plaintiff approached Lloyd’s Bank (the bank) for finance. The bank required a professional valuation of the open market value of the property once completed. The plaintiff approached Hamptons who made a valuation of £285,000 with a reduction of 15% if the holiday letting restriction was not lifted at the time the cottages were sold. The plaintiff then instructed the defendant whose valuation was £345,000 with a reduction of 10% if the holiday letting restriction was not lifted. The defendant’s valuation was made known to the bank which agreed to advance the required finance.
The sale of the property was completed and the plaintiff began work. However, the building work exceeded the budget and the time estimate, and the cottages were not ready by August 1989 when there had begun to be a significant downturn in the market. The plaintiff made a loss of £250,000 on the project and issued proceedings claiming that the defendant’s valuation had been negligent. The defendant denied negligence and contended in the alternative that if it had been negligent, the plaintiff had not relied on the defendant’s valuation.
Held Judgment was given for the plaintiff.
1. The defendant’s valuation of the property of £345,000 on completion of the development, with a reduction of 10% if the holiday letting restriction was lifted, was negligent. The appropriate value had been £285,000 with a reduction of 15% to 20% if the holiday letting restriction was not lifted. Therefore, if the plaintiff had relied on the valuation, the plaintiff was entitled to the difference between £285,000 and £345,000 as damages.
2. However, the plaintiff had known of Hamptons’ valuation of the property and had not been deterred. It had obtained the valuation from the defendant in order to satisfy the bank. Even if the plaintiff had received the appropriate valuation of £285,000 it would have gone ahead with the project. It could be concluded therefore that the plaintiff had not relied on the defendant’s valuation and the plaintiff was entitled to nominal damages only.
Anthony de Freitas (instructed by Yates Barnes, of Chorley) appeared for the plaintiff; Simon Russen (instructed by Fishburn Boxer) appeared for the defendant.