Developer obtaining valuation of site undeveloped and developed – Developer unable to sell properties once developed – Proceedings claiming negligent valuation – Whether judge entitled to reject plaintiff’s expert’s evidence on value of developed property – Whether developer relied on valuation – Judge awarding nominal damages only – Appeal dismissed
The plaintiff was a property company that bought development sites upon which it carried out development works and subsequently sold once the development was completed. It was interested in purchasing a site at Cockbury Court, Winchcombe, Gloucestershire, for which there was planning permission for the construction of cottages. However, the planning permission was subject to the restriction that: “The proposed development shall only be occupied as holiday units and shall not be let to any one occupant family for more than 2 months in any one period of twelve months”. The purchase price of the site was £130,000. The plaintiff engaged the defendant to provide a valuation of the site on the basis that three cottages had been built on it. The defendant produced a valuation of the site, undeveloped, of £130,000, and, on the basis of three cottages having been constructed, a valuation of £345,000.
The plaintiff purchased the site for £130,000 together with stamp duty and land registry fees and incurred construction costs of £153,880. The total development costs amounted to £398,435. As a result of a downturn in the market, the cottages proved impossible to sell and their value steadily decreased. Subsequently, the plaintiff entered into an agreement with its bankers and an associated company and, as a result, the plaintiff’s loss was frozen at £94,065. The plaintiff issued proceedings claiming that the defendant’s valuation had been negligent and in breach of contract.
The judge found that the defendant’s valuation of £345,000 had been negligent and that a valuation produced with reasonable care and skill would have been in the region of £280,000. However, he concluded that the plaintiff did not rely on the defendant’s valuation when proceeding with the purchase and development of the site, and, therefore, the plaintiff was only entitled to nominal damages. The plaintiff appealed, submitting that the judge had no basis for rejecting the evidence of the plaintiff’s expert witness on valuation, who had attributed a value to the developed site at the date of the defendant’s valuation of £150,000. It was also submitted that the judge’s own valuation exercise had not been based on any proper supporting evidence.
Held The appeal was dismissed.
1. The role of expert witnesses was to act as impartial advisers to the court. However, they often espoused the cases of the party instructing them and, accordingly, judges had to be aware that an expert might not be impartial. The judge had seen and heard both the plaintiff’s and the defendant’s expert witnesses, and had been entitled to conclude that the view they had taken was biased in support of their clients’ claims.
2. The appropriate way to value the developed site was on the open market value basis, by reference to the property market in the same area, rather than the investment basis. There was evidence to show that it was appropriate to make a discount of between 15-20% to reflect the planning restriction. Accordingly, the judge had been entitled to conclude that a valuation produced with reasonable skill and care would have been in the figure of £280,000.
3. The judge had clearly identified the law, and the burden of proof and the evidence that he had accepted clearly demonstrated that, on the balance of probabilities, the plaintiff had not relied on the defendant’s valuation.
Anthony de Freitas (instructed by Yates Barnes, of Chorley) appeared for the plaintiff; Simon Russen (instructed by Fishburn Boxer) appeared for the defendant.
Thomas Elliott, barrister
