Shokrollah-Babaee v EFG Private Bank Limited
[2023] EWHC 3270 (Ch)
Hope Capital Limited v Alexander Reece Thomson LLP
27 September 2023
[2023] EWHC 2389 (KB)
High Court
A company gave a bad property valuation, causing another company to lose money on a loan. The court said the company that got the bad valuation also did some bad things themselves that caused the money loss, not just the bad valuation. So, the company that gave the bad valuation doesn't have to pay.
Key Facts
- •Hope Capital Limited (Hope) provided a bridging loan of £2,215,440 to St Anselm Heritage Properties Limited (St Anselm), secured by a Grade II listed property, Cedar House.
- •Alexander Reece Thomson LLP (ART) provided a valuation of Cedar House at £4,000,000.
- •St Anselm defaulted on the loan, and Cedar House was eventually sold for £1,400,001.
- •Hope claimed ART's valuation was negligent, leading to their losses.
- •ART admitted breach of duty but denied causation and loss, alleging contributory negligence.
- •Hope applied to amend its Particulars of Claim to include allegations of ART's lack of independence in conducting the valuation.
- •The court considered evidence from factual witnesses (Mr. Sealey and Ms. Cowan) and expert witnesses on valuation and lending practices.
- •The court determined the correct open market value (OMV) of Cedar House at the time of the valuation, and the appropriate discount for a shorter sale period.
- •The court assessed whether Hope would have advanced the loan had they known the true value of Cedar House.
- •The court analyzed whether Hope was entitled to recover interest as damages.
- •The court considered the issue of contributory negligence on the part of Hope.
Legal Principles
The recoverable loss in a negligent valuation case is capped by the difference between the negligent valuation and the true value (SAAMCO principle).
South Australia Asset Management Corp v York Montague Ltd [1997] AC 191
In professional negligence cases, the scope of duty is determined by the purpose of the advice or information provided.
BPE Solicitors v Hughes Holland [2017] UKSC 21, Meadows v Khan [2021] UKSC 21, Manchester Building Society v Grant Thornton UK LLP [2021] 3 WLR 81
A valuer's duty typically extends to protecting the lender against the risk of the valuation being wrong, not against all other risks of the transaction. Cases where the valuer is liable for all foreseeable consequences are rare.
Charles B Lawrence & Associates v Intercommercial Bank [2021] UKPC 30
Contributory negligence can reduce damages recoverable by a claimant.
N/A (general principle of tort law)
Outcomes
The application to amend the Particulars of Claim was refused.
The information supporting the amendment was available earlier, and the amendment would cause unfair prejudice to the Defendant.
The court found the true OMV of Cedar House was £2,750,000, and the 180-day valuation was £2,475,000.
Based on an assessment of expert evidence and other factors.
Hope was not entitled to recover interest as damages or loss of profits.
Hope failed to provide sufficient evidence of limited funding, unsatisfied demand, and a demonstrable history of profitable operation.
The Claimants' total actionable loss was nil.
The losses suffered were caused by factors outside the scope of the Defendant's duty of care (borrower's conduct and the COVID-19 pandemic).
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