A Lucky Escape for Surveyors

There are concerns that the economic downturn may give rise to claims against  valuers for professional negligence arising out of over valuations during the boom years. There is a risk that in such a claim, the valuer may be found liable for all the claimant's losses, including any caused by a fall in market values, if he gives commercial investment advice beyond the scope of providing a valuation.

The case of Capita Alternative Fund Services (Guernsey) Ltd & Anor v Drivers Jonas (A Firm) [2011] EWHC 2336 (Comm), concerned a substantial claim for professional negligence resulting from a failed investment in a factory outlet shopping centre which was to be developed at Chatham Historic Dockyard.

The judge held that the defendant valuers, retained to advise in relation to the acquisition of the development, had overstated its commercial prospects and had been negligent.

The claimants submitted that the defendants were not simply providing a valuation but were advising on the commercial viability of the centre and providing commercial investment advice and therefore, they should be entitled to recover their total loss from entering into the project, a sum in excess of £42 million.

The court held that while the defendants agreed to and did provide commercial investment advice, in particular advice as to the commercial viability and prospects of the centre, the purpose of such commercial advice was to provide a valuation. The court did not accept that the two exercises – of providing a valuation and giving commercial investment advice – were distinct. The defendants’ duty was to take reasonable care to ensure that the valuation was accurate.

The defendants’ liability was therefore restricted to the amount by which the purchase price paid by the claimants exceeded the valuation that should have been provided.

On any view, it was a bad result for the defendant surveyors, who were held to be liable for damages in the sum of £18.05 million, but it could have been a lot worse.