Cases - Arab Bank plc v John D Wood (Commercial) Ltd
Record details
- Name
- Arab Bank plc v John D Wood (Commercial) Ltd
- Date
- [2000]
- Citation
- 1 WLR 852, CA
- Legislation
- Keywords
- Expert witness - negligence in valuations and surveys
- Summary
-
In 1989 the claimant bank was approached to fund the purchase of a 93-acre industrial estate. Having obtained a valuation from the first defendants, the bank decided that it wanted what it described as a 'franking valuation' from another firm. In a subsequent negligence action against both valuers, there was considerable dispute as to what was meant by this term but, having considered the evidence (including the size of the fee charged for this service), the court decided that what the second firm of valuers had agreed to carry out was not a full free-standing open market valuation. It was rather a check on the earlier valuation. It was held accordingly that the second valuers were entitled to accept the factual content of the earlier report (on such matters as floor areas and physical condition), except in so far as the very limited inspection of the property which they themselves had carried out might cause them to doubt the accuracy of the information.
During the case, the judge complained of the lack of objectivity exhibited by the valuation expert witnesses:
'The court has not been assisted by the tendency which I detected in all the expert witnesses who gave evidence before me to take upon their own shoulders the mantle of advocacy and themselves to seek to persuade the court to a desired result rather than to offer dispassionate and disinterested assistance and advice to the court to enable it to arrive at a fair and balanced view of the conflicting contentions of the parties.'
On the basis of the two valuations AB advanced £17.1m to the purchasers. The purchasers defaulted and AB took possession realising only £10.75m on sale. AB sued JW and WG (and one of its employees) in negligence. The judge found JW liable for £6m on the basis of its negligent valuation but dismissed the claim against WG. WG’s role was somewhat more limited than that of JW. WG provided a ‘franking valuation’ (review valuation) whereby it performed only a cursory inspection of the property and relied mostly on the information collated by JW. There were, however, faults in its assessment which led it to overvalue the property, but the final figure was within an acceptable margin of error. AB appealed.
The Court of Appeal held that it was open to the judge to allow WG a wider margin of error (20-25%) given its lesser role in the process and to allow JW less room to manoeuvre (15%). It was open therefore for the judge to find that the value of £19m given by WG was within an acceptable range from the true value of £16m. The judge however erred when calculating the estimated rental value of the premises as well as other matters meaning that the true value was in fact only £14.84m. It followed that WG’s valuation fell outside the permissible bracket of reasonable valuations. This was evidence (albeit not conclusive) of negligence. The matter therefore had to be remitted to the High Court for reconsideration.