Cases - Craneheath Securities Ltd v York Montague Ltd

Record details

Name

Craneheath Securities Ltd v York Montague Ltd

Date

[2001]

Citation

Lloyd's Rep PN 348; [1994] 1 EGLR 159; [1995] 1 EGLR 130, CA

Legislation

• Housing Grants, Construction and Regeneration Act 1996
• Supply of Goods and Services Act 1982

Keywords

Negligence in valuations and surveys

Summary

The claimant ‘C’ was a bank who provided short-term finance of £550,000 to the owners of a restaurant on the basis of a valuation provided by the defendant surveyors ‘Y’. The valuation was for the restaurant as a going concern including the benefit of goodwill, fixtures and fittings. It was not therefore a basic valuation requiring assessment of comparables in the market place, but a more complex evaluation of present and future projected revenue and development. Y valued the restaurant at over £5m. The restaurant failed and C’s loan went entirely unsatisfied. C sued Y alleging negligence. The judge dismissed the claim and C appealed.

The Court of Appeal held that the judge was correct to find that the failure of the restaurant was in part due to the dramatic downturn in the economy and a falling out between the proprietors. Y had followed the RICS guidance and applied the correct methodology. There were some faults in the way in which that methodology was applied to the facts, but there was no evidence that the final valuation figure was wrong. Valuation is an art not a science and it is not sufficient to infer a negligent valuation figure from the existence of errors along the way only, particularly where it involves ongoing concern and assessment of market behaviour. Although the final valuation figure was out of line with later valuations there was no evidence that it was wrong (that is, fell outside the range of reasonable valuations given the unique market within which it was to be assessed).

The test for establishing negligence may be more generous to defendants when the valuation requires an assessment of viability and market behaviour. It is a difficult and necessarily partly speculative process. Expert evidence will normally be required to establish a wrong valuation.

When bringing or defending a claim in negligence the importance of obtaining reliable expert evidence is emphasised. While it is generally the case that negligence will not be inferred from errors in the valuation process alone, defendants are advised to seek expert opinion in order to shore up any defence. It might also be the case that serious failures in more straightforward valuation cases could be used to infer negligence (that is, where comparative analysis alone might indicate a wrong figure).