Cases - Barclays Bank PLC v TBS & V LTD

Record details

Name

Barclays Bank PLC v TBS & V LTD

Date

[2016]

Citation

EWHC 2948 (QB)

Legislation

• Supply of Goods and Services Act 1982
• Contracts (Rights of Third Parties) Act 1999

Keywords

Valuation – surveyors – margin of error

Summary

In a claim against a valuer in respect of the valuation of a leasehold care home property, the key issues were the method of valuation and the margin of error in testing whether the valuation was negligent.

In 2007 the claimant bank loaned £250,000 to the purchasers of a 40-year lease of a care home to enable their acquisition of the property. This comprised a Grade II listed building with a cottage and other builidings that was being run as a 17-bed care home. In making the loan the bank relied upon a valuation prepared by the defendant, valuing the leasehold property in the sum of £350,000. In 2011 the care home business failed and the bank forfeited the lease and repossessed the property. It claimed its losses from the defendant asserting that a proper valuation of the property in 2007 had been £130,000.

HELD: To decide whether a valuation was negligent, the court had first to form its own view of the value of the property in question on the expert evidence adduced before it and then determine whether the allegedly negligent valuation was within the ‘margin of error’ (Merivale v Strutt & Parker [1999] Lloyd’s Rep PN 734 applied). The Court therefore carried out a ‘red book’ valuation based on a case such as this upon an (EBITDA) assessment of the projected net profit of the business and an appropriate multiplier. On this basis the Court arrived at a correct valuation of the property of £330,000.

The question then was the applicable ‘margin of error’. In this regard the Court provided helpful guidance. Dove J stated that in general for standard residential property 5% would be appropriate, for a ‘one-off’ property the margin would be 10%, while for a property that had exceptional features 15% would be applicable. In this case he held that the property came within the latter category. A leasehold property of this kind was rare. There were very few comparables and the property was idiosyncratic if not unique. Accordingly, given the exceptional nature of the property the defendant valuer’s valuation fell within the permitted margin of error. It could not, therefore, be classed as negligent whatever errors or flaws there may have been in arriving at the original valuations (Lincoln v CB Richard Ellis Hotels [2009] EWHC 2344 (TCC) applied).