Valuation: Duty of Care to Investors

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What is the extent of a valuer’s duty of care to an investor? The UK courts have considered this issue, which is of particular importance to the property and financial sectors, surveyors, and other experts. The expert commercial litigation lawyers at Bahamas law firm ParrisWhittaker are highly experienced in advising businesses on valuers’ reports and duty of care issues.

What is the extent of a valuer’s duty of care to an investor? The UK courts have considered this issue, which is of particular importance to the property and financial sectors, surveyors, and other experts. The expert commercial litigation lawyers at Bahamas law firm ParrisWhittaker are highly experienced in advising businesses on valuers’ reports and duty of care issues.

What did the court say?

A valuer does not owe duty of care to an investor in circumstances when the valuer is instructed to produce a report for one purpose, but his report is relied upon by the investor for other purposes.

What led to the case?

The defendant company was instructed by the claimant company to provide a valuation report. This was required in relation to a loan application to fund a redevelopment of land valued at between £17-18.7 million, depending on planning permission.

The claimant treated the valuation obtained as the minimum price it should accept when selling the site. Consequently, it rejected subsequent offers received from developers in the region of £11 million. The site was never actually redeveloped, falling into disrepair to the point that it was considered by the claimant company to have become worthless. The claimant company therefore brought a negligence claim against the defendants, arguing that the defendants had overvalued the site. The claimant sought damages for loss of profit in relation to the rejected offers and, alternatively, the loss of a chance to sell the site.

How did the court approach the case?

The court found that under the terms of the agreement between the parties, the defendant valuer owed duty of care to provide a valuation report for secured lending purposes. The claimant’s argument that there was also an express or implied term that the report would also be relied upon in relation to redevelopment plans was rejected by the court. There was no contractual duty in relation to the claimant’s redevelopment plans.

This meant the claimant could not succeed in its claim for financial losses arising from its investments decisions which were made in reliance on the valuer’s report.

What does this mean?

When a valuer’s report is commissioned, the organization concerned must check the terms of the contract and ensure it covers all areas for which it is to be relied upon. The contractual terms must be clear and unambiguous; otherwise, in the event of a dispute, the
Court will look at the purpose behind a valuation report and will not readily imply terms into the agreement where, for instance, the expert did not know that the other party would rely upon the report for additional purposes.

How can we help?

At ParrisWhittaker, our expert commercial litigation lawyers have many years’ experience in handling all kinds of commercial disputes. We are experts in advising commercial organisations on their contract terms and assisting in pre-contract negotiations, including situations wherein valuers and other experts are required. Contact the experienced commercial litigation lawyers at Bahamas law firm ParrisWhittaker now for urgent advice and representation.

¹ Freemont (Denbigh) Ltd v Knight Frank LLP [2014] EWHC 3347 (Ch)