The Court of Appeal has overturned what was considered an influential decision that Colliers International UK plc (Colliers) was negligent in valuing a large commercial property in Germany at €135m in 2005.
Credit Suisse instructed Colliers to value the property as security for a loan to Valbonne Real Estate VB (Valbonne) and pursuant to that valuation, Credit Suisse advanced a loan of €110m. Thereafter the majority of the loan was sold via a securitisation package to Titan.
In September 2009, both Quelle Alktiengeschell-Schaft (the occupier) and Valbonne became insolvent and in due course the property was sold for €22.5m.
The High Court held that the true value of the premises at the time was in fact €103m and thus outside the permissible margin of error and granted damages of €32m.
The Court of Appeal, whilst not overturning the High Court on the facts of the case, stripped Titan of its award and held the true value was in fact €118m and therefore that the valuation fell within the margin of error.
A further ground of appeal was that Titan was the wrong claimant and had no title to sue. However, Lord Justice Longmore added that if Colliers had been negligent, then the Court of Appeal would have upheld the High Court’s decision on title to sue because Titan were the owners of the loan and the securities.
What the case highlights is the vital importance of obtaining high quality impartial expert evidence and the weight that should be given to impartial contemporaneous evidence. The two sides' expert witnesses were far apart in their valuations (which was unhelpful to the Judge) and both were criticised for various reasons.
Furthermore, the Court of Appeal placed significant weight on the fact that the property had been sold six months before the valuation for €127m and thereafter the market had continued to rise. This independent transaction was the most reliable piece of information, leading the court to rule that the value of the property could not have been as low as €103m.
The Court of Appeal also noted that a valuation of €103m was too close to the €100m figure which the trial judge found was the minimum credible value where the margin of error was 15%.
For more information, please contact Lia Grant.