In November of last year the Court of Appeal in the UK delivered judgment in Titan Europe 2006-3 Plc v Colliers International UK Plc (In Liquidation). The proceedings related to a negligence action against Colliers International (UK) Plc (now in liquidation) for its overvaluing of a property in 2005.
Colliers valuation was over 15% above the Commercial Court’s estimation of the property's value and they were therefore found to be negligent. The Commercial Court awarded €32 million in damages, which was the difference between its valuation and Colliers'.
On appeal to the Court of Appeal, Colliers did not challenge the Commercial Court’s finding that the permissible margin of error was 15% but the way the Commercial Court determined the 'true' value of the property.
In making its own assessment the Court of Appeal gave weight to the fact that the property had been sold six months prior to Colliers’ valuation (a fact the Commercial Court did not appear to consider). The previous sale price together with evidence of upward market trends resulted in the Court of Appeal determining that the Commercial Court’s valuation was incorrect and that the true value of the property was in fact €118.3 million. This brought Colliers’ valuation within the 15% margin of error. The appeal was granted and Colliers’ were found not to have been negligent.
Titan is persuasive in indicating that a permissible range of error for Valuers could be within 15% of the subject valuation.
Titan issued proceedings against Colliers for negligence on the grounds that it had overvalued the property by almost €60 million. In considering the facts, the Commercial Court determined that the correct value of the property in 2005 was €103 million. Colliers valuation was over 15% above the Court’s ‘correct’ calculation and they were held to be negligent. The Court awarded €32 million in damages, representing the difference between Colliers’ valuation and the Court’s estimation.