This dispute involves surveyor negligence the valuation of a derelict site in Aberdeen, intended for redevelopment into Purpose Built Student Accommodation (PBSA). The project was to be carried out by a special purpose vehicle, which was granted a 170-year lease of the site. The lease’s ground rent terms are central to the case.
The Claimant provided mezzanine financing secured on the Leasehold, relying on a valuation of the Leasehold provided by the Defendant, a surveyor’s firm. The Claimant alleges that this valuation was negligent. Ultimately, the Development was sold for a much lower price (£4.2 million) than the valuation (£16.58 million), resulting in the Claimant recovering no return on its investment.
Legal Framework
The court had to consider the following:
- Valuation – Professional Standards of the Royal Institution of Chartered Surveyors (RICS Red Book)
The RICS Red Book is the globally recognised set of standards and guidance for professionals engaged in valuation, property, and construction. It ensures consistency, transparency, and professionalism in valuation practices.
- Duty of Care and Principles of Professional Negligence
A duty of care is a legal obligation requiring professionals to adhere to a standard of reasonable care while performing their services. Chartered surveyors owe a duty to their clients (and sometimes third parties) to provide competent, accurate, and unbiased valuations. Breach of duty occurs when a professional fails to meet the accepted standards, such as making errors in valuation, misrepresenting facts, or neglecting relevant information. When a breach of duty causes harm or financial loss to a client or third party, the professional can be held liable. The claim hinges on proving that the professional’s negligence directly resulted in the damage.
- Causation and Reliance in Negligence Claims
In negligence claims, establishing causation and reliance is crucial: The claimant must demonstrate that the professional’s breach of duty directly caused the loss. This involves proving that the harm would not have occurred ‘but for’ the professional’s negligent conduct. The damage must be foreseeable; not all consequences of negligence are recoverable if deemed too remote. The claimant must show they relied on the professional’s valuation or advice when making decisions. This reliance must be reasonable; if the claimant ignored obvious flaws or did not rely on the valuation, their claim may fail. Courts often use the ‘but for’ test to establish causation and consider whether the reliance was justified and reasonable.
Decision
The court ruled that the Defendant surveyor’s firm was negligent in failing to warn about the burdensome ground rent terms and the lack of comparable evidence, which affected the reliability of the valuation. However, it also found that the Claimant mainly relied on the overall reasonableness of the valuation figure itself, and the missing warnings would unlikely have changed their decision to invest. Consequently, the court dismissed the Claimant’s claim, concluding that the alleged breaches did not cause their loss since they would have proceeded regardless.
This ruling serves as a reminder to property professionals and investors to investigate further on the unsuccessful investment projects, whether a breach of duty is indeed responsible for the actual damages before pursuing experts for negligence-related claims.
Have questions? Get in touch today!
Call us on 020 7928 0276, phone calls are operating as usual and we will be taking calls from 9:30am to 6:00pm.
Email us on info@lisaslaw.co.uk.
Or, use the contact form on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/contact/
For more updates, follow us on our social media platforms! You can find them all on our Linktree right here.
