Titan Europe 2006-3 Plc v Colliers International UK Plc

In professional negligence claims against property valuers, liability depends on whether the valuation fell outside the permissible margin of error, or bracket, judged against the valuation a reasonably competent valuer could have reached. The bracket is a fact-sensitive legal assessment assisted by expert evidence. Recent, properly marketed transactions involving the property may be the most cogent evidence of market value, subject to adjustment for materially different terms. An appellate court may intervene where undisputed primary facts do not support the trial judge’s inferential valuation. A valuation within the bracket is not negligent. The court’s views on a securitisation vehicle’s title to sue and loss were obiter.

Credit Suisse instructed Colliers to value a commercial property in Nuremberg at €135 million. The related loan was later acquired by Titan through a securitisation. Following the insolvency of the tenant and borrower, the property was sold for €22.5 million.

Blair J held that Colliers had been negligent, assessed the true value at €103 million, and awarded Titan €32 million, in a judgment reported at [2015] 2 AER Comm. 479. Colliers appealed the findings of negligence and Titan’s entitlement to recover. The central issues were whether the valuation fell outside the agreed 15% bracket and, if so, whether Titan had title to sue and had suffered recoverable loss.

Appeal allowed. The court entered judgment for Colliers on Titan’s claim.

1. The court proceeded on the agreed principles governing valuer negligence. Valuation is an exercise involving professional judgment and subjective elements, rather than a mechanistic process. Negligence requires a valuation which no reasonable valuer would have reached and which falls outside the permissible margin of error, or bracket. The bracket is ultimately a question for the court, assisted by expert evidence and assessed in light of the particular property. The 15% bracket adopted at trial was not challenged.
2. The judge’s primary factual findings were not challenged, but his inferential conclusion that the correct value was €103 million was unsupported by the evidence. The six transactions and valuations concerning the property formed part of the overall picture. In particular, the June 2005 sale at €127.1 million was potentially the most cogent evidence of market value. Adjusting for the longer warranted lease term, the assumed rent and purchasers’ costs produced a more realistic value of approximately €118.3 million. Colliers’ valuation of €135 million was within 15% of that figure and therefore was not negligent. The court was entitled to intervene because it was reviewing an inference from established facts, rather than reversing a finding based on the assessment of witnesses.
3. The court’s discussion of title to sue was expressly obiter. If Colliers had been negligent, Titan would have been entitled to sue for substantial damages because it remained the legal and beneficial owner of the loans and underlying securities. The choses in action were property, and retaining that property distinguished The Albazero [1977] AC 774, where the claimant had parted with both property and risk.
4. The court approved the reasoning in Interallianz Finanz A.G. v Independent Insurance Co Ltd, dated 30th May 1997, that independent sub-participation arrangements did not reduce the continuing lender’s damages. It also observed that a noteholder’s claim might be defeated by the reflective loss doctrine, which was not confined to shareholders.

• Court of Appeal (Civil Division): The appeal was allowed and judgment was entered for Colliers. [2015] EWCA Civ 1083
• High Court, Queen’s Bench Division, Commercial Court: Blair J held that Colliers had been negligent, that the property’s true value was €103 million, and that Titan was entitled to €32 million in damages. The judgment was reported at [2015] 2 AER Comm. 479.