Barclays Bank Plc v Christie Owen & Davies Ltd (t/a Christie & Co)

A professional valuer is not negligent merely because another valuation would have produced a different figure. The claimant must first show that the valuation fell outside the permissible range for a reasonably competent valuer. That is necessary but not sufficient: the court must still decide whether the valuer exercised reasonable skill and care.

For specialised trading property, an EBITDA-based valuation should generally be used where reliable profitability evidence is available, unless a different methodology is supported by market practice or better evidence. Loss arising from negligent valuation involves assessing transactional loss and then attributing the recoverable part to the deficiency in security. Contributory negligence must be considered separately and may reduce damages where the lender’s own failures causally contributed to the loss.

Barclays lent money to Thurston UK Ltd to acquire and develop the Flamingo family entertainment centre alongside two existing arcades. Christie & Co supplied valuations of £1.5m for the Flamingo and £2.7m for the existing arcades. After the borrower entered administration and the arcades were sold, Barclays claimed professional negligence, alleging that the valuations were materially excessive.

The principal issues were the correct valuation methodology, whether Christie’s valuations were negligent, whether Barclays relied on them and suffered recoverable loss, the proper measure of that loss, and whether Barclays’ own lending decisions amounted to contributory negligence.

1. Valuation methodology and range. The proper approach was to determine the court’s own view of the true market value, assisted by the expert evidence. The permissible margin of error was 15%. A valuation outside that range called for an examination of the valuer’s competence and care, but did not itself establish negligence.
2. EBITDA basis. Under the applicable RICS guidance, the value of the arcades depended principally on the fair maintainable trade and profitability achievable by a reasonably efficient operator. Reliable EBITDA evidence was available. Christie had no sufficient justification for using a turnover multiplier instead. The EBITDA approach was the appropriate methodology.
3. Negligence and values. The Flamingo was worth £1,185,738 and CCGN £2,317,279.50. Their combined value was rounded to £3.5m, compared with Christie’s combined valuation of £4.2m. The overvaluation exceeded the permissible range. Christie had acted as no reasonably competent valuer would have acted and was negligent.
4. Causation and loss. Barclays reasonably relied on the reports. With non-negligent valuations, the purchase and associated borrowing would probably not have proceeded. Transactional loss was assessed by comparing Barclays’ outlay and funding costs with its recoveries. The recoverable loss was subject to the amount of the overvaluation.
5. Contributory negligence. Under section 1(1) of the Law Reform (Contributory Negligence Act) 1945, Barclays’ own fault had to be causally connected with the loss. Barclays should have responded much more seriously to the Thurstons’ misuse of the earlier £300,000 mortgage advance and should have scrutinised the proposed lending more closely. A 40% reduction was just and equitable.
6. Disposition. Subject to further evidence and argument on funding-cost interest or statutory interest, Barclays was entitled to judgment for 60% of £1,022,523.19. The parties were directed to agree an order, with costs and permission to appeal reserved.

First-instance decision. The judgment records no earlier decision in the same proceedings.