UK: Court Of Appeal Finds For Defendant Valuers In Titan V Colliers

Last Updated: 9 February 2016
Article by Tom White

In November 2015, the Court of Appeal overturned in Titan Europe 2006-3 plc v Colliers International UK plc (In liquidation) [2015] EWCA Civ 1083 the High Court's finding that Colliers was negligent (see our Real Estate Bulletin, Spring 2015).

The case concerned Colliers' valuation in December 2005 of a large (242,195m˛) commercial property ("the Property") in Nuremberg, Germany, occupied by Quelle – at the time, Germany's biggest mail-order company, which occupied the Property on a 15-year lease, expiring in 2016. Colliers valued the Property at EUR 135 million. In reliance on the valuation, Credit Suisse made a loan of EUR 110 million to Quelle's landlord, Valbonne. In 2006, the loan was securitised with numerous other loans and was purchased by Titan, a newly incorporated special purpose vehicle, which issued around EUR 1 billion of floating-rate loan notes to investors. Quelle and Valbonne subsequently became insolvent and Valbonne defaulted on the loan in around 2009. The Property was eventually resold for only EUR 22.5 million.

Titan pursued a claim against Colliers, in which it alleged that the true value of the Property in December 2005 had been only EUR 76.6 million. Titan sought damages equivalent to the "SAAMCo cap" (ie the difference between the reported value and the alleged true value of the property, which is the maximum for which a valuer providing information of this sort can be held liable) of EUR 58.8 million.

At first instance, Blair J. found liability to have been established, on the basis that the true value of the Property had been only EUR 103 million and the bracket of reasonable valuations had been 15% either side of this, such that the valuation of EUR 135 million fell outside the bracket. The judge's finding as to true value was a somewhat surprising inference on the evidence, which showed that, amongst other things, in the same year as Colliers' valuation, and in a rising market, there had been two other valuations and one sale of the Property all at levels above the top end of the judge's bracket. The judge also rejected Colliers' argument that, as a non-recourse issuer of the loan notes to investors, Titan had, in any event, suffered no loss. Damages of EUR 32 million were awarded to Titan.

Colliers subsequently appealed on two principal grounds: (1) that the true value of the Property had been substantially higher than EUR 103 million; and (2) that Titan did not have title to sue and, even if it did, had itself suffered no loss in any event.

Finding of breach of duty overturned

On ground (1), the Court of Appeal substituted a true value of EUR 118.3 million and, as a result, found that Colliers' valuation fell within a 15% margin of error and had not been negligent. Attributing particular importance to the fact that, only six months prior to Colliers' valuation, the Property had been sold for EUR 127.1 million, Longmore LJ held that it was "inconceivable" that the true value in December 2005 could have been as low as EUR 103 million and that the judge at first instance had wrongly proceeded without regard to evidence of an actual sale, which Phillips J (in Banque Bruxelles Lambert v Eagle Star Insurance (1995)) had called "the most cogent evidence" of any property's market value. Referring also to three other occasions between September 2003 and March 2005 on which the Property had been valued by others at between EUR 114.7 million and EUR 134.5 million, Longmore LJ further noted that a value of EUR 103 million would be "perilously close" to the figure of EUR 100 million which the trial judge had himself said was the "absolute minimum that would have carried any credibility in the market". He found that the evidence provided by the earlier sale and valuations justified a yield of 7.4%, lower than the trial judge's figure of 8.5%. He added that, although the Court of Appeal had reached its conclusion without taking into account the rising market that had been current in 2005, this would have been yet another factor in Colliers' favour.

The securitisation issue

The securitisation issue was rendered redundant by the exoneration of Colliers on liability grounds. Expressing obiter views on ground (2), however, the court commented that, since Titan had retained legal and beneficial ownership of both the loans and the loan notes, it would have retained the right to sue Colliers for substantial damages. The court was also not prepared to dismiss the claim on the basis that the noteholders, not Titan, had suffered the loss. Taking a novel approach, which did not arise out of either side's submissions, the court drew an analogy with the relationship between a company and its shareholders, commenting that the fact that the investors in the loan notes had been the ultimate losers did not mean that Titan itself could not have sustained a loss. Rather, if (contrary to the court's finding on the valuation) Colliers had negligently overvalued the Property, Titan would have suffered a loss as soon as it acquired the loans and securities (including the Property) from Credit Suisse.

Comment

It is certainly positive that an appellate court felt able to overturn the trial judge's views on valuation and adopted an approach more precise than simply "splitting the difference" between the retrospective calculations of opposing experts. Equally welcome is the court's recognition that the pre-crash rising market is a relevant factor that should be taken into account. Together, these findings suggest (at least implicitly) that the Court of Appeal is keen to take full account of the reality of the sustained boom in the pre-2008 European property market and to avoid hindsight to the greatest extent possible.

Less positive, on the other hand, is the court's obiter comments on the question of whether an issuer of mortgage-backed securities had standing to pursue a claim against a valuer retained by an original lender. As was submitted by Colliers, this exposes valuers instructed in the context of securitisations to the risk of liability to both investors and the issuer of securities. The Court of Appeal's analysis of this important issue was surprisingly brief.

However, every securitisation will be factually distinct and valuers will be appointed on different terms and will accept different responsibilities in relation to each transaction. It is clear from both the Court of Appeal and first instance judgments that, in determining the scope of a valuer's duty and in deciding which of a number of entities may have suffered a recoverable loss, there remains no substitute for a close analysis of both the specific contractual documentation and the structure of the individual finance transaction in question. An issuer claimant's entitlement to sue valuers in circumstances similar to those in Titan v Colliers may well, therefore, be a matter of dispute in future litigation and should always be assessed carefully by reference to the specific facts in issue.

In a press release published on the same day as the Court of Appeal judgment, Titan's solicitors said that they are considering an application for permission to appeal to the Supreme Court. It will be interesting to see whether the matter proceeds any further.

Court Of Appeal Finds For Defendant Valuers In Titan V Colliers

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Tom White
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.