What issues arise when deciding whether a valuer owes a duty of care to a third party?

What issues arise when deciding whether a valuer owes a duty of care to a third party?

The recent case of Freemont (Denbigh) Limited v Knight Frank LLP [2014] EWHC 3347 considered this issue.

The facts

Freemont Denbigh (FD) claimed against Knight Frank LLP (KF) for damages said to run to many millions of pounds in connection with a valuation of development land which was made in early August 2006.

  • The development site formed approximately 17 acres of a larger plot of land on the outskirts of Denbigh, which until 1995 was the site of the North Wales Hospital.
  • In July 2006, the site was transferred to FD.
  • An existing outline planning permission had been granted, subject to a satisfactory Section 106 Agreement being entered into.
  • One of the proposed Section 106 requirements was for the owner of the site to provide a bond to secure its agreement to deposit approximately £5m into an account in the name of the Council, in order to finance works to the listed buildings on the site.
  • Lloyds Bank had confirmed they were interested in providing the bond, but required a valuation first. KF provided this valuation report. It was dated 1st August 2006 and was said to be provided for secured lending purposes. The report valued the development land as at 26th July 2006 at £17m with the benefit of outline planning permission and £18.7m with detailed planning consent.
  • The Section 106 Agreement was signed, but detailed planning consent was never obtained and no development took place at the site.
  • The listed buildings fell even further into disrepair. In FD’s view, the whole site is now worthless due to the state of disrepair and the fact the likely costs of reinstatement are so high.
  • FD’s claim against KF was that it had entirely lost the value in the site and that that loss was caused by the negligent overvaluation of the site by KF in 2006. FD said it relied on the valuation report for the purposes of assessing whether to sell the development land to developers in the months or years which followed the report, but because the developers were not prepared to match KF’s valuation, it declined all offers for the land.
  • Had the valuation been for what FD alleged was the correct figure, it claimed it would have taken a different approach to the offers and would have accepted one of them.
  • It was no part of FD’s claim that KF’s valuation report was deficient for the express purpose for which it was provided - in connection wit

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About the author:
Joanna is a commercial property specialist. Prior to joining the LexisPSL Property team, she was a transactional lawyer. She qualified in 1995 at Shoosmiths and subsequently worked at Nabarro, Charles Russell, Bircham Dyson Bell and Pemberton Greenish. She has wide-ranging experience of all non-contentious property transactions, with a particular emphasis on landlord and tenant work.