The recent legal dispute involving Alexander Reece Thomson LLP, Hope Capital Limited, and Hope Capital 2 Limited has shed light on the complexities of professional negligence claims related to a defective property valuation survey in this bridging loan case. This case serves as a prime example of the intricacies involved in a professional negligence case.
In the world of professional services, trust in experts is of paramount importance. Clients, whether individuals or businesses, rely on professionals to provide sound advice and dependable guidance. However, there are instances when professionals make errors, resulting in financial losses and damages. In such situations, professional negligence claims offer legal redress.
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Hope Capital v Alexander Reece Thomson LLP
This case revolves around Cedar House, a historic property dating back to the 15th century, located on approximately 0.667 acres of land in the picturesque village of Cobham, Surrey. In 2018, Hope Capital Limited and Hope Capital 2 Limited (referred to as “Hope”) engaged the services of Alexander Reece Thomson LLP, a firm specialising in Chartered Surveyors and property consultancy. Their purpose was to obtain a valuation for Cedar House, which was crucial as it was intended as collateral for a bridging loan.
The valuation, dated 14 February 2018, assigned a substantial value of £4,000,000 to Cedar House. Concurrently, Hope Capital extended a bridging loan of £2,215,440 to St Anselm Heritage Properties Limited (“St Anselm”), excluding interest and fees. Regrettably, St Anselm defaulted on the loan, leading to the appointment of receivers, who took possession of Cedar House on 12 November 2018. As a result, Cedar House was sold on 2 October 2020 for a significantly reduced amount of just £1,400,001.
The Negligence Claim against the Surveyors
Following this financial setback, Hope Capital pursued a negligence claim against Alexander Reece Thomson LLP. Their argument rested on the belief that the valuation provided was negligent, and they would not have proceeded with the loan had they been aware of the true value of the property. According to Hope, the accurate valuation of Cedar House was only £2,150,000.
The claimed loss amounted to a sizeable claim of £2,527,749, encompassing capital loss, interest on the loan, and lost profits. It is essential to note that Hope agreed, in line with their duty to mitigate damage, to limit their loss by referencing the difference between the £4,000,000 valuation and their claimed valuation of £1,950,000, which was based on a 180-day assessment.
Professional Negligence Claim Defence
On the opposing defending side, Alexander Reece Thomson LLP admitted that they had breached their professional duty. Nonetheless, they argued that the genuine value of Cedar House was £3,175,000, even though they conceded that their valuation still fell short of the standards of reasonably competent valuations.
Additionally, they disputed damages by reference to the legal concepts causation and loss and alleged that Hope was partially responsible for the loss particularly in light of their delay which meant the sale was effected during the COVID-19 pandemic. The law firm contended that the loss should be calculated by considering the difference between the property’s value and the loan, accounting for any discounts due to contributory negligence and interest.
What was the Court’s Verdict / Order?
The judge overseeing the case meticulously examined the expert evidence presented by both parties. The final verdict was that the accurate valuation of Cedar House in February 2018 stood at £2,750,000. The judge concurred with Hope’s expert, concluding that a 10% reduction was appropriate for a 180-day valuation, resulting in a valuation of £2,475,000. Moreover, the court addressed the standard “bracket of tolerance” associated with property valuations, suggesting that valuations should ideally fall within plus or minus 15% of the true property value.
Even when contemplating the potential widening of this bracket to 20%, the valuation provided by Alexander Reece Thomson LLP at £4,000,000 was determined to be significantly beyond the acceptable limits. Consequently, the judge ruled that the firm’s valuation was not competent.
Judgment of the Case
Ultimately, the judge’s decision revolved around the absence of actionable loss. Although Alexander Reece Thomson LLP was found negligent, the judge determined that Hope Capital did not experience an actionable loss directly due to this negligence. Crucially, the capital extended under the loan and the incurred costs remained lower than the security amount, as calculated based on the genuine 180-day valuation of £2,475,000.
Download Judgment Here
What is the significance of this case?
This case underscores the intricacies inherent in professional negligence claims. It emphasises the need to establish a clear connection between professional negligence and the subsequent financial loss. In cases involving valuations, professionals such as surveyors must perform their duties within the bounds of accepted brackets of possible valuations, as exemplified in this case.
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Professional negligence claims can be labyrinthine and multifaceted, as exemplified by the Cedar House Valuation Case. We specialise in professional negligence claims and have years of experience in handling and resolving negligence claims. Our lawyers have market-leading experience of providing bespoke legal advice and bringing complex claims to settlement. As a leading law firm regularly featured in the news and media and with a track record of success, you can be assured your negligence claim will proceed with precision and care.
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