Some interesting analysis from Bryan Johnston of Clifford Chance on the Capita Alternative Fund Services (Guernsey) v Drivers Jonas case in which DJ was ordered to pay £18.05m in damages over its negligent valuation of a factory outlet shopping centre in Chatham Historic Dockyard.
He says "The Dockside case is one of the first big professional negligence claims to be determined by the Court since the downturn (albeit the negligence complained of dates back to 2001). The judgment is detailed and complex and in view of this, it would not be unexpected if permission is sought to appeal the judgment.
"As in previous downturns, property litigators have been expecting an upturn in professional negligence claims concerning valuation, though the floodgates do not appear to be fully open just yet. Whether Dockside is a one-off or the start of a trend remains to be seen.
"It is likely that if investors and financial institutions increase asset disposal activities, historic valuations may well be dusted off and scrutinised. Whilst the impact of over-optimistic valuations is ameliorated in a buoyant market, such valuations will starkly stand out in adverse market conditions.
"The case highlights the need for professional services firms to have express retainers, setting out the scope of their activities and ensuring that responsibility for activities beyond their expertise is not assumed. Where a service is beyond the expertise of a firm, it should either expressly decline to provide the service or else engage a specialist to provide it.
"Such firms may also be expected to seek to limit their liability to the extent of their insurance cover, subject to reasonableness. It will be interesting to see if the judgment leads to increased PI premiums.
"Valuation professionals who are faced by a claim, or circumstances giving rise to a claim, should immediately notify their insurers and seek legal advice.
"Investors and financial institutions concerned about the value of assets which they are interested in should also seek legal advice to establish whether or not the valuation was negligently provided.
"Whether a valuer or investor, it is clear that valuation negligence is once again a key area for property litigation disputes, and is likely to be more prevalent as disputes work their way through the legal system," he concluded.
Photo by Doug Wertman via Flickr.
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