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Negligence – damages

Breach of contract: valuation: professional negligence: loss of opportunity: surveyors: duty of care: negligent undervaluation of rugby ground: development prospects: residential developments: purposes of capital gains tax: open market valuations: depreciated replacement cost valuation: scope of duty: negligent representations

The defendant surveyors gave a negligent valuation of the claimants’ rugby ground and were liable in damages for the difference between the negligent valuation and a non-negligent valuation.

The claimant trustees of a rugby club (W) claimed damages for breach of contract and negligence arising out of a 1996 valuation of the club’s ground by the defendant company of surveyors and valuations (L). Rugby Union became a professional game in 1996 and W’s assets and liabilities including the ground were transferred to a company in exchange for shares. The ground was transferred at L’s March 1996 valuation of £832,500. The shares taken by W were exchanged for shares in a plc which was floated on the Alternative Investment Market in October 1996. The prospectus for that flotation valued the ground at £5.7 million. In 1999 the ground was sold with outline planning permission for residential development for £8.9 million. W claimed that L was negligent in making the valuation because it failed to make proper planning enquiries, failed to appreciate that there were prospects of obtaining residential planning permission and so substantially undervalued the ground. W alleged that the value of the ground in 1996 was £3.42 million. L admitted negligence in certain respects but contended that the ground’s value at the relevant time was no more than about £1.5 million.

HELD: (1) The context in which L’s 1996 valuation was sought was the possible transfer of the ground as part of a process intended to enable W to raise funds for the professional era. There was nothing to suggest that L knew or was concerned about any particular transaction for which W might rely on the valuation. The valuation was expressed to be made for “the purposes of capital gains tax” but such a valuation assumed a contemplated disposal and required an open market valuation including any development prospects. It was at least a purpose of the 1996 valuation that it would enable W to decide whether, and if so at what value, to dispose of the ground and L knew or should have known that W would rely on it for that purpose. L had been negligent in representing that residential planning permission would be extraordinarily difficult to obtain without carrying out any investigation into the position when in fact the chances of planning consent were at least 50 per cent. (2) A non-negligent valuation in March 1996 would have been £3.25 million. In consequence of the law valuation W disposed of the ground for less than it was worth when it would not otherwise have done so. That loss fell fairly within the scope of the duty undertaken by L to W. There was no contributory negligence by W. The fair assessment of the loss suffered by W was the difference between L’s valuation of £832,500 and the proper valuation of £3.25 million (subject to the question whether W had to give credit for any sum because it had received a benefit for the ground in excess of L’s valuation figure). W was entitled to damages in that sum and interest from the end of 1996 which was the date by which W would have realised that sum.

Judgment for claimants.

(1) IVOR ALEXANDER MONTLAKE (2) PETER YARRANTON (3) DONALD WILLS (AS PER TRUSTEES OF WASPS FOOTBALL CLUB) V LAMBERT SMITH HAMPTON GROUP LTD (Defendant/Part 20 Claimant) & NICHOLSON GRAHAM & JONES (Part 20 Defendant) (2004).

QBD (Comm) (Langley J) 6/5/2004


“Lawtel”: 17.5.04