Summary
The claimant sought damages amounting to the difference between the £16.9 million contract sale price from a failed house sale and the sum ultimately obtained for the property of £10.1 million, less that £2.5 million forfeited deposit. After finding the expert evidence compromised by the information provided to the experts, the judge set out a better approach to expert evidence in property valuation.
Learning points
Learning points for instructing parties
Learning points for property valuation experts
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If you have been provided with the contract price and the sale price for the property in question, you should endeavour not to allow that information to influence your valuation.
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Immediately notify your opposing expert if you realise that both of you have wrongly stated details about comparable properties.
Learning points for all experts
The case
The defendant failed to complete the contract for sale for a property in North London (the ‘Property’). The Property was subsequently sold by the claimant to 16 BL for significantly less than the contract price with the defendant. The claimant sought damages amounting to the difference between the contract sale price of £16.9 million and the sum ultimately obtained for the Property of £10.1 million, less that £2.5 million forfeited deposit.
The expert witnesses
The claimant’s expert was Mr N, a chartered surveyor since 1995 and a member of the Royal Institution of Chartered Surveyors (‘RICS’). The defendant’s expert was Mr K, a chartered surveyors since 1996 and also a member of RICS.
Criticism of Mr N
The judge noted two of the criticisms made of Mr N by the claimant. Mr N failed to inform Mr K when he realised that details regarding one of the properties, which both he and Mr K had agreed were comparable to the Property, had been wrongly stated by both of them. This was even though Mr K had informed Mr N of revisions to information of other comparable properties. It also emerged that Mr N was aware that his son had visited the Property. This fact, and any details passed to Mr N by his son, were not disclosed to Mr K.
The judge found these matters to be consistent with how Mr N gave his evidence in cross-examination, noting that “[w]hile I believe that on the whole [Mr N] was doing his best to assist the court with his honestly held views, he probably did so with Regal’s case well in mind and sometimes felt the need to state his views accordingly.”
The judge noted that Mr K was more willing to make appropriate concessions in cross-examination.
A better approach to expert evidence
As part of the preparation for drafting their reports, both experts were provided with many of the documents in the proceedings including the pleadings. As a result, both experts knew from the start:
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the defendant’s argument that the Property was worth the £10.1 million for which it ultimately sold, and
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the claimant’s contention that the difference between that figure and the £16.9 million contract sale price had been the defendant’s failure to mitigate its loss and that, by implication, the Property was worth $16.9 million when sold.
The judge found this unsatisfactory, noting that:
“The credibility of both experts would have been much improved if neither had been told the value of the Property which each side wished to establish at the trial before finalising and serving their respective reports. That way the experts would have used their expertise to arrive at a valuation of the Property in September 2024 without being influenced by the figure for which their instructing party contended. After service of the reports it would then have been helpful to inform them of the price achieved in the sale to 16 BL in September 2024 and to have asked them to comment on it in a supplementary report, stating whether the actual sale price affected any view expressed in the main report and if so, why. I doubt that it was either necessary or desirable to inform the experts of the price set out in the Sale Agreement or the parties’ pleaded contentions on price before the experts’ evidence had been concluded and served.”
The judge found that it was likely that the estimates of both experts were influenced by the respective expert’s knowledge of each party’s pleaded case. While the judge did not suggest that either expert intended to mislead the court, “in any contentious proceedings loyalty on the part of an expert to their instructing party is almost inevitable.” This loyalty was liable to build up over the course of preparation for trial by the litigation team. He also noted that the expert may also have an understandable wish to justify their fee.
As a result, the judge concluded that the value of the expert evidence, even as a cross-check, was compromised.
The cross-check
The experts overall considered 14 properties to be comparable, agreeing on 6 of these as comparable. The price achieved per square foot for the 6 agreed comparables was in every case higher than the equivalent for the Property. Mr K said this was because the higher figures reflected the true market value of the Property, while Mr N identified features in each of the comparables which he considered were preferable to the Property.
What emerged from this, the judge noted was that “identifying comparables is a highly subjective process and that reasonable experts can disagree.” The judge found no real assistance in the cross-check other than that the expert evidence was not sufficiently at odds with the price paid by 16 BL to case doubt on the adequacy of the defendant’s marketing.