no loss caused by negligent valuation where loss caused by
In the widely reported case of Platform Funding v Anderson
Associates , a valuer was found
not to have been negligent in a "no transaction" case involving
fraudulent behaviour because, notwithstanding that the valuation
was negligent, the lender suffered no loss as a result of this
negligence. Whilst on the face of it this case is surprising
given the fraud involved, it is a clear reminder that in order to
succeed in a professional negligence claim a claimant must show
that the negligent valuation has caused the lender or the purchaser
to suffer the loss. It is also a reminder to valuers of the
importance of having comparable evidence.
This case involved the sale of a new build
flat, No 25, in a development of a residential block of faults
located in Thamesmeade, in 2006. A Mr Alim Barrie,
through his company Atrex Property Company Limited, bought all 84
flats in the block. Persimmon Homes, the developer, still marketed
the flats but Mr Barrie negotiated the sales and informed
Permission of the "sale price". In fact Mr Barrie informed
Persimmon of the market price only rather than the true sale value
which was significantly lower.
Flat 25 was eventually bought by Mr Darren
Jikiemi. Anderson Associates Limited were the second firm of
surveyors to value the property and were instructed twice by two
separate lenders (one of which was Platform Funding) to value the
The surveyor provided a valuation of £274,995
and Platform Funding agreed to provide a mortgage on the basis on
90% loan to value ratio. Mr Jikemi subsequently defaulted on
the mortgage and the property was sold in 2008 at a substantial
Platform Funding brought a claim against
Anderson Associates for the over-valuation of the flat.
There were various aspects to the fraudulent
transaction. False information was provided both to Persimmon and
to the surveyors. The solicitors firm failed to report properly to
the lender and there was a falsely prepared mortgage
The key issue in this case concerned the
enquiries made by the valuer. Anderson Associates were
instructed by Platform on the lender's standard terms and
conditions for a panel firm which included that the valuation must
be carried out in accordance with RICS specifications. At
this time, there was an amendment to the RICS Red Book, which was
designed to protect against the overvaluation of new build
apartments and included that a surveyor must take into account any
incentives when undertaking a new build valuation exercise.
The Red Book also indicated that there must be extensive
examination of comparables.
The court held that the valuation provided to
Anderson Associates did not consider whether the sale price
provided by Flat 25 was adversely affected by incentives, did not
seek out any new build comparables in adjacent blocks, did not seek
out second hand market valuations and did not make any enquires
about the selling conditions of the flats in the block.
Notwithstanding this, the court held that even if the surveyor had
carried out these enquiries, his valuation may not have been any
different. This was because it was impossible to ascertain in
these circumstances whether there were any incentives applied in
this sale, that it was a sale by a third party rather than the
developer, the comparable sale prices of flats in the block would
have shown a value of £274,795 and he would not have been able to
establish evidence of the downward trend on values of other new
build properties in the local area.
The court held that Anderson Associates could
not be held liable in negligence as what had in fact caused the
loss in this case was the underlying widespread fraud, the
dishonest way in which the flats were sold and marketed by Mr
Barrie, the shortcomings in the solicitors instructed in the
transaction and the apparent involvement of Persimmon.
Causation is always the achilles heel of any
professional negligence claim and this case is no exception.
However, this case is likely to be of limited assistance to
professionals because of its particular facts – here the extent of
the underlying fraud.
For lenders and valuers, this case is
important as it emphasises the importance of undertaking all checks
in accordance with RICS guidelines and other standard forms of
practice. It is also a clear reminder to valuers of the
importance of obtaining comparable evidence when undertaking
valuations. It is also likely that had the underlying fraud
not prevented the surveyors from being able to establish the
existence of any incentives, then this case could have had a very
-  EHWC 1853