Bank loses 'unrealistic' negligence claim against surveyors

A bank was being unrealistic when it brought a professional negligence claim for £750,000 against a firm of quantity surveyors.

That was the decision of the High Court in a case involving the Bank of Ireland and the Watts Group plc.

The bank agreed to lend £1.4m to a company to develop a city centre property into apartments. It engaged Watts to provide an appraisal of the borrower's building costs estimates.

The borrower later entered creditors' voluntary liquidation and building work ceased.

The unfinished property was sold, but the bank suffered a loss of approximately £750,000. The bank sought damages from Watts, claiming that the appraisal was negligent, and that if it had been properly prepared, the money would not have been loaned.

The court rejected the claim. It held that the surveyor had not fallen below the standard to be expected of a “reasonable monitoring surveyor,” and he could not be expected to carry out the entire calculation himself when his role was to simply assess the reasonableness of the figures provided by the borrower.

The bank’s expert was not a properly independent witness. The bank was his principal client and had provided most of his work for the last few years.

The expert had adopted an unrealistic approach to the allegations. Watts were paid £1,500 for producing the report. The size of the fee was good evidence of the limited nature of the service they were expected to provide.

It reflected the fact that they were not expected to do their own detailed calculations of cost, time or cash-flow, but instead had to check the borrower's calculations. In contrast, the expert's report and the associated work cost more than 30 times that amount.

That was a clear indication that the criticisms were based on an entirely unrealistic expectation of what Watts were required to do.


Please contact us if you would like more information about the issues raised in this article or any aspect of professional negligence claims.


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