The High Court has given guidance that will limit what clients can expect professionals to do for their fees, and could prevent some cases being brought against valuers if the property market crashes again.
Dismissing a claim against a monitoring surveyor, Mr Justice Coulson held that limited fees are evidence of limited service, in Bank of Ireland v Watts Group [2017] EWHC 1667 (TCC).
The Bank claims that Watts Group should have identified that a construction project on which it was lending was not viable. However, Coulson J found that the project was viable and also held that the size of the fee was good evidence of the work the firm was expected to carry out. Watts Group received £1,500 for an initial appraisal report. Coulson J held that the surveyor could not be expected to do its own detailed calculations of cost, time or cashflow within its limited budget. Rather, it should only have been expected to check the borrower's calculations.
Alan Stone, partner at RPC, who acted for Watts Group, said the decision will affect a number of other cases: ‘A small fee can now be seen as evidence of the limited nature of the service that a professional firm is expected to provide. Although this case involves a monitoring surveyor, this ruling may well be relevant to other professions.’
Tom Green, senior associate at RPC, said: ‘When the property market falls sharply, as it will again at some point, construction projects may well run into difficulties, with contractors, borrowers and developers encountering financial difficulties.
‘The lending banks will often pursue property valuers, or as in this case monitoring surveyors, and of course their insurers. They are the only people left standing. This means they often face claims they shouldn’t have to face—this High Court judgment should now prevent some of those cases going forward in the future.’
