Valuer’s negligence: method of valuation

Barclays Bank PLC v Christie Owen & Davies Ltd (t/a Christie & Co) [30.09.16]

High Court holds that when valuing a gaming arcade the valuer should have followed the RICS guidance notes and calculated the EBITDA and multiplier; the appropriate reduction for contributory negligence was 40% given the borrower’s dishonest misuse of a previous loan.


The decision demonstrates how difficult it is to justify departing from the RICS guidance notes in the absence of exceptional circumstances. In this case the valuer (Christie) had based its valuation on turnover rather than calculating the EBITDA, the approach suggested in the RICS guidance note, a more time-consuming exercise that involved a detailed analysis of the expenses involved in running a successful arcade. Christie’s justification for its approach - that there was no evidence on which to base EBITDA - found no favour.

Purchase price remains significant evidence in support of value (Banque Bruxelles Lambert SA v Eagle Star Insurance Company Ltd and others [1995]). However, the judge (Richard Spearman QC) distinguished this case and said that the purchase price could be ignored. He emphasised the particular circumstances of the borrower and the extent to which it could be described as a special/non-typical purchaser.

Finally, Barclays Bank PLC (Barclays) had previously provided £300,000 in mortgage finance for the purpose of expanding the borrower’s business. It was in fact used by the borrower to buy a house in Spain. Despite finding that a reasonably competent bank would never have made the new loan, given the evidence of the borrower’s dishonesty, the judge only awarded a 40% reduction for contributory negligence.


Barclays asked Christie to value three gaming arcades in Great Yarmouth. The borrower, a long standing customer of Barclays, owned two of the arcades and was purchasing the third.

Christie valued the two arcades that the borrower owned at £2.7 million and the arcade that it wished to purchase at £1.5 million.

Based on the valuations, Barclays extended its existing lending by £1.8 million. This allowed the borrower to purchase the third arcade and refurbish the three properties. Within two years the borrower went into administration. The three arcades were sold, leaving the bank with a loss of around £1 million.


The judge held as follows:

  • Christie should not have adopted a turnover/multiplier basis of valuation. It should have calculated the EBITDA based on the expenses that were required to run arcades at this level.
  • Had Christie adopted the correct method then it would have valued the arcade the borrower wished to acquire at around £1.185 million and the two arcades already in its ownership at around £2.317 million (rather than £1.5 million and £2.7 million).
  • A SAAMCO cap of around £700,000 applied.
  • Barclays’ recoverable loss was around £1 million, made up of a capital loss of around £700,000 plus compound interest at LIBOR of around £265,000, representing the cost of funding. However, quantification of the actual loss was reserved for further argument in respect of the cost of funding. Barclays was entitled to apply the sale proceeds to the pre-existing debt first.
  • There was evidence of contributory negligence by Barclays, based on the previous dishonest conduct of the borrower, rather than absence of lending guidelines. A 40% reduction to Barclays’ recoverable losses applied. It was therefore awarded damages of around £600,000.    

Related item: Surveyors’ negligence: no more ‘but for’?