Negligent Valuation Of Seaside Amusement Arcades – Las Vegas Comes To The Rolls Building

In a judgment handed down this morning in the Chancery Division, Barclays Bank PLC v. Christie Owen & Davies Limited (trading as Christie Owen & Davies Limited [2016] EWHC 2351 (Ch)), Dentons acted for the bank in its successful claim against a firm of valuers over its negligent valuation of three amusement arcades in Great Yarmouth - The Flamingo, Circus Circus and Golden Nugget. It covers a wide range of important issues in these types of case including:

valuations of going concerns; the extent to which an expert who has previously been involved in the sale of the properties is a suitable expert; the incorporation of a valuer's terms and conditions into the retainer; the extent to which the bank contributed to its loss; the extent to which weight should be placed on the transaction being negotiated at the time of the valuation; causation; and how credit should be given for the sale proceeds of the subject property where there is other lending. Facts of the case

In March 2007, the claimant, Barclays Bank PLC (Barclays) granted a loan to its customer (the Borrower) for £1.9 million. The Borrower was part of a group of companies that traded as amusement arcades and were owned and operated by husband and wife Mr and Mrs Thurston. The purpose of the loan was to enable the Borrower to purchase The Flamingo arcade for £1.6 million, to undertake various renovation works to the arcade and to restructure an overdraft facility. The security for the loan included first legal charges over The Flamingo and two other conjoined arcades called Circus Circus and Golden Nugget. As part of Barclays' underwriting process it commissioned Christie Owen & Davies Limited (Christies) to value The Flamingo, Circus Circus and Golden Nugget as fully equipped operating entities. By valuation reports dated 27 February 2007, Christies valued The Flamingo arcade at £1.5 million and the conjoined arcades Circus Circus and Golden Nugget at £2.7 million, making a total of £4.2 million. Christies used a turnover multiplier basis of valuation as opposed to the more conventional EBITDA basis.

After the loan was granted, The Flamingo was purchased and the renovation works went ahead. Later, the group of companies got into financial difficulties and, on 12 October 2010, the Borrower was placed into administration. On 16 March 2011, the arcades were sold for a combined sum of £1.35 million. This resulted in Barclays suffering a significant loss.

Barclays' case was that, as at...