A Case Study in specialist competence – Dale House Developments Ltd v Ronnie

The recent case of Dale House Developments Ltd v Ronnie provides a useful reminder of a valuer’s responsibilities when appointed in respect of an independent determination. The judgment highlights the risks of adopting a narrow, submission-based approach to a determination, rather than undertaking the broader market analysis required by an independent expert.

Facts

Dale House Developments Ltd (“the Pursuer”) contracted to sell a commercial property in central Glasgow to Legal & General Assurance Society Ltd (“L&G”). There was a “Profit Share Scheme” clause in the contract, which required that an Independent Valuer assess the open market value of the property, “having regard to information provided by both parties in support of their proposed valuation”. Mr Ronnie (the “First Defender”), a consultant surveyor employed by Ryden (the “Second Defender”), was appointed to undertake this role.

The First Defender received competing proposed valuations from the Pursuer and L&G, and subsequently assessed the open market value of the property as £3,900,000. The effect of this decision was that the Pursuer was not entitled to any profit share in terms of the missives. L&G later concluded a sale of the property for £8,750,000 as a hotel with retail space.

The Pursuer alleged that the First Defender failed to carry out the valuation in accordance with the RICS Valuation – Professional Standards (commonly known as the “Red Book”), and failed to carry out the valuation with reasonable skill and care. The Pursuer argued that, had the valuation been properly carried out, it would have been entitled to a profit share in terms of the missives.

It came to light that the First Defender lacked expertise in valuing hotel developments, which was one potential use for the property.

Judgment

Lord Richardson rejected the First Defender’s submission that he was not obliged to look beyond what was contained in parties’ valuation proposals. He also rejected the notion that the First Defender ought only to be held to the standard of a commercial valuer, rather than a valuer with specialist knowledge. He considered that in accepting the appointment, Mr Ronnie had held himself out as an expert valuer having experience in undertaking development-led valuations in Glasgow, including hotels. His actions fell to be judged by that specialist standard.

The Court found that the First Defender had failed to cross-check his valuation with available market evidence; erroneously restricted his assessment to the submissions of parties; failed to consider the value of a proposed ground floor development; and failed to consider the possibility that the purchaser might be an owner-operator. In each respect, he failed to value the property in accordance with the RICS Red Book, and failed to meet the standard of a suitably qualified chartered surveyor of ordinary competence acting with reasonable skill and care. The Pursuer was consequently awarded damages in the sum of £928,650 to reflect the loss of profit share.

Key Takeaways

• The role of an “independent valuer” is not a passive one – it demands active engagement with the valuation. A valuer must apply professional judgment and critically assess parties’ submissions – not merely choose between them.
• Surveyors must evidence strict adherence to RICS Valuation Professional Standards, including cross-checking residual valuations against market evidence.

Beale & Co have extensive experience advising on complex professional negligence claims. If you have any questions regarding the issues covered in this article or wish to understand how these apply to your contracts or business practices, please contact Lindsay Ogunyemi and Jamie Harris.