In Titan Europe 2006-3 Plc v Colliers International UK Plc the UK Court of Appeal heard an appeal by Colliers against a decision of the High Court concerning the allowable margin of error in property valuation and the right of suit under a securitised loan.
Colliers provided a commercial property valuation of €135m to the property's owner. The owner borrowed €110m, using the property as security. The loan was purchased by Titan under securitisation. Titan then issued investors with mortgage backed securities under the loan.
In its action, Titan claimed Colliers had been negligent in valuing the property at €135m, claiming €135m was outside allowable margins of error. Titan claimed the difference of the adjusted High Court valuation of €103m.
On appeal, Colliers claimed the High Court valuation was incorrect, and that the €135m was within an allowable margin of error under a correct valuation of the property. Colliers also claimed Titan did not have a right of suit under the securitised loan, which it said belonged to noteholders of the mortgage backed securities.
As to permissible margins of error in property valuation, the Court of Appeal held the value of the property was €118m. The Court then upheld the High Court's decision that 15% was an acceptable margin of error for a sufficiently unusual building. On the adjusted €118m valuation, the €135m Colliers valuation was within a 15% margin of error.
As to the right of suit, the Court held that Titan retained the right to sue Colliers, stating that the owner of property has rights of suit for substantial damages in respect of any actionable negligence. This applied to rights of suit in relation to loans and the securities underlying them.
Although Titan retained the right of suit, as the valuation was within the 15% margin of error the Court allowed the appeal.
See Court decision here.