This case concerned the overvaluation of a leveraged property portfolio and resultant losses to a bank on enforcement. The defendant valuer was found to have been negligent in preparing the valuation. However, failures by the bank in ignoring its customer’s apparent lack of integrity led the Court to rule that its recovery should be capped at 60%.

In 2007, Thurston UK Limited (Thurston) approached Barclays Bank PLC (Barclays) for a loan of £1.8 million. Thurston had been a customer of the bank since 1982. This loan was to fund the acquisition of an arcade, The Flamingo, and to carry out works so that The Flamingo and two arcades already owned by Thurston (Circus Circus and The Golden Nugget) could be operated together.

Barclays engaged Christie & Co (Christie) to value the arcades on a trading basis. Christie used a turnover multiplier based methodology in order to value Circus Circus and The Golden Nugget at £2.7 million and The Flamingo at £1.5 million.

Barclays proceeded to make the loan against the arcades on the basis of a maximum total loan to value ratio (LTV) of 67%, and the acquisition and alterations went ahead as planned. In 2010, Thurston fell into financial difficulties and was placed into administration. The arcades were sold for £1.35 million, leaving Barclays significantly out of pocket.

Barclays brought a professional negligence claim against Christie claiming that Christie had negligently overvalued the arcades and that Barclays had relied on this negligent valuation in making the loan.



The Court noted from RICS guidance that arcades, like pubs, hotels and care homes are typically valued by reference to their trading potential. The valuer should, in the absence of special circumstances, calculate the EBITDA of a reasonably competent operator of the property and apply a multiplier based on recent sales of comparable properties. In contrast, turnover is a cruder indication of value – in the Judge’s words, ‘there is no consistent relationship between turnover and profit’. Using the EBITDA method, the court determined that the actual value of Circus Circus and The Golden Nugget at the relevant date was £2.3 million and the actual value of The Flamingo was £1.2 million: in total, £700,000 below Christie’s valuation.

The court considered Christie’s submission that there was a lack of good comparable evidence for EBITDA multiplier purposes but dismissed this.


The court noted that valuation is not a precise art and divergence from the ‘true’ value is not necessarily evidence of negligence, provided the ‘incorrect’ valuation is within an acceptable margin of error. Experts for both parties agreed that, given the scarcity of comparable properties, an acceptable margin of error would be less than 15%.

Christie’s valuation fell wide of the mark. Further, the court decided that Christie had been negligent in failing to appreciate that there was no good reason to perform the valuation on turnover rather than EBITDA. Competent research would have turned up sufficient data to do so, but this was not carried out.

Causation and Loss

The court considered that Barclays had relied on the valuation in lending the sum, and it was reasonable for it to do so. The total cost to purchase The Flamingo and carry out the alterations was £1.8 million. Thurston would not have purchased The Flamingo without making these alterations, but based on LTV there would have been a £253,000 shortfall if the bank had lent against actual value, which Thurston could not have absorbed. The court therefore held it very unlikely that Barclays would have made any loan without the overvaluation.

Contributory Negligence

The court felt that Thurston’s proposals were over-optimistic and this would have been revealed had the bank subjected them further scrutiny. However, the court could not say that no competent bank would have proceeded without more rigorous investigation, given the length of the parties’ relationship and the volume of information Barclays had access to.

Fatal for Barclays was the fact that in 2003 it had advanced £300,000 to Thurston for the purpose of business expansion, which the directors instead used to buy a residential property in Spain. This was known to Barclays, but the court felt that the bank had overlooked Thurston’s lack of integrity and obvious misuse of funds because it could continue making money from the relationship: a “regrettable attitude” which the “court ought not to ignore”. Despite the 25 year relationship between them, the court felt that a reasonably competent bank would have either refused to lend outright or at least carried out a more robust evaluation of Thurston’s situation. Had this latter step been taken, Barclays would in all likelihood have refused the loan.

The court therefore decided that Barclays had fallen below the standard of a reasonably competent bank and had contributed to its loss. The sum it could recover from Christie was reduced by 40% to £613,513.


This case provides useful guidance on methodology for those preparing trading valuations.

The judgment is not quite as grave as it may first appear for lenders, as few will have actual knowledge of a borrower’s prior dishonesty. Where there is such knowledge, however, lending proposals must be carefully scrutinised, regardless of any longstanding relationship or continuing profitability. As Richard Spearman Q.C. noted in his judgment, what would be reasonable without knowledge of dishonesty may not be deemed reasonable with that knowledge, including the scant analysis carried out by Barclays in this instance.