On 8 November the Court of Appeal handed down its decision in Capita Alternative Fund Services (Guernsey) Limited and Another v Drivers Jonas (a firm) (2012).  The case, which concerned the negligent valuation of a factory outlet centre development within an Enterprise Zone, is one of the first significant professional negligence cases to come to court since the beginning of the financial crisis.

First instance decision 

At first instance the judge rejected the claimant investors’ argument that they should recover all losses suffered as a result of purchasing the development, instead awarding damages of £18.05 million on a diminution in value basis.  In reaching that figure, the judge relied on the evidence of the claimants’ expert.  On appeal, the valuer’s key arguments were as follows:

  1. that the expert’s evidence had been based on the “discredited” evidence of another expert and that accordingly the judge had had no proper basis for his conclusion as to the valuation that would  have been given by a competent valuer; and
  2. that the judge had been wrong as a matter of law in not giving credit for the tax benefits which had been received by the investors as a result of the purchase.

Court of Appeal decision

The judgment of the Court of Appeal in relation to the first argument is of significance to those involved in professional negligence valuation claims where expert evidence is a prerequisite. 

The majority of the Court of Appeal found that the judge at first instance had been entitled to rely on the evidence of the claimants’ expert when calculating the “true value” of the development.  Although the expert had, in part, relied on the discredited evidence of another expert, it was held that his evidence had not been damaged to such an extent that no foundation remained upon which the judge could reasonably and rationally base his conclusion.  The Court of Appeal emphasised that whilst a judge must have a reasoned or rational basis for a decision, he is not confined to the figures contended for by the experts, particularly in valuation claims, where the figure arrived at by a judge may fall somewhere between two figures proposed by opposing experts. Indeed, a judge will sometimes find himself “needing to do the best he can”.

Dissenting judgment

In his dissenting judgment, however, Lord Justice Lloyd would have allowed the valuer’s appeal, finding that the claimants had not proved their loss, and as such they were entitled to no more than nominal damages in contract and nothing in tort.  Lord Justice Lloyd commented that:

“It is not for the court to embark on what could be no more than guesswork to make good the failure of the Claimants’ attempt to adduce evidence on which the court could rely in order to prove the amount of their loss”.

The claimants’ expert had relied entirely on the discredited evidence of the other expert.  Consequently, in the view of Lord Justice Lloyd, there was no legitimate basis for the judge to arrive at a conclusion that the valuation of the claimants’ expert was correct.


Whilst the reasoning of Lord Justice Lloyd is highly persuasive and it is to be hoped that a further appeal to the Supreme Court will be pursued, it would be wholly understandable if the valuer’s insurers cut their losses and settle for the reduced sum identified by the Court of Appeal (which gives credit for the tax benefits received by the investors – see below).

On the tax benefits issue, the Court of Appeal agreed unanimously that, within the specific context of investments in Enterprise Zones, the tax considerations were integral to the investment and it would be unreal to leave tax considerations wholly out of account in determining the losses suffered by the investors.  Accordingly, the damages awarded to the claimant were reduced from £18.05m to £11.86m.  This judgment will be of significance to property unit trusts and other structured investment vehicles, where the beneficial investors are intentionally kept separate from the acquisition vehicle (i.e. the buyer/investor company) itself.

For further comment on this second argument, please see our Law Now.

Further reading: Capita Alternative Fund Services (Guernsey) Limited and Another v Drivers Jonas (a firm) [2012] EWCA Civ 1417