The claim concerned a failed investment in a factory shopping outlet (FCO), which was to be developed at the Chatham Historic Dockyard, Medway in Kent. Capita was trustee of The Matrix Chatham Maritime Trust, which was an investment vehicle established to enable 480 individual investors to invest in Dockside. The claimants retained the defendant chartered surveyors and property consultants, Drivers Jonas, DJ, to advise them on the acquisition of the site. DJ gave the claimants positive advice about the commercial prospects for the development and valued Dockside in the sum of £62,850,000 (with the benefit of Enterprise Zone tax allowances) and £48,150,000 (without the benefit of Enterprise Zone tax allowances). The claimants alleged that, relying upon this when Capita acquired a long leasehold interest in Dockside. DJ received fees totalling in excess of £500,000 for their work on the project, of which nearly £400,000 was, according to the Defendants’ invoice, for “investment and valuation advice”. The claimants said that DJ substantially overstated the commercial prospects and overvalued the Dockside.
The claimants said that DJ’s failure to make a competent assessment of the likely level of turnover rents that Dockside might achieve led them to overstating substantially the rent, value and commercial prospects of Dockside. In addition, the claimants maintained that DJ made a series of failures relating to their assessment of the attractiveness of the location and design of Dockside and as to the competence and experience of the Developer to be able to operate Dockside successfully. According to the claimants, these failings demonstrated that DJ did not possess the necessary expertise to advise on Dockside and this lack of expertise led them to make fundamental errors in their approach to valuing and assessing the commercial prospects of Dockside which ultimately led to their advice to the claimants being woefully inadequate.
Capita claimed damages for breach of duty in relation to all of the losses they have suffered as a result of entering into the transaction. They calculated these on the basis of the difference between the price paid for Dockside (£62,850,000) together with interest at base rate plus 1% from 5 April 2001 to date and the expenses and losses incurred in operating Dockside to date, and any profits earned from Dockside to date and its current market value. They pleaded that this was no more than £9,650,000 and in fact most recently valued at £7,200,000. Alternatively, they claimed damages based on the difference between the price paid for Dockside and its true value as at April 2001 (either including or excluding the benefit of Enterprise Zone tax allowances). Matrix also claimed an indemnity in respect of potential claims by investors.
The starting point is to consider what terms both as to what DJ would do and as to the contractual relationship between Capita and DJ were expressly agreed between Mr. Randall, a director of Matrix, and Mr. Blake for DJ. Based on the evidence and content of the report provided by DJ, the judge found that all the pleaded terms of the retainer were established. DJ had referred to themselves as the “Trust’s Surveyor” in the report, and it was clear from the content that they were providing advice to the proposed purchaser. DJ described their services as including “acquisition advice”. Given that the Trust and not Matrix acquired Dockside this further indicated that the retainer was with Capita as well as Matrix. It was clearly agreed that Capita would be entitled to rely on DJ’s advice. So, for example, the Draft Short Form Valuation Report provided at paragraph 1.2 that it had been prepared by the Defendants “for the benefit of, [the Trust] (the Investor)”.What DJ did, or purported to do made plain what they were retained to do. The claimants were correct about the scope of the retainer and the scope of DJ’s duty.
The court concluded that DJ did owe the claimants a duty of care in tort. DJ had provided their advice to the claimants and not the investors. In providing that advice, DJ had made it clear that they would not accept responsibility to anyone else. DJ’s advice had provided in respect of the acquisition of Dockside and that acquisition was completed by Capita, and not by anyone else.
STANDARD OF CARE AND BREACH
It was common ground that the relevant duty was to exercise reasonable care and skill in all work carried out, but not every error would amount to a breach of duty. In order to succeed, the claimants had to show that the advice and/or valuations provided by the DJ were such that an ordinarily competent valuer and commercial investment adviser could not have provided them exercising reasonable skill and care. The standard of care expected was properly defined as: “that degree of skill and care which is ordinarily exercised by reasonably competent members of the profession”. That standard would not be relaxed for a valuer or adviser with limited experience of, for example, a certain type of property or a certain type of task. If a professional holds itself out as having a particular skill, it is to be judged by the standards of people holding that skill.
In the present case, DJ was a firm of chartered surveyors and property consultants offering a range of consultancy services including commercial property investment and valuation advice. As a minimum, by agreeing to act as they did, they held themselves out as being competent to perform the appraisal, assessment and valuation of an undeveloped FOC for EZPUT purposes. Thus, their work fell to be judged by reference to an ordinarily competent valuer and commercial investment adviser competent to advise on EZPUTs and FOCs (“ordinarily competent valuer and commercial investment adviser”).
CAUSATION
The claimants submitted that they had relied upon DJ’s advice, valuations, due diligence and/or negotiations, and that such reliance caused loss and damage. The judge accepted that the claimants need not show that DJ’s advice was the only matter relied on in determining to acquire Dockside; it would suffice if the advice played “a real and substantial, though not by itself a decisive part, in inducing” the claimants to act as they did: see JEB Fasteners v Mark Bloom, [1983] 1 All ER 582. DJ argued that Capita had no locus to bring the claim. The judge found that this argument relied upon a flawed construction of the relevant contractual arrangements and was rejected.
It was important to bear in mind that DJ had already provided their essential advice and valuation prior to delivery of their draft report on 4 April 2001; and that the claimants had plainly relied on that earlier advice. The Draft Report did not arrive out of the blue. It was in nature confirmatory of the advice that had already been given by them. The judge was satisfied that had Capita and Matrix received advice at any point prior to completion that the open market value of dockside was materially less than £48,150,000 and in particular was (as I have concluded) £34,375,000, then Capita and Matrix would not have proceeded with the transaction.
Capita Alternative Fund Services (Guernsey) Ltd. And Matrix Securities Ltd. V Drivers Jonas (A Firm)
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