Titan Europe 2006-3 Plc v Colliers International UK Plc ((in Liquidation))
| Jurisdiction | England & Wales |
| Judge | Mr Justice Blair |
| Judgment Date | 30 September 2014 |
| Neutral Citation | [2014] EWHC 3106 (Comm) |
| Docket Number | Case No: 2012 folio 860 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 30 September 2014 |
[2014] EWHC 3106 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Blair
Case No: 2012 folio 860
Christopher Symons QC and Peter de Verneuil Smith (instructed by Rosling King LLP) for the Claimant
Patrick Lawrence QC and Siân Mirchandani (instructed by Reynolds Porter Chamberlain LLP) for the Defendant
Hearing dates: 9 to 18, 29 and 30 July 2014
Approved Judgment
| 1. Introduction | para. 1 |
| 2. The proceedings | 5 |
| The expert evidence | 9 |
| 3. The facts | 26 |
| The securitisation | 73 |
| The loan goes into default | 82 |
| The notice of 18 July 2014 from the Note Trustee | 85 |
| 4. Colliers' contention that Titan as issuer of the securities is the wrong claimant | 86 |
| The parties' contentions | 86 |
| Discussion and conclusion | 93 |
| (1) The correct claimants to bring the claim under the contractual scheme of the securitisation | 93 |
| (2) Colliers case that the Noteholders were the correct claimants to bring the claim | 99 |
| (3) The applicable legal principles | 105 |
| (4) Did Titan suffer any loss? | 115 |
| (5) The Albazero point | 126 |
| 5. Whether or not Colliers' valuation of the property was negligent | 127 |
| Legal principles | 127 |
| Valuation issues: overview | 138 |
| Sales and valuations of the property between 2000 and 2005 | 148 |
| (1) 26 October 2000: sale and leaseback: €102m | 149 |
| (2) 27 August 2003 sale at €91m | 152 |
| (3) September 2003 Weatherall valuation at €114m | 155 |
| (4) January 2005 Weatherall valuation at €125m | 160 |
| (5) 5 March 2005 Meeùs valuation at €134m | 163 |
| (6) 1 June 2005 sale of shares in Valbonne at a stated value of €127m | 166 |
| Discussion and conclusion as regards sales and valuations of the property | 174 |
| 6. Valuation issues raised by the parties: | 178 |
| (1) Investment market 2004-5 | 178 |
| (2) Classification of the property | 181 |
| (3) Refurbished offices | 183 |
| (4) Petrol station and carwash | 188 |
| (5) Potential for land development | 189 |
| (6) Estimated rental value | 192 |
| (7) Quelle's covenant | 206 |
| (8) Obsolescence | 215 |
| (9) Monumental protection/planning | 222 |
| (10) Valuation methodology | 226 |
| (11) Reversion to vacant possession/the perpetuity assumption | 227 |
| (12) Ability to re-let upon Quelle vacating | 236 |
| (13) Conversion issues | 246 |
| (14) Property valuations | 253 |
| (15) Property sales | 254 |
| (16) Comparables | 255 |
| (17) Retail potential | 263 |
| (18) Yield | 264 |
| (19) Acquisition costs | 277 |
| (20) Vacant possession value | 278 |
| (21) True market value | 279 |
| (22) Bracket | 286 |
| 7. Findings as to negligence | 287 |
| 8. Causation | 289 |
| 9. Reliance | 300 |
| 10. Loss | 304 |
| 11. Interest | 305 |
| 12. Overall conclusion | 306 |
Introduction
This is a claim by Titan Europe 2006-3 plc, an Irish company, against Colliers International UK plc ("Colliers"), an English company which went into liquidation on 28 March 2012. At the relevant time, Colliers was part of a global real estate services organisation whose expertise included the valuation of commercial properties. The proceedings are a claim for professional negligence in which Titan claims that it relied upon an overvaluation given by Colliers on 15 December 2005 of a commercial property in Nürnberg (Nuremberg), Germany. Titan seeks judgment for €58,400,000, being the difference between the Colliers' valuation of the property at €135m and what Titan says was its true market value at €76.6m.
Although the Nürnberg property was security for a loan, the loan was not made by Titan. It was made by Credit Suisse and transferred to Titan as part of a securitisation in respect of which Credit Suisse was arranger and lead-manager. Titan is a special purpose vehicle incorporated as the issuer of the securities, which are called commercial mortgage backed securities (or CMBS). Essentially, the securitisation transaction packaged into transferable securities eighteen loans in all together with the security for the loans which was in the form of mortgages over commercial property in Europe. The securities were issued by Titan on 27 June 2006 to a value of just short of a billion euros, and the subscription by investors in the securities funded the acquisition of the loans by Titan from Credit Suisse. The market for such securities dried up in the wake of the 2007-8 financial crisis, but the principal cause of the present litigation is the insolvency of the tenant of the Nürnberg property in 2009. The property is currently in the process of being sold for about €22.5m, which is far below the valuation.
This case is concerned therefore with only one of the loans that was securitised, namely the loan secured on the Nürnberg property, and concerned specifically with the allegedly negligent valuation of that property by Colliers. There are two main questions for decision. The first is Colliers' contention that Titan as issuer of the securities is the wrong claimant on the basis that it has not suffered any loss. Colliers contends that it is the holders of the securities who sustained the loss, and who relied directly or indirectly on the valuation, and who could have sued the allegedly negligent valuer, but have not done so. This question is potentially capable of arising in respect of other securities issues, including some concerning CMBS which I understand are presently in course of litigation. However, I state at the outset that the answer to the question will depend upon the structure of the particular transaction, and the court has to answer it on the facts of the particular transaction and the contentions of the parties.
The second question does not raise any particular legal disputes, but is a complex one on the facts, namely whether or not the valuation of the property was negligent. This is disputed by Colliers, and potentially raises a causation issue should the court decide that the value fell between the opinions expressed by the parties' respective experts.
The proceedings
These proceedings were begun on 26 June 2012 when the Claim Form was issued. Companies within the Credit Suisse Group were instrumental in the loan and valuation underlying the claim, but are not parties to the litigation. Colliers has however obtained documents from Credit Suisse, both voluntarily, and pursuant to an order I made pursuant to an application by Colliers the day before trial. Colliers says that Credit Suisse has not been particularly helpful in providing documents, and there may be force in this. I should make it clear that the defendants' legal advisers did everything in their power to obtain what they felt were relevant documents. However, I believe that all documents volunteered or ordered to be disclosed were produced by the end of trial.
Factual witness evidence was given for Titan by Mr Alan Geraghty, a director of Titan, Mr Stephen Yankauer (by video link with New York), a senior Credit Risk Manager within the Credit Suisse Group's real estate finance and securitisation business, and Ms Katja Lennig, who is a Vice-President of Hatfield Philips Deutschland GmbH, and responsible for the day-to-day management of the loan which was securitised.
For Colliers, the factual witnesses were Mr Robert Mayhew, the valuer employed at the time by Colliers who valued the property, and Mr Nicholas Harris, also a valuer employed at the time by Colliers, who assisted Mr Mayhew. Titan described Mr Mayhew as an evasive and argumentative witness, but I reject this criticism. He gave his evidence in a professional manner, and in the light of the findings I am obliged to make in this judgment, I record that it is common ground between the parties that the property in question was particularly difficult to value.
As well as written submissions, junior counsel for Titan prepared a document summarising the facts and legal terms of the securitisation on which junior counsel for Colliers commented, and junior counsel for Colliers prepared a document analysing the expert valuation evidence on which junior counsel for Titan commented, and I express my appreciation in that regard. Finally, the court was not asked to make findings on quantum issues, the principles under SAAMCO (see below) being common ground.
The expert evidence
The court received expert evidence from Ms Solveig Loretz for Titan, and Mr John Deacon for Colliers. Both have extensive experience in the field, though in the event there are few differences between them which it is necessary to resolve. There was also written evidence of German law, but I was not taken to it by either side during the trial, and so far as any issues arise, I am not asked to resolve them.
The position as regards the valuation evidence is different, and each side raises fundamental objections as regards the other side's expert witness. These were Mr Duncan Preston, for Titan, and Mr Jonathan Manley, for Colliers. Both are valuers currently in practice.
Colliers submits that since Mr Preston has no experience of valuing property in Germany, Titan has not adduced any evidence from the valuer with appropriate expertise. Titan submits that Mr Manley has a conflict of interest, since his valuation of another commercial property in Germany is the subject of a...
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Quelle horreur!
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