Case No: A3/2014/4201
Neutral Citation Number: [2015] EWCA Civ 1083
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN’S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE BLAIR

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 3/11/2015
Before:

THE RIGHT HONOURABLE LORD JUSTICE LONGMORE
THE RIGHT HONOURABLE LORD JUSTICE LLOYD JONES
and
THE RIGHT HONOURABLE LORD JUSTICE BRIGGS
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Between:

	TITAN EUROPE 2006-3 PLC	Respondent	
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	COLLIERS INTERNATIONAL UK PLC (IN LIQUIDATION)	Appellant	

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Mr Patrick Lawrence QC & Ms Siận Mirchandani (instructed by Reynolds Porter Chamberlain LLP) for the Appellant
Mr Christopher Symons QC & Mr Peter Verneuil Smith (instructed by Rosling King LLP) for the Respondent

Hearing dates: 6th, 7th & 8th October 2015
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Judgment
This is a judgment of the court delivered by Longmore LJ: 
Introduction
1.	This is an appeal in a valuer’s negligence case.  On 15th December 2005 Mr Robert Mayhew of Colliers International UK Plc (the defendants below and respondents here) valued at €135 million a large commercial property on Fürther Strasse in Nuremberg used mainly for warehousing, (but including offices and a department store) and occupied by the then biggest mail-order company in Germany, Quelle Alktiengeschell-Schaft (“Quelle”).  This was at a time of generally rising property values in Germany and elsewhere, well before the fall of Lehmann Brothers and the subsequent financial crisis.  Quelle’s occupation was as leaseholder pursuant to a 15 year lease beginning on 1st January 2001.  At the time of Colliers’ valuation there was thus a further 10 years to run and Colliers assessed the covenant as “very good”; the judge decided that the probability in 2005 was that Quelle would renew but that there was a “real risk” that they would not, a risk which Colliers had not factored into their valuation.  The judge also held that, in the event of non-renewal, it might not be easy to find a new tenant or otherwise dispose of the property.
2.	As from 27th August 2003 Quelle’s landlord was Valbonne Real Estate B.V. (“Valbonne”) who wanted a loan from Credit Suisse on the security of the property.  It was Credit Suisse who instructed Colliers to value the property leased to Quelle and thereafter entered into a facility agreement pursuant to which it advanced €110 million to Valbonne on 29th December 2005.  Credit Suisse instructed Colliers to assume that the passing rent was €9.28 million although it was in fact only €8,589,703.  No complaint is made that Colliers followed that instruction.
3.	This loan was, some 5 months later, sold to Titan Europe 2006-3 Plc (“Titan”) pursuant to a process of securitisation whereby a number of loans were packaged together and a number of “Noteholders” became the ultimate beneficiaries of the loan and the securities supporting those loans.  The process of securitisation is usually understood to be the repackaging of illiquid financial assets or receivables into more liquid tradeable securities.  The detail will have to be examined but in very broad terms the position was that Titan had an obligation to administer the loans and securities which were referred to as commercial mortgage backed securities (or CMBS).  It acquired and held the benefit of charges over the various properties subject to the securitisation and remained the legal and beneficial owner of the rights it had relating to what was called “the Senior Tranche” of the loan.  Once it received sums by way of realisation, Titan was obliged to distribute such sums to the Noteholders pursuant to a “waterfall” provision in the securitisation agreements.
4.	In September 2009 both Valbonne and Quelle became insolvent.  Quelle’s last payment of rent was made in December 2009.  In due course Valbonne’s administrator disposed of the property for €22.5 million by which time this litigation had begun.
5.	Blair J in a judgment now reported at [2015] 2 AER Comm. 479 has held that the true value of the property was €103 million, that Colliers were negligent in making their valuation of €135 million and that Titan were entitled to sue for damages, which have been assessed at €32 million.  Colliers have appealed both the finding of negligence and the decision that Titan was entitled to damages in respect of that negligence.  They say that it was the Noteholders who suffered the loss since it was the value of the Notes that was reduced as a result of their undervaluation and the Noteholders had no recourse to Titan in respect of that loss.  Although the securitisation industry in general is interested in the title to sue question and this question was argued first before us, it is more logical to consider initially the question of negligence since, if there is no claim, title to sue does not generally matter.
(A)	Negligence? (1) The Law
6.	At paragraph 127 of his judgment, Blair J recorded that the legal principles in relation to a valuer’s negligence were not in dispute:-
“(1) As has been said in the case law, the process of valuing real property has strong subjective elements (Capita Alternative Fund Services (Guernsey) Ltd v Drivers Jones [2012] EWCA Civ 1417 at [43], Gross LJ), and this was clear in the present case.  If the valuation is complex, as it was in this case, a number of variables will go into the mix, including market information available about the property, but what emerges is ultimately an opinion as to the market value of the property on the basis on which it was valued.
(2) The competence or otherwise of a valuer cannot be judged as though this is a mechanistic process.  For that reason it has also been said in the case law (ibid) that valuation is an art not a science, though surveyors themselves may describe it more aptly as an art and a science.  In particular, the valuation (or “appraisal” in North American usage) of property applies standards set out by leading professional organisations such as those in the Red Book issued by the RICS (Royal Institution of Chartered Surveyors), and international standards developed by bodies such as the International Valuation Standards Council (IVSC).  It should be noted, however, that there is no one approach to valuation which is universally acceptable, and the Red Book does not comment on which methodology to adopt.
(3) Not every error of judgment amounts to negligence.  In order to establish negligence, a claimant must prove that the disputed valuation was one which no reasonable valuer would have reached and was outside the permissible margin of error (Singer & Friedlander Ltd v John D. Wood & Co [1977] PNLR 40 at p. 4, Watkins J).
(4) The permissible margin of error, or the range within which a reasonably competent valuer could have valued the asset, is often referred to as the bracket.  If the valuation is within the range, then the valuation will not be found to have been negligent even if some aspect of the valuation process can be criticised as having fallen below reasonably competent standards.  In each case, the court must assess what it regards as being the competent valuation and what it regards as being the size of the permissible range.  The assessment of range should not be approached mechanistically, and the court’s findings will depend on the particular facts of the case.  Whatever the range may be, the court must still form a view as to what the correct valuation would have been (i.e. the figure which it considers most likely that a competent valuer would have put forward).  Even if the valuation is outside the range, the professional may escape liability if he can prove that he exercised reasonable skill and care (see Goldstein v Levy Gee [2003] PNLR 35, Lewison J, Dennard v Pricewaterhouse Coopers LLP [2010] EWHC 812 (Ch), Vos J, and Capita Alternative Fund Services (Guernsey) Ltd v Drivers Jonas [2011] EWHC 2336 (Comm) where at [145] the principles in this regard are distilled by Eder J from the authorities).
(5) The question of bracket is ultimately a question of law for the court’s determination assisted by the views of expert valuers as to the degree of difficulty of the valuation under consideration.  The case law suggests that for a standard residential property, the margin of error may be as low as plus or minus 5 per cent; for a valuation of a one-off property, the margin of error will usually be plus or minus 10 per cent; if there are exceptional features of the property in question, the margin of error could be plus or minus 15 per cent, or even higher in an appropriate case (see K/S Lincoln v CB Richard Ellis Hotels Ltd [2010] PNLR 31 (TCC), Coulson J.)”
(2) The Judgment
7.	The trial was complex since the judge was invited to deal with many issues and sub-issues few of which he ultimately held to be decisive.  The expert evidence presented particular difficulty since each of the parties chose to be particularly critical of the competence of the other side’s expert.  Mr Duncan Preston, acting for Titan, was said by Colliers to be unfamiliar with the valuation of properties in Germany and so no weight should be accorded to his evidence; Mr Jonathan Manley, acting for Colliers, was said by Titan to be unacceptably conflicted because he had made a valuation of another German property which was itself not dissimilar to Quelle’s building and this valuation was itself subject to a pending claim for negligence so that he had a reputational interest to defend.  The judge dealt with each of those criticisms in a measured way which, despite the repetition of the criticisms by both Mr Patrick Lawrence QC for Colliers and Mr Christopher Symons QC for Titan in this court, we find impossible to criticise.  He permitted both experts to give evidence some of which the judge found valuable, taking into account the extent to which he held that the criticisms made were legitimate.
8.	The judge’s difficulties with the experts’ evidence did not, however, end there because their expert valuations were a very long way apart.  Mr Preston’s first valuation recorded in Titan’s solicitors’ letter of claim of 6th October 2010 was as low as €61 million; by the time of his report he had come up to €76.6 million.  That produced a net initial yield of 11.38% which Titan accepted was high but was justified by the fact that Quelle’s lease only had 10 years to run and the property would then only be worth its land value.  For this purpose Mr Preston had adopted what he called a “term and reversion” methodology.  In contrast, Mr Manley adopted a “yield and covenant” methodology which apportioned rental income across the various components of the property; this led to a valuation of €125.9 million with a net initial yield of 6.77%.
9.	As far as the permissible margin of error (or the “bracket” as it is frequently called) was concerned, Mr Preston accepted that the property was sufficiently unusual to justify a figure of 15% either side of what a judge would decide to be the “correct” valuation.  Colliers pointed out that the bracket applicable to Mr Preston’s own two figures was itself more than 20% and argued that that was the appropriate margin of error for any valuation for what was accepted by both sides as being a building which was undoubtedly difficult to value.
10.	In the event the judge decided this point in favour of Titan (and Mr Preston) and adopted a bracket of 15%.  That is not challenged on appeal.  When he came to assess the true market value of the property as at December 2005, the judge made the following important findings:-
i)	a valuation below €100 million would not have carried any credibility in the market (para 279(1));
ii)	it was open to a reasonably competent valuer to conclude that it was probable Quelle would stay in the property after the lease had expired but that there was a real risk that it might leave.  He therefore rejected Mr Preston’s term and reversion methodology (para 279(2));
iii)	Mr Manley’s valuation was too high partly because his estimated rental value for the property was too high (although the judge felt unable to make any specific findings as to the ERV (para 205)) but mainly because his yield calculations were “too low by a substantial margin” and he had understated the real difficulties of disposing of the building if Quelle did indeed leave (para 279(3)).  In any event the judge (like Mr Manley) relied on the passing rent for the purpose of making his calculations;
iv)	an appropriate yield to adopt in order to apply it to the net rental income from the property was 8.5%; and
v)	this then led to a valuation of €103 million.
(3) Actual dealings in the property
11.	The judge was aware of the importance of this aspect of the case.  He said:-
“136. A further issue between the parties is as to the significance to be attached to earlier transactions and valuations concerned with the property itself.  This arises in the present case because the valuation of Mr Preston, the claimant’s expert, is out of line with the market evidence as to the value of the property for the period between 2000 and 2005.
137. Market evidence of this kind is likely to be important where the valuer is instructed to express an opinion as to the market value of the property in question.  As Mr Preston wrote in a piece he published in 2010, “It is a brave valuer who concludes that the open market evidence should be set aside because it does not fit with his or her view of that market.  If the market speaks, the valuer should heed the message”.  On the other hand, it cannot be conclusive, since on investigation the careful valuer may conclude for good reason that the market view is not justified.  In any event, there may be, and are in this case, questions as to whether particular features of other valuations or sales of the property mean that they cannot be relied upon as providing proper comparisons.”
No doubt the judge had in mind the observations of Phillips J in Banque Bruxelles v Eagle Star [1995] 2 All E.R. at 789:-
“Valuing a property that has just been sold
Where the sale of a property has just been agreed, it might be thought that there is little scope for the valuer’s art; that the value is demonstrated by the sale price.  But this will only be so if the property has been freely and competently marketed on the open market.  The possibility will always exist that a seller may for one reason or another not have achieved the full market value of his property, or that a buyer may have been prevailed on to agree to pay more that the market value of the property.  For these reasons a bank that is requested to advance money for the purchase of a property on the security of the property to be purchased will normally require a valuation of the property in question.
All the experts were agreed that where a property has just been sold, the sale is potentially the most cogent evidence of the open market value of that property.  Provided that the property was properly exposed to the market and competently marketed, the market price will demonstrate the market value.  The experts were also agreed that the fact that the property has just been sold does not relieve the valuer of the need to consider comparables.  The conclusion that the valuer draws from comparables will be part of the material upon which he bases his valuation.  If the comparables suggest a value that differs significantly from the sale price agreed, the valuer has to consider all the evidence in order to decide why the discrepancy exists.
Mr Terence Knight, the senior partner of Weatherall Green & Smith, was called primarily as a witness of fact in relation to the marketing of Cambridge Circus.  I found him a particularly impressive witness and ventured to ask him about the approach of a valuer where the property to be valued has recently been sold.  He told me that he would regard it as part of his due diligence as a valuer to find out what the purchase price was and to see what the marketing had been.  If he was satisfied that the sale had been an open market sale, with no unusual features, he would base his valuation on this rather than on calculations made from comparables.  He explained that “if there has been a marketing of a particular property and it has been properly marketed, that is the best evidence of value.  It is the value.  It is the best price that was obtained in the market at that particular time on that day”.  He also said that if there was some special feature which explained why the price realised did not represent the open market value, he would refer to that matter expressly in his valuation”
12.	There was evidence of “comparables” but in the end the judge did not find it particularly helpful.  The transactions and valuations of the property itself thus became important.
13.	There were 6 potentially relevant transactions and valuations of the property between 2000 and 2005:-
i)	Quelle was the original owner of the property but in 2000 sold the property to Thesaurus GmbH and then leased it back from Thesaurus.  The sale price was the Deutschmark equivalent of €102,258.000  The 15 year lease began on 1st January 2001 renewable for three further terms at Quelle’s option.  The judge regarded the transaction as significant;
ii)	Thesaurus then sold the property to Valbonne on 27th August 2003 for €91,787,400 (recorded in Valbonne’s books as €95,030,793 which the judge considered to be a better indication of value) but (obviously) below the 2000 price;
iii)	a valuation in September 2003 by a Netherlands firm Weatherall Vastgoed Adviseurs (“Weatherall”) at €114.7 million.  The judge accepted it as part of the overall picture while not giving it undue weight because there was no analysis of the strength of the covenant, comparables, rental value or the tenant’s intended use of the property at the end of what was now an unexpired term;
iv)	a second Weatherall valuation in January 2005 at €125.4 million calculated by capitalising the rent of €9.28 million per annum (the rent which Colliers were required by Credit Suisse to assume) at a gross initial yield 7.4% (or an adjusted yield of 6.98%).  The judge gave this the same weight as the previous valuation;
v)	a further valuation by another Dutch firm Meeùs in March 2005 at €134.5 million to which the judge ascribed less weight than the Weatherall valuations because it was only disclosed shortly before trial and neither expert commented upon it.  He nevertheless said that Colliers was entitled to put it before the court as part of the overall picture; and
vi)	on 1st June 2005 the owners of Valbonne’s shares sold them to Homco Realty Fund which was owned by Hofberg Invest Inc for €127.1 million.  The judge accepted that this was an arms length sale and potentially an indicator of the market value at the relevant time (para 169).  The judge made an “important qualification” to this because the seller had warranted that Quelle would execute a new 15 year lease with a rent of €9.28 million rather than the rent of €8,589,703.  The judge accepted that this transaction was of relevance but said it was necessary to adjust the value to reflect “the fact that the seller warranted that there would be a 15 year lease entered into by Quelle in place of the 10 years remaining on the existing lease and this did not happen” (para 172).  He added that it was significant that the purchaser required an extension of the Quelle term since that underlined the importance to the market value of Quelle’s “position” namely that, although Quelle’s covenant was “good” it had some concerns (para 214) in the light of the risk that Quelle might not renew (although it probably would, see paras 235 and 179(2) already cited above) and the consequent difficulties if it did not renew.
(4) Submissions
14.	In the light of the judge’s acceptance that all these figures, albeit with some qualification, were legitimately part of the overall picture in relation to Colliers’ valuation, Mr Lawrence produced in this court a graph showing the various transactions and valuations in respect of the Quelle property which we reproduce below.  He added Colliers’ own valuation beside them.

15.	Mr Lawrence then pointed to the parties’ agreement that prices were generally rising at the time in a bullish market as reflected in paras 20, 136-7 and 178 of the judgment and submitted that Colliers’ valuation was in line with all the available evidence of the approximately contemporaneous transactions and valuations of the property itself, which were much the most cogent evidence of a true valuation.  He pointed out, further, that there was an inherent inconsistency in the judge saying that on one hand a valuation below €100 million would carry no credibility in the market and on the other fixing on a figure of €103 million as the true valuation when also deciding that a bracket or margin of error of a non-negligent valuation was 15%.  If a valuation of €100 million was the minimum the market would consider credible a true value had to be at least €117.39 million so that the valuation actually given by Colliers of €135 million was within 15% of the true value.
(5) Discussion
16.	We can see no answer to these criticisms of the judgment.  It is, of course, true that all six transactions shown in the graph were subject to some legitimate qualifications but, if six months before the valuation there had been an actual sale at €127.1 million (albeit on somewhat different terms) and the market was still rising it is, to our minds, inconceivable that the “correct” value could be as low as €103 million.
17.	Moreover, during the trial Colliers produced the yield table recorded at para 268 of the judgment, which was not factually in dispute.  These yields are not net initial yields but are adjusted to take into account purchaser’s costs at 6% as Colliers did in their own valuation which the judge accepted (para 268) was a reasonable figure.  

Date	Action	Rent 	Price	Yield –	
Oct -00	Sale	€8,589,756	€102,258,000	7.92%	
Sep-03	Valuation – Weatherall	€8,589,756	€114,700,000	7.06%	
Jan-05	Valuation-Weatherall	€9,280,000	€125,400,000	6.98%	
Mar-05	Valuation-Meeus	€9,280,000	€134,500,000	6.51%	
Nov-05	Desktop – Colliers	€9,280,000	€140,000,000	6.25%	
Dec-05	Report-Colliers	€9,280,000	€135,000,000	6.48%	

It is notable (and perhaps surprising) that the June 2005 sale referred to in para 13(vi) above is missing from this table.  That sale gives an adjusted yield of 6.9% using the same percentage for purchasers’ costs.  
18.	Of course these figures require some adjustment to allow for the fact that by 2005 only a 10 year term remained rather than the 15 year lease contemplated at the time of the sale to Homburg; the mean of the experts’ views was that that could be catered for by an adjustment of 0.5%, which the judge also accepted.  That then gives a further adjusted yield of 7.4% which on a rent of €9.28 million, (which Colliers were instructed to assume) results in a “correct” value of € 118,306,986.  That, as it seems to us, is a more likely value than €103 million.  This figure places Collier’s valuation of €135 million within the 15% bracket.
19.	Mr Symons’ response to these arguments was that the judge was entitled, on all the evidence, to adopt a yield of 8.5% which then leads to the figure of €103 million but, for our part, we cannot see that the judge was so justified.  It is a much higher yield than those given in the table referred to and reaches a figure which is perilously close to the figure of €100 million, the absolute minimum that would have carried any credibility in the market.  It is, moreover, significant that in the calculations that led him to the figure of €103 million, the judge has not even mentioned the June 2005 sale although he had earlier (para 172) accepted that it was relevant.  He seems therefore to have proceeded without regard to what Phillips J called “the most cogent evidence”.
20.	In a note submitted after oral argument had concluded, Mr Symons contended for other (higher) yields on the basis first that the true value at the time of the June 2005 sale was not €127.1 million but €118.1 million because the difference of €9 million was the deposit which was held back pending signature of a new lease.  But the judge was in our view correct to accept (para 169) that the sale was based on a value of the property of €127 million since that value was not conditional on a new lease being signed and the judge accepted that the right probability for Colliers to take into account was that Quelle would renew although that was not certain.  He correctly identified the retention of €9 million as the combined effect of the need to await the warranted new lease with both a longer term and a higher rent, and that since Colliers were instructed to assume the higher rent, no adjustment had to be made for that.  This left, as the judge said, only the need to adjust for the warranted longer term of 15 years (para 172), which he elsewhere decided could be reflected in a 0.5% increase in the yield (para 259(1)).
21.	Mr Symons also submitted that the purchase costs were not 6% but 2.5% because stamp duty in Germany was, as in the United Kingdom, not chargeable on a sale of shares but only on a sale of the property.  But it was agreed between the parties at trial that 6% was the appropriate figure which the judge explained was, in any event, a reasonable figure.  Moreover it was an opinion as to the sale price value of the property itself which Colliers were instructed to provide, and it would therefore be appropriate for stamp duty to be brought into account as part of purchasers’ costs, so as to compare like with like when using a yield.
22.	In the end it does not matter whether the “correct” value is a figure 15% of which is within the minimum credible figure of €100 million or what we believe to be a more realistic valuation of €118.3 million.  Colliers’ valuation is within 15% of both of them and, on the agreed view of the law, Colliers cannot therefore be liable.
23.	We are conscious that the figures fall somewhat narrowly rather than generously into the bracket selected by the judge but they speak for themselves and a narrow success is still a success.  It must also be remembered that the market was a rising market; that is a factor which has not been included in our calculations at all, but would favour Colliers if it was.
24.	If we were reversing the judge on a question of fact we would, of course, be extremely hesitant about doing so.  But none of his basic findings of fact have been challenged by Colliers; it is only his inferential conclusions as to the “correct” value based on his earlier findings that are subject to challenge.  After anxious consideration we have been unable to see any satisfactory answer to Mr Lawrence’s submissions as to the true value of the property.
25.	Mr Lawrence also sought to appeal the judge’s findings on causation and reliance but in the light of our conclusion that the “correct” value was in the region of €118.3 million and that Colliers’ valuation of €135 million cannot therefore be said to be outside the 15% bracket, those arguments need not be addressed in any detail.  For our own part, however, we cannot see that the findings of the judge, who saw and heard the relevant witnesses can, in this respect, be criticised.  It follows therefore, that the appeal will have to be allowed and that anything we say about title to sue will be obiter.  Since the matter was, however, fully argued and since it is probably of more importance to the securitisation industry than the outcome of any one valuation appeal, we think it right to express our views.
(B) Title to Sue
26.	Colliers submit that the judge was wrong to hold that Titan had any cause of action against them or, alternatively, that even if Titan did have a cause of action it had suffered no loss, because the risk of their valuation being negligent had passed to the Noteholders who were therefore the only persons to have suffered loss.  For this purpose it is unfortunately necessary to refer to the securitisation in some detail.  The judge’s account was not seriously challenged and can be quoted:-
“73. Credit Suisse had always intended that the loan to Valbonne would be securitised, though Mr Mayhew suggested that he did not know this until he was asked to issue a “Third Party Consent Letter” dated 25 May 2006 in connection with the securitisation. …
74. The securitisation was a particularly complicated financial transaction.  As the name of the claimant (Titan Europe 2006-3) suggests, it was one of number of securitisations arranged by Credit Suisse during this period.  A member of the group called Credit Suisse Securities (Europe) Ltd (formerly Credit Suisse First Boston (Europe) Ltd) was the arranger and lead manager.
75. On 24 April 2006, Titan was incorporated as a special purchase vehicle in order to act as the issuer of securities in the form of floating rate notes.  Administrative functions were (and are) provided for the company by Wilmington Trust SP Services (Dublin) Ltd, which is a corporate services provider of which Mr Geraghty is managing director.  Colliers submits, and I accept, that it was Credit Suisse’s nominee SPV, and that the work required to put in place the securitisation was done by Credit Suisse.
76. The steps required by Titan to complete the transaction were in outline as follows.  On 2 June 2006, Titan held a board meeting and resolved to participate in the proposed CMBS transaction.  On 5th June 2006, it issued a Note Term Sheet.  On 6 June 2006 a preliminary offering circular was produced.  On 19 June 2006, the directors of Titan approved among other documents a draft offering circular, and a draft Asset Sale Agreement whereby Titan would acquire the loans.
77. The final Offering Circular was issued on 26 June 2006, offering “Commercial Mortgage Backed Floating Rate Notes due 2016” with a total value of €943,750,559.  There were 10 classes of floating rate notes secured against a pool of commercial mortgages relating to 18 properties situated in France, Germany, the Netherlands, Belgium and Luxembourg.  The loan with which this action is concerned represented 10.5% of the pool.  The Notes were to be rated by credit rating agencies from AAA in respect of the classes bearing the lowest interest rates, to BBB or less for the notes bearing the highest interest rates, which also ranked lowest in priority.
78. The securitisation completed on 27 June 2006.  Among the steps that happened that day, Titan purchased the 18 loans which made up the asset base for the securitisation pursuant to an Asset Sale Agreement.  At the same time, Titan received funds from the subscribers of the floating rate notes (which were fully subscribed), and issued the Notes.  The proceeds from the investors were transferred as to €759,475,365 to Credit Suisse International and as to €182,175,855 to Credit Suisse AG to pay for the purchase of the loans forming part of the securitised pool.  The remainder of €28,915,000 was applied towards fees, expenses and reserves.
79. Under the contractual scheme, the loans and securities are administered by Hatfield Philips International Ltd as Titan’s agent.  The loan in respect of the Nürnberg property is administered by Hatfield Philips Deutschland GmbH.  As I understand it, the claimant’s instructions in this case to their legal team essentially come from Hatfield Philips.
80. A Cash Management Agreement (the Cash Manager was ABN Amro Bank NV) dated 27 June 2006 to which Titan and others were party contained in Schedule 5 the Priority of Payments.  Priority has been referred to at trial as the payments “waterfall”.
81. Finally, not all the €110m loan by Credit Suisse to Valbonne was transferred to Titan in the securitisation, but only €99,358,333 which is described as “the Senior Tranche”.  (An explanation was not available at trial as to why the deal was structured in this way, but in closing Titan suggested that it may have had to do with credit ratings.)  An Intercreditor Deed was entered into to regulate priorities between the senior and junior tranches, but nothing turns on it.
…
94. …as part of the Valbonne loan, the security rights in the Nürnberg property became vested in the Security Agent (which was Credit Suisse).  As part of the securitisation arrangements, a Deed of Charge and Assignment dated 27th June 2006 governed by English law was entered into between, amongst others, Titan and the Note Trustee.  There was also a German Loan and Security Assignment of the same date which recites that after execution Titan as issuer owned the loan, and the Security Agent owned the security as trustee for, amongst others, Titan as issuer. …
95. Titan’s case (which was not disputed at trial) is that under English law it remains the legal and beneficial owner of its rights relating to the Senior Tranche.  This is because, whilst it has assigned security rights to the Note Trustee, it says that these are not legal assignments as they concern part of a debt (the whole debt being the whole loan to Valbonne) and no notice has been given to Valbonne.  They were equitable assignments by way of charge only, with no obligation to give notice of the assignment (see clause 3.2 of the Deed of Charge and Assignment). …”
27.	In these circumstances it is not at first sight easy to see why Titan as the legal and beneficial owner of both the securitised loans and the securities cannot sue Colliers to recover any loss resulting from Colliers’ negligence in relation to the valuation.  It may well be that after recovery of that loss, the loss will be treated as a receivable that must be applied in accordance with the provisions of Schedule 5 of the Cash Management Agreement but that is a matter with which Colliers should have no legitimate concern.
28.	In this connection it is important to note that the valuation itself expressly provided:-
“Liability and Publication
We acknowledge that this certificate will be used by Credit Suisse First Boston (CSFB) in evaluating a request for a loan to be secured by the property.  This certificate is addressed to and may be relied upon by:
1.	CSFB (in any and/or all of its capacities), its employees, agents, successors and assigns;
2.	any actual or prospective purchaser, transferee, assignee, or servicer of the loan, any actual or prospective investor (including agent or advisor) in any securities evidencing a beneficial interest in or backed by the loan;
3.	any rating agency actually or prospectively rating any such securities;
4.	any trustee for bond holders holding bonds backed by the loan (“Relevant Securities”).
A copy of this certificate may be disclosed to any rating agency (actually or prospectively) rating and relevant Securities and to any trustees for holders of Relevant Securities provided the entire Report is disclosed together with the letter of instruction.  Prior to this report or a reference to this report being included or quoted in any offering circular or Prospectus, Colliers CRE’s formal written approval/consent, (provided the entire Report is disclosed together with the letter of instruction) or the existence of the report is stated, such consent to be provided to a first request by CSFB and such consent not to be unreasonably withheld to any subsequent request) must first be obtained before disclosure or publication.  For the avoidance of doubt such approval is required whether or not Colliers CRE is referred to by name and whether or not the contents of our Report are combined with others.
Colliers CRE agrees to co-operate in answering questions by any of the above parties in connection with a securitisation or transaction involving the Mortgage Loan and/or such securities, providing the quantity of such questions is reasonable and sufficient prior notice is given.
This report has no other purpose and should not be relied upon for any other purpose or by any other person or entity.”
The Noteholders, Mr Lawrence submitted, had therefore their own right of action and it could not have been intended that Titan should have a cause of action as well.
29.	He relied on the decision of the House of Lords in The Albazero [1977] AC 774 in which it was held that a charterer and seller of goods under a c.i.f. contract who had parted with both property and risk in the goods to the purchaser of the goods was held to be entitled to nominal (rather than substantial) damages in an action against the shipowner for breach of charterparty because the shipowner would otherwise be exposed to the risk of double liability both to the charterer under the charterparty and the purchaser under the terms of the bill of lading.  Lord Diplock said at page 848E:-	
“The complications, anomalies and injustices that might arise from the co-existence in different parties of rights of suit to recover, under separate contracts of carriage which impose different obligations upon the parties to them, a loss which a party to one of those contracts alone has sustained, supply compelling reasons why the rule in Dunlop v Lambert 6 Cl. & F. 600 should not be extended to cases where there are two contracts with the carrier covering the same carriage and under one of them there is privity of contract between the person who actually sustains the loss and the carrier by whose breach of that contract it was caused.”
30.	We are unable to accept Mr Lawrence’s submissions.  It is a commonplace truism of property law that the owner of property has rights of suit for substantial damages in respect of any actionable negligence, see e.g. The Sanix Ace [1987] 1 Lloyds Rep. 465.  In our judgment the same applies to rights of suit in relation to loans and the securities underlying them.  The choses in action owned by Titan in this respect are just as much property as any other sort of property and Titan’s title to those choses in action entitles it to sue for substantial damages if it has a cause of action at all.  It clearly would have had such a cause of action against Colliers (if Colliers had been negligent) since Colliers expressly assumed responsibility to Titan as the “purchaser or transferee” of the loan pursuant to the “Liability and Publication” section of their valuation report.
31.	Much time was taken up both at the trial and in this court by counsel’s submissions on the question whether the Noteholders had a cause of action so that Colliers might be exposed in theory to a possible action by a Noteholder as well as to the action by Titan.  (We say in theory because no Noteholder has sought to sue and it is difficult to see how any action brought now would not be time-barred).  There would be other difficulties in any such action since the Notes were secured against a pool of mortgages on 18 separate properties and it would not be obvious what interest any particular Noteholder would have in the Quelle property.  The judge recorded what he called Mr Lawrence’s diplomatic observation that he did “… not submit that the exercise would be free of forensic complication”.
32.	But in our view that enquiry is irrelevant because Titan owned both the loans and the securities.  The case is therefore different from the Albazero in which the claimant charterer had parted not merely with the risk in the goods but also with the property.  In this case Titan may well have parted with the risk but it had retained the property in the loans and the securities and therefore, in our view, has title to sue Colliers for their negligence if any.
33.	Since Colliers expressly assumed responsibility to “any actual or prospective investor” in the Liability and Publication section of their report, we would be reluctant to say that a Noteholder could never bring an action but, since the Noteholders stand in much the same relation to Titan as a shareholder stands in relation to a company whose shares he owns, any such action by a Noteholder might well be met with the assertion that his loss was reflective of Titan’s loss and thus be defeated by the doctrine of reflective loss as exemplified by Johnson v Gore Brown [2002] 2 A.C. 1.  Gardner v Parker [2005] BCC 46, to which Mr Lawrence very properly drew our attention, makes it clear that the reflective loss principle is by no means confined in its effect to shareholders.
34.	Mr Lawrence then submitted that even if Titan had a theoretical right to sue, it had suffered no loss because it laid off the risk of Colliers’ negligence to the Noteholders who had no recourse to Titan.
35.	The same argument was put to Thomas J as he then was in Interallianz Finanz A.G. v Independent Insurance Co Ltd dated 30th May 1997.  That was not a case of securitisation but of sub-participation (with only limited recourse) in the loan on the part of other “lenders” after draw down had occurred.  The judge held that the original (and continuing) lender was entitled to recover damages from a negligent surveyor.  He described the arrangement by saying:-
“The effect of the sub-participation agreement was to leave Interallianz as the only party making the loan to [the borrower] and the only party having any contractual relationship with [the borrower]; the sub-participators had no direct interest in the mortgage and were not lenders to [the borrowers].”
Apart from the fact that the valuers probably owed no duty of care to the sub-participators, this arrangement was similar to that in the present case.  It was different from a case of a syndicated loan where the participants would normally have a contractual relationship with the borrower as was the case in the Banque Bruxelles case.
36.	Interallianz submitted that they had suffered the relevant loss and that the sub-participation agreements were res inter alios acta.  The judge agreed relying on British Westinghouse v Underground Railway [1912] AC 673 which held that subsequent transactions, if they were to be taken into account, had to arise “out of the consequences of the breach and in the ordinary course of business”.  He said (page 73):-
“Taking into account the important consideration that the sub-participation agreements were made at a time when Interallianz had no knowledge of Allsop’s breach or of any damage flowing from it and thus did not arise out of the breach of duty or the loss but were wholly independent of it, I do not consider that the sub-participation agreements should be brought into account to reduce the damages that Allsop would otherwise have to pay.  The sole relationship Allsop had was with Interallianz and the sole relationship that [the borrower] had was with Interallianz.  They in fact obtained security for their loan to [the borrower] of a value less than they had been told by Allsop; they suffered that loss on draw down.  The fact that they entered into independent arrangements with others which has the consequences that loans to them by the sub-participates do not have to be repaid is a matter that is in my judgment collateral and does not have to be brought into account.  There is nothing unjust or unreasonable in that conclusion.”
37.	We would respectfully approve this decision, although on the facts of the present case we would, as we have said, put primary emphasis on the fact that Titan were the owners of the loan and of the securities.  That of itself gave Titan not only its right to sue but also the right to recover substantial damages.
38.	It is, moreover, not correct to say that Titan suffered no loss.  It suffered a loss when it acquired the loans and the securities including (on this hypothesis) the over-valued property in Fürther Strasse.  The price it paid for the loans was too high.  Titan's relationship with the Noteholders is analogous to that of a company with its shareholders; no one suggests that, because the shareholders may be the ultimate losers in a case of this kind, the company has not suffered a loss.
Conclusion
39.	If therefore Colliers had been negligent and provided a valuation outside the 15% bracket we would have held, like the judge, that Titan could recover the difference between their valuation and the “correct” value whatever that was.  As it is, however, this appeal must be allowed and judgment entered for Colliers on Titan’s claim.