High Court Test Case Ruling a Crucial Precedent in Commercial Mortgage-Backed Securities Market

LONDON, September 30, 2014 /PRNewswire/ --

The High Court in London today issued a judgment against Colliers International (UK) plc over its negligent valuation of a commercial property in a test case that will have major implications for the commercial mortgage-backed securities (CMBS) market.  

Rosling King LLP were legal advisers in the case brought by Titan Europe 2006-3 plc against Colliers following its valuation of a commercial property in Germany. The building lost nearly 90% of its stated value when the occupants, German mail order company Quelle, became insolvent and vacated the property.

Colliers valued the property in December 2005 at €135m. Given the valuation, Credit Suisse advanced a loan of €110m, the bulk of which was subsequently securitised and transferred to Titan, the Issuer, in a securitisation of circa €1bn. The case was progressed by Hatfield Philips International, the special servicer of the loan.

In his judgment Blair J. concluded that the true value of the property as at December 2005 was €103m.  Colliers had therefore negligently overvalued the property by €32m and this is the figure that Colliers are required to pay to Titan, together with interest and costs. Rosling King's barristers were Christopher Symons QC and Peter De Verneuil Smith, both of 3 Verulam Buildings.

Rosling King partner James Walton, who advised Hatfield Philips throughout the case, said: "This was an extremely complex case that has taken five years to resolve and this landmark judgment has wide implications for other issuers and special servicers in the CMBS market; the decision will probably result in the pursuit of other claims.

"The case hinged on two key issues - firstly did Colliers negligently overvalue the property and secondly had Titan suffered a loss so as to entitle it to pursue a claim against Colliers? Mr. Justice Blair ruled in favour of Titan on both counts.

"This is the first time that a UK Court has been faced with a claim brought against a negligent property valuer where the loan advanced by the original lender has been securitised. As a result of this judgment it is very likely we will see a greater appetite to recover losses suffered during the collapse of the commercial property market across Europe during the recession. There is a perception that these claims may now be time-barred but that perception is wrong.

 "Our strategy was to inform the court as thoroughly as possible on real estate valuation methodology and the many variables that lie within that. By doing that the Judge was armed with all the necessary information and a 'valuation toolkit' which enabled him to reach his own measured conclusion as to valuation. This strategy has paid off in spades."

Blair Lewis, Chief Executive Officer of Hatfield Philips said "We are very pleased with the ruling, not just because of the positive impact it will have for the noteholders of Titan 2006-3 directly, but also for the precedent it sets for other claims of this nature.  Hatfield Philips is proud to have once again demonstrated its commitment to pursuing all possible avenues available to recover monies due to our clients.  We couldn't be happier with the work done by Rosling King and 3 Verulam Buildings in achieving this successful outcome."

Notes to editors

About Rosling King LLP 

Rosling King is a UK-based legal firm specialising in the needs of banks, financial institutions, corporations and the property market. http://roslingking.com/