Valuation: negligent or not unreasonable?

An interesting valuation case has just been concluded: Coleridge v Sotheby's [2012] EWHC 370 (Ch).

It concerns the Coleridge Collar.  That is a gold chain of office that was worn by the judge Lord Coleridge while he was Chief Justice of Common Pleas until 1880, when the post was abolished.  Historically, the chain had been passed from officeholder to officeholder for a nominal sum and so was always owned by the holder.  With no one to pass it on to, Lord Coleridge kept it.  It remained in the family, until it passed to the current Lord Coleridge.  In November 2006, he sold it privately for £35,000, on the basis of a valuation from Sotheby's of £25,000-35,000.  Two years later, the purchasers sold the collar at auction at Christie's for £260,000.  (report)

The main area of difference between the opinion of the appraiser at Sotheby's and the catalogue preparer at Christie's was about the age of the collar.  Sotheby's concluded that it was made in the late seventeenth century, whereas Christie's believed that it dated from the mid-sixteenth century.  Inevitably, Lord Coleridge argued that Christie's were right, but on balance the judge sided with Sotheby's on the point.  Even so, Sotheby's valuation looked remarkably low.

There is a lot of interesting history set out in the judgment about chains of office and their manufacture, and it was clearly an unusual item.  The only comparable is known as the Gilbert Collar, which was sold privately by a retailer for £300,000 in 1996.  That was unknown to Sotheby's and it only emerged because it happened to be known by one of the experts in the case.  In any event there were differences and a retailer would sell an item of this sort for very much more than might be paid at auction or by private treaty.

The claim was for "professional negligence", and the test to be applied by the court was whether no reasonable appraiser in the position of Sotheby's could have arrived at the valuation it gave.  The judge held that he could not conclude that.  So Sotheby's won on the main issue.  However, it was held that the valuation, which was given as an auction value, should have been scaled up for a private sale, by doubling the lower end of the range, so it should have been £50,000, rather than £25,000-35,000, making Sotheby's liable for £15,000.

The case illustrates that a valuer can produce a valuation that, in light of a subsequent sale, seems very wide of the mark, and yet not be liable.  These sort of claims require deeper investigation and, if enough uncertainty can be shown, it is hard for the court to conclude that no reasonable valuer (and there are some pessimistic ones out there) would have reached the same conclusion.

I'm grateful to Sotheby's counsel Richard Edwards for alerting me to the judgment.