Estate agent 'negligent' in valuing property, court hears
An estate agency was "grossly negligent" in valuing a south Belfast mansion at £5m after the property market had peaked, a court has heard.
In 2009, Aurora Leasing lent the homeowner, Paul Campbell, around £1m on the strength of the valuation.
When he defaulted there was so little equity in the house that Aurora was unable to get any of its money back.
Aurora is suing the Belfast office of Colliers claiming it failed to provide a proper valuation.
The case in Belfast High Court centres on Terrace Hill House, a five bedroom house at Shaws Bridge in south Belfast.
It is owned by Mr Campbell who, in 2008, wanted to borrow money to fund a firm called Rippingham Bristow that was set up to deal in modern Irish art.
He was introduced to London-based finance firm Aurora Leasing by a financial adviser and the company agreed to lend him £901,000, plus interest payments of £378,000.
At that time Mr Campbell's net worth was estimated at £18m and his businesses included the now defunct sportswear brand Gaelic Gear.
Aurora agreed to lend the money on the condition that Terrace Hill House would act as security.
In January 2008, Colliers valued the house at £4.5m, revising that up to £5m in August 2008.
In early 2009, Aurora became concerned after seeing negative reports about the Northern Ireland property market and asked Colliers to confirm the valuation.
Shortly before Aurora agreed to release the money, in May 2009, Colliers confirmed the value was still £5m, explaining that various planning consents had offset any potential fall in value.
Terrace Hill House already had a £2m mortgage with Bank of Scotland that gave it first call over the property.
However Aurora's barrister, Nicholas Hanna QC, said his clients drew comfort from the £3m of equity that was still available, based on the Colliers valuation.
Mr Campbell made only two payments before defaulting and when Aurora got a new valuation in December 2009, the house was worth at most £2.5m.
In October 2010, Aurora won a judgment for almost £1.3m but by then there was not enough equity in the house for them to enforce the judgement.
Aurora are now seeking to recover some of that money from Colliers with Mr Hanna QC saying their valuation had been "indefensibly high."
Aurora's expert witness, the estate agent Beth Robinson, told the court that in her opinion the house was only worth £3m in January 2008 and by May 2009 would have fetched just £1.8m.
She said that from Easter 2008 it was "like someone had switched the lights off" in the Northern Ireland property market.
Colliers expert witness, the estate agent Gerry O'Connor, said that Terrace Hill House was a "special property" that would have been "immune" from the fall in the market in 2008.
He cited a large refurbished stable block, which he said was unique for that part of Belfast and would be "very attractive to the horsey set".
However he gave a valuation of just £3.75m and said Colliers "might have to admit they erred" although he emphasised that valuation was always a matter of opinion.
Briefly outlining Colliers case, Gerry Simpson QC said he would explain how the planning consents had added significantly to the property's value and that he would also cite contributory negligence by Aurora due to their failure to do proper due diligence checks.
The case resumes on Monday.