A house described as unsaleable, an expert valuation of £817,000 and a £225,000 settlement. There was one rather substantial difficulty: the house had been sold for £780,000 before the settlement was agreed.

In Thames Water Utilities Limited v Karen Imber, the High Court considered a claim arising from sewage flooding. An expert had valued the property on the hypothetical basis that it had never flooded, but considered that its history meant there was unlikely to be a willing buyer.

The factual basis had changed

The homeowner’s mediation statement described the property as unsaleable and claimed its full hypothetical value as diminution in value. The mediation did not settle the dispute. Negotiations continued, the sale completed, and a settlement was subsequently concluded for £180,000 plus £45,000 in costs. Thames Water was not told about the sale before concluding the agreement.

The court granted summary judgment on the fraudulent misrepresentation claim, rescinded the settlement and required repayment of the settlement sum. The application focused on the failure to correct the earlier representation after the completed sale.

Settlement does not freeze the facts

The practical point extends beyond property valuation. Negotiations often continue for weeks or months after a position statement or expert report has been exchanged. During that period, the facts on which a claim is advanced may change considerably.

A position statement is not simply a historical document to be put away once the mediation ends. Those responsible for advancing the claim should consider whether an earlier statement continues to convey a factual position which subsequent events have overtaken.

What experts should take from the case

For experts, the useful discipline is to make assumptions explicit and to distinguish a hypothetical valuation from evidence of what has actually happened in the market. When new transaction evidence becomes available, its significance needs to be considered rather than allowing an earlier opinion to continue in isolation.

That does not mean this judgment establishes misconduct by the valuation expert. The finding concerned the homeowner’s failure to correct the representation. The broader lesson for experts and instructing teams is to keep the evidential basis of negotiations under review and communicate material developments to the appropriate people.

A report may have been prepared carefully, yet the use subsequently made of it can become misleading. Accuracy during settlement negotiations requires attention to the current facts as well as the original wording.

Read the judgment.