Titan Europe v Colliers International

Posted on 28/08/2015 · Posted in Expert Witness, Financial Litigation, Investment, Structured Products

Titan Europe was a Special Purpose Vehicle (‘SPV‘) issuer of a Commercial Mortgage Backed Security (‘CMBS‘) conduit securitisation. It had a portfolio of secured property loans which had been assigned to it by investment banks, in this case, Credit Suisse. The loan in question, secured on a commercial property in Nuremberg, had been advanced by the bank on the basis of a valuation by the Defendant, Colliers International. They had valued it at €135m and Credit Suisse had advanced a loan of €110m to the freeholder of the property (Valbonne) in December 2005.

Where large sums of money are concerned, it is advisable to trust nobody. .”
Agatha Christie

In June 2009 Valbonne defaulted and the security was enforced by the special server, and soon after the property was valued at the enormously low value of €12.47m. In September 2013 the insolvency administrator for Valbonne agreed to sell the property for €22.5m, some quarter of the loan advanced by Titan four years before. Titan sought to recover the difference between Colliers’ 2005 valuation of the property at €135m and what Titan argued was the true market value at that time of €76.6m ie €58.4m.

The 2 main questions facing the Court were:

  1. Was the Colliers valuation of the property negligent?
  2. Was Titan, as issuer of the CMBS, the correct claimant? And, if so, had Titan suffered any loss as a result of the alleged negligent overvaluation of the property?

Expert valuation evidence at the court showed that the value of the property in 2005 should have been €103m rather than the Colliers valuation of €135m. Allowing for a 15% bracket, this meant that the Colliers valuation was 28% higher than it should have been, and the Judge held that they had therefore been negligent.

With regard to whether Titan was the correct claimant in the case the Judge considered two main arguments put forward by Colliers. First, that the securitisation had been structured in such a way that the noteholders, rather than Titan, were the parties with the right to bring the claim, and that if Titan were allowed to sue as well, Colliers would have a double liability. Secondly, Titan had not actually suffered any loss itself because any losses under the loan would be passed on to its noteholders.

Mr Justice Blair considered that he could take a commercially pragmatic view bearing in mind the complex arrangements of the securitisation and acknowledged how difficult it would be for the noteholders to bring a claim themselves, both legally and practically. Titan should therefore be allowed to bring a claim in negligence although he made it clear that the case turned on its facts.

The case is groundbreaking in that its the first time an Issuer has been allowed to bring such a claim. Colliers are seeking leave to appeal to the Court of Appeal.

Link: Titan Europe 2006-3plc v Colliers International UK plc [2014] EWHC 3106 (Comm)

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