Outer House case considering a contract between the Bank of Ireland and Knight Frank relating to a valuation which Knight Frank provided to the Bank in respect of a client’s property over which the Bank received a standard security.

Background
The Bank claimed that it had suffered substantial loss as a result of the valuation and sought damages for negligence from Knight Frank. However, Knight Frank’s standard terms provided that any contract to provide a survey report was subject to English law and that the English courts would have exclusive jurisdiction in respect of any dispute arising from it. The issue for the court was whether the standard terms formed part of the contract and, consequently, whether the court had jurisdiction to hear the case.

Knight Frank had provided a valuation for the Bank’s client in relation to the property (near Kilmacolm) which was to be the subject of a development. The Bank instructed its own valuation of the property from Knight Frank (by letter dated 2 May). This was provided and included Knight Frank’s standard terms. However, in a departure from its normal practice, Knight Frank had not sought to ask the Bank in advance for written confirmation that the standard terms formed part of the contract. Following receipt of the valuation, the Bank advanced a loan of £2.35m to the client in return for a standard security.

Arguments
The parties were agreed that the Bank’s letter of instruction constituted an offer that the offer had been accepted by conduct. The Bank argued that the offer was accepted by Knight Frank when it delivered the valuation report to the bank. The contract was accepted at the moment the report went through the bank’s letterbox at which point it was too late to introduce new terms (the bank argued that it would have been odd if the fulfilment of the contract –i.e. providing the valuation- were to be treated as a counter offer.)

On the other hand, Knight Frank argued that the delivery of the valuation report along with the standard terms constituted a counter offer which the bank had accepted when it relied on the report to grant the loan.

Decision
Lord Woolman preferred Knight Frank’s argument noting that it had been open to the bank to raise an issue with Knight Frank regarding the standard terms and it had not one so. It was irrelevant that the officer of the bank dealing with the transaction had not read the standard terms. The Bank could not “cherry pick” the document: i.e. it could not accept the valuation without also accepting the standard terms attached. In coming to his conclusion, Lord Woolman also took account of the facts that it had not been surprising to the bank’s employees (giving evidence in the case) that surveyors would seek to introduce their own standard terms into the valuation agreement and that the terms introduced were not unusual.

As such, Lord Woolman found that the court did not have jurisdiction to hear the dispute.

The full judgement is available from Scottish Courts here.