Introduction

In the case of Mark Ellison Coulter against Anderson, Anderson & Brown LLP ([2025] CSOH 32), the Scottish Court of Session grapples with fundamental issues arising from the role and responsibilities of expert valuers. The dispute centers on the valuation of Mr. Coulter’s shares in Coulter Property Ltd (CPL), a valuation performed under the company’s Articles of Association which prescribed a mandatory mechanism. The pursuer, previously a director and shareholder, claimed that his shares were undervalued – having been determined on a net asset value (NAV) basis rather than on an earnings basis (EB) as argued should have been followed given CPL’s status as a continuing concern.

The key issues presented include whether the expert valuers (the defenders) owed a duty of care to the pursuer despite being engaged contractually by CPL, whether the limitation of liability clause in the defenders’ engagement letter may limit such a duty, and whether the allegedly negligent conduct (including the alleged collusive behavior and departure from the method mandated by the Articles) could give rise to damages exceeding the contractual cap. The case also touches on the application of the Unfair Contract Terms Act 1977 (UCTA) in moderating any attempts to restrict liability.

Summary of the Judgment

The Court, in an opinion delivered by Lord Braid, dismissed Mr. Coulter’s claim. The judgment primarily focused on whether the defenders could owe a duty of care to the pursuer and the extent to which any such duty could be limited by the contractual (limitation of liability) provision contained in their engagement letter with CPL.

It was held that albeit a duty of care may exist arising from the experts’ assumption of responsibility (noting that such reliance was inherent when the defenders were aware that their valuation was to be the “final and binding” determination for the sale of Mr. Coulter’s shares), the contractual limitation clause – which capped their liability at £45,000 – was relevant to the scope of that duty. The Court found that the pursuer’s pleadings failed to demonstrate that no ordinarily competent expert would have relied on an NAV basis when circumstances indicated a going concern. Additionally, the allegations of negligence and collusion proved, at best, insufficiently detailed to overcome the contractual limit. Consequently, the action was dismissed.

Analysis

Precedents Cited

The judgment cites several significant precedents and analogies. Notably, the analysis draws on the threefold test for imposing a duty of care in economic loss as summarized in Barclays Bank Plc v Grant Thornton UK LLp by Cooke J. This test – forecasting foreseeability, proximity, and fairness of imposition – laid the framework for evaluating whether the defenders owed a duty.

Another central case referenced is Killick and another v PriceWaterhouseCoopers [2001] P.N.L.R 1. In Killick, Neuberger J recognized that despite the expert being appointed by a company, a duty of care could be owed to a third-party shareholder if the expert visibly assumed responsibility and if reliance was reasonable. Similarly, decisions in White v Jones and Gorham v British Telecommunications plc reinforced the principle that contractual terms (including limitation clauses) may define the scope of an expert’s duty toward a third party, even if that party was not directly involved in the contract.

Legal Reasoning

The Court’s reasoning navigates through several intertwined legal areas. First, it examined whether the defenders had assumed responsibility and whether the pursuer could be said to have reasonably relied on that assumption in light of the Articles’ valuation mechanism. Although the pursuer’s pleadings did not explicitly mention “assumption of responsibility” (a cornerstone of the Killick test), the Court recognized that by consenting to a system that dictated a fixed valuation methodology, the pursuer was effectively reliant on the defenders’ judgment.

Second, the decision placed significant emphasis on the limitation of liability clause contained in the defenders’ letter of engagement. Here, the Court clarified that when a duty of care in delict is established based on a contractual assignment (even indirectly), the scope of liability may be restricted to the agreed cap – unless the pursuer can show that applying the limitation would be fundamentally unfair under statutory provisions like the UCTA.

The Court further critically analyzed the pursuer’s claim that the valuation should have been performed on an earnings basis (EB) rather than a net asset value (NAV) basis. Noting that the Articles allowed the defenders a broad discretion (even resolving valuation difficulties “as they think fit”), and that a valuation is intrinsically a matter of professional judgment, the Court found that the alleged deviation from a preferred method did not, in itself, constitute negligence.

Impact on Future Cases and Area of Law

This judgment reinforces the principle that even where experts assume responsibility for valuation in accordance with corporate governance rules, contractual limitations – duly communicated to all parties – can effectively bound their liability towards third parties. Future cases involving expert misvaluation claims will likely reference this decision when determining the relevance and enforceability of limitation clauses against non-contracting claimants.

Moreover, the Court’s cautious stance on challenging professional judgment in valuation matters may serve to streamline disputes over accounting methodologies, making it clear that merely favoring an alternative valuation basis (e.g., EB versus NAV) is insufficient to establish negligence.

Complex Concepts Simplified

Assumption of Responsibility: This concept refers to an expert’s voluntary decision to undertake an assignment, with the understanding that the outcome of their expert opinion is relied upon by others. In this case, although the expert was hired by CPL, the pursuer was aware that the valuation would determine the sale price of his shares.

Net Asset Value (NAV) vs. Earnings Basis (EB) Valuation: NAV valuation involves determining a company’s value based on its assets net of liabilities – typically used when a company is not operating or is about to be wound up. In contrast, EB valuation focuses on the ongoing ability of a business to generate profits. The Articles mandated a going concern assumption, suggesting an EB approach; however, the defenders opted for an NAV basis reacting to market uncertainty.

Limitation of Liability Clause: This clause restricts the maximum amount for which a professional can be held liable in the event of a negligent or wrongful act. Here, the clause limited the defenders’ liability to £45,000. Even though the pursuer argued that such a contractual provision should not bind a third party, the Court found that it formed part of the context in which the duty of care was assessed.

UCTA (Unfair Contract Terms Act 1977): UCTA provides that contractual limitation clauses must be fair and reasonable. While the pursuer attempted to argue that the clause was unfair (given his status as a third party), the Court held that the defenders had not been compelled to prove fairness because the pursuer had not adequately put the matter before the Court.

Conclusion

In summing up, the Court’s decision in Mark Ellison Coulter against Anderson, Anderson & Brown LLP confirms two key legal propositions. First, it underscores that when an expert valuer undertakes an assignment knowing that his work will be pivotal in determining a shareholder’s exit price, a duty of care may be imputed—even when the expert is contractually engaged by the company rather than the individual shareholder. Second, and crucially, it affirms that limitation of liability clauses in the underlying contract can effectively cap such liability, provided that no compelling evidence is advanced to subject the clause to the fairness test under UCTA.

The judgment thereby dispels the notion that third parties can circumvent explicit contractual caps through separate delict claims. Its comprehensive analysis of reliance, professional judgment, and contractual limitations is likely to influence future litigation in commercial disputes involving expert valuations, sharpening the balance between professional discretion and accountability.