BL-2022-000438 - [2025] EWHC 2212 (Ch)

The expert evidence on valuation of the Property

Both parties adduced expert evidence on valuation. The Claimant called the evidence of Dr George Mountis MRICS of Delfi Real Estate LLC and Dr Mountis gave evidence via video link. The Defendant adduced a joint report of Mr Constantinos Pierides MRICS and Mr Constantinos Georgiou MRICS of PropertyServe Chartered Surveyors; the latter gave oral evidence via video link. Each expert produced a main report and they collectively produced two iterations of a Joint Statement. In addition, Mr Georgiou produced an Addendum to his main report. These materials were lengthy running to over 350 pages (including various exhibits).

Dr Mountis and Mr Georgiou gave evidence over the course of two days. In the case of Mr Georgiou, he was assisted by an interpreter.

Although the expert evidence covered valuations of the villas from 2006 to 2019, for limitation purposes, the valuations of the villas prior to the cut-off for limitation purposes of 10 March 2010 are of particular importance.

Given that the villas were not completed until October 2010, the experts made various assumptions regarding the stage that the villas had reached for the purposes of their valuations. The valuations for the years 2008, 2009 and 2010 can be summarised as follows:

Dr Mountis’ valuations for March 2010 and December 2010 were based on four comparable transactions from the Paphos district. The table below lists the purchase contract date for each of the comparables and also the date on which the contract was subsequently registered with the Land Registry.

As is apparent from the table, the contract date for all of the key comparables relied on by Dr Mountis was long before the valuation dates of March 2010 and December 2010. That discrepancy is potentially significant because the Cypriot residential market suffered a downturn after the global financial crisis. For example, the Central Bank of Cyprus reported in its Residential Property Price Index that residential prices had fallen by 9.4% in the period between Q3 2008 and Q4 2010.

In the circumstances, there is a concern that Dr Mountis’ approach in valuation based on contracts which were entered materially before the valuation date might overstate their value.

Dr Mountis sought to address that discrepancy by suggesting that it was the date of registration that really mattered because that was the stage that the purchaser was committed to proceed with the contract. Based on the evidence before the Court, the practice of purchasing a property in Cyprus does not appear to be materially different to England and so, in my view, the price stated in the contract is likely to be largely reflective of the market conditions at the date of the contract. As with the position in England, it appears that a purchaser in Cyprus is committed to the transaction from the point of exchange of contracts and so, whilst I recognise that a purchaser may theoretically not proceed with the transaction if there was a substantial deterioration in market conditions after the exchange of contracts, it is the date of exchange of contracts which will generally be the more illuminating rather than the date of registration.

In the circumstances, I consider that it is striking that all of Dr Mountis’ comparables are chosen from a time when the residential property market was materially stronger than it was in March and December 2010.

In relation to Mr Georgiou’s valuations, for the period from 2007 to 2009, he valued the land on a comparable basis and based the value of the development on the inventories in the financial statements and included developer’s profit, overheads, other expenses and contingencies. For the period from 2010 onwards, Mr Georgiou used the comparable approach albeit for the valuation as at March 2010, he appears to have taken his December 2010 valuation and made a deduction to reflect the fact that there remained work to be done. The precise calculation is unclear. The difference between his valuations for March and December 2010 is €220,250 albeit that the joint statement refers to the work remaining as €151,104 + VAT. In cross-examination, the figures for the remaining work were suggested by the Defendant’s counsel to be €174,000 and a further €9,000 for road construction.

Mr Georgiou’s methodology involved providing a long list of potentially comparable properties but without identifying the precise transactions which led to his valuations. In relation to the four comparables chosen by Dr Mountis, Mr Georgiou says that one is not comparable, two are “superior to the under-study property” and one is similar. For two of the comparables, Mr Georgiou says that Dr Mountis has incorrectly recorded the square metreage and nature of the spaces at these properties, and that in fact they were more substantial than Dr Mountis’ analysis indicates (thereby suggesting that Dr Mountis has overstated the price per square foot for these comparables).

I note that Dr Mountis’ view is that the value of the villas was essentially the same at March 2010 and December 2010. He has conducted both valuations on the basis that the properties were 100% complete. As explained above, I think that it is logical to value the villas as at March 2010 on the basis that a purchaser would require the Company to finish the properties before completion and so they were being sold on the basis that they were 100% complete (as Dr Mountis assumes). For that reason, I do not follow Mr Georgiou’s approach of making a deduction to the valuation to reflect the remaining works.

Instead, I consider that the appropriate approach is to value the villas on the basis that the remaining works (which were nearly complete) would be completed and to include the costs of doing so in the Company’s liabilities. In my view, this was likely to be the best way of the Company maximising the value of its assets and would lead to a better net return for the Company than selling the villas “as is” in their uncompleted state.

In relation to the absolute values of the villas, I think that Mr Georgiou’s valuation of €3,027,250 as at December 2010 is more realistic than Dr Mountis. I also consider that the villas were likely at around the same level (€3,027,250) in March 2010. I note that this value is about 10% below the level that the villas were actually on the market at the time. Given that none of the villas sold during this period, it is logical in my view to assume that true value of the villas was at a discount to the price that they were advertised in the market. I consider that 10% is a reasonable discount and is supported by the valuation evidence.

There are various other factors which lead me to the conclusion that Dr Mountis’ valuations of c. €3.5 million for March 2010 and December 2010 are too high: