Insights

Jonathan Woodroffe

Published 6 June 2024
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The Test for Valuers’ Liability

In March 2024, the Chancery Division handed down the judgment in Bratt v Jones. The case concerned the correct approach to take when determining liability in valuer negligence cases.

The facts

The case revolved around the valuation of a development site for sale by Mr Bratt to a development company, with an option agreement for 90% of its market value.

As the parties could not agree a valuation, the parties instructed Mr Jones as an expert third party. The parties’ respective experts made submissions to Mr Jones about value, namely, Mr Bratt submitted the appropriate valuation was £8 million, and the buyer submitted the appropriate valuation was £1.8 million.

Mr Jones determined the market price to be £4.075 million. This was lower than the halfway point between the two positions.

Mr Bratt contended that the true value of the site was £7.8 million, with a 10% margin of error either way. As Mr Jones’ valuation fell well out of the 10% margin, Mr Bratt argued that Mr Jones had acted negligently in reaching his valuation. Mr Bratt sought £3.5 million in damages.

The issues

The issue that fell to be determined was the correct approach to be taken to determine a valuer’s liability. Was it, on the one hand, to focus on the actual valuation reached and whether the mere fact of a valuation being outside a reasonable margin alone was enough to justify a finding of negligence?

Or, on the other hand, should negligence be established by reference to the process by which the valuation was arrived at, along with the Bolam test, namely “whether the defendant has acted in accordance with practices which are regarded as acceptable by a respectable body of opinion in his profession”?

The decision

The Court helpfully set out the proper approach as explained in Barclays Bank Plc v TBS & V Ltd [2016] EWHC 2948 (QB) at [64], namely:

  1. The court must form its own view, based on the evidence and its own evaluation, of the correct value as at the valuation date.
  • The court must then decide the appropriate margin of error based on the particular facts of each case. This will usually be plus or minus 10%, but plus or minus 15%, or even higher in appropriate or exceptional cases.
  • If the valuation is within the relevant margin of error of the court’s valuation, negligence is not established.
  • If the valuation is outside the appropriate margin of error, the court should assess the competence of the valuer by reference to the Bolam test.

Applying the above, the court found that the true value of the site in this case was just over £4.7 million and a margin of 15% was appropriate. Therefore, Mr Jones’ valuation was just within the margin of error and as a result, the court found Mr Bratt’s negligence claim failed and there was no need to consider the Bolam test.

Comment

This case is helpful for a number of reasons:

  • This case provides useful clarity as to the proper test for negligence in claims alleging valuer’s negligence, in light of a number of previous decisions which have muddied the waters.
  • The court emphasised the importance of the unique facts of each case and reaffirms that the Bolam test remains a necessary test before valuers’ professional liability in negligence can be established.
  • In a case where the appropriate margin of error was so important, Mr Bratt had not submitted any evidence as to the appropriate margin of error and therefore the court accepted the defendant’s submissions on this point (namely 15%).
  • Mr Jones admitted to making a double-counting error relating to enhancements within his valuation. The mistakes would probably not have made a difference to the outcome but in any event were not pleaded by the claimant.

If you would like to discuss any of the issues raised in this case, please get in touch.

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