In determining a negligence claim against a valuer for an
alleged under-valuation of a residential development site, the High
Court considered whether it was sufficient when considering the
question of liability to focus on the end result of the valuation,
rather than the valuer’s process of arriving at his result
– raising the question of whether a valuer must separately
and additionally be shown to have fallen below the standard of a
reasonably competent valuer (the Bolam test). In
dismissing the claim, the Court gave careful consideration to the
apparently conflicting cases applicable to determining valuers’
liability and clarified the correct legal test to be applied in
such cases.
Introduction
Bratt v Jones1 involved the purchase by a
home-building company of a residential development site in
Oxfordshire from the Claimant, Mr Bratt. The relevant contract
granted an option for the home-building company to buy the site,
following the grant of planning permission, at 90% of its market
valuation. The contract provided that if the buyer and seller did
not agree a valuation, then it would be determined by an expert
third-party valuer. The Defendant in this case, Mr Jones, was an
experienced professional valuer who was jointly instructed to value
the site by the parties to the contract. As part of that process,
the buyer and seller instructed separate valuers to make
submissions to Mr Jones about the estimated market value of the
site. The seller’s valuer put forward a market valuation of
£8 million, which drew heavily on evidence of comparable
transactions, whereas the buyer’s valuer put forward a market
valuation of £1.8 million, which was largely based on an
assessment of the development project’s residual value
(broadly, the developed value of the site minus the development
costs). Subsequently, Mr Jones prepared his own valuation by
reference to both valuation approaches and determined the market
price of the site to be £4.1 million; approximately
£800,000 lower than the halfway point between the two
positions.
The Claimant strongly disagreed with the result of the
valuation, contending that it under-valued the site by millions of
pounds, and he alleged that Mr Jones had acted negligently in
reaching that valuation. The Claimant sought £3.5 million in
damages, representing the difference in the purchase price that
would have been paid if the valuer had not been negligent, as
alleged, minus certain agreed costs.
The negligence claim
The Claimant argued that that the “correct” market
value of the site was at least £7.8 million and, given that
the Defendant’s valuation fell well below that figure (or any
reasonable margin or bracket that may be applied to it), the
Defendant had been negligent and was liable to pay damages.
Although the Claimant pointed to some errors that the Defendant was
alleged to have made in reaching his valuation, the Claimant’s
case focused heavily on the result of the valuation exercise,
rather than on how the result was reached. On the Claimant’s
case, a finding by the Court that the Defendant’s valuation
fell outside of a reasonable margin of the correct valuation was
sufficient to establish negligence, without the need for any
further consideration of whether the Defendant’s conduct (i.e.
the valuation process undertaken by the valuer) fell below the
requisite standard of skill and care applying the Bolam
test.
By contrast, the Defendant contended that the starting point for
the Court’s assessment of liability was the Bolam test
and that it is not enough to show simply that another expert would
have given a different answer. Rather, the Court needs to assess
“whether the defendant has acted in accordance with
practices which are regarded as acceptable by a respectable body of
opinion in his profession“. The Defendant submitted that
it was necessary for the Court to first determine the reasonable
competence of his methodology before determining the
“correct” market valuation and considering whether the
Defendant’s own valuation fell within a reasonable margin
either side of the “correct” market valuation. The
Defendant submitted that he had always acted in accordance with
practices which ought to be regarded as acceptable by a respectable
body of opinion in his profession, and that he had applied his
methodology in a competent way. Accordingly, despite the difference
between his valuation and that of the Claimant’s experts, he
had not acted negligently. The Defendant admitted to making a
double-counting error relating to enhancements within his valuation
but said that it was not negligent as it was a mistake any valuer
could have made.
The High Court’s decision
The case came down to the question of whether, in the context of
claims alleging negligence on the part of valuers, the focus of the
Court’s enquiry should be on the result or conclusion of the
impugned valuation rather than on the process by which the valuer
arrived at his valuation, which raised the question of the extent
to which it is necessary to consider whether the valuer’s
actions fell below the requisite standard of skill and care
applying the Bolam test. The Court asked: Is it
necessary for a valuer to be shown to have acted below the
standards of his profession in some way before liability can be
found? and answered in the affirmative.
In confirming that (a) a determination that the valuation fell
outside of the relevant bracket and (b) the valuer’s conduct
fell below the requisite standard in the valuation are both
necessary elements, the Court sought to explain differences of
approach in prior cases by reference to the facts of those cases.
The Court explained that different analytical approaches may have
been adopted in those cases depending on whether the defendant
effectively said, “I may have been negligent but it does not
matter because the valuation was within the appropriate
bracket”, as compared to a defendant who said “whatever
the appropriate bracket is, I have not acted negligently”.
The Court accepted that the proper legal enquiry was that set
out by Dove J in Barclays Bank Plc v TBS & V Ltd
[2016] EWHC 2948 (QB) at [64], in summary:
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;
2. The court must then consider by
reference to the facts of the case what the appropriate margin of
error should be, in order to determine the bracket within which a
non-negligent valuation would have fallen. The margin of error will
usually be plus or minus 10%, but if there are exceptional features
of the property in question, the margin of error could be plus or
minus 15%, or even higher in an appropriate case;
3. If the impugned valuation is
within the relevant margin of error of the court’s valuation,
then it is within the bracket of potential non-negligent valuations
and negligence would not have been established;
4. If the valuation is beyond the
margin of error in relation to the court’s valuation and
therefore outside the bracket, then the valuer’s competence and
the care used in his or her valuation is called into question. The
court will examine at this stage the question of whether in
reaching a valuation outside the bracket the valuer has acted
“in accordance with practices which are regarded as acceptable
by a respectable body of opinion in his profession”, i.e. the
Bolam test.
The Court also explained that whilst in many instances the court
may adopt an analytical framework that follows the four stages set
down in Barclays Bank (above), in some cases the court may
take an alternative approach, under which it adopts a more
analytical approach to the determination of the margin of error
that applies to the “correct” valuation. Under this
approach the court will consider the valuation process adopted by
the valuer, by reference to the scope of reasonable professional
opinion as applied to each of the steps involved in the valuation
process. The court would only find the valuer to have acted
negligently if one or more of the steps taken as part of the
valuation process fell outside the envelope of what was regarded as
acceptable by a respectable body of opinion within the profession
and the margin of error around the “correct” valuation
would be considered and set accordingly. In instances where the
court utilises this “alternative approach”, it is not
necessary to then go on to the fourth stage of analysis on the
Barclays Bank approach because Bolam
considerations would already have been taken into account in the
determination of the margin of error.
The Court adopted the Barclays Bank approach on the
basis that it was better suited to the facts of this case,
finding:
1. The Court preferred the expert
evidence put forward by the Defendant’s expert and found that
the “correct” value of the site at the valuation date was
£4.7 million (as compared to the Defendant’s £4.1
million).
2. The appropriate margin was
between plus or minus 10-15%, which reflected certain unique
characteristics of the development plot and the wide range of
valuation opinions and questions of judgment required in this
valuation exercise.
3. The impugned valuation fell
within approximately 14% of the Court’s own valuation, i.e.
within the bracket of potential non-negligent valuations such that
negligence was not established.
4. Nevertheless, the Court found
that the Defendant had failed to make provision for the recovery
through the purchase price of the cost of enhancements and that the
admitted double-counting error further demonstrated a failure to
have “got to grips” with the question of enhancements.
The Court stated that had the valuation fallen outside of the
appropriate bracket, the correct measure of damages for the
negligent conduct identified in relation to enhancements would have
been approximately £500,000.
Legal and practical implications
The decision in this case provides additional clarity on the
proper application of the test for negligence in the context of
claims alleging valuer’s negligence, against the backdrop of
prior decisions which the Court considered difficult to reconcile.
The Court in this case was at pains to rationalise the different
approaches taken to the analysis of valuer negligence claims in the
past, emphasising the unique facts of each case and the way the
parties’ cases had been formulated. The judgment in this case
also affirms that the Bolam test remains a necessary
consideration before valuers’ professional liability in
negligence can be established, consistent with other cases
involving allegations of professional negligence.
The case also underlines the importance of claimants ensuring
alignment between their pleaded case, legal submissions and topics
addressed by their expert in his or her evidence. It can be
inferred that the Claimant’s case may have been fortified
(although it was unlikely to have changed the result) if the
Claimant had ensured greater alignment between these parts of his
case. For instance, the Court considered only the pleaded
allegations of negligence and noted that certain of the errors or
failings allegedly committed by the Defendant that were identified
in the Claimant’s expert evidence or referred to in legal
submissions had not been pleaded. Furthermore, the only expert
evidence before the Court on the important issue of the appropriate
margin to apply to the valuation in this case was that put forward
by the Defendant’s expert, which the Court accepted, in the
absence of equivalent expert evidence on behalf of the
Claimant.
Footnotes
1 [2024] EWHC 631 (Ch)
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