August EWJ 24 - Flipbook - Page 33
Clarity on the Approach to Liability in
Valuer Negligence Cases - Bratt v Jones
On 22 March 2024, the judgment in Bratt v Jones was handed down in the Chancery
Division. The judgment provides helpful clarity on the approach to determining liability in
valuer negligence cases.
Background
The Defendant, Mr Jones, was jointly instructed by
the Claimant, Mr Bratt and a home-building company in relation to a proposed sale of a development
site from Mr Bratt to the company pursuant to an option agreement for 90% of its market value. If the valuation of the site could not be agreed, an expert third
party would determine it. The expert appointed was
Mr Jones.
Decision
HHJ Kawson KC considered the various authorities
and recognised two key legal principles:
1. In order to establish negligence by a professional, it
is a fundamental requirement for the Claimant to
prove that the professional failed the test as set down
in Bolam; and
2. Nevertheless, there is a precondition of liability that
the valuer’s valuation should fall outside of the permitted margin of error.
The parties instructed separate valuers who put
forward submissions to Mr Jones about the estimated
market value of the site. Mr Bratt’s valuer submitted
a value of £8 million, whereas the buyer’s valuer
submitted a value of £1.8 million.
The Court accepted that the proper legal enquiry was
that set out by Dove J in Barclays Bank Plc v TBS & V
Ltd (summarised as follows):
l The Court must form its own view, based on the
evidence and its own evaluation, of the correct value
as at the valuation date;
Mr Jones prepared his own assessment using both
valuation approaches and determined the market
price to be £4.075 million, nearly £1 million lower
than the halfway point between the two positions.
l The Court must then determine the appropriate
margin of error by reference to the facts of the case
and guided by the principles in K/S Lincoln v CB
Richard Ellis;
Negligence claim
Mr Bratt disagreed with the result and argued that
Mr Jones had significantly undervalued the site and
had acted negligently. He argued that the true value
of the site was £7.8 million, with a 10% margin of error
either way and that as a result of the negligence, he
was entitled to damages.
l If the valuation falls within the margin of error, then
liability cannot be established; or
l If the valuation falls outside the margin of error,
then the competence of the valuer must be assessed
by application of the Bolam test to establish liability.
Mr Bratt’s case on liability focused on the result of the
valuation, i.e. the fact that Mr Jones’ valuation fell
below what he argued to be the true position, rather
than the process by which Mr Jones had reached his
valuation. Therefore, Mr Bratt argued that the Court
could establish negligence by finding that the valuation fell outside the reasonable margin of the correct
valuation, rather than considering whether Mr Jones’
conduct fell below the requisite standard of skill and
care as set down in Bolam.
The Court adopted the above approach to the instant
case, finding:
1. The Court preferred the expert evidence put
forward by the Defendant's expert and found that the
‘true’ value of the site at the valuation date was just
over £4.7 million on the basis of a comparable approach (as compared to the Defendant's £4.1 million).
2. The only expert evidence provided on the margin
of error was for the Defendant, whose opinion was
that a margin of 15% was appropriate. The Court
agreed with this. On that basis, the original valuation
by Mr Jones fell just within the appropriate margin of
error (14.15%). Therefore, Mr Bratt had failed on
liability and it was not necessary to assess Mr Jones’
conduct by reference to the Bolam test.
Mr Jones’ position on how to approach liability was
almost the inverse: he argued that negligence should
be established by the process by which the valuation
was arrived at, and that this starting point must be the
Bolam test: "whether the defendant has acted in accordance with practices which are regarded as acceptable by a respectable body of opinion in his
profession"[1]. Mr Jones argued that if he was found
to have acted competently in his approach to the valuation, then regardless of the result of the valuation he
could not be found to have acted negligently.
3. Nevertheless, the Judge did note that Mr Jones had
made an error in relation to double-counting
enhancements.
Comment
The judgment in this case provides helpful clarity on
the proper application of the test for negligence by a
valuer, and confirms that the Bolam test remains a
fundamental consideration to establish liability.
Mr Jones did accept that a double-counting error had
been made in relation to enhancements within his
valuation but denied that this constituted negligence.
EXPERT WITNESS JOURNAL
31
AUGUST 2024
