The judgment handed down in the recent High Court case of Rowland Philip Bratt v Nigel Lawson Jones [2024] EWHC 631 has highlighted the significance which is placed on the “Margin of Error” in negligence claims against valuers, with importance weighted more towards the valuation result rather than how the valuation was obtained.
In this case, Mr Bratt (the Claimant) claimed damages from Mr Jones (the Defendant), in relation to Mr Jones’s determination, as an expert valuer, of the value of a piece of development land (the Site) which was owned by Mr Bratt. The Site was subject to an option agreement with Banner Homes Limited (Banner), whereby Banner had the option to purchase the Site for 90% of its market value. If not agreed, the market value was to be determined by a third party valuer.
Mr Jones had valued the site at £4,075,000, but Mr Bratt argued that the true value should have been between £7,000,000 and £8,600,000, which represents a margin of 10% above and below his purported value of £7,800,000. Mr Bratt therefore claimed that Mr Jones breached his contractual obligations and duties of care owned to Mr Bratt. Mr Bratt sought damages representing the difference between 90% of the true value of the site and 90% of £4,075,000, less agreed costs of £138,000. Mr Bratt’s case focused on the ‘result’ (i.e. the valuation figure actually arrived at) rather than how it was arrived at.
However, Mr Jones argued that the Court needed to make a determination as to whether he acted reasonably competently in approaching his valuation. Mr Jones submitted that the starting point should be the Bolam test [1]; whether the Defendant has acted in accordance with the practices which are to be regarded as acceptable by a respectable body of opinion in his profession. Therefore, as Mr Jones had acted in accordance with practices which ought to be acted by a reasonable body of opinion, he is not to be regarded to have acted negligently.
By way of summary, although Judge Cawson found Mr Jones was in error in applying particular interest rates and “enhancements” on deferred payments in his comparable analysis, he ultimately considered that Mr Bratt’s claim in negligence was not established and the claim was dismissed.
The Judge submitted that there are two relevant principles so far as negligence claims against valuers are concerned:
In order to give effect to the above, the Court needed to conduct the following steps:
Following an in depth discussion of the expert evidence, the Judge reached a “correct” value of £4,746,860. This figure was broadly consistent with the residual valuation he had found of £4.55 million.
Turning to identifying the correct margin of error to be applied, the Judge took note of the 10% plus or minus margin of error suggested in K/S Lincoln. This case also stated that if there are exceptional features of the property in question, this could increase to 15%. Additionally, an expert for Mr Jones, Mr Buckingham, supported a margin of 15%.
Thus, the Judge took the view that the margin of error in this instance for a non-negligent valuation should be anywhere between 10% and 15%. In reaching this decision, the Judge pointed out that the case law shows that the margin applicable for a non-negligent valuation is likely to be higher in the case of a development plot with certain unique characteristics than a standard residential property. He also agreed with Mr Buckingham’s assessment of a margin for 15%.
By using the Courts “correct” value and the applicable margin of error, the Court found that Mr Jones’s original valuation of £4,075,000 was within 14.15% of the “correct” valuation. Therefore, Mr Jones’s valuation was determined to be within the margin and allowable in respect of a non-negligent valuation. Due to this, Mr Bratt’s claim was dismissed and there was no need to show that Mr Jones had acted negligently.
What this case highlights is that in order to successfully challenge an expert’s valuation, simply arguing that their valuation was lower than the argued ‘true’ valuation is not enough. The Courts are more interested in whether the challenged valuation falls outside of the reasonable margin of error.
This margin of error will be determined by the Courts on a case by case basis, taking into account the type of the property, as well as any complexities involved. If the Court determines that a valuation does fall outside this margin or bracket, only then will they scrutinise a valuer’s conduct in reaching the valuation.
In this case, the 10% to 15% margin of error can be seen a good indicator as to how the Courts will approach a property with varying complexities. But as mentioned above, the margin will be determined differently depending on the facts.
The Court did not look at the question of value of quantum of losses, as its decision meant that the margin of error test was not made out in this case. It may therefore remain open for further comment by the Courts.
Overall, it shows that a claimant will have a mountain to climb to establish a valuers negligence, if their valuation is within the Court’s margin of error.
If you would like to discuss this in more detail, or require further information or advice, the Dispute Resolution Team are well placed to assist, or contact Sam Leaver ([javascript protected email address]) who will be able to help.
References:
[1] Bolam v Friern Hospital Management Committee [1957] 1 WLR 582
[2] K/S Lincoln v CB Richard Ellis Hotels Ltd [2010] PNLR 31
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