The Court of Appeal (CoA) confirmed that even a significant divergence in valuation does not automatically equate to a finding of negligence.
Background:
Mr. Bratt owned a site in Oxfordshire which had planning consent for 82 houses across approximately 10 acres. In June 2013, a developer who had the option to purchase the site at 90% of market value exercised its option. As the parties could not agree on a price, they jointly instructed Mr. Jones to value the site in an independent expert determination.
Mr. Jones carried out his valuation using two standard methods, namely a comparable sales approach and a residual valuation. He identified a site which he considered sufficiently similar to place an exclusive reliance on it. As a result, he assessed the site at £4.075 million, leading to a purchase price of £3,529,500 after deductions.
In Mr. Bratt’s opinion, the figure was too low, as he claimed the true market value was £7.8 million and that Mr. Jones's valuation was significantly outside a reasonable margin of error (10%). He alleged that a valuation of his development land by Mr. Jones was negligently low, thus costing him millions.
The High Court noted that the most likely true market value of Mr. Bratt’s site was about £4.74 million and that Mr. Jones’ valuation was within the 15% acceptable range.
Decision:
The CoA dismissed Mr. Bratt’s appeal. The Court reviewed Merivale Moore, highlighting that a valuation outside the permissible margin "calls into question" the valuer's competence and care, and that showing the valuation is "wrong" is a necessary condition of liability. However, this is not sufficient on its own, and it is for the claimant to show the valuer acted other than in accordance with acceptable professional practices.
The Court disagreed with Mr. Bratt's interpretation that the burden of proving non-negligence shifts to the valuer simply because the valuation is outside the bracket. The Judge emphasised that the legal burden of proving negligence according to Bolam principles always rests with the claimant.
The CoA concludes that the determination of the acceptable valuation bracket is a question of fact for the Judge to determine based on the expert evidence presented in the specific case. The Judge was therefore not wrong to approach it as such.
The Court briefly acknowledges the "logical fallacy" argument (i.e., that a negligent valuer could escape liability if their valuation falls within the Court's determined bracket). While noting concerns raised by Lord Hoffmann in SAAMCO and Lion Nathan, the Court decides this is not the case to resolve this issue, as it would require questioning the precedent set by Merivale Moore.
Implications:
This case reaffirmed the two-stage legal test for negligence in valuation under Merivale Moore. To succeed in a negligence claim against a valuer, a claimant must prove both that the valuation fell outside the acceptable bracket or permissible margin of error as determined by the Court based on the evidence and that the valuer failed to exercise due and proper professional skill, care, and diligence in undertaking the valuation (i.e., the Bolam test).
It confirms that claimants who allege a negligent undervaluation must do more than show the valuation was significantly too low; they must also demonstrate how the valuer’s methodology or reasoning fell below the standards of a reasonably competent professional. This decision clarifies that the determination of the acceptable margin of error is a question of fact for the Judge to decide based on the specific evidence presented in the case, particularly expert valuation evidence, and the nature and complexity of the property being valued. It is however not a strict question of law with fixed percentages.