Exciting (no) development in valuer negligence claims

The key takeaway in the recent Court of Appeal decision in Bratt v Jones is that the test to establish valuer negligence remains unchanged.

In short, a claimant must both prove that the valuation falls outside a reasonable margin of error, and that the valuer was negligent in carrying out its valuation, by falling below the standard of the reasonably competent valuer (the test established in Bolam).  The margin of error is a pre-condition to liability meaning the Court will only consider the Bolam test if the valuation falls outside a reasonable margin of error.

The Claimant in this case, argued that it was enough for him to show that the Defendant's valuation fell outside a reasonable margin of error, which he said was 10%, to establish the Defendant's negligence.  The Claimant's position was that the burden of proof was then reversed, and that the Defendant had to disprove his negligence.

The Court of Appeal disagreed with all of these points.

Burden of proof

Importantly, the Court confirmed that the burden of proof remains with the Claimant.  This is the general rule in litigation which is only departed from in select instances.

The Court held that as the relevant authorities referred to the valuation falling outside a reasonable margin of error as a "pre-condition" to liability, "the identification of the margin or bracket cannot itself be determinative of the bounds of reasonable professional competence" [164].

As such, the Claimant must prove the Defendant's negligence by reference to Bolam as well as proving the valuation falls outside the margin.

Margin of error

What constitutes a reasonable margin of error is a question for the Court, rather than the Claimant, based on the facts of the case, the parties' expert evidence, and the Court's own assessment of the correct valuation.

The Court stressed that it was not required to find "an immaculate or absolute value" [177], but rather "the most likely figure" based on the expert evidence before it.

In this case, the Claimant did not adduce any expert evidence as to the reasonable margin, but the Court was convinced by the Defendant's evidence and found that the correct valuation figure was closer to the Defendant's valuation than the Claimant's (which was almost double).  The Court concluded that a reasonable margin of error was between 10% and 15%, and the Defendant's valuation was within 14.15% of the "correct" valuation [235 and 238].

Bolam

Relying on established authorities, the Court repeated that it only needed to consider whether the Defendant had acted "in accordance with practices which are regarded as acceptable by a respectable body of opinion in his profession" if the valuation fell outside the reasonable margin of error [239].

Interestingly in this case, the Court commented that this could result in a "logical fallacy" [161] whereby a valuer could be negligent but escape liability if its valuation nevertheless fell within a reasonable margin of error.

In fact, in this case, the Court found that if the Defendant's valuation had fallen outside the reasonable margin, it would have found the Defendant negligent due to a number of mistakes made during the valuation.

Discussion

The Court's comments regarding the logical fallacy almost read like an invitation to Claimants to test the law in the Supreme Court.

However, until then, the position remains unchanged, and such a challenge would only be possible where certain specific circumstances have arisen.

The likely outcome of such a challenge will depend on the Supreme Court’s view on the scope of the relevant valuer’s duty, whether it was to provide a reasonably competent overall valuation, or to exercise reasonable skill and care to avoid error in the report.

In Bratt v Jones, the Defendant was to provide a valuation figure to be used in a specific calculation, rendering the valuer's workings largely irrelevant for that purpose, provided the end result was correct.  It therefore makes sense that in such a case, the reasonable margin of error would play a crucial part.  This case (as opposed, say, to one in which the accuracy of the valuation calculation is in question) appears unsuited to further challenge to the Supreme Court.

For the time being though, nothing has changed.