When does a low valuation become a negligent one?
This question was recently tackled by the High Court in London, which clarified the test for valuers’ liability.
Background
In 2002, the Claimant and a developer entered an option agreement. The developer had the right to purchase a residential development site from the Claimant at 90% of market value, to be determined by a third-party valuer. The Defendant was jointly appointed by the Claimant and the developer for this role.
The Defendant valued the site at £4,075,000. The Claimant claimed the true value was closer to £7.8m and sought damages from the Defendant for breach of contract and negligence.
Judgment
The High Court reaffirmed that valuers owe a duty of care to their clients to provide valuations with reasonable skill and care. This duty is measured against the standards of a competent professional in the same field.
However, the Court emphasised the inherently subjective nature of valuations, such that valuations will fall within a bracket of permissible valuations. The key question is whether a valuation falls within an acceptable range of professional opinion. It was held that the Defendant’s valuation fell within the bracket of permissible valuations.
If the valuation was outside this bracket, then the standard of care exercised by the Defendant would have been considered, including the process and procedures followed and whether practices were regarded as acceptable by a respectable body of professional opinion. This is known as the Bolam test. The Court would have questioned whether the Defendant had acted in accordance with “the principle that a defendant valuer or other professional conforming to a practice accepted as proper by a respectable body of professional opinion should not, ordinarily, be held liable merely because others disagree.”
His Honour Judge Cawson KC, sitting as a judge of the High Court, concluded: “… I do not consider that [the Claimant’s] claim in negligence is established, and I consider that his claim should therefore be dismissed.”
Comment
This judgment marks a significant milestone in professional negligence jurisprudence, particularly in the context of property valuations. It provides a clear framework for assessing the standard of care.
Where a valuation falls outside the margin of error allowed for, the courts will consider whether the valuer’s actions were in any material respect, negligent, being otherwise than in accordance with practices regarded as acceptable by a respectable body of opinion within the profession. This affirms the long-standing Bolam test.
For more information about this article or any other aspect of professional negligence in property, contact your Napthens Solicitors in Preston, Liverpool, Blackburn, and across the North West today.
