Valuers negligence

Citation

Waterson, G. and Lee, R. (1999), "Valuers negligence", Property Management, Vol. 17 No. 3. https://doi.org/10.1108/pm.1999.11317cab.014

Valuers negligence

Morgan Sindall plc v. Sawston Farms (Cambs) Ltd. [1999] 07 EG 135

This case basically concerns the efforts of a plaintiff to challenge what had subsequently turned out to be a bad deal.

On 11 February 1991 the plaintiff was granted an option to purchase a roadway at a price to be determined by a valuer acting as an expert. In the absence of agreement as to the choice of valuer one was to be nominated by the RICS, and this is what occurred. On 25 January 1996 the plaintiff exercised the option and after representations from the parties' own valuers the expert determined the option price at £130,000 in a non-speaking valuation.

The plaintiff was dissatisfied with the valuation claiming that since the roadway was unlikely to be required in a development of the area it should have a very low value. The defendants claimed that it had a ransom value of £772,000.

A further problem was that in November 1996 the defendant supplied the plaintiff with a copy of a deed of grant of a right of way for all purposes in favour of land the plaintiff already owned. The plaintiff believed that it had rights of way over the land but only "for current and previous uses" whereas in fact they only discovered after exercising the option that they had possessed unlimited rights of way all the time. Consequently the plaintiffs sought to have the valuation set aside. The plaintiff's proceedings were dismissed in the High Court and the plaintiff appealed on two grounds: first that the valuer must have used a ransom value approach and proceeded on the wrong principle since RICS Practice Statements do not permit the inclusion of the bid of a "special purchaser". Secondly, that the valuer had valued the wrong subject matter because the road he valued had limited rights over it whereas by reason of the deed of grant the plaintiff actually had unlimited rights of way.

Robert Walker LJ gave the unanimous judgement of the Court of Appeal. He began by referring to the nature of a "non speaking" valuation made by an expert to whom the parties have agreed to refer a decision as to valuation. He stated that the principles are best summarised in the judgement of Dillon J in Jones v. Sherwood Computer Services plc [1992] 1 WLR 277. In essence all of the cases cited seem to agree that the issue is simply one of contract. If the parties have agreed that the value be determined by a valuer on whom both agree they are bound by the value he gives in honesty and good faith as long as he values what he is supposed to value. The only circumstance that might change this is evidence of fraud or collusion.

On the first of the plaintiff's two grounds of appeal, his Lordship stated that he found no assistance from the RICS Practice Statement because they are not mandatory in this type of valuation and in any case, he found it difficult to "...see a clear dividing line between a valuer taking account of the release of 'marriage value', which the relevant practice statement permits and his taking account of an extra bid from a 'special purchaser', which it prohibits."

However according to his Lordship, there was a much more fundamental objection to the plaintiff's argument. It was that "...it is seeking, by a process of inference, to turn a non speaking valuation into a reasoned valuation and then to attack those reasons". His Lordship found that the materials on which the inferences were based were tenuous but even if they "had been more substantial and the process of inference less speculative the court should, in my view, turn its face against that sort of argument, except in wholly exceptional circumstances. The whole point of instructing a valuer to act as expert (and not as an arbitrator) is to achieve certainty by a quick and reasonably inexpensive process. Such a valuation is almost invariably a non speaking valuation, with the expert's reasoning and calculation concealed behind the curtain. The court should give no encouragement to any attempts to infer, from ambiguous shadows and murmurs, what is happening behind the curtain."

On the plaintiff's second point that the valuer had valued the wrong subject matter, they argued that a roadway subject to the limited rights they thought they had and a roadway subject to an unlimited right of way were quite different. This argument was unanimously rejected. The valuer had valued precisely what he was required to value. Any mistake related to the attributes of the land in question, not to its identity. In fact there was no evidence that the valuer had made any mistake as he had valued the land in accordance with his instruction. Any mistake lay in the formulation by the option agreement of the task that was to be undertaken by the valuer.

The appeal was unanimously dismissed. However, his Lordship did express some sympathy with the plaintiff because "from what I have seen of the papers the price fixed by Mr. Harris [the expert valuer] for a stretch of roadway over which it already had some rights, and which might not, by itself, hold the key to any eventual development seems distinctly steep. But that is always a possible consequence of deciding to take and exercise an option in this form."

The law is stated as it is understood to be up to 20 May 1999.