Bratt v Jones — valuer negligence, margin of error and implications for lenders

The judgment underscores the importance of robust valuation protocols and clear reliance frameworks, particularly in light of the FCA’s expectations under the Senior Management Arrangements, Systems and Controls (SYSC) sourcebook.

SYSC sets out how regulated firms should structure governance, risk management, and operational controls to meet regulatory standards, including those governing prudent lending and valuation reliance. Lenders must ensure that valuation reliance is embedded within their broader risk governance and documented in internal control frameworks. 

Case summary

The dispute concerned a development site in Oxfordshire with planning permission for 82 homes across 10 acres. Under an option agreement, the buyer could purchase the site at 90% of market value. When the parties failed to agree on the valuation, an independent valuer, Mr Jones, assessed the site at £4.075 million, relying exclusively on a single comparable sale. His residual valuation supported this figure, though it later emerged that the residual model contained a mathematical error, had it been corrected, it would have indicated a value of £4.6 million, significantly below the seller’s (Mr Bratt's) estimate of £7-8 million. The seller alleged professional negligence. 

Both the High Court and Court of Appeal rejected the claim, finding Mr Jones’s valuation defensible and within the accepted margin of error. The courts emphasised that valuation is inherently subjective and must be assessed within a reasonable professional context.  

Legal test reaffirmed

The Court endorsed the established two-stage test for valuer liability: 

1. Margin of error
   A valuation must fall outside a court-determined “margin of error” before liability can be considered. In this case, the court accepted a ±15% margin. Mr Jones’s valuation fell within that range, therefore no negligence presumed. This reinforces the principle that not every valuation discrepancy gives rise to liability, only those that materially deviate from professional norms.
2. Methodological negligence
   Even if outside the margin, the claimant must demonstrate that the valuer’s methodology was such that no reasonably competent valuer would have adopted it (the Bolam test). Deviation alone is insufficient. The Court also rejected the claimant’s argument that the burden of proof should shift once a valuation falls outside the margin. The claimant must still establish both breach and causation. This sets a high bar for claimants, requiring proof of both technical error and professional incompetence. 

Implications for lenders

Valuation risk remains material — but manageable with appropriate controls. Courts are reluctant to penalise honest errors within an accepted margin, but regulatory scrutiny may still apply.

1. FCA oversight

Under SYSC and credit risk frameworks, firms must evidence robust due diligence on valuations underpinning lending decisions. This includes documenting valuation instructions, review processes, and reliance protocols.

2. No automatic liability

A valuation within margin won’t trigger a claim, even if it results in financial loss. Lenders should distinguish between commercial risk and legal exposure.

3. Methodology still matters

Liability may arise if a valuation is both outside margin and methodologically flawed. Internal audit and second-opinion mechanisms can help mitigate this risk.

Action points for lenders

1. Strengthen valuation instructions
   Define methodology, assumptions, and sensitivity ranges. Require transparency on comparables and adjustments. Ensure instructions are tailored to asset type and lending context.
2. Clarify margin expectations
   Ask valuers to specify acceptable brackets. Ensure reports and pleadings reflect those margins. This can support defensibility in litigation and regulatory review.
3. Scrutinise methodology
   Challenge inputs and assumptions. Document reliance and review processes. Consider implementing a valuation committee or escalation protocol for high-value or complex assets.
4. Review contractual protections
   Use warranties, disclaimers, and indemnities. Consider independent review triggers for material deviations. Ensure engagement letters and reliance statements are aligned with internal risk appetite. 

Looking ahead 

The Court acknowledged conceptual tension in requiring margin breach before assessing methodology, hinting that this “margin first” rule may be revisited by the Supreme Court. A shift toward method-first analysis could materially reshape lender exposure and litigation strategy. Such a shift would place greater emphasis on technical scrutiny and could increase the evidentiary burden on valuers and lenders alike.

Fieldfisher continues to monitor developments in this area and advises lenders to review valuation reliance protocols in light of this decision. For tailored advice or a review of your current valuation governance framework, please contact our Financial Services team.