Negligent Land Valuations

In September 2013 the High Court judgment in Brownrigg v Leacy & Anor held two auctioneers to have acted negligently in the provision of land valuations.

The judgment set out a useful five stage analysis of what constitutes a negligent valuation, while also giving a note of caution for those who buy before they sell, risking a finding of contributory negligence.

Mr Brownrigg wished to purchase lands adjacent to his farm at public auction, in order to consolidate his holding.  If successful at auction he intended to then sell a separate plot of land to finance the purchase.  He sought valuations of the plot that he intended to sell from two auctioneers, Mr Leacy and Mr Kavanagh.

Mr Leacy valued the plot at between €10 and €11 million and Mr Kavanagh provided a valuation of €6.9 million.  Following receipt of the valuations, Mr Brownrigg provided the valuations to his bank and obtained a bank loan of €7.7 million to finance the purchase, contingent on the sale of his own plot.  He then successfully bid €5.9 million at public auction for the adjacent lands and paid a 10% deposit.  When his own plot was put up for sale the highest offer he received was €1 million.  Mr Brownrigg was therefore unable to complete the purchase of the adjacent lands and he forfeited his deposit of €590,000.

Mr Brownrigg claimed that he had relied on the valuations provided and that the bank had also relied on the valuations in agreeing to provide the loan.  Mr Kavanagh did not defend the proceedings but Mr Leacy claimed that the letter he had provided was a “thinking of selling” letter rather than a valuation.  He said it amounted to an expression of opinion made in good faith.  Mr Leacy also queried the level of responsibility he had to Mr Brownrigg given that he did not retain him to act in the sale of the lands.

The Judge held as follows, setting out a useful five stage analysis for a claim of negligent valuation:

1. Was Mr Leacy aware that Mr Brownrigg would rely on the letter as a valuation?  Held: Mr Leacy was aware as Mr Brownrigg had assiduously pursued him for the valuation.

2. Was the letter intended to be a valuation?  Held: If the letter was not intended to be a valuation this should have been clearly stated.  No such statement had been included.

3. If it was a valuation, was it prepared negligently?  Held: The valuation was negligent as it was not in accordance with internationally recognised standards for valuation in “the red book” and no warning of uncertainty had been provided. While valuation is an imprecise art, the valuation was far outside the permissible margin of error; nor did it contain any advice re: the risks inherent in zoning as a factor.

4. Did Mr Brownrigg rely upon the letter?  Held: Mr Brownrigg bid a purchase price for the adjacent lands that was below the lower of the two valuations. It was clear that Mr Brownrigg relied on the valuations to his detriment and the valuations of both auctioneers were relied upon equally.

5. Was there contributory negligence by Mr Brownrigg?  Held: Mr Brownrigg was an experienced and knowledgeable farmer and it was his decision to purchase the adjacent lands before selling his own plot.  Mr Brownrigg was therefore the one to embark on the risk and was found to be 50% responsible for the loss.

Mr Brownrigg was awarded damages equating to 50% of the deposit forfeited by him. Mr Leacy and Mr Kavanagh were held jointly and severally liable for that 50%.

If you are interested in discussing this further, please contact Lisa Byrne (ACA, BBS(Acc) Dip Managing People, Dip Forensic Accounting) on +353 (0)1 677 9000 or by email.

If this article helped you, please share it with other businesses.