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Negligent land valuations: The dangers of buying before you sell
The September 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 test while sounding 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 which were advertised for public auction. If successful at auction he intended to sell a separate plot of land to finance the purchase. He sought valuations of that plot 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 acquired a bank loan of €7.7 million, contingent on the sale of his own plot, to finance the purchase of the adjacent lands. 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 him with the bridging 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 Judgment – five stage test
The Judge held as follows, setting out a useful five stage test for determining a negligence claim:
(i) 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.
(ii) 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.
(iii) If it was a valuation, was it prepared negligently? Held: The valuation was negligent as it was not in accordance with internationally recognised standards as set out in “the red book” and no warning of uncertainty had been provided.
(iv) Did Mr Brownrigg rely upon the letter? Held: It was clear that the plaintiff relied on the valuations to his detriment and the valuations of both auctioneers were relied upon equally.
(v) Was there contributory negligence on the part of 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 in the circumstances was found to be 50% responsible for the loss.
Mr Brownrigg was awarded damages equating to 50% of the deposit which he had forfeited and Mr Lacey and Mr Kavanagh were each held jointly and severally liable for 50%.