The Court of Appeal recently upheld a High Court's decision to overturn an independent expert valuer's determination on the sale of a share in a dental practice (Shafi v Rutherford [2014] EWCA Civ 1186).

The case neatly illustrates the difficulties an expert valuer can face, in dealing with past incorrect accounting treatments.  

The issue in the case turned on the accounting treatment of leases, whether finance or operating.  The expert correctly identified that the practice's accounts had applied the wrong accounting treatment. So far so good.  But he then considered he was bound by the treatment in the earlier (incorrect) accounts for his determination of the sale price.  That was because the sale agreement referred to the valuation being carried out on the basis of the existing accounts and in accordance with past "practices".  

That, the court decided, was the wrong approach.  The wording of the agreement could not be read as meaning that the valuer should apply the wrong accounting treatment in coming to his determination.    

It is perhaps not a surprising result.  It does highlight however the importance of expert valuers clarifying up front the basis for their valuation; and the need to iron out the legal effect of relevant documents sooner rather than later in the determination process.