Margin of Error in the Negligent Valuation

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Introduction

The aspect of valuation is an important aspect of asset management in the UK today and it is seen that it is very significant, because a large part of the UK economic growth stems from the real estate markets. Further, it is also seen that the growth in property markets have a great impact on the valuation of the property and impinges on matters relating to purchase, sale and dealings with real estate and other assets which are in need of valuation on a continual basis.

Before entering the subject, we need to consider what is negligent valuation and it is seen that it could be defined as not acting in the proper way for the valuation of property or assets. It is often the case, that in the case of landed properties and other immovable assets; the valuer is forced to put in a figure that is advised by the client. Often the valuer has to act in accordance with the requirements of the client, including showing a market value of the properties in excess of what it actually commands, for the purpose of sale, lease or disposal of said land. This is unethical and against the fair concepts of real estate dealings but this often happens since the seller wished to have higher profits. It could also be due to the case that the valuer or expert witness was, initially engaged as a member of the team of valuers and had to toe the line of his seniors in preparing the reports etc. But now, he is an independent valuer but he has to stand by what he had opted for along with his other colleagues, and thus has no independent thinking of his own in certain circumstances.

Client-biased valuation

The aspect of client-biased valuation is of major concern in the UK today and often results in fraudulent transactions taking place due to the overvaluation of assets.

It is believed that valuation is an important aspect and is attributed to property at any particular time. The main advantage is that it is a one-point estimate within a distribution, It is often seen that, at the discretion of the Court, the expert witness may often, at the instance of the clients, give valuation figures that may not believe themselves, or they may provide professional advice to their clients which they may not adhere themselves. There have been many changes in the UK judicial system with regard to valuation and the Woolf commission report in 1995 lists two types of evidence that an expert witness could give in terms of factual evidence and/or evidence of expert opinion. The case law of Whalley v Roberts and Roberts (1990) I EGLR 164 looked into the irregularities concerning negligence in mortgage valuation and the court opined that in certain situations, civil engineers and architects have no professional value as compared to surveyors

In this case, it is also necessary to consider the duties of expert witnesses under English Common Law:

The expert witness has to bear in mind that his duty to the State overwhelms his sense of duty to his clients and thus he should not act in compromise of this supreme fact. This stand was re-established in the case of National Justice Compania Naviera SA v. Prudential Assurance.
Next, we need to consider the fact that the enforcement of expert duty would be with regard to perjury (lying under oath) committed. The law may refuse to accept the expert witness’s deposition if the Court believes that it has been heavily compromised by biased interest towards the client. Under such circumstances, the Court has the option of holding the expert witness guilty of contempt of court In the case of Stanton v.Callaghan (1998) 4 All 961 this was held.

It is seen that an expert witness possesses certain immunity in terms of not being chargeable for utterances and for reports presented in court.

Aspects of the Civil Procedure Rules

The Civil Procedures Rules are an important piece of legislation that aims to control the functioning of expert witnesses and streamline they’re in court activities.

This was drafted to increase the sovereignty of experts and to reduce the incidence of partiality used by experts towards their clients.

It is used to motivate the use of experts to solve the problem.

Reduce the delay and expenses in the use of experts.

Under Part 35 of the Civil Procedure Rules, the Report should mandatory:

Be addressed to the Court and not to any client or another person
State the expert witness’s qualifications
Materials from which the draft report has been prepared
Range of opinions in summary form
Summary of conclusions
Details from whom the witness has received instructions
Containing a confirmatory statement that the expert is aware of his duties to the Court.

In addition to this, the expert also has to give a statement that all details are true.

In addition, the Court has given the powers to bring about a rapprochement between the expert witnesses of the different parties in order to identify and narrow down the different areas of conflicts and reach agreements wherever possible.

Woolf Committee

Further, in its interim report, the Woolf Committee had paid little attention to the quality of expert evidence but the final report addressed the issue more boldly and noted that there were natural tendencies by expert witnesses to stray away from the main points.

Therefore, it became necessary for the expert witnesses to be properly inducted and trained in the awareness of governing rules and be fully equipped to meet the challenges of effective presentation of evidence in Courts. However, the Court did not feel it necessary to introduce any changes in the qualifications of Expert witnesses.

The number of expert witnesses is usually two, one for each side. Sometimes the parties may agree to appoint one expert. However, as a normal policy, each party retains one expert.

In a survey conducted recently, of the 400 odd destinations localized, nearly 250 completed the question.

Results of the survey

The main task areas were in terms of judging the performance of the Expert witnesses. Thus, it is seen that the response has been an encouraging 63 %. The main areas that needed to be

Focused had respondents comment on the performance of the expert witnesses.

The results of the investigation showed that expert witnesses including valuers sometimes, sided with the clients and they even acted as advocates for their clients although they were supposed to depose as witnesses. Thus, it is seen that the basic purpose for the deposition and witnessing failed since the witnesses were biased. The judges maintained that although other people in the case were honest, the expert witnesses did not seem to have been properly guided or briefed by concerned people. The senior-most judges with the highest experience are quoted as having said

Aspects of property sales

That the property up for sale in the market would fetch only what its market demand could muster. However, more often than not, sellers tend to attach objective or innate value to it in order to make it saleable. In many cases, very unshakeable properties are also given such values. However, the best way out in the cases of biased witnesses is to leave it to the judge to decide and remove the element of bias from the evidence provided by such expert witnesses.

Further, the judges were of the opinion that the witnesses need to be trained and guided more professionally in the discharge of their duties. For this purpose, it would be necessary to have some training session programmes giving practical demonstrations of the expert witness’s activities in court going on and the trainees learning how to make a good and effective presentation that would be appreciated by the jury and the audience.

Normally the acceptable margin of error is 10-15% but it is seen that sometimes it reaches 44% the values manifest scant knowledge of the rules of evidencing and its deposition to the members of the distinguished jury. This creates doubt whether the witnesses are aware of their duties and responsibilities to the Court and the legal proceedings.

However, this fear is discounted because the majority (90%) believed that their primary responsibility was to the Court, only 5% said it was a mixture of Court and Client and only 5% were fully in support of the client, oblivious of RICS Guidelines. Thus, it is seen that the expert witnesses although aware of their duties and commitments to the Court, had chosen, either deliberately or non-deliberately, to ignore it. Most of the witnesses were also theoretically aware of the fact that their primary and fundamental duty was to the Court by ensuring that the presentation was done according to the Court’s directive, and by subserving the client’s needs in this case.

Thus, the aspect of client-based valuation, with its inherent and characteristic drawbacks needs to be removed. This could be best done through the process of training and orientation into the field of study. Moreover, it is also seen that the present tendency of interacting more with the clients and taking professional advice from the clients need to be curtailed in order to provide justice and fair play in valuation cases. It is also seen that the objective and client-oriented approach needs to be altered in order to bring it more customer-oriented and favourable to the Court and to the masses. It is only by ensuring that all facets of this problem need to be taken into consideration, and the expert witness would be able to throw light that is more deliberate on this subject. It could only be through a strong and well-motivated action plan that these undesirable elements in judicial matters could be solved for common good.

The aspects of formal training in techniques and procedures of valuation is being demonstrated, The support in this regard is for formal training in order to reap the benefits of technical knowledge and beliefs about the method in general. The new Guidance, RICS has been a remarkable book in this direction and is being actively consulted for this study.

It is felt that the benefits from valuation would be better forthcoming if structured procedural orientation classes were made for the new entrants and serve as brush-ups for the experienced staff. Whether valuation needs to be considered in the substantial established area of knowledge is a matter of debate, discussion since it varies considerably from one set up to another, and there is a high degree of estimation mostly between 10-15%. Nevertheless, sometimes it may be beyond this ranging to 55 %or more. Therefore, this creates a greater degree of stress and mental lack of focused work on the part of the expert witnesses.

It could be seen that even in the case of valuers, there could be a severe difference of perspectives and action plans which could be eve4n more sharply focused in the case of expert witnesses. therefore by adopting standardisation of training programmes it is seen that a lot of movements in this market could be made possible. This is also necessary because the choice of a single expert will not be forthcoming and it would be necessary to take the experience of several such witnesses to arrive at the correct solutions. It is necessary that in the larger interests, a consensus be taken so that the biasness if any of local influences is to be reduced. It needs to be remembered in consensus trade, that just amicable and mutually agreeable solutions need to be taken by all the parties. They should try to adopt unique techniques to reduce the pressures on any single individual or class of organisation.

Several aspects of performance

Next, it is to be seen about the several aspects of performance in this concept; they may be of three types;

Performance of Expert valuation witnesses
Training of Expert valuation witnesses
Organization of expert valuation witnesses.

It is seen that in the first aspect, that is, the question of performance is a relative term and it may vary from individual to individual or from situation to situation. Further, the bias that is being shown to clients may be accidental and not deliberate. Therefore, when correct intervention measures are made, this aspect would be solved.

Coming to the second part, it could e saw that further, the bias that is being shown to clients may be accidental and not incidental. Therefore, greater caution has to be exercised in future to ensure that such heavy bias that could vitiate the research studies does not take place. The bias needs to be avoided because the primary responsibility of the witness is to the Court and to law, and not to his client. If this is allowed to be so, in the days to come, it is feared that the bias would be very high and no decisions could be forthcoming.

Further, it needs to be said that the responsibility of the witness to the legal process should veer them away from careless witnessing and raise their great responsibility and duty to the Court.

Finally, it is seen that the principle is that one witness for one client. However, sometimes there may be a multiplicity of witnesses which could confuse the courts or even if one witness attends to a large number of cases. Their ore the 1:1 party-leader system would be most appropriate and cost-effective since the more the expert witnesses in a case, the more amounts would have to be spent for their travel, stay, etc. Thus, the budgetary constraints would not allow such things to happen, and even if they do, it would be at lower costs for the party or the customers.

Singer & Friedlander Ltd v John D wood case

In the decided case of Singer & Friedlander Ltd v John D wood, the Courts initially accepted the concept of margin of error in a case relating to professional negligence on a valuer. (Neil Crosby & Anthony Lavers Property valuation accuracy, variation, and the “margin of error”

It may be further said that nowadays, Courts rely heavily upon the depositions of the experts who may, as noted earlier, bring in an element of bias and discrimination towards their clients as has been the subject matter of many decided case laws In Singer & Friedlander Ltd v John D Wood & Co [1977] 2 EGLR 84, Watkins J took a similar line:

“The valuation of land by trained, competent and careful professional men is a task which

rarely, if ever, admits of precise conclusion. Often beyond certain well-founded facts so

many imponderables confront the valuer that he is obliged to proceed based on

assumptions. Therefore, he cannot be faulted for achieving a result, which does not admit of

Some degree of error. Thus, two able and experienced men, each confronted with the same

task, might come to different conclusions without anyone being justified in saying that either

Of them has lacked competence and reasonable care, still less integrity, in doing his work

Valuation is an art, not a science. Pinpoint accuracy in the result is not, therefore, to be

expected by he who requests the valuation.”

(Neil Crosby and John Murdoch: Expert valuation witnesses in the UK: problems and solutions.

The accepted margin of errors

The aspects of valuation error could be seen with regard to an example if the valuer gives a certain percentage (say between 5-10) within brackets and this could be proved in court to have been arrived at even without negligence, the client does not have to bear any loss because of this aberrance. It is also seen in many contexts that the Courts assign values to every property termed as ‘true value;.If this true value is negligently not identified by the valuer, it could be said that negligence has taken place, since the identification was necessary for this claim to be met. Neil Crosby & Anthony Lavers Property valuation accuracy, variation, and the “margin of error”

Thus, it is seen that what matters most in the cases of valuation error is that the valuation error is within predetermined standards and has not created a loss for the depository. If it has arisen involuntarily then the valuer is not guilty of any offence, but if there was the need for verifying the existence of goods and its arithmetical accuracy and certain figures have been arrived at, if it is proved that prima facie, there was no cause for carelessness than the case is withdrawn and the matter is resolved.

Again, it is seen that this principle is unique in that the Courts have to rely on the witnesses to determine the value of the property and regarding the other formalities that have to be completed during the sale etc. Thus, it is seen that for the seller, it is important that the correct valuations are received since otherwise it may invite judicial revaluation etc.

I saw that over the years these laws have remained more or less than the same, and it is only created more complications and delays, because of different interpretations by diverse opinions. Therefore, it is now necessary that proper professionalized services need to be utilized to determine the correct price to the satisfaction of all concerned and the Government tax etc

It could be said that the Margin of errors would remain in UK laws for a long time since there are no basic implications of losses if paid up. There are no strong motivating factors for changing prices for the seller and he is aware that he cannot pay in bulk for goods. Even the Courts are aware of the difficulties since the buyer is buying out and there is no real difference between the goods and the pattern of the seller.

It is seen that the area of margin of error in negligence valuation is something, which is part of UK business and it is often seen that in the case of failure of negotiating the parties have to seek recourse to litigation. It is preferred to seek out of court settlement along with out–of–court settlement for the speedy termination of the litigation since otherwise there will be a great deal in losses in terms of time and money etc., Moreover it would against the spirit of future business with the customers since to a large extent, the goodwill would be reduced..

It is seen that the arbitration process could bring relief in the case of such kinds of disputes. By offering arbitration what is being offered is basically a professional solution with proper facilities

In many countries, it is seen that arbitrator offers more than just solutions – it offers partnerships and trade agreements. It is also seen that in the present context, the courts rely heavily upon the conduct and depositions of the expert witnesses regarding cases involving margin of error in negligent valuation. It is for the courts to decide whether a margin or error has occurred due to negligent valuation, and how the negligence in valuation has taken place. The Courts would then apply the Concepts of the margin of error in the proved negligent valuation and established a verdict based upon the depositions of the parties.

There are several aspects to incorrect or negligent valuation and they could be seen in the following ways:

Due to lack of knowledge on the part of the valuer
Despite knowledge he may be in the clutches of his client
Decision is taken by consensus, therefore; individuals have little decision-making powers
Sale value of the item cannot be correctly assessed or estimated which leads to negligent valuation
The person who has been inducted as the expert valuer has little if no knowledge about the valuation field and needs to be trained and given experience in this field

Due to lack of knowledge on the part of the valuer: It may sometimes happen that the person who has been appointed as expert valuer or assessor is not qualified nor experienced, as is often the case. Thus, having no background knowledge about the technical subject, he is unable to form his independent opinion or present his findings on the assigned case. It is also possible that his line is specialization may be different from what is required from this particular assignment.

For instance, a surveyor would not have the technical knowledge of a chartered civil engineer, or a draughtsman would not be as knowledgeable as an engineer, etc.

Despite knowledge, he may be in the clutches of his client: As is often the case, the final control and supervision of the work lie with the client and he is in a position to dictate terms to the expert valuer or assessor, since the final authority vests on him. Therefore, bowing to the wishes of the client, it is often seen that expert witnesses often have to give misleading data in order to please the client and secure his financial position. Although this could keep him open to perjury (false statement under oath), he is bound to take the risk in the interest of his client and professional standing. Although the witness’s loyalty has to be with the Court this is not often practicable, the clients are able to exploit the weaknesses in the judicial system for their own gains, and benefits, and they, in turn, use the witnesses as pawns in a power-brokering game. Further, it is seen that the risks borne by the witnesses, although in the course of defending his client, but in the event of legal proceedings against the witness for contempt of Court, or any other legal proceedings, will have to be borne by the witness individually and not by the client.

The decision is taken by consensus, therefore; individuals have little decision-making powers

As is often the case, the expert witness may not be able to express an individualistic opinion, regarding the matter of margin of error in negligent valuation and therefore, he has to seek the consent of his immediate seniors and associates before he could give his deposition in Court. A plasticizing expert also needs to consult his partners and business associates before speaking at the Court. Thus, the matter of correct and technically sound valuation may not be forthcoming and maybe rigged and presented by the clients with the connivance of the legal supporters.

The sale value of the item cannot be correctly assessed or estimated which leads to negligent valuation

Sometimes it may happen that the correct sale price may not be accurately determined due to paucity of information or because of the confidentiality exercised by the owners, due to competitive considerations and therefore the expert witness is not able to depose effectively regarding these aspects in Court

The person who has been inducted as the expert valuer has little if no knowledge about the valuation field and needs to be trained and given experience in this field

As is often the case, it often happens that the expert witness may not have any knowledge about the present field of study and is part of a team for the client. However, later, due to circumstantial reasons, he is constrained to lead the case and put forth his opinion. Under such circumstances, he would need to be provided further induction and through knowledge and experience in this highly technical and specialized field before he seeks a deposition in the Court. Outside professionals who are aware of the valuation matters or someone within the organization who could take care of this matter could provide this training.

The proposition is that valuer is not liable for loss due to a fall in market prices.

It was held by the distinguished jury in the “decision of South Australia Asset Management Corporation vs. York Montague Ltd … in which the House of Lords unanimously decided that a valuer is not liable for market losses suffered by a lender who lends on the security of negligently valued property in circumstances where the valuation is only one of many pieces of information on which the lender bases the decision to lend.” (R.Lee: Ingenta Connect: Valuers do not need a crystal ball: Property Management Volume 15: Number 1, 1997.

It is seen that the real estate market in the UK is a very volatile and sensitive market and has experienced heavy vicissitudes, in its chequered history. During the 1990s the UK domestic real estate market took a deep slump from which it took a very long time to get back to a buoyant industry. The implications of real estate pervade the entire domestic economy and also affect market prices significantly.

The determination of market prices is the net effects of many factors and not just one or two factors, including the GDP and the incomes and expenditures pattern of the people. Since the valuer is not responsible for losses occurring due to fall in market prices, because it is almost an impossible task that the value to be objectively identified or marked for any specific property at any specific time.

There are countless instances when the markets in UK, USA, Australia etc. went through many economic upheavals and eventually overcame them.

In the case of Blake v, Barking and Dagenham a purchaser of a council house, which had reduced in value after acquiring, claimed that the local authority owed a duty in respect of the assessment of the sale price by its valuer. However, no such duty of care was found to exist in law in these

Circumstances. The valuer may admit that the duty of care exists but deny that it has been breached, in that the standard of professional conduct achieved meets that of the ordinary competent practitioner: Bolam v Friern Hospital Management Committee.

Optimum Resolution of Negligent Valuation Disputes

Anthony Lavers, Professor of Law, Centre for Real Estate Management, Oxford P 2.

In the event of a proposed sale of real estate or property, the valuer makes the necessary calculation and presents it to the client. However, it is possible that after the presentation of the documents, but before the actual sale transaction takes place, the price of the property would have fallen or risen what would happen in such an eventuality?

It is seen in such cases that the determination of the value of the property is being valued. In the case of mortgage valuation, when the buyer has agreed to the purchase price, the role of the valuer is just to confirm or reject the purchase price. In case the purchase price is rejected, the buyer takes up the Market price.

The valuation of the purchase price is primarily done for two things:

Confirm that the PP is correct
Valuation is necessary for arriving at the amount of collateral security for loans being pledged by the pledge.

The fact remains that the purchase price is the best evidence of value. In most cases, the assets taken are valued at their current values.

Valuing the purchase price of the property – Is the purchase price of the property the best evidence of value? 2006.

In the event that there is a change in position from employee to contractor, it is important that professional indemnity insurance be taken in order to seek protection from litigation.

The evidence of market value is based on the evidence available that is supporting the market value. In some cases, it is seen that the sale prices are not available – in such cases, the sales have to be evidenced from certain sources. The sales evidence and the analysis of market values in the valuation price could be seen in terms of the fact that market value is based on evidence that underpins the market value assessment value. In the leading case of Reading v The Valuer Gen (1923) 6 LGR: 132 there were three aspects that needed to be taken into consideration while determining market value: 1. Sales value based on other people’s opinion

Value-based markets
Previous recorded opinions

In the case of loaned or mortgaged valuation, it is seen that the value provider would be the purchase price The importance of sales evidence and buyer behaviour analysis is important and needs to be understood. Along with the basis of valuation and its application is also important

Factors that affect sales price

Buyer behaviour and analysis
Special conditions of sale if any
Vendor agent

It has been seen through case studies that, by far the sales would depend on two aspects –

Actual wordings of the court order regarding the purchase price
In the leading case of ACCC v.Oceana Comm Pte Lted (2003) ECA the role of valuer has been further defined 25 years after the Inez v Dodd decision. In this latter case, the valuer advised

The lender that the purchase price of the property was well in excess (46%) of its market value. Valuing the purchase price of the property –Is the purchase price of the property the best evidence of value?

The role of the valuer in the lending process is not to confirm the purchase price of the property and its value but to ensure whether the Sale price conforms to the Purchase price that is in conformity with market value based on sales.

It is the foremost task of the valuer to ensure that the purchase price constitutes the market value.

In addition, whether the sales price complies with the test of value as enunciated through Spencer case. It is the role of the valuer to determine that the criteria set by the Spenser test are met this is particularly when the sale of the subject property has evidence, particularly when considered against the absence of adequate compensatory sales evidence the valuer must confirm that the purchaser has passed the Spencer test. The failure to pass this test means that the valuer risks ignoring the best evidence of value – the sale of the subject does not automatically become the proof of value. The sale of the subject becomes evident only after the transaction has been duly tested and the valuer has gained the necessary information from the purchase.

Another aspect that impinges on the sale of the subject property being affected by situations in which the buyer was not aware of the process not being equivalent to the market value. Australian Competition & Consumer Commission v Oceana Commercial Pty Ltd [2003] FCA 1516, The values apportioned by the lender varied with the purchase price at $ 100,000 as opposed to the purchase price of $164,900.The lender was successful in not disclosing this variation to the borrower and required the borrower to furnish further collateral security,

The second expert valuer who verified said that they had determined the value of the subject property at $115,000 which is at 15% above the purchase price. (Valuing the purchase price of the property – Is the purchase price of the property the best evidence of value (2006)

Banque Bruxelles Lambert SA v. Eagle Star Insurance Co Ltd

In yet another case heard by the House of Lords, called Banque Bruxelles Lambert SA v. Eagle Star Insurance Co Ltd, the facts clarified a significant aspect of liability of values. By awarding greater importance to the scope of duty for determination of wrongful valuation of property, clarity was established by making greater accountability for the assessment of damages arising out of contractual breach.

The facts of the case were that a lender lends money on the strength of collateral property security. Later, the borrower defaulted and the lender sought repossession of his loans by sale of property. However, the amount that accrued out of sale was far lower than the amount of the loan because of these two reasons:

The value of the property was overvalued while taking the loan
During the intervening period between granting of the loan and its subsequent recall, the value of property had fallen, and thereby the present value of the security was down.

The question arouse as to whether the valuer was responsible for the loss arising due to fall in the value of property during the intervening period.

Although the Court of Appeals upheld the decision, the House of Lords was not inclined to follow suit. In a a judgment, Lord Hoffman upturned the Court of Appeal decision and held the valuer liable only for the loss that was directly resulting from the overvaluation of assets and absolved him for the losses accrued due to fall in the value of house properties in the UK. John Wightman: Negligent Valuations and a Drop in the Property Market: The Limits of the Expectation Loss Principle.

However, the above judgment has not set a precedent, as far as the market value losses are concerned and it is seen that, at the Court’s discretion, the lender could also recover as indemnity, losses suffered due to fall in the value of property during the intervening period i.e., the period between the date of the mortgage and the date on which the mortgaged property is repossessed and resold. (Negligence in valuation and surveys: John Murdoch: P 60)

Nevertheless, it is seen that the total damages that could be recoverable cannot exceed the amount of overvaluation. To take a simple illustration, a house valued for £ 100,000 has been overvalued to £150,000 and a loan for £ 75,000 realized. If the loanee defaults, the maximum damages that could be claimed would be (150,000 – 100,000 = £50,000)

There are a number of controversies on this subject and opinions are polarized. The writer feels that since the fall in value of price during the currency of the mortgage period could be attributed to the default on payment on the part of the mortgagee, he needs to be held responsible, to a certain degree. If the mortgagee repayment were made in terms of the covenant, the question- neither of sales of the collaterals or the question of deficit mortgage dues would arise in the ordinary course of business. Therefore, the aspect of value of real estate property would not have arisen. Again, if it were claimed by the mortgagor that he had negotiated the mortgage only due to the overvaluation of the value of collaterals, he could recover indemnity for the losses he has sustained.

However, an interesting aspect that may come up would be should the value of property go up, during the interim period. Would the appreciation in price and the consequent profit by the mortgagor be shared with the mortgagee? A simple example should clear the point.

In the referred case, a house valued for £ 100,000 has been overvalued to £150,000 and a loan for £ 75,000 realized. If the loanee defaults, the maximum damages that could be claimed would be (150,000 – 100,000 = £50,000)

Suppose the rise in prices of real estate fetches the mortgagor, £ 25,000 appreciated in sale prices. Would the appreciation of £ 25,000 be adjusted from the maximum damages of £50,000, and the balance claimed? In all probability, it would not be so. This may emanate from the principle that all notional losses need to be accounted but notional profits may not be done so.

Thus, for legal standing it could be said that in most cases, the Courts would not take view of including losses due to fall in the market prices of property on the valuer’s account.

South Australia Asset Management Corporation -v- York Montague Ltd; Similar [1997] AC 191; [1996] 3 WLR 87; [1996] UKHL 10; [1996] 3 All ER 365.

It was while deciding the case that Lord Hoffman observed that before the principles for computation of damage is considered it would be deemed to undertake the losses for which a person could possibly claim indemnity. He opines that the extent of liability should commensurate with the degree of wrongdoing, and it would indeed be a travesty of justice to hold a person liable for the total responsibilities of his wrongdoing.

The following case laws are dealing with negligence and its effects

The claimants based their decision on a mistaken homebuyer report and began inhabiting the home. Soon they found that it was uninhabitable and move to court over disputes of being led fraudulently into purchasing a home. The claimants were awarded damages based on value differences and indemnity damages as alternative arrangements until such time they were able to dispose the defective accommodation and get accommodation elsewhere. The Court of Appeal held that the application needing the aspect resale also should set a timeframe by which it would be necessary for them to arrange for alternative arrangements. In other words, the Courts held the view that although the primary negligence has been established against the defendants for having misrepresented the applicants and provided them with unsatisfactory accommodation, their claim for damages until such time they were allotted alternative arrangements could be seen as a non-causative factor and needed to be controlled. Thus, their main claim was upheld and the others claim with conditions attached. (John Murdoch: Case in Point: Negligence in valuations and surveys: Shifting the blame: Mitigation of damage: P 77:

Again, this decision was reinforced in the case of Platform Home Loans Ltd v.Oyster Shipways Ltd (1999) in which case, the learned and honorable House of Lords opined that where a negligent valuer’s debt to a loaner is subject to a restriction or limit, equal to the amount by which over-valuaton has ensued, it is seen that any reduction from the damages on the ground of the mortgagor’s contributory negligence is to be effected from the mortgagor’s total loss and not from the limit. Thus, in the above case, the loss being £611,000, the damages were capped to

£500,000 and the share determined by the House of Lords at 20%. It was held that the computation would be made at 20% of £611,000 = £488,800 instead of £400,000 (20% of £500,000) (John Murdoch: Case in Point: Negligence in valuations and surveys: Shifting the blame: Mitigation of damage: P 79).

In the context of valuation, it is necessary to consider certain significant aspects of law, which may be as follows: 1. Reduction of blame and Contributory negligence.

Reduction of blame

The principle of reduction of blame invokes a person to seek damages for breach of contract and is debarred from recovery of compensation for any aspects of loss or damage which, through ordinary skill and prudence, he could very well, have circumvented. Such loss or damage resulted fully from claimant’s own inability to reduce, and not to the defendant’s perceived breach of duty or care. The onus of proving that the claimant has not indicated reasonable degree of care is incumbent upon the defendant. In the context of reduction of risks in this study, the reference needs to address matters connected with surveyors or valuers.

In addition, it could emanate from a number of ways. The case of Nykredit Mortgage Bank plc v Edward Endmann Group Ltd (No2) (1998) is a case of relevance and is directly related to the principle of reduction of blame or fault in a bilateral valuaton deal. It was in this case that the House of Lords observed that the Court, being highly skeptical about the lender’s fault to take up legal action against the defaulter. Mortgages could be termed as the reduction of blame and it needs to be seen from the perspective that “the borrower’s covenant to repay the mortgage loan has a capital value” and it is this amount that needs to be matched up with the loss suffered by the lender. (John Murdoch: Case in Point: Negligence in valuations and surveys: Shifting the blame: Mitigation of damage: P 77 – 79)

The next factor that needs to be studied is with respect to the degree of contributory negligence.

The English law had determined that the aspect of contributory negligence arises, upon the valuer, on being sued for negligence, raises the defiance, that the claimant’s own conduct has, even in part, has been a contributory reason for the losses. Once the Court is convinced that the claimant is also partially, at fault, the claim of the applicant is not nullified, but is reduced by that quantitative amount that could have arisen due to the applicant’s faults.

The aspects of contributory negligence is seen in the case of Forsikringaktieselskapet Vesta v Butcher (1986).However, it has been determined in this case that the legal defiance of contributory negligence is independent of action for violation of strict contractual obligation and the former cannot be used for negating the latter. It is also independent of action for breach of contract when the aspect of , for instance, fiduciary relationship is involved.However, it could be used for professional negligence. (John Murdoch: Case in Point: Negligence in valuations and surveys: Shifting the blame: Contributory Negligence: P 80: Forsikringaktieselskapet Vesta v Butcher (1986)

The aspect of contributory negligence needs to be seen from the legal angle also. The lawmakers of the law reforms (Contributory Negligence) Act 1945, in their magnanimity, or otherwise, had not sought to brand the nature of conduct that could be termed as contributory negligence. Therefore, this has left the options open to the Courts to use their discretion to invoke this statute whenever it was deemed relevant to do so. Largely, the following conduct could be said to come under the umbrella of contributory negligence based on three allegories

Claimant assisted in the performance of the defendant’s error or fault
Claimant acted without proper reason in placing faith on defendant’s report
Claimant‘s decision to enter into contractual agreement was injudicious for other reasons.

Contributory negligence

It is seen that in order to prefer a defence for contributory negligence, or all, or any one of the above, needs to be invoked. It is seen that in the case of Cranehearth Sec Ltd. V. York Montague (1994), although the claimants had the financial statements, they did not show it to the valuers, and the defendants were constrained to assume misstatements regarding turnover. It could not be proved that the defendants were negligent and thereby, the claimants escaped from the penalty of contributory negligence.

However, in the cases of both South Australia Asset Management Corpn. V York Montague Ltd (1996) and a recent case of Western Trust & Savings Ltd. V Strutt and Parker (1998), the overwhelming evidence against the claimants help adjudge them to have committed contributory negligence.

Conclusion

It has been seen that in most cases, the Jury has not been in favour of holding the valuers responsible for losses due to the fall in market prices of property since they are already accountable for showing abnormally high property values in order to get better selling prices.

It would be presumptuous to demarcate and border areas of negligence or non-negligence since a lot would depend upon circumstantial evidences, the material witnesses and the course of judicial proceedings. It is often best to leave legal pronouncements on the better senses of wiser and saner members of the distinguished jury.

Cited Texts

Neil Crosby and John Murdoch: Expert valuation witnesses in the UK: problems and solutions: (provided by customer),

R.Lee: Ingenta Connect: Valuers do not need a crystal ball: Property Management Volume 15: Number 1, 1997: Web.

Optimum Resolution of Negligent Valuation Disputes.

Anthony Lavers, Professor of Law, Centre for Real Estate Management, Oxford P 2. Web.

Valuing the purchase price of property – Is the purchase price of property the best evidence of value? Web.

Valuing the purchase price of property – Is the purchase price of property the best evidence of value (2006). Web.

John Wightman: Negligent Valuations and a Drop in the Property Market: The Limits of the Expectation Loss Principle the Modern Law Review, Vol. 61, No. 1 (1998), pp. 68-76. Web.

John Murdoch: Case in Point: Negligence in valuations and surveys: Shifting the blame: Mitigation of damage: P 77: Web.

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