competence margin duty methodology loss reasonable breach of duty codes of practice case law bracket resultant loss SAAMCO cap

Transcription

1 Carrie de Silva

2 duty competence margin reasonable methodology loss breach of duty case law bracket codes of practice resultant loss SAAMCO cap

3 Cann & Sons v Willson (1888) Ch Le Lievre v Gould [1893] CA Donaghue v Stevenson [1932] HL Candler v Crane Christmas & Co. [1951] CA Hedley Byrne v Heller [1963] HL Caparo Industries v Dickman [1990] HL Macpherson v Buick Motor Co. (1916) NYCA Ultramares Corp. v Touche (1931) NYCA Credit Alliance Corp. v Arthur Andersen (1984) NYCA

4 Cann & Sons v Willson (1888) Ch Le Lievre v Gould [1893] CA Donaghue v Stevenson [1932] HL Candler v Crane Christmas & Co. [1951] CA Hedley Byrne v Heller [1963] HL Caparo Industries v Dickman [1990] HL Macpherson v Buick Motor Co. (1916) NYCA Ultramares Corp. v Touche (1931) NYCA Credit Alliance Corp. v Arthur Andersen (1984) NYCA

5 Duty of care Breach of duty of care Resultant damage

6 Duty of care owed by D to C Breach of duty of care Resultant damage

7 Client - obviously (in contract, as well as tort). Purchaser of property when you are engaged by mortgage lender? Caparo constraints.

8 Lack of reasonable care. Look at: terms of engagement industry guidance industry practice - the competent valuer/surveyor

9 In valuation, if within margin, the quality/method of calculation is ignored so some very poor work may not be negligent at law. If outside margin, the burden is on valuer to prove that they were not negligent.

10 Not following industry codes of practice / guidance. Is compliance mandatory?

11 Not following industry codes of practice / guidance. Is compliance mandatory? They are not LAW!

12 these guidance notes [Red Book] are not to be regarded as a statute. I suspect that they are as much for the protection of surveyors as anything else, in that they set out various recommendations which, if followed, it is hoped will protect the surveyor from the unpleasantness of being sued. In any event, mere failure to comply with the guidance notes does not necessarily constitute negligence. I am not prepared to find Mr Appleton guilty of negligence because of this omission.

13 Not following industry codes of practice/guidance. Is compliance mandatory? They are not LAW! But need to establish CLEARLY in Terms of Reference or have a sound justification if not following.

14 Inadequate time Failure to visit property Failure to gather sufficient information Failure to keep adequate, contemporaneous records Failure to expand on site notes Lack of awareness of market (geographic or specialist)

15 Working outside area of expertise Ignoring recent selling price Failure to react to findings during work Failure to keep up to date (law, general CPD, etc.) Poor terms of reference Use of inappropriate comparables I could go on.!!!

16 Hubbard v Bank of Scotland (t/a ) [2014] CA BPE Solicitors v Hughes-Holland [2017] SC (also known as Gabriel v Little) Dunfermline Building Soc. v CBRE Ltd [2017] Ch Tiuta International v De Villiers Surveyors [2017] SC

17 Ashton House, Pattingham Road, Perton Ridge, Wolverhampton. (current est. 1.2m) Valuation report, not full structural survey. Valuer indicated visible cracks were old. No movement identified so no structural survey expressly recommended. Property on ground which had been quarried to 1884 and filled in by House straddled solid ground and the land fill area.

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19 Ashton House, Pattingham Road, Perton Ridge, Wolverhampton. (current est. 1.2m) Valuation report, not full structural survey. Valuer indicated visible cracks were old. No movement identified so no structural survey expressly recommended. Property on ground which had been quarried to 1884 and filled in by House straddled solid ground and the land fill area.

20 Claimant allegations - failure to: (a) identify ongoing subsidence (b) recommend further investigation of the cracks (c) reduce the value of the property to reflect cracks. Held: High Court, upheld in Court of Appeal No liability unless valuer knew, or ought to have known, that a full structural survey should be recommended. Valuer reasonably concluded that cracks were historic and, on the facts, was not negligent in failing to recommend full structural survey. Good site notes + contemporaneous photo highlighted by judge as the best evidence.

21 Take away practice point? Document bases for decisions - clear site notes, photos, etc. Be alert to additional/different terms or information in verbal conversations.

22 Considered the extent of liability when negligence established.

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24 Considered the extent of liability when negligence established. EXAMPLE FIGURES Negligent valuation - 100,000 True valuation at the time - 80,000 Sale price following a drop in the market - 70,000 Liable in negligence for loss of 20,000 or 30,000? If providing information only - 20,000 If providing investment advice - 30,000

25 Considered the extent of liability when negligence established. EXAMPLE FIGURES Negligent valuation - 100,000 True valuation at the time - 80,000 Sale price following a drop in the market - 70,000 Liable in negligence for loss of 20,000 or 30,000? If providing information only - 20,000 If providing investment advice - 30,000

26 Considered the extent of liability when negligence established. Negligent valuation - 100,000 True valuation at the time - 80,000 Sale price following a drop in the market - 70,000 Liable in negligence for loss of 20,000 or 30,000? If providing information only - 20,000 If providing advice - 30,000

27 If providing information only - 20,000 If providing advice - 30,000 Take away practice point? Have clear terms of reference.

28 42 Kenavon Drive, Reading Development planned: > 500 residential + s106 agreement on inclusion of social housing, retail, leisure and medical centre m market valuation by CRBE 107m gross development value m sale price

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30 42 Kenavon Drive, Reading Development planned: > 500 residential + s106 agreement on inclusion of social housing, retail, leisure and medical centre m market valuation by CRBE 107m gross development value m sale price

31 42 Kenavon Drive, Reading Development planned: > 500 residential + s106 agreement on inclusion of social housing, retail, leisure and medical centre m market valuation by CRBE 107m gross development value m sale price

32 Northern Rock Freddie Mac and Fannie Mae Lehman Brothers Royal Bank of Scotland etc., etc.

33 42 Kenavon Drive, Reading Development planned: > 500 residential + s106 agreement on inclusion of social housing, retail, leisure and medical centre m market valuation by CRBE 107m gross development value m sale price

34 Claim: Comparables Inadequate comparable evidence overall. Private residential PSF - inadequate use of comparables. No adjustment for poorer location (gas holders, railway, building density). Residual Social housing and shared ownership not adequately adjusted for. Finance costs incorrect. Developer s contingency not accounted for.

35 Argument on behalf of CBRE: Is valuation within the bracket? If so - dismiss claim. If not - then there is negligence. - then there is negligence.

36 Argument on behalf of CBRE: Is valuation within the bracket? If so - dismiss claim. If not - then there is negligence. - then there is negligence.

37 Argument on behalf of CBRE: Is valuation within the bracket? If so - dismiss claim. If not - then there is negligence.

38 Judgment: Being outside the bracket is a necessarily condition of liability but not, of itself, sufficient.

39 Judgment: Being outside the bracket is a necessarily condition of liability but not, of itself, sufficient.

40 Judgment: Being outside the bracket is a necessarily condition of liability but not, of itself, sufficient. Once the court decides true value and that value is outside the bracket, the burden shifts to D to demonstrate that appropriate care and skill was used. CBRE valuation April m True market value in April m. Bracket - ± 15%

41 CBRE valuation April m True market value in April m. Bracket - ± 15% 15% 2,437,500-15% 13,820, % 18,680,000

42 Judgment: Being outside the bracket is a necessarily condition of liability but not, of itself, sufficient. Once the court decides true value and that value is outside the bracket, the burden shifts to D to demonstrate that appropriate care and skill was used. CBRE valuation April m True market value in April m. Bracket - ± 15% Result: within margin thus, despite flaws, claim failed.

43 Key cases: Singer & Friedlander v John D Wood & Co. [1977] QBD Banque Bruxelles Lambert SA v Eagle Star [1995] CA Legal & General Mortgage Services v HPC [1997] QBD Merivale Moore plc v Strutt & Parker [2000] QBD Goldstein v Levy Gee [2003) Ch Dennard v PricewaterhouseCoopers LLP [2010] CA K/S Lincoln v CB Richard Ellis Hotels [2010] TCC Capita v Drivers Jonas [2011] QBD (Comm)

44 Key references: RICS Valuation Information Paper 12: Valuation of development land (pub. March 2008 but reflecting existing practice). Savills Residential Development Land Briefing Notes Savills UK Residential Research Bulletin Reading Development and Investment Review (Hicks Baker) GVA UK Economic and Property Market Review Land Registry UK House Price Index Jackson & Powell on Professional Liability

45 Singer and Friedlander v John D Wood [1977] QBD ± 10% residential development on agricultural land ± 15% or more in exceptional circumstances Axa Equity & Law v Goldsack & Freeman [1994] QBD ± 5% residential BNP Mortgages v Barton, Cook & Sams [1996] ORC ± 15% unusual residential

46 K/S Lincoln v CB Richard Ellis Hotels [2010] TCC ± 5% standard residential ±10% one-off property ±15% or > exceptional features Paratus AMC v Countrywide Surveyors [2011] Ch ± 8% not unusual but limited comparables Preferred Mortgages v Countrywide Surv.s [2005] Ch ± 15% unique residential - chapel conversion Webb Resolutions v E.Surv [2012] TCC ± 5% standard residential

47 February 2011 first mortgage 2.475m December 2007 additional loan 289,000 But structured as > 3m new lending to redeem first mortgage along with additional requirement. Valuation regarding second loan negligent. Were valuers liable for FULL loss of entire venture or just regarding the extended borrowing?

48 High Court X extended loss only but for test Court of Appeal liable for full loss due to structure X full amount lent on December 2011 valuation majority decision Supreme Court X X extended loss only but for test unanimous

49 The lender cannot recover losses it would have made regardless of the negligent valuation simply due to the choice of the internal structuring of the finance. a welcome and crystal clear clarification of the law Preferred Motgages v Bradford & Bingley [2002] CA Swynson v Lowick Rose [2015] CA

50 Due care. Appropriate Terms of Reference. Terms not extended verbally. Thoughtful comparables. Good site notes. Good office notes and files. Working within capacity. Demonstration of competence - qualifications and CPD. State assumptions and areas where more information is required to be sure.

51 Due care. Appropriate Terms of Reference. Terms not extended verbally. Thoughtful comparables. Good site notes. Good office notes and files. Working within capacity. E.surv [2012] Demonstration of competence - qualifications and CPD. State assumptions and areas where more information is required to be sure.

52 Due care. Appropriate Terms of Reference. Terms not extended verbally. Thoughtful comparables. Good site notes. Good office notes and files. Working within capacity. Hubbard [2014] Demonstration of competence - qualifications and CPD. State assumptions and areas where more information is required to be sure.

53 Due care. Appropriate Terms of Reference. Terms not extended verbally. Thoughtful comparables. Good site notes. Good office notes and files. Working within capacity. Watts v Morrow [1991] Demonstration of competence - qualifications and CPD. State assumptions and areas where more information is required to be sure.

54 Due care. Appropriate Terms of Reference. Terms not extended verbally. Thoughtful comparables. Good site notes. Good office notes and files. Working within capacity. technical geographical discipline Demonstration of competence - qualifications and CPD. State assumptions and areas where more information is required to be sure.

55 Due care. Appropriate Terms of Reference. Terms not extended verbally. Thoughtful comparables. Good site notes. Good office notes and files. Working within capacity. Demonstration of competence - qualifications and CPD. State assumptions and areas where more information is required to be sure.

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57 For those doing or considering expert witness work, see Riva Properties v Foster & Partners [2017] TCC Six experts two each: architects, quantity surveyors and accountants. A range of judicial criticism, particularly of one of the quantity surveyors.

58 Equine Law: An introduction to aspects of law and taxation relating to horse, rider and the small equine business First Women in law, government, the professions and other notable posts and achievements Health and Safety Casebook: key cases Negligent Valuation Casebook A Short History of Agricultural Education and Research from the 17 th to the 21 st centuries Contact author for copies.

59 BlueBox trainer Harper Adams University Principal Lecturer Law and Taxation