Justice Einstein in Genworth Financial Mortgage Insurance v Hodder Rook & Associates  NSWSC 1043 handed down 15 September 2010 gave an concise review of the law of negligence as it pertains to valuers, the essence of which is as follows:
Duty of Care
The legal principles are not in doubt. A valuer owes a duty of care to the recipient of a valuation containing negligent misstatements causing economic loss.
The relevant authorities were recently reviewed by the Full Court of the Federal Court in Kestrel Holdings v APF Properties  FCAFV 144. The judgement of the full court stated:
It now seems clear that a valuer may in certain circumstances owe a duty of care to the recipient of a valuation containing negligent misstatements causing economic loss, even in the absence of a contractual relationship between the valuer and the recipient of the valuation. A duty of care is recognised to exist where the valuer actually knows or ought to have known that the person in question would rely upon the valuation so prepared. In respect of the objective limb of that formulation, it is noted that subjective knowledge of the particular recipient or purpose to which the valuation would be put is not relevant. In addition, there is the further requirement that a finding of a duty of care be reasonable in all the circumstances. Accordingly, the subjective knowledge, actual or potential, of the valuer is a relevant consideration in determining reasonableness
This analysis is consistent with the High Court’s judgment in Kenny & Good Pty Ltd v MGICA  HCA 25, where Justice McHugh held:
The valuation in the present case is the product of a contract between the valuer and the Bank. MGICA was not a party to that contract. However, the scope of the duty of care which the appellant owed to MGICA is identical with the contractual duty which the appellant owed to the Bank and which is to be deduced from the terms of the contractual arrangement entered into by those parties. That is because the contract specifically contemplated MGICA as a party which was entitled to rely on the valuation.
In the same case Justice Gummow stated:
In this case, MGICA relied upon the valuers to exercise reasonable care and skill in providing the valuation. The relationship of reliance was particularly close in that but for the valuation MGICA would not have acted to its detriment in entering into the mortgage insurance transaction. Further, given the text of their Report, the valuers knew, or ought to have known, that their representations would be relied upon by MGICA.
Australian Property Institute (API) Residential Valuation and Security Assessment Pro-forma Valuation Instrument and Supporting Memorandum
The API proform report and supporting memorandum is critical in framing the scope of the duty of care where it is used as a basis for instructing a valuer, or where the valuer holds out the standard as being the basis for his work. In Vero Lenders Mortgage Insurance Ltd v Taylor Byrne Pty Ltd  FCA 1430, Justice Greenwood noted:
In preparing the valuation, Mr Duffield was undertaking professional tasks which gave rise to a duty to exercise all reasonable care, skill and diligence as a competent valuer in preparing the valuation and security assessment contained within the Pro-forma Report compiled in accordance with the Supporting Memorandum.
Justice Einstein in the Genworth case held:
The content of the duty owed by Hodder Rook can largely be determined from the documentary evidence which is not in dispute. Each of the valuations contained a statement in the following terms:
As instructed this report complies with the criteria set out in the API Residential Valuation and Security Assessment pro forma supporting memorandum dated 8 May 1998, and must be interpreted with that memorandum.”
The PropertyPro Residential Valuation and Security Assessment Pro-forma Supporting Memorandum (PropertyPro Memorandum) sets out detailed instructions and guidance for the completion by a valuer of the pro-forma valuation. The memorandum gives content to the duty owed by Hodder Rook to Genworth.
The key matters which emerge from the PropertyPro Memorandum are as follows:
- The valuer is required to provide an opinion as to the market value of the property at the date of the valuation (usually the date of inspection) that is supported by the evidence of at least 3 comparable sales within the 6 month period prior to the valuation (or 3 months in a rapidly moving market). If there are insufficient suitable comparable sales in the prior 6 months period, an explanation must be given in the Additional Comments section of the form.
- The sales evidence should provide a realistic comparison in terms of price range, type of property and price. If the sales evidence varies significantly from the valuation (+ or – 15% is referred to in the memorandum) a suitable comment should be provided in the Additional Comments section of the form.
- The sales evidence should be compared with the subject property with a description of the comparable sale which allows an understanding of why it has been judged to comparable, inferior or superior (as the case may be).
- A sale of the subject property in the previous 3 years should be noted, particularly if the valuation is a significant variation from the valuation. The memorandum makes the common sense point that a prior sale is a test of the market.
- The valuer is required to comment on the direction the recent activity and direction of the market.
- The Risk Analysis section of the form requires a forward-looking assessment of four risk factors which may affect the value of the subject property, particularly over a 2 to 3 year period. The most pertinent factors are “market volatility” and the “reduced value 2-3 years.” The risk rating system requires a comment on any “4” rating or if there are three or more “3” ratings.
The acceptable margin of error “The Bracket”
It is accepted by the courts, that competent valuers may differ as to the correct valuation of a property see Hann Nominees Pty Limited v National Australia Bank Limited  FCA 454 and Lancini Properties Pty Limited v Savills (Qld) Pty Limited  QSC 323. In each case, there will be an acceptable range of opinion or, as it is sometimes described, a margin for error. In Hann Nominees the Full Court of the Federal Court stated:
Because a valuation does not admit of a precise conclusion, competent and careful valuers may properly differ as to a particular figure. Therefore difference of result does not necessarily mean that a valuer has been negligent. However where a valuer determines a figure which is outside a range of values which could properly be arrived at by a competent valuer the Courts have taken the view that such an over-valuation affords some evidence of negligence on the valuer’s part…
The relevant principles were also considered by the English Court of Appeal in Merivale Moore plc v Strutt & Parker  2 EGLR 171 where Lord Justice Buxton held:
There is, as I have said, a permissible margin of error, the ‘bracket’ as I have called it. What can properly be expected from a competent valuer using reasonable care and skill is that his valuation falls within this bracket.
A valuation that falls outside the permissible margin of error calls into question the valuer’s competence and the care with which he carried out his task: ibid. But not only if, but only if, the valuation falls outside that permissible margin does that enquiry arise.
Once it is shown that the valuation falls outside the “bracket” the plaintiff will by that stage have discharged an evidential burden. It will be for the defendant to show that, notwithstanding that the valuation is outside the range within which careful and competent valuers may reasonably differ, he nonetheless exercised the degree of care and skill which was appropriate in the circumstances.
A finding that a valuation fell outside a reasonable range or “bracket” is not of itself sufficient to establish negligence but it substantially eases the task of the Court in deciding whether a valuer has been negligent. His Lordship was not prepared to hold in general terms that the adducing of evidence to the effect that the valuation is outside a reasonable range or bracket is a necessary precondition to a finding of negligence on the part of a valuer. He considered it may be open to a Judge, in a suitable case, to hold that a valuation figure is so far removed from what is the true value of the property that it could be regarded as a valuation that was outside the limits open to a competent valuer without specific professional evidence being given of what those limits were.
In Adwell Holdings Pty Ltd v Smith  NSWCA 103 a unanimous decision held:
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 on the basis of 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.
Since then, judges seem to have taken a figure of 10% (or, in some cases at least, perhaps 15%) of the true figure to constitute an area, or bracket, within which, prima facie, a valuation is not negligent. But the importance of that “bracket” notion must not be misunderstood. It is not a statement of some principle that no valuation within the bracket can, as a matter of law, be negligent. That such a valuation can still be negligent is not only a matter of common sense, but has been judicially developed. Once one finds that a valuation is within the “bracket”, one can infer that prima facie, but only prima facie, it is not tainted by negligence; of course, it may have been arrived at by negligence, but that fact must be proved; one can never say that purely because a figure is within the “bracket”, no negligence can be involved; but, on the other hand, if one arrives at a conclusion that a particular valuation is correct, one may turn to the “bracket” test as a check.