The lender sued the valuer and the company he worked for negligence and misleading and deceptive conduct under the Trade Practices Act.
Are subsequent sales relevant to the question of negligence?
The valuer appealed on the grounds that the trial judge disregarded subsequent sales figures in determining whether the valuation was negligent.
The appeal court pointed out that of the two questions:
- What was the true value of the land at the valuation date?
- Was the valuation in question misleading or deceptive (s 52) or arrived at negligently?
It is a common fallacy that in proving a valuation was negligent the lender must lead expert evidence that proves what the true value was (question 1). In fact a valuation can be plainly wrong, even significantly so, yet not be negligent. The true question for the expert evidence to consider is whether the valuation was arrived at negligently (question 2).
For this reason the Court of Appeal endorsed the trial judge’s comment:
… in my view, it is impermissible, in conducting a valuation for the purposes of the s 52 proceeding and the negligence proceedings, for the Court to take into account sales subsequent to the date of the valuation for the purpose of deciding these competence and representational issues.
The Court of Appeal noted the judge was simply following the rule the High Court noted in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd  HCA 54;
The task of valuation is to be conducted without hindsight – that is, without knowledge of events which have not happened by the date at which the value is to be ascribed, though they have happened by the date on which the valuation takes place. That task is different from the task of assessing loss, because the latter task is to be conducted with hindsight.
Referring to this decision the Court of Appeal noted that:
The decision demonstrates why, in some circumstances, hindsight can be and, indeed, must be regarded in determining questions of damage or loss where the question of lost value arises. But hindsight has no place in an action concerning the competency of a valuation of land at a certain point in time for the purposes of the law of negligence or for the purposes of an action founded on breach of s 52 of the TP Act.
His Honour described the task before the Court as being to assess whether, upon the sales evidence available as of 3 April 2007, a competent valuer could have, using the comparable sales methodology, ascribed a value of $1.6 million to 95 Curtin Avenue. In my view this description is accurate, and adopts the approach applied in other cases where the question of the duty of valuers has been considered.
The Court of Appeal described the proper test as follows:
It is common ground that the duty of care so owed was to use the ordinary skills of an ordinarily competent man exercising the particular art, and professing to have the particular skill, of a valuer of property.
The guiding question for consideration as to whether the valuer had breached a duty of care was whether the valuer, in putting forward the relevant valuation, relied upon any matters upon which no competent valuer could properly rely, or failed to take into account any matters to which no competent valuer could in the circumstances fail to have regard.
One of the judges of the appeal dissented on this point distinguishing HTW Valuers and arguing:
The case pleaded and run was that, as at that date, the market value of the property was not $1.6 million but was only $1,030,500. That being so, evidence of comparable sales both before and after 3 April 2007 was, in my opinion, relevant and admissible to prove market value as at 3 April 2007. That, it seems to me, is entirely consistent with established case law.
Did the actual valuer owe a duty of care?
The actual valuer who signed off on the report was also sued. He argued that he owed no duty of care. In considering this the Court of Appeal applied the following test for determining whether a duty of care lay for negligent misstatement:
- The speaker must realise, or the circumstances be such that he ought to have realised, that the recipient intends to act upon the information or advice in respect of his property or of himself in connexion with some matter of business or serious consequence; and
- The circumstances must be such that it is reasonable in all the circumstances for the recipient to seek, or to accept, and to rely upon the utterance of the speaker. The nature of the subject matter, the occasion of the interchange, and the identity and relative position of the parties as regards knowledge actual or potential and relevant capacity to form or exercise judgment will all be included in the factors which will determine the reasonableness of the acceptance of, and of the reliance by the recipient upon, the words of the speaker.
The Court of Appeal rejected a line of authority that a company could be vicariously liable for the actions of the individual employee without the employee being liable:
To say that the principal or employer is legally responsible but that the actual wrongdoer is not, seems to me to be an inversion of the whole doctrine of vicarious liability.
Did the actual valuer know he was misleading and deceiving?
The valuer argued he was not knowingly concerned in the contravention of s 52 of the Trade Practices Act, because no evidence was led that Mr Coleman knew that the valuation of 95 Curtin Avenue was misleading or deceptive.
The Court of appeal rejected this argument holding:
The knowledge required is not knowledge or awareness that the conduct has the capacity to mislead nor knowledge that it may be a contravention of s 52 of the Act.