LIABILITY
david hornby
SCOPE

Under certain circumstances a third party who has suffered economic loss as a result of the valuer's negligence can claim damages from the valuer. In Hedley Byrne v Heller (1964) the House of Lords held that a negligent, though honest misrepresentation spoken or written may give rise to an action for damages for financial loss incurred by anybody who acted upon it. This is because there is a general duty of care imposed on a person who possesses special skill and if reliance has been placed on the exercise of that skill.

Under the rule in MLC v Evatt (1969), a negligent statement by one person will be actionable at the suit of a person to whom it is made, whether or not there has been a contractual relationship between them if their relationship possessed the following characteristics:

  1. that the maker of the statement had made it in the ordinary course of his business or profession; or
  2. that the subject matter of the statement called for the exercise of some qualification, skill or competence not possessed by the ordinary, reasonable man to which the maker of the statement was known by the recipient to lay claim by reason of his engaging in that business or profession (480).

The carrying on of a business or profession which involves the giving of advice of a kind which calls for special skill and competence is the normal way in which a person lets it be known to the recipient of the advice that he claims to possess that degree of skill and competence and is willing to exercise that degree of diligence which is generally possessed and exercised by persons who carry on the business or profession of giving advice of the kind sought (482).

Those persons such as accountants, surveyors, valuers and analysts whose profession and occupation it is to examine books, accounts and other things and to make reports on which other people - other than their clients - rely in the ordinary course of business" may be held liable for any loss sustained by a person acting on the faith of such a report.

The Privy Council further said:

Where the adviser, although not carrying on the business of profession generally has at or before the time at which his advice is sought let it be known in some other way that he claims to possess skill and competence in the subject matter of the particular inquiry comparable to those who do carry on the business or profession of advising on that subject matter and is prepared to exercise a comparable skill and competence in giving the advice ...the law should require him to make good his claim (482).

The law does not distinguish between written formal valuations or statements and oral or informal statements. The valuer can incur liability equally as a result of any such statement or valuation incautiously or negligently made and it does not matter whether or not the person to whom the statement is made or letter written was not a client or did not pay a fee for the advice given.

See:

valuation law
sufficiency of instructions
prepare and provide instructions
access to subject property
complexity
determine assignment plan
valuation report
determine and negotiate fee







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