Snapshot

The Full Court of the Federal Court of Australia has confirmed that (at least with respect to determining the liability of a valuer who undertakes a valuation as at a certain date) it is inappropriate for an expert retrospective valuer to take account of sales (and one can assume any other data) subsequent to the relevant valuation date.

Facts

As outlined on page 189 of the September 2011 edition of this journal, this case arose from a loan transaction whereby a lender lent slightly more than $1.22 million to a borrower secured by a mortgage.

This loan was in reliance upon a valuation by the valuer, who valued the property at $1.6 million. The borrower defaulted and was unable to repay the mortgage debt, so the lenders sued the valuer. One of the issues that fell for determination was how to resolve divergent expert retrospective valuation opinions.

The lender's expert had considered and analysed evidence of comparable sales that had occurred before the date of the valuation. However, the valuer's expert had considered and analysed these sales both before and after the date of the subject valuation.

At first instance (Australian Executor Trustees Limited v Propell National Valuers (WA) Pty Ltd [2011] FCA 522), the court held that it was inappropriate for an expert to take into account 'hindsight' information/evidence. As a result, the court was unable to rely upon the valuer's expert. The court therefore found that the subject valuation was negligent and misleading and deceptive.

On appeal, the valuer argued that it was permissible, when determining the value of a property at a specific earlier time, to have regard to sales of properties comparable to the subject property that were sold subsequent to the relevant valuation date.

Ultimately, this argument was not successful.

The court accepted that, in some circumstances, particularly where the relevant issue for determination is the actual value of the land at a particular date, it may be prudent to take into account hindsight information/evidence. Circumstances where this might be appropriate could include the valuation of property at a relevant time for land tax purposes or for the assessment of estate duty, a valuation for the purpose of rental, or a determination of the value of the land at the time of compulsory resumption for the purposes of assessing compensation payable.

However, where a claim relates to the conduct of a valuer at a particular time (including where a focus is on the task undertaken by the valuer and the valuation produced in light of the exercise of the valuer's judgment at that particular time), including conduct which is relevant to a claim for negligence or in respect of misleading or deceptive conduct, later events are of no relevance.

The relevant question is whether, as at the valuation date, a competent valuer could have described a specific value (or thereabouts) to a specific property. Expert evidence in such proceedings must only be relevant to the determination of that question, to which hindsight can play no part.

Accordingly, the appeal was dismissed by the majority judges (Stone and Collier JJ).

However, Gilmour J dissented, finding that subsequent comparable sales might be relevant to establish loss or damage in a case, as well as determining whether allegations of misleading and deceptive conduct, or negligence, are made out. Gilmour J arrived at this conclusion by placing significant importance on the way in which the case was run.

In this case, the lender had argued that the market value of the property was not $1.6 million as at the valuation date. That being so, evidence of comparable sales both before and after the valuation date ought to have been admissible as they were relevant to proving market value as at the valuation date.

Impact

Although there was a 2:1 split between the judges, this case reinforces the general rule that, when conducting an expert retrospective valuation in respect of proceedings that have alleged negligence and/or misleading and deceptive conduct against a valuer who has provided a valuation as at a specific date, regard must not be had to comparable sales that have occurred after the date of the subject valuation. This decision therefore remains consistent with other decisions, such as HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640.

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