Professional Negligence II
Valuer Property Crash
In Brownrigg v Leacy [2013] IEHC 434 a farmer had obtained valuations of this property when intending to purchase an adjoining farm and sell some of his own land to purchase the same. The valuations overestimated the value of the property significantly. This became particularly acute in the context of the economic crash of 2007- 2012.
“The plaintiff is quite clearly an experienced and knowledgeable farmer. He had no hesitation in dealing in millions for the betterment of his farm. He has invested heavily in milk quotas. He knew well there was a risk involved in buying before he sold. His searching for valuations shows he was well aware of that. His conservative approach to bidding also demonstrated a careful attempt to minimise risk. Yet he was the one to embark on this risk. He does appear to have been a buyer and seller at the wrong time. The market turned against him and he suffered the fate of many before. At any time over the previous ten years or more, he would have had no difficulty. This time what began as a falling back in land prices turned into a price crash as regards development land and he is the victim of that. Yet it was his decision to buy before he sold and the two valuations are, therefore, in my judgment, only partly responsible for the unfortunate consequences of that decision. I consider him fifty per cent responsible and the two defendant’s twenty five per cent each for the unhappy result.”
“..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 any one being justified in saying that either of them has lacked competence and reasonable care, still less integrity, in doing his work. The permissible margin of error is said by [expert witnesses] to be generally 10 per cent either side of a figure which can be said to be the right figure, so I am informed, not a figure which later, with hindsight, proves to be right but which at the time of valuation is the figure which a competent, careful and experienced valuer arrives at after making all the necessary inquiries and paying proper regard to the then state of the market. In exceptional circumstances the permissible margin, they say, could be extended to about 15 per cent, or a little more, either way. Any valuation falling outside what I shall call the ‘bracket’ brings into question the competence of the valuer and the sort of care he gave to the task of valuation.”
“The defendant in his evidence was not able to show any real effort made by him to produce a true and reliable valuation of the lands. The overwhelming impression created by his evidence was that he hazarded a guess backed up by a vague general knowledge of the value of properties in the immediate area. He was, in my view, far outside the ‘bracket’ referred to in Singer & Friedlander Limited v. John D. Wood & Co. [1977] 2 EGLR 84 at p. 86. The valuation … does not appear to have been prepared in accordance with minimum standards with regard to appropriate comparators nor did it contain any advice re the risks inherent in zoning as a factor. As a valuation it turned out to be hopelessly incorrect.”
Receiver’s Duty of Care
In Farrelly and Kenny v Kavanagh [2015] IEHC 114, Costello J
“The mortgagee is entitled to sell the mortgaged property as it is. He is under no obligation to improve it or increase its value. There is no obligation to take any such pre-marketing steps to increase the value of the property as is suggested by the claimants.”
“In our judgment there can accordingly be no duty on the part of a mortgagee, as suggested by the claimants, to postpone exercising the power of sale until after the further pursuit (let alone the outcome) of an application for planning permission or the grant of a lease of the mortgaged property, though the outcome of the application and the effect of the grant of the lease may be to increase the market value of the mortgaged property and price obtained on sale. A mortgagee is entitled to sell the property in the condition in which it stands without investing money or time in increasing its likely sale value. He is entitled to discontinue efforts already undertaken to increase their likely sale value in favour of such a sale. A mortgagee is under a duty to take reasonable care to obtain a sale price which reflects the added value available on the grant of planning permission and the grant of the lease of a vacant property and (as a means of achieving this end) to ensure that the potential is brought to the notice of prospective purchasers and accordingly taken into account in their offers: see Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949. But that is the limit of his duty.”
“The mortgage confers upon the mortgagee a direct and indirect means of securing a sale in order to achieve repayment of his secured debt. The mortgagee can sell as mortgagee and the mortgagee can appoint a receiver who likewise can sell in the name of the mortgagor. Having regard to the fact that the receiver’s primary duty is to bring about a situation where the secured debt is repaid, as a matter of principle the receiver must be entitled (like the mortgagee) to sell the property in the condition in which it is in the same way as the mortgagee can and in particular without awaiting or effecting any increase in value or improvement in the property. This accords with the repeated statements in the authorities that the duties in respect of the exercise of the power of sale by mortgagees and receivers are the same and with the holding in a series of decisions at first instance that receivers are not obliged before sale to spend money on repairs”.
“It is important … to consider what was the duty of care owed by the defendant as a receiver to the plaintiff’s as borrowers. His first duty of care is owed to the mortgagee who appointed him. No particular duty of cares owed to the borrower. The duty is owed equally to any person who has an interest in the equity of redemption. The duty owed by the defendant to the plaintiff’s is the same as that owed to a charge holder ranking in priority after ACC if there had been one in this case.”
Costello J. quoted an English case :
“The mortgagee is free (in his own interest as well as that of the mortgagor) to investigate whether and how he can ‘unlock’ the potential for an increase in value of the property mortgaged (eg by an application for planning permission or the grant of a lease) and indeed (going further) he can proceed with such an application or grant. But he is likewise free at any time to halt his efforts and proceed instead immediately with a sale. By commencing on this path the mortgagee does not in any way preclude himself from calling a halt at will: he does not assume any such obligation of care to the mortgagor in respect of its continuance as the claimants contend.”
Estate Agents / Surveyors
Walsh v Jones Lang Lasalle Ltd [2007] I.E.H.C. 28 Quirke J.
A disclaimer will not necessarily negate liability for carelessness in particular where the requisite care has not been taken. “Whilst every care has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending purchasers/lessees should satisfy themselves as to the correctness of the information given.”
It is difficult to accept that ‘every care has been taken in the preparation of these particular’ because the floor area, (perhaps the most important particular found within the brochure), was overstated to a degree which was seriously misleading to prospective purchasers. The area of the first 551 floor, (which had a rental value in the region of IR £20.00 per square foot), was overstated by more than 1800 square feet.
“It follows that loss and damage to the plaintiff in this case was reasonably foreseeable by the defendant. Having found, as I have, that, (a) the relationship between the plaintiff and the defendant was sufficiently proximate to give rise to a ‘special relationship’ of the kind identified in Wildgust and, (b) that the loss allegedly sustained by the plaintiff was reasonably foreseeable in the circumstances and, (c) that the imposition upon the defendant of such a duty is, in the circumstances not unfair, unjust or unreasonable, it follows that I am satisfied on the facts of this case that the defendant owed a duty of care to the plaintiff to ensure that the calculation of the floor area of the property in which the defendant published in its sales brochure was accurate.”
:
“No evidence was adduced in these proceedings suggesting that it is, or was, or has been a practice for prospective purchasers to measure the floor areas of properties after entering into the contract for purchase and before the completion of the contract.
Negligent misstatement
A disclaimer will not necessarily negate liability for carelessness in particular where the requisite care has not been taken. “Whilst every care has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending purchasers/lessees should satisfy themselves as to the correctness of the information given.”
It is difficult to accept that ‘every care has been taken in the preparation of these particular’ because the floor area, (perhaps the most important particular found within the brochure), was overstated to a degree which was seriously misleading to prospective purchasers. The area of the first floor, (which had a rental value in the region of IR £20.00 per square foot), was overstated by more than 1800 square feet.
Undeniably the defendant published grossly inaccurate measurements of the floor area of the property within its sales brochure. It knew or ought to have known that the plaintiff and the other prospective purchasers, to whom the brochure was directed, would rely upon and be influenced by measurements of such apparent precision.
The defendant, nonetheless, argued that it is not liable for any absence of care on its part because the ‘waiver’ provided that the particulars ‘… are not warranted and intending purchasers/lessees should satisfy themselves as to the correctness of the information given.’ I do not accept that this provision is sufficient to relieve the defendant of liability in the circumstances of this case…
If the defendant wished to reserve to itself the right, (a) to publish within its sales brochure, precise measurements which were in fact grossly inaccurate and, (b) to relieve itself of liability to the category of persons to whom the brochure and its contents were directed, then there was an obligation upon the defendant to draw to the attention of the plaintiff and other prospective purchasers the fact that the seemingly precise measurements published were likely to be wholly unreliable and should not be relied upon in any circumstances.
By including within its brochure an enigmatic sentence in small print claiming to have taken particular care in the preparation of all of the particulars within the brochure but advising prospective purchasers to ‘satisfy themselves as to the correctness of the information given’ the defendant failed to discharge that obligation.”
Quirke J. indicated the defendant knew, or should have known, that the plaintiff, and the other prospective purchasers of a property, would value the property with particular reference to the rental income recoverable from the property. The rent was dependent upon a precise measurement of the floor area available for letting. It was that precise measurement which the defendant had purported to provide within its brochure. It was clearly foreseeable by the defendant that an overstatement of the floor area of the property would give rise to an inflated estimate of the rental income recoverable from the property and a corresponding inflation in the estimated value of the property.
“It follows that loss and damage to the plaintiff in this case was reasonably foreseeable by the defendant. Having found, as I have, that, (a) the relationship between the plaintiff and the defendant was sufficiently proximate to give rise to a ‘special relationship’ of the kind identified in Wildgust and, (b) that the loss allegedly sustained by the plaintiff was reasonably foreseeable in the circumstances and, (c) that the imposition upon the defendant of such a duty is, in the circumstances not unfair, unjust or unreasonable, it follows that I am satisfied on the facts of this case that the defendant owed a duty of care to the plaintiff to ensure that the calculation of the floor area of the property in which the defendant published in its sales brochure was accurate.”
Quirke J. held that plaintiff was not been guilty of contributory negligence in failing to undertake a survey before the purchase of the property:
“No evidence was adduced in these proceedings suggesting that it is, or was, or has been a practice for prospective purchasers to measure the floor areas of properties after entering into the contract for purchase and before the completion of the contract.”
The Supreme Court in Walsh v Jones Lang Lasalle Ltd [2017] IESC 38, reversed the HighCourt Judgment ([2007] IEHC 28) . The claimant purchased a property that been described in the defendant auctioneer’s brochure as being 23,057 square feet while the correct area was 21,248 square feet. The brochure said in small print at the end of first page :
“Whilst every care has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending purchasers/lessees should satisfy themselves as to the correctness of the information given.”
“If the defendant wished to reserve to itself the right, (a) to publish within its sales brochure, precise measurements which were in fact grossly inaccurate and, (b) to relieve itself of liability to the category of persons to whom the brochure and its contents were directed, then there was an obligation upon the defendant to draw to the attention of the plaintiff and other prospective purchasers the fact that the seemingly precise measurements published were likely to be wholly unreliable and should not be relied upon in any circumstances.
By including within its brochure an enigmatic sentence in small print claiming to have taken particular care in the preparation of all of the particulars within the brochure but advising prospective purchasers to ‘satisfy themselves as to the correctness of the information given’ the defendant failed to discharge that obligation.”
O’Donnell J. in the Supreme Court wrote:
“The disclaimer should not be approached in an attempt to exclude a preexisting liability whether contractual or tortious, and accordingly strictly construed. Instead, it is to be considered as one, albeit an important, piece of evidence as to whether the agent, retained by the vendor, assumed responsibility in this case to the plaintiff purchaser (without consideration) for the accuracy of the statements contained in the particulars. This must be assessed in the light of all of the facts, and in particular, the structure of the transaction which takes place in a relationship between each of the parties controlled by contract in familiar and well understood terms. It is relevant, in my view, that the special relationship and assumption of liability are alleged to arise from the terms of particulars made available generally rather than from any specific interaction between any employee of Jones Lang Lasalle and the plaintiff. It is also relevant that the general structure of the transaction is one where the agent acts for and owes duties to the vendor. Again, it is not irrelevant that the purchasers did not apparently obtain any provision in the contract, in a warranty or otherwise in relation to the size of the premises. It would be unusual for an agent to undertake a gratuitous responsibility when the principal, who was receiving consideration, had not. Again, it is relevant that even though this was a substantial commercial transaction, which can carry significant fees for the agents, (suggested to be in the region of 1.5 per cent) that the element of that fee which should represent profit to the agent is a tiny fraction of the potential liability here, excluding costs. Again, it would be unusual that an agent would gratuitously assume that risk. Against that background, I cannot see the disclaimer as anything other than an assertion, unsurprising to anyone dealing in the property market, that Jones Lang Lasalle was not responsible for the accuracy of anything contained in the particulars.”
….
“an outcome which provides clarity and promotes efficiency. This case is, ultimately, about the allocation of risk. At first blush, it might appear reasonable that the agent uttering the statement, should bear the risk of damage flowing from error, but when put in context this is less clear. Everyone involved in this transaction is selling or buying something. The provision of information or advice which can be relied on (and sued on if incorrect) has a value, sometimes substantial. Why should one party, be able to acquire this information backed by the resources of a substantial firm, for nothing? If the agent is unable to limit liability (or be confident that it can do so, which if a disclaimer is to be assessed with the severity of an exemption clause, it cannot be), it must seek to price its services at a sufficient price to cover the risk. Given the potential exposure to damages in property transactions and the costs involved in litigation, this is a substantial cost that must be built into the price either directly, or indirectly through insurance. This means that the cost is spread across the agent, its client, and all other purchasers. But those purchasers may have no interest in accuracy of information as to area, and will not be relying on the brochure in other respects, such as title or tenure. To these participants this would be an additional and unnecessary cost. It is only a special purchaser, who has a particular interest in the square footage for whom the information has value, and there is no reason why that purchaser should be able to avoid the cost of being able to rely on that information, and spread it across other market participants. It is reasonable in my view, that if a purchaser has a particular interest in reliance on the information in the brochure, the starting point should be that he should contract for that, either with the vendor, the vendor’s agent, or his own expert, and otherwise bear the risk of reliance in error, unless the agent has, and for whatever reason, clearly assumed the risk. This is, as I understand, the essential approach to claims of negligent misstatement in cases such as this and is consistent with the outcome of those cases, whether the claims succeed or fail. In my view, it cannot be said from the circumstances of this case (which here resolve themselves on the terms of the brochure), that the agent assumed that responsibility to this plaintiff.”
MacMenamin J., dissented ,
“To my mind, the disclaimer itself contained a number of representations. The first was to the effect that this highly reputable firm had taken ‘every care’ in the preparation of the particulars. Second, it was represented that the measurements were believed to be correct, although they were not warranted, and that intending purchasers should satisfy themselves as to those measurements. This clause was ambiguous, in the sense that, while it conveyed an invitation, it also contained a representation that acceptance of the invitation was hardly necessary.
It is, in my view, erroneous simply to suggest that the very existence of ‘any’ disclaimer clause is sufficient … What is, in my view, determinative is, rather, an objective reading of everything that is said in the waiver. It contained an explicit representation to the effect that ‘every care’ had been taken by the firm. This is to be seen in the context of the findings of fact regarding the practice in Dublin among auctioneers, valuers, and surveyors. There was no finding of fact that this was an inherently defective practice.
A further key question is the extent to which, upon an objective reading, the potential purchaser was put on notice It is, of course, true that Mr Walsh was aware as to the existence of a waiver. But, as the judge found, he was not aware of its purported scope. This was a reasonable inference based on the judge’s assessment of the witness.
To the eye of a potential purchaser then, the brochure, which came from a highly reputable firm, conveyed that the firm had taken ‘every care’ in carrying out the measurements of the property. What else was a purchaser to believe? The brochure elsewhere conveys that what was given were accurate, precise measurements in square feet. By its reputation, and by the precise nature of the measurements, the firm conveyed the message that the measurements were reliable. The situation is not altered by deploying the term ‘while’, as a preface to the disclaimer.
For a court to be asked to carry out a ‘weighting process’ between one half and the other half of this disclaimer clause is itself a rather artificial process. But it can be assisted by looking to the backdrop of the evidence as to how that disclaimer was generally understood. The disclaimer clause contained a representation, intended to instil belief, regarding care. I do not accept that an objective reading entails that the reader should treat the latter part of the waiver as being, in some way, more legally significant than the former. I reject the proposition that the first part of the disclaimer is mere ‘flowery language’, as it was called, and that only the latter part is legally significant. A disclaimer can only be given the legal significance imparted by all of the actual words it contains, and the sense that all those words, taken together, would reasonably convey. If there is opacity, or ambiguity, it should, at minimum, be strictly construed; if necessary, it should be interpreted contra proferentem. I choose the former.
There is, surely, something rather incongruous about a highly reputable firm of auctioneers and valuers seeking to make the case that potential bidders should not, really, lend total credence to, or place complete faith in, their own representation, that they have taken ‘every care’ in preparing measurements. In fact, the evidence did not at all establish that the firm had taken ‘every care’. The trial court was left in the situation where it might infer that JLL had either carried out the measurements incorrectly and negligently, or, alternatively, had itself conveyed information which was communicated to JLL by another, accepted it at face value, and put it in the brochure, without any intermediate checking. At risk of repetition, the appellant did not call any evidence on this issue.”
References and Sources
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