Risk Management Flashcards
Negligence in valuation
What is a valuer or surveyor’s duty when carrying out professional work?
They owe a duty of care and skill to the client, either as an express or implied term of the contract.
What happens if a valuer or surveyor fails to meet the required standard of care and skill?
It constitutes a breach of contract.
What legal claim can a client make if a breach of contract occurs due to lack of care or skill?
A claim can be made under the tort of negligence.
Why is the tort of negligence significant in professional claims?
It may provide different time limits for starting legal action compared to contract claims.
Can third parties (not clients) bring a claim under the tort of negligence?
Yes, if they can prove foreseeability of damage, proximity, and that imposing a duty of care is fair, just, and reasonable.
What is the tort of negligence?
A legal principle allowing claims for damages due to a failure to take reasonable care, potentially available to both clients and third parties.
What is a breach of contract?
Failure to perform duties as agreed in a contract, including the duty of reasonable care and skill.
What is the basic obligation of a valuer or surveyor retained to exercise professional skill?
To perform with reasonable skill and care, whether in contract or tort.
When can a stricter obligation than reasonable care be imposed?
Only through special facts or clear contractual language.
Is a written contract necessary for a surveyor or valuer to owe a duty to the client?
No, contracts can be oral or written—form doesn’t affect the legal obligation.
Why are written instructions recommended?
They are easier to prove in the event of a dispute and may be required by professional bodies.
According to the RICS Valuation – Global Standards (UK supplement), what must a valuer do before starting work?
Obtain written instructions covering the minimum terms of engagement (as per VPS 1).
What does Section 13 of the Supply of Goods and Services Act 1982 state?
Services must be carried out with reasonable care and skill.
What does Section 14(1) of the same Act provide?
If no time is fixed, services must be provided within a reasonable time.
Is a written contract necessary for a surveyor or valuer to owe a duty to the client?
No, contracts can be oral or written—form doesn’t affect the legal obligation.
Why are written instructions recommended?
They are easier to prove in the event of a dispute and may be required by professional bodies.
According to the RICS Valuation – Global Standards (UK supplement), what must a valuer do before starting work?
Obtain written instructions covering the minimum terms of engagement (as per VPS 1).
What does Section 13 of the Supply of Goods and Services Act 1982 state?
Services must be carried out with reasonable care and skill.
What does Section 14(1) of the same Act provide?
If no time is fixed, services must be provided within a reasonable time.
In what case was it held that no fee is payable if services are worthless due to negligence?
Whitty v Lord Dillon (1860).
What case involved a valuer including saplings incorrectly, rendering the valuation useless?
Hoadley v Edwards (2001).
Who is usually the contracting party when a client instructs a firm?
The contract is usually with the firm, not the individual surveyor.
What advantages might a client gain by suing in tort rather than contract?
Different (often longer) limitation periods for bringing legal action.
Can individual employees be liable in tort?
Yes, as seen in Merrett v Babb (2001) and J P Tupper Associates v Thomas Pearson-Chisman (2011).
When is a firm liable for work done by individuals?
When work is entrusted to an individual, whether or not employed by the firm.
Luxmoore-May v Messenger May Baverstock (1990)
What is SAAMCo v York Montague Ltd (1996)?
Key case on the scope of duty and recoverable loss in professional negligence claims.
What is the significance of Platform Funding Ltd v Bank of Scotland Plc (2008)?
Reaffirmed the principle that professionals are liable for breaches of the duty of care, but not beyond what is fair or reasonable.
What did Norwich & Peterborough BS v Gillies Solicitors LLP (2011) apply?
Applied principles from Platform Funding regarding professional liability.
What is the general rule established by the principle of privity of contract?
Only parties to a contract can enforce or be bound by its terms.
What Act creates a statutory exception to privity of contract?
Contracts (Rights of Third Parties) Act 1999.
Under what conditions can a third party enforce a contract term under the Contracts (Rights of Third Parties) Act 1999?
If (1) the contract expressly provides they may do so, or (2) the term purports to confer a benefit on them and there’s no indication to the contrary.
How must the third party be identified in the contract to have rights under the Act?
By name, as a member of a class, or by a specific description.
What case established liability for economic loss from negligent misstatements?
Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) established that liability for economic loss can arise from negligent misstatements when there is an assumption of responsibility, unless disclaimed.
What principle was confirmed in Henderson v Merrett Syndicates Ltd [1995]?
The principle confirmed was that professionals can have concurrent liability in tort and contract based on assumption of responsibility and reliance.
Can tortious liability be broader than contractual liability?
Yes, depending on the context, the duty in tort may be more extensive.
When might a surveyor or valuer owe a duty of care to a third party?
When they know or ought to know that the third party is likely to rely on their report.
Can a valuer be liable to someone they have no knowledge or reason to foresee might rely on their report?
No, there must be knowledge or foreseeability of reliance.
Smith v Carter (1994)
Example of professional negligence involving foreseeability and duty of care.
Le Lievre v Gould (1893)
Early authority on duty of care and liability for negligent misstatements.
Realstone Ltd v J&E Shepherd (2008)
Emphasized the importance of foreseeability in determining third-party duty.
Steel v NRAM Ltd [2018]
Clarified that reliance must be reasonable and foreseeable.
In a case of concurrent duties in contract and tort, how are damages typically assessed?
On the contractual basis of reasonable contemplation, not the tortious standard of reasonable foreseeability.
Multiplex Construction Europe Ltd v Bathgate Realisations (2021)
Confirmed approach to damages and scope of liability in concurrent duty cases.
Beattie Passive Norse Ltd v Canham Consulting Ltd (2021)
Applied principles of third-party reliance and concurrent liability in engineering/professional contexts.
Can a valuer owe a duty of care to a purchaser when acting for a mortgage lender?
Yes, especially in cases involving modest residential properties.
Does it matter if the valuer is employed by the lender rather than independent?
No, the duty may still exist regardless of employment status.
Is the valuer’s report required to be disclosed to the purchaser for a duty to arise?
No, the purchaser may rely on the approval of the loan as an implied valuation.
In which types of property is the valuer less likely to owe a duty to the purchaser?
Substantial residential, buy-to-let, and commercial properties.
Why is there often no duty in buy-to-let or commercial cases?
Purchasers in such cases are expected to obtain and rely on their own valuations.
What was confirmed in Yianni v Edwin Evans & Sons (1981)?
A valuer instructed by a lender owed a duty to a first-time buyer of modest property.
What did the House of Lords hold in Smith v Eric S Bush (1990) / Harris v Wyre Forest DC (1990)?
A valuer can owe a duty of care in tort to a purchaser, even with a disclaimer, if it’s unreasonable under UCTA.
What was held in Scullion v Bank of Scotland Plc (2011)?
No duty of care was owed in a buy-to-let valuation; purchasers were expected to seek independent advice.
When can an individual valuer (not the firm) be personally liable in tort?
When there’s a personal assumption of responsibility and reliance by the client.
Merrett v Babb (2001)
Held that an individual employee could be personally liable for negligent valuation where they assumed responsibility.
Yazhou Travel Investment Co Ltd v Bateson Starr (2005)
Reaffirmed that individual professionals may be liable if they accept personal responsibility beyond their firm.
Is a mortgage lender generally liable to a house purchaser for negligence by the lender’s independent valuer?
No, not usually—unless specific circumstances create indirect liability.
What is Ward v McMaster (1985)?
An example where indirect liability for the lender arose due to reliance and proximity.
What is the significance of Smith v Bush; Harris v Wyre Forest DC (1990)?
Cases where disclaimers used by the lender were held to be unreasonable under the Unfair Contract Terms Act (UCTA), creating potential liability.
Can a valuer instructed by a borrower owe a duty to the lender?
Yes, if the valuer knows the lender’s identity and that the lender will rely on the report.
What happens if the lender is known to exist but not specifically identified?
Duty of care may be uncertain or contested; courts have been divided on this.
What effect do disclaimer clauses in valuation reports have on third-party reliance?
They may limit or exclude duty unless deemed unreasonable.
Cann v Willson (1888)
Early case recognizing that a valuer may owe a duty to a third party (like a lender) relying on the report.
SAAMCo v York Montague Ltd (1996)
Key case on the scope of a valuer’s duty—limited to losses within the scope of their valuation advice.
Nightingale Finance Ltd v White & Co (1997)
Affirmed that a valuer may owe a duty to a lender where reliance is foreseeable.
Assured Advances Ltd v Ashbee & Co (1994)
Example where the valuer was held liable to a lender for negligent valuation commissioned by a borrower.
Secured Residential Funding plc v Nationwide Anglia BS (1997)
Addressed complexities where valuations are addressed to intermediaries rather than the ultimate lender.
When might a vendor’s surveyor owe a duty of care to a purchaser?
When the survey is intended for purchaser reliance (e.g., auction), and the surveyor knows this.
What is the significance of Bourne v McEvoy Timber Preservation Ltd (1976)?
Established liability of a vendor’s surveyor where report intended for purchaser use.
What does Shankie-Williams v Heavey (1986) illustrate?
Further example of duty owed by vendor’s surveyor where reliance is foreseeable.
What duty does a lender owe the borrower upon repossession and resale?
Not to sell below market value—failure allows borrower to claim damages.
Can the borrower sue the lender’s negligent adviser directly?
Not usually—courts generally hold the lender liable, not the adviser directly.
Cuckmere Brick Co Ltd v Mutual Finance Ltd (1971)
Lender liable for undervalued resale—even if advised by a valuer.
Raja v Austin Gray (2003)
Current case law suggests borrower can’t sue the valuer directly.
What’s the main distinction between an arbitrator and an independent expert?
Arbitrators act judicially (protected from liability); experts owe a duty of care.
Can arbitrators be sued for negligence under the Arbitration Act 1996?
No—unless they acted in bad faith (s.29(1)).
Zubaida v Hargreaves (1995)
Case discussing duties owed by independent experts.
Currys Group plc v Martin (1999)
Clarifies duty of care owed by expert vs arbitrator.
Under what condition can arbitration decisions be appealed under Arbitration Act 1996, s.69?
If all parties agree or the court grants leave—only if decision is ‘obviously wrong’ or ‘open to serious doubt’.
What is Jones v Sherwood Computer Services plc (1992)?
Example of restrictive appeal approach under Arbitration Act.
What is National Grid Co plc v M25 Group Ltd (1998)?
Affirms limited judicial intervention in arbitration outcomes.
