Genworth paid out on a Lenders Mortgage Insurance Policy and then sued the valuer for negligence. It seems that the valuer’s P/I insurer refused to respond as the valuer conducted his defence as litigant-in-person. That may have been because the valuation was not co-signed by a director of the valuation company. At least that was one of the defences raised – essentially that the valuation was not a real valuation, it was some sort of draft that should not have been relied upon. The judge rejected this defence as there was no evidence the originator or Genworth knew of the requirement. Another defence raised was that the valuer never got paid for the valuation but the court found this irrelevant, noting it was a credit risk issue and did not impact on the existence or scope of the duty owed by the valuer to Genworth.
The valuer did not pursue the defence of contributory negligence and the Genworth witnesses were not challenged about the steps taken to verify the employment of the borrowers and their ability to service the loans. This is usually a fruitful way to whittle down a claim against a valuer as in most cases, where a loan goes bad, there are issues with the underwriting. Additionally if there is fraud, by a “concurrent wrongdoer”, such as the borrower or broker, even as limited as exaggeration of income on the application form, then proportionate liability can be raised and the valuer’s liability could have been reduced by as much as 90%.
Justice Einstein’s judgment was an excellent and scholarly review of the law in relation to valuer liability, in particular the significance of the 10% bracket within which valuer’s can err and be prima facie not negligent and the significance of the API’s memorandum in framing the relevant duty of care. The essence of this judgment has been distilled into an article published 3 October 2010 by Matthew Bransgrove entitled “Claims against valuers – an up-to-date review of the law” which can be found on the Bransgroves website.