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Saamco Notes

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SAAMCO FACTS In the three cases the subject of the appeals the defendants, as valuers, were required by the plaintiffs to value properties on the security of which they were considering advancing money on mortgage. In each case, the defendants considerably overvalued the property. Following the valuations, the loans were made, which they would not have been if the plaintiffs had known the true values of the properties. The borrowers subsequently defaulted, and in the meantime the property market had fallen substantially, greatly increasing the losses eventually suffered by the plaintiffs. The plaintiffs brought actions against the defendants for damages for negligence and breach of contract. Valuer's argument: They say that a valuer provides an estimate of the value of the property at the date of the valuation. He does not undertake the role of a prophet. It is unfair that merely because for one reason or other the lender would not otherwise have lent, the valuer should be saddled with the whole risk of the transaction, including a subsequent fall in the value of the property. HOLDING Court must first consider the scope of duty I think that this was the wrong place to begin. Before one can consider the principle on which one should calculate the damages to which a plaintiff is entitled as compensation for loss, it is necessary to decide for what kind of loss he is entitled to compensation. A correct description of the loss for which the valuer is liable must precede any consideration of the measure of damages. For this purpose it is better to begin at the beginning and consider the lender's cause of action. The lender sues on a contract under which the valuer, in return for a fee, undertakes to provide him with certain information…. But there is one common element which everyone accepts. In each case the valuer was required to provide an estimate of the price which the property might reasonably be expected to fetch if sold in the open market at the date of the valuation. There is again agreement on the purpose for which the information was provided. It was to form part of the material on which the lender was to decide whether, and if so how much, he would lend. The valuation tells the lender how much, at current values, he is likely to recover if he has to resort to his security…. The valuer will know that if he overestimates the value of the property, the lender's margin for all these purposes will be correspondingly less. Concurrent Duty in Tort

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