On professional opinions and 3rd parties: some lessons for professional advisors.

A company was facing financial difficulty. It wanted to obtain a loan. It engaged valuers to prepare valuation reports of its assets to "use with the lenders".

The valuers prepared 2 reports. In the 1st report, they valued the assets at around USD26m (fair market value) and USD12m (forced sale value). The lender then lent around S$1.6m to the company.

However, the company continued to face financial difficulties. The lender obtained an updated valuation report, which valued the assets at around USD27m (fair market value), USD9m (forced sale value), and USD4m (scrap value).

The company was subsequently placed under judicial management. Another valuer was engaged, who valued the "salvage value" of the assets at between USD1m and USD1.5m. The assets were eventually sold for S$250,000.

The lender could not recover the loan, and sued the valuers. It claimed that the valuers prepared the 2 reports negligently.

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This post is not meant to be a comprehensive summary of the decision, but I suggest 3 take-aways for those who issue professional opinions in their line of work.

First, the valuers argued that their reports stated that they would not be liable to any 3rd party for their reports, and they owed no duty to the lender because of this express disclaimer of responsibility. However, the Court held that since the valuers were informed that the lender would rely on the reports, the disclaimers were not "reasonable" and could not be relied on.

TAKE-AWAY: don't assume that blanket disclaimers will protect you from liability to 3rd parties, especially when you have been informed that a 3rd party will be relying on your opinion.

Second, at trial, the lender's lawyers criticised aspects of the valuers' reasoning. However, the requisite standard of care is that of an ordinary competent valuer, and a valuer cannot be faulted for making inconsequential human mistakes.

TAKE-AWAY: you are not expected to provide a robotically perfect opinion, especially if the mistakes made are inconsequential to the conclusion. I am not suggesting that this provides an excuse for slipshod work. But it does provide some comfort if, in hindsight, some inconsequential mistakes are observed.

Third, the valuers eventually had to testify at trial, and suffer the indignity of being cross-examined. One of the valuers also admitted to lying in Court. I suspect that when the valuers were originally engaged, they may not have anticipated this outcome.

TAKE-AWAY: when preparing reports or opinions, it may be unwise to distinguish between non-contentious work, versus work done when litigation is contemplated. The work will need to live up to the same standards regardless. If necessary, price your work accordingly to take such contingencies into account.