ALLIANCE BANK M.B. v YAP KOO KONG, JAIMAN BIN CHAPANG,J.S. VALUERS PROPERTY CONSULTANTS (MJLR 2009a3) - Clement Skinner, SS
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MALAYSIA
IN THE HIGH COURT IN SABAH AND SARAWAK
AT KOTA KINABALU
CIVIL SUIT NO. K22-101 OF 2005-II
BETWEEN
10 ALLIANCE BANK MALAYSIA BERHAD … PLAINTIFF (Company No.: 88103-W)
V
YAP KOO KONG … 1st DEFENDANT (NRIC No.: H0118642/550116-12-5187)
JAIMAN BIN CHAPANG … 2nd 15 DEFENDANT (NRIC No.: H0019071/590413-12-5075)
J.S. VALUERS PROPERTY CONSULTANTS (E.M) SDN. BHD. (Company No.: T265178-T) - 3rd DEFENCANT
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BEFORE THE HONOURABLE JUSTICE DATUK CLEMENT SKINNER IN OPEN COURT
JUDGMENT
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In 2001, Alliance Bank Malaysia Berhad (‘the plaintiff’) granted housing loans of RM300,000.00 each to six borrowers. The loans were to part finance the purchase of six units of semi-detached houses in a housing scheme known as Taman Kandavai, 30 Donggongon, Penampang described as Lot 1, Lot, 2, Lot 3, Lot 4, Lot 5 and Lot 6 (‘the properties’) each of which were allegedly bought for RM400,000.00 by Amelia Barero, Charles Padua, Nonoy Padua, Ho Mei Hoong, Loretto Padua and Justine Galawis respectively. [CSK.22-101-2001-II]
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The loan applications were processed by the 5 plaintiff’s former executive officer at its Kundasang Branch, namely, Mr. Jaiman Bin Chapang (‘the 2nd defendant’) and approved by the plaintiff’s former Kundasang Branch Manager, Mr. Yap Koo Kong (‘the 1st defendant’).
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A firm of registered licenced Valuers, namely, J.S. Valuers Property Consultants (E.M.) Sdn. Bhd. (‘the 3rd defendant’) undertook a valuation of the properties (individually) on the instructions of the borrowers to support their loan applications but the report was addressed to the plaintiff. The 3rd defendant valued the open market
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of Lot 1 at RM390,000.00 and for that of Lot 2 to 6 at RM380,000.00 respectively. Their forced sale value were given as RM312,000.00 for Lot 1 and RM305,000.00 for Lot 2 to 6. After approval of the loans by the 1st defendant, the plaintiff
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disbursed RM1.8 million in all to the six borrowers on the security to the six properties. Within a year all the borrowers defaulted in their loans which became non-performing. The plaintiff took steps as Chargee to sell off the properties by
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public auction. After several attempts, the properties were sold but the proceeds realized on each property were insufficient to cover the outstanding amount due on them, thereby causing the plaintiff to suffer loss. Lot 1 was sold for RM275,000.00, Lot 2 for RM255,050.00, Lot 3 for RM300,000.00, Lot 4 for RM325,000.00,
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Lot 5 for RM243,900.00 and Lot 6 for RM280,000.00. [CSK.22-101-2001-II]
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The plaintiff attributes its loss to the three 5 defendants. The plaintiff alleges that 1st and 2nd defendants were in breach of their contractual obligations to the plaintiff in approving and disbursing the loans or alternatively they were negligent or in breach of their fiduciary duty when processing, approving and disbursing the loans. As against the 3rd 10 defendant, the plaintiff alleges that it had misrepresented the open market value for the properties to be much higher than their actual values or alternatively the 3rd defendant was negligent in preparing its valuation report on the properties.
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Hence the filing of this action against the defendants. The agreed issues. The parties agreed that the following issues arise for
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determination by the court. (1) Whether the 1st defendant as the Branch Manager and the 2nd defendant as the Processing Officer had breached his contractual obligations and/or was negligent and/or had breached their fiduciary duty to the plaintiff when they
25 processed, recommended, approved and disbursed the said loans?
(2.1) Whether the 3rd defendant had misrepresented to the plaintiff the true market value of the said properties?
(2.2) Further or alternatively, whether the 3rd defendant was
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negligent in preparing the six valuation reports by adopting comparables which are more superior than the [CSK.22-101-2001-II]
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said properties instead of analyzing the 5 transacted prices of similar properties within the same locality? There was a forth issue of whether the plaintiff’s claim against the 1st and 2nd defendant was time barred but this issue was abandoned by the 1st and 2nd 10 defendant at the trial. The claim against the 1st and 2nd defendants. It is an agreed fact between the parties that the 1st and 2nd 15 defendant had each signed an Employee’s Service Agreement dated 02.09.1980 and 03.05.1982 respectively, in which they undertook and agreed amongst other things:
(a) to observe and execute all directives rules, regulations and instructions, or any other instructions by whatsoever
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name called issued or given to them from time to time by an Officer or Officers of the Bank acting in the name or on behalf of the Management of the Bank;
(b) to make good all losses, damages, expenses or otherwise incurred or expended by the Bank as a consequence of
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their act or default or neglect or omission or as consequence of their causing the act to be done the default to happen or omission to occur or neglect to take place to carry out and perform the functions and duties above stated with their individual attention on all 30 occasions. (See their respective service agreement at [CSK.22-101-2001-II]
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pages 79 and 87 of the Agreed and 5 Admitted Bundle of Documents marked ‘AAB’).
It was the testimony of Amalia Anschia Mosikon (PW 1), a Manager at the plaintiff’s Operations hub at Donggongon, 10 Penampang, Kota Kinabalu, that for housing loan applications the Bank’s guidelines, instructions and procedures regarding the processing and approval of such loans are contained in the plaintiff’s Consumer Mortgage Loan Manual, (found at pages 39 to 76 of ‘AAB’).
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PW 1 testified that when the six housing loans became non-performing loans the Bank conducted an internal audit investigation into them, headed by PW 1 and assisted by the plaintiff’s Auditor Mr. Bonny Chong (PW 3). It was PW 1’s as well as
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PW 3’s testimony that many discrepancies and breaches of the directives in the plaintiff’s Consumer Mortgage Loan Manual (‘the Manual’) were detected in the processing, approval and disbursement of these six loans.
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The Manual sets out at Item 5 the directives of the Bank in relation to the eligibility for a housing loan and the requirements in relation to the applicant for such a loan and the documents required. In particular, the Manual directs that the applicants should have a regular source of income either from employment or business and
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must provide documents to substantiate income. Further, a duly [CSK.22-101-2001-II]
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completed application form must be submitted at 5 the time of making the application for a housing loan. Where housing loans are applied for in respect of completed properties, the Manual states that a formal valuation report is required
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unless the property is RM250,000.00 or less, and such valuation report must be from Valuers on the Bank’s panel. Another directive in the Manual is that if the housing loan is to be granted for an owneroccupied house, then the applicant must be interviewed. It was the testimony of both PW 1 and PW 3 that the 1st 15 and 2nd defendant had the responsibility of verifying the information and supporting documents provided by the six housing loan applicants before they were recommended by the 2nd defendant and approved by the 1st defendant.
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PW 1 and PW 3 testified that the breaches of the directive in the Manual which were highlighted in their investigation report which was admitted in evidence as Exh. P-3 (1) to (95) included the following:
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(i) the application forms were not properly completed;
(ii) the letter of appointment granting employment to one purchaser Mr. Loretto Padua was issued on 07.07.2000 by Islo Water Resources Sdn. Bhd., but a check on that company revealed it was non-existent on that date as it 30 was only registered on 15.03.2001; [CSK.22-101-2001-II]
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(iii) that although Mr. Charles Padua stated 5 that he earned an income of RM62,400.00 in his EA Form dated 31.12.2000, yet he had worked with his company for less than 3 months from 19.10.2000 which meant that his monthly income for the 3 months was only RM20,800.00 10 which in turn did not match his income statement of RM5,650.00 per month stated in the application form;
(iv) that despite the clear requirement in the application form for it, no Form J was submitted by any of the loan applicants, while the EA Form submitted by five of the
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applicants (other than Amelia Barero) contained numerous missing details such as employer tax file number, employee tax file number, EPF deductions or signature of the employee;
(v) that the monthly salary of one of the applicants
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Justine Galawis was declared as RM6,760.00 per his salary slip which was inconsistent with his annual income of RM90,000.00 stated in his EA Form which works out to RM5,730.00 per month only. On the plaintiff checking with his employer Informatics Institute, it was revealed
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that he was only earning a gross salary of RM1,900.00 a month from 01.07.2000 until June 2002 and therefore from July 2002 he earned an increased salary of RM2,700.00 per month;
(vi) that all the supporting documents submitted with the 30 application forms were chopped “certified true copy” by a Company Secretary who was not the Company Secretary [CSK.22-101-2001-II]
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of the company concerned, in that, a person name5 d Vun Nyuk Yun, had certified documents for Islo Water Resources Sdn. Bhd., Perunding Bumi Utama Sdn. Bhd., Lengkap Sedia Sdn. Bhd. and Joinace Sdn. Bhd. by which the applicants were allegedly employed, but on the
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plaintiff checking the Form 49 submitted by these companies it did not show that Vun Nyuk Yun was the Company Secretary of any of them;
(vii) that each application form for a housing loan contains a column entitled “Comments/Recommendations”; an
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examination of all the six application forms show that, the six lines of handwritten recommendations for the loan were all in the 1st defendant’s handwriting, whereas it is the 2nd defendant who is supposed to make the recommendation. All the application forms show that although the 2nd 20 defendant did recommend the loans, it was the 1st defendant who wrote the comments/recommendation and approved the loans all on the same day they were applied for.
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I accept the testimony of PW 1 and PW 3 relating to the breaches by the 1st and 2nd defendant of the directive in the Manual relating to the recommendation and approval of these loans. What they say about the breaches are fully supported and substantiated from a perusal of the relevant documents referred to.
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[CSK.22-101-2001-II]
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The 1st and 2nd defendant deny that they are 5 in breach of their contractual duty to the plaintiff or that they had performed their duties negligently or that they were in breach of their fiduciary duty to the plaintiff for the following reasons.
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All the six loan applications were submitted through Mr. Ho Mei Hoong to the 1st defendant who said that he met and interviewed all the loan applicants at Mr. Ho Mei Hoong’s office and he was satisfied with the documents and the information contained in the documents which they had submitted in support of their applications. The 1st 15 defendant admitted in his cross-examination that he wrote the recommendations in each application form and then handed them to the 2nd defendant for processing. The 2nd defendant said in his cross-examination that after he received the application forms, the supporting documents and the valuation report, he
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checked through them and they appeared to be in order so he recommended them for approval. The 1st and 2nd defendant say that they have not acted wrongfully in any way in recommending and approving these loans respectively because as far as the 1st 25 defendant is concerned he had sighted all the documents referred to in the Manual and where necessary he retained certified true copies of them. As regards the Form J’s, the 1st defendant said that even though no Form J was submitted by the applicants as required in the application form, their EA Form were submitted. Accordingly, the 1st 30 defendant submitted to the effect that from the information supplied by these borrowers in
[CSK.22-101-2001-II]
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their various documents, it showed that they were 5 employed in senior positions at the time they submitted their loan applications. Further, all the evidence showed that the borrowers’ employers were in existence at the time they submitted their housing loan applications. According to the 1st defendant, the applicants’ salaries and income
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were commensurate with the position they held. And even further still, under Section D of the Manual it was a requirement that the monthly repayment of a borrower must not exceed 40% of his or her individual monthly income, which from the documents supplied by each borrower this 40% margin was not exceeded and so, according to the 1st and 2nd 15 defendant there was nothing wrong in the way these loan applications were processed and approved, especially so when under the Manual there is no directive for the verification of the documents submitted by housing loan applicants. I do not agree.
20 In the Manual Item 5 (iv) clearly states that in respect of housing loan applications, the applicants should have a regular source of income either from employment or business, and must provide documents to substantiate income. Further, all application forms must be duly completed, and one of the documents required to 25 be supplied in the application form is the Form J. In my judgment, the purpose behind the Manual requiring these supporting documents to be supplied together with the application forms is quite clear: it provides a means by which and an opportunity for the officer in charge of processing the application to verify and ascertain whether
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the loan applicant is eligible for the loan and whether he or she is able to repay the amount borrowed so that the officer can decided
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whether to recommend approval of the loan or 5 not. In turn, the supporting documents mentioned are to enable and afford the approving officer an opportunity to verify and ascertain for himself whether there is a basis for the recommendation made by the officer who processed the loan, so that he can decide for himself whether
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the applicant is eligible for a housing loan and to approve the loan or not. I find that the 2nd defendant did not verify the information in the six applications and their supporting documents at all so as to
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ascertain for himself whether the applicants were eligible for the loans. My finding is based on the 2nd defendant’s admission that all the application forms and supporting documents were handed to him by the 1st defendant with the recommendations already written in. The 2nd defendant admitted in evidence that since the documents all
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seemed to be in order, he recommended the loan applications which means that he did not bother to check and verify the information in them which was clearly a breach of the directive contained in Item 5 of the Manual because if he had done so, especially when no Form J was provided by the applicants, he would have found a need to
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undertake further checking and verification of the facts stated in them because the EA Forms did not contain particulars about the employee’s or employer’s tax file number or EPF deductions which should have put the 2nd defendant on enquiry regarding the applicants regular source of income from employment. Further, the
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income statements in the EA Forms and salary information supplied by Amelia Barero, Ho Mei Hoong, Charles Padua and Justine
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Galawis all showed the discrepancies earlier described 5 in PW 1’s and PW 3’s testimony which should have caused the 2nd defendant to take further steps to verify the information supplied so as to ascertain if the applicants were really eligible for the loans applied for and that their monthly repayments would not exceed 40% of their monthly
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income. Without verifying and checking the information and figures received with the applicants’ employers, how could the 2nd defendant ascertain what the applicants’ “substantiated” income were when ascertaining whether they came within the 40% monthly repayment to monthly salary ratio? Clearly, he was in no position to do so.
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What is said above applies with equal force to the 1st defendant as well. On what basis was he able to write out his recommendation and then approve the loans when he never bothered to verify the information stated in the application forms and the supporting
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documents which were showing the discrepancies I earlier mentioned. In not have taken steps to check and verify the documents and information supplied by the six loan applicants, I find that the 1st and 2nd 25 defendant were clearly in breach of their contractual obligations to the plaintiff to comply with the directives and guidelines set out in the Manual. In failing to do so, the 1st and 2nd defendant had also performed their duties which they owed to the Bank as its employees, without due care and attention as envisaged in the Manual. In other words, the 1st and 2nd 30 defendant had performed their duties negligently. I also find that the 1st and 2nd defendant were for the
[CSK.22-101-2001-II]
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same reasons in breach of their fiduciary duty towards 5 the Bank, in that, the 1st and 2nd defendant being entrusted with the responsibility to recommend and approval the use of money belonging to the Bank by way of housing loans, was under a duty to see that the applications were properly processed and approved in accordance
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with the directive and guidelines in the Bank’s Manual, which they did not do. The 1st and 2nd defendant contended that they did what they did so as to comply with a directive from the Bank that all housing loan
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applications must be decided on within 3 days of application. In my judgment, this cannot afford any excuse for the 1st and 2nd defendant to breach their contractual obligations and duty of care or fiduciary duty towards the Bank. This directive which they rely on is but one of the directives from their employer that they need to comply with. If
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they cannot comply with it due to shortness of time then that would be a good reason for not approving the loan, but it cannot justify the breaches of their obligations I just mentioned. For all the reasons given above, I find that the Issues stated against the 1st and 2nd 25 defendant must be answered in the affirmative. I find that the plaintiff has proved its case against the 1st and 2nd defendant on a balance of probabilities. I grant judgment against the 1st and 2nd defendant in the terms stated in the plaintiff’s amended statement of claim. I order that damages are to be assessed against the 1st and 2nd 30 defendant by the Deputy Registrar on a date to be fixed.
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The claim against the 3rd 5 defendant. For Misrepresentation. The first issue stated against the 3rd defendant is whether the 3rd
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defendant had misrepresented to the plaintiff the true market value of the said properties? It is well settled that the parties are bound by their pleadings. By paragraph 20 of its amended statement of claim, the plaintiff pleaded that the 3rd 15 defendant knew or ought to know that the plaintiff would be “included” by the 3rd defendant’s valuation report. Then in para 22 of its amended statement of claim, the plaintiff averred that “[I]n reliance upon the said Report, the plaintiff approved the Applications and disbursed the sum of RM1.8 million on the security
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of the charge over the said Properties on the mistaken belief that the total market value of the said Properties was accurately assessed and therefore would be more than sufficient to protect the plaintiff’s interest in the event of default and upon realization”.
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The evidence led at this trial shows that the person in the plaintiff Bank who approved all the six housing loan applications was the 1st defendant. It was to him that the loan application forms were submitted, it was he who allegedly interviewed all the six loan applicants. It was he who visited Taman Kandavai and took
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photographs and viewed the six semi-detached houses for which the loans were applied for. It is his testimony that he decided to approve
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the six housing loan applications without reliance 5 on the valuation report of the 3rd defendant or even sighting the reports. If he did not sight the report when he decided to grant the loan he could not have been induced by it. This is what the 1st defendant said on the matter in his cross-examination:
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“Q The amount lent by you as the Branch Manager for the Kundasang branch to the 6 borrowers, was it within your authorized limit?
A Yes.
15 Q What is your authorized limit?
A RM300,000.00.
Q Sometime late 2001, did you inspect the 6 properties in question?
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A Yes, I did. I took photograph for the properties that we are financing.
Q Is there any other purpose for the visit?
A No.
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Q Were the houses completed at the time of visit?
A Yes.
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Q Was the visit before the date of the Sale and Purchase agreement which is 26.11.2001?
A Yes.
Q Was that visit also before the valuation report
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was done which is 09.11.2001?
A Yes.
Q Were you satisfied that these properties that you saw were worth more than
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RM300,000.00?
A Yes.
Q That was why you were willing to lend RM300,000.00 against the properties?
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A Yes.”.
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The above evidence of the 1st defendant was not 5 challenged at all and neither was he re-examined on it or asked to clarify it. It should be noted that earlier on in his evidence in chief the 1st defendant had said that he had approved the applications in compliance with all the procedures set out by the plaintiff in the Manual, but he never said he relied on the 3rd 10 defendant’s valuation report. However during his cross-examination by counsel for the plaintiff the 3rd defendant said that he relied on the 3rd defendant’s valuation report when approving the six loan applications. The 1st defendant was asked in crossexamination by the Bank’s counsel:
15 “Q You must be aware that the S&P prices of the said properties were also higher than the market value given by the 3rd Defendant. Following this, did you seek a second opinion to seek verification with the other valuers in the
20 Bank’s panel before approving the loans?
A In this case, there is a willing buyer and seller and we have valuation report from our approved professional valuer and there was no requirement in the credit manual to seek
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another independent valuers report.
Q Are you saying now that you relied upon the 3rd defendant’s valuation report in approving the loan?
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A I relied on both the Sale and Purchase agreement and the valuation report submitted.”. I find that what the 1st defendant said about relying on the sale and purchase agreement and on the 3rd 35 defendant’s valuation report cannot be true because the evidence revealed in the investigation report Exh. P-3 shows that the sale and purchase agreements were only signed on 26.11.2001 whereas the loans were approved on 15.11.2001. Further, when cross-examined later on by the 3rd
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defendant’s counsel, the 1st defendant clearly 5 admitted that even before the 3rd defendant’s valuation report was done on 09.11.2001, he had visited the six houses and was already satisfied that they were worth more than RM300,000.00.
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Most significantly, nowhere in his evidence did the 1st defendant say or indicate to the effect that he was of “the mistaken belief” that the total market value of the said properties was accurately assessed by what was stated in the 3rd defendant’s valuation report and therefore he was satisfied that the forced sale
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values stated in the reports would be more than sufficient to protect the plaintiff’s interest in the event of default and upon realization, or words to that effect. Further, the plaintiff did not adduce any evidence about who else, apart from the 1st 20 defendant in the plaintiff Bank, relied on the “representations” made in the 3rd defendant’s valuation report and was induced by it to approve the loan. In the absence of such evidence, on the evidence before the Court, it was only the 1st defendant who had approved these six loans, and he clearly did not rely on the 3rd 25 defendant’s valuation report nor was he induced by it. For completeness, the 2nd defendant did say in his evidence that he relied on the 3rd defendant’s valuation report in recommending the loans, but I find that that also cannot be true because the evidence shows that the 2nd 30 defendant merely relied on all the information and recommendations made in the application forms by
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the 1st defendant when the 2nd defendant 5 recommended the applications. He did not even say that he had read the 3rd defendant’s valuation report nor did he say he undertook his own verification of the documents before he recommending the loans.
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For Negligence. The next issue is whether the 3rd defendant was negligent in preparing its valuation report in respect of the six properties. It is the plaintiff’s case that the 3rd
15 defendant was indeed negligent as it had adopted comparables which were more superior and far from the said properties instead of analyzing the transacted prices of similar properties within the same locality. The 3rd
20 defendant’s valuation report was prepared by Mr. Rayner Molikun (DW 3) a Registered Valuer. The material date of valuation was 05.11.2001. To arrive at the market value of the six properties as at 05.11.2001 Mr. Molikun adopted the comparative method of valuation. For his comparable sales figures Mr. Molikun
25 selected three properties, two of which were in a housing development called Taman Mega Ria, Luyang and the other in Taman Aman, Off Jalan Lintas (both of which are not in the Penampang District). All the three comparables selected were double-storey semi-detached houses. The two houses at Taman
30 Mega Ria were sold in August 2001 for RM455,000.00 each, while the house at Taman Aman was sold at RM400,000.00 in February [CSK.22-101-2001-II]
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2001. Mr. Molikun disclosed in his report that compared 5 to the six subject properties, the comparables he had selected were more superior as these comparables were situated within a new housing estate and located in an established residential area known as ‘Luyang’. Mr. Molikun went on to state that in arriving at the market
10 value of the subject properties, he made adjustments for the difference in location, accessibility, built-up area, size, floor finishes, land area, surrounding developments, the current prevailing property market and other relevant characteristic. He then stated his opinion of the Market Value and Forced Sale Value for the six properties. I
15 have stated what there are earlier on. To prove that Mr. Molikun was negligent in arriving at his opinion of market value, the plaintiff first referred me to the duty in law on a valuer such as Mr. Molikun, which was referred to in the judgment of
20 Goddard LJ in Baxter v FW Gapp & Co. Ltd. [1938] 4 KBD, ALL ER 457 where it was said: “His (i.e. valuer’s) duty was, first of all, to use reasonable care in coming to the valuation which he was employed to make and he must be taken to have
25 held himself out as possessing the experience and skill required to value the particular property…..”. The plaintiff also referred me to the correct test to be applied in cases of negligence which involve the use of some special skill or
30 competence, which was stated by Mc Nair J. in Bolam v Friern Hospital Management Committee [1957] 2 ALL ER 118, a case of medical negligence, where it was said: [CSK.22-101-2001-II]
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“The test of (i.e. negligence in 5 a situation which involves the use of some special skill or competence) is the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill at the risk of being
10 negligent………. it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular act”. I will return to discuss the significance of the words “the standard
15 of…..” in the above passage in a later part of this judgment. For present purposes, I accept it that the above test which became known as the “Bolam Test” is not confined to medical negligence cases or to doctors only but is of general application to any profession which requires special skill knowledge and experience. I
20 also accept it that when considering professional negligence the Court’s attention is focused on the way in which the defendant has carried out the relevant task rather than the result which has been achieved, as exemplified by the judgment of Lord Denning in Greaves & Co. (Contractors) Ltd. v Baynham Meikle & Partners [1975] 3 ALL
25 ER 99 where is was said: “Apply this to the employment of a professional man. The law does not usually imply a warranty that he will achieve the desired result, but only a term that he will use reasonable care and skill. The surgeon does not
30 warrant that he will cure the patient. Nor does the solicitor warrant that he will win the case”. It is also evident from the case law referred to me that valuation is not an exact science and is very much a matter of informed
35 opinion, an art. In Banque Bruxelles Lambert SA v Eagle Star Insurance Co. Ltd. [1995] 2 ALL ER 769 Sir Thomas Bingham MR [CSK.22-101-2001-II]
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described the duty which is owed by a valuer to a 5 mortgage lender as follows: “To take reasonable care to give a reliable and informed opinion on the open market value of the land in question at the date of valuation. In the ordinary
10 way [the Valuer] does not warrant that the land would fetch on the open market the value he puts on it, any more than a medical practitioner warrants that he will cure a patient of illness”.
15 And in Singer & Friedlander Ltd. v John D Wood & Co. [1977] 2 EGLR 84 Watkins J. said: “The valuation of land by trained, competent and careful professional men is a task which rarely, if ever, admits of precise conclusion………. Thus, two
20 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……….. Valuation is an art,
25 not a science. Pinpoint accuracy in the result is not, therefore, to be expected by he who requests the valuation”. Reverting to the facts of our case, the plaintiff called two
30 valuers to give their opinions of what the market value of the six properties in question were in November 2001. They were Mr. Chong Choon Kim (PW 4) a Registered Valuer and the Managing Director of C.H. Williams Talhar & Wong (Sabah) Sdn. Bhd. and Ms. Caroline Sebangkit (PW 5) who is a Registered Valuer and
35 Director of VPC Alliance (Sabah) Sdn. Bhd. Both of them also adopted, like Mr. Molikun did, the comparable method of valuation in arriving at their opinion on value. Both Mr. Chong and Ms. Sebangkit gave market values which were lesser than Mr. Molikun. Thus, [CSK.22-101-2001-II]
-22- Mr. Chong valued Lot 1 at RM268,000.00, while he valued 5 Lot 2, 3, 4, 5 and 6 at RM228,000.00 each. Ms. Sebangkit valued Lot 1 at RM350,000.00, while she valued Lot 2, 3, 4, 5 and 6 at RM290,000.00 each.
10 To arrive at his opinion on the market value of the six subject properties, Mr. Chong chose five other sales of properties as comparables. He said he used these five comparable sales “because these are similar types of properties i.e. semi-detached houses or corner terraced houses within the locality”. By “locality” I take
15 Mr. Chong to mean in the Donggongon area of Penampang. In accordance with the comparable method of valuation he used, Mr. Chong made adjustments to allow for differences between the comparables he had selected and the six subject properties in terms of time factor, location and accessibility, size and shape, surrounding
20 development, facilities and quality of construction/upkeep in arriving at his opinion on their market value. To arriving at her market value of the six subject properties, Ms. Sebangkit also selected five comparable sales. She said she
25 used these five comparables sales as (a) the comparables used are within the locality of Penampang District; (b) the comparables are also similar in terms of land size; and (c) the date of transaction of these comparables are within the same period i.e. 2001. Ms. Sebangkit did not indicate in her witness statement if she made any
30 adjustments in arriving at her opinion on value, although a perusal of her valuation report shows that she stated at Item 14.0 that “relevant [CSK.22-101-2001-II]
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adjustments were made between the comparable 5 properties and the subject properties” but without indicating what those adjustments were. Before addressing the question of whether Mr. Molikun was
10 negligent, a point needs to be made about Mr. Chong’s and Ms. Sebangkit’s opinions of value. It is this: when comparing their values with Mr. Molikun’s values, it is important to recognize that in giving their opinions of value in 2005, both Mr. Chong and Ms. Sebangkit had the benefit of hindsight including in the selection of
15 suitable comparable sales within the Penampang District which they would use, which Mr. Molikun did not have in 2001 when he selected his three comparables in the Luyang and Lintas Road area which are outside the Penampang District.
20 Was Mr. Molikun negligent in selecting his comparables from outside the Penampang District as the plaintiff alleges? The test is whether Mr. Molikun measured up to the standard of the ordinary skilled man exercising and professing to have that special skill in valuing property. And in deciding this question, the standard by
25 which Mr. Molikun must be measured is the standard expected of those in his same profession. This is the standard Mc Nair J. was adverting to when he spoke of “the standard of the ordinary skilled man” in formulating the Bolam Test. This much is also made clear in the case of Sansom & Anor v Metcalfe Hambleton & Co. [1998] 2
30 EGLR 103 where Her Ladyship Butler-Sloss L.J. speaking for the English Court of Appeal stated: [CSK.22-101-2001-II]
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“In my judgment, it is clear..... that 5 a court should be slow to find a professionally qualified man guilty of breach of his duty of skill and care towards a client (or third party) without evidence from those within the same profession as to the standard expected on the
10 facts of the case and failure of the professionally qualified man to measure up to that standard. It is not an absolute rule but, unless it is an obvious case, in the absence of the relevant expert evidence the claim will not be proved”.
15 I do not regard the standard of skill and care to be exercised when valuing property as so obvious a case that there is no need to call expert evidence of others from within the same profession to ascertain the standard expected. As I pointed out earlier, valuation is
20 not a precise science but one of informed opinion where two able and experienced men, each confronted with the same task might come to different conclusions without one saying that the other lacked competence and reasonable care as was said in Singer & Friedlander Ltd. V John D Wood (Supra).
25 Our courts have taken a similar approach as Butler-Sloss L.J. did in Sansom & Anor v Metcalfe Hambleton & Co. (Supra). This is illustrated in Mercantile Insurance Sdn. Bhd. V A Denny & Company Sdn. Bhd. [2002] MLJ 119 where Raus Sharif J. (as he then was) did
30 not accept the evidence of a single witness, Mr. Tay, a Registered Valuer, as sufficient to establish the standard of care of a prudent valuer. In doing so, Raus Sharif J. referred to Ngeoh Soo Oh & Ors. v G Rethinasamy [1984] 1 MLJ 126 which was a case concerning a claim for professional negligence against a solicitor, where the
35 plaintiff there called three practicing solicitors to give evidence on the [CSK.22-101-2001-II]
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practice relating to how searches should be made in 5 land acquisition cases to establish the standard of care required by a prudent solicitor, which the court there accepted. Reverting to the facts of our case, did the plaintiff lead evidence
10 in this case from others in the valuation profession of the standard of care to be expected where a piece of land or house is being valued as security to obtain a housing loan? I find that the plaintiff did not do so because neither Mr. Chong or Ms. Sebangkit, apart from saying that they were both governed by the Malaysian Valuation Standards
15 issued by the Board of Valuers & Estate Agents in preparing their valuation reports, gave any evidence on the standard of care expected from a Valuer on the facts of this case was so as to enable the court to decide as a matter of law, what the standard of care expected by the profession from a prudent valuer was and whether
20 Mr. Molikun had failed to measure up to that standard. Without having done so, I find the plaintiff has not proved its case of negligence against the 3rd defendant on a balance of probabilities. Even if Mr. Chong’s and Ms. Sebangkit’s evidence must be
25 read as stating that the expected standard of a prudent valuer is as set out in the Manual of Valuation Standards (‘the valuer’s manual’) issued by the Board of Valuers & Estate Agents, Malaysia, a reference to the valuer’s manual shows that Item 9.2.0 contains a “Statement of Standards” which states in its relevant part that “the
30 Valuer should use appropriate method(s) of valuation in carrying out his valuation”. Item 9.2.1 under the heading of “Comparative Method” [CSK.22-101-2001-II]
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then mentions six matters which a valuer needs to consider.
5 Since it is the plaintiff’s case that Mr. Molikun was negligent when he selected six comparable properties from outside the locality of the Penampang District, it is Item 9.2.1 (b) of the Manual which sets the relevant standard. That standard reads: “Sales of comparable properties
10 selected must be for similar properties”. Learned counsel for the plaintiff contended that since the standard states that the selected comparables to be used must be “for similar properties”, this means that as far as location is concerned, the selected comparables must be in the same locality as the subject property and that since Mr.
15 Molikun had selected three properties outside the Penampang District as comparables, he was negligent. In support of what he said, learned counsel for the plaintiff pointed out that both Mr. Chong and Ms. Sebangkit were able to find
20 comparables from within the Penampang District as suitable comparables and so Mr. Molikun should have been able to do so as well and his failure to do so was indicative of his negligence. I do not agree. The term “similar properties” applies to a whole range of characteristics found in property i.e. similar in size, similar in shape,
25 similar in topography, similar in land use, similar in title conditions, similar in location, similar in design or type of house found on the land, similar date of transaction and e.t.c. So, similarity in location is one of the matters to be taken into account in the selection of a similar comparable.
30 [CSK.22-101-2001-II]
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The plaintiff has ‘zeroed in’ on the fact that Mr. Moliku5 n did not select his comparables from the same locality as the six subject properties as the basis for their complaint that he did not select “similar properties” as comparables as required by the standard set in the valuer’s manual and hence was
10 negligent. Since that is the basis of the plaintiff’s complaint, are the market values of Mr. Chong and Ms. Sebangkit any more correct and acceptable than Mr. Molikun’s because it is certainly arguable that Mr. Chong and Ms. Sebangkit too had not selected “similar properties” as comparables,
15 in that, some of the characteristics in the properties they had selected as comparables were not “similar” to the subject properties. It is true that the comparables selected by Mr. Chong were all located in the same district as the six subject properties, but Mr. Chong’s report indicates that out of his
20 five comparable sales, three were double-storey corner terraced houses, one was a single storey semi-detached house and one was a double-storey semi-detached house whereas the six subject properties were all split-level semi-detached houses. Applying the argument of the plaintiff, can it not be said
25 then that Mr. Chong had not used “similar properties” as comparables and was therefore negligent? Further, Mr. Chong indicates in his report that he had tried to discover sales transacted close to the material date i.e. November 2001 but found very limited transactions during that period so he
30 selected comparable sales which took place “a year or two earlier”, but Ms. Sebangkit managed to find comparable sales transacted in [CSK.22-101-2001-II]
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2001. Can it be said then that Mr. Chong was negligent
5 as he had not used “similar properties” as his comparables as their transaction dates were different from that of the six subject properties? Further, neither Mr. Chong or Ms. Sebangkit chose comparable properties within a development consisting
10 of six semi-detached houses only as far as density was concerned. Can it be said then that their comparables were not of “similar properties” and so they were negligent? Common sense tells us that Mr. Chong and Ms. Sebangkit did not fall short of the standard expected of them by the valuer’s manual
15 because valuation is not an exact science. In selecting their comparables they looked for properties as similar as possible in terms of design/type and time of transaction but when Mr. Chong could not find them he selected what in his opinion were suitable comparables i.e. corner terraced houses
20 and single/double storey semi-detached houses transacted one or two years earlier from the material date, and then made the necessary adjustments for those factors. Did Mr. Molikun approach his task any differently
25 from Mr. Chong and Ms. Sebangkit? The evidence shows that he adopted and followed the same processes as they did i.e. he too used the comparable method and relied on transaction data obtained from the Jabatan Penilaian dan Perkhidmatan Harta, Malaysia in his search for similar comparables. Since it is
30 Mr. Molikun’s choice in selecting comparables from outside the [CSK.22-101-2001-II]
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same locality as the subject properties which has
5 given rise to the allegation of negligence, I will focus on this point. It was Mr. Molikun’s evidence that amongst other things, he regarded Taman Kandavai as a low density development
10 as it consisted of only six units of semi-detached houses with a vacant lot and open space. Further, the estate was enclosed by a brick wall with metal swing gates at the entrance, giving the development a gated community concept. Mr. Molikun said he looked for similar properties in the same locality as the
15 subject properties to use as suitable comparables but he did not find any because even though there were other similar semi-detached houses in the Penampang District, they were all situated in what Mr. Molikun regarded as high density locations or developments. So, Mr. Molikun said he decided to
20 use comparables at Taman Mega Ria and Taman Aman in Luyang and Off Lintas Road which are outside the Penampang District, because of their density and they were newer i.e. more or less the same age as the subject properties and reflective of the price of two-storey semi-detached houses
25 marketed at the material time of valuation, but in arriving at the market value of the subject lands, Mr. Molikun acknowledged that he had used what he termed “superior comparables” but made adjustments for the difference in location as well as for accessibility, built-up area, size, floor finishes, land area,
30 surrounding developments, the current prevailing property market and other relevant characteristic. [CSK.22-101-2001-II]
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Did Mr. Molikun fail to measure up to the standard 5 set in the valuer’s manual? I find not. It was his informed opinion that there were no suitable similar comparables in the Penampang District in terms of a low density development which he regarded the subject properties to be. Therefore, he looked outside that locality for
10 suitable comparables and made adjustments for difference in location when arriving at his opinion on value. As there was a rational basis for Mr. Molikun’s decision to choose suitable comparables from outside the Penampang District it cannot be said that he had not exercised the ordinary skill of a competent valuer. Was what Mr.
15 Molikun did a breach of the standard set by the valuer’s manual? I find not as both Mr. Chong and Ms. Sebangkit testified that where no comparables are available within the locality, valuers will compare similar properties in other locations subject, however, to making adjustments for the difference which is what Mr. Molikun did.
20 I accordingly find that Mr. Molikun did not fall short of the standard expected of an ordinary skilled valuer in arriving at his market values of the six subject properties.
25 It was contended by the plaintiff that because Mr. Molikun had used the services of his assistant who was a fully qualified valuer to prepare his report, he was negligent. I see no merit in this contention. In the first place, contrary to the rules of pleadings the plaintiff never raised this point in its particulars of negligence. In the
30 second place, I accept Mr. Molikun’s testimony that he had personally inspected the six subject properties and the three selected [CSK.22-101-2001-II]
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comparables with his assistant valuer. Thirdly, I also accep
5 t Mr. Molikun’s evidence that he did not go to all the other housing estates in the vicinity of Penampang as he felt he did not need to do so as on going through the list of comparables which was available to him, he was familiar with their surroundings, he having lived in the
10 Penampang area for 15 years before moving to Tuaran in August 2000. It should be noted that neither Mr. Chong nor Ms. Sebangkit said they visited all the housing estates in Penampang District when considering suitable comparables or that there was any requirement that they should do so.
15 It was also complained that Mr. Molikun had not exhibited any notes he made when approaching his valuations and so that was indicative of negligence. Again, the plaintiff never raised this allegation in its pleadings and so it cannot now complain that
20 Mr. Molikun had not displayed his notes. I find no merit in this contention. It is to be noted that neither Mr. Chong nor Ms. Sebangkit had displayed the notes of their approach to their valuations but the plaintiff nevertheless expects the court to receive their reports in evidence.
25 Finally, since I have not found the 3rd defendant guilty of any misrepresentation or negligence, I do not find it necessary to address the question whether the courts here should, like the courts in England accept the “margin of error” principle whereby a difference of
30 between 10% to 15% in differing valuations is acceptable. [CSK.22-101-2001-II]
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In the result for all the reasons given above, 5 I find that the plaintiff has not proved its case against the 3rd defendant on a balance of probabilities and dismiss their claim against the 3rd defendant with costs.
10
DATUK CLEMENT SKINNER Judge
15 Date : 13th November 2009 Counsel
20 For Plaintiff : Mr. Nicholas Fernandez with Puan Nasrinah Jabirin Messrs. Fernandez & Co. Advocates and Solicitors
25 KOTA KINABALU
For 1st and 2nd Defendant: Mr. Gilbert Bulagang Messrs. Bulagang & Co. Advocates and Solicitors KOTA KINABALU
For 3rd
30 Defendant : Datuk Douglas Primus with Ms. Shireen Sikayun
Messrs. Lee & Thong Advocates and Solicitors KOTA KINABALU
MALAYSIA
IN THE HIGH COURT IN SABAH AND SARAWAK
AT KOTA KINABALU
CIVIL SUIT NO. K22-101 OF 2005-II
BETWEEN
10 ALLIANCE BANK MALAYSIA BERHAD … PLAINTIFF (Company No.: 88103-W)
V
YAP KOO KONG … 1st DEFENDANT (NRIC No.: H0118642/550116-12-5187)
JAIMAN BIN CHAPANG … 2nd 15 DEFENDANT (NRIC No.: H0019071/590413-12-5075)
J.S. VALUERS PROPERTY CONSULTANTS (E.M) SDN. BHD. (Company No.: T265178-T) - 3rd DEFENCANT
20
BEFORE THE HONOURABLE JUSTICE DATUK CLEMENT SKINNER IN OPEN COURT
JUDGMENT
25
In 2001, Alliance Bank Malaysia Berhad (‘the plaintiff’) granted housing loans of RM300,000.00 each to six borrowers. The loans were to part finance the purchase of six units of semi-detached houses in a housing scheme known as Taman Kandavai, 30 Donggongon, Penampang described as Lot 1, Lot, 2, Lot 3, Lot 4, Lot 5 and Lot 6 (‘the properties’) each of which were allegedly bought for RM400,000.00 by Amelia Barero, Charles Padua, Nonoy Padua, Ho Mei Hoong, Loretto Padua and Justine Galawis respectively. [CSK.22-101-2001-II]
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The loan applications were processed by the 5 plaintiff’s former executive officer at its Kundasang Branch, namely, Mr. Jaiman Bin Chapang (‘the 2nd defendant’) and approved by the plaintiff’s former Kundasang Branch Manager, Mr. Yap Koo Kong (‘the 1st defendant’).
10
A firm of registered licenced Valuers, namely, J.S. Valuers Property Consultants (E.M.) Sdn. Bhd. (‘the 3rd defendant’) undertook a valuation of the properties (individually) on the instructions of the borrowers to support their loan applications but the report was addressed to the plaintiff. The 3rd defendant valued the open market
15
of Lot 1 at RM390,000.00 and for that of Lot 2 to 6 at RM380,000.00 respectively. Their forced sale value were given as RM312,000.00 for Lot 1 and RM305,000.00 for Lot 2 to 6. After approval of the loans by the 1st defendant, the plaintiff
20
disbursed RM1.8 million in all to the six borrowers on the security to the six properties. Within a year all the borrowers defaulted in their loans which became non-performing. The plaintiff took steps as Chargee to sell off the properties by
25
public auction. After several attempts, the properties were sold but the proceeds realized on each property were insufficient to cover the outstanding amount due on them, thereby causing the plaintiff to suffer loss. Lot 1 was sold for RM275,000.00, Lot 2 for RM255,050.00, Lot 3 for RM300,000.00, Lot 4 for RM325,000.00,
30
Lot 5 for RM243,900.00 and Lot 6 for RM280,000.00. [CSK.22-101-2001-II]
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The plaintiff attributes its loss to the three 5 defendants. The plaintiff alleges that 1st and 2nd defendants were in breach of their contractual obligations to the plaintiff in approving and disbursing the loans or alternatively they were negligent or in breach of their fiduciary duty when processing, approving and disbursing the loans. As against the 3rd 10 defendant, the plaintiff alleges that it had misrepresented the open market value for the properties to be much higher than their actual values or alternatively the 3rd defendant was negligent in preparing its valuation report on the properties.
15
Hence the filing of this action against the defendants. The agreed issues. The parties agreed that the following issues arise for
20
determination by the court. (1) Whether the 1st defendant as the Branch Manager and the 2nd defendant as the Processing Officer had breached his contractual obligations and/or was negligent and/or had breached their fiduciary duty to the plaintiff when they
25 processed, recommended, approved and disbursed the said loans?
(2.1) Whether the 3rd defendant had misrepresented to the plaintiff the true market value of the said properties?
(2.2) Further or alternatively, whether the 3rd defendant was
30
negligent in preparing the six valuation reports by adopting comparables which are more superior than the [CSK.22-101-2001-II]
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said properties instead of analyzing the 5 transacted prices of similar properties within the same locality? There was a forth issue of whether the plaintiff’s claim against the 1st and 2nd defendant was time barred but this issue was abandoned by the 1st and 2nd 10 defendant at the trial. The claim against the 1st and 2nd defendants. It is an agreed fact between the parties that the 1st and 2nd 15 defendant had each signed an Employee’s Service Agreement dated 02.09.1980 and 03.05.1982 respectively, in which they undertook and agreed amongst other things:
(a) to observe and execute all directives rules, regulations and instructions, or any other instructions by whatsoever
20
name called issued or given to them from time to time by an Officer or Officers of the Bank acting in the name or on behalf of the Management of the Bank;
(b) to make good all losses, damages, expenses or otherwise incurred or expended by the Bank as a consequence of
25
their act or default or neglect or omission or as consequence of their causing the act to be done the default to happen or omission to occur or neglect to take place to carry out and perform the functions and duties above stated with their individual attention on all 30 occasions. (See their respective service agreement at [CSK.22-101-2001-II]
-5-
pages 79 and 87 of the Agreed and 5 Admitted Bundle of Documents marked ‘AAB’).
It was the testimony of Amalia Anschia Mosikon (PW 1), a Manager at the plaintiff’s Operations hub at Donggongon, 10 Penampang, Kota Kinabalu, that for housing loan applications the Bank’s guidelines, instructions and procedures regarding the processing and approval of such loans are contained in the plaintiff’s Consumer Mortgage Loan Manual, (found at pages 39 to 76 of ‘AAB’).
15
PW 1 testified that when the six housing loans became non-performing loans the Bank conducted an internal audit investigation into them, headed by PW 1 and assisted by the plaintiff’s Auditor Mr. Bonny Chong (PW 3). It was PW 1’s as well as
20
PW 3’s testimony that many discrepancies and breaches of the directives in the plaintiff’s Consumer Mortgage Loan Manual (‘the Manual’) were detected in the processing, approval and disbursement of these six loans.
25
The Manual sets out at Item 5 the directives of the Bank in relation to the eligibility for a housing loan and the requirements in relation to the applicant for such a loan and the documents required. In particular, the Manual directs that the applicants should have a regular source of income either from employment or business and
30
must provide documents to substantiate income. Further, a duly [CSK.22-101-2001-II]
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completed application form must be submitted at 5 the time of making the application for a housing loan. Where housing loans are applied for in respect of completed properties, the Manual states that a formal valuation report is required
10
unless the property is RM250,000.00 or less, and such valuation report must be from Valuers on the Bank’s panel. Another directive in the Manual is that if the housing loan is to be granted for an owneroccupied house, then the applicant must be interviewed. It was the testimony of both PW 1 and PW 3 that the 1st 15 and 2nd defendant had the responsibility of verifying the information and supporting documents provided by the six housing loan applicants before they were recommended by the 2nd defendant and approved by the 1st defendant.
20
PW 1 and PW 3 testified that the breaches of the directive in the Manual which were highlighted in their investigation report which was admitted in evidence as Exh. P-3 (1) to (95) included the following:
25
(i) the application forms were not properly completed;
(ii) the letter of appointment granting employment to one purchaser Mr. Loretto Padua was issued on 07.07.2000 by Islo Water Resources Sdn. Bhd., but a check on that company revealed it was non-existent on that date as it 30 was only registered on 15.03.2001; [CSK.22-101-2001-II]
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(iii) that although Mr. Charles Padua stated 5 that he earned an income of RM62,400.00 in his EA Form dated 31.12.2000, yet he had worked with his company for less than 3 months from 19.10.2000 which meant that his monthly income for the 3 months was only RM20,800.00 10 which in turn did not match his income statement of RM5,650.00 per month stated in the application form;
(iv) that despite the clear requirement in the application form for it, no Form J was submitted by any of the loan applicants, while the EA Form submitted by five of the
15
applicants (other than Amelia Barero) contained numerous missing details such as employer tax file number, employee tax file number, EPF deductions or signature of the employee;
(v) that the monthly salary of one of the applicants
20
Justine Galawis was declared as RM6,760.00 per his salary slip which was inconsistent with his annual income of RM90,000.00 stated in his EA Form which works out to RM5,730.00 per month only. On the plaintiff checking with his employer Informatics Institute, it was revealed
25
that he was only earning a gross salary of RM1,900.00 a month from 01.07.2000 until June 2002 and therefore from July 2002 he earned an increased salary of RM2,700.00 per month;
(vi) that all the supporting documents submitted with the 30 application forms were chopped “certified true copy” by a Company Secretary who was not the Company Secretary [CSK.22-101-2001-II]
-8-
of the company concerned, in that, a person name5 d Vun Nyuk Yun, had certified documents for Islo Water Resources Sdn. Bhd., Perunding Bumi Utama Sdn. Bhd., Lengkap Sedia Sdn. Bhd. and Joinace Sdn. Bhd. by which the applicants were allegedly employed, but on the
10
plaintiff checking the Form 49 submitted by these companies it did not show that Vun Nyuk Yun was the Company Secretary of any of them;
(vii) that each application form for a housing loan contains a column entitled “Comments/Recommendations”; an
15
examination of all the six application forms show that, the six lines of handwritten recommendations for the loan were all in the 1st defendant’s handwriting, whereas it is the 2nd defendant who is supposed to make the recommendation. All the application forms show that although the 2nd 20 defendant did recommend the loans, it was the 1st defendant who wrote the comments/recommendation and approved the loans all on the same day they were applied for.
25
I accept the testimony of PW 1 and PW 3 relating to the breaches by the 1st and 2nd defendant of the directive in the Manual relating to the recommendation and approval of these loans. What they say about the breaches are fully supported and substantiated from a perusal of the relevant documents referred to.
30
[CSK.22-101-2001-II]
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The 1st and 2nd defendant deny that they are 5 in breach of their contractual duty to the plaintiff or that they had performed their duties negligently or that they were in breach of their fiduciary duty to the plaintiff for the following reasons.
10
All the six loan applications were submitted through Mr. Ho Mei Hoong to the 1st defendant who said that he met and interviewed all the loan applicants at Mr. Ho Mei Hoong’s office and he was satisfied with the documents and the information contained in the documents which they had submitted in support of their applications. The 1st 15 defendant admitted in his cross-examination that he wrote the recommendations in each application form and then handed them to the 2nd defendant for processing. The 2nd defendant said in his cross-examination that after he received the application forms, the supporting documents and the valuation report, he
20
checked through them and they appeared to be in order so he recommended them for approval. The 1st and 2nd defendant say that they have not acted wrongfully in any way in recommending and approving these loans respectively because as far as the 1st 25 defendant is concerned he had sighted all the documents referred to in the Manual and where necessary he retained certified true copies of them. As regards the Form J’s, the 1st defendant said that even though no Form J was submitted by the applicants as required in the application form, their EA Form were submitted. Accordingly, the 1st 30 defendant submitted to the effect that from the information supplied by these borrowers in
[CSK.22-101-2001-II]
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their various documents, it showed that they were 5 employed in senior positions at the time they submitted their loan applications. Further, all the evidence showed that the borrowers’ employers were in existence at the time they submitted their housing loan applications. According to the 1st defendant, the applicants’ salaries and income
10
were commensurate with the position they held. And even further still, under Section D of the Manual it was a requirement that the monthly repayment of a borrower must not exceed 40% of his or her individual monthly income, which from the documents supplied by each borrower this 40% margin was not exceeded and so, according to the 1st and 2nd 15 defendant there was nothing wrong in the way these loan applications were processed and approved, especially so when under the Manual there is no directive for the verification of the documents submitted by housing loan applicants. I do not agree.
20 In the Manual Item 5 (iv) clearly states that in respect of housing loan applications, the applicants should have a regular source of income either from employment or business, and must provide documents to substantiate income. Further, all application forms must be duly completed, and one of the documents required to 25 be supplied in the application form is the Form J. In my judgment, the purpose behind the Manual requiring these supporting documents to be supplied together with the application forms is quite clear: it provides a means by which and an opportunity for the officer in charge of processing the application to verify and ascertain whether
30
the loan applicant is eligible for the loan and whether he or she is able to repay the amount borrowed so that the officer can decided
[CSK.22-101-2001-II]
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whether to recommend approval of the loan or 5 not. In turn, the supporting documents mentioned are to enable and afford the approving officer an opportunity to verify and ascertain for himself whether there is a basis for the recommendation made by the officer who processed the loan, so that he can decide for himself whether
10
the applicant is eligible for a housing loan and to approve the loan or not. I find that the 2nd defendant did not verify the information in the six applications and their supporting documents at all so as to
15
ascertain for himself whether the applicants were eligible for the loans. My finding is based on the 2nd defendant’s admission that all the application forms and supporting documents were handed to him by the 1st defendant with the recommendations already written in. The 2nd defendant admitted in evidence that since the documents all
20
seemed to be in order, he recommended the loan applications which means that he did not bother to check and verify the information in them which was clearly a breach of the directive contained in Item 5 of the Manual because if he had done so, especially when no Form J was provided by the applicants, he would have found a need to
25
undertake further checking and verification of the facts stated in them because the EA Forms did not contain particulars about the employee’s or employer’s tax file number or EPF deductions which should have put the 2nd defendant on enquiry regarding the applicants regular source of income from employment. Further, the
30
income statements in the EA Forms and salary information supplied by Amelia Barero, Ho Mei Hoong, Charles Padua and Justine
[CSK.22-101-2001-II]
-12-
Galawis all showed the discrepancies earlier described 5 in PW 1’s and PW 3’s testimony which should have caused the 2nd defendant to take further steps to verify the information supplied so as to ascertain if the applicants were really eligible for the loans applied for and that their monthly repayments would not exceed 40% of their monthly
10
income. Without verifying and checking the information and figures received with the applicants’ employers, how could the 2nd defendant ascertain what the applicants’ “substantiated” income were when ascertaining whether they came within the 40% monthly repayment to monthly salary ratio? Clearly, he was in no position to do so.
15
What is said above applies with equal force to the 1st defendant as well. On what basis was he able to write out his recommendation and then approve the loans when he never bothered to verify the information stated in the application forms and the supporting
20
documents which were showing the discrepancies I earlier mentioned. In not have taken steps to check and verify the documents and information supplied by the six loan applicants, I find that the 1st and 2nd 25 defendant were clearly in breach of their contractual obligations to the plaintiff to comply with the directives and guidelines set out in the Manual. In failing to do so, the 1st and 2nd defendant had also performed their duties which they owed to the Bank as its employees, without due care and attention as envisaged in the Manual. In other words, the 1st and 2nd 30 defendant had performed their duties negligently. I also find that the 1st and 2nd defendant were for the
[CSK.22-101-2001-II]
-13-
same reasons in breach of their fiduciary duty towards 5 the Bank, in that, the 1st and 2nd defendant being entrusted with the responsibility to recommend and approval the use of money belonging to the Bank by way of housing loans, was under a duty to see that the applications were properly processed and approved in accordance
10
with the directive and guidelines in the Bank’s Manual, which they did not do. The 1st and 2nd defendant contended that they did what they did so as to comply with a directive from the Bank that all housing loan
15
applications must be decided on within 3 days of application. In my judgment, this cannot afford any excuse for the 1st and 2nd defendant to breach their contractual obligations and duty of care or fiduciary duty towards the Bank. This directive which they rely on is but one of the directives from their employer that they need to comply with. If
20
they cannot comply with it due to shortness of time then that would be a good reason for not approving the loan, but it cannot justify the breaches of their obligations I just mentioned. For all the reasons given above, I find that the Issues stated against the 1st and 2nd 25 defendant must be answered in the affirmative. I find that the plaintiff has proved its case against the 1st and 2nd defendant on a balance of probabilities. I grant judgment against the 1st and 2nd defendant in the terms stated in the plaintiff’s amended statement of claim. I order that damages are to be assessed against the 1st and 2nd 30 defendant by the Deputy Registrar on a date to be fixed.
[CSK.22-101-2001-II]
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The claim against the 3rd 5 defendant. For Misrepresentation. The first issue stated against the 3rd defendant is whether the 3rd
10
defendant had misrepresented to the plaintiff the true market value of the said properties? It is well settled that the parties are bound by their pleadings. By paragraph 20 of its amended statement of claim, the plaintiff pleaded that the 3rd 15 defendant knew or ought to know that the plaintiff would be “included” by the 3rd defendant’s valuation report. Then in para 22 of its amended statement of claim, the plaintiff averred that “[I]n reliance upon the said Report, the plaintiff approved the Applications and disbursed the sum of RM1.8 million on the security
20
of the charge over the said Properties on the mistaken belief that the total market value of the said Properties was accurately assessed and therefore would be more than sufficient to protect the plaintiff’s interest in the event of default and upon realization”.
25
The evidence led at this trial shows that the person in the plaintiff Bank who approved all the six housing loan applications was the 1st defendant. It was to him that the loan application forms were submitted, it was he who allegedly interviewed all the six loan applicants. It was he who visited Taman Kandavai and took
30
photographs and viewed the six semi-detached houses for which the loans were applied for. It is his testimony that he decided to approve
[CSK.22-101-2001-II]
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the six housing loan applications without reliance 5 on the valuation report of the 3rd defendant or even sighting the reports. If he did not sight the report when he decided to grant the loan he could not have been induced by it. This is what the 1st defendant said on the matter in his cross-examination:
10
“Q The amount lent by you as the Branch Manager for the Kundasang branch to the 6 borrowers, was it within your authorized limit?
A Yes.
15 Q What is your authorized limit?
A RM300,000.00.
Q Sometime late 2001, did you inspect the 6 properties in question?
20
A Yes, I did. I took photograph for the properties that we are financing.
Q Is there any other purpose for the visit?
A No.
25
Q Were the houses completed at the time of visit?
A Yes.
30
Q Was the visit before the date of the Sale and Purchase agreement which is 26.11.2001?
A Yes.
Q Was that visit also before the valuation report
35
was done which is 09.11.2001?
A Yes.
Q Were you satisfied that these properties that you saw were worth more than
40
RM300,000.00?
A Yes.
Q That was why you were willing to lend RM300,000.00 against the properties?
45
A Yes.”.
[CSK.22-101-2001-II]
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The above evidence of the 1st defendant was not 5 challenged at all and neither was he re-examined on it or asked to clarify it. It should be noted that earlier on in his evidence in chief the 1st defendant had said that he had approved the applications in compliance with all the procedures set out by the plaintiff in the Manual, but he never said he relied on the 3rd 10 defendant’s valuation report. However during his cross-examination by counsel for the plaintiff the 3rd defendant said that he relied on the 3rd defendant’s valuation report when approving the six loan applications. The 1st defendant was asked in crossexamination by the Bank’s counsel:
15 “Q You must be aware that the S&P prices of the said properties were also higher than the market value given by the 3rd Defendant. Following this, did you seek a second opinion to seek verification with the other valuers in the
20 Bank’s panel before approving the loans?
A In this case, there is a willing buyer and seller and we have valuation report from our approved professional valuer and there was no requirement in the credit manual to seek
25
another independent valuers report.
Q Are you saying now that you relied upon the 3rd defendant’s valuation report in approving the loan?
30
A I relied on both the Sale and Purchase agreement and the valuation report submitted.”. I find that what the 1st defendant said about relying on the sale and purchase agreement and on the 3rd 35 defendant’s valuation report cannot be true because the evidence revealed in the investigation report Exh. P-3 shows that the sale and purchase agreements were only signed on 26.11.2001 whereas the loans were approved on 15.11.2001. Further, when cross-examined later on by the 3rd
[CSK.22-101-2001-II]
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defendant’s counsel, the 1st defendant clearly 5 admitted that even before the 3rd defendant’s valuation report was done on 09.11.2001, he had visited the six houses and was already satisfied that they were worth more than RM300,000.00.
10
Most significantly, nowhere in his evidence did the 1st defendant say or indicate to the effect that he was of “the mistaken belief” that the total market value of the said properties was accurately assessed by what was stated in the 3rd defendant’s valuation report and therefore he was satisfied that the forced sale
15
values stated in the reports would be more than sufficient to protect the plaintiff’s interest in the event of default and upon realization, or words to that effect. Further, the plaintiff did not adduce any evidence about who else, apart from the 1st 20 defendant in the plaintiff Bank, relied on the “representations” made in the 3rd defendant’s valuation report and was induced by it to approve the loan. In the absence of such evidence, on the evidence before the Court, it was only the 1st defendant who had approved these six loans, and he clearly did not rely on the 3rd 25 defendant’s valuation report nor was he induced by it. For completeness, the 2nd defendant did say in his evidence that he relied on the 3rd defendant’s valuation report in recommending the loans, but I find that that also cannot be true because the evidence shows that the 2nd 30 defendant merely relied on all the information and recommendations made in the application forms by
[CSK.22-101-2001-II]
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the 1st defendant when the 2nd defendant 5 recommended the applications. He did not even say that he had read the 3rd defendant’s valuation report nor did he say he undertook his own verification of the documents before he recommending the loans.
10
For Negligence. The next issue is whether the 3rd defendant was negligent in preparing its valuation report in respect of the six properties. It is the plaintiff’s case that the 3rd
15 defendant was indeed negligent as it had adopted comparables which were more superior and far from the said properties instead of analyzing the transacted prices of similar properties within the same locality. The 3rd
20 defendant’s valuation report was prepared by Mr. Rayner Molikun (DW 3) a Registered Valuer. The material date of valuation was 05.11.2001. To arrive at the market value of the six properties as at 05.11.2001 Mr. Molikun adopted the comparative method of valuation. For his comparable sales figures Mr. Molikun
25 selected three properties, two of which were in a housing development called Taman Mega Ria, Luyang and the other in Taman Aman, Off Jalan Lintas (both of which are not in the Penampang District). All the three comparables selected were double-storey semi-detached houses. The two houses at Taman
30 Mega Ria were sold in August 2001 for RM455,000.00 each, while the house at Taman Aman was sold at RM400,000.00 in February [CSK.22-101-2001-II]
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2001. Mr. Molikun disclosed in his report that compared 5 to the six subject properties, the comparables he had selected were more superior as these comparables were situated within a new housing estate and located in an established residential area known as ‘Luyang’. Mr. Molikun went on to state that in arriving at the market
10 value of the subject properties, he made adjustments for the difference in location, accessibility, built-up area, size, floor finishes, land area, surrounding developments, the current prevailing property market and other relevant characteristic. He then stated his opinion of the Market Value and Forced Sale Value for the six properties. I
15 have stated what there are earlier on. To prove that Mr. Molikun was negligent in arriving at his opinion of market value, the plaintiff first referred me to the duty in law on a valuer such as Mr. Molikun, which was referred to in the judgment of
20 Goddard LJ in Baxter v FW Gapp & Co. Ltd. [1938] 4 KBD, ALL ER 457 where it was said: “His (i.e. valuer’s) duty was, first of all, to use reasonable care in coming to the valuation which he was employed to make and he must be taken to have
25 held himself out as possessing the experience and skill required to value the particular property…..”. The plaintiff also referred me to the correct test to be applied in cases of negligence which involve the use of some special skill or
30 competence, which was stated by Mc Nair J. in Bolam v Friern Hospital Management Committee [1957] 2 ALL ER 118, a case of medical negligence, where it was said: [CSK.22-101-2001-II]
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“The test of (i.e. negligence in 5 a situation which involves the use of some special skill or competence) is the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill at the risk of being
10 negligent………. it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular act”. I will return to discuss the significance of the words “the standard
15 of…..” in the above passage in a later part of this judgment. For present purposes, I accept it that the above test which became known as the “Bolam Test” is not confined to medical negligence cases or to doctors only but is of general application to any profession which requires special skill knowledge and experience. I
20 also accept it that when considering professional negligence the Court’s attention is focused on the way in which the defendant has carried out the relevant task rather than the result which has been achieved, as exemplified by the judgment of Lord Denning in Greaves & Co. (Contractors) Ltd. v Baynham Meikle & Partners [1975] 3 ALL
25 ER 99 where is was said: “Apply this to the employment of a professional man. The law does not usually imply a warranty that he will achieve the desired result, but only a term that he will use reasonable care and skill. The surgeon does not
30 warrant that he will cure the patient. Nor does the solicitor warrant that he will win the case”. It is also evident from the case law referred to me that valuation is not an exact science and is very much a matter of informed
35 opinion, an art. In Banque Bruxelles Lambert SA v Eagle Star Insurance Co. Ltd. [1995] 2 ALL ER 769 Sir Thomas Bingham MR [CSK.22-101-2001-II]
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described the duty which is owed by a valuer to a 5 mortgage lender as follows: “To take reasonable care to give a reliable and informed opinion on the open market value of the land in question at the date of valuation. In the ordinary
10 way [the Valuer] does not warrant that the land would fetch on the open market the value he puts on it, any more than a medical practitioner warrants that he will cure a patient of illness”.
15 And in Singer & Friedlander Ltd. v John D Wood & Co. [1977] 2 EGLR 84 Watkins J. said: “The valuation of land by trained, competent and careful professional men is a task which rarely, if ever, admits of precise conclusion………. Thus, two
20 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……….. Valuation is an art,
25 not a science. Pinpoint accuracy in the result is not, therefore, to be expected by he who requests the valuation”. Reverting to the facts of our case, the plaintiff called two
30 valuers to give their opinions of what the market value of the six properties in question were in November 2001. They were Mr. Chong Choon Kim (PW 4) a Registered Valuer and the Managing Director of C.H. Williams Talhar & Wong (Sabah) Sdn. Bhd. and Ms. Caroline Sebangkit (PW 5) who is a Registered Valuer and
35 Director of VPC Alliance (Sabah) Sdn. Bhd. Both of them also adopted, like Mr. Molikun did, the comparable method of valuation in arriving at their opinion on value. Both Mr. Chong and Ms. Sebangkit gave market values which were lesser than Mr. Molikun. Thus, [CSK.22-101-2001-II]
-22- Mr. Chong valued Lot 1 at RM268,000.00, while he valued 5 Lot 2, 3, 4, 5 and 6 at RM228,000.00 each. Ms. Sebangkit valued Lot 1 at RM350,000.00, while she valued Lot 2, 3, 4, 5 and 6 at RM290,000.00 each.
10 To arrive at his opinion on the market value of the six subject properties, Mr. Chong chose five other sales of properties as comparables. He said he used these five comparable sales “because these are similar types of properties i.e. semi-detached houses or corner terraced houses within the locality”. By “locality” I take
15 Mr. Chong to mean in the Donggongon area of Penampang. In accordance with the comparable method of valuation he used, Mr. Chong made adjustments to allow for differences between the comparables he had selected and the six subject properties in terms of time factor, location and accessibility, size and shape, surrounding
20 development, facilities and quality of construction/upkeep in arriving at his opinion on their market value. To arriving at her market value of the six subject properties, Ms. Sebangkit also selected five comparable sales. She said she
25 used these five comparables sales as (a) the comparables used are within the locality of Penampang District; (b) the comparables are also similar in terms of land size; and (c) the date of transaction of these comparables are within the same period i.e. 2001. Ms. Sebangkit did not indicate in her witness statement if she made any
30 adjustments in arriving at her opinion on value, although a perusal of her valuation report shows that she stated at Item 14.0 that “relevant [CSK.22-101-2001-II]
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adjustments were made between the comparable 5 properties and the subject properties” but without indicating what those adjustments were. Before addressing the question of whether Mr. Molikun was
10 negligent, a point needs to be made about Mr. Chong’s and Ms. Sebangkit’s opinions of value. It is this: when comparing their values with Mr. Molikun’s values, it is important to recognize that in giving their opinions of value in 2005, both Mr. Chong and Ms. Sebangkit had the benefit of hindsight including in the selection of
15 suitable comparable sales within the Penampang District which they would use, which Mr. Molikun did not have in 2001 when he selected his three comparables in the Luyang and Lintas Road area which are outside the Penampang District.
20 Was Mr. Molikun negligent in selecting his comparables from outside the Penampang District as the plaintiff alleges? The test is whether Mr. Molikun measured up to the standard of the ordinary skilled man exercising and professing to have that special skill in valuing property. And in deciding this question, the standard by
25 which Mr. Molikun must be measured is the standard expected of those in his same profession. This is the standard Mc Nair J. was adverting to when he spoke of “the standard of the ordinary skilled man” in formulating the Bolam Test. This much is also made clear in the case of Sansom & Anor v Metcalfe Hambleton & Co. [1998] 2
30 EGLR 103 where Her Ladyship Butler-Sloss L.J. speaking for the English Court of Appeal stated: [CSK.22-101-2001-II]
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“In my judgment, it is clear..... that 5 a court should be slow to find a professionally qualified man guilty of breach of his duty of skill and care towards a client (or third party) without evidence from those within the same profession as to the standard expected on the
10 facts of the case and failure of the professionally qualified man to measure up to that standard. It is not an absolute rule but, unless it is an obvious case, in the absence of the relevant expert evidence the claim will not be proved”.
15 I do not regard the standard of skill and care to be exercised when valuing property as so obvious a case that there is no need to call expert evidence of others from within the same profession to ascertain the standard expected. As I pointed out earlier, valuation is
20 not a precise science but one of informed opinion where two able and experienced men, each confronted with the same task might come to different conclusions without one saying that the other lacked competence and reasonable care as was said in Singer & Friedlander Ltd. V John D Wood (Supra).
25 Our courts have taken a similar approach as Butler-Sloss L.J. did in Sansom & Anor v Metcalfe Hambleton & Co. (Supra). This is illustrated in Mercantile Insurance Sdn. Bhd. V A Denny & Company Sdn. Bhd. [2002] MLJ 119 where Raus Sharif J. (as he then was) did
30 not accept the evidence of a single witness, Mr. Tay, a Registered Valuer, as sufficient to establish the standard of care of a prudent valuer. In doing so, Raus Sharif J. referred to Ngeoh Soo Oh & Ors. v G Rethinasamy [1984] 1 MLJ 126 which was a case concerning a claim for professional negligence against a solicitor, where the
35 plaintiff there called three practicing solicitors to give evidence on the [CSK.22-101-2001-II]
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practice relating to how searches should be made in 5 land acquisition cases to establish the standard of care required by a prudent solicitor, which the court there accepted. Reverting to the facts of our case, did the plaintiff lead evidence
10 in this case from others in the valuation profession of the standard of care to be expected where a piece of land or house is being valued as security to obtain a housing loan? I find that the plaintiff did not do so because neither Mr. Chong or Ms. Sebangkit, apart from saying that they were both governed by the Malaysian Valuation Standards
15 issued by the Board of Valuers & Estate Agents in preparing their valuation reports, gave any evidence on the standard of care expected from a Valuer on the facts of this case was so as to enable the court to decide as a matter of law, what the standard of care expected by the profession from a prudent valuer was and whether
20 Mr. Molikun had failed to measure up to that standard. Without having done so, I find the plaintiff has not proved its case of negligence against the 3rd defendant on a balance of probabilities. Even if Mr. Chong’s and Ms. Sebangkit’s evidence must be
25 read as stating that the expected standard of a prudent valuer is as set out in the Manual of Valuation Standards (‘the valuer’s manual’) issued by the Board of Valuers & Estate Agents, Malaysia, a reference to the valuer’s manual shows that Item 9.2.0 contains a “Statement of Standards” which states in its relevant part that “the
30 Valuer should use appropriate method(s) of valuation in carrying out his valuation”. Item 9.2.1 under the heading of “Comparative Method” [CSK.22-101-2001-II]
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then mentions six matters which a valuer needs to consider.
5 Since it is the plaintiff’s case that Mr. Molikun was negligent when he selected six comparable properties from outside the locality of the Penampang District, it is Item 9.2.1 (b) of the Manual which sets the relevant standard. That standard reads: “Sales of comparable properties
10 selected must be for similar properties”. Learned counsel for the plaintiff contended that since the standard states that the selected comparables to be used must be “for similar properties”, this means that as far as location is concerned, the selected comparables must be in the same locality as the subject property and that since Mr.
15 Molikun had selected three properties outside the Penampang District as comparables, he was negligent. In support of what he said, learned counsel for the plaintiff pointed out that both Mr. Chong and Ms. Sebangkit were able to find
20 comparables from within the Penampang District as suitable comparables and so Mr. Molikun should have been able to do so as well and his failure to do so was indicative of his negligence. I do not agree. The term “similar properties” applies to a whole range of characteristics found in property i.e. similar in size, similar in shape,
25 similar in topography, similar in land use, similar in title conditions, similar in location, similar in design or type of house found on the land, similar date of transaction and e.t.c. So, similarity in location is one of the matters to be taken into account in the selection of a similar comparable.
30 [CSK.22-101-2001-II]
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The plaintiff has ‘zeroed in’ on the fact that Mr. Moliku5 n did not select his comparables from the same locality as the six subject properties as the basis for their complaint that he did not select “similar properties” as comparables as required by the standard set in the valuer’s manual and hence was
10 negligent. Since that is the basis of the plaintiff’s complaint, are the market values of Mr. Chong and Ms. Sebangkit any more correct and acceptable than Mr. Molikun’s because it is certainly arguable that Mr. Chong and Ms. Sebangkit too had not selected “similar properties” as comparables,
15 in that, some of the characteristics in the properties they had selected as comparables were not “similar” to the subject properties. It is true that the comparables selected by Mr. Chong were all located in the same district as the six subject properties, but Mr. Chong’s report indicates that out of his
20 five comparable sales, three were double-storey corner terraced houses, one was a single storey semi-detached house and one was a double-storey semi-detached house whereas the six subject properties were all split-level semi-detached houses. Applying the argument of the plaintiff, can it not be said
25 then that Mr. Chong had not used “similar properties” as comparables and was therefore negligent? Further, Mr. Chong indicates in his report that he had tried to discover sales transacted close to the material date i.e. November 2001 but found very limited transactions during that period so he
30 selected comparable sales which took place “a year or two earlier”, but Ms. Sebangkit managed to find comparable sales transacted in [CSK.22-101-2001-II]
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2001. Can it be said then that Mr. Chong was negligent
5 as he had not used “similar properties” as his comparables as their transaction dates were different from that of the six subject properties? Further, neither Mr. Chong or Ms. Sebangkit chose comparable properties within a development consisting
10 of six semi-detached houses only as far as density was concerned. Can it be said then that their comparables were not of “similar properties” and so they were negligent? Common sense tells us that Mr. Chong and Ms. Sebangkit did not fall short of the standard expected of them by the valuer’s manual
15 because valuation is not an exact science. In selecting their comparables they looked for properties as similar as possible in terms of design/type and time of transaction but when Mr. Chong could not find them he selected what in his opinion were suitable comparables i.e. corner terraced houses
20 and single/double storey semi-detached houses transacted one or two years earlier from the material date, and then made the necessary adjustments for those factors. Did Mr. Molikun approach his task any differently
25 from Mr. Chong and Ms. Sebangkit? The evidence shows that he adopted and followed the same processes as they did i.e. he too used the comparable method and relied on transaction data obtained from the Jabatan Penilaian dan Perkhidmatan Harta, Malaysia in his search for similar comparables. Since it is
30 Mr. Molikun’s choice in selecting comparables from outside the [CSK.22-101-2001-II]
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same locality as the subject properties which has
5 given rise to the allegation of negligence, I will focus on this point. It was Mr. Molikun’s evidence that amongst other things, he regarded Taman Kandavai as a low density development
10 as it consisted of only six units of semi-detached houses with a vacant lot and open space. Further, the estate was enclosed by a brick wall with metal swing gates at the entrance, giving the development a gated community concept. Mr. Molikun said he looked for similar properties in the same locality as the
15 subject properties to use as suitable comparables but he did not find any because even though there were other similar semi-detached houses in the Penampang District, they were all situated in what Mr. Molikun regarded as high density locations or developments. So, Mr. Molikun said he decided to
20 use comparables at Taman Mega Ria and Taman Aman in Luyang and Off Lintas Road which are outside the Penampang District, because of their density and they were newer i.e. more or less the same age as the subject properties and reflective of the price of two-storey semi-detached houses
25 marketed at the material time of valuation, but in arriving at the market value of the subject lands, Mr. Molikun acknowledged that he had used what he termed “superior comparables” but made adjustments for the difference in location as well as for accessibility, built-up area, size, floor finishes, land area,
30 surrounding developments, the current prevailing property market and other relevant characteristic. [CSK.22-101-2001-II]
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Did Mr. Molikun fail to measure up to the standard 5 set in the valuer’s manual? I find not. It was his informed opinion that there were no suitable similar comparables in the Penampang District in terms of a low density development which he regarded the subject properties to be. Therefore, he looked outside that locality for
10 suitable comparables and made adjustments for difference in location when arriving at his opinion on value. As there was a rational basis for Mr. Molikun’s decision to choose suitable comparables from outside the Penampang District it cannot be said that he had not exercised the ordinary skill of a competent valuer. Was what Mr.
15 Molikun did a breach of the standard set by the valuer’s manual? I find not as both Mr. Chong and Ms. Sebangkit testified that where no comparables are available within the locality, valuers will compare similar properties in other locations subject, however, to making adjustments for the difference which is what Mr. Molikun did.
20 I accordingly find that Mr. Molikun did not fall short of the standard expected of an ordinary skilled valuer in arriving at his market values of the six subject properties.
25 It was contended by the plaintiff that because Mr. Molikun had used the services of his assistant who was a fully qualified valuer to prepare his report, he was negligent. I see no merit in this contention. In the first place, contrary to the rules of pleadings the plaintiff never raised this point in its particulars of negligence. In the
30 second place, I accept Mr. Molikun’s testimony that he had personally inspected the six subject properties and the three selected [CSK.22-101-2001-II]
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comparables with his assistant valuer. Thirdly, I also accep
5 t Mr. Molikun’s evidence that he did not go to all the other housing estates in the vicinity of Penampang as he felt he did not need to do so as on going through the list of comparables which was available to him, he was familiar with their surroundings, he having lived in the
10 Penampang area for 15 years before moving to Tuaran in August 2000. It should be noted that neither Mr. Chong nor Ms. Sebangkit said they visited all the housing estates in Penampang District when considering suitable comparables or that there was any requirement that they should do so.
15 It was also complained that Mr. Molikun had not exhibited any notes he made when approaching his valuations and so that was indicative of negligence. Again, the plaintiff never raised this allegation in its pleadings and so it cannot now complain that
20 Mr. Molikun had not displayed his notes. I find no merit in this contention. It is to be noted that neither Mr. Chong nor Ms. Sebangkit had displayed the notes of their approach to their valuations but the plaintiff nevertheless expects the court to receive their reports in evidence.
25 Finally, since I have not found the 3rd defendant guilty of any misrepresentation or negligence, I do not find it necessary to address the question whether the courts here should, like the courts in England accept the “margin of error” principle whereby a difference of
30 between 10% to 15% in differing valuations is acceptable. [CSK.22-101-2001-II]
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In the result for all the reasons given above, 5 I find that the plaintiff has not proved its case against the 3rd defendant on a balance of probabilities and dismiss their claim against the 3rd defendant with costs.
10
DATUK CLEMENT SKINNER Judge
15 Date : 13th November 2009 Counsel
20 For Plaintiff : Mr. Nicholas Fernandez with Puan Nasrinah Jabirin Messrs. Fernandez & Co. Advocates and Solicitors
25 KOTA KINABALU
For 1st and 2nd Defendant: Mr. Gilbert Bulagang Messrs. Bulagang & Co. Advocates and Solicitors KOTA KINABALU
For 3rd
30 Defendant : Datuk Douglas Primus with Ms. Shireen Sikayun
Messrs. Lee & Thong Advocates and Solicitors KOTA KINABALU
