The Surveyors' Expert Witness Handbook

Martin Farr

• Publisher: Estates Gazette
• Year: 2014
• ISBN:
  9781135328092
• Edition: 1
• Topic: Derecho
• Subtopic: Derecho de la propiedad

Thisbook is an invaluable guide for thoseproviding expert evidence on valuations of commercial properties – including civil actions, rent review arbitrations, lands tribunal cases and rating appeals.The object of the book is to provide the commercial property valuer with a detailed introduction to providing expert evidence in a litigation context, the rules, requirements and the pitfalls for the unwary. Particular trouble has been taken to emphasise the need for quality evidence based on relevant experience which is objective, unbiased, independent, and of sufficient quality to resist challenges before the courts, tribunals and arbitrators. This handbook will help the practitioner start off on the right course and provide forewarning of the issues which he or she is likely to face, leading to greater professional awareness and to higher standards of valuation expert evidence in all commercial property fields.

1

Introduction

In our 21st century consumer-led society, there is an increasing belief, indeed often the firm expectation, that when things go wrong, a remedy is available, if necessary through the courts. There is also continuing growth in the development of appeal rights associated with statute-based intervention, which must be seen to impact widely, fairly and correctly. The resulting trend towards increased litigation is played out against the backdrop of a society grappling with ever more complex, technical, economic and social issues given wider circulation and exposure by our advanced information-based technology.

It is, therefore, no accident that the need for expert evidence and advice in dispute resolution has steadily increased. The field of property valuation is no exception. Commercial and residential property valuers have experienced increasing demands for their services from a wide range of sectors and for differing purposes.

The range of disputes with property value-related issues include actions in the High Court, county courts, compensation and rating appeals before the Lands Tribunal, leasehold enfranchisement proceedings, commercial property lease renewals, commercial and industrial property rent reviews before arbitrators and independent experts, rating and council tax appeals before local valuation tribunals and so on. This list is not exhaustive.

The object of this book is to provide the commercial property valuer with a general introduction to providing expert evidence in a litigation context, and the rules, requirements and the pitfalls for the unwary. Particular trouble has been taken to emphasise the need for quality evidence based on relevant experience that is objective, unbiased, independent and of sufficient quality to resist challenges before the courts, tribunals and arbitrators.

It is my experience that surveyors often do not fully understand the need for a wholly unbiased approach. The temptation to persuade, exaggerate or veer towards advocacy, fulfilling the natural desire to please those who are paying the fee, can often result in flawed evidence, which, ultimately, may be detrimental to the client’s case.

Within the scope of this book, it is impossible to provide a detailed exposition of all procedures, relevant valuation and technical issues as to do so would fill a library. Nevertheless, it is hoped that this handbook will help the practitioner to start off on the right course and be forewarned of the issues that he* is likely to face. As always, there is no substitute for practical experience but it is hoped that, as a result of this handbook, greater professional awareness and interest will be generated, leading to higher standards of valuation expert evidence in all commercial property fields. The valuer will find that experience can be supplemented by the many courses held from time to time on specific areas of expert evidence practice, including legal updates and procedures, report writing and courtroom skills training.

On the rare occasion when a settlement has not been achieved, expert evidence needs to be reported and tested before a court, arbitrator or tribunal. While attendance at a hearing is now rare, it must always be anticipated. It can be challenging but not always the ordeal that is widely feared if the right steps are taken in accordance with the advice in this handbook.

If I have managed to convey the basic elements of sound, well-presented, objective evidence prepared in accordance with relevant procedures, this may have started the aspiring valuation expert down a satisfying road in terms of professional development, while contributing to fairer justice and a satisfied client.

*  Wherever “he” or “his” is used in this book, this refers to “he or she” or “his or her”.

2

Background

The majority of well-established judicial systems throughout the world rely, to a greater or lessor extent, upon expert evidence. The role of the expert in advising on specialist, scientific or technical matters makes a vital and fundamental contribution towards the fair and proper administration of justice. Judges and tribunals will frequently not have sufficient knowledge or experience in such areas in order to reach fair judgments awards or determinations.

It will be advantageous that a tribunal or arbitrator will often have some specialist knowledge or experience of particular technical issues, but rarely will these be sufficient to reach a thorough understanding of the particular circumstances portrayed in evidence. The expert will have the ability and opportunity to concentrate on the issues in depth. In my experience, many High Court judges rarely have more than a very elementary grasp of the art of property valuations and the associated technical issues. Indeed, they should rarely be expected to have such an understanding.

Expert evidence in civil actions

It must be emphasised, however, that in civil actions expert evidence is not admissible as of right. Section 3 of the Civil Evidence Act 1972 may allow for the introduction of such evidence. It has been held in Barings v Coopers & Lybrand (a firm) [2001] EWCA Civ 1163, a case concerning the much-publicised unauthorised trading by Nick Leeson, that it will be admissible under Section 3: “In any case where the court accepts that there exists a recognised expertise governed by recognised standards and rules of conduct capable of influencing the court’s decision on the issues which it has to decide”.

It is always important to bear in mind that the expert’s role is to provide evidence on the necessary technical issues so that it is fully understood by the court. It can then be evaluated and given an appropriate degree of weight in the formulation of a decision. The expert evidence itself will not provide the judicial conclusion.

Over the past 50 years and into the millennium, three important but connected trends may be perceived in the development of civil dispute resolution in England and Wales and all of which have important implications for the valuer expert witness.

Growth of dispute resolution

There has been significant growth in nearly all areas of dispute resolution. The exercise of democratic rights of appeal grow as the obligations of individuals and businesses develop in reaction to the ever-growing statutory interference and regulation of their affairs. In addition, this trend is given added impetus as our consumer society continues to indulge in what has been called “the blame culture” of seeking compensation for perceived injury, financial loss or whatever, if necessary, via the courts.

By way of illustration, the number of non-domestic civil actions registered in the High Court within England and Wales for 2003 indicate that this had grown to 1.790,000. However, the promotion of alternative dispute resolution has caused the number of court hearings to decline quite dramatically, in the case of the Queens Bench Division of the High Court, from 120,000 in 1998 to 14,000 in 2003 (71,300 for all non-domestic civil actions).

The Valuation Office Agency records indicate that the number of appeals lodged in the 1990 Rating Revaluation was 1.539 million, compared with 1.508 million in the 2000 Rating Revaluation. Interestingly, however, a smaller proportion of appeals (1%) were determined by the local valuation tribunals, compared with those brought to a hearing at the earlier Revaluation.

In the field of rent review dispute resolution, the RICS Dispute Resolution Service received 3828 applications in 1996 for the appointment of a rent review arbitrator or expert, compared with 7942 in 2003 (59% were for arbitrator). It has to be said that the number of appointments has since declined due to the current changed market conditions, particularly in the offices sector. It is to be expected that the number of appointments will eventually revive and increase over time when market conditions improve and more rent reviews are “triggered” and negotiated.

Thus, the need for expert valuation evidence and advice is likely to increase further in line with overall trends but with some ebb and flow within individual cycles, such as the quinquennial Rating Revaluations and market-induced changes. It is particularly noticeable, for example, that some forms of civil litigation tend to increase in depressed market conditions, no doubt reflecting the greater need for a remedy when business losses are most prevalent. However, the nature of the role will change as dispute resolution practice develops.

Dispute resolution by tribunals

The second most obvious trend is towards the much increased use of specialist tribunals and other means of alternative dispute resolution away from the courts, at least at first instance, but with the ability to appeal to the High Court or beyond, at least on a point of law.

The use and occupation of commercial property is subject to taxation, both local and national, and is otherwise widely regulated by statute. Rights of appeal or other remedies have spawned a large number of alternative dispute systems and bodies, some of which are now long established.

Rating appeals

Surveyors will be familiar with the long-established rating system of local government taxation, rates being levied on assessments prepared by the Valuation Office Agency in accordance with defined rental valuation criteria and which are now revised every five years.

If not resolved, appeals are heard by independent local valuation tribunals, now administered by the Valuation Tribunal Service. Where legal issues exist, or the case is of sufficient size or complexity, appeals can be made to the Lands Tribunal, an independent body with High Court status, the members being experienced senior QCs or surveyors.

The Lands Tribunal also has referred to it applications made for the assessment of compensation for compulsory purchase, restrictive covenant disputes within the provisions the Law of Property Act 1925 and a number of other appeal rights arising out of other specific statutory provisions.

Rent review arbitration

With the emergence of significant rates of monetary inflation from the late-1960s, it became the practice to insert rent review clauses in commercial property leases, initially on seven or 14-year cycles, but later reduced to five-year intervals. The rent review clause was (and is) usually based on the concept of a hypothetical open market letting between a willing lessor and a willing lessee. The precise interpretation of such clauses has generated a considerable amount of litigation. If the parties cannot agree the review, it is normally provided that it should be referred to an arbitrator or independent expert appointed, in the absence of agreement between the parties, by the president of the Royal Institution of Chartered Surveyors (RICS).

Since it is normal for valuer experts to be appointed by both landlord and tenant in such a dispute to give evidence to the arbitrator, this represents a considerable area of expert evidence work that has developed over the years in relation to the various commercial and industrial property sectors.

In recent years, it has, in addition, become the practice on occasion to refer the Landlord & Tenant Act 1954 commercial lease renewals to a RICS-appointed arbitrator in preference to a hearing before the local county court. The attractions being the arbitrator’s greater specialist expertise, speed and possibly lower costs. These referrals are made under what have become known as the PACT (Professional Arbitration on Court Terms) rules, a joint initiative of the RICS and the Law Society.

Mediation

Within the overall trend, alternative dispute resolution has embraced the concept of mediation. It must be distinguished, however, from other means of dispute resolution. The role of the mediator is to persuade the parties to find common ground in a dispute that may lead to a settlement. He is there to try and narrow the issues between the parties by assuming the characteristics of a “go between” or exercising what has often been termed, on the world stage, “shuttle diplomacy”. It is not about a judgment of the evidence.

Under the Civil Procedure Rules discussed later, judges commonly direct that mediation is to be attempted as part of the ongoing procedures in order to try and avoid the costs of a trial. From the most recent data available, it appears that around 96% of High Court civil actions commenced are resolved without resorting to a trial hearing and more than 50% of these have been the result of a reference to mediation.

In addition to the ever-increasing volume of litigation cases and the trend towards various forms of alternative dispute resolution, important developments have emerged in the methods of securing justice.

Adversarial versus inquisitorial

Our legal system relies on an adversarial basis of presenting and testing evidence, as opposed to the inquisitorial system favoured in continental Europe. Until recently, the judge’s role was mainly to listen to the conflicting evidence put by the parties on their behalf, both expert and of fact and to determine which case more closely resembled the truth. He would only intervene to ensure that the rules of evidence were properly applied, to seek clarification and to ensure “fair play”.

Many have questioned whether justice is best served by deciding a case on the basis of a contest in which the better-presented evidence and the greater skills of cross-examination may be overwhelming factors in persuading the judge or judicial body. In contrast, criticisms have been encountered by those who believe that the inquisitorial system relies too heavily on the judgment of one person, since only the examining judge or magistrate conducts the investigations, calls witnesses, and so on. The system could be open to abuse and may call into question standards of integrity and independence.

Despite these criticisms, the adversarial system largely remains but there is a trend towards a more inquisitorial approach by judges. This is mirrored by the greater use of tribunals and arbitrators, who often have greater specialist knowledge and expertise. They are able to adopt a more “hands on” approach, with greater control of the process and a greater involvement in asking questions of wi...