My focus has been on grand corruption, the large-scale acts of fraud which endanger the very stability and rationale of our society and its key institutions. No act of grand corruption is possible in isolation. The only way to steal these large amount of money is to have the collaboration of responsible officials and professionals, who either look the other way or actively assist in the looting.
That was the case in Eden Gardens and the other episodes covered thus far. None of these acts of grand corruption would have been possible without the intentional help of professionals such as attorneys, engineers, accountants or even surveyors. Our current private and public sector systems rely on the professional standards and ethics of those professionals to ensure value for money.
The previous article in this series examined the main points arising from ICATT’s attempts to use its disciplinary procedures against one of its members, Chanka Seeterram, who had been auditor for the failed Hindu Credit Union. This column continues the series by examining the 16 October 2014 High Court ruling arising from a December 2008 mortgage valuation by Charles B Lawrence and Associates of a property on the San Fernando bypass.
That property is on the northern side of the San Fernando Bypass, between Rushworth Street and Navet Road and it was valued for $15M. The lender was Intercommercial Bank Ltd (IBL) and a loan of $3M was made using that property as security. When the loan was not serviced, IBL attempted to sell the property by appointment of receivers who invited offers in March-April 2010. The highest offer received was for $2.0M. In July 2010, Brent Augustus provided a valuation for the Receiver at $1.9M.
IBL then bought two lawsuits in the sum of $4,761,636.70 – one against its attorneys, for negligence in doing the title search; the other against the valuers, for negligence in preparing the property valuation. The attorneys settled the matter by Consent Order by paying $2.4M, but admitting no liability. The High Court ruling was in IBL’s favour, with the valuers ordered to pay $2,361,636.70 plus interest and costs. The valuers have appealed that ruling.
The interesting points arising in that case were –
- The range of opinions – The bank engaged Brent Augustus as its expert witness, while the valuer engaged Roy Gumansingh. The experts were requested to provide opinions of the property value as a cleared site for both commercial and residential use as at 2008; July 2010 and December 2013. This is a summary of those opinions submitted to the High Court (para 40):
VALUATION DATES BRENT AUGUSTUS ROY GUMANSINGH Commercial Residential Commercial Residential 2008 $15.0M $2.375M $14.0M No figure July 2010 $12.5M $1.9M $12.5M No figure December 2013 $12.5M $1.9M $12.5M No figure
- Commercial Use – The big variance in the values arises from the assumptions as to the use of the property and the applicability of that use. On that issue there were various opinions in play and the Court ruled that:
“…87. At the end of the day the question is whether there was a proper basis for the Defendant to value the land as commercial. In this regard not only are the opinions of the experts relevant but so is the basis upon which the Defendant determined that the Land ought to be valued as commercial. The Defendant bases his opinion in the main on the fact that the Land has been developed changing its use from agriculture to commercial purposes. There is however no evidence of this. In that regard I am satisfied that insofar as the Defendant based his conclusion that the optimum use for the Land was commercial. This was based on the fact that the Land had been developed changing its use from agriculture to commercial purposes. In the absence of such evidence this was not a valid basis for arriving at the conclusion and in fact its inclusion in the Valuation was wholly misleading…” (emphases are mine)
- Occupiers/Squatters – Another important issue was that the property was not vacant land, but in fact had a number of occupiers/squatters, which were not especially highlighted in the Lawrence Report, as required by professional standards. From the judgment:
“…59. I am satisfied that in the conduct of the Valuation the Defendant failed to disclose important adverse features of the Land and in particular to identify and/or indicate that there were occupiers on the Land in accordance with the practice accepted by competent respected professionals in the field…”
- Contributory Negligence claim – This is a defensive maneuver used in negligence cases to reduce ones liability by proving that the party bringing the lawsuit also had some responsibilities which they did not properly fulfill. In this case, the Valuer, Charles B Lawrence and Associates claimed that:
“…112. Basically the Defendant submits that the Bank contributed to its loss by failing:…
(iii) to observe that the property was only purchased two months earlier for $450,000.00;..”
Just reflect on that claim, with the valuer who issued a $15.0M valuation submitting to the High Court that the bank ought to have known that the same property sold two months before for $450,000. Well I tell you.
I will certainly be paying attention to this appeal as it proceeds.
© 2017, Afra Raymond. All RIghts Reserved.