Legal Firm Partner Nikolai Sapozhnikov Commented on Supreme Court’s Position on Damages Claim to Appraiser for Poor Service Delivery.

6 March 2020

Nikolai Sapozhnikov, a BIEL partner, pointed out that the Supreme Court’s ruling confirmed the appraiser’s direct financial liability for impossibility to rely on the opinion issued to the customer in contesting the cadastral value of a property. “The ruling says that a lack of opportunity to use the outcome of the defendant’s work to identify the value of land is an indication of poor quality of services delivered under the contract which means that he must pay a compensation due to poor service delivery. Undoubtedly, this approach is very much welcome because it works to considerably improve the responsibility of appraisers for the outcomes of services they deliver”, the expert believes.

According to Mr. Sapozhnikov, in the ruling in question the Supreme Court, among other things, rejected the position of lower courts which would dismiss a customer’s claim on the basis of his “passive” position in defending the appraiser’s opinion in the course of related proceedings. “In the course of litigation to contest the cadastral value, the customer accepted the value determined by legal expertise and did not contest the regional court’s verdict. The Supreme Court pointed out that if the defendant had duly complied with his obligations, the regional court would not have doubted the validity of the land’s market value and would not have required legal expertise”, Nikolai Sapozhnikov believes. He supposed that the cost of legal expertise can also be added to the customer’s losses but whether the legal practice will follow this path is not yet clear because the case was remitted for a new trial.

According to Mr. Sapozhnikov, another important question is whether the appraiser was involved in the litigation to contest the cadastral value as a third party. “The ruling is silent about it. If the appraiser was not involved in the litigation, it is not quite clear, in view of his right to legal remedy, how much evidential force the relevant ruling of the general jurisdiction court has for the dispute in question. I believe that in this case the appraiser has the right to prove as part of the litigation to collect damages from him that his opinion complies with all industry standards including by way of appointing legal expertise. On the contrary, if the appraiser was already involved in the proceedings to contest the cadastral value, the fact of poor service delivery is deemed established in his respect”, Nikolai Sapozhnikov believes.

The expert added that in this situation the appraiser may be helped to some extent by clause 2 of HAC Memorandum No. 92 of May 30, 2005 which says that where the appraised value of a property is contested as part of a specific litigation, the appraiser will be involved as a third party to the extent he does not make any independent claim in relation to the subject matter of the dispute.

“The ruling in question presents yet another matter of interest regarding the Supreme Court’s conclusion important for this category of cases. It follows from it that the customer was not an appraisal professional and was not aware of poor services delivered to him until the general jurisdiction courts made their verdicts on the claim to contest the cadastral value. Obviously, this approach is important for calculating the limitation period for similar claims in likewise circumstances”, Nikolai Sapozhnikov summed up.