RES exam question on Torts, Mortgages & Co-ownership: Mr Lau, a valuer, prepares a report on a shophouse for its owner, knowing it will be…
Mr Lau, a valuer, prepares a report on a shophouse for its owner, knowing it will be handed to Eastern Bank to support a $2 million loan. He negligently overvalues the shophouse by $600,000. The owner later defaults and the bank's security falls short. What is Mr Lau's likely position toward Eastern Bank?
- ALiable if Eastern Bank proves he knew the valuation was false, but not for mere carelessness.
- BLiable in negligent misstatement, having known the bank would rely on the report to lend.
- CNo liability, as the owner who engaged and paid him is the one person who can sue.
- DNo liability, since the owner's default rather than the valuation caused the bank's loss.
Show answer & explanation
Answer
B. Liable in negligent misstatement, having known the bank would rely on the report to lend.
Explanation
Answer: Liable in negligent misstatement. He knew the bank would rely on his report for a specific $2 million loan, so he assumed responsibility to it.Rule: Negligent misstatement causing pure economic loss needs a special relationship or assumption of responsibility, a live risk for valuers. No contract is needed.Source: Hedley Byrne; Spandeck (the Singapore test for the duty); RESPrep /learn/property-torts-mortgages-co-ownership, current at 1 October 2026
Why the other options are wrong
- Liable only if he knew the valuation was false: Fraud is not needed. Carelessness is enough for negligent misstatement.
- No liability, as only the paying client can sue: The lack of a contract does not matter. He assumed responsibility to a known party for a known purpose, and the bank relied on it.
- No liability, as the owner's default caused the loss: The overvaluation is what left the bank under-secured when the owner defaulted.
Study the concept behind this question: Property Torts, Mortgages & Co-ownership (Singapore)
Practise more Property Torts, Mortgages & Co-ownership questions
Drill the full Property Torts, Mortgages & Co-ownership bank with instant answers and explanations — free to start, no card needed.
Try a timed set: sit a free RES mock exam, no sign-up needed. Or see the passes for the full question bank.
Related Property Torts, Mortgages & Co-ownership questions
- RES exam question on Torts, Mortgages & Co-ownership: Mr Aziz's neighbour, Ms Chong, renovates for three months
- RES exam question on Torts, Mortgages & Co-ownership: Ms Goh, a salesperson, tells a buyer from memory that a development is freehold
- RES exam question on Torts, Mortgages & Co-ownership: now owns the house
Get each day's lesson free — one RES topic + the trap, every day on Telegram.
Join @resprepsg →Original study material mapped to the public CEA RES syllabus. Verify any rate-based figures against current IRAS/CPF/MAS rules before relying on them.