I & L Securities Pty Ltd v Htw Valuers (Brisbane) Pty Ltd

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: Gleeson CJ,Gaudron,Gummow,Hayne JJ,McHugh J,Kirby J,Callinan J
• Judgment Date: 02 October 2002
• Neutral Citation: 2002-1002 HCA A,[2002] HCA 41
• Docket Number: B48/2001
• Date: 02 October 2002

I & L Securities Pty Ltd

Appellant

and

Htw Valuers (Brisbane) Pty Ltd

Respondent

[2002] HCA 41

Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ

B48/2001

HIGH COURT OF AUSTRALIA

I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd

Trade practices — Misleading or deceptive conduct — Enforcement and remedies — Loan transaction — Mortgage over land — Misleading and deceptive valuation of land by valuer — Failure by lender to make reasonable inquiries as to borrower's capacity to meet interest payments — Default on loan by borrower — Proceeds of sale by mortgagee insufficient to meet borrower's obligation — Liability of valuer for loss and damage suffered by lender — Causal connection between contravention of Trade Practices Act 1974 (Cth) and loss and damage suffered — Whether damages awarded under s 82 of the Trade Practices Act 1974 (Cth) to be reduced for lender's failure to take reasonable care to protect its own interests.

Trade Practices Act 1974 (Cth), ss 52, 82, 87.

Representation:

P A Keane QC with J D McKenna for the appellant (instructed by Deacons Lawyers)

D F Jackson QC with P D T Applegarth SC for the respondent (instructed by Thynne & Macartney)

ORDER

1. Appeal allowed.

2. Set aside the order of the Court of Appeal of Queensland dated 22 September 2000 and, in its place, order that the appeal to that Court be allowed, that the judgment entered by Williams J on 22 October 1999 and the order of Williams J made on 8 November 1999 be set aside, and that there be judgment for the plaintiff for $661,481.53.

3. Respondent to pay the appellant's costs at first instance, in the Court of Appeal and in this Court.

1 Gleeson CJ. The issue in this appeal concerns the extent of the respondent's liability to the appellant, which suffered loss or damage by conduct of the respondent which contravened s 52 of the Trade Practices Act 1974 (Cth) (‘the Act’). The misleading or deceptive conduct involved an erroneous valuation of real estate over which a mortgage was to be given as security for a loan by the appellant. Relying upon the valuation, the appellant made the loan. The borrower defaulted, and the security, when realised, was insufficient to meet the borrower's liability. The appellant sued for the deficiency and related losses. The appellant was found to have failed to exercise reasonable care to protect its own interests, in that it did not take proper steps to investigate the credit-worthiness of the borrower. The principal question is whether the amount of the respondent's liability to the appellant should be reduced on that account. As the case was argued, and as it was decided in the Supreme Court of Queensland, the answer to that question depends upon the meaning and effect of ss 82 and 87 of the Act.

The appellant's claim

2 The borrower, Camworth Pty Ltd, owned land at Acacia Ridge, in Queensland, which it proposed to subdivide and develop. It owed money to a financier and to a construction company. During 1995, it sought re-financing. On 2 March 1995, the borrower obtained, from the respondent, a valuer, a valuation of its land at $1.576m. In July 1995, it sought a loan from the appellant of $950,000 on the security of a first mortgage over the land, and supplied the valuation report in support of its application. The respondent wrote to the appellant advising that the valuation report could be relied upon in connection with the proposed loan. On that basis, the appellant approved the loan, and it was made.

3 The term of the loan was 12 months from the date of settlement (28 July 1995). The rate of interest was 19.5% per annum, payable monthly, reducible to 13.5% if payments of interest were met as they fell due.

4 The borrower defaulted when the first interest payment fell due. The appellant took all reasonable steps to realise the security. The mortgaged land was ultimately sold on 8 January 1997. The net proceeds of sale amounted to $592,367. There was no suggestion that the appellant acted other than prudently in the exercise of its power of sale. The borrower was put into liquidation, which yielded nothing.

5 The appellant's claim, with the figures adjusted in accordance with the findings of the trial judge, was as follows:

1. Difference between amount of loan and proceeds of sale	$357,632.31
2. Lost interest for period 1.8.95 — 31.7.96	$120,650.00
3. Expenses connected with exercise of power of sale	$34,103.35
4. Interest on amount in item 3	$7,302.66
5. Interest pursuant to Supreme Court Act 1995 (Q)	$135,441.90
6. Legal costs	$6,351.31
Total	$661,481.53

The decisions in the Supreme Court of Queensland

6 The appellant's claim was for breach of contract, negligence, and contravention of Pt V (specifically, s 52) of the Act. The action in contract failed, and may be disregarded. The respondent admitted both negligence and misleading and deceptive conduct.

7 The trial judge, Williams J, found that the appellant had contributed to the loss by failing to take reasonable steps to assess the ability of the borrower to repay and failing to perform any proper risk assessment with respect to the borrower. He found that there would have been no loan, regardless of the value placed on the land, if the appellant had made proper enquiries about the borrower's capacity to service the loan. On the claim in negligence, he reduced the amount of damages by one-third on account of contributory negligence, applying the relevant apportionment legislation. That aspect of the decision is not in issue in this appeal.

8 The present appeal arises out of the manner in which the Supreme Court dealt with the claim under the Act. In brief, the trial judge dealt with it in the same way as he dealt with the claim in negligence. He held that, in assessing the amount to be awarded under s 82 of the Act, it was appropriate to reduce the appellant's claim by one-third. There were, he reasoned, ‘two independent causes of the loss sustained by the [appellant].’ The first was the misleading and deceptive conduct of the respondent in the representation made as to the value of the land. The second was the conduct of the appellant in failing to make reasonable enquiries as to the financial capacity of the borrower. In applying s 82, Williams J held that he was entitled to adopt an approach ‘broadly similar to that which would apply in determining apportionment of negligence.’ There was judgment for the appellant for $440,987.68.

9 The appellant appealed to the Court of Appeal of the Supreme Court of Queensland, challenging the trial judge's decision as to the amount to be awarded under the Act. There was, the appellant contended, no justification for reducing the amount by reference to the appellant's failure to take reasonable care to protect its own interests in the manner found.

10 The Court of Appeal (McPherson, Pincus and Thomas JJA, Moynihan SJA and Atkinson J) upheld the decision of the primary judge, but on a different basis 1. Whereas Williams J had applied s 82 according to what he regarded as its legal effect in a case such as the present, the Court of Appeal based its reasoning upon s 87 of the Act. As will appear, that involved a difference of opinion as to the operation of s 82.

11 In this Court, the respondent relies, in the alternative, upon each approach. It is convenient to deal first with the reasoning of the Court of Appeal and then that of Williams J.

The statutory provisions

12 Sections 82 and 87 of the Act are in Pt VI, which deals with enforcement and remedies. It is important to bear in mind, when considering their operation, that they have potential application to a wide range of conduct proscribed by the Act and, in the case of s 87, to remedies that may be sought in a wide range of circumstances. We are at present concerned with their operation in the case of a claim for damages incurred by reason of a carelessly made false and misleading representation. It would be wrong to regard that as the paradigm case in which the sections were intended to apply. It is simply one of a number of different circumstances in which each provision might be invoked.

13 Section 82 provided, relevantly:

‘(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.’

14 The section has since been amended to refer to additional statutory provisions, but the amendments are presently immaterial.

15 It is only necessary to read the provisions of Pt IV and Pt V to observe the extent of the kinds of conduct that could amount to a contravention. And it is not only the contravener who may be liable under s 82; it may be another person ‘involved’ in the contravention. The possible conduct of a defendant may cover the entire spectrum of degrees of fault. It may be conduct that, apart from the statute, would not be regarded as involving any kind of fault at all. In the case of a misrepresentation, the defendant's conduct might be fraudulent, or (as here) careless, or innocent.

16 The section has nothing explicit to say about the conduct of a plaintiff, except that the plaintiff has suffered loss or damage by contravening conduct of another person. And it has nothing to say, except in one pregnant preposition, ‘by’, about the significance, in measuring the extent of a defendant's liability, of factors other than the contravening conduct which may have contributed to a plaintiff's loss or damage. Such factors, of course, could include the plaintiff's own conduct, the conduct of third parties, or events or circumstances outside the control of anyone.

17 Section 87 follows a series of provisions dealing with...