FEDERAL COURT OF AUSTRALIA
Angas Securities Limited v Valcorp Australia Pty Ltd [2011] FCA 190
Citation: Angas Securities Limited v Valcorp Australia Pty Ltd [2011] FCA 190 Parties: ANGAS SECURITIES LIMITED ACN 091 942 728, BARKER MORTGAGES PTY LTD ACN 106 071 676 and KWS CAPITAL PTY LTD ACN 114 209 808 v VALCORP AUSTRALIA PTY LTD ACN 008 147 671 File number: SAD 172 of 2009 Judge: BESANKO J Date of judgment: 8 March 2011 Catchwords: TRADE PRACTICES — where applicants conducted mortgage lending businesses — where respondent a valuer retained to value property to be security for loan by applicants — where borrower defaulted — where value of property on forced sale was substantially less than valuation — whether respondent had been negligent — whether respondent had contravened s 52 of the Trade Practices Act 1974 (Cth) and s 56 of the Fair Trading Act 1987 (SA) — whether applicants had relied on the valuation report in entering into transaction — whether applicants were guilty of contributory negligence by failing to make proper enquiries about the borrowers’ ability to service the loan — whether first applicant had failed to mitigate its loss — whether respondent should be liable for loss attributable to fall in market value of the property — whether applicants entitled to loss of opportunity damages — whether first applicant entitled to interest under s 51A of the Federal Court of Australia Act 1976 (Cth) from date it received insurance moneys — alternative cases in contract and tort discussed
HELD: The respondent’s valuation had been prepared negligently and in contravention of s 52 of the Trade Practices Act 1974 (Cth) and s 56 of the Fair Trading Act 1987 (SA). The applicants had been guilty of 25 per cent contributory negligence by failing to make proper enquiries about the borrowers’ ability to service the loan. The applicants were entitled to loss of opportunity damages and the first applicant was entitled to interest under s 51A of the Federal Court of Australia Act 1976 (Cth) after date of receipt of insurance moneys.
Legislation: Corporations Act 2001 (Cth)
Fair Trading Act 1987 (Cth) s 56
Federal Court of Australia Act 1976 (Cth) s 51A
Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) s 7(2), s 8
Police Regulation (Superannuation) Act 1906 (NSW) s 10
Trade Practices Act 1974 (Cth) s 52Cases cited: Alderslade v Hendon Laundry Ltd [1945] 1 KB 189, cited
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, cited
Batchelor v Burke (1981) 148 CLR 448, cited
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, cited
Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592, cited
Commissioner for Railways (New South Wales) v Quinn (1946) 72 CLR 345, cited
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, cited
Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642
Keep reading for free
Create a free CaseChat account to read Angas Securities Ltd v Valcorp Australia Pty Ltd and more:
- Read every judgment in full
- Ask AI and get answers linked to paragraphs
- See how each paragraph was cited in later cases
- Download judgments as PDF or Word
One click creates your free account or signs you in.
By continuing you agree to the Terms and Privacy Policy.
Details
- Case
- [2011] FCA 190
- Decision Date
CaseChat Overview and Summary
Angas Securities Ltd and Barker were mortgage lenders who had entered into transactions based on a valuation report prepared by Valcorp Australia Pty Ltd, a valuer. The valuation report was significantly higher than the actual sale price of the property when the borrower defaulted, leading to significant financial losses for Angas and Barker. Angas and Barker sued Valcorp for negligence and for breaching trade practices laws, seeking damages for the loss of opportunity and interest on the amounts received from insurance. Valcorp denied liability, arguing that Angas and Barker were contributorily negligent in not verifying the borrower's ability to service the loan. Valcorp also claimed that any interest should not accrue from the date Angas received the insurance moneys.
The court found that Valcorp's valuation was negligent and in breach of trade practices laws. The court also determined that Angas and Barker were 25% contributory negligent due to their failure to properly investigate the borrower's capacity to repay the loan. The court held that Angas and Barker were entitled to loss of opportunity damages. Regarding interest, the court considered that Angas' receipt of insurance moneys should not reduce the interest claim under section 51A of the Federal Court of Australia Act 1976, as insurance payments replace the lost principal rather than lost earnings. The court allowed Angas to claim interest from the date it received the insurance moneys, finding that an implied term in the insurance contract supports the insurer's right to claim interest after settlement.
The court gave leave for the parties to make submissions on final orders.
The court found that Valcorp's valuation was negligent and in breach of trade practices laws. The court also determined that Angas and Barker were 25% contributory negligent due to their failure to properly investigate the borrower's capacity to repay the loan. The court held that Angas and Barker were entitled to loss of opportunity damages. Regarding interest, the court considered that Angas' receipt of insurance moneys should not reduce the interest claim under section 51A of the Federal Court of Australia Act 1976, as insurance payments replace the lost principal rather than lost earnings. The court allowed Angas to claim interest from the date it received the insurance moneys, finding that an implied term in the insurance contract supports the insurer's right to claim interest after settlement.
The court gave leave for the parties to make submissions on final orders.
Orders
Orders of the court
The parties have leave to make submissions as to final orders in light of these reasons.
Note:
Background
Background to the litigation
A number of these issues also arise in the case of Barker and KWS. However, there is not a complete overlapping of issues. Barker and KWS make no claim in contract against the respondent. There is an issue as to whether the respondent owed a duty of care to Barker and KWS in relation to the valuation report. They were not parties to the contract of retainer, and as will be seen, the valuation report was clearly directed to Angas and for its benefit. They claim that a duty of care arose by reason of the events which took place on 27 November 2007. The respondent denies that, saying that by then it was too late for a duty of care to arise because Barker and KWS could not show any reliance on the valuation report. The question of interest with respect to moneys for which there has been an insurance payment does not arise in the case of Barker and KWS as they did not receive any insurance moneys.THE FACTS I will deal with the facts in chronological order, except for the facts relevant to contributory negligence which I will deal with separately. In July 2007 the Opies had loans with La Trobe Investment Services Australia Pty Ltd, La Trobe Capital and Mortgage Ltd, and some private lenders. I will refer to the La Trobe companies as La Trobe. The loans were secured by mortgages over the property. The total amount owing was in the order of $2.55 million. I note that on settlement of the loans in December 2007 the amount paid out was in the order of $2.659 million. The Opies were looking to refinance their loan facilities with La Trobe. On 9 July 2007, the Opies, through Mr Fimeri, made an application to Angas for loan finance. The Opies wished to borrow $2.76 million in order to discharge existing liabilities in relation to the property of $2.55 million. The application stated that Mr Opie was under pressure from La Trobe as their loan had expired. The purpose of the loan was said to be to ‘refinance home’ and the security offered was a registered first mortgage over the property. The application included a valuation report from Savills (SA) Pty Ltd (‘Savills’) of the property. The date of that valuation was 18 May 2007 and the valuation was $3.25 million. The valuation was prepared on instructions from Mr Opie and was carried out by a Mr Tim Trnovsky. The Savills valuation was admitted in evidence but the author of the valuation was not called as a witness. The loan sought by the Opies was approximately 85 per cent of the valuation of the property by Savills. On 7 August 2007 Mr Morton examined the application by the Opies. He was prepared to recommend a loan by Angas and Barker of an amount not exceeding 75 per cent of a check valuation to be conducted by the respondent. He suggested that the respondent be advised that Angas and Barker were going to lend 75 per cent on the property. He suggested that the loans be approved subject to signed and dated joint statements of position which would include ‘all worth including any equities in companies’, the assignment of the Savills valuation and the establishment of servicing capacity. Mr Morton made a note to the effect that in the application Mr Opies’ income was stated to be $250,000 and that this should be established by documentary proof. He made the observation that amount alone would not be sufficient to service the debt.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Angas’ claim for interest is made under s 51A(1) of the Federal Court of Australia Act which is in the following terms:51A Interest up to judgment(1)In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:(a)order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or(b)without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest. The purpose of an award of interest under s 51A is compensatory: see Spangaro v Corporate Investment Australia Funds Management Ltd (No 2) [2003] FCA 1363 at [2] per Finkelstein J; HK Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795 at [5]-[7] per Finn J. In Wenkart v Pantzer [2010] FCA 866 at [129] Flick J identified a secondary purpose for an award of interest, namely, ‘to provide a discouragement to respondents form delaying the conclusion or settlement of the proceedings’. At the same time, the award of interest is not punitive: Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 at [408] (Lander J). It is well-established that interest should not be awarded in respect of damages for pre-trial economic loss where a plaintiff has been in receipt of workers’ compensation payments which replaced the lost earnings: Batchelor v Burke (1981) 148 CLR 448 at 455. On the face of it, Angas’ receipt of the insurance moneys is to be treated in the same way. Angas relied on Evans v Port of Brisbane Authority (1992) Aust Torts Reports 81-169 and New South Wales v Davies (1998) 43 NSWLR 182, where the receipt of a lump sum superannuation payment and a ‘hurt on duty’ allowance paid pursuant to s 10 of the Police Regulation (Superannuation) Act 1906 (NSW) respectively were not taken into account to reduce the interest to which the plaintiffs were entitled. However, those payments were of a different nature to workers’ compensation payments which specifically replace lost earnings and insurance moneys which replace the lost principal. If the first applicant is entitled to retain an award of interest for the period from 6 April 2010 to the date of judgment it would be over-compensated and I would not award interest under s 51A.However, Angas submits that notwithstanding the absence of an express clause in the insurance contract for the repayment of interest to the insurer, there is an implied term that the insurer’s right of subrogation includes interest. It relies on the decision in H Cousins & Co Ltd v D & C Carriers Ltd [1971] 2 QB 230, where the Court of Appeal considered whether the interest awarded in respect of a period after the insurers had settled with the insured could be claimed by the insurers by subrogation. Widgery LJ said (at 241-3):That the court has power to award interest in respect of the full period seems to me to be clear, though the exercise of its discretion will depend on whether the interest remains in the plaintiffs’ pocket or can be claimed by the insurers.…It is therefore pertinent to inquire what term, if any, is to be implied in a contract of insurance in regard to the ultimate destination of interest awarded under the Law Reform (Miscellaneous Provisions) Act 1934. It seems to me that the answer to the officious bystanders’ query would be: ‘Of course the assured may retain interest accruing prior to the date of settlement by the insurers but thereafter such interest must go to the insurers’… I think that such a term was necessary to give business efficacy to the contract now in question.
Ratio Decidendi
Legal Principle Established
Full text does not contain this section.