Permanent Trustee Co Ltd v Spencer's Real Estate No. DCCIV-98-514

PERMANENT TRUSTEE CO LTD V SPENCER’S REAL ESTATE PTY LTD & RENTON
[2000] SADC 65

Judge Bright
Civil

Early in 1997, a Mr. Martin borrowed $224,000 on the security of a house which he intended to buy and which he apparently intended to let. A mortgage was entered into. Mr. Martin made no repayments. The mortgagee foreclosed and sold the property. It suffered a loss of part of the principal. It incurred fees and it lost interest it expected to earn. Mr. Martin’s whereabouts are not known. No recovery has been made, or is expected, of amounts owed by him, apart from what was recovered on foreclosure and sale.
Prior to the loan being granted, a valuation was prepared by the second defendant, Mr. Renton, who was employed by the first defendant, which trades as Richardson and Wrench Commercial Adelaide. It is alleged that it was defective. It is alleged that, had it not been defective, the lender would simply not have advanced the money. It seeks to recover from the defendant the amount it claims to be entitled to recover from Mr. Martin, but which it has been unable to recover. The defendants deny (at least most of) the defects alleged to taint the valuation and say that any such defects played no part in the decision to lend. They raise certain other defences. While this may all sound pretty straightforward, the arrangements underlying it are, in fact, quite complex.
Some years ago, the Bank of Singapore wished to lend money in the Australian home mortgage market. Later it assigned its rights and obligations, at least in regard to this area of business, to Overseas Chinese Banking Corporation (OCBC). I shall refer only to OCBC, although some aspects of the story actually involve Bank of Singapore.
OCBC appointed LaTrobe Home Loans of Australia Pty. Ltd. (LaTrobe) to manage that business in Australia. Without going into too much detail, a person wishing to borrow could apply to LaTrobe, or to any of various agents appointed by LaTrobe. LaTrobe would consider the application and, if satisfied, would request funds from OCBC. OCBC, while having freedom to refuse to advance, would usually do so. The mortgage to secure the advance would be in the name of the plaintiff, Permanent Trustee Co. Ltd. (PTC), which company had agreed to act as trustee for OCBC in relation to such mortgages. Mortgages were issued in such numbers that it was convenient for the standard conditions to be deposited at the Lands Titles Office and for individual mortgages to be short documents referring to the deposited conditions. At the relevant time, about 15 to 18 million dollars of loans per month were processed and thereafter managed by LaTrobe. Payments were to be made by the mortgagor to LaTrobe, which then relayed them to OCBC. LaTrobe had to organise recovery action in respect of defaulters, though OCBC would indemnify it in respect of costs incurred. The evidence does not disclose the precise amount of business LaTrobe wrote for OCBC (as distinct from other financiers), but I feel it safe to assume that it was substantial.
An obviously significant part of LaTrobe’s activities was to procure valuations in respect of properties offered as security for loans. To this end, and in accordance with precise instructions from OCBC, it appointed a panel of valuers acceptable to it and to OCBC. Formal agreements were entered into with those valuers, no doubt similar to exhibit P3, which is the specific agreement between the defendants and LaTrobe. The first defendant evidently received P3 on 10 October 1995 and the various valuers, including Mr. Renton, countersigned the document, accepting its terms and conditions, on 26 October 1995.
Exhibit P3 makes it plain that LaTrobe acts as agent for various lending institutions.   It will require, from time to time, valuations of properties “for lending purposes”.   It sets out a number of matters to be addressed in any such valuation.   Of relevance are the following clauses:-
“3.     Would you also note in your report whether any work of a repair, renovation or improvement nature is to be undertaken, and if so, your assessment of :
a.      the extent of the work
b.      the cost
c.      the estimated value of the property upon satisfactory completion
4.     irrespective of the foregoing your report should state the valuation of the subject property at the date of the inspection and having regard to its existing condition.
Please ensure that your report includes a statement to the effect :
This valuation is for the use only of the party to whom it is addressed, ........LaTrobe Home Loans being the mortgage manager appointed under agency by the party to whom this report is addressed and for no other purposes with the exception of the relevant mortgage insurer.   No responsibility is accepted to any other third party who may use or rely on the whole or any part of the contents of this valuation.”
In order to facilitate the nomination by LaTrobe of the lending institution to be asked to provide the money, the following instruction is given in exhibit P3 that the valuation is to commence:
“On page 1. Instructed by: LaTrobe Home Loans of Australia
For: (leave blank and allow (2) lines.”
From all of this I think it clear that the defendants knew that their valuations would be used to assess the suitability of properties as security for loans to be secured by those properties. It is apparent that LaTrobe was acting as agent for other financiers and was not itself the lender. Although less clear, I think it is clear enough that LaTrobe would insert the name of the financier to whom the valuation was to be “addressed” in the two lines left blank on page 1 of its valuation. While the defendants may not have known who the lender was to be, I find that they did know that the valuation was to be used by a financier other than LaTrobe.
One of the agents appointed by LaTrobe was Home Mortgage Services Pty. Ltd. (Home Mortgage). Home Mortgage was authorised to seek and forward applications from borrowers for loans to LaTrobe, in return for certain fees. Evidently Mr. Martin approached Home Mortgage and filled in a form applying for a loan. He wanted to borrow $224,000, which was 80% of the purchase price of the house, which was $280,000. No doubt because it knew it would be required, and because it knew the defendant was a valuer acceptable to LaTrobe, Home Mortgage requested the defendants to prepare a valuation. It did so by fax (exhibit P5), identifying the address, the estimated value ($285,000 - $290,000), that the proposed loan was for 80% of the value, the name of the borrower, the name of a person who could give access to the property (in fact the builder of a new house on the property) and it advised that the lender would be LaTrobe.
It must have been plain to the defendant that it was to provide a valuation in accord with the arrangements it already had with LaTrobe pursuant to exhibit P3. In short, it must have realised that its valuation was to be used by the financier to be nominated by LaTrobe. The defendants owed a duty of care to LaTrobe and to that ultimate financier, being the ordinary duty to act competently as professional valuers. In addition to that common law duty, certain contractual and statutory duties are alleged by the plaintiff to be owed. I shall come to them later.
Mr. Renton was the valuer who prepared this valuation. He rang the builder and arranged for access on 31 January 1997 at 12 noon. At that time he went to the property. He found a substantially complete new house in a new sub division alongside Estcourt House at Tennyson. He would have seen that the sub division had roads and gutters installed, with street lights, but no footpaths. There were some sixteen allotments. This was the only one built on. The sub division was off Military Road, an old established main road in an old established suburb of Adelaide.
At the property Mr. Renton met a woman, whose name is not known, and was let in. He prepared a valuation (exhibit P6). He says that he was assured by that woman that, before settlement, the property would be completed. He noted in his valuation that there was:
“Minor work to complete - minor painting/tiling and carports” (the underlining is Mr. Renton’s.)
Other circumstances make it obvious that the last word should have been “carpets”. That error is of no importance. He was aware that various appliances, such as heaters, an oven, hot water service and spa pump were not there. He did not expect them to be, as such appliances are routinely stolen from unattended new houses. He expected them to be installed only at the last moment.
He took some photos, which show that second fix electrical work had not been performed - bare wires protruded from walls. It can be seen that kitchen joinery was not complete. In fact, there must have been a lot of work to be done, as it is admitted in the pleadings that the value of outstanding work was $35,000, There must have been much more than the minor work he described.
He accepted the assurance that all work would be completed. He said (on page 6) of his valuation:
“Valuation (ex chattels) total: $280,000 (assuming completion of minor work as per approved plans and specifications).
On the next page he wrote:
“Certificate I, John Charles Renton, qualified valuer, of Richardson and Wrench Commercial Adelaide, 168 Melbourne Street, North Adelaide, S.A. 5006, hereby certify that I internally inspected the property referred to in this report on the 31st day of January, 1997 that I have no interest in the property, or prospective mortgagor, and I assess the present market value as above $280,000 (Two hundred and eighty thousand dollars).
It will be noted that the final value is expressed to be “the present market value”. On an earlier page he had listed the various rooms, describing them as complete with carpets. Carpets were not there.
In my view, the reasonable reader of this valuation would conclude that the property was complete, except for works so minor as not to be significant in assessing the present value at $280,000, While some minor matters are noted as needing to be finished, there is no suggestion of anything like $35,000 worth of work to be done. It would have been simple to have set out the work, its approximate value and, perhaps, to suggest a further inspection at, or just before, settlement, to see that it had been done. It was misleading to proceed on such an important assumption (that outstanding work would be completed) without stating it. The contract (P3) required him to do so.
In a list of “services” he wrote “gas: yes”, “electricity: yes”, “water: yes”. In my opinion, a reasonable reader would understand that those services, if not actually turned on, were available for the asking. That is what Mr. Renton also believed.
In fact, electricity was not available. The incomplete state of the house wiring would have been obvious. Not much turns on that. Mr. Renton did not actually look for a meter box. If he had, he would have found that none was installed. Even then, on his assumption that work would be completed, there would not have been anything remarkable. A meter might well not be installed until wiring was complete.
However, there was a further problem. It appears that the subdivider/developer had not paid the contractor who had installed the underground wiring in the streets servicing the entire sub division. For this reason that contractor would not grant access to its installation to ETSA. Without that access, ETSA could not supply electricity to the house, even if all of its wiring, meter box, etc. were complete. That situation prevailed at all times relevant to this action.
In my view, the reasonable reader of the words “electricity: yes” would conclude that the house was intended to be powered by electricity, that it was (or would with only minor works be) wired for electricity, and that electricity was available from the main ETSA grid, on application. I do not accept that it meant that the house circuit was actually energised.
I note a brief, probably hearsay, claim by Mr. Renton that someone, at some stage, used a portable generator to power the house. If that happened, it is not a matter which I would expect to occur to a reader of his valuation. Nor does that possibility make his statement any more “true”.
I accept the evidence that a property in a location like this with no, or delayed, access to electricity is worth substantially less than an otherwise identical property with such access. A figure of $25,000 as the diminution in value was suggested by one valuer in evidence. I was not clear whether that was for anticipated permanent lack of access, or for the nuisance value of delay and problems in getting eventual access. If the latter, there was no evidence about how long the delay was expected to be, nor of what needed to be done to resolve it. I would have thought that any likely purchaser could reasonably have assumed that power would eventually be connected - and that any discount would reflect the extent of the delay, problems in getting access and the practicability of alternative arrangements, such as short term use of a generator.
For these reasons, I do not accept the figure of $25,000 as a precisely reliable figure to cover all eventualities. However, I do accept that problems, at least spanning the period of about a year between the advance of the loan and the sale on foreclosure would have had a substantial, foreseeable, effect on the value, quite possibly of the order of $25,000.
To my mind, the reasonable reader of the valuation would not have appreciated that, in its condition on the day of the valuation, the property was worth, perhaps $50,000 less than the value stated. In my view, such a reader would have realised that a few, say four or five, thousand dollar’s worth of painting, tiling and carpeting remained to be done and that the value could not be exact as it would necessarily be correct only within a range. Mr. Renton and the other valuer who gave evidence, Mr. Cottle, suggested that a reasonable valuation could be out by as much as 10% (up or down). I believe any reasonable, experienced lender, looking at such a valuation would know that. I adopt the figure of $50,000 to cover the outstanding work and the absence of electricity. A lender would not expect a $280,000 valuation to be out by around $50,000.
The proposed loan was for $224,000. The ratio between borrowing $224,000 and security of $230,000 is such that no experienced commercial lender would be likely to lend that amount. Mr. Renton knew that the loan was to be for 80% of value. On those figures, a loan of $224,000 would exceed 95% of value.
Later events suggest that the valuation was, in fact, out by about the amount discussed, and probably for the reasons discussed. On foreclosure, Mr. Cottle was asked to value the property. He, unaware of Mr. Renton’s valuation, and unaware of problems with electricity, saw the property about six months later. It was no more complete and had deteriorated a little. It appears that there had been a break in, causing unquantified damage. The lawn and small garden had not been cared for and were not in good condition. No expert figure was given for the deterioration, but, for present purposes I think it would be fair to estimate it at a couple of thousand dollars. Mr. Cottle concluded that the property was worth $200,000.
On sale it fetched $216,500 (still without electricity, but, perhaps - the evidence is silent - with a clearer idea of when it might be available). If $50,000 be added to that figure, we get to a figure of $266,500, which is a figure within 10% of $280,000. Thus, the basic valuation is within tolerable limits, but the failure to refer to outstanding work and to the absence of electricity vitiate it.
I turn to the role that Mr. Renton’s valuation played. It was requested by Home Mortgage, but the request made it clear that it was for LaTrobe. It appears to have been furnished to Home Mortgage, which then forwarded it, with a supporting application from Mr. Martin, to LaTrobe.
A good deal of attention at trial was focussed on the precise history of how the loan was processed by LaTrobe and whether, in fact, the valuation was ever relied on. I do not need to canvas it in detail. Clerks employed by LaTrobe opened a file and recorded on certain pro forma sheets a good deal of information. Someone at LaTrobe, probably Mr. Hill, evidently determined that the loan was the sort of loan which might be of interest to OCBC and stamped the valuation, in the blank space left on P1, “Permanent Trustee Co. Ltd”. It will be recalled that P.T.C. was contracted to OCBC to act as trustee for OCBC of security taken by OCBC for loans advanced by OCBC.
This transaction was one of many processed by LaTrobe at about this time. Its national manager was Mr. Hill. He could say that he was responsible for overseeing this loan, but could not recall any specific details. He could only say what he expected would have happened, having regard to then current directions, arrangements and practices.
Probably clerks processed the application to the stage where, by fax, OCBC in Hong Kong was asked if it would advance money for this loan. That fax included advice that the proposed security was valued at $280,000 and that market rental could be expected to be $300 per week (a figure included in the valuation). It appears that the property was to be an investment property for Mr. Martin, as the loan was approved by OCBC, subject to obtaining a tenant at that figure.
Clerks also prepared an offer to Mr. Martin to provide the finance he sought, which set out in detail the terms on which it would be provided. The fax to OCBC, OCBC’s faxed reply and the despatch of the offer to Mr. Martin all occurred on the same day, 12 February, 1997. The offer was accepted by Mr. Martin and settlement later took place.
The only person authorised by LaTrobe to authorise such loans, or to send out such offers, was Mr. Hill. Normally, any loan of which he approved was granted by OCBC, but OCBC was not bound to do so. In this case it did, apparently relying on the request, which referred to a valuation of $280,000. It agreed to advance 80% of that figure, $224,000.
Mr. Hill said that he must have considered the valuation, as that was his invariable practice. He could not be certain of exactly when he did that. On one interpretation of the evidence and documentation, it may have been after the request to OCBC to advance funds and after their agreement to do so. That is not certain, but it is quite possible.
It argued by the defence that, in as much as the plaintiff cannot prove that OCBC’s decision to advance the money followed critical appraisal of the valuation by Mr. Hill, it could not prove that OCBC relied on it. I prefer the approach argued for by the plaintiff. A procedure had been set up to assess and, if appropriate, grant loans. Provided that the valuation was properly assessed before the money was advanced by Mr. Hill, an inference can readily be drawn that there was reliance on the valuation.
In more detail, I find that OCBC received a request from LaTrobe, which referred to an acceptable valuation at $280,000. Possibly a clerk sent off that request before Mr. Hill had satisfied himself about the valuation. The clerk may have exceeded her authority and jumped the gun. But I have no doubt that OCBC relied on the assurance that there was an acceptable valuation at $280,000 in deciding to agree to advance funds.
In fact, an apparently acceptable valuation was in existence. Perhaps it was slightly later that Mr. Hill confirmed to his own satisfaction that that was so. I am sure that OCBC would have relied on LaTrobe to be so satisfied, before actually parting with funds - and they were. I have no doubt that, if Mr. Hill had detected something unsatisfactory about the valuation, even after sending out an offer, even after acceptance of the offer by Mr. Martin, he would have cancelled or varied the proposed arrangement. This is not a case in which the lender irretrievably committed itself to the loan before considering the valuation.

I am satisfied that, whenever it took place, the valuation was considered by Mr. Hill and that the loan was put into effect in reliance on it. I am satisfied that OCBC relied on Mr. Hill to do that.
I have already found that Mr. Renton knew that his valuation would be used for that purpose by LaTrobe and by the ultimate financier to be nominated by LaTrobe. In these circumstances, what duty did he owe to the plaintiffs?
The action was originally brought by Permanent Trustee Co. No doubt, P.T.C. as registered mortgagee, was the party entitled to enforce the mortgage against Mr. Martin, in accordance with its terms. It did so. No challenge has been raised in respect of its right to do that, or in respect of the amount still owed by Mr. Martin. However, that does not necessarily confer any right on P.T.C. against Mr. Renton. There is no evidence that it ever received, or read the valuation. Its only involvement is as trustee for OCBC. I do not see how it has any right against anyone (in these circumstances) apart from those conferred by the mortgage. The defendants are not parties to the mortgage.
It is true that the valuation was stamped “Permanent Trustee Co. Ltd.” by LaTrobe, apparently pursuant to LaTrobe’s right to nominate the financier. P.T.C. is not a financier. Arguments based on it being trustee for the ultimate financier do not satisfy me that it has locus standi to bring this action. It has lost nothing of its own - it did not put up the money. It did not (and was not intended to) make any independent decision of its own about whether or not money would be lent. There is no evidence of either loss or reliance on the valuation.
During trial, this possible view was anticipated. Application was made, and leave was granted, to join OCBC as a plaintiff in its own right. It is the party which has suffered loss. It advanced the money. I have found that it relied on the valuation. In my view it has locus standi to bring this claim.
I find that stamping “Permanent Trustee Co. Ltd.” on the valuation did not sever any relationship between the defendants and the ultimate financier, OCBC. The original arrangements between LaTrobe and the defendants, and the terms stated on page 1 of the valuation, limit the use to made of it. It is not for the use of the world generally. It is for the use of LaTrobe and of the ultimate financier. I do not know why P.T.C. is nominated as the financier. It may have been believed that its status as mortgagee required this. I note that the arrangements between LaTrobe and OCBC require that OCBC’s name not be mentioned.
The ”disclaimer” on the valuation reads:
“This valuation is for the use only of the party to whom it is addressed, LaTrobe Home Loans of Australia Pty. Limited being the mortgage manager appointed under agency by the relevant financier to be nominated by LaTrobe after receipt of the report .......... and for no other purposes with the exception of the relevant mortgage insurer. No responsibility is accepted to any other third party who may use or rely on the whole or any part of the contents of this valuation.”
In my view, nominating P.T.C., though not literally accurate, was, for purposes relevant to this case, sufficient to identify the financier to LaTrobe as being OCBC, because of its relationship with Permanent Trustee Co. OCBC is not “any other third party”, it is a party directly concerned. Nomination of P.T.C. was not nomination of some financier other than OCBC. The defendants had no interest in who the financier might be, but knew that there would be one. The nomination was to take place “after receipt of the report” by LaTrobe. How that financier was to be identified was not to the point. The object of the clause is to protect against reliance by others, not in the contemplation of the defendants - and that has not occurred.
Mr. Renton’s duty at common law was to act competently. I am not persuaded that the ordinary, competent valuer would, in the circumstances of this case, have checked to see whether there was any reason why electricity could not be connected. Granted, a simple telephone call to ETSA or, perhaps, to the builder, could have revealed that. I can well understand that everything looked in order for connection. There is no evidence of any practice for valuers to check that. Mr. Cottle did not check it when he prepared his valuation. He was unaware of it.
I accept that the ultimate judgment is the court’s, but the practice of valuers is a powerful factor. It is not proved to me that Mr. Renton was negligent in failing to find out about the problem with electricity. However, his statement “electricity: yes” appears to be, in fact, misleading - and I so find. That, without going into detail, applies to the various statutory bases for the claim.
Regardless, while it may have been reasonable for him to accept assurances that minor work would be completed, either he was careless in failing to appreciate how much work remained to be done, or was careless in accepting that $35,000 worth would be done, without some clear reference to it in the valuation. He was thereby negligent and in breach of his common law duty to, in the end, OCBC.
I think that he was also guilty of misleading conduct in the same regard. Further, it was a breach of the requirement of his contract with OCBC (through the agency of LaTrobe) to act competently.
Mr. Hill gave evidence of what he would have done if correctly apprised of various matters. For example, the valuation included the words “hot water service - gas” and “cooking facilities - gas hot plate, wall oven”. Those words suggest to me that those facilities were present, but they were not. I have reservations in accepting Mr. Hill’s claim that, if he had known that any of those appliances were not there, he would not have approved the loan. They might play a cumulative part in such a decision, but I doubt that they, in isolation, would cause it.
However, I do accept his evidence that, if he had realised that the value of the “minor work to complete” was $35,000, or so, he would not have been prepared to approve, at least not without later inspection to see that it had been done. Such a diminution in value meant that the proposed loan would be for more than 80%.
Insofar as I need to, for the purposes of the claims pursuant to the Trade Practices Act and the Fair Trading Act, I find the representation “electricity - yes” to be misleading or deceptive, as was the description of the outstanding work as “minor”.
It was suggested that statutory remedies would be time barred, if I were to hold that the cause of action arose at the moment when the money was advanced, or even at the date of the valuation. Loss (or, appreciation that it must occur) is an essential ingredient of the causes of action in this case. The earliest possible date on these facts was the date of receipt of Mr. Cottle’s valuation at a much lower figure, or, perhaps, when the problem with electricity was later discovered. On either of those dates it must have been realised that there might be trouble getting enough to cover the outstanding amount. More probably, the loss occurred when the property sold for a figure less than was owed. I do not stay to analyse this in detail, as I am satisfied of at least the common law bases for the claim - and they are well within time.
Various allegations of contributory negligence were pleaded, It is enough to say that some were positively disproved and the rest were not even nearly made out by the defendant. There is no basis to reduce the claim at common law. In any event, contributory negligence probably does not apply to the causes of action other than negligence. In particular, it does not apply to contract. Contract is pleaded, based on a contract between OCBC, as undisclosed principal, through the disclosed agency of LaTrobe, and the defendants to provide a competent valuation. The plaintiff must prove a reasonable basis for its claimed loss, but there is no allegation by the defendant in this case of any failure to mitigate that loss.
Fortunately, it has not been suggested that the measure of damage would vary, depending on which cause of action was considered. It is accepted that, if I were to find as I have, this is a “no transaction” case. But for the problems in the valuation, OCBC would not have entered into this transaction at all. It is not a case in which I should enquire into whether some variation to the deal might have been expected. The measure of loss is the amount necessary to put OCBC in the same position as if it had never done this deal.
The claim has been pleaded as if it is for the same amount as that alleged to be owed by Mr. Martin to P.T.C. pursuant to the mortgage. It is expressed to be made up of the principal advanced, interest at the agreed rate, certain charges levied on early repayment, and the cost of foreclosing and selling. Credit is given for the amount realised on sale, and then interest at the agreed rate is alleged to run on the balance.
In my view, that is not the measure of what is necessary to put OCBC back to its original position. OCBC, in my view, is entitled to the difference between what it advanced and what it recovered. It is entitled to the reasonable costs of effecting recovery. It is entitled to the costs of making the original advance. It is entitled to reasonable and direct consequential loss through loss of use of its money, without mounting a full Hungerford v Spooner claim (which it has not done).
This last head is challenged on the basis that, if I put the plaintiff in the position it would have been in if it had not entered into the transaction, I should not also give it the profits it might have made on the transaction, if it had been successful. I accept that in general terms. However, between that position and a full Hungerford v Spooner, compound interest claim, there seems to me to be room for the proposition that, if it had not entered into this transaction, OCBC would not have left its money entirely idle. It was in the business of making loans. I have no specific evidence, but I expect it did other things with its money which earned it income.
If it had lent this money to some other non defaulting borrower it would, presumably, have lent it at a similar rate to that agreed with Mr. Martin. That was, at the time the loan was drawn down, 7.9%, variable. It would have incurred management costs to LaTrobe and Permanent Trustee Co. I have no evidence about what its profit might have been in respect of this specific parcel of money, had it been lent to someone else, nor as to the average profit (if any) on funds of this type, generally.
Because of complications like these, it is not possible for me to pretend to accuracy in calculating consequential loss. What I shall do is allow 5% interest on the whole capital of $224,000 up to the date of settlement on resale and then on the balance of the capital up to the date of the summons. I will not allow interest on other items of expense. It appears that they would have been met by LaTrobe, but would be subject to indemnity from OCBC. I do not know whether, or when, OCBC actually indemnified LaTrobe. I do accept that it was (or is) liable to do so. I will then allow interest at 6% from the date of summons to the date of judgment.
This method of calculation does not meet the submissions of either side. I give liberty to the parties to check my calculations and to bring the matter back on (within 10 days) if it is suggested that I have failed to implement the method on which I have decided. I now set out my calculation.
On 12th February 1997, OCBC approved a loan of $224,000. The mortgage in respect of it was registered on 5th March 1997. That must have been the date when money was advanced to Mr. Martin. No doubt it was transmitted to Australia by OCBC earlier than that. I shall assume that OCBC sent its money on 1st March 1997, for ease of calculation. After foreclosure, the property was sold and settlement occurred on 1st December, 1997. No repayments had been made by Mr. Martin. Thus the whole of the capital of $224,000 was outstanding until 1st December 1997, a period of nine months. $224,000 X 5% X 9/12 = $8,400.
On 1st December 1997, OCBC recovered $216,500, leaving a shortfall of $7,500.
The summons was issued on 16th April 1998, which is near enough to four and a half months later. $7,500 X 5% X 4.5 months = $140.62.
OCBC incurred, or is liable for various expenses in connection with granting the loan and of enforcing its security. I think they are as follows:-
I then take other expenses from exhibit P33.
28/2/97 Insurance $38.50
4/3/97 Bank charges $30.00
31/3/97 Tax $1.34
31/3/97 Insurance $38.50
30/4/97 Insurance $38.50
30/5/97 Insurance $38.50
30/6/97 Insurance $38.50
23/7/97 Legal Costs $325.00
31/7/97 Insurance $38.50
31/8/97 Insurance $38.50
12/9/97 Legal Costs $325.00
?/9/97 Valuation $565.00
30/9/97 Insurance $38.50
31/10/97 Insurance $38.50
25/11/97 Title Production $150.00
30/11/97 Insurance $38.50
1/12/97 Tax $146.31
TOTAL $1,912.65
I disallow the claim for insurance in respect of a period after settlement.
OCBC must have incurred internal costs in processing the loan. I note that a fee of $675 was agreed with Mr. Martin as being an early repayment fee. It is additional to penalty interest and I infer that it gives some guide to the cost of processing a loan. I shall allow $500.
On settlement, certain rates and taxes had to be paid.
Council $480.51
Water $392.60
Land $95.36
TOTAL $968.47
The agent who sold the property charged $9,865.56.
Legal fees of $1,995.90 are claimed. I am unsure if they are all additional to the fees taken from P33. The defendant expressed the reservation that they had not been proved. For purposes of this calculation, I shall allow them, but I give leave to the parties to address me on them. On this basis the total assessment is $31,283.20.
From the date of the summons, 16th April 1998, to now is little over two years. I allow interest at 6% for 2.1 years, which is $3,941.66. This gives a total figure of $35,224.86.
SUMMARY
1) Interest on $224.000 $7,466.67
2) Loss of Capital $7,500.00
3) Interest on $7,500 $140.62

100 4) Cost of granting loan

a) internal $500.00

102 5) Items from P33 $1,912.65

103 6) Rates $986.47

104 7) Land Agent $9,865.56

105 8) Lawyer $1,995.90

106 9) Interest to judgment $3,941.66

107 TOTAL $35,224.86

108 To avoid such specious exactness, I will, subject to any submissions on my calculation, give judgment for the plaintiff, OCBC, against both defendants, in the sum of $35,225. I dismiss the claim of the plaintiff Permanent Trustee Company Ltd.

109 I will hear the parties on costs

[2000] SADC 65

1 June 2000