Stanru Pty Ltd v La Trobe Capital & Mortgage Corporation Ltd & Fitzroys Pty Ltd

[2008] VSC 44

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT

No. 10142 of 2007

STANRU PTY LTD	Plaintiff
v
LA TROBE CAPITAL & MORTGAGE CORPORATION LIMITED and FITZROYS PTY LTD	Defendant

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	22 February 2008
DATE OF JUDGMENT:	26 February 2008
CASE MAY BE CITED AS:	Stanru Pty Ltd v Fitzroys Pty Ltd
MEDIUM NEUTRAL CITATION:	[2008] VSC 44

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PRACTICE AND PROCEDURE – appeal from Master – application for summary dismissal of claim against second defendant – alleged liability of second defendant as an accessory to alleged contraventions by the first defendant.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Ravech	Spigler & Schwarcz
For the Second Defendant	Mr J  Dixon SC, with Ms G Coghlan	DLA Phillips Fox

HIS HONOUR:

1. In this matter I allowed an appeal from orders of Master Daly summarily dismissing the plaintiff’s claim against the second defendant and said that I would give my reasons later.  These are those reasons.

1. The plaintiff’s statement of claim raises two causes of action against the first defendant (“La Trobe”).  La Trobe is a trading corporation and a responsible entity for a managed investment scheme within the meaning of the Corporations Act.  The plaintiff alleges that it entered into negotiations with La Trobe with a view to advancing $125,000 to La Trobe to be lent to Properties Australia Pty Ltd on the security of a registered second mortgage in favour of La Trobe over a property in Little Lonsdale Street Melbourne.  The plaintiff alleges that La Trobe represented to it, both orally and in writing, that the said property had a value of $1.5M, and that, taking into account an existing first mortgage in favour of La Trobe securing an advance of $1M, if the plaintiff advanced $125,000 to La Trobe and that was on lent on the security of a second mortgage the loan to valuation ratio would be 75%.  The plaintiff says that those representations induced it to advance the said sum of $125,000.  The plaintiff further alleges that these representations were false misleading and deceptive in contravention of s.52 of the Trade Practices Act because the property had a substantially lower value.  The plaintiff says that it has suffered loss and damage as a result.

1. The plaintiff raises a further cause of action against La Trobe based on the same underlying facts but with particular reference to a duty imposed upon La Trobe under s.601FC(1)(b) of the Corporations Act.  The breaches of duty are particularised by reference to allegedly incorrect statements in the valuation report prepared by the second defendant (which is a company carrying on business as a valuer of real estate).

1. The causes of action raised against the second defendant are based on alleged accessorial liability for the conduct of La Trobe.  The plaintiff alleges that the second defendant aided, abetted, counselled or procured the alleged misleading conduct and/or breach of duty (or induced it, or was directly or indirectly knowingly concerned in or party to the alleged contraventions).  The statutory provisions relied on are in similar if not identical terms – namely, s.75B of the Trade Practices Act and s.79 of the Corporations Act.

1. The particulars of the accessorial conduct alleged against the second defendant are the provision by it of a valuation report dated 8 April 2003 to La Trobe.  As appears below, the plaintiff’s case depends not only upon the provision of this report by the second defendant to the first defendant but upon the first defendant’s provision of the report to the plaintiff and the second defendant’s intention that this might occur.  The pleading could no doubt be improved. 

1. The second defendant submitted that the plaintiff had no standing to make these claims against the second defendant because the plaintiff was simply an investor in the managed investment scheme and the only causes of action available against the second defendant (if any) were vested in La Trobe.  In my opinion that submission is misconceived, or at least arguably misconceived, because the plaintiff is claiming in respect of damage directly suffered by it as a result of alleged contraventions by La Trobe and it is further alleged that the second defendant is an accessory to those contraventions.  The plaintiff is not purporting to make a claim on behalf of La Trobe against the second defendant but a direct claim against both defendants for its own loss. 

1. The second defendant next submitted that the pleading disclosed no facts giving rise to accessorial liability in the second defendant and, further, the evidence before the Court in the affidavits filed supported the second defendant’s position that there was no case against it at all.  The second defendant contended that it was clear on the evidence that it had no knowledge of the existence of the plaintiff or of the plaintiff’s proposed advance and indeed no relevant knowledge or intention within the meaning of the abovementioned statutory provisions as to be interpreted in the light of the well-known decision of the High Court in Yorke v Lucas (1985) 158 CLR 661.

1. However the plaintiff submitted that the mortgage valuation request from La Trobe and the valuation report itself showed that the second defendant contemplated and intended that the valuation report (and hence the representations contained therein) might be used or relied upon by a person in the position of the plaintiff.  The plaintiff pointed to the words “this valuation is addressed to and for the use only of the following parties… [including] a Credit Provider to be nominated by La Trobe after receipt of the Report…”.  The plaintiff submitted that it was such a Credit Provider as therein described.  The second defendant submitted that the plaintiff was not a Credit Provider as therein described.  I do not think that this question can be determined on a summary basis as it will or may depend, inter alia, on interpretation of these documents in the light of all the surrounding circumstances.

1. I cannot conclude that it is not reasonably arguable that the second defendant was an accessory in the relevant sense to the making of any  relevant representations  to the plaintiff  constituted by La Trobe’s giving the second defendant’s valuation report to the plaintiff.  It may appear when the matter is fully investigated at trial that the plaintiff’s case against the second defendant, as above outlined, is unsound in fact or in law (or both) but I cannot say, at this stage, that it is hopeless. 

1. For those reasons the appeal was allowed with costs.  

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