FEDERAL COURT OF AUSTRALIA
Valcorp Australia Pty Ltd v Angas Securities Limited [2012] FCAFC 22
Citation: Valcorp Australia Pty Ltd v Angas Securities Limited [2012] FCAFC 22 Appeal from: Angas Securities Limited v Valcorp Australia Pty Ltd [2011] FCA 190
Angas Securities Limited v Valcorp Australia Pty Ltd (No 2) [2011] FCA 248Parties: VALCORP AUSTRALIA PTY LTD (ACN 008 147 671) v ANGAS SECURITIES LIMITED (ACN 091 942 728), BARKER MORTGAGES PTY LTD (ACN 106 071 676) and KWS CAPITAL PTY LTD (ACN 114 209 808) File number: SAD 59 of 2011 Judges: JACOBSON, SIOPIS AND NICHOLAS JJ Date of judgment: 9 March 2012 Catchwords: TRADE PRACTICES – valuation of property – financiers made advances in reliance of valuation – no reasonable grounds for valuation – conduct of valuer fell below standard of reasonably competent valuer –financiers did not carry out adequate inquiries as to whether borrowers could service the loans – borrowers defaulted within two months of the loans being made – contributory negligence of lenders – apportionment of the responsibility for loss between the valuer and each lender – damages for loss of opportunity of some value – whether evidence discharged the onus of proof. Legislation: Trade Practices Act 1974 (Cth) ss 52, 82, 82(1B)
Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) ss 7(1), 7(2)Cases cited: Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361
Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALR 592
Liftronic Pty Ltd v Unver (2001) 179 ALR 321
Pennington v Norris (1956) 96 CLR 10
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Tabet v Gett (2010) 240 CLR 537
La Trobe Capital & Mortgage Corporation Limited v Hay Property Consultants Pty Ltd (2011) 190 FCR 299
St George Bank Ltd v Quinerts Pty Ltd (2009) 25 VR 666Date of hearing: 17 August 2011 Place: Adelaide Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 184 Counsel for the Appellant: Mr I Robertson SC and Ms G Walker Solicitor for the Appellant: Fox Tucker Lawyers Counsel for the First, Second and Third Respondents: Mr MCJ Hoffman QC and Mr BC Roberts
Solicitor for the First, Second and Third Respondents: Madsen Rowley
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 59 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: VALCORP AUSTRALIA PTY LTD (ACN 008 147 671)
AppellantAND: ANGAS SECURITIES LIMITED (ACN 091 942 728)
First RespondentBARKER MORTGAGES PTY LTD (ACN 106 071 676)
Second RespondentKWS CAPITAL PTY LTD (ACN 114 209 808)
Third Respondent
JUDGES:
JACOBSON, SIOPIS AND NICHOLAS JJ
DATE OF ORDER:
9 MARCH 2012
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.The appeal is allowed in part, but is otherwise dismissed.
2.The orders made by Besanko J on 17 March 2011 are set aside.
3.Within 7 days, the parties are to provide a minute of orders which gives effect to the reasons of the Court.
4.Within 7 days,…
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Details
- Case
- [2012] FCAFC 22
- Decision Date
CaseChat Overview and Summary
Valcorp Australia Pty Ltd appealed against the primary judge’s decision regarding contributory negligence and the award of damages for consequential loss, while the respondents cross-appealed from the primary judge’s decision that the damages awarded to them should be reduced by 25% on account of their contributory negligence. The case involved a dispute over the valuation of property, where financiers had made advances in reliance on a valuation. The valuer’s conduct fell below the standard of a reasonably competent valuer, and the financiers did not carry out adequate inquiries as to whether the borrowers could service the loans. The borrowers defaulted within two months of the loans being made. The court had to determine the apportionment of responsibility for the loss between the valuer and each lender, and whether the evidence discharged the onus of proof.
The court held that the valuer’s conduct fell below the standard of a reasonably competent valuer, and that the financiers did not carry out adequate inquiries as to whether the borrowers could service the loans. The court found that the evidence discharged the onus of proof, and that the loss should be apportioned between the valuer and the financiers. The court held that the primary judge erred in finding that the financiers were not contributorily negligent, and that the damages awarded to the respondents should be reduced by 25% on account of their contributory negligence. The appeal was allowed in part, but was otherwise dismissed. The orders made by Besanko J on 17 March 2011 were set aside, and the parties were required to provide a minute of orders which gave effect to the reasons of the Court within 7 days. The parties were also required to file and serve submissions not exceeding 4 pages on the question of costs within 7 days.
The court held that the valuer’s conduct fell below the standard of a reasonably competent valuer, and that the financiers did not carry out adequate inquiries as to whether the borrowers could service the loans. The court found that the evidence discharged the onus of proof, and that the loss should be apportioned between the valuer and the financiers. The court held that the primary judge erred in finding that the financiers were not contributorily negligent, and that the damages awarded to the respondents should be reduced by 25% on account of their contributory negligence. The appeal was allowed in part, but was otherwise dismissed. The orders made by Besanko J on 17 March 2011 were set aside, and the parties were required to provide a minute of orders which gave effect to the reasons of the Court within 7 days. The parties were also required to file and serve submissions not exceeding 4 pages on the question of costs within 7 days.
Orders
Orders of the court
1. The appeal is allowed in part, but is otherwise dismissed.
2. The orders made by Besanko J on 17 March 2011 are set aside.
3. Within 7 days, the parties are to provide a minute of orders which gives effect to the reasons of the Court.
4. Within 7 days, each party is to file and serve submissions not exceeding 4 pages, on the question of costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Valcorp appeals from the primary judge’s decision in relation to contributory negligence and the award of damages for consequential loss. The respondents cross-appeal from the primary judge’s decision that the damages awarded to them should be reduced by 25% on account of their contributory negligence.BACKGROUND The first respondent, Angas, carries on, as it did in 2007, business as primarily a money lender. Angas lends money on the security of a first mortgage. It applies a loan to valuation ratio of 70% and does not lend on the security of second mortgages. In 2007, Mr Matthew Hower and Mr Robert Morton were directors of Angas. Mr Hower was, also, Angas’s managing director, and a member of its credit committee and audit risk management committee. Mr Morton was in 2007, chairman of Angas’s credit committee. At all material times, Angas raised the monies that it loaned, from members of the public through the issue of debentures. From time to time, Angas published a prospectus whereby investors were invited to subscribe funds. The investors received a fixed rate of return and the loans made by the investors were secured by a floating charge held by a trustee over the mortgages and other assets of Angas. The relevant prospectus in this case was Prospectus No 8. Angas stated in its prospectus that it lent monies to borrowers who “do not deal with traditional lenders such as banks or who may not meet the lending criteria of such lenders”. In its prospectus, Angas described the typical class of borrowers as “[b]usiness proprietors, self-employed or investors in property which does not generate income” and “credit impaired and those seeking debt consolidation”. Angas, also, stated in the prospectus that it typically advanced loans for shorter periods than did traditional lenders and that loan terms were generally for one year and never for longer than three years. The prospectus went on to state that the nature of the borrowers and the short terms for which loans are advanced, can lead to loan defaults at a higher rate than traditional lenders experience. The prospectus stated that Angas lent money on the security of a first mortgage at a loan to valuation ratio of no higher than 70% for residential land The prospectus, also, contains the following statement:The analysis of the mortgage loan applications by the Company involves consideration of the real property that the Company will take as prime security together with any collateral security and an assessment of the credit worthiness of the borrower and any other transacting parties to the loan. Angas Securities Limited obtains current valuations, credit reference reports, undertakes general reference checking, reviews financial statements and assesses the impact of any other borrowings. This analysis is undertaken to assess the likelihood of recovering the loan advance that is to be made. The outcome of such analysis will determine whether or not the Company will make a loan at all, the amount of any such loan in terms of the maximum LVR and the length of the loan term.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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