Zagga Investments Pty Ltd v Walsh; Walsh v Preston Rowe Paterson Newcastle & Central Coast Pty Ltd (No 2)

[2024] NSWSC 1500

Supreme Court

New South Wales

Medium Neutral Citation:

Zagga Investments Pty Ltd v Walsh; Walsh v Preston Rowe Paterson Newcastle & Central Coast Pty Ltd (No 2) [2024] NSWSC 1500

Hearing dates:

22 November 2024

Date of orders:

22 November 2024

Decision date:

22 November 2024

Jurisdiction:

Equity - Commercial List

Before:

Stevenson J

Decision:

Statement of Cross-Claim struck out; defendant/cross-claimant to pay the second cross-defendant’s costs of the motion

Catchwords:

CIVIL PROCEDURE – pleadings – striking out – where defendant/cross-claimant has joined wrong cross-defendant to cross-claim – where defendant/cross-claimant has arguable case on his cross-claim – where cross-claim, in its current form, is nonetheless insufficiently pleaded

Legislation Cited:

Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law

Cases Cited:

Frost v James Finlay Bank Limited [2001] Lloyd’s Rep. Bank. 302; [2001] 6 WLUK 524; Rehman v Santander UK Plc [2018] EWHC 748; [2018] 4 WLUK 127

Perre v Apand Pty Ltd (1999) 198 CLR 180; [1999] HCA 36

Category:

Procedural rulings

Parties:

Zagga Investments Pty Ltd (Plaintiff)
Dylan James Walsh (Defendant/Cross-Claimant/Respondent)
Preston Rowe Paterson Newcastle & Central Coast Pty Ltd (First Cross-Defendant)
Zagga Markets Pty Ltd (Second Cross-Defendant/Applicant)

Representation:

Counsel:
A Berriman (Plaintiff/Second Cross-Defendant)

Solicitors:
Indigo Associates (Plaintiff/Second Cross-Defendant)
Defendant/First Cross-Claimant/Respondent (Self-Represented)
Blue Rock Lawyers (First Cross-Defendant/Applicant)

File Number(s):

2023/461187

EX TEMPORE JUDGMENT (REVISED)

1. The background to this matter is set out in my judgment of 8 November 2024. ^[1]

   1. Zagga Investments Pty Ltd v Walsh; Walsh v Preston Rowe Paterson Newcastle & Central Coast Pty Ltd [2024] NSWSC 1447.

2. The plaintiff, Zagga Investments Pty Ltd, brings these proceedings against the defendant, Mr Dylan Walsh. Zagga Investments seeks to recover some $3 million from Mr Walsh under a guarantee that Mr Walsh executed in relation to advances made by Zagga Investments to New Aged Projects No 2 Pty Ltd (“NAP2”), a company associated with Mr Walsh. NAP2 is now in liquidation.

3. Mr Walsh has made a cross-claim against Zagga Markets Pty Limited, a different company to Zagga Investments.

4. I am now dealing with the Notice of Motion of 5 November 2024 filed by Zagga Markets, which seeks to have Mr Walsh's Cross-claim against it struck out. I referred to that motion at [4] of my earlier judgment. I incorrectly referred to the motion as having been brought by Zagga Investments.

5. Mr Walsh's Cross-claim has the problems that I outlined at [21] to [27] of my earlier judgment.

6. There are further problems, so far as Mr Walsh's claim is formulated against the Zagga interests.

7. First, the cross-defendant is named as Zagga Markets. Zagga Markets was not the lender to NAP2 and, on the evidence before me, appears to be a stranger to the transaction. Mr Walsh has thus joined the wrong defendant.

8. If that were the only problem, it could doubtless be cured by simply substituting Zagga Investments for Zagga Markets.

9. There is, however, a wider problem. As best I can understand Mr Walsh's Cross-claim, he appears to contend that the lender to his company, NAP2, owed him, as guarantor of NAP2's debts, a duty of some kind concerning the correctness of the valuation or perhaps regarding the instructions given to the valuer. Those contentions, without more, cannot possibly impose on the lender a duty in favour of the borrower or the guarantor concerning the correctness of the valuation.

10. First, it is impossible to see how those circumstances could attract the principles that are necessary to be brought to bear when determining whether a duty of care exists in relation to pure economic loss. ^[2]

    2. See my earlier judgment at [17], referring to Perre v Apand Pty Ltd (1999) 198 CLR 180; [1999] HCA 36 at [104]-[105] (McHugh J).

11. Further, there is authority from the United Kingdom which establishes, in terms, that a lender who receives a valuation relating to a proposed lending does not owe the borrower, let alone the guarantor of the borrower, a duty of care^[3] .

    3. See Frost v James Finlay Bank Limited [2001] Lloyd’s Rep. Bank. 302 at [27]-[28] (Hart J); [2001] 6 WLUK 524; Rehman v Santander UK Plc [2018] EWHC 748 at [24], [32] (Klein J); [2018] 4 WLUK 127.

12. As to the claim in the Cross-claim concerning misleading or deceptive conduct for the purpose of s 18 of the Australian Consumer Law, ^[4] the only allegations appear to be directed to the valuation itself save, perhaps for [49] which is in these terms:

“Zagga Markets provided such illogical instructions for the type of valuation knowing very well the asset type and inherent valuation drivers of an Aged Care and Retirement Living asset. They asked for a type of valuation that was so materially different to the actual type of asset”.

4. Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law.

13. The Cross-claim in its current form cannot be sustained.

14. I order that it be struck out.

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Endnotes

Decision last updated: 26 November 2024