Perpetual Trustee Company Limited v Landmark White

Judgment 1FULLERTON J: The plaintiff is the custodian of loans made by two investment funds managed by Balmain Aqua Pty Limited. The defendant was a valuer of residential and commercial property. On 5 July 2013 leave was granted to the plaintiff to continue the proceedings against the defendant pursuant to s 500(2) of the Corporations Act 2001 (Cth) following the appointment of a liquidator on 14 June 2013. 2In April 2008 Montpensier Pty Limited, a company controlled by Gary Baker, contracted to purchase an apartment at xx Notts Avenue, Bondi Beach ("the property") for $3.5 million. Mr Baker owned or controlled other apartments in the building and planned to acquire the remaining apartments with a view to redeveloping the site. 3In late June 2008 Mr Baker approached Balmain Aqua for short term bridging finance on terms that the facility would be repaid when loans from third party lenders secured against other apartments in the building were refinanced. 4On 3 July 2008 the defendant provided Balmain Aqua with a report which valued the property on an "as is" basis at $4.65 million ("the valuation"). In reliance on that valuation the plaintiff advanced $4 million to Montpensier, secured over the property. 5Montpensier defaulted under the terms of the loan agreement. The plaintiff took possession of the property and ultimately sold it as a mortgagee in possession in November 2010 for $1.5 million. This amount was insufficient to discharge the full amount outstanding under the loan. 6The plaintiff seeks damages as a consequence of its reliance on the defendant's valuation of the property. The plaintiff alleges that it relied on the valuation when it determined to advance the loan to Montpensier. 7The plaintiff brings proceedings alleging breach of contract, breach of duty of care and contraventions of s 52 of the Trade Practices Act 1974 (Cth). 8By notice of motion of 8 May 2013 the defendant seeks orders, pursuant to rule 14.28 of the Uniform Civil Procedure Rules 2005 (UCPR), striking out various paragraphs of the plaintiff's amended statement of claim filed on 29 April 2013. 9Rule 14.28 of the UCPR provides that: (1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) ... 10The principles applicable on a strike out application have been encapsulated in Agar v Hyde [2000] HCA 41; 201 CLR 552 at [57] in the following terms: ...Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. 11A pleading will only be struck out if the claims under challenge are so obviously untenable or groundless that there is a "high degree of certainty" that they will fail if allowed to go to trial such that the Court, in its discretion, may intervene to prevent the claims being litigated (Shaw v State of NSW [2012] NSWCA 102 per Barrett JA at [30]-[34] with Beazley JA, McColl JA, Macfarlan JA and McClellan CJ at CL agreeing). 12The amended statement of claim was filed consequent upon directions I made on 22 April 2013 when, after I reserved judgment on 4 April 2013 on a notice of motion under which the plaintiff sought orders for discovery and before judgment on that motion was published, the matter was relisted at the request of the parties following an exchange of correspondence when the basis upon which the plaintiff pleaded part of its case could not be agreed. 13The defendant resisted orders for discovery at the earlier hearing, inter alia, on the basis that the documents sought were irrelevant to the resolution of any issue raised by the pleadings after it had filed an amended defence in which various admissions were made. Although the judgment on the plaintiff's motion for discovery remains reserved, at the hearing of the defendant's motion the subject of this judgment it was common ground that the question of discovery had been largely overtaken, or subsumed, by the application to strike out a substantial part of the plaintiff's re-pleaded case. It was ultimately agreed that the parties would reconsider whether it is necessary to seek a final ruling on discovery. 14Although the application to strike out is necessarily a matter to be decided referable to settled principles (in this case, in summary, whether the plaintiff's claim that the valuation contained an implied representation as to the reliability of the contract price as evidence of value is a triable issue as a separate ground for liability), the defendant also submitted that the power under the UCPR should be exercised to give effect to the overriding purpose in s 56 of the Supreme Court Act 1970. Counsel submitted that the breadth and extent of the amendment to the statement of claim, in particular by the inclusion of paragraphs 16, 16A, 16B and 16C, raises a plethora of irrelevant issues which will inevitably and unjustifiably extend the length and cost of the proceeding, in circumstances where the amended defence has narrowed the issues in contest by admitting both breach of the valuer's duty and contravention of s 52 of the Trade Practices Act in circumstances where the assessment of value contained in the valuation was admittedly above a reasonable range of values for the property. 15In its amended defence the defendant made the following admissions of fact: (a) That it received instructions from Mirvac Aqua (which the defendant reasonably believes is Balmain Aqua Pty Limited) to provide a current market valuation of the property for mortgage purposes; (b) That on or about 3 July 2008 the defendant provided a valuation of the property addressed to, amongst others, the plaintiff for mortgage security purposes; (c) That in the valuation provided, the defendant represented the market value of the property as at 3 July 2008 was $4,650,000; and (d) That the opinion of market value for the property, as contained within the valuation, was at an amount above a reasonable range of values for the subject properties such that breach of duty of care in so far as the valuation was provided for mortgage purposes was admitted as was a contravention of s 52 of the Trade Practices Act. 16What remains in issue, at least from the defendant's perspective, is whether the breach and/or contravention were the cause of the whole or part of the plaintiff's loss. In paragraphs 21-26 of the amended defence the defendant contends that the loss was caused by the plaintiff's ineptitude as lender in its application of a loan to value ratio which was excessive; by its imprudence in lending by reference to the valuation of the property and not the purchase price and by failing to obtain an "all in one line" valuation in circumstances where it knew that control of the entire site was being sought by Montpensier for redevelopment. 17In the event that the defendant is found to have any liability in damages to the plaintiff, the defences of proportionate liability under the Civil Liability Act 2002 and Trade Practices Act are relied upon in paragraphs 28-48 of the amended defence. The conduct of the plaintiff and Balmain Aqua as its agent as the first concurrent wrongdoer and Mr Baker as the second concurrent wrongdoer is particularised at length in the amended defence. 18Further, and of central importantance so far as the strike out application is concerned, the defendant did not admit the implied representation pleaded in paragraph 12 of the statement of claim (as identified in the Sale Price Representation) and replicated in the amended statement of claim. 19Paragraph 12 of both of the statement of claim and the amended statement of claim allege that the defendant engaged in conduct that was misleading and deceptive, or likely to mislead or deceive, where the valuation report states that the property was: ... currently under contract for $3,500,000 which was exchanged in April 2008, however negotiated over a period of 18 months prior to formal exchange". (emphasis added) 20That statement was made in the executive summary to the valuation report under a subheading entitled "major issues". The plaintiff submitted that the use of the word "however" must be afforded some meaning. He submitted that it gives rise to the implication that the sale price should not be taken at face value, it being subject to negotiations over 18 months preceding the formal exchange and in a fluid and rising property market a lender may be prepared to reason that the valuation 18 months later is sound. 21In reliance on that construction of the express words in the valuation the plaintiff goes on to allege, in the same paragraph, that this statement also contains the implied representation (referred to as the "Sale Price Representation") that: ... the contract price had been agreed in late 2006 and was not useful evidence as to the value of the property in July 2008. 22The defendant admits the express representation (in [19] above) but does not admit that the plaintiff relied upon it for the purposes of advancing the loan. The implied representation is not admitted. 23Counsel for the plaintiff submitted that the Sale Price Representation had no meaning unless it is construed to mean that the April 2008 sale price of $3.5 million should not be taken to be a reliable indicator of the current value of the property because the vendor and purchaser had settled on the sale price, in principle, well before the formal exchange of contracts. To read it in any other way, it was submitted, necessarily undermines the reliability of the "as is" market valuation of the apartment as a single unit at $4.65 million (being $1.16 million above the purchase price), that being the express basis upon which the property was valued. 24The defendant submitted that the Sale Price Representation, so called, simply cannot be implied from the express words in the valuation report as pleaded, there being nothing in the admitted fact that the contract had been negotiated over 18 months prior to exchange to support an implication or representation that the contract price of $3.5 million had been agreed in "late 2006" and, that being the case, it could not support the related representation that the sales price was not useful evidence of the value of the property. The defendant submitted that, for this reason, the second sentence of paragraph 12 (set out in [21] above) should be struck out, since it did not have the quality of a triable issue and, that being the case, the balance of paragraph 12 (being the preceding sentence set out in [19] above) is otiose and should also be struck out. 25Although the defendant submitted that it was unnecessary to review other parts of the valuation report to inform the reader of what is meant because the express statement (since it is said to be self evident and needing no explanation), further support for the submission that the express words cannot support the implied representation contended for is said to derive from paragraph 7.2 of the valuation which states the following: [The property] was purchased by the applicant in April 2008 for the consideration of $3,500,000. Negotiations commenced over a period of 18 months with the vendor only agreeing to the price recently. 26This, it was submitted, addresses what is said to be the implied representation in the executive summary by clarifying what was at best an ambiguity in the statement said to constitute the Sale Price Representation. 27The plaintiff countered with the submission that the statement relied upon by the defendant "buried" at 7.2 of the valuation report as reflecting the real position simply serves to reinforce the misleading nature of the valuation report and does nothing to address the claim based upon the plaintiff's reliance upon the implied representation included in the executive summary as a "major issue". Counsel submitted that on any proper construction of the report the executive summary purports to encapsulate for the reader the major issues addressed in the report. In any event, as counsel submitted, whether the plaintiff reasonably relied on the Sale Price Representation is an issue of fact for the trial. 28Counsel for the plaintiff also submitted that once the importance of the context in which the reference to sales price in the executive summary is recognised, the question of whether the express words pleaded in paragraph 12 are capable of bearing the meaning contended for is itself a question of fact and not susceptible to summary disposition. Importantly, as counsel emphasised, the valuer's retainer required the provision of the recent sales history of the property and, it would seem, something the valuer regarded as a "major issue" that needed to be addressed having identified the discrepancy between the sale price and the valuation. 29Counsel referred me to Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134 where at [108] in the joint judgment of Greenwood, Logan and Yates JJ, the importance of contextual circumstances was emphasised when the inquiry into whether impugned conduct (here the making of a statement) conveys the representation sued upon under s 52 of the Trade Practices Act. 30I find that analysis instructive although not determinative of the issues raised by the notice of motion. I have ultimately resolved to the view that the express words in the valuation (as admitted) are not incapable of supporting the implied representation pleaded in paragraph 12 of the amended statement of claim. I regard that aspect of the pleading as giving rise to a triable issue. 31Consequential orders are also sought in order 2 of the notice of motion to strike out other references to the Sale Price Representation in the amended statement of claim, in the event that paragraph 12 is struck out. Since I do not propose to strike out that paragraph as pleading an unarguable cause of action the consequential orders are also refused. That said, I make the observation that they may not all survive as ultimately material to the plaintiff's case on liability. Nonetheless, I consider they may inform the question of proportionate liability pleaded in the amended defence. As I see it, it is not necessarily the case that the defendant's admission of breach of duty and its admitted contravention of the Trade Practices Act that will be determinative of the course of trial. 32Order 3 of the notice of motion is confined to paragraphs which deal with the terms upon which the defendant was contracted to prepare the valuation. The defendant seeks an order that these paragraphs be struck out since the plaintiff was not the contracting party and no claim for damages is made by reason of any breach of contract. In correspondence the plaintiff has advised that it will not press those particular paragraphs. 33At the hearing of the motion I accepted the assurance of the plaintiff's counsel that following disposition of the primary orders sought by motion (namely orders 1 and 2) the amended statement of claim would be further amended. For those reasons, and in anticipation of a further minor amendment to the amended statement of claim, I do not propose to make the orders in proposed order 3.