Ta Ho Ma Pty Ltd v Allen [1999] NSWCA 202 | Case summary

(d) in the judgment of McHugh J, that a duty of care will normally require an intention to induce the recipient of the information or advice, or a class to which the recipient belongs, to act or refrain from acting on it at 275 . 20 Involved in these criteria is that the class of persons to whom a duty of care is owed will normally be confined to those persons whose reliance on the information or advice is reasonable. The reasonableness will be tested according to the circumstances as they become known. 21 The likelihood of which Brennan CJ spoke reflects his Honour's citations from earlier cases Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) AC 465 at 503; Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 112 CLR 556 at 571; San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340 at 357, 372; Caparo Industries Plc v Dickman (1990) 2 AC 605 at 620-21, 628-9, 661, including from his own judgment in San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340 at 372 in which he had stated as one of the conditions for a duty of care that it "would be reasonable for the representee to accept, and act on [the] information or advice", and connotes reasonable conduct by the plaintiff. 22 Reasonable reliance is express in what was said by Dawson J, and his Honour also cited the passage from the judgment of Brennan J (as he then was) in San Sebastian Pty Ltd v The Minister with the condition of reasonable acceptance and action on the information or advice. Reasonable reliance is also express in what was said by Toohey and Gaudron JJ, and followed preference for reliance expressed in terms of an expectation, reasonable in the circumstances, that due care will be exercised in the provision of the information or advice at 264, taken from the judgment of Mason J in Kondis v State Transport Authority (1984) 154 CLR 672 at 687, and for assumption of responsibility as explained by Barwick CJ in Mutual Life & Citizens' Assurance Co Ltd v Evatt: that explanation included that it was reasonable for the recipient of the information or advice to accept and act upon it at 264: see footnote 4. 23 The intention of which McHugh J spoke would seldom be an intention to induce unreasonable action or inaction, and his Honour regarded San Sebastian Pty Ltd v The Minister as the leading case in the area at 274 and included in his citations from that case the recognition in the joint judgment of Gibbs CJ, Mason, Wilson and Dawson JJ that the defendant's appreciation of the reasonableness of reliance will be relevant at 273; see San Sebastian Pty Ltd v The Minister at 358 and the passage from the judgment of Brennan J with the condition of reasonable acceptance and action on the information or advice at 274-5. 24 So where a valuer puts out a negligent valuation the class of persons to whom the valuer owes a duty of care will normally be confined, apart from any other considerations, to those persons whom the valuer knows or ought to know will reasonably rely on the valuation. If the reliance of the particular financier is unreasonable, it will normally follow that the criteria for a duty of care owed to the financier are not satisfied. If the valuer knows or intends that the plaintiff as a particular person will rely on the valuation, even unreasonably, different considerations of course arise. 25 I would prefer not to ascribe the part played by reasonableness of reliance in determining the duty of care in a case such as the present to a lurking fear of opening the floodgates. In this area there is often reference to the cautionary admonition of Cardozo CJ in Ultramares Corporation v Touche (1931) 255 NY 170 at 179 against "liability in an indeterminate amount for an indeterminate time to an indeterminate class". Deeper analysis of policy factors can be found in the cases, especially in the judgments of McHugh and Gummow JJ in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords at 281-9 per McHugh J, 302-4 per Gummow J. If it be asked whether what McHugh J calls "the demands of corrective justice" Esanda Finance Corporation Ltd v Peat Marwick Hungerfords at 289 require the imposition of a duty of care in favour of a financier who unreasonably relies on a valuation, the balance of policy factors is in the negative. 26 The imposition of a duty of care could spur valuers to take greater care, although it might be thought that the prospect of liability to the person(s) to whom the valuation is addressed and perhaps other persons reasonably relying on the valuation would impress upon the most obtuse valuer the need to take care. But financiers and others who act on valuations are generally persons of business, able to look after their own interests, and there is no reason to excuse them from the consequences of their unreasonable conduct by letting them recover from the negligent valuer. There is no reason to impose on the public, via the charges of valuers, financiers and possibly others and the cost of the justice system, the expense of additional insurance, litigation, and unproductive time involved in shifting losses from one unreasonable actor to another. 27 Whether or not on this kind of analysis of policy factors Toohey and Gaudron JJ refer simply to commonsense and ordinary principles in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords at 265, it follows from the principles established by authority that a valuer may owe a duty of care to a financier who immediately lends money in reliance on the valuation, but may not owe a duty of care to another financier - or even the same financier - who lends money in reliance on the valuation at a later time As in R & G Mortgage Pty Ltd v Ronald A Newton & Associates Pty Ltd, McDonald J, 4 July 1997, unreported; see also Lord Griffiths' exclusion of liability to subsequent purchases in Smith v Bush (1990) 1 AC 831 at 864-5, presumably regarding subsequent purchasers as remote in time or other circumstances so as to be outside the class of identifiable persons who will act on the valuation. It will depend, of course, on all the circumstances. The financier relies on the valuer's opinion of value as at the date of the valuation (or the date as at which the valuation is made). In particular circumstances that reliance may be reasonable even at the later time: for example, if what matters for the transaction is that the property had a particular value at the earlier time. In other circumstances the transitory nature of a valuation will mean that the reliance is unreasonable at the later time: for example, if what matters for the transaction is that the property has a particular value at the later time, and the passage of time and possible changes in market values or the value of the property in question have or may have blighted or removed the authority of the valuation. 28 In the present case, the determinative consideration in the duty of care owed by the respondent to the appellant, as a member of a class of potential financiers, is expectation of reliance, including the reasonableness of the appellant's reliance on the valuation. 29 What was reasonable in the circumstances of this case will be informed by evidence of the practices of valuers and financiers. 30 The evidence of the practice of valuers was scanty. Mr Allen gave no direct evidence concerning the life of a valuation. Indirectly, that he as a valuer recognised limitation on the life of a valuation came first from the condition in his valuation that it was valid only during the economic conditions prevailing at the date at which the appraisal applied, and secondly, from his evidence of the requirements of banks and solicitors to which I shortly refer. As explained by Sheppard AJA, there was also no direct evidence from Ms Blamey, called for the appellant, but she did accept that for comparable sales when making a valuation a time-frame was involved, described by her as "certainly not years and certainly not months", and that in the valuation of a property at different points of time a short period of time could make a difference. Mr Quinlan, called for the respondent, gave evidence of the requirements of banks, and explained the reasons for their three months limit - "Well there could be a number of things, there could be a fall in the market within the area. There could be a catastrophe thats effected [sic] the house, the construction of the house. All the repairs may not have been carried out and the property may not have been in the same condition as it was when first valued, when they first considered the loan." 31 The evidence of the practice of financiers was, so far as it went, all one way. Mr Allen said that the major banks would only accept a valuation less than three months old - "… otherwise they ask you to update them and normally you'll find that most solicitors will go up to six months but they'll normally ring you and just make sure that that's okay. After six months then you virtually have to update the valuation. Certainly all the solicitors that I have worked for have done that." 32 Mr Quinlan said that the Commonwealth Bank and the Commonwealth Development Bank "wouldn't accept a valuation without checking it after three months and they would either send one of their own valuers or they would get a private valuer to carry out another valuation". 33 This evidence does not necessarily close off a finding of reasonable reliance on a valuation more than six months old cf Rogers v Whitaker (1992) 175 CLR 479 at 487, but I see no reason to impose on the respondent a more generous standard of reasonableness than that informed by the evidence. The evidence justified the conclusion that the appellant did not reasonably rely on the valuation and was outside the class of persons to whom the respondent owed a duty to take care in making the statement in the valuation - a conclusion expressed by Raphael DCJ in the terms that it was "not objectively reasonably foreseeable that a lender will, without any reference whatsoever to the original valuer, or without making some confirmatory check of its own … rely upon a valuation of that age". An age of about nine months may be close to the line, but even when market values generally are not volatile the value of a property can be suddenly, and markedly, affected by matters peculiar to its neighbourhood or to the property itself. Good reason can be seen for prudence in the currency to be ascribed to a valuation, and for confirmatory reference to the valuer or a revaluation after a period of six months or so. 34 The particular circumstances in which the appellant made the first advance do not save it from the consequential conclusion that the respondent did not owe it a duty of care in relation to that advance. Mr Johnson relevantly acted through Mr McCarthy. Mr McCarthy said that he was aware from his extensive dealings in property that the property market had improved substantially since the date of the valuation, and that he assumed that the value of the property would not have decreased. It was correct that there had not been an adverse change in market values generally since the valuation was made. They may have improved very slightly, although the expert evidence did not support Mr McCarthy's reference to substantial improvement. But even if Mr McCarthy combined the valuation of the property as at August 1992 with his assumption that the value of the property would not have decreased, in the light of the evidence to which I have referred his reliance on the valuation was still not reasonable. He acted on his view of the property market generally, but the reasons for a valuation's limited life include that matters peculiar to the neighbourhood, or to the particular property, can affect its value. The evidence of the practice of banks and solicitors, for example, was not qualified in the event that there was a stable or improving general property market. 35 In my opinion, therefore, Raphael DCJ correctly concluded that it had not been established that the respondent owed to the appellant a duty of care in relation to the first advance. I agree that the appeal should be dismissed with costs. 36 SHEPPARD AJA: This is an appeal from a judgment of the District Court (Raphael ADCJ) in which his Honour dismissed an action brought by the appellant to recover damages from the respondent. The action arose out of the alleged reliance by the appellant upon a valuation prepared by the respondent for a Mr Beckers whose company, Palpay Pty Ltd, was the owner of a residential property at Dural. The valuation stated that it was made for mortgage purposes. It followed that it was likely to be shown to prospective mortgagees who might rely on it in deciding whether to advance moneys upon the security of the property. It was common ground that the valuation was done carelessly and was wrong. This was because the respondent had relied on supposedly comparable sales which proved not to be comparable with the property in question. There was no submission on the appeal to suggest that his Honour's findings in this regard were erroneous. The issue between the parties is, however, whether it was in all the circumstances reasonable for the appellant to rely on the valuation which was some nine months old at the time it made the advance. 37 His Honour held that there was no duty of care owed by the respondent to the appellant in respect of the valuation at the time the appellant relied upon it nine months after it was made. In reaching his conclusion, his Honour considered that the reliance by the appellant upon the valuation was not, in the circumstances of the case, something which was reasonably foreseeable by the respondent. He said that the matter could be put also as one of proximity, ie whether there was a sufficiently proximate relationship between the parties to warrant the conclusion that a duty of care was owed. 38 Originally the appellant relied upon causes of action based upon breaches of provisions of the Trade Practices Act 1974 (Cwth). His Honour held, however, that the claim being against an individual, as distinct from a corporation, no cause of action was available under the Trade Practices Act. The case was put alternatively in negligence and that is how the matter was dealt with by his Honour. There was no attempt by the appellant to rely on the causes of action under the Trade Practices Act on the hearing of the appeal. 39 Before coming to his Honour's account of the facts and his findings, I should refer briefly to the valuation. It shows that the property in question was a residential property at 78 Jenner Road, Dural. The object of the "appraisal" was stated to have been "Mortgage Loan". The property was said to consist of a large two storey home which, at the date of the valuation, 24 November 1992, was approximately three years old. There followed a list of sales of properties said to be comparable. No comment was made on these and there was no discussion in the valuation report of why they were said to be comparable. There then followed the respondent's conclusion which was described as "Certificate of Value". Effectively, the certificate said that the respondent assessed the value of the property at $565,000 as at 20 November 1992. 40 Appended to the valuation was a list of the respondent's qualifications and appointments and, in addition, a document headed, "Limiting Conditions". The valuation was said to be subject to a number of conditions. Only two of these are at all relevant. The first provided that, where the appraisal was shown in the valuation to be for mortgage purposes - that is the case here - the estimate of value was for first mortgage on the current usual terms only unless otherwise stated. The second condition provided that the value stated in the appraisal was valid only during the economic conditions prevailing "at the date at which this appraisal applies". 41 In the course of his judgment, his Honour said that the Court had not been told "much about Ta Ho Ma" (the appellant). He said that the company was run out of the offices of an accountant, Mr Johnson, who was also a director and secretary of the company. His Honour said that it seemed to be "the captive lender of a solicitor, Mr Bryan McCarthy". Potential borrowers would apply to Mr McCarthy who would refer their application to Mr Johnson. Mr Johnson gave evidence that all his business came from Mr McCarthy. His Honour continued: "He said apropos of the Company's lending policy, words to the following effect: 'If Mr McCarthy says it's ok and we have the money we approve it most of the time.'" 42 His Honour said that Mr Johnson did not, in respect of the subject loan, see either the applicant for the loan (ie the appellant) or the valuation upon which the appellant was said to have relied. He added that Mr McCarthy gave evidence that he received his instructions from Mr Johnson who he believed made decisions on behalf of the elderly shareholders of the company. 43 His Honour said that the property was owned by Palpay Pty Limited. He said that company was the creature of a Mr Beckers who, according to the evidence of Mr McCarthy, was a finance broker. Both Mr McCarthy and Mr Allen knew Mr Beckers although, I gather, not well. His Honour then said, "Mr Beckers is a shadowy, if important, character in this drama from whom the Court did not hear". 44 The property was auctioned in about October 1992 but did not sell. No bids were received. The reserve price was $485,000. The evidence of another valuer, Ms Blamey, was that the public reaction to the property was that it was over priced and that a reasonable price for it would have been in the region of $400,000 at the time. In late November 1992 Mr Beckers decided to try to raise money on the security of the property to repay loans which he had taken out with Barclays Bank. He approached the respondent and asked him whether he would prepare a valuation. The valuation was carried out. It was addressed to Mr Beckers from whom Mr Allen received his instructions. 45 His Honour then said: "The very strong impression that I obtained from the evidence of Mr Allen was that he was aware that this valuation, although addressed to Mr Beckers, would be used by Mr Beckers to obtain a mortgage and would therefore be relied upon by any potential provider of such a mortgage. Indeed, he gave evidence that he received a telephone call some weeks after providing the valuation from the Commonwealth Bank and he was happy to give them information about the property and his valuation. He then heard no more about it." 46 In late August 1993, some nine months after the valuation had been made, Mr McCarthy was approached by Mr Beckers who requested a loan of $375,000 on the security of the property. Mr McCarthy said that Mr Beckers asked him whether money was available. Mr McCarthy said that it might be depending on the type of property and the amount of the valuation. Mr Beckers told Mr McCarthy of the valuation made by Mr Allen of $565,000. Later, Mr McCarthy told Mr Beckers that he could arrange the loan and asked for the particulars of title and for the valuation. Mr McCarthy gave evidence that the appellant had a strict lending policy of providing money only up to sixty-six per cent of the valuation. Mr Johnson, who gave the instructions on behalf of the company for the loan to be made, said that he had had regard to the valuation although he had not read it. He knew the valuation was dated in 1992 but received no copy of it. He believed that Mr McCarthy must have told him about it in his conversations with him. 47 The loan was drawn down. In or about December 1994 Mr Beckers approached Mr McCarthy again. He requested that Mr McCarthy arrange for the loan to be increased by a further sum of $50,000. His Honour said that the additional $50,000 took the "ratio of the loan" to the valuation above the normal limit permitted by the appellant. In order to support the additional loan, a document described as an appraisal and addressed, "To Whom It May Concern" was provided to Mr McCarthy by a firm of property consultants in Balmain, MJM Property Consultants. His Honour said that he was not clear whether Mr McCarthy had commissioned this document or whether Mr Beckers had, but his Honour said that he believed that Mr McCarthy's evidence was to the effect that Mr Beckers had Mr Mannix of MJM Property Consultants send the appraisal directly to Mr McCarthy. In his evidence Mr McCarthy said that he relied on that document and so had Mr Johnson although Mr Johnson did not see it. Mr Johnson said that he had been told about it by Mr McCarthy but said that he did not rely solely upon it. He said he needed some comfort to have approved the increase and then stated that as the total loan was still within seventy-five per cent of the value of the property pursuant to the valuation, it was still within the guidelines. As his Honour remarked, this was patently incorrect as the instructions dated 14 December 1994 and signed by Mr Johnson indicated that "the estimated value of the security at the date of the loan would be at least $600,000". The instructions also said, "the value will be evidenced by MJM". 48 On or about 1 December 1995 Palpay Pty Limited defaulted under its mortgage. In May 1996 the company was wound up and on 19 November 1996 the property was sold for $387,500 by an agent acting on behalf of the liquidator of Palpay Pty Limited. 49 His Honour referred to the pleadings and dealt with the causes of action based on the Trade Practices Act. I do not refer to the detail of these. 50 His Honour then turned to the case in negligence. He said that the gravamen of the complaint against the respondent was that he overvalued the property and could not support that overvaluation by the use either of the comparable method of valuation or the summation method of valuation. His Honour said that in the way the case developed, it was clear that an allegation was being made that the respondent misrepresented that certain properties he claimed were comparable were truly comparable and that his valuation had been negligently arrived at because it was not within the range of valuation that any competent valuer could possibly have reached at that time. 51 His Honour went on to discuss the evidence in more detail and reached conclusions about the reliability of the various witnesses. He said that he found Mr McCarthy an honest and straightforward witness whose evidence he had no hesitation in accepting. He was not quite as confident of the evidence of Mr Johnson. That was particularly the case in relation to questions put to him concerning the second loan of $50,000. In relation to that matter his Honour said: "When he was asked about whether at this time he still relied on the original valuation he stated that he did do so but he also wanted some additional comfort which was obtained from the MJM letter. He then went on to give responses concerning the total of the amount lent to the valuation and stated that the increased amount was still within 75% and therefore within guidelines. I felt that Mr Johnson was aware that a question of this type would be asked of him and was determined to give an answer which indicated his reliance upon the original valuation so far as was consistent with his obligation to tell the truth. I find the reference to 75% difficult to understand in the light of the evidence given previously about a limit of 66% and the plain written instructions." 52 His Honour said that he was impressed by the evidence of Ms Blamey. His Honour made no adverse comment about the respondent's evidence. He said that he was no longer carrying on practice as a valuer and that he lived in Indonesia. However, he said that, where the evidence of Ms Blamey and the respondent differed, he preferred that of Ms Blamey. Finally, his Honour referred to the evidence of Mr Quinlan who was an expert called by the respondent. It is sufficient to say that again his Honour preferred the evidence of Ms Blamey to that of Mr Quinlan. 53 His Honour said that he would deal with the second advance first of all. He said that he was satisfied by the evidence of Mr McCarthy and Mr Johnson that neither relied at the date of the second advance on the report given by the respondent. He commented that, if they had relied upon it, the total amount of the advance would have exceeded the sixty-six per cent margin which the appellant had "laid down". 54 His Honour's conclusion in relation to the second advance is challenged on this appeal. I have considered the various submissions which have been made in relation to this matter but it seems to me that the matter was, as his Honour thought it was, a pure question of fact. He found that the respondent's valuation was not relied upon for the second advance. It was clearly open to him to make that finding. In the circumstances, the appeal, so far as it is based upon reliance on the valuation for the second advance, must fail. The questions which arise in relation to the first advance are more difficult. 55 His Honour referred to a submission made on behalf of the respondent to the effect that Mr Johnson had not seen the valuation and could therefore not have relied upon it even for the first advance. He rejected that submission because he found that Mr McCarthy as solicitor for the lender was its effective agent to receive, consider and make recommendations upon mortgage propositions to be put to it. He was the appellant's agent, not the agent of the borrower. If the appellant accepted his recommendations and acted on them, as it did in the present case, then it was bound by the consequences so far as third parties were concerned. His Honour said that the respondent would have been as liable for the delivery of negligent advice to the agent as he would have been if the advice had been given to the principal. 56 After referring to a number of authorities, his Honour continued: "Although the valuation prepared by Mr Allen was prepared for the mortgagor and not the mortgagee I have already found that Mr Allen was aware that it was likely to be used and relied upon by a potential mortgagee. The necessary degree of proximity has been established." 57 His Honour referred at length to the speech of Lord Griffiths in Smith v Bush [1990] 1 AC 831. I shall refer to this case in more detail a little later. His Honour said that he was obliged to consider as a threshold question whether or not any duty of care owed by the respondent to Palpay Pty Limited extended to "any mortgagees". He said that he believed that the duty extended to a mortgagee such as the Commonwealth Bank which was considering lending money on the security of the property within a reasonable time after the production of the valuation. He referred to evidence of what would be considered the reasonable "life" of a valuation of this type given by the respondent and Mr Quinlan. His Honour continued: "The maximum period appears to be approximately 3 months although the evidence was limited to their personal experience, which in the case of Mr Quinlan was only in respect to the Commonwealth Bank. Mr Allen conceded that where money was being obtained through solicitors valuations of up to 6 months were sometimes used but only after a telephone enquiry to ascertain the current position. No authority has been provided to me in which there was any judicial pronouncement on the "life" of a valuation but I take comfort from what Lord Griffiths said in Smith ( supra ) that the valuation can only be relied on only once. I interpret his remarks as indicating that valuations do have a limited life span and after that life span has expired it would be unreasonable for a third party to rely upon it. After that time the economic loss to the third party will be no longer be foreseeable. 58 The reasons for this are obvious. A valuation relates to two criteria, the market and the property. The market can swing, sometimes violently, within a very short period of time as this country experienced between 1987 and 1992. The property can also change. It can be allowed to deteriorate slowly or it could be burnt down, the owner could make improvements or delete improvements such as a swimming pool or extra rooms which were there at the time of the valuation. The area in which the property is situated could be blighted by fears of, or the existence of, aircraft noise. That these things or a combination of them are so common is presumably the reason why a prudent lender such as the Commonwealth Bank of Australia which is regularly trumpeted as Australia's largest home lender only allows a valuation a life span of three months. It is not difficult for a lender to contact a valuer after such a period to check whether or not that valuer stands by his or her valuation in the current market. Mr Allen indicated that he was happy to have done so in the case of the inquiry from the Commonwealth Bank. No inquiries were made by Mr McCarthy or Mr Johnson and the document they allege they were relying upon was at least 9 months old. It is not objectively reasonably foreseeable that a lender will, without any reference whatsoever to the original valuer, or without making some confirmatory check of its own (which in my view would generally supersede the reliance on the valuation) rely upon a valuation of that age. In these circumstances even though this lender could have brought itself within a sufficient degree of proximity to have rights against the valuer it cannot do so in this case." 59 His Honour referred at some length to the decision of McDonald J of the Supreme Court of Victoria in R & G Mortgages Pty Ltd v Ronald A Newton & Associates Pty Ltd (Supreme Court of Victoria, 4 July 1997, unreported, but noted in (1997) Butterworths' Unreported Cases 973013). In the course of that discussion, he referred also to the decisions of the High Court in San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340 and Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241. 60 His Honour referred to part of the discussion to be found in McDonald J's judgment in R & G Mortgages Pty Ltd including his statement that it was by application of the principles referred to in Esanda Finance that it must be determined whether, insofar as one King relied on the valuation and report for the purpose of the plaintiff entering into the transactions, there existed at that time a relationship of proximity between the plaintiff and one Newton to give rise to a duty of care owed by the latter to the former. Having referred to this, his Honour in the present case said: "In coming to his determination the learned Judge used the word "proximity" where I have used the words "reasonable foreseeability". There is currently considerable debate as to the use of these terms but I do not think it matters for the purposes of either decision which are used. In R & G Mortgages Pty Ltd evidence was given that since 1996 it had been a recommendation of the Law Institute of Victoria that a loan being made by a solicitor should be supported by a valuation made within 6 months of the commencement of the loan. There was other evidence that the "life" of a valuation which gave the "market value" of a property was between 60 to 90 days." 61 His Honour went on to refer to more of what McDonald J had said in R & G Mortgages Pty Ltd and concluded his reasons by saying: "I rely on this judgment as authority for my finding that there was no duty of care owed by Allen to Ta Ho Ma in respect of the valuation at the time Ta Ho Ma proposed to use it some 9 months after it was written. The facts relating to the changes in the property market described in some detail by his Honour in R & G Mortgages may be different to those which occurred in this case, I do not believe they affect the principle which is discernible from his judgment." 62 His Honour then reached the conclusion that the respondent should succeed. 63 In the course of his submissions, counsel for the appellant referred to the fact that the valuation unquestionably had been prepared negligently, ie in the sense of carelessly, and that the respondent was aware that the valuation was intended to be relied upon by a potential mortgagee so that the necessary degree of proximity existed between the respondent and "a potential class of mortgagee". It was submitted that his Honour was in error in finding that all valuations had a limited life of three months for the purpose of a mortgagee relying on them. Counsel said that the primary Judge was wrong to take into account evidence given in R & G Mortgages that since 1996 it had been a recommendation of the Law Institute of Victoria that a loan being made by a solicitor should be supported by a valuation made within six months of the commencement of the loan. Counsel said that the recommendation should not have been taken into account because it was not in evidence in these proceedings and, in any event, the recommendation was not made until three years after the loan in the present case was made. He also drew attention to the fact that the matter of the life of a valuation was not put to Ms Blamey whose evidence was preferred to the evidence of the other valuers, the respondent himself and Mr Quinlan. 64 Counsel submitted that the shelf life of a valuation was an issue of fact in each case and not a matter for rigid definition. Counsel conceded that the circumstances affecting the validity, really the relevance, of a valuation were obvious. These included changes in the state of the market or changes in the nature of the property. In the present case the evidence was that there had been no material change in the condition of the property. To the knowledge of Mr McCarthy there had been an improvement in the market since the valuation was made. Certainly, the market had not declined. Ms Blamey's evidence confirmed this. It was counsel's submission that there were not in existence between the date of the valuation and the time that each advance was made any factors which would have made the original valuation irrelevant. There was no reason for any three months rule. To adopt such a rule would involve a very artificial approach. In short, counsel submitted that the primary Judge was wrong in saying that there was a fixed rule and in not considering the evidence as to the circumstances about the actual market and state of the property. That evidence was given by Ms Blamey and Mr McCarthy. He distinguished R & G Mortgages because there had been a marked decline in market value during the relevant period in that case. 65 Counsel submitted that it was "objectively foreseeable" that a valuation made nine months earlier than the reliance placed on it could be relied upon where the market had not deteriorated and the property had not deteriorated. He said that a confirmatory check would not necessarily supersede the original valuation as the basis of the lending decision. It did not create a fixed rule of limitation regardless of the actual facts. The facts were not reviewed but would have confirmed that no relevant changes in the market or condition of the property had occurred and, even if a check had been carried out, the evidence would have confirmed that the market had not declined. There was absolutely no basis for suggesting that a confirmatory check would have demonstrated the market value of the property nine months later to have declined by $155,000. 66 Counsel then made submissions about the second advance. I have already expressed my views about this matter. In my opinion, as I have said, that matter depends entirely on factual considerations. The Judge's finding was that there was in fact no reliance. That seems to me to be the end of the matter. 67 Counsel concluded by submitting that the losses sustained were clearly foreseeable in circumstances where the valuation was prepared for mortgage purposes and provided a substantially inflated and erroneous value. 68 Counsel for the respondent said that his Honour had correctly identified the requirements for a duty of care to arise on the part of the respondent to the appellant in relation to the use of the valuation by the appellant some nine months after it was made. Counsel said that the requirements were proximity between the parties, a reasonable foreseeability of economic loss and reasonable reliance on the valuation in the making of loan advances. Counsel referred to San Sebastian v The Minister (supra) at 355 and 357-8, Hawkins v Clayton (1988) 164 CLR 539 at 555-6, 593, 596-7, and Smith v Bush (supra). 69 Counsel conceded that there was here the necessary degree of proximity. He said that this was not an issue on the appeal. His principal submission was that it was not reasonably foreseeable that the appellant would rely on the valuation after its life span expired, namely more than three months after it was made, without reference to its author, or more than six months after it was made if reference had been made to the respondent prior to reliance being placed upon it. Reference was made to the evidence of the respondent and Ms Blamey. 70 Counsel for the respondent then referred to R & G Mortgages. His Honour had relied extensively upon this decision. Counsel emphasised that there was clear evidence accepted by the primary Judge to the effect that the life of a valuation was limited to no more than six months. That was the experience of the valuers and, upon the basis of their evidence, the practice of mortgagees, particularly mortgagees who are institutions. It followed, in counsel's submission, that in those circumstances it was not reasonable for the appellant to rely on the valuation nine months after it was made. The fact that the valuation may have been carried out negligently was not to the point. 71 There was discussion in the argument about the fact that Ms Blamey was not directly asked about her view of the usual life of a valuation. She was called in the appellant's case. No questions had been asked her by counsel for the appellant about this matter. Counsel for the appellant criticised counsel for the respondent for not asking questions but counsel for the respondent submitted that it was a matter for counsel for the appellant. If the matter were not raised in the appellant's case, there was no obligation on the respondent to raise it. I think that the appropriate way of dealing with this contretemps is to conclude that there is no evidence on the point from Ms Blamey. The case has to be dealt with on that basis. Her failure to deal with the matter ought not to be regarded as advantageous or disadvantageous to either of the parties. 72 In essence, the appellant's case may be said to be based on the following matters, namely:

Ta Ho Ma Pty Ltd v Allen

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