Supreme Court New South Wales

• Medium Neutral Citation: AE Consulting Pty Ltd v Online Valuations Pty Ltd [2012] NSWSC 1300
• Hearing dates: 24 October 2012
• Decision date: 24 October 2012
• Jurisdiction: Common Law
• Before: Davies J

Decision

1. Upon the filing of appropriate affidavits on behalf of the Plaintiffs judgment should be entered for $876,198.72 together with the interest.

2. The Defendants are to pay the Plaintiffs' costs of the proceedings.

• Catchwords: PROCEDURE - claim against valuers for negligent valuation - loan made in reliance on valuation - default - resale - sale price less than valuation - whether claim is liquidated claim - what constitutes a liquidated claim; DAMAGES - heads of damage - whether contractual interest is recoverable - whether amounts referable to default of borrower recoverable
• Legislation Cited: Australian Consumer Law; Uniform Civil Procedure Rules
• Cases Cited: Alexander v Ajax Insurance Co Ltd [1956] VLR 436; Hay Property Consultants Pty Ltd v Victorian Securities Corporation Ltd (2010) 29 VR 503; Kenny Pty Limited and Good v MGICA (1992) Ltd (1999) 199 CLR 413; State Bank of NSW Ltd v Yee (1994) 33 NSWLR 618; Swingcastle Limited v Alistair Gibson [1991] 2 AC 223; Trade Credits Limited v Baillieu Knight Frank (1985) 12 NSWLR 670; Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514
• Category: Principal judgment
• Parties: AE Consulting Pty Ltd (First Plaintiff); Liondon Pty Ltd (Second Plaintiff); Moshe Ambarchi (Third Plaintiff); Madine Ambarchi (Fourth Plaintiff); Online Valuations Pty Ltd (First Defendant); Joseph Nicholas Barter (Second Defendant)
• Representation: Counsel: A Segal (Plaintiffs); No Appearance (Defendants); Solicitors: Segal & Associates (Plaintiffs); No appearance (Defendants)
• File Number(s): 2012/40108

Judgment

1 These proceedings commenced on 10 February 2012. The Plaintiffs sued two Defendants. The First Defendant was a valuation company and the Second Defendant was the person who undertook the valuation on behalf of the First Defendant. The valuation was of a property at 416 Piggabeen Road, Currumbin Valley in Queensland. The purpose of the valuation was for an advance to a person called Andrew John Wells. The valuation was provided as at 10 June 2008 and assessed a value of $2,500,000.

2 On the basis of the valuation the Plaintiffs advanced to Mr Wells the sum of $1,500,000. Mr Wells defaulted shortly after the loan was made and ultimately the land was sold for a figure much reduced from that assessed by the valuers. Damages are claimed against the valuers for the way they assessed the value of the land.

3 The proceedings were served on the Defendants on 10 February 2012 and 3 March 2012 respectively. No Notice of Appearance was filed on behalf of the Defendants and no defence was filed by either of them. A document was filed on 21 March 2012 by the Defendants headed Notice of Change of Address for Service. However, that document was filed when no prior Notice of Appearance had been served. If it is to be accepted as an Appearance, the Defendants remained in default by reason of not having filed a defence to the claim. Rule 16.2(1)(a) provides that a Defendant is in default if the Defendant fails to file a defence within the time stipulated by r 14.3(1) of the Rules.

4 The Plaintiffs now seek a default judgment on the claim. The Notice of Motion filed was headed "Notice of Motion including a Notice of Motion for Default Judgment for Liquidated Damages". Despite the heading the first prayer sought "That Judgment for the First, Second and Third Plaintiffs against the First and Second Defendants for damages as referred in the Statement of Claim to be assessed (sic)." The Registrar referred the Motion to me as Duty Judge because of doubt concerning whether the claim was one for liquidated damages.

5 The Plaintiffs claimed "Damages" in the Statement of Claim but then claimed an amount of $1,461,035.47, apparently as the crystallisation of those damages. There was, however, no indication in the pleading of how that sum was ascertained apart from a general statement that after selling the security property the Plaintiffs had incurred a loss of a particular sum to which other amounts were then added.

6 In Alexander v Ajax Insurance Co Ltd [1956] VLR 436 Sholl J concluded that the expression "debt or liquidated demand" covered any claim:

for which the action of debt would lie;

for which an indebitatus (or "common") count would lie;

for which covenant or special assumpsit would lie provided that the claim was for a specific amount not involving in the calculation thereof elements whose selection would depend on the opinion of a jury.

7 Sholl J said (at 442):

It would therefore seem that, in order to be "liquidated", the sum claimed (save no doubt, in the case of a claim for a reasonable amount. Where that could have been sued for under the common counts) must, in the opinion of the Court, have been agreed upon in some binding and conclusive fashion.

8 The present is not such a claim. The Plaintiffs correctly claims damages from the valuer for breach of contract and for breach of s 18 Australian Consumer Law.

9 The mere fact that calculation can be made of the precise amount of damages that are alleged to be payable does not convert what is a claim for damages into a claim for a liquidated sum: Alexander at 450.

10 Accordingly, the application is properly one pursuant to r 16.7 for default judgment for unliquidated damages. I am satisfied by reason of the absence of any Defence that judgment should be given to the Plaintiffs for damages to be assessed.

11 The Plaintiffs seek further to have the damages assessed forthwith. In that regard I was provided with an affidavit of Anthony Etzime, a director of the first Plaintiff, of 23 October 2012. I was also provided with an affidavit of the Plaintiffs' solicitor setting out a basis for the calculation of damages.

12 I raised with Mr Segal, solicitor for the Plaintiffs, the difficulty of claiming as damages against the valuers interest which has been calculated pursuant to the terms of the contractual arrangements with Mr Wells as well as such matters as unpaid council rates and legal costs in relation to proceedings taken against the borrower. It has been held that contractual interest is not recoverable: State Bank of NSW Ltd v Yee (1994) 33 NSWLR 618 at 636; Swingcastle Limited v Alistair Gibson [1991] 2 AC 223; Trade Credits Limited v Baillieu Knight Frank (1985) 12 NSWLR 670 at 673-674.

13 Similarly, on the principle established by Yee the unpaid rates and the legal costs associated with obtaining possession against the defaulting borrower would not have been incurred if the advance had not been made. Alternatively, they cannot be said to be causally related to the negligence of the valuer. They arise from the independent acts of the borrower. Although the case is not on all fours with Hay Property Consultants Pty Ltd v Victorian Securities Corporation Ltd (2010) 29 VR 503 (because in that case criminal damage was perpetrated by a third party) the remarks of Neave JA at [86] to [90] are apposite to support the view that these matters cannot be laid at the feet of the valuers.

14 All of these claims, it seems to me, are not damages properly recoverable against the valuers in the circumstances.

15 What does appear to me to be appropriate as heads of damage against the valuer are the difference between the amount realised on the sale of the property and the amount of the mortgage advanced, together with the costs associated with the sale of the property. It seems to me that the valuer cannot be responsible in addition for the default of the borrower.

16 In addition, the cause of action which the Plaintiffs have against the valuer is likely not to have accrued to them until about the time of the sale of the property after possession had been obtained. I refer in that regard to what was said in Wardley Australia Limited v The State of Western Australia(1992) 175 CLR 514 at 533 and by Gaudron J and Gummow J in Kenny Pty Limited and Good v MGICA (1992) Ltd (1999) 199 CLR 413 at [13]-[16] and [82]-[89]. The right of the Plaintiffs is the right to recoupment of moneys under the mortgage and it is only when recoupment becomes impossible that the cause of action accrues.

17 On that basis it is only when there has been a resale of the property so that the amount of the loss is crystallised that the cause of action has accrued.

18 The loan advance and the expenses on re-sale total $1,530,847.10. I am informed the property was resold for $654,648.38 on 8 March 2011. On that basis the loss established by the Plaintiffs is the amount of $876,198.72.

19 The Plaintiffs should be entitled to interest at pre-judgment rates from 8 March 2011. The material has not been made available to me with those calculations but upon the filing of appropriate affidavits on behalf of the Plaintiffs judgment should be entered for $876,198.72 together with the interest. The Defendants are to pay the Plaintiffs' costs of the proceedings.

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Decision last updated: 29 October 2012