Astonland P/L v HTW Valuers (Central Queensland) P/L [2002] QCA 302

SUPREME COURT OF QUEENSLAND CITATION: Astonland P/L v HTW Valuers (Central Qld) P/L [2002] QCA 302 PARTIES: ASTONLAND PTY LTD ACN 078 204 163 (plaintiff/respondent) v HTW VALUERS (CENTRAL QLD) PTY LTD ACN 010 463 073 (defendant/appellant) FILE NO/S: Appeal No 9537 of 2001 SC No 400 of 2000 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Rockhampton DELIVERED ON: 20 August 2002 DELIVERED AT: Brisbane HEARING DATE: 8 May 2002 JUDGES: McMurdo P, McPherson JA, Mullins J Separate reasons for judgment of each member of the Court, each concurring as to the orders made. ORDERS: 1. Appeal dismissed. 2. The appellant pay the respondent’s costs of the appeal to be assessed. CATCHWORDS: DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT – GENERAL PRINCIPLES – respondent engaged appellant for advice on maintainability of rental levels from shopping centre – appellant negligently failed to qualify opinion by cautioning about the potential adverse affect of new development under construction – respondent purchased shopping centre – rentals at and value of shopping centre subsequently affected by new development – assessment of capital loss – difference between purchase price and value of the shopping centre when effect of new development became apparent DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR TORT – MEASURE OF DAMAGES – IN GENERAL – respondent engaged appellant for advice on maintainability of rental levels from shopping -- 1 of 8 -- 2 centre – appellant negligently failed to qualify opinion by cautioning about the potential adverse affect of new development under construction – respondent purchased shopping centre – rentals at and value of shopping centre subsequently affected by new development – assessment of capital loss – difference between purchase price and value of the shopping centre when effect of new development became apparent TRADE AND COMMERCE – TRADE PRACTICES AND RELATED MATTERS – ENFORCEMENT AND REMEDIES – PENALTIES – GENERAL PRINCIPLES OF ASSESSMENT – FALSE REPRESENTATIONS – respondent engaged appellant for advice on maintainability of rental levels from shopping centre – appellant negligently failed to qualify opinion by cautioning about the potential adverse affect of new development under construction – respondent purchased shopping centre – rentals at and value of shopping centre subsequently affected by new development – assessment of capital loss – difference between purchase price and value of the shopping centre when effect of new development became apparent APPEAL AND NEW TRIAL – GENERAL PRINCIPLES – INTERFERENCE WITH JUDGE’S FINDINGS OF FACT – FUNCTIONS OF APPELLATE COURT – IN GENERAL – evidence to support finding of trial judge as to value of shopping centre at date of assessment of loss Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, followed Gould v Vaggelas (1985) 157 CLR 215, followed Henville v Walker (2001) 75 ALJR 1410, followed Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413, applied COUNSEL: JC Bell QC, with JD McKenna for the respondent PA Keane QC, with LF Kelly for the appellant SOLICITORS: Russell Hanley & Johnson for the respondent Thynne & Macartney for the appellant [1] McMURDO P: I agree with the reasons for judgment of Mullins J. [2] I only wish to add the following brief observations as to the second ground of appeal. [3] Valuer, Mr Dodds explained in evidence that the property's falling value from about $375,000 in July 1997 to $130,000 in March 2000 was because of the falling income from the property, 1 caused largely by the impact from the Beach Road shops which were opened in mid-1998. His Honour effectively found that by about early 1 Transcript, 222. -- 2 of 8 -- 3 1999, the full impact on the valuation from the construction of the Beach Road shops first became known; this was also when leases over the property expired and there were no enquiries as to vacant spaces.2 Mr Dodds' contemporaneous valuation report in March 2000 took into account the full impact from the construction of the Beach Road shops.3 He continued to value the property at $130,000 in March 2001.4 His Honour was entitled to draw the inference from this evidence that the March 2000 valuation of the property at $130,000, which remained its valuation in March 2001, was also its valuation in about early 1999, the date when the full effect on that valuation of the construction of the Beach Road shops first became known. [4] The appeal should be dismissed with costs to be assessed. [5] McPHERSON JA: I agree with the reasons of Mullins J for dismissing the appeal with costs. [6] MULLINS J: HTW Valuers (Central Qld) Pty Ltd (“the appellant”) was found liable to Astonland Pty Ltd (“the respondent”) for damages in the sum of $406,194.60 for negligence, breach of contract and breach of s 52 of the Trade Practices Act 1974 (Cth). It is only the assessment of the damages which is the subject of the appeal. Facts [7] On 28 April 1997 the respondent entered into a contract to purchase a small shopping centre known as “Central Street Plaza” in Central Street, Sarina (“the property”) for the sum of $485,000. The contract was completed in July 1997. [8] The respondent had engaged valuer Mr Deacon of the appellant to give advice about rental levels for retail shops in Sarina, the appropriateness of the rentals for the property and demand for retail tenancies in Sarina which was required in connection with the respondent’s proposed purchase of the property. The applicant wrote a letter dated 21 April 1997 to the respondent which revealed the extent of the rental evidence for commercial premises in Sarina that had been ascertained by Mr Deacon. The letter referred to a proposed new development at Beach Road in the following terms: “Within the town at present there are only limited vacancies. Ten (10) specialty shops to be constructed in conjunction with a 1500 square metre new supermarket on Beach Road have attracted reasonably strong interest. Two lease commitments at rents of $220 per square metre have been signed and names have been put on the other shops. Only one of these prospective tenants are currently in business in rental premises in Sarina. The eight (8) interested tenants are awaiting finalisation of the supermarket lease before being prepared to commit to the centre.” The letter concluded: “While the available information is only limited we believe it suggests that the current rental levels are maintainable, and some are 2 Reasons for Judgement, para [49]. 3 Transcript 223. 4 Ex 8. -- 3 of 8 -- 4 at the lower end of the market range. However it may be difficult to increase rental levels to any significant degree without some titivation of the building.” [9] The learned trial judge found that the appellant’s advice in the letter of 21 April 1997 was given negligently in that it failed to qualify the opinion about the maintainability of rentals for the property by cautioning about the potential adverse effect of the Beach Road shops. [10] It was found that the respondent relied upon the current rentals for the property being maintainable to conclude that the property would be self-funding and therefore proceeded with the purchase of the property. The learned trial judge accepted that the appellant would not have proceeded with the purchase, if there had been any caution in the appellant’s letter of advice as to a possible negative outcome for the property due to the Beach Road shops. [11] The Beach Road shopping centre was completed and occupied in mid 1998 and thereafter the respondent’s centre failed rapidly. At the date of contract the net rentals from the property were approximately $60,000 per annum. By March 2000 the net rentals had reduced to $15,069 per annum. The learned trial judge concluded that this rapid decline was attributable to the opening of the new shops at Beach Road, as that centre moved the shopping focus in Sarina away from Central Street. [12] The learned trial judge calculated the loss from the date the Beach Road shops had an effect on the earnings or value of the property and set out his reasons for so doing at para [48] of the reasons for judgment: “In a valuation case where property would not have been acquired without the intervention of the negligence the conventional measure of damages is to compare the amount paid for the property with its true value at the time. Consequential losses need to be considered separately. This case is different from such a case. In the first place it is not in fact a true valuation case since Mr Deacon did not relevantly value the property. Rather he gave a predictive opinion from which Mrs Foster formed her own opinion as to value. The negligence or breach of contract or misleading conduct was in failing to flag the possible negative impact of the Beach Road shopping centre. In such a case no loss is suffered until it is reasonably ascertainable that the purchaser is in fact worse off as a consequence of the negligence or other breach. The cause of action does not arise until that time. In this case it could not reasonably be ascertained what effect the Beach Road shops would have until they were constructed and opened. In this case the primary assessment for damages purposes is the difference between the amount paid for the property and its value once the anticipated market factors had operated upon it. In this case I am entitled to have regard to what in fact happened to the property up to the time a reasonable person in the defendant’s position would have sold it.” (footnote omitted) [13] In terms of determining the value of the property at the time the respondent’s business went into decline, the learned trial judge accepted the evidence of valuer Mr Dodds who valued the property at $130,000 in 2000 and the evidence that the -- 4 of 8 -- 5 respondent had attempted to sell the property without success since 1999 and stated at para [51] of the reasons for judgment: “In the result I assess the plaintiff’s primary loss before considering consequential losses at the sum of $355,000 being the purchase price less $130,000 which I consider to have been the value of the land more or less since it became apparent that tenants were largely unavailable except at minimal rentals. I consider the effect of any downturn in the Sarina economy would not have been apparent until early 2000 by which time the fate of the Plaza was established.” [14] The damages of $406,194.60 comprised the sum of $396,791.51 and interest of $41,791.51 from 1 July 1999 until judgment. The sum of $396,791.51 was calculated as follows: Purchase price $485,000.00 Less value at date of assessment of loss 130,000.00 $355,000.00 Plus additional purchase costs referable to that difference 11,600.00 Plus a further sum spent on refurbishment 8,590.00 Plus trading losses 21,601.51 Total $396,791.51 Issues [15] The appellant relies on two grounds to support the appeal: (1) the respondent’s damages should have been assessed by comparing the amount paid by the respondent for the property with its true value at the date of purchase in April 1997, or alternatively, at the date of completion of the purchase in July 1997; (2) even if the approach of the learned trial judge to the measure of damages were correct, there was in fact no evidence adduced to support the finding that the value of the property at late 1998 or early 1999 was $130,000. Measure of damages [16] The appellant’s argument proceeded on the basis that the usual measure of damages where the negligent conduct has caused a party to enter into a contract to purchase property is the difference between the contract price and the value of the property at the date of contract and that there was no reason in this case to depart from the usual measure of damages. [17] First, this argument does not take into account the distinction properly made by the learned trial judge between a negligent valuation case and the unusual facts of the subject case. The appellant relies on the statement of general principle made by McHugh J in Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413, 431 in respect of losses which flow from a negligent valuation: “In my view, where a person has agreed to value property and, as a result of the agreement, a person to whom the valuer owes a duty of care has suffered loss, the proper approach is to apply the principles -- 5 of 8 -- 6 of contract law in assessing damages. Furthermore, that is the proper approach whether the plaintiff was a contracting party or merely a person for whose benefit the valuation was made. Speaking generally, the valuer is liable only for such losses as a reasonable person would regard as flowing naturally from the negligent valuation or which are of a kind that should have been within the valuer’s contemplation. In the absence of a contrary undertaking or special circumstances, the aggrieved party cannot recover any part of the difference between the true value of the property and the price recovered at the time of the sale. The aggrieved party’s damages are confined to the difference between the price paid for the property and the price that would have been paid on the basis of a true valuation together with such expenses and other losses that were sufficiently likely to result from the breach of duty to make it proper to hold that they flowed naturally from the breach of duty or that they were within the reasonable contemplation of the parties to the valuation contract or arrangement. In the case of money lent on a valuation, the damages are confined to the difference between what was lent and what would have been lent on the true value of the property together with such expenses and other losses that were sufficiently likely to result from the breach of duty to make it proper to hold that they flowed naturally from the breach of duty or that they were within the reasonable contemplation of the parties to the contract or arrangement. In either case, losses do not include the consequences of subsequent market declines.” [18] That statement of general principle cannot be transposed to the facts of this case, when the negligence is not in respect of a valuation, but in the valuer failing to qualify an opinion about maintainability of rentals for the property which, if it had been given, would have resulted in the respondent not purchasing the property. [19] Second, the usual measure of damages is a prima facie measure of damages only, as ultimately the overriding principle for the assessment of compensatory damages is that the injured party should receive compensation in a sum which will put that party in the same position as the party would have been in, if the contract had been performed or the tort or misleading or deceptive conduct had not been committed: Gould v Vaggelas (1985) 157 CLR 215, 220-221, Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 12, Henville v Walker (2001) 75 ALJR 1410, 1433, 1437. [20] The appellant relies on the evidence of Mr Dodds who valued the property at $400,000 as at April 1997 and at $375,000 as at July 1997 and, in so doing, had taken into account the risk of the Beach Road shops being completed in arriving at each of those values. [21] The task undertaken by Mr Dodds in his valuation is not equivalent to the task undertaken by the court in assessing damages. According to his evidence, what Mr Dodds did in arriving at those respective values for April and July 1997 was factor into account the impact on the market at the relevant time for the risk that the Beach Road shops would be completed. This was consistent with the learned trial judge’s finding that is not challenged on the appeal that it could not be reasonably -- 6 of 8 -- 7 ascertained what effect the Beach Road shops would have until they were constructed and opened. [22] If the respondent had received the appropriate qualification to the opinion given by the appellant, the respondent would not have purchased the property at all. It was not until the Beach Road shops had been completed and opened that the risk to which the respondent should have been alerted was realised. That risk became an actuality. That actuality had a dramatic effect on the net rentals generated from the property and thus reduced the value of the property, in contrast to the effect on value of merely taking into account the risk of the nature that was contemplated by Mr Dodds when undertaking the valuations as at April and July 1997. [23] The usual measure of damages, contended for the appellant, calculated at the date of contract or, alternatively at the date of completion, could not result in full compensation for the respondent’s capital loss, as that compensation could only be calculated when the risk that the Beach Road shops would be completed and have an adverse impact on the value of the property was realised, as a result of the occurrence of those events. [24] The appellant argued that the measure of damages adopted by the learned trial judge was equivalent to holding the appellant liable for damages for breach of warranty of the maintainability of the rents of the property. It was common ground that there was no such warranty given by Mr Deacon. It does not follow from the fact that the measure of damages adopted by the learned trial judge may have resulted in the same calculation of damages, if the offending conduct had amounted to breach of such a warranty, that there is an error in the measure adopted by the learned trial judge. The issue is whether the capital loss assessed by the learned trial judge was that which was required to put the respondent in the position it would have been in, had it not purchased the property. [25] On the particular facts of this case, there was no error in the measure of damages adopted by the learned trial judge to assess the capital loss suffered by the respondent, as a result of purchasing the property in reliance on the appellant’s negligence. [26] The first ground of appeal must fail. Value of property at date of assessment of capital loss [27] Because the learned trial judge used the valuation of the property performed by Mr Dodds as at March 2000 of $130,000 to calculate the respondent’s capital loss, it is argued by the appellant that that valuation could not be relied on as the value of the property at the date when the learned trial judge was assessing the capital loss. [28] This ground of appeal overlooks the express finding made by the learned trial judge at para [49] of the reasons for judgment that the value put on the property by Mr Dodds in 2000 of $130,000 “was probably close to its realistic value” when the respondent was attempting to sell the property unsuccessfully since 1999. The learned trial judge therefore treated the March 2000 valuation of Mr Dodds, as being effective from the time that the property was adversely affected by the Beach Road shops. -- 7 of 8 -- 8 [29] This ground of appeal was premised on the basis that the learned trial judge had made a finding that damages for the capital loss had to be assessed at late 1998 or early 1999. What the learned trial judge identified in para [49] of the reasons for judgment was the starting point for determining when the property was adversely affected by the competition from the Beach Road shops: “The new shops opened in mid 1998. I should therefor (sic) start by looking at a value for the premises at a time after that, say, for example the end of 1998 or early 1999. Exhibit 11 shows that gross rentals held up reasonably well to about March 1999 and then collapsed. This would correspond with the expiration of leases for shops previously vacated but for which the term of the lease had not expired. Since there was no inquiry for the vacant space it would be reasonable in assessing value to discount the maintainable rent to substantially exclude the rent for those premises.” [30] It is clear from para [51] of the reasons for judgment that the date of assessment of the capital loss was when it became apparent that tenants were largely unavailable except at minimal rentals which was identified in para [49] of the reasons of judgment, as being from March 1999. [31] There is no basis to support a challenge to the finding of the learned trial judge that the value of $130,000 for the property was its realistic value from March 1999. [32] The second ground of appeal must also fail. [33] It is unnecessary to consider the notice of contention filed by the respondent. Orders [34] It follows that the orders which should be made are: 1. Appeal dismissed. 2. The appellant pay the respondent’s costs of the appeal to be assessed. -- 8 of 8 --