FEDERAL COURT OF AUSTRALIA G R Finance Ltd v Barnden Partners Property Pty Ltd (in liq) [2011] FCA 1542 Citation: G R Finance Ltd v Barnden Partners Property Pty Ltd (in liq) [2011] FCA 1542 Parties: G R FINANCE LTD v BARNDEN PARTNERS PROPERTY PTY LTD (IN LIQUIDATION) ACN 007 254 677 and ROBERT GREY CHAFFEY BARNDEN File number: VID 438 of 2011 Judge: MURPHY J Date of judgment: 22 December 2011 Date of hearing: 22 December 2011 Place: Melbourne Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 21 Solicitor for the Applicant: Mr V Stefano, Wilmoth Field Warne Lawyers IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 438 of 2011 BETWEEN: G R FINANCE LTD Applicant AND: BARNDEN PARTNERS PROPERTY PTY LTD (IN LIQUIDATION) ACN 007 254 677 First Respondent ROBERT GREY CHAFFEY BARNDEN Second Respondent JUDGE: MURPHY J DATE OF ORDER: 22 DECEMBER 2011 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: The second respondent pay damages to G R Finance Ltd pursuant to s 82 of the Trade Practices Act 1974 (Cth) and/or s 159 of the Fair Trading Act 1999 (Vic) of $3,087,845.61. 1. The second respondent pay the party/party legal costs of G R Finance Ltd to be taxed in default of agreement. 2. The applicant serve a copy of this order on the second respondent within seven days by mailing it to his address at Block 9, Sultana Avenue, Irymple, Victoria. 3. The second respondent may apply to set aside these orders on the basis that he did not have proper notice of the assessment of damages on 22 December 2011 if he does so within 21 days of this date. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 438 of 2011 BETWEEN: G R FINANCE LTD Applicant AND: BARNDEN PARTNERS PROPERTY PTY LTD (IN LIQUIDATION) ACN 007 254 677 First Respondent ROBERT GREY CHAFFEY BARNDEN Second Respondent JUDGE: MURPHY J J DATE: 22 DECEMBER 2011 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 22 July 2011 judgment was given against the second respondent Robert Grey Chaffey Barnden, with damages to be assessed. Having read the affidavits referred to in these reasons and today heard submissions from the applicant G R Finance Ltd as to the quantum of damages, I deliver the following ex tempore reasons. 2 Robert Barnden has not entered an appearance in the proceeding and he has not appeared at any hearing in the matter. He did not appear to oppose judgment being entered against him on 22 July 2011. He did not appear to oppose this application to quantify damages, or make submissions in that regard. 3 I am satisfied that Mr Barnden has had proper notice of this proceeding and the hearing today. Proof of service of the Application and Statement of Claim on him is found in the affidavit sworn by Peter Woods on 3 June 2011. That Application noted 24 June 2011 at 9.30 am as the date and time at which this matter was to be heard by the Court. Mr Barnden he did not appear. The hearing was then adjourned until 22 July 2011. Proof of advice to him of the adjourned hearing date and notice that judgment may be entered against him is found in the affidavit of Stefanie Ng sworn on 13 July 2011 Mr Barnden again did not appear. Proof that he was given notice of the hearing scheduled for yesterday is found in the affidavit of Rachael McLeod sworn on 7 December 2011 which deposes to the sending of a letter to him setting out the hearing date of 21 December 2011, together with a copy of the affidavit and exhibits supporting the application for quantification of damages. It was addressed to him at the address at Block 9, Sultana Avenue, Irymple, Victoria which he confirmed as correct when served with the Application and Statement of Claim in June 2011. 4 The hearing on 21 December 2011 was adjourned for one day because the applicant failed to provide its materials to the Court. Although I have no indication that Mr Barnden attended Court on 21 December 2011 I cannot be satisfied that he did not. Accordingly, against the slender possibility that he attended the Court yesterday but did not inform the registry or my chambers of this fact, my orders provide 21 days within which he may apply to set them aside. I order the Applicant to serve a copy of this order on Mr Barnden within seven days by sending it to his address at Block 9, Sultana Avenue, Irymple, Victoria. 5 G R Finance claimed that the First Respondent, Barnden Partners Property Pty Ltd and Mr Barnden made representations as to the value of four identified rural properties ("the Properties") in two valuation reports provided to G R Finance on 20 July 2006 and 14 September 2006. The valuation reports were provided for the purposes of G R Finance making a loan to Agri-Vest Holdings Ltd, to be secured by a second mortgage over the Properties. G R Finance claims that the valuation reports significantly over-valued the Properties, and when Agri-Vest defaulted on the loan it suffered a significant loss because it could not recoup its loan from their sale. 6 The Properties are: (a) a property known as "Plum Block" being Certificate of Title Folio Identifier 3/1039695 situated at Brungle Road, Tumut, New South Wales; (b) a property known as "Bombowlee" being Certificate of Title Folio Identifiers 20/801949, 34/801949 and 43/1072717 situated at Wee Jasper Road, Tumut, New South Wales; (c) a property known as "Bellevue Orchard" being Certificate of Title Folio Identifiers 41/750987, 1/779781, Auto-Consol 7084-169 and Auto-Consol 7938-186 situated at Hopewood Road, Goobarralong, New South Wales; and (d) a property known as "Gocup Orchard" being Certificate of Title Folio Identifier B/370115 situated at Gocup Farms Road, Tumut, New South Wales. 7 G R Finance claimed that making the representations in the valuation reports constitutes conduct which is misleading and deceptive or likely to mislead and deceive in breach of s 52 of the Trade Practices Act 1974 (Cth) and or s 9 of the Fair Trading Act 1999 (Vic). It also claims that the Respondents each agreed with G R Finance to provide the valuation reports to it for the purpose of it lending money secured by mortgage over the Properties, and that it was an implied term of the agreement that the Respondents would exercise reasonable skill and care. It contends that wrongly and in breach of this agreement the Respondents each failed to exercise reasonable skill and care as a valuer. These matters are the subject of the judgment entered on 22 July 2011. 8 The Applicant claimed damages pursuant to s 82 of the Trade Practices Act, s 159 of the Fair Trading Act, and at common law, and they are now to be assessed. The application to assess damages is supported by the affidavit of Phillip John Boyle, a director of G R Finance sworn on 1 September 2011 together with the ten exhibits thereto. Exhibit PJB-1 to the affidavit is a Finance Submission dated 24 August 2006 received by G R Finance from Agri-Vest seeking approval for a loan of $1,455,000 secured by second mortgages over the Properties. Agri-Vest already owed $5,250,000 to another finance provider which was secured by first mortgages over the Properties. The Finance Submission included a short valuation report dated 24 July 2006 regarding the Properties, on the letterhead of Barnden Partners Property Pty Ltd and signed by Robert Barnden as a Certified Practising Valuer, containing valuations of the properties as follows: Property Value Bombowlee $3,750,000 Gocup Orchard $1,000,000 Plum Block $625,000 Bellevue Orchard $5,800,000 TOTAL $11,175,000 9 The evidence is that on 11 September 2006 G R Finance conditionally approved a loan of $1,455,000 to Agri-Vest. The conditions included that full valuation reports regarding the Properties were provided to G R Finance. On or about 14 September 2006 G R Finance received detailed valuation reports in relation to the Properties, on the letterhead of Barnden Partners Property Pty Ltd and stated to be prepared by Robert Barnden as a Certified Practising Valuer. The valuation reports were stated to be for the use of the Applicant and Agri-Vest and for no other purpose. The valuation reports are exhibits PJB-4, PJB-5, PJB-6 and PJB-7. 10 Mr Boyle deposes that he reviewed each of the valuation reports and relied upon them as being accurate statements of the value of each of the Properties. He deposes that the loan to Agri-Vest would not have been approved if he had known that the real value of the Properties was substantially lower than as represented in the reports. 11 Agri-Vest failed to repay any of the loan. G R Finance and the other finance provider have been unable to recover substantial monies from it, its directors or from the Properties. 12 For these proceedings G R Finance retained the well-known firm of rural property valuers, Sam Paton & Associates, to provide a valuation of the Properties as at September 2007. Exhibit PJB-9 is a copy of the detailed valuation report prepared by that firm dated November 2010. The valuations provided are as follows: Property Value Bombowlee $550,000 +Surplus Water Entitlements [$90,000] +Water Entitlement Value [$2,300,000] Gocup Orchard $575,000 +Water Entitlement Value [$225,000] Plum Block $410,000 Bellevue Orchard $900,000 +Surplus Water Entitlements [$40,000] +Water Entitlement Value [$250,000] TOTAL INCLUDING WATER ENTITLEMENTS $5,340,000 TOTAL EXCLUDING WATER ENTITLEMENTS $2,435,000 13 By letter dated 18 January 2011, exhibit PJB-10, Sam Paton & Associates further advised G R Finance that in its opinion there was no significant difference between the value of the Properties assessed as at September 2007 or September 2006. 14 The valuation reports dated 20 July 2006 and 14 September 2006 prepared by Robert Barnden and Barnden Partners represent that the Properties had a value of approximately $11.1 million. The Properties in fact had a value at September 2006 of approximately $5.3 million. G R Finance claims the loss of the moneys which it advanced to Agri-Vest in reliance on the valuations provided, plus interest, plus costs. 15 The loss of principal claimed by G R Finance is substantially less than the difference between the value of the Properties as represented by Mr Barnden and their true value. This reinforces my view that the amount of the judgment herein is appropriate, even in the absence of the submissions from Mr Barnden. 16 The calculation of loss and damage suffered by G R Finance until 31 July 2011 is set out at paragraph 18 of the affidavit of Mr Boyle. This calculation of damages of $2.87 million wrongly included legal fees which do not relate to this proceeding and which were not properly itemised. The interest arising was therefore applied to an incorrect total. A further and up-to-date calculation of the loss and damage suffered by G R Finance is set out in the affidavit of Vincent Stefano dated 22 December 2011. It calculates the loss and damage suffered on a loan it describes as Loan 1 up to date as $3,087,845.61. 17 The Court was today informed that G R Finance also claims a further amount of $804,581.60 pursuant to a loan it describes as Loan 2. I have made no order today in relation to Loan 2 as if there is no affidavit which deposes in clear terms to the existence of that loan, its relationship to the circumstances set out in the proceedings hearing, or that it remains unpaid. The Court will not treat the judgment herein as final until 31 January 2012. Until that time should the applicant file a further affidavit in relation to Loan 2 the Court will consider a further order. 18 Taking account of all matters I quantify damages in relation to what has been described to the Court as Loan 1 in the sum of $3,087,845.61. 19 In this matter there is no difference between the damages available at common law and pursuant to s 82 of the Trade Practices Act 1974 (Cth) and s 159 of the Fair Trading Act 1999 (Vic). I order that Mr Barnden pay damages to G R Finance pursuant to s 82 of the Trade Practices Act 1974 (Cth) and s 159 of the Fair Trading Act 1999 (Vic) in the sum indicated. 20 I have ordered that Mr Barnden pay the party/party costs of the applicant to be taxed in default of agreement. The Court was in a position to fix the costs but the applicant failed to provide any breakdown of the same. 21 I order as follows: (a) The second respondent pay damages to G R Finance Ltd pursuant to s 82 of the Trade Practices Act 1974 (Cth) and/or s 159 of the Fair Trading Act 1999 (Vic) of $3,087,845.61. (b) The second respondent pay the party/party legal costs of G R Finance Ltd to be taxed in default of agreement. (c) The applicant serve a copy of this order on the second respondent within seven days by mailing it to his address at Block 9, Sultana Avenue, Irymple, Victoria. (d) The second respondent may apply to set aside these orders on the basis that he did not have proper notice of the assessment of damages on 22 December 2011 if he does so within 21 days of this date. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy. Associate: Dated: 22 December 2011