Kenny & Good Pty Ltd v MGICA (1992) Ltd [1999] HCA 25

High Court of Australia Gaudron, McHugh, Gummow, Kirby and Callinan JJ Kenny & Good Pty Ltd v MGICA (1992) Ltd [1999] HCA 25

ORDER Appeal dismissed with costs

Cur adv vult

The following written judgments were delivered: —

17 June 1999 Gaudron J.

1. The appellants are real estate valuers who, for a fee, were engaged by Macquarie Bank Ltd (the Bank) to value a residential property (the property) in Hunters Hill, a harbourside suburb in Sydney. The valuation was required to enable a decision to be made as to the provision of mortgage finance to the owner, Beca Developments Pty Ltd (Beca). The Bank's request was for a valuation which "extended to include Permanent Custodians [and] MGICA Limited". The respondent to this appeal, MGICA (1992) Ltd (MGICA), was formerly MGICA Ltd.

2. The appellants valued the property while building work was still in progress. They assessed its value as it stood on 18 April 1990 at $5.35 million and at $5.5 million on completion. In May 1990, Permanent Custodians Ltd (Permanent Custodians) lent $3.575 million to Beca, that being 65 per cent of the valuation of the property on completion. The loan was secured by a first mortgage and insured by MGICA.

3. It is not now in issue that the value of the property was less than stated by the appellants and that, on 18 April 1990, its true value, on an "as completed" basis, was of the order of $3.9 million to $4 million. In June 1991, Beca defaulted under the mortgage and, on 2 July 1991, Permanent Custodians entered into possession. On 6 January 1992, the property was sold for $2.65 million. It is not suggested that the property could have been sold earlier. Moreover, it is accepted that $2.65 million was its value when sold, there having been a fall in residential property values in Hunters Hill between April 1990 and January 1992.