Todd Hadley Pty Limited v Lake Maintenance (NSW) Pty Ltd (No 2)

1. [1]

   BELL P: The issue before the Court in proceedings brought by a lender against a valuer of property for mortgage valuation purposes is whether causes of action in negligence and for damages for misleading or deceptive conduct arise:

2. [2]

   The issue is critical in the present case because the sale of the mortgaged property, for an amount significantly less than that for which it was valued and for significantly less than the moneys advanced, occurred more than 6 years prior to the commencement of the proceedings against the valuer.

The separate question

1. [3]

   The issue is raised by a separate question referred to this Court by Cavanagh J of the Common Law Division: Todd Hadley Pty Limited v Lake Maintenance (NSW) Pty Limited [2019] NSWSC 1764. That separate question is as follows:

2. [4]

   The formulation of the separate question had its origin in an earlier decision of this Court (Todd Hadley Pty Limited v Lake Maintenance (NSW) Pty Limited [2019] NSWCA 262) in which the Court allowed an appeal from a decision refusing to state a separate question. The appeal was allowed and the separate question formulated on the express basis that:

3. [5]

   As recorded in [25] of the earlier decision, Dr Birch SC, who appeared for Lake Maintenance (NSW) Pty Ltd (Lake Maintenance), accepted that if the question were answered in the affirmative, the defendant valuer would succeed.

The answer to the separate question

1. [6]

   In my opinion, the separate question should be answered in the affirmative.

2. [7]

   The very purpose for which the mortgage security was obtained was defeated by no later than when the sale of the mortgaged property yielded an amount significantly less than that for which the property had been valued.

3. [8]

   Expressed slightly differently, the risk that called the valuer’s duty of care into existence, namely that recoupment of the secured moneys out of the proceeds of sale of the mortgaged property would be inadequate, materialised when the sale of the property yielded significantly less than the amount advanced against the mortgage. By at least that time, the lender had lost the opportunity to move against a secured asset to recover the full balance of the loan and was left to remedies at law, namely, suing the borrower for recovery of the debt or for breach of the personal covenant, which are far more limited and less flexible than the panoply of rights available to a security holder.

4. [9]

   This loss comprised “actual damage”. There was nothing contingent about the mortgagee’s loss. The loss of the ability to recoup secured moneys from a property whose value was represented by the valuer to be, in the context, more than adequate to secure the repayment of the moneys to be advanced, was not “negligible” or exiguous.

5. [10]

   If there were negligence or misleading or deceptive conduct, the cause of action arose no later than the date of the sale of the secured property.

6. [11]

   To the extent that a lender may recover moneys subsequent to the sale of the mortgaged property from the borrower under the personal covenant, such recovery may be brought to account and affect the quantum which may be recovered in an action for negligence or misleading or deceptive conduct against the valuer by reference to the principle against double recovery, but this fact does not bear upon the question of the time at which the lender’s cause(s) of action against the valuer accrued.

7. [12]

   These summary conclusions which, in my opinion, are supported by both principle and authority will be elaborated upon after a consideration of the background facts that gave rise to the stating of the separate question.

Background facts

1. [13]

   The parties have, for the purposes of the determination of the separate question, agreed the facts which are set out in the next section of this judgment and which have been supplemented by details taken from documents that were tendered without objection in the hearing before the Court.

2. [14]

   Todd Hadley Pty Limited and Sean McGill Pty Ltd carry on business in partnership as 'MJD Valuers' (the Valuer).

3. [15]

   On instructions from Mr David James Bone (Mr Bone), the Valuer prepared a valuation report dated 12 February 2010 (the Valuation) in relation to land known as 137 High Street, Wallalong in the State of New South Wales (the Property). The Valuation recorded that it had been prepared for mortgage valuation purposes.

4. [16]

   In the Valuation, the Valuer expressed an opinion that the Property had a current market value of $7,450,000.

5. [17]

   As at the date of the Valuation, Mr Bone was the sole registered proprietor of the Property.

6. [18]

   On or about 23 June 2010, Lake Maintenance entered into a loan agreement (Loan Agreement) with Mr Bone, pursuant to which it advanced to Mr Bone the amount of $3,073,000. Clause 3 of the Loan Agreement provided that:

7. [19]

   Clauses 4 and 5 of the Loan Agreement provided for the payment of interest, adjusted interest and default interest. Clause 4.2, in particular, contained a personal covenant that the Borrower “shall pay the Interest at the end of the Term at the same time of repayment of the Principal Sum”. Clause 5 provided:

8. [20]

   Clause 7.1.1 of the Loan Agreement provided that there would be an “Event of Default” if the Borrower failed to make any loan repayment, including any interest payment. Clauses 7.1.6 and 7.1.7 provided that, by notice to the Borrower, the Lender required remedy of the default within 14 days or any longer period the Lender allowed, and that the Borrower would still be in default at the end of that period.

9. [21]

   Clause 6.1 of the Loan Agreement obliged Mr Bone to grant Lake Maintenance a first registered mortgage over the Property as security.

10. [22]

    That mortgage was in fact executed on 18 June 2010 or 21 June 2010 (the precise date is not clear but is immaterial for present purposes) by Mr Bone in favour of Lake Maintenance (the Mortgage).

11. [23]

    Lake Maintenance alleges that it relied on the Valuation in entering into the Loan Agreement.

12. [24]

    Clause 3.1 of the annexure to the Mortgage also contained a personal covenant which obliged Mr Bone to repay the sum advanced together with interest.

13. [25]

    Mr Bone failed to pay Lake Maintenance the sum of $5,038,000 on 23 December 2011. This constituted an “Event of Default” under cl 7.1.1 of the Loan Agreement.

14. [26]

    On or about 16 January 2012, Lake Maintenance issued Mr Bone a Notice of Default in accordance with cl 7.1.6 of the Loan Agreement. The Notice of Default:

15. [27]

    Mr Bone failed to comply with the Notice of Default.

16. [28]

    On or about 25 January 2012, Messrs Bradd Morelli and Andrew Spring of Jirsch Sutherland were appointed by Lake Maintenance as receivers of the Property.

17. [29]

    On 23 May 2012, Wallalong Land Developments Pty Limited entered into a contract for sale to purchase the Property for $1,250,000.

18. [30]

    Settlement of the sale occurred on 15 June 2012, as a result of which Lake Maintenance received the sum of $1,017,561.70, being the net proceeds of sale.

19. [31]

    On 28 June 2012, Lake Maintenance commenced an action in debt against Mr Bone for the sum advanced pursuant to the Loan Agreement together with interest, less the net proceeds of sale (the Bone Proceeding).

20. [32]

    Until about 20 August 2012, Mr Bone had communicated to Lake Maintenance proposals to settle his indebtedness on terms that would see him retain the Property. Further, in a statement of assets and liabilities provided by Mr Bone to Lake Maintenance, Mr Bone declared that as at 7 December 2011, he had assets of about $30,350,000 (including the Property) subject to encumbrances of $17,632,500.

21. [33]

    On 20 February 2015, Lake Maintenance and Mr Bone entered into a deed of settlement (the Settlement Deed).

22. [34]

    Clause 1 of the Settlement Deed obliged Mr Bone to provide Lake Maintenance with a signed consent order, consenting to judgment in the amount of $5,000,000. Clause 6 relevantly entitled Lake Maintenance to file the consent order in the Bone Proceeding on 20 February 2017 and cause judgment to be entered in that amount, unless Mr Bone paid $5,000,000 to Lake Maintenance before that date.

23. [35]

    Mr Bone failed to pay Lake Maintenance $5,000,000 before 20 February 2017.

24. [36]

    On 20 February 2017, Lake Maintenance filed the consent order and caused judgment to be entered against Mr Bone in the amount of $5,000,000.

25. [37]

    On 20 September 2017, Mr Bone was made a bankrupt by order of the Federal Circuit Court of Australia on the petition of Lake Maintenance. A final report to creditors issued on 29 March 2018 indicated that no dividend was expected.

26. [38]

    By statement of claim filed on 14 June 2018, Lake Maintenance commenced an action for damages against the Valuer in tort and for contravention of statutory prohibitions against conduct that is misleading or deceptive.

Consideration

1. [39]

   It is desirable to commence the analysis with a consideration of the duty of care owed by a valuer providing a valuation for mortgage valuation purposes.

2. [40]

   As Lord Templeman put the matter in Smith v Bush [1990] 1 AC 831 at 844; [1990] UKHL 1:

3. [41]

   As his Lordship pointed out, the duty owed by a valuer in such circumstances was recognised well prior to Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465; [1963] 3 WLR 101: see, for example, Cann v Willson (1888) 39 ChD 39, per Chitty J.

4. [42]

   There are a number of Australian decisions in which a duty of care has been found or assumed to have been owed by a valuer to a mortgagee lender or mortgage insurer, although it may be noted that the analysis by reference to which a duty has been held to exist differs from case to case, reflecting the common law’s evolution with respect to the imposition of duties of care in relation to the recovery of pure economic loss. The decisions include Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413; [1999] HCA 25 at [58], [83], [116] (Kenny & Good); R & G Mortgages Pty Ltd v Ronald A Newton & Associates Pty Ltd (Supreme Court of Victoria, McDonald J, 4 July 1997, unrep); Plenty v Pattinson [2001] SASC 42 at [77]; Vero Lenders Mortgage Insurance Ltd v Taylor Byrne Pty Ltd [2006] FCA 1430; Kestrel Holdings Pty Ltd v APF Properties Pty Ltd (2009) 260 ALR 418; [2009] FCAFC 144 at [94]; Genworth Financial Mortgage Insurance Pty Ltd v Hodder Rook & Associates Pty Ltd [2010] NSWSC 1043; Ta Ho Ma Pty Ltd v Allen (1999) 47 NSWLR 1; [1999] NSWCA 202.

5. [43]

   A valuation supplied for mortgage valuation purposes, in the words of Lord Hoffmann in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 at 211; [1996] 3 WLR 87 (Banque Bruxelles):

6. [44]

   In a similar vein, it has been observed (A McGee, Limitation Periods (8th ed, 2018, Sweet & Maxwell) at 5.051) that:

7. [45]

   A mortgage, of course, provides to the lender a range of rights and remedies on default, including the right to sue on the personal covenant, the right to possession (see Real Property Act 1900 (NSW) s 60), the right to improve the property and perfect the security, the right to accretions to and fruits of the mortgaged property, the power to lease, the right to appoint a receiver, the right to foreclose and the power of sale (see Real Property Act s 58): see generally, B Edgeworth, Butt’s Land Law (7th ed, 2017, Thomson Reuters Australia) at [11.630]-[11.1570] (Butt). The exercise of a right of foreclosure will extinguish a right to sue on the personal covenant (Conveyancing Act 1919 (NSW) s 100), whereas a mortgagee who exercises a power of sale will still have a right to sue on the personal covenant: Rudge v Richens (1873) LR 8 CP 358; Commonwealth Bank of Australia v Buffett (1993) 114 ALR 245 at 252. In doing so, however, the mortgagee will have no rights superior to those of the mortgagor’s other creditors (Butt at [11.1150]) and, subject to the terms of the mortgage, will have no entitlement to receive an indemnity for the costs of realising the debt.

8. [46]

   A mortgage granted to secure the repayment of a loan may be conceptualised as giving to the lender a chance and, depending on the lender’s loan value ratio and tolerance for risk, a good chance of being able to recoup the loan from the sale of the mortgaged property, in the event of a borrower defaulting on the repayment of the loan. The chance is not, however, a guarantee, because the property market may move in such a way as to eliminate the cushion and erode the security which the mortgage was otherwise designed to afford. The chance is, nevertheless, extremely valuable: where the security proves inadequate, the lender is exposed to competition in relation to the recovery of the outstanding portion of the loan with the borrower’s other creditors.

9. [47]

   The value of the chance represented by the security will be affected by the competence of any underlying valuation of the security property. An incompetent over-valuation of the security property will diminish the value of the mortgage in the hands of the lender. Once a mortgaged property is sold, but some of the loan remains outstanding, the chance to recoup the balance of the loan from the property is necessarily lost.

10. [48]

    In Kenny & Good at [16], Gaudron J observed that:

11. [49]

    Gaudron J cited as authority for the penultimate sentence the decision of Brennan J in Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 537; [1992] HCA 55 (Wardley), where his Honour had said:

12. [50]

    Kenny & Good was a case where a real estate valuer, Kenny & Good Pty Ltd, at the request of Macquarie Bank Ltd, valued a property under construction both as it stood and on completion. The valuation report provided that the lending institution Permanent Custodians Ltd (Permanent Custodians) and mortgage insurer MGICA (1992) Ltd (MGICA) “may” rely on the valuation. The valuation was significantly higher than the true value of the property at the time of the report. MGICA agreed to indemnify Permanent Custodians, and Permanent Custodians advanced a loan to the borrower. The borrower defaulted and the property was sold at a loss. The sale price was lower still than the true value of the property at the date of the valuation report, there having been a recent fall in the residential property market.

13. [51]

    MGICA indemnified Permanent Custodians and proceeded to bring claims against Kenny & Good in tort for negligence, for breaches of ss 52 and 53A of the Trade Practices Act 1974 (Cth) and for breaches of ss 42 and 45 of the Fair Trading Act 1987 (NSW). The question before the High Court was whether Kenny & Good was liable for the whole of the loss sustained by MGICA, or whether the fall in the market could be regarded as some independent cause of the loss. As such, it may be observed that the observation of Gaudron J as set out at [48] above was strictly obiter.

14. [52]

    Gaudron J was not the only judge in Kenny & Good, however, to consider the nature of the interest protected by the duty of care imposed upon a valuer conducting a valuation for mortgage security purposes, and the related question of when a cause of action against such a valuer arose. In this context, Gummow J observed (at [85]-[89]):

15. [53]

    Earlier in his decision, Gummow J observed that MGICA’s cause of action in negligence accrued when the damage to its interest was sustained: at [84]. Its interest had been described by his Honour as “that, in the event of default, the mortgagee would have the capacity to recover the amount secured by realising its security and without calling upon the insurance. To the extent that MGICA recouped to the mortgagee the moneys secured by the mortgage, it would have an interest in the security by way of subrogation”: at [82]. As to precisely when this cause of action accrued, Gummow J said that it was “at the earliest, when the mortgagor defaulted and certainly when the property was sold”: at [84]. To that extent, his Honour’s judgment bears a close affinity with that of Gaudron J and, in particular, the important passage reproduced at [48] above and, specifically, the final sentence of that passage.

16. [54]

    In Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; [2013] HCA 10 (Hunt & Hunt), the High Court considered whether a lender’s claim for professional negligence against a firm of solicitors was an apportionable claim within the meaning of s 35(1) of the Civil Liability Act 2002 (NSW), the alleged concurrent wrongdoers being Messrs Caradonna and Flammia who had forged and falsely witnessed signatures on loan and mortgage documents. French CJ, Hayne and Kiefel JJ said (at [24]-[26]):

17. [55]

    In support of the final sentence of this passage, their Honours cited Hawkins v Clayton (1988) 164 CLR 539 at 601; [1988] HCA 15; Wardley at 533 and Kenny & Good at [16]. Their Honours then (at [27]) devoted a full paragraph to Kenny & Good, stating as follows:

18. [56]

    It may also be noted that, although in dissent in Hunt & Hunt, Bell and Gageler JJ also cited [16] of Gaudron J’s decision in Kenny & Good, stating (at [99]) that:

19. [57]

    Their Honours concluded at [99] by stating that:

20. [58]

    Mr McCulloch SC, who appeared for the Valuer, called in aid all of these passages in support of the argument that any cause of action which Lake Maintenance had against the Valuer accrued, at the latest, by the time of the sale of the mortgaged property, and that this was irrespective of whether or not the balance of the moneys owing could still be recovered from the borrower under the personal covenant.

21. [59]

    By contrast, Dr Birch maintained that:

22. [60]

    The concept of “reasonably ascertainable” which lay at the heart of Dr Birch’s argument appears to derive from that passage of Brennan J’s judgment in Wardley at 537,extracted at [49] above. The term was also employed by Gaudron J in Kenny & Good at [16]. It should immediately be said, however, that Gaudron J was suggesting in Kenny & Good that loss or damage may be reasonably ascertainable (and thus a cause of action may accrue) prior to the sale of the mortgaged property, as opposed to only at the time of sale. An example of this may occur where, for example, the valuer’s negligence comprises a failure to detect a defect in the building, such as the presence of asbestos, which was so profound that it became reasonably ascertainable, even prior to the time of sale, that the property was so defective that it would not allow a mortgagee to recover the moneys advanced against the property.

23. [61]

    Similarly in Nykredit, which was the sequel to Banque Bruxelles and which also involved a claim against a valuer who had provided a valuation for mortgage security purposes, the House of Lords treated the sale of the mortgaged property as crystallising the lender’s loss, meaning that the cause of action against the valuer in that case must necessarily have arisen by that time.

24. [62]

    Dr Birch sought to rely upon the following passage from the speech of Lord Nicholls in Nykredit (at 1631-1632):

25. [63]

    Whilst it is correct that Lord Nicholls contemplated in the ante-penultimate paragraph of the passage extracted above that there may be no loss even when the borrower defaults, this was not said to be because there may be a prospect of recovering under the personal covenant notwithstanding the default. Rather it was because, depending on the amount of the loan, the negligently overvalued property may still yield a sufficient sum on sale to mean that the borrower was able to draw on the security to recoup the sum advanced and secured.

26. [64]

    In a similar vein to Lord Nicholls, Lord Hoffmann said in Nykredit (at 1639):

27. [65]

    Each of the other Law Lords agreed with both Lord Nicholls and Lord Hoffmann.

28. [66]

    Lord Hoffmann, like Lord Nicholls, treated the default which triggered the right of sale of the mortgaged property as the latest point in time at which the cause of action for negligence could have arisen. The default meant that the interest of the lender as mortgagee, which it was the duty of the valuer to protect by a competent valuation, was in play.

29. [67]

    As has also been seen, Gaudron and Gummow JJ in Kenny & Good were both clear that the relevant cause of action would have certainly accrued by the time of the sale following on a default. Neither Kenny & Good nor Nykredit contemplate that the cause of action against a negligent valuer may arise after sale because of the possibility that the defaulting borrower may yet honour, albeit belatedly, his, her or its personal covenant under the mortgage. Indeed, the following observation by Lord Nicholls in Nykredit (at 1633) is quite contrary to such a contention:

30. [68]

    The key to the present case lies, in my opinion, in focusing upon the nature of the interest infringed. This starting point does not depend upon the obiter observations of Gaudron and Gummow JJ in Kenny & Good, highly persuasive though they are. Rather, it derives directly from the joint judgment of Mason CJ, Dawson, Gaudron and McHugh JJ in Wardley to which Gummow J referred in the extract of his judgment in Kenny & Good, set out at [52] above. That passage linked the timing of the accrual of the cause of action to the nature of the interest infringed. The same point was made by the majority in Hunt & Hunt: see [54] above.

31. [69]

    The nature of the interest infringed was, relevantly, the ability to “recoup” from the proceeds of sale the moneys advanced by way of loan. At the time of sale, it was plain that Lake Maintenance had suffered harm or, to paraphrase Brennan J in Wardley at 537, was “worse off than if [it] had not entered into the transaction”. Thereafter Lake Maintenance could no longer look to the property to recover its debt. Any subsequent recovery from the borrower would have to be brought to account, but the prospect or possibility of such recovery did not stand in the way of an action being brought against the Valuer then and there. The cause of action had accrued.

32. [70]

    If it were the case that the borrower was still solvent but Lake Maintenance had not sued it, it may have been open to the Valuer to contend that there had been a failure to mitigate the loss sued upon, or possibly to raise a proportionate liability defence consistent with the decision in Hunt & Hunt. But neither of these potential defences would mean that the cause of action had not accrued. They would be germane only to matters of quantum.

33. [71]

    Whether or not any failure to mitigate defence, upon which the Valuer would bear the onus, would be sustainable would depend upon whether it could be shown that Lake Maintenance had acted unreasonably in not pursuing the borrower: see London and South of England Building Society v Stone [1983] 1 WLR 1242; [1983] 3 All ER 105 (Stone). In that case, Stephenson LJ said (at 1262-1263) that:

34. [72]

    The position is put even more strongly by the editors of Clerk & Lindsell on Torts (22nd ed, 2018, Sweet & Maxwell) at 10-192 (Clerk & Lindsell):

35. [73]

    The “contrary authority” referred to in this passage was the Court of Appeal’s decision in Stone. The authority relied upon by the editors of Clerk & Lindsell for the proposition that, in England at least, there is not even a duty to mitigate was Peters v East Midlands Strategic Health Authority [2010] QB 48; [2009] ECWA Civ 145 (Peters) where Dyson LJ, as his Lordship then was, in delivering the judgment of the Court of Appeal, said (at [53]-[54]):

36. [74]

    By analogy, this decision would treat a lender who had received a negligent valuation, and whose borrower had defaulted, as having independent concurrent causes of action against both the borrower and the valuer. The decision may be taken as authority for the proposition that it is not open to either the valuer or the defaulting borrower to contend that no loss has been caused by it (and thus no cause of action has accrued) because of an outstanding right of recourse against the other. This is an application of the principle that where there are two parties who both may be liable, a plaintiff may choose to recover from whichever liable party it so wishes: see Peters at [41]; Marlborough District Council v Altimarloch Joint Venture Ltd [2012] 2 NZLR 726 at [201]; [2012] NZSC 11 (Marlborough).

37. [75]

    The decision in The Liverpool (No 2) [1963] P 64; [1960] 3 WLR 597, referred to by Dyson LJ in Peters, was a decision of the English Court of Appeal. Handley JA cited it when referring to the “general principle that a party with remedies against two or more persons for the same loss may pursue any or all of those remedies in whatever order he pleases, subject to giving credit for any recoveries provided that in total they do not exceed his loss”: Bebonis v Angelos (2003) 56 NSWLR 127 at 133; [2003] NSWCA 13 at [32]. The qualification to this statement by reference to the principle against double recovery also supplies an answer to Lake Maintenance’s submission at para 58 that:

38. [76]

    Any recovery by the lender of the debt after the accrual of the cause of action against the valuer may not be res inter alios acta or collateral: see Swynson Ltd v Lowick Rose llp (in liq) [2018] AC 313; [2017] UKSC 32 at [11]-[13]; but cf. Howkins & Harrison v Tyler [2001] PNLR 27; [2000] 7 WLUK 296 (Howkins) in which the English Court of Appeal held that the damage suffered as a result of a negligent valuation for mortgage security purposes was not the same damage as that constituted by the non-payment of the debt by the borrower under the mortgage for the purposes of s 1(1) of the Civil Liability (Contribution) Act 1978 (UK). If the damage was not the same, it is difficult to see how the ascertainability of the impossibility of repayment of the borrower’s debt could affect the time at which the different damage caused by the valuer’s alleged negligence occurred.

39. [77]

    One important point to note about Howkins is that, even though it was held that subsequent recovery of some or all of the debt related to a different type of damage, it was also held that that posited recovery would affect the lender’s entitlement pro tanto to retain damages earlier recovered from the negligent valuer: see [19]-[21] per Sir Richard Scott VC. This was a matter that would go to quantum. Critically for present purposes, however, the posited subsequent recovery against the borrower did not mean that the lender’s cause of action against the negligent Valuer for a different type of damage had not accrued at an earlier point in time.

40. [78]

    Conceptualising a mortgagee’s power of sale as involving a valuable commercial opportunity (see [46]-[47] above) may facilitate or reinforce the analysis because, as Hodgson JA observed in Cassis v Kalfus [2001] NSWCA 460 at [76], by reference to Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4:

41. [79]

    In the present case, Lake Maintenance suffered an economic disadvantage when the secured property proved inadequate, upon its sale, to recoup the totality of the loan. This “economic disadvantage” was in no way a “contingency for future loss”. In this context, the observations of Young AJA in Khoury v Coffey Projects (Australia) Pty Ltd [2015] NSWSC 591 at [26]-[27] may be recalled:

42. [80]

    Wardley was a very different case to the present, involving, as it did, an indemnity granted by the State of Western Australia to the National Australia Bank in respect of a bill facility granted to Rothwells Ltd. Notions of contingent loss are far more intelligible in the context of such a commercial arrangement; they are not readily transposed to liability for breach of a duty of care.

43. [81]

    Treating the Valuer’s liability in the present case as “contingent” is not, in my opinion, apposite. As Bell and Gageler JJ observed in Hunt & Hunt (at [99]):

44. [82]

    As has been noted above, the argument relied upon by Dr Birch seems, with respect, to seek to transpose Gaudron J’s view in Kenny & Good, that the existence of a loss may be “reasonably ascertainable” in a given case well prior to the sale of a mortgaged property (with the consequence that a limitation period will run from that point), to a period after the default which triggers the mortgagee’s right of sale. Apart from the fact that a full reading of her Honour’s reasons does not support that interpretation, one consequence of this argument is that Lake Maintenance could not have sued the Valuer for negligence, however gross, until it was “reasonably ascertainable” that the borrower was unable (not simply unlikely) to meet its obligations under the loan, notwithstanding a breach of covenant which had triggered the power of sale under the mortgage.

45. [83]

    It was submitted, and I accept, that this would be a most problematic basis for identifying the date of accrual of a cause of action against a third party such as a valuer. It would require an assessment to be made of the value of the borrower’s personal covenant, and could give rise to satellite litigation between the lender and the valuer as to a third party borrower’s wherewithal at a particular point in time in order to determine when a cause of action against the valuer accrued. That is not attractive.

46. [84]

    The test contended for is also inconsistent with the observation of Lord Nicholls in Nykredit at 1633, cited at [67] above, namely that “within the bounds of sense and reasonableness the policy of the law should be to advance, rather than retard, the accrual of a cause of action”.

47. [85]

    For completeness, two further arguments advanced by Dr Birch should be noted. The first was by reference to the decision of Tipping J in Marlborough, in which his Honour said that a “negligent valuer does not cause any ultimate loss to the lender unless and until the actual value of the security, together with the actual value of the borrower’s personal covenant, are shown to be less than the amount owing to the lender”: at [112]. Tipping J was one of five justices sitting in Marlborough. His Honour, in the passage relied upon, was simply stating his understanding of Nykredit. His Honour’s judgment did not take into account the matters referred to in [61]-[67] above and, in any event, did not on this issue attract the support of any other member of the Supreme Court of New Zealand.

48. [86]

    Moreover, notwithstanding his application of his understanding of Nykredit to the facts in Marlborough, on the question of when the cause of action in negligence against the Council arose, Tipping J identified this as having occurred at the time when Altimarloch Joint Venture Ltd committed to the contract to acquire the rural property that had been the subject of the Council’s negligent representation: at [122]. Tipping J’s ultimate (minority) conclusion that “[t]he Council’s negligence caused the purchaser no loss” (at [123]) did not mean that no cause of action had accrued, but simply that, because of another recovery against the vendor of the property, no damages were recoverable. Marlborough does not assist, in my opinion, on the question of when the cause of action in the present case accrued.

49. [87]

    The second matter to be noted is that reference was made to a number of decisions at first instance, including the decision of Davies J in Ross v Cook [2009] NSWSC 671 and Ball J in LM Investment Management Limited (In Liquidation) (Receivers Appointed) v BMT & Assoc Pty Limited (No. 2) [2016] NSWSC 317, where there is some discussion of the key passages from Kenny & Good that have been considered above.

50. [88]

    To the extent that it was suggested by Dr Birch that the discussion in those cases of the point of principle supported the arguments advanced by Lake Maintenance, I do not agree. The question, in any event, is for this Court to determine, guided by High Court authority and considerations of fundamental principles.

51. [89]

    For all of the above reasons, I would answer the separate question in the affirmative. It follows that Lake Maintenance should pay the Valuer’s costs of the hearing of the separate question.

52. [90]

    It should also follow that the proceedings be dismissed with costs. An order to this effect will be made but this order will be stayed for 14 days to permit Lake Maintenance to seek to vary an order for the dismissal of the proceedings with costs, if so advised.

53. [91]

    BASTEN JA: I agree with the President.

54. [92]

    MACFARLAN JA: I agree with Bell P.