University of Queensland Law Journal
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THE HONOURABLE CW PINCUS[*]
Suppose I buy shares for $100,000, their market price, on my broker’s advice. The company is in fact then in serious trouble. A year later it is wound up and I get nothing. I sue the broker for $100,000, complaining that he had told me, not fraudulently but mistakenly, that the company was sound. Do I win?
HTW Valuers (Central Qld) Pty Ptd v Astonland Pty Ltd (‘HTW’) has relevance to problems of that sort. There, the property bought was realty, a small shopping centre, which had when purchased a market value somewhat less than the price paid, $485,000. Its true value was, with the benefit of hindsight, found to be much less again; the High Court could make no finding as to precisely what that true value was. However, a claim against a valuation company which advised on the purchase, for a fee of $250, was allowed in a sum which reflected the true, hindsight value of the shopping centre, which the primary judge held to be only $130,000. The price paid was $85,000 more than the then market value. However, the damages actually awarded was over $400,000.
The main question in HTW was whether, and if so on what basis, the hindsight loss was recoverable. It is proposed to discuss only some of the issues the High Court dealt with. The case is not relevant merely to questions of quantum of damages. It bears on a more basic issue: when does the cause of action for a contingent loss arise?
The High Court’s view was that the loss suffered could ‘with the benefit of hindsight’ be seen to be much greater than $85 000, that being the quantified loss as at the date of the purchase. There was then a risk of greater loss, in that a contingency which the valuer had taken into account might well eventuate and greatly reduce the value of the property bought. That contingency was that the advent of a new nearby shopping centre could make the one being bought less attractive to tenants of the latter centre. That eventuality came to pass.
The Supreme Court of Queensland held that it was not until the new competing centre was running that the loss suffered was ascertainable, and so that was the date at which it had to be calculated by the Court. The trial judge said that until that date no loss had been suffered, citing Wardley Australia Ltd v Western Australia.[1] Wardley held that a person wrongfully induced to enter into a contract to indemnify another had no cause of action until called on to pay — however probable it might seem, at the contract date, that the indemnity would be resorted to. In that case, it was said that only actual, not prospective, loss was recoverable. The view taken at first instance in HTW could perhaps be argued to be a pardonable extension of the doctrine of Wardley.
There are of course authorities that accept that loss of a chance or opportunity is recoverable even if there is no certainty of any gain from the chance or opportunity.[2] Why there should be so sharp a distinction between the right of a plaintiff whose claim relates to a prospective gain, and that of a plaintiff whose claim relates to a prospective loss, is not absolutely clear.
The basis on which the High Court in this case held, as it did, that Wardley was inapplicable, and so all the damages should be assessed as at the date of the purchase, was that at that date there was an immediate loss of the $85 000 referred to above — the difference between the price and the then market value. The law is, then, that the rule denying a cause of action for a merely prospective loss does not apply at all where another component of the claim is an immediate loss, such as having paid a price above the then market value. The plaintiff is, it appears, entitled to sue immediately not only for the immediate but also for any contingent loss; Wardley is inapplicable to the whole cause of action.
The appellant pointed out that the evidence did not establish a matter on which the judgment below was based, namely that the true, hindsight, value at the date of purchase was only $130 000, rather than the $400 000 market value. While not disagreeing with that, the High Court upheld the judgment below, relying in part on the view that, provided there is some evidence of damage, in the field of assessing damages for fraud, ‘as in other fields, a tribunal of fact must do the best it can in assessing damages’. This quotation comes, surprisingly, from the dissenting judgment of Barwick CJ in Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd,[3] where the majority decided the case on the basis that there no sufficient proof of the quantum of loss. The broad statement quoted, if it implies that a court must always assess the successful party’s damages, whatever the gaps in proof, is submitted to be unorthodox. Cases on the point are surveyed in Optus Vision Pty Limited v Australian Rugby Football League Limited.[4]
A second basis on which the High Court rejected the appellant’s contention that the damages found were insufficiently proved was that the outcome was fair. The reasoning underlying this conclusion is complex; but on the bare facts the outcome seems generous. The basis of the award was this: when honestly giving his opinion to the purchaser to the effect that the rents of the property to be purchased were unlikely to be affected adversely by the new shopping centre, the valuer failed to qualify that advice by cautioning that the effect the forthcoming centre would have was uncertain. Surely, that would have been evident. Denying – a proposition the valuer never advanced – that the effect the new centre would have was certain to accord with his opinion – would have saved the defendant from becoming, for the $250 advice, liable to indemnify the purchaser for the whole of any loss consequent on the purchase, which then became risk-free. As Kirby J remarked during argument, ‘Everything is uncertain, everything in this life.’
[*] The Honourable CW Pincus QC, Adjunct Professor, TC Beirne School of Law, University of Queensland, and former Justice of the Queensland Court of Appeal (1991-2001), and of the Federal Court of Australia (1985-1991).
[1] [1992] HCA 55; (1992) 175 CLR 514 (‘Wardley’).
[2] See, for example, Sellars v Adelaide Petroleum NL (1994) 179 CLR 332.
[3] (1977) 16 ALR 23, 26.
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