Cummins Generator Technologies Germany GmbH v Johnson Controls Australia Pty Limited [2015] NSWCA 264
Introduction
In litigation where a lender sues a property valuer for negligently valuing a property, it is commonly asserted by the valuer that the lender is required to prove that it would have embarked on a different course of action "but for" the misleading and deceptive conduct of the valuer. This is often referred to as the "no transaction" principle or the "different transaction" principle.
A recent decision of the New South Wales Court of Appeal in Cummins Generator Technologies Germany GmbH v Johnson Controls Australia Pty Limited [2015] NSWCA 264 has considered this assertion.
Facts
Cummins was a case which involved the supply of electrical generators. The generators were required to possess certain technical specifications which would allow them to operate in parallel with a suite of already functioning generators. The generators which were supplied did not possess those specifications, and a claim for misleading and deceptive conduct was brought against the supplier.
Issues
Although the facts of Cummins are unrelated to valuer negligence the Court held that, to prove causation of damage in a misleading and deceptive conduct claim, it is only necessary for a party to prove that it relied on a misrepresentation and, in reliance on the misrepresentation, it acted in a particular way that caused it loss.
There is no strict requirement for a party to prove that it would have taken a different course of action "but for" its reliance on the misrepresentation.
The supplier, against whom the claim of misleading and deceptive conduct was made, submitted that "...establishing loss or damage requires consideration in comparison with the events that actually happened with what would have happened had there been no misleading conduct".
This submission was rejected by the Court, which noted at [133] that:
...the trial judge was correct in stating there was no strict requirement to prove a 'no transaction' or 'different transaction' case. Rather, it is necessary for a party to prove that in reliance on the misrepresentation it acted in a particular way that caused it loss and to then prove the quantum of that loss.
Conclusion
When faced with a defence from a valuer that a lender must put forward a "no transaction" or "different transaction" case in order to prove it has suffered damage, lenders can rely on the conclusion of the Court in Cummins that enquiries as to what a lender would have otherwise done, or might have otherwise done, but for the negligent or misleading valuation are irrelevant in determining causation.
Although a lender may need to go into evidence of what other action it might have taken if not for the negligent or misleading valuation to explain the quantum of damage it had suffered, in order to show that the conduct of a valuer caused it to suffer damage, the lender need only demonstrate that it relied on a negligent misrepresentation (the valuation) and, in doing so, suffered loss.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
