In the current market, lenders often seek to recover shortfalls
on the sale of security property from valuers.
There are many cases involving claims against professionals
where liability has been apportioned amongst concurrent wrongdoers
(see, for example, Ginelle Finance Pty Ltd v Diakakis, Vella v
Permanent Mortgages and Solak v Bank of Western Australia
Ltd, discussed in our May 2009 update click here to read). These cases
demonstrate that the apportionment of liability to third parties
may adversely impact the ability of lenders to recover losses from
negligent professionals, including valuers.
However, in a recent decision of the Victorian Supreme Court of
Appeal involving a claim by a lender against a negligent valuer,
St George Bank Limited v Quinerts Pty Ltd, the Court
refused to apportion liability to third parties and held the
negligent valuer liable for the whole of the lender's
While the Quinerts decision is favourable to lenders,
it highlights the inconsistency in the approach that courts may
take in apportioning liability and draws attention to the
importance of accounting for the risk of apportionment in the
conduct of matters.
The case involved a claim by St George against Quinerts (the
valuers) in relation to a negligent valuation. Quinerts
admitted that their valuation was negligent but contended, amongst
other things, that the liability for St George's loss should be
apportioned to the borrower and the guarantor, who the valuers
submitted were concurrent wrongdoers within the meaning of Part
IVAA of the Wrongs Act.
The Court held that the borrower and the guarantor were not
concurrent wrongdoers with the valuer and that no liability should
be apportioned to them.
The Court's reasoning was as follows:
The proportionate liability provisions of the Wrongs Act,
properly construed, should be interpreted consistently with the
contribution provisions of the Wrongs Act and case law on
The contribution is available only where two or more persons
have contributed, albeit in different ways, to the "same
damage" and the mere fact that two or more wrongs lead to a
common result does not of itself mean that the wrongdoers are
liable in respect of the same damage
The valuers in this case were not liable for the "same
damage" as the borrower and the guarantor
While the valuer's negligence caused the bank to make the
loan, or at least caused it to lend more than it would otherwise
have been prepared to lend, neither the borrower nor the guarantor
did or failed to do anything actionable (in the sense of rendering
them liable to the bank) that caused the bank to lend or to lend
more than it would otherwise have been prepared to lend
On the facts of the case, the only misconduct of the borrower
and guarantor were their failures to repay the loan and, as such,
their failures to repay the loan did not cause the bank to make the
loan or to lend more than it would otherwise have been prepared to
Further support for the conclusion that the borrower and the
guarantor did not cause the "same damage" can be found by
considering the time at which the damage caused by the valuer's
negligence was suffered and to compare that with the time at which
the damage caused by the borrower's and guarantor's failure
to repay the loan was suffered.
In coming to the above conclusions, Nettle
JA considered the decision of Vella v Permanent
Mortgages. In Vella, a fraudster forged
the execution of a mortgage against which Permanent lent funds,
which later proved irrecoverable. Permanent's solicitors
were guilty of negligence in failing to draw the mortgage in a form
which, despite fraud, would have rendered the mortgage effective
upon registration. In Vella it was held that the
fraudster was a concurrent wrongdoer in the context of
Permanent's claim against the solicitors and a significant
amount of loss was apportioned to the fraudster.
Nettle JA said that he accepted the decision in Vella
was "at odds" with his own conclusion but that he was not
persuaded by it.
Where To From Here
The proportionate liability regime is still a relatively new
concept which is being tested by the Courts.
In light of the authorities, there are two alternative views on
whether it is appropriate to apportion liability in negligence
claims against professionals, including valuers.
The Quinerts decision is favourable to the lenders,
whilst Ginelle, Vella and Solak are
Therefore, as a practical matter, the risk of apportionment
should be taken into account as a factor in any settlement
negotiations and the conduct of the litigation generally.
In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
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