Case: HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54 ; (2004) 217 CLR 640
Outcome: applied
applicants seek damages for their capital loss assessed as the difference between the price paid for their units and their true value at the time of the transaction. This is a common measure of damage in claims under s 82 of the Act where land has been acquired in consequence of a contravention of s 52: see HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54 ; (2004) 217 CLR 640 at 656 [35] . However, the rule is not inflexible or rigid and, as Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ went on to point out, the test depends on the difference between price and the real or fair or intrinsic value of the asset, as opposed to its market value: Astonland 217 CLR at 656-657 [35]-[36]. In Astonland 217 CLR 658-659 [38]-[40] the Court indicated that subsequent events could be used to arrive at an assessment of the real value of an asset for the purposes of calculating compensation under s 82 of the Act in respect of a claim of overpayment at the time of acquisition. Events after the date of acquisition can be taken into account but when that is done care must be taken in distinguishing among possible causes of the decline in value of what had been bought. Thus, there is a fundamental distinction between causes inherent in the property acquired, and independent or extrinsic causes. To the extent that the latter causes have affected the value, then loss flowing from them would not have been caused by the inducement of the misleading or deceptive conduct. But if the value of the property acquired was always going to fall when some inherent cause began to operate (e.g. when a competing property, not adverted to by the negligent valuer in performing the valuation for the acquisition, commenced operation) that would be indicative of the true value. Such a loss in the value was, accordingly, inherent in the nature of what was purchased namely, that it would decline in value because of the operation of the competing property in close proximity: Astonland 217 CLR at 660 [43]. Their Honours said that the rental levels and, therefore the value of, Astonland's property were doomed from the start because, so long as the construction of the neighbouring shopping centre continued to completion, the plaintiff's loss would be inevitable. In such a case the court is not limited to the assessment of risk of loss at the time of purchase "... but is entitled to take account of how those risks had evolved into certainties at dates after the date on which the comparison of price and true value was being made": Astonland 217 CLR at 661 [45]-[46]. The Court continued: " [46] Figures worked out by analysing what willing but not anxious buyers and willing but not anxious sellers would agree on, without taking account of subsequent events, may correspond with market value; but they do not necessarily correspond with true value because the market can operate under some material mistakes. In particular, some material factor may not be apparent to it. A mistake of this kind, it seems likely, was present here. Though the market value on 21 April 1997 was $400,000, and in July 1997 it was $375,000, one matter was not apparent then which was apparent later. The trial judge found that $130,000 was "the value of the land more or less since it became apparent that tenants were largely unavailable except at minimal rentals" (footnote omitted). That unavailability was an inevitable consequence of the Beach Road Shopping Centre once it was completed, but the perception of the likely effect of that completion was obscure in 1997, and only became clearer from the latter part of 1998 on." Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ considered an alternative approach to the assessment of damages under s 82. That approach was to allow a plaintiff to recover the purchase price of the asset less whatever was "left in its hands": Astonland 217 CLR at 666-668 [63]-[67]. They concluded that once the plaintiff had been induced to buy the property "... at a time when it was perceived to be valuable, and was forced to retain it because it increasingly became to be perceived as being of declining utility and value": Astonland 217 CLR at 668 [67]. In such a situation the plaintiff's property was not a readily marketable asset. Austcorp pleaded that the claims were time barred because each applicant entered into the contract more than six years before the commencement of the proceedings. Austcorp also argued that the applicants had become committed to, first, the contracts which they had entered prior to 1 August 2000 and, secondly prior to that date, to paying legal fees incurred and other costs. However, the applicants did not claim any damages in respect of transaction costs incurred before the registration of the strata plan. Austcorp argued that an applicant will be found to suffer loss immediately upon entering into a contract for the purchase of land if the true value of the land at that time is less than the contract price. Accordingly, it contended that the applicants' causes of action under s 52 of the Act accrued at that moment relying on Astonland 217 CLR at 654-655 [28] and 656 [33] per Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ. In Astonland the plaintiff had relied on the advice of a valuer before entering into a contract to purchase an income producing shopping arcade. The valuer advised that the construction of a new shopping centre nearby was not likely to affect adversely the arcade's existing retail tenancy levels. But, there was unchallenged evidence that on the date of the contract, and the date of completion, the land was worth less than the price payable or paid under the contract. That was because the valuer on whose valuation the plaintiff had relied advised the plaintiff incorrectly: Astonland 217 CLR at 655 [28]-[29]. Their Honours distinguished that situation from the category of case where a contingency, which might or might not come to pass, was hidden by a representor's conduct. They said that the plaintiff could have found out at once that the market value of the arcade was less than it had agreed to pay. Thus, the risk of the catastrophic effect on rent levels of the plaintiff's land to which the defendant valuer had not alerted the plaintiff, in fact, had already had an impact on the value of the plaintiff's land at the time of the purchase. Austcorp argued that on the applicants' cases, their apartments must have been worth less than the price paid for them at the dates of entry into the contracts for sale. I reject that argument. The applicants were not obliged to complete the contracts until after registration of the strata plan pursuant to cl 33 of the contract which provided the following: "33.1 Completion of this contract is conditional on the consent of the Council to, and the registration of, the Strata Plan. 33.2 If the Strata Plan is not registered by the Registration Date [defined as 31 December 2000] either party may at any time after the Registration Date until registration rescind this contract by written notice to the other."