A managed investment scheme loaned reliance on a rural NSW properties and suffered severe losses when the security proved to be worth much less than the valuations.
The responsible entity of the scheme sued the valuer claiming misleading conduct and breach of contract.
The valuer made a late application to plead that the officers (MD, lending manager and non-executive directors) of the responsible entity, as well as the trustee of the scheme, are concurrent wrongdoers and that the loss should be apportioned amongst them. The late application was said to have been due to the scheme’s failure to provide proper discovery of the compliance manual.
The claim against the officers was that they breached their section 601FD Corporations Act obligations to ensure proper lending practices and this contributed to the scheme’s loss. A similar allegation was made against the trustee.
Despite the lateness of the application, the court gave leave to the valuers to plead the proportionate liability of the officers and scheme so as not to shut out that defence because the court said it was difficult to know whether the conduct of the officers amounted to breach.
The court dismissed the argument that the defence of proportionate liability did not advance the valuer’s case because it has already pleaded the defence of contributory negligence because if one defence fails, the other is then available (it is difficult to imagine how this could be so).
The lender sought to argue that the claims were of a different nature and therefore not apportionable however the court found the loss claimed arising from the failure of the mortgages to provide proper security was the same as the loss contributed to by the officers through their alleged breached, which involved failure to take reasonable care in relation to the loans.
The court also allowed joinder of the officers because even though the Civil Liability Act (NSW) and the TPA (Cth) do not require joinder for proportionate liability to be pleaded, the Wrongs Act (Vic) does.