Pattinson v Bellwether Agriculture Pty Ltd (In Liq)

The first defendant, Bellwether Agriculture Pty Ltd (In Liq) (Bellwether), which is now in liquidation, was incorporated to establish in Australia a business of extracting biogas from manure and other animal waste using technology from the United States and of extracting other resources from the waste such as fertiliser and water using a process known as SBR-BNR (Sequencing Batch Reaction, Biological Nutrient Removal). The executive directors of Bellwether were the second defendant, Mr Allan Richardson, and the third defendant, Mr Christopher Davidson.

Bellwether sought to raise capital for the business. Two potential investors it approached were the first plaintiff, Mr Lewy Pattinson, and Mr Timothy Single, the director of the third plaintiff, Mamaal Pty Limited. Mr Pattinson, Mr Single and Mr Richardson had become friends while attending The King’s School in Parramatta in the late 1960s and early 1970s and had remained friends after leaving school.

Ultimately, Mr Pattinson invested $1,000,000 on 4 December 2007 and Mamaal, Mr Single’s company which acted as trustee of the Single Minded Family Trust, invested $250,000 on behalf of the trust on 13 December 2007. On 17 January 2010, the second plaintiff, Binna Burra Pty Ltd, invested $1,000,000 in Bellwether and Bellwether simultaneously repaid Mr Pattinson a total of $1,000,000. Binna Burra is the trustee of a discretionary trust established by Mr Pattinson. Mr Pattinson is its sole shareholder and director. He is also the principal and only named beneficiary of the trust, although the beneficiaries also include unnamed persons and companies which have a specified connection with Mr Pattinson, anyone determined by the trustee or principal to be a beneficiary and any charitable or religious body.

The venture was not a success and ultimately Bellwether went into liquidation on 17 June 2013.

In these proceedings, the plaintiffs sought to recover the losses they say they have suffered as a result of their investments from Bellwether and various persons associated with it. The proceedings against Bellwether were stayed as a result of its liquidation and, by the commencement of the hearing on 23 October 2017, the plaintiffs had settled with each of the defendants other than Mr Richardson and Mr Davidson.

On the first day of the hearing, counsel for Mr Richardson informed the court that Mr Richardson intended to lodge a debtor’s petition to make himself bankrupt and would not be appearing. Consequently, the hearing proceeded against Mr Davidson and against Mr Richardson ex parte.

On 26 October 2017, Mr Davidson also reached a settlement with the plaintiffs and the court was informed that Mr Richardson had been made bankrupt. Mr Faulkner SC, who appeared for the plaintiffs, submitted that it was not necessary to obtain leave to proceed against Mr Richardson because the relief sought against him was not a provable debt in his bankruptcy and consequently a claim to enforce that relief was not stayed by s 58(3) of the Bankruptcy Act 1966 (Cth). The debt was said not to be provable because of the operation of s 82(2) of the Bankruptcy Act, which provides that demands in the nature of unliquidated damages otherwise by reason of contract, promise or breach of trust are not provable in bankruptcy.

The matter was adjourned until 1 November 2017 to permit the plaintiffs’ solicitor to inform Mr Richardson and his trustee in bankruptcy of their clients’ position and to give them an opportunity to be heard on a continuation of the ex parte hearing against Mr Richardson.

There was no appearance by either Mr Richardson or his trustee in bankruptcy on 1 November 2017, although I was informed that the plaintiffs’ solicitors had been asked by the trustee to inform the court that he is not in funds, that he had incomplete information and that he had been unable to form a concluded view as to whether leave was required.

At that time, I indicated that I had formed the view that leave was not required and that I would give my reasons when giving judgment. I then proceeded to hear the balance of the case ex parte.

In my view, the facts of this case are indistinguishable from the facts considered by the High Court in Coventry v Charter Pacific Corporation Limited (2005) 227 CLR 234; [2005] HCA 67. In that case, the claim was a claim for damages under what was then s 1005 of the Corporations Law of Queensland for misleading and deceptive conduct in contravention of s 995(2). The claim arose from misleading and deceptive representations made by, among others, Mr Andrew Coventry, which had induced the first respondent, Charter Pacific, to enter into a deed by which it invested in and lent money to a company known as Evtech Pty Ltd. Mr Coventry was not a party to the deed. The money was not repaid and the shares proved to be worthless. In June 1990, Charter Pacific sued Mr Coventry for the consequent losses it suffered. At about the same time, Mr Coventry was made bankrupt. He was discharged from bankruptcy in 1997 and the case came on for trial in 2000. The claim succeeded at first instance. It was also held that the claim was not provable in Mr Coventry’s bankruptcy. The High Court upheld that conclusion. It pointed out that claims for unliquidated damages for misleading and deceptive conduct inducing the making of a contract with a bankrupt are claims arising by reason of a contract and are therefore provable (at [71]). However, the same could not be said where the misleading and deceptive conduct resulted in a contract with a third party. The High Court accepted that the result was anomalous. But that anomaly arose from the unequivocal language of s 82 of the Bankruptcy Act and the nature of claims for unliquidated damages: see (2005) 227 CLR 234; [2005] HCA 67 at [72].

The present case is not distinguishable. It involves a claim for misleading and deceptive conduct against the bankrupt for losses arising from a contract with a third party (Bellwether). In the present case, Mamaal’s claim is a claim for damages under s 68 of the Fair Trading Act 1987 (NSW) for contravention of s 42. On the other hand, as I will explain, Mr Pattinson’s primary claim is a claim for an order under s 72 of the Fair Trading Act that Mr Richardson pay Binna Burra an amount that will compensate Mr Pattinson for the loss in value of his interest in the trust. However, a claim for such an order is a claim in the nature of a claim for unliquidated damages because the amount of any order is uncertain and depends on an assessment of the loss suffered by Mr Pattinson: see Australian Competition and Consumer Commission v Kritharas (2000) 105 FCR 444; [2000] FCA 1442; Australian Competition and Consumer Commission v Black on White Pty Ltd (2004) 138 FCR 314; [2004] FCA 363 at [22]-[36]; Director General, Department of Services, Technology & Administration v Veall (No. 6) [2012] NSWSC 1118 at [34] (per Davies J).

The plaintiffs contend that Mr Richardson, in trade or commerce, engaged in misleading or deceptive conduct in contravention of s 42 of the Fair Trading Act 1987 (NSW) (as it was at the time of the alleged contraventions) by making a number of representations to Mr Pattinson, and to Mr Single as the agent for Mamaal. An alternative case that Mr Richardson aided, abetted, counselled or procured or was directly or indirectly knowingly concerned in, or party to, the misleading and deceptive conduct of Bellwether for the purpose of s 75B of the Trade Practices Act 1974 (Cth) was not pressed in final submissions.

The relevant representations are alleged to have been made in a number of documents and orally in a number of conversations. It is not necessary to deal with all the representations identified by the plaintiffs. Many of them are principally concerned with the plaintiffs’ original claim against Bellwether. The critical representations in the case against Mr Richardson were made in writing in an email Mr Richardson sent to Mr Pattinson on 3 November 2007 and orally in a meeting on 5 November 2007 at the Sheraton Hotel in Sydney attended by Mr Richardson, Mr Davidson, Mr Pattinson, Mr Single and two other potential investors.

The email dated 3 November 2007 was sent in response to an earlier email Mr Pattinson had sent to Mr Richardson setting out a number of questions that Mr Single had about the project. Mr Richardson returned Mr Pattinson’s email with his responses inserted in blue after each question. The first two questions and answers were in the following terms:

The answer to the second question must be understood in the context where Bellwether had previously distributed a business plan in August 2007 to Mr Pattinson and Mr Single. That business plan included the following statement:

Mr Pattinson forwarded Mr Richardson’s response to Mr Single (among others) later on 3 November 2007.

The plaintiffs in para 25 of their Further Amended Commercial List Statement plead that Mr Richardson and Mr Davidson made the following representations at the 5 November 2007 meeting, among others:

Both Mr Pattinson and Mr Single give affidavit evidence to the effect that those representations were made. In addition, Mr Richardson admits in para 25 of his Commercial List Response filed on 23 May 2016 that he or Mr Davidson made statements to the effect of those set out in subparagraphs (e), (f) and (g) and that Mr Davidson made statements to the effect of those set out in subparagraphs (a), (b) and (i):

Mr Pattinson also gives evidence that at the meeting Mr Richardson said words to the following effect:

In his Commercial List Response, Mr Richardson denies that he made that statement. However, in my opinion, the likelihood is that he did make a statement to that effect. In connection with the investment both Mr Pattinson and Mr Single and Mamaal entered into a deed with Bellwether. The deed between Bellwether and Mr Pattinson contained the following provisions:

Schedule 1 was in the following terms:

The deed executed by Mr Single and Mamaal was in similar terms except it provided for four repayments of $62,500 each.

The deeds are, to say the least, poorly drafted. However, it is apparent from their terms that Bellwether agreed to repay the amount of the investment in four equal instalments. The likelihood is that they were the expected terms at the time of the meeting on 5 November 2007; and it seems likely that that is what Mr Richardson said at the meeting.

There can be no question that the representations that are either admitted to have been made or I have found were made were made in trade or commerce.

I also accept that the representations were made by Mr Richardson in his personal capacity. Mr Pattinson and Mr Single relied on Mr Richardson personally in making the investment. He was a friend who they trusted and who they regarded as having considerable business acumen. He was not simply passing information on as a cipher for Bellwether.

I also accept the plaintiffs’ submission that it does not matter whether the words relied on were spoken by Mr Richardson or Mr Davidson. It was a joint presentation by both of them and both of them by participating in the presentation must be taken to have confirmed what the other said.

There can be little doubt that each of the representations relied on was a representation with respect to a future matter. Each representation concerned what Bellwether would be able to achieve in the future. Section 41 of the Fair Trading Act relevantly provides:

Mr Richardson has not sought to discharge the onus placed on him by s 41(2). Consequently, the representations made by him are taken to be misleading and deceptive.

I accept that Mamaal (through Mr Single) and Mr Pattinson relied on the representations. The representations were obviously made to induce them to invest in Bellwether. In those circumstances, reliance can be inferred: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [55] (French CJ and Crennan, Bell and Keane JJ); see also Redmond Family Holdings v GC Access Pty Ltd [2016] NSWSC 796 at [84] (Black J).

Mamaal’s claim for damages is relatively straightforward. The evidence is that it borrowed the amount it invested ($250,000) from the National Australia Bank (NAB). I accept that it would not have borrowed that amount but for the representations that induced it to make the investment. Of the amount it invested, Bellwether repaid the first instalment of $62,500, leaving a balance of $187,500. However, it has made no other re-payments and it is apparent that the shares in Bellwether are now worthless. Mamaal claims as damages the $187,500 together with borrowing costs of $101,381.00 as at 16 August 2017. It also claims interest under s 100 of the Civil Procedure Act 2005 (NSW) (CPA) on the amounts that it has paid the NAB. According to Mamaal, that interest comes to $177,766.51 as at 31 October 2017, making a total of $466,647.51.

It is not entirely clear how Mamaal has calculated interest. It provided the court with a schedule setting out the borrowing costs it incurred together with a calculation of the interest it claims under s 100 of the CPA on both the outstanding principal and borrowing costs. However, it is not clear from the schedule how those calculations were performed. In principle, Mamaal is entitled to recover all amounts it has paid or is liable to pay to NAB together with interest under s 100 of the CPA on the amounts that it has paid from the date of payment until the date of judgment less the amount it received from Bellwether. Once the court has been provided with evidence of what those amounts are and when they were paid, judgment should be entered for that amount.

In addition to that amount, Mamaal claims its establishment and maintenance costs, together with those of the Single Minded Family Trust, on the basis that it and the trust would not have been established except to make the investment in Bellwether. The costs claimed are $36,042.50. Mamaal also claims interest on that amount under s 100 of the CPA. Again, it is not clear from the schedule provided to the court how that interest was calculated. There is, however, no evidence that Mamaal, rather than Mr Single, incurred the costs of establishing Mamaal and the trust. The evidence, as might be expected, is that Mr Single established Mamaal and the trust. In the absence of any evidence, I am not prepared to conclude that the costs of establishing and maintaining Mamaal were actually paid for by Mamaal. For that reason, I would not permit Mamaal to recover in respect of this aspect of its claim.

Mamaal made some recoveries against other defendants in the proceedings and professional advisors who were sued in other proceedings. However, I accept that the costs it incurred together with damages that are not claimed in these proceedings exceed the amount of the recoveries so that the recoveries can be put to one side.

In the Amended Summons, both Mr Pattinson and Binna Burra sought relief. The relief sought by Mr Pattinson included an order under s 72 of the Fair Trading Act that Mr Richardson pay $1,000,000, or such other sum as the Court thinks appropriate, to Binna Burra. Section 72 of the Fair Trading Act relevantly provides:

Mr Pattinson contends that he is a person who has or is likely to sustain loss or damage as a consequence of Mr Richardson’s breach of s 42 of the Fair Trading Act (which is in Part 5) because, as a consequence of that breach, he is likely to receive less by way of distributions from the trust and that an appropriate order that will make good that loss is to place the trust in the position it would have been in if it had retained the $1,000,000 that it invested in Bellwether. Although an order that the person in contravention pay money to a third person is not one of the orders set out in s 72(5), the court is not confined to making orders of those types and may make any order “the Court thinks appropriate against the person who engaged in the conduct”.

In the alternative, Mr Pattinson seeks to value the income he has lost from the trust and will lose in the future and seeks to recover that loss as damages under s 68 of the Fair Trading Act.

Binna Burra also sought relief on the basis that it relied on representations made to it in investing $1,000,000 in Bellwether. However, that claim was not pursued in final submissions.

Before dealing with Mr Pattinson’s claim, it is necessary to set out some more background.

As I have said, the original investment was made by Mr Pattinson personally. It is not entirely clear how that investment was funded. It appears that $550,000 was funded from a facility that Mr Pattinson had with the NAB and that the balance was funded from Mr Pattinson’s personal resources. However, it is unclear from the evidence whether Mr Pattinson sold other investments in order to fund the balance or whether the balance was at the time held in a bank account. Mr Pattinson’s total borrowings from NAB at that stage were $1.55 million.

As I have said, I accept that in making the investment Mr Pattinson relied on statements made to him by Mr Richardson which were misleading and deceptive.

In March 2009, Bellwether was taking steps to issue shares to investors in accordance with the investor agreements. In that context, Mr Pattinson sought advice from his accountant and tax advisor, Mr Russell Franey, concerning who should own the shares. Mr Franey advised that it would be desirable to hold the shares through a discretionary trust. Acting on that advice, Binna Burra was incorporated on 24 March 2009 with Mr Pattinson as its sole shareholder and director and the Binna Burra discretionary trust was established by trust deed dated 1 April 2009. The evidence given by Mr Pattinson suggests that Binna Burra was incorporated to hold the shares. However, the evidence given by Mr Franey is that he had recently taken over advising Mr Pattinson on his financial affairs following the retirement of Mr Pattinson’s previous accountant and that he advised Mr Pattinson that it would be desirable if he held his assets through a discretionary trust. The likelihood, then, is that Binna Burra would have been incorporated and Mr Pattinson would have transferred his assets to it irrespective of the investment in Bellwether.

On 3 September 2009, Mr Franey sent an email to Mr Pattinson advising “to have the loan account owing to the Family Trust” and suggesting that that be achieved by Bellwether repaying Mr Pattinson’s loan, Mr Pattinson gifting that amount to the Family Trust and the Family Trust lending the money on the same terms to Bellwether. In fact, what happened was that Binna Burra obtained a loan from NAB for $1,000,000. That amount was paid (by way of bank cheque) to Bellwether by providing ANZ, Bellwether’s bank, with the cheque. At the same time, ANZ provided Mr Pattinson with two cheques. One was for $550,000 and was payable to Mr Pattinson. It was used to discharge his loan to NAB referable to his investment in Bellwether. The other, for $450,000, was payable to Binna Burra and represented a gift by Mr Pattinson to Binna Burra of that amount.

The primary relief sought by Mr Pattinson has two steps.

First, Mr Pattinson submits that if he had not been misled he would not have paid away $1,000,000. Mr Pattinson was entitled to interest on that amount from the time the money was lent until the time it was repaid and the shares in Bellwether transferred to Binna Burra (that is, 1 April 2009) in accordance with s 100 of the CPA. That amount comes to $132,136.98. Mr Pattinson received only one payment on account of interest from Bellwether in the amount of $48,206.16, leaving a balance of $83,930.82.

Second, Mr Pattinson submits that it follows that, but for Mr Richardson’s misleading and deceptive conduct, he would have been able to add $1,083,930.82 to the assets of the trust. If he had done so, he submits that the assets of the trust would, as at 31 October 2017, have been $4,859,854.33 more than is now the case. In making that submission, Mr Pattinson relies on evidence given by Mr Bernard Perkins, an investment advisor engaged by him. According to Mr Perkins, he established a portfolio for Binna Burra on 1 April 2009 consisting of shares in “approximately 10 companies, valued at approximately $100,000 each”. Mr Perkins’ evidence is that the portfolio has generated a return of 19.35 percent, comprising both capital growth and income, compounded, every year from the period 1 April 2009 to 28 February 2017. Mr Perkins says that if Mr Pattinson had had available an additional $1,083,930.82 to invest he would have advised him that Binna Burra should purchase approximately double the number of shares in each company than it actually did rather than purchasing shares in additional companies. He says that he is “very confident” that Mr Pattinson would have accepted that advice. On that basis he applies the same rate of return as earned by Binna Burra in the period from 28 February 2017 to 31 October 2017 to the additional $1,083,930.82 to conclude that the total value of the fund referable to the $1,083,930.82 was $4,859,854.33 as at 31 October 2017 (ignoring a small arithmetic error in Mr Richardson’s favour). Mr Pattinson seeks an order that that amount (or that amount increased at the same compounding rate until the date of judgment) be paid to Binna Burra in order to compensate him for the loss that he has suffered.

In addition to that amount, Mr Pattinson claims:

Like Mamaal, Mr Pattinson made some recoveries. With one exception, the costs incurred exceeded the amount recovered. The exception relates to a recovery of $730,000 in relation to a claim Mr Pattinson brought against his legal advisor. I accept the evidence given by Mr Pattinson’s solicitor, Mr Chapman, that the costs incurred in relation to that claim (after apportioning the costs incurred) total $385,943.62. On that basis, Mr Pattinson made a net recovery of $344,056.38. Mr Pattinson accepts that that amount must be deducted from the amount that he claims.

In the alternative, Mr Pattinson submits that his loss can be measured by valuing the additional distributions he would have received and could have been expected to receive from the trust if it had received an additional $1,082,862.33 on 1 April 2009. That amount is calculated by Mr Franey. Mr Franey took the amount that the trust did receive ($947,543.00). If it had also received $1,082,862.33, then its total assets as at 30 June 2009 would have been $2,030,405.33, which was an increase of 114.28 percent. Mr Franey assumes that in each year the trust assets, and the amount available for distribution, would be increased by that proportion. He gives evidence of the advice he would have given to Mr Pattinson concerning the distributions he would have recommended in those circumstances. Mr Pattinson says that he would have accepted that advice. In substance, that advice would have been that distributions should be made to Mr Pattinson up to the point where his income in the relevant year was approximately $180,000. On that basis, Mr Franey expresses the view that the additional distributions that Mr Pattinson would have received in respect of the financial years ending 30 June 2010 to 30 June 2016 would have been $448,049. He concludes that Mr Pattinson would also have received an additional income stream of $98,821.20 over the next 25 years (representing his life expectancy). He calculates the present value of that income stream using a discount rate of 3 percent to be $1,720,788.15. Mr Pattinson submits that it is necessary to add to those amounts the net interest forgone between 4 December 2007 and 1 April 2009 of $83,930.82 and the mitigation expenses of $645,678.97, making a total (before interest) of $2,898,446.94. From that amount must be deducted the recovery of $344,056.38.

The way in which Mr Pattinson puts his damages claim raises four issues. First, can it be said that Mr Pattinson suffered a loss as a consequence of Mr Richardson’s conduct when he was repaid the $1,000,000 he invested on 1 April 2009? Second, assuming that it can, is it appropriate to calculate Mr Pattinson’s loss by reference to the assumed increase in value of the trust assets if the trust had invested approximately a further $1,000,000 in April 2009? Third, should the court in the exercise of its discretion make an order under s 72 of the Fair Trading Act of the type sought by Mr Pattinson? Fourth, if not, how should Mr Pattinson’s damages be assessed?

As to the first issue, I am satisfied that it is correct to characterise Mr Pattinson’s loss as the loss in the value of his interest in the Binna Burra trust. One of the reasons the trust was established was for the purpose of holding Mr Pattinson’s interest in Bellwether. Mr Pattinson remained exposed to an inability to recover the value of that investment through a diminution in the value of the assets of the trust. That exposure did not come to an end on the repayment of the loan to Mr Pattinson. The direct exposure Mr Pattinson did have only came to an end because it was replaced by an identical exposure held by the trust. It is true that the trust is a discretionary trust and that Mr Pattinson is one of a number of discretionary beneficiaries. However, in circumstances where the trust is controlled entirely by Mr Pattinson, it is still the case that if the trust suffers a loss then Mr Pattinson will or is likely to do so as well.

As to the second issue, in my opinion it is not correct to assume that the trust would have had an additional $1,000,000 to invest in the same portfolio of shares it did invest in if it had not invested in Bellwether. In determining the loss suffered by Mr Pattinson, the question that must be asked is what would have happened if the misleading and deceptive conduct had not occurred. On Mr Pattinson’s case, if the conduct had not occurred, he would not have invested $1,000,000 in Bellwether. There is no evidence that he would have borrowed the amount he did borrow ($550,000) to invest in Bellwether to invest in shares at that stage. Nor is there any evidence of how the other $450,000 was held. Assuming that Binna Burra would have been established in April 2009 to hold Mr Pattinson’s assets even if Mr Pattinson had not invested in Bellwether, it might be inferred that at that stage Mr Pattinson would have had an additional $450,000 that he could and would have gifted to Binna Burra. However, I do not think that it can be inferred that Binna Burra would have borrowed an additional $550,000 to make further investments. It is one thing for it to borrow that amount in order to permit Mr Pattinson to repay a debt he incurred in connection with his investment in Bellwether. It is another thing for Binna Burra to borrow $550,000 to invest in shares, particularly given that the global financial crisis had occurred not that long before. Consequently, the approach underlying Mr Pattinson’s assessment of damages is flawed. The correct question is how much better off Mr Pattinson would have been if he had not invested in Bellwether, not how much better off he would have been if the trust had invested an additional $1,000,000 in April 2009.

In my opinion, there is a further difficulty with the way in which Mr Pattinson seeks to prove the additional assets the trust would have held but for the investment in Bellwether. No evidence is given of what shares the trust held and the actual returns that the trust earned from the investments it made in each year after allowing for distributions to Mr Pattinson. Consequently, there is no way of testing Mr Perkins’ evidence concerning the returns the trust made. Moreover, the average return that the trust is said to have made appears to be notional because it does not take into account distributions made to Mr Pattinson. Lastly, Mr Pattinson’s calculations assume that the trust continued to earn the same average return up until 31 October 2017 and that the court should use that average up until the date of judgment. Again, however, it would be more appropriate to use the actual income earned by the trust during the relevant period for the purpose of calculating the income the trust would have earned if it had acquired additional shares of the same type.

As to the third issue, in my opinion, this is not an appropriate case in which to make an order under s 72 of the Fair Trading Act. I say that for three reasons. First, it is apparent that Mr Richardson will not be able to comply with such an order. He is bankrupt. There is no suggestion that he has available to him assets from which he could satisfy any order made by the court. In my opinion, the court should not readily make an order under s 72 which it knows Mr Richardson cannot comply with. Mr Pattinson submitted that the court could not be certain that Mr Richardson will not be able to comply with the order some time in the future. However, on any view the amount that Mr Richardson would be ordered to pay would be substantial; and there is no reason to think that Mr Richardson will ever be able to comply with that order.

Second, any order made by the court for payment of money to the trust may have the effect of conferring a windfall on a third party – that is, on some other beneficiary of the trust. Mr Pattinson’s primary case is that the trust should receive the same damages as he would have been entitled to if he had not established the trust and if he had made the same investments personally as were made by the trust. But in my view that is not correct. When Mr Pattinson established the trust and gifted his assets to it, he made a decision to substitute for his absolute right of ownership of the assets a lesser right. He did so because that had tax benefits. It is not clear why he should be entitled both to the tax benefits and to receive compensation (paid to the trust) which in effect is calculated on the basis that the transfer was never made. In my opinion the court would only make such an order if it were satisfied that there is no other mechanism for compensating Mr Pattinson for the loss that he now will suffer.

Third, and connected to the second point, although it may be difficult, it is possible to compensate Mr Pattinson for his loss without conferring a windfall on a third party, as Mr Pattinson’s alternative damages calculation recognises. In my opinion, where an adequate remedy is available under s 68 of the Fair Trading Act, there is no reason to make an order under s 72.

As I have said, in the present case, the correct question is what would have Mr Pattinson’s position been if he had not invested $1,000,000 in Bellwether. That has two components. First, before 1 April 2009, Mr Pattinson would not have incurred the borrowing costs that he did on the $550,000 and presumably would have earned some income on the $450,000 (or used that amount to reduce his remaining debt to NAB). On the other hand, he would not have received the amount of $48,206.16 which was paid to him by Bellwether. In my opinion, interest on the $1,000,000 under s 100 of the CPA from the time the investment was made until 1 April 2009 is a reasonable proxy for the borrowing costs Mr Pattinson incurred on the $550,000 and income forwent on the $450,000. Consequently, I am prepared to accept that Mr Pattinson’s loss for that period is $132,136.98 less the amount he received ($48,206.16), making a total of $83,930.82. Mr Pattinson is also entitled to interest on that amount under s 100 of the CPA from 1 April 2009 up until the date of judgment, since he has been out of pocket by that amount during that period.

Second, in respect of the period after 1 April 2009, Mr Pattinson is entitled to recover the amount of any additional distributions that would have been made to him and will be made to him by the trust assuming that the trust had not borrowed $1,000,000 from NAB. Unfortunately, the evidence before the court does not enable that amount to be calculated. The position appears to be that the Binna Burra trust would have been established at the same time. At that time, Mr Pattinson would have had an additional $450,000 to give to the trust, which I accept would likely have been invested in the same way as the amount that was gifted to the trust at that time. In addition, the trust would not have incurred the costs that it did in relation to the borrowing of $1,000,000 and would not have had the liability to repay that amount. The evidence of Mr Franey is that he would have advised Mr Pattinson to cause distributions of income to him up to $180,000 each year. I accept that evidence. There is no evidence that other distributions would or are likely to have been made to Mr Pattinson. The question, therefore, is what additional income (up to a maximum of $180,000) would have been available for distribution to Mr Pattinson in those circumstances. The evidence before the court is inadequate to permit the court to make a proper assessment of that amount. However, in circumstances where Mr Pattinson’s claim was not contested and any reduction in the claim he makes arises from matters the court considers appropriate to take into account on an ex parte hearing, Mr Pattinson should be given an opportunity to provide the court with additional evidence to enable damages to be assessed in accordance with the court’s conclusions. In performing those calculations, it seems to me reasonable to assume that Mr Pattinson’s life expectancy is 25 years and that an appropriate discount rate to use is the 3 percent used by Mr Franey. Of course, it will still be necessary to deduct the net recovery made my Mr Pattinson of $344,056.38.

Mr Pattinson also claims mitigation costs. Those costs consist of the costs of funding the liquidator to conduct public examinations and legal and accounting costs of pursuing other claims in order to reduce his loss.

The evidence concerning those mitigation costs is scant. As to the costs of funding the liquidator to conduct public examinations, Mr Pattinson simply says that he “funded the Liquidator to investigate the affairs of [Bellwether] with a view to recovering sufficient funds to enable repayment of Binna Burra’s and Mamaal’s loans to [Bellwether]. Those investigations included the conduct of liquidator’s examinations of persons involved in [Bellwether]”. No explanation is given of what potential claims were investigated or how the examinations that were conducted were thought to assist the investigation of those claims. In the absence of evidence of that type, it is not possible to form a view that the costs that were incurred were reasonable.

Similarly, the only evidence given in relation to the legal and accounting costs is that Mr Pattinson incurred a total of $337,156.87 “on solicitors’ and accountants’ costs and disbursements since about May 2010 up to the commencement of this proceeding”. No explanation is given of what the costs relate to. Mr Pattinson did tender a bundle of the relevant invoices. However, for the most part the descriptions of the work that was done were redacted, presumably on the basis that it was the subject of a claim for client legal privilege, and it is not possible from the invoices to get any real sense of what work was done and to what extent the work was unrelated to the current court proceedings. It may be inferred that some of the work related to the costs of serving statutory demands on Bellwether for the debt claimed by Mr Pattinson and for subsequent winding-up proceedings on the basis that Bellwether was insolvent. I accept that those costs, to the extent that they are reasonable, would be recoverable. However, there is no means of determining what they are on the basis of the evidence before the court. It is also apparent that the work that was undertaken related to claims brought by Mamaal and two other investors. Again, in the absence of more detail, I am not satisfied that the amount claimed is reasonably recoverable as mitigation costs.

Mr Pattinson bore the onus of proving that the costs he incurred were reasonable and that they were incurred to mitigate his loss rather than in connection with the current court proceedings. He has failed to discharge that onus. They are matters that Mr Pattinson could reasonably have been expected to address at the time he filed his evidence. For those reasons, I do not think that he should be given a further opportunity to address this aspect of his claim for damages.

No defence of contributory negligence arises in respect of a claim under the Fair Trading Act. Mr Richardson pleads in his Response that the claim was an apportionable one, that there were concurrent wrongdoers and that his liability ought therefore to be limited under s 35 of the Civil Liability Act 2002 (NSW). However, Mr Richardson has produced no evidence in support of that contention. It therefore must fail.

On the conclusions I have reached:

The orders of the court are: