City Pacific Ltd (in liq) v CBRE (V) Pty Ltd

HIS HONOUR: By a further amended statement of claim (“FASOC”) filed in Court on 4 September 2019, City Pacific Ltd (in liq) (“City Pacific”) and Martha Cove Marina Pty Ltd (in liq) (“Martha Cove”) (collectively, “the plaintiffs”) brought a claim for damages against CBRE (V) Pty Ltd (“CBRE”) and Christopher Nicodimou, a certified practising valuer formerly employed by CBRE (collectively, “the defendants”). There is no issue that CBRE was liable for Mr Nicodimou’s conduct. The plaintiffs are now in liquidation.

The plaintiffs’ claim arose out of valuation reports, prepared by the defendants of Lot S17 (also known as stage S6 and 2H, being initially 239 and subsequently 233 marina berths) (“the Marina”), which formed part of the Martha Cove Development on the Mornington Peninsula in Victoria. (The Marina was also interchangeably referred to in documentation and by the parties as “the Martha Cove Property”, “Lot S17” and “the Marina lot”). The reports also contained valuations of the following properties: Lots S22, S23 and S24 on Plan of Subdivision 435310J, which were part of the Martha Cove Development (collectively, “the Other Properties”). However, the valuations of the Marina are what were in issue in the present proceedings.

Three valuation reports were prepared with respect to the Marina and the Other Properties, namely:

The relevant valuations for the purposes of the plaintiffs’ claim were the June Valuation and the Amended Indigo Valuation (which shall hereinafter be referred to as, collectively, “the valuations”). I shall return to the contents of those valuations, and the entities mentioned therein, below.

The Marina has never been transferred to Martha Cove and the vendor has failed to repay any of the Martha Cove Property Monies. Consequently, Martha Cove has been unable to repay the debt it owed to City Pacific.

The plaintiffs contended that the valuations:

The plaintiffs also contended that, in reliance on the valuations and associated representations:

In an agreed glossary of terms provided by the parties, the Martha Cove Property Monies were said to have comprised of the following separate payments:

I will return to the circumstances of those payments in the context of the factual background.

The plaintiffs submitted that, but for the conduct of the defendants, they would not have entered into those abovementioned agreements and paid the Martha Cove Property Monies.

If they had known the true value of the Marina, City Pacific would not have paid to the benefit of Martha Cove those monies, and Martha Cove would not have paid those moneys to the vendor.

Broadly, the plaintiffs’ claim had then two elements:

In summary, the defendants’ position was that the plaintiffs’ Duty Case and Representation Case failed at every stage of the relevant inquiries to be made by the Court. That is:

The defendants further contended that, if the plaintiffs were to overcome each of those hurdles, the damages should be reduced by 100%, or close to that figure, on account of contributory negligence or the concurrent wrongdoing of the directors, Philip Sullivan, Director of City Pacific and Martha Cove, and James Finucan, Director of Martha Cove.

The parties provided a joint dramatis personae, which relevantly detailed the key companies/entities, individuals, together with an agreed glossary, which is incorporated into the following summary.

As mentioned at the outset, City Pacific and Martha Cove are the plaintiffs. This next section introduces both corporations, together with the relevant and related entities associated with the plaintiffs.

City Pacific was a financial services company, the business of which included mortgage backed securities and other forms of property funding.

The principal activity of City Pacific was to act as the responsible entity of a number of registered managed investment schemes, including the City Pacific Mortgage Trust (“CPMT”). City Pacific also made various investments in its own right.

The CPMT was established on 13 July 1999. It invested in property secured by registered first mortgage. As mentioned above, City Pacific was the manager and responsible entity, specifically from 13 July 1999 to 7 July 2009.

The CPMT was referred to by different names between 1999 and 2009, as follows:

The Public Trustee of Queensland (“PTQ”) was the custodian of the CPMT.

City Pacific was the parent entity of CP1 Limited (“CP1”). CP1 was a subsidiary and controlled entity of City Pacific and the owner of all of the issued share capital of Marina Cove Pty Ltd (“Marina Cove”).

City Pacific was a related party of Marina Cove. As mentioned above, Marina Cove was a wholly-owned subsidiary of CP1. It was the registered proprietor of the Marina and Other Properties prior to 18 July 2006. Marina Cove Pty Ltd was deregistered on 25 March 2019.

City Pacific was a related party of Indigo Pacific Capital Limited (“IPC”).

Liquidators were appointed for City Pacific on 28 August 2009.

Martha Cove is the second plaintiff. It was a wholly-owned subsidiary of City Pacific. It was also the purchaser of the Marina under the Contract of Sale dated 8 October 2007. (Hence, the description of the “Martha Cove Property” being commonplace as a reference to the Marina).

Liquidators were appointed for Martha Cove in 23 October 2009.

CBRE and Mr Nicodimou are the defendants.

CBRE was one of Australia’s largest commercial real estate services companies, offering services including property management, valuation and advisory services, residential and retail sales and leasing, debt and structured finance, institutional and international investment.

Mr Nicodimou was a certified practising valuer from at least 2006 to 2008. He was an employee of CBRE from at least 2006 to November 2008.

The expression “Indigo group” as used in the proceedings, was not intended to convey the existence of a legal entity or commercial connotation. It was adopted by the parties as a “shorthand” adjectival term; as a means to describe three companies that had “a loose commercial affiliation”. Those companies were as follows:

ILO was, relevantly, the registered proprietor of the Marina from 18 July 2006 to 21 July 2015.

It was also the trustee of the following trusts:

It was deregistered on 18 November 2018.

IHPO, relevantly, was the registered proprietor of the Other Properties from 18 July 2006 to 15 January 2014.

It was the trustee of the following trusts:

It was deregistered on 16 November 2014.

IPC was a public company which specialised in providing funding to property developments. Its business included lending money to IHPO and ILO, but IPC did not have any ownership interest in those two companies.

As mentioned earlier, it was a related party of City Pacific.

The IPC was deregistered on 25 December 2016.

The Australian Property Institute (“API”) was an industry recognised organisation for property professionals in Australia which, together with the Property Institute of New Zealand:

Reference was made to API Practice Standards and API Guidance Notes in these proceedings.

MCD (Aust) Pty Ltd (“MCD”) was a property advisory company which instructed CBRE to prepare valuations “on behalf of Indigo group”. I will return to the role of MCD in the context of the Indigo and Amended Indigo Valuations.

In addition to the multitude of relevant entities, the factual matrix of these proceedings was complicated by the number of “key individuals” that held and/or changed positions within one or more of the abovementioned entities. As such, the key individuals, together with their respective roles at relevant times, are summarised in the below in tabular form, by reference to the following groupings:

As mentioned above, as part of their joint dramatis personae, the parties produced an agreed glossary of terms. It is convenient, at this juncture, to set out some of those terms.

A valuation of a property in which it is assumed that any proposed work on the property is already complete at the date of inspection and reflects the market at that date.

A valuation of a property in its current physical condition, use, and zoning at the date of inspection.

A designated location in a port or harbour used for mooring vessels when they are not at sea.

To that definition it may be added, a “freehold berth” is a berth subject to freehold ownership. A “leasehold berth” is a berth subject to a lease.

A valuation methodology which involves converting the property’s income stream into a capital value estimate through a capitalisation process.

The sum of the market values of the individual units which a property can achieve over a specified selling period, assuming an orderly sale, between willing buyers and willing sellers, in arm’s length transactions, after proper marketing, wherein the parties acted knowledgably, prudently and without compulsion.

The evidence in the proceedings was voluminous and primarily consisted of the following documents:

At the hearing Mr Lane, Mr Wright and Mr Gordon, the expert witnesses, provided oral evidence via concurrent evidence. I will turn to a summary of the expert evidence in the course of my considerations after setting out the factual background.

In considering the lay evidence given by each party, it is important to bear in mind the respective positions of the parties. The plaintiffs are in liquidation and bring these proceedings by their liquidator, Mr Cathro. Mr Cathro has put in evidence of the documents available to him. The plaintiffs did not call any of their former officers. As was common ground, and stated by counsel for the defendants on a number of occasions, Mr Cathro in his capacity as liquidator of City Pacific had sued some of those officers in separate proceedings. Jones v Dunkel has no application to the position of the plaintiffs, the former directors and employees of City Pacific are not in the same camp as the companies in liquidation: see, by analogy, Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345 at [254] and [265] (per Heydon J).

On the other hand, Mr Nicodimou was available and was not called by the defendants. I accept the submissions of the plaintiffs that the Court should not draw any inference favourable to the defendants as to what Mr Nicodimou may have said orally regarding the valuations or how it was that he came to adopt a particular valuation methodology.

The Court had the benefit of detailed and comprehensive written submissions prepared by counsel for the plaintiffs, Mr J C Giles SC with Mr B G Curtin, and the defendants, Mr D A Lloyd SC with Ms V Bulut. Their written submissions are as set out below:

During the course of proceedings the parties were requested to identify agreed facts and to crystallise factual matters that were in dispute. In relation to agreed matters, there was produced, at an earlier stage, an agreed statement of facts. Later in the proceedings, a document was prepared which set out, in part, those parts of the plaintiffs’ written submissions providing a factual background with respect to which the defendants agreed.

As to the disputed matters, the defendants response to the plaintiffs factual submissions contained notations as to some factual issues which was supplemented by a more substantial document, from the defendants, setting out nine factual controversies. The plaintiffs objected to that document on the basis it did not conform with the agreement reached between the parties to identify the parties’ positions with respect to the factual background by reference to the plaintiffs’ written submissions and also because the document did not properly represent all relevant factual controversies.

The following discussion of the factual background proceeds upon the large measure of agreement as to the factual background, which agreement conforms with the Court’s view of the evidence, together with the resolution of factual controversies (except to the extent those controversies are dealt with in the consideration section of this judgment). In adopting that approach, I proceeded upon the basis that, regardless of the disconformity of the document produced by the defendants with arrangements entered at the final day of hearing, the Court should grapple with those issues so far as they represented, as they did, various factual contests over which the parties joined issue in the course of the proceedings. In other words, regardless of the form of the document and its timing, the issues raised were squarely before the Court and should be dealt with, although the document does not deal with all of the factual controversies laying between the parties. Those broader range of issues are also addressed in the following discussion, albeit in the context where the utility of the approach earlier envisaged by the Court was diminished to some degree by the approach adopted by the defendants.

In about January 2006, Mr Nicodimou signed a document entitled “Quality Assurance Procedures for Mortgage Security Valuations”, acknowledging CBRE’s mandatory procedures for mortgage security valuations.

On about 10 March 2006, Mr Nicodimou provided Mr Sullivan of City Pacific with a copy of a draft valuation of a number of properties within the Martha Cove Development, including the Marina. The draft valuation was titled: “A Valuation Report prepared for City Pacific Limited Of Stages 2A —H, S7, S8 & 3, 4A-C, 5, 6, Martha Cove Safety Beach VIC 3004” (“the draft valuation”) and dated 9 February 2006.

In s 1.1 of the draft valuation, the defendants recorded the instructions they had received from City Pacific dated 27 February 2006, being, relevantly, to assess the “Current Market Value ‘As Is’” and the “Gross Realisation ‘As if Complete’” of the Marina for “first mortgage security purposes”. Section 1.1. is extracted below:

The draft valuation responded to express instructions to value the Marina on a gross realisation basis.

At some stage prior to 25 May 2006, Marina Cove became the registered proprietor of the Marina and the Other Properties. As earlier mentioned, City Pacific was the ultimate parent company of Marina Cove.

On about 28 April 2006, Marina Cove provided various documents to Mr Neilsen at IPC, including feasibility reports for the Marina and Other Properties, in connection with a proposed sale of those properties to the Indigo group. The defendants disputed the relevance of this fact to the proceedings, but did not appear to dispute its occurrence.

It is apparent that it was anticipated that the purchase by the Indigo group was to be funded by a loan by City Pacific in its capacity as responsible entity of the CPMT. In the events which occurred, Marina Cove also provided vendor finance. Although that is part of the factual setting, the vendor finance does not inform the analysis. The purchaser repaid Marina Cove in about August 2007.

By letter dated 25 May 2006, addressed to Mr Nicodimou, City Pacific engaged CBRE to provide a valuation report in respect of the Marina and the Other Properties for mortgage security purposes in accordance with “City Pacific Limited Valuation Guidelines” (“the Valuation Retainer”). The Valuation Retainer expressly stated that the valuation report was to be relied upon by City Pacific and PTQ as custodian for the CPMT.

The purpose of the valuation, expressly stated in the letter, was that City Pacific was considering funding, by loan, the acquisition by an Indigo group company of the Marina and Other Properties. The following facts are not controversial:

At the outset, the Valuation Retainer stated:

As to that initial instruction, the plaintiffs contended that the reference to “procedures, processes, enquiries and examinations that would reasonably be expected of a registered valuer to determine market value of the property” is informed by the API Practice Standards and the expert evidence before this Court. Reference, in that respect, was made to Practice Standard 1, in particular, para 4.0, which is extracted below:

The effect of that standard, it was correctly submitted, “is that a gross realisation analysis is not to be stated as a valuation of separate properties”. That requirement, it was further contended by counsel for the plaintiffs, was consistent with the suggestion ultimately made by Mr Wright that a gross realisation might be an integer in a valuation, but otherwise tells one little or nothing about the market value of a property. That evidence is extracted below (T112.48-115.20):

That conclusion also follows as the definition of market value which was adopted in substance reflecting the well-known Spencer v Commonwealth of Australia (1907) 5 CLR 418 (“Spencer”) definition at 431-432 (per Griffith CJ).

Returning to the Valuation Retainer, the following “special instructions” were also included:

The Valuation Retainer incorporated a copy of the City Pacific Limited Valuation Guidelines (which included “the Report Content Requirements”) (collectively, “the Valuation Guidelines”). An extract of those guidelines appears below:

Immediately following that table was a further table described as “Valuation Report Content where applicable”. It included additional guidelines with respect to the content of the report and including, inter alia, the following categories:

Next to the heading, “Valuation Rationale”, the following guidelines relevantly appeared:

Next to the heading, “Determination of Value and Summary”, the following guideline relevantly appeared:

On 1 June 2006, Mr Nicodimou sent an email to Mr Gillam, then the Assistant Lending Manager at City Pacific, providing details of the valuations for the Marina and the Other Properties. That email stated:

On 1 June 2006, Mr Gillam responded by an email to Mr Nicodimou, which stated:

Later that day, Mr Nicodimou responded by an email to Mr Gillam, which stated:

A factual dispute arose as to the effect of Mr Gillam’s emails with Mr Nicodimou upon the instructions given to the defendants via the Valuation Retainer.

In support of that finding the defendants contended:

For the following reasons, I do not accept that the email exchange between Mr Gilliam and Mr Nicodimou in June 2006 constituted a change of instructions set out in the Valuation Retainer:

In about June 2006, Marina Cove agreed to sell the Marina and the Other Properties to the Indigo group.

After exchanging preliminary offers, on 22 June 2006, City Pacific, in its capacity as the responsible entity of the CPMT, offered to provide a facility of $27.84 million to the Indigo Group for the purposes of acquiring the Marina and the Other Properties (“the Indigo Loan Facility”).

The parties provided the following agreed definition of the Indigo Loan Facility:

On the same day, Marina Cove offered to provide a facility of $6.88 million to the Indigo Group to assist with the purchase of security, expenses and interest costs associated with the Indigo Loan Facility (“the Indigo Mezzanine Facility”).

The parties provided the following agreed definition of the Indigo Mezzanine Facility:

Both offers were subject to the provision of security by the Indigo group, including mortgages over the properties, and to a satisfactory valuation for mortgage security purposes being obtained.

The offers did not commit City Pacific; its commitment to lend on the terms suggested being subject to its determination that the security was of sufficient value.

The Indigo Group accepted the offers on 26 June 2006. City Pacific’s commitment to lend remained subject to, inter alia, satisfactory valuations of the security.

The plaintiffs contended that between 26 and 29 June 2006, in connection with the proposed sale and finance of the Marina and the Other Properties, Mr Gillam and Mr Nicodimou exchanged emails and had discussions pursuant to which Mr Gillam requested that the assessment of market value and the valuation for the Marina and Other Properties be increased.

Conversely, the defendants submitted that there was no evidence before the Court as to the contents of any discussions between Mr Nicodimou and Mr Gillam. The Court can only proceed, it was submitted, on the basis of the contents of the emails which were in evidence. Those emails are extracted below.

On 26 June 2006 at 6.08pm, Mr Nicodimou sent an email to Mr Gillam, which stated:

On 27 June 2006 at 9.03am, Mr Gillam responded by email to Mr Nicodimou, which stated:

Later on 27 June 2006 at 1.36pm, Mr Gillam sent a further email to Mr Nicodimou (“the Further 27 June 2006 Email”), which stated:

In my view, notwithstanding the absence of viva voce evidence from either Mr Nicodimou or Mr Gillam (noting that neither were called to give evidence in these proceedings), it may be plainly inferred that the two men were engaged in discussions between 26 and 29 June 2006, which included verbal conversations not captured in the above email exchange. That conclusion is supported by the content of the above emails, in particular, the repeated references to “phone message” and “give me[/you] a call”, which features in each email. That said, as to the nature and contents of any conversation had, it may only be inferred that the it connected to the issues raised in the emails. No further conclusions are available on the evidence before the Court. As such, the weight to be put on the fact of such conversations is limited.

The plaintiffs contended that the Further 27 June 2006 Email informed Mr Nicodimou of the relationship between City Pacific and the purchaser (at that time). The text relied upon in the Further 27 June 2006 emailed was:

The defendants submitted that the email speaks for itself. At its highest, it tells of a relationship but not the nature of extent of that relationship.

In the absence of Mr Nicodimou being called to give evidence, it is difficult to see how significant weight can be attached to a statement of Mr Gillam to Mr Nicodimou as to the relationship between City Pacific and the Indigo Group. As to this second factual controversy, I accept the submission of the defendants. At its highest, the Further 27 June 2006 Email, in particular the passage relied upon by the plaintiffs, indicates that a relationship existed as at that time but does not sustain an inference as to Mr Nicodimou’s knowledge of the nature or extent of such a relationship as at that time.

The plaintiffs advanced the following submissions as to the significance of the Further 27 June 2006 Email:

In contrast to the first contention, the defendants relied on the course of correspondence between City Pacific and Mr Nicodimou between 25 May 2006 (the date of the Valuation Retainer) and when the June Valuation was completed as evidencing a change in instructions.

In reply to that contention that plaintiffs submitted:

Further, even if the Court accepted the defendants’ submission, the plaintiff submitted, such a fact would not diminish the plaintiffs’ case for the following reasons:

In my view, the course of correspondence does not permit, for the reasons advanced by the plaintiffs in their reply submissions, a change of instructions. With that finding includes a consideration of whether or not Mr Gillam had such authority and/or capacity to make such variations.

On 30 June 2006, Mr Nicodimou sent an email to Mr Gillam attaching the final signed June Valuation. The Valuation Retainer and Valuation Guidelines were annexed to the June Valuation (see Appendix I to the June Valuation). There is no express statement of any different instruction.

The June Valuation valued the Marina and the Other Properties as at 18 May 2006 for a total assessed value of $34.8 million (excluding GST). The June Valuation was comprised as follows:

The “client” listed on the June Valuation was City Pacific.

In light of the contentions raised by the plaintiffs in these proceedings, it is necessary to set out particular aspects of the June Valuation.

The June Valuation is divided into seven broad areas:

In addition to those topics, the June Valuation included a “Valuation Summary”; “Assumptions, Disclaimers, Limitations & Qualifications”; and Appendices I-VI.

In written submissions, the parties made particular reference to the contents appearing within Introduction, Property Description, Sales Evidence for "As Is " Values, and Valuation Rationale. Reference was also made to the disclaimers included within the report. The relevant passages are extracted below.

Section 1.1 is extracted below:

The definitions of “Market Value”, “Gross Realisation” and “As If Complete” adopted in the June Valuation appear at s 1.6, see below:

At s 3.1, the land that was subject to the valuation was set out. Under the heading “Overall Proposal” the following appeared:

An extract appears below:

Section 3.2 is titled “Development Timeline”. The section confirms that CBRE “have been provided with a detailed development timeline for the subject development”, which “form part of Stage 2”. Following a table that sets out the timing for development from Stage 2 to Stage 6, the following is recorded:

Section 5.2.1 provided:

Section 5.5 is extracted below:

Sections 6.1 and 6.2 appear below:

It may be noted that the valuation amount of $22.5 million, with respect to Lot S17, appears consistently throughout the June Valuation.

Two disclaimers appeared in the June Valuation, which attracted significant controversy in the context of the parties’ respective cases vis-à-vis reliance (particularly in the context of the Amended Indigo Valuation, which will be set out below). The relevant disclaimers are found on page vi and s 1.4 of the valuations.

The disclaimer on page vi appears next to the heading “Assumptions, Disclaimers, Limitations & Qualifications”. It is extracted below:

Section 1.4 is also described as a disclaimer. Under the heading, “Extension of Liability & Confidentiality”, the following appears:

I will return to the plaintiffs’ contentions as to the alleged misleading and deceptive representations within the June Valuation at a separate juncture in the context of a consideration of the relevant issues in dispute.

On about 29 June 2006, a proposal in relation to the Indigo Loan Facility was prepared. The proposal was titled: “Proposal – Variation/Extension of Loan”. An extract of that proposal appears below:

That proposal referred to a valuation date of 18 May 2006 and a property value of $34.8 million, which details correspond with the June Valuation. That proposal adopted the June Valuation. Further, City Pacific at that stage, it was contended, was expressly acting in reliance on the June Valuation.

The sale of the Marina and Other Properties occurred, financed by City Pacific as responsible entity for the CPMT and by vendor finance from Marina Cove. On the same day, the sale of the Marina and Other Properties occurred, financed by City Pacific as responsible entity for the CPMT and by vendor finance from Marina Cove. A number of documents were executed effecting the sale of the Marina and the Other Properties, including:

On 30 June 2006, a number of documents effecting the Indigo Loan Facility and the Indigo Mezzanine Facility and associated security were also executed, including:

The effect of those transactions, when completed, relevantly was that ILO acquired the Marina, funded by PTQ as custodian of the CPMT. Marina Cove provided mezzanine finance, secured by a second ranking mortgage.

As to the issues concerning the operation of s 601FS of the Corporations Act 2001 (Cth) vis-à-vis the rights, obligations and liabilities of former responsible entities, I will return to those contentions at a separate juncture in the context of the consideration of the issues in dispute.

By early 2007, ILO was looking to sell or refinance the Marina.

By letter of instruction dated 14 February 2007, MCD on behalf of the Indigo group engaged CBRE “to update the Valuation for Martha Cove Activity Centres for the Marina Lot S17 and the apartments at Lots S22, and 24 to reflect Current Market Value “As Is” acknowledging the permit, approved plans for each Lot S17, Lot S23, Lot S22 and S24 on Plan of Subdivision PS435310J (Stages S7, S8, 2H, S6 of the Martha Cove Master Plan” (“14 February 2007 Letter”).

That letter of instruction is extracted in full below:

On 16 March 2007, Mr Nicodimou provided MCD with a valuation report in response to the above instructions, and which expressed an opinion as to market value as at 30 January 2007. That valuation report was titled: “A Valuation Report prepared for MCD AUSTRALIA ON BEHALF OF INDIGO (MARTHA COVE HARBOUR PRECINCT LAND OWNER) PTY LTD Of “Martha Cove Marina & Commercial Centre” Lot S17, Lot S23, Lot S22 and S24 on Plan of Subdivision PS435310J “Martha Cove” Safety Beach VIC 3936” and dated 30 January 2007 (“the Indigo Valuation”). The relevant letter of instruction is extracted below:

In light of the contentions raised by the plaintiffs in these proceedings, it is necessary to set out particular aspects of the Indigo Valuation.

The Indigo Valuation was divided into seven broad areas:

The Indigo Valuation valued the Marina (namely, Lot S17) at $27.7 million GST exclusive on a “Gross Realisation – As if Complete” basis. The date of valuation was 30 January 2007.

The client listed on the Indigo Valuation was “MCD Australia on behalf of Indigo (Martha Cove Harbour Precinct Land Owner) Pty Ltd”.

The relevant instructions provided to CBRE by MCD commissioning the valuation were set out at s 1.1, extracted below:

The definitions of “Market Value”, “Gross Realisation” and “As If Complete” appeared again at s 1.6. The definitions adopted for the purposes of the June Valuation were repeated in the Indigo Valuation.

At s 3.1, the land that was subject to the valuation was set out. Under the heading “Overall Proposal” the following appeared:

. An extract appears below:

Section 3.2 is titled “Development Timeline”. The section confirms that CBRE “have been provided with a detailed development timeline for the subject development”, which “form part of Stage 2 and Stage 3”. Following a table that sets out the timing for development from Stage 2 to Stage 6, the following is recorded:

Relevantly, at ss 5.2.1 and 5.5, the following appeared:

Sections 6.1 and 6.2 appear below:

It may be noted that the valuation amount of $27.7 million, with respect to the Marina (namely, Lot S17), appears consistently throughout the Indigo Valuation.

For completeness, it may be noted, there is a discrepancy between the timeline of the date of the letter of instruction annexed to the valuation and the date of valuation, with the latter preceding the former. This discrepancy was not the subject of any submissions and not appear to impact upon the resolution of the issues in dispute.

I now turn to three particular factual controversies raised with respect to the Indigo Valuation, which concerned the following:

As to Mr Nicodimou’s knowledge of the relationship between City Pacific and the Indigo Group as at 2007, the plaintiffs relied upon their submissions with respect to Mr Nicodimou’s knowledge as at 2006 and, furthermore, the content of the letter of instruction dated 14 February 2007. Turning to the letter, the plaintiffs highlighted the first line of the letter, which stated: “MCD Australia on behalf of Indigo Group, confirm your commission to update the Valuation for Martha Cove Activity Centres for the Marina Lot S17…” (emphasis added). It was contended that such words confirm that it was expressly communicated to Mr Nicodimou that it was the Indigo Group that engaged CBRE to provide a valuation of the Marina.

Additionally, in consideration of this controversy, Mr Nicodimou’s appreciation for a relationship may also be inferred by the subject line of his letter address to MCD: “Valuation Report — City Pacific Land Portfolio”.

In written submissions, the plaintiffs also submitted:

The relevant part of Mr Wright’s evidence at the hearing, relied upon in the preceding submission, is extracted below (see T109.35-110.31):

Turning to the position of the defendants, with respect to the same, they repeated there earlier submission with respect to the evidence of Mr Nicodimou’s knowledge of the relationship as at 2006, namely, there was no evidence that CBRE was told of the nature or extent of the relationship but “merely of the existence of a relationship with the Indigo Group, whatever that label actually means”.

In light of my earlier finding, I accept that Mr Nicodimou had knowledge of the relationship between City Pacific and the Indigo Group. Further, I accept that Mr Nicodimou must have or should have understood the instructing relationship as existed in exchange above.

As to Mr Nicodimou’s knowledge of the instructions given to CBRE by MCD, the plaintiff’s contended that, objectively, the defendants knew that the Indigo Group had the June Valuation, as that what was requested in the 14 February 2007 Letter was an “update” of that valuation.

The defendants submitted that there was no evidence that the “Indigo group” had the June Valuation, nor was there any evidence as to what was being sought to be “updated”.

I accept the submission advanced by the plaintiffs for the following reasons:

The plaintiffs contended that, on 16 March 2007, CBRE provided MCD with the Indigo Valuation, as defined in the FASOC.

The defendants’ position was that the evidence before the Court did not reveal what version of the valuation was enclosed with the letter dated 16 March 2007. That is, whether it was the “Indigo Valuation” (as defined in the FASOC), the “Amended Indigo Valuation” (as defined in the FASOC) or some other variation.

In light of the letter of instruction annexed to the Indigo Valuation, the inference to be drawn is that the Indigo Valuation was provided with the letter dated 16 March 2007.

From about May 2007, City Pacific began investigating the possibility of setting up a Marina Trust to buy various marinas, including the Marina. As to City Pacific’s knowledge of the value of the Marina, at that time, the plaintiffs contended such knowledge was derived from the June Valuation. It was further contended that neither of the defendants had told City Pacific that the June Valuation was other than a valuation at market value, or that it was other than a valuation which expressed an opinion that the Marina would hold value, as expressly requested, over the 3 to 5 years from mid-2006 (the time of the June Valuation). I will return to this issue below, in the context of representations made by the defendants.

In June 2007, City Pacific and representatives of the Indigo Group began negotiating an option for the proposed Marina Trust to buy the Marina for approximately $30 million. That appears to be the price ILO was prepared to negotiate.

On 13 June 2007, Mr Kelly, CFO of the Indigo Group, sent an email to Mr Nicodimou providing information in relation to a valuation of the Marina (“the 13 June 2007 Email”), which was in the following terms:

The email attached an excel spreadsheet, which consisted of several “worksheets”. The file was titled: “Martha Cove Marina All Sales Master” (“the All Sales Master file”). Whilst express reference was made to a “cashflow worksheet” within the All Sales Master file, the file consisted of the following spreadsheets (or worksheets):

I accept that the All Sales Master file was provided to Mr Nicodimou. The file included information with respect to, inter alia, cashflow, berth configurations and lease terms. The plaintiffs contended that upon a comparison of the data in the Allocations sheet and the Offering Model with ss 3.1, 5.2 and 5.2.1 of the Amended Indigo Valuation, information from that spreadsheet was incorporated into that valuation. That submission is further supported by reference to para 7.1 of Lane Reply Report (which I will return to below).

As to that contention, the defendants submitted, there is no evidence before the Court as to when the information recorded in the Amended Indigo Valuation, namely, at ss 3.1, 5.2 and 5.2.1, was provided to CBRE for the first time. Further, it was submitted, that the email from Mr Kelly only draws Mr Nicodimou’s attention to the “cashflow” tab of that spreadsheet document. That submission refers to the second bullet point in Mr Kelly’s email: “A lease sales forecast set out in the cashflow worksheet in the attached All Sales Master file”.

In light of the fact that the All Sales Master file was provided to Mr Nicodimou on 27 June 2007, in his capacity as an employee of CBRE, I accept that to be the date upon which CBRE was first alerted to the information in the spreadsheet. To the extent that the information was then, in turn, incorporated into the Amended Indigo Valuation, I also accept 27 June 2007 as the first instance at which that information was communicated to CBRE.

On 24 June 2007, Angela Tinson, City Pacific’s solicitor, sent the following email to Mr Finucan of City Pacific:

That same day, Mr Finucan replied by copying in Mr Sullivan (Director of Martha Cove with Mr Finucan) and Mr Mackay of IPC.

On 25 June 2007, Mr Mackay forwarded the email chain, including Ms Tinson’s email of 24 June 2007, to Adam Purss, the CFO of City Pacific. On that same day, in reply to the email of Mr Mackay, copying in Mr Finucan, Mr Purss sent the following communication:

On 25 June 2007 at 4.07pm, Terry Lambert, ILO’s solicitor sent an email to Angela Tinson, City Pacific’s solicitor, regarding sale of the Marina (Mr Kelly was also copied into the email). The subject of the email was “Indigo (Martha Cove Marina Land Owner) Pty Ltd proposed sale to Indigo Pacific Capital Ltd - Marina Lot (S17), Martha Cove - 'Subject to Agreement'”. That email is extracted below:

Relevantly, the proposed sale price was “$30 million (exclusive of GST)”. On that same day at 4.15pm, Ms Tinson forwarded Mr Lambert’s email onto City Pacific representatives: Mr Rob Donaldson and Mr Finucan. The contents of that email may be briefly stated: “Rob/Jimmy, Please see below from Indigo's solicitors. Please can you confirm the terms are as you had agreed - is the sale to IPC Ltd?”.

Later that evening at 8.11pm, Ms Tinson sent a further communication in relation to the email of Mr Lambert to Mr Donaldson and Mr Finucan. That email is extracted below:

On 26 June 2007 at 8.11am, Mr Finucan forwarded Ms Tinson’s email (of 8.11pm) and Mr Lambert’s email (setting out the proposed terms of the option) onto to Mr Purss and Mr Mackay. The email was brief and read: “Please consider the below emails and advise the correct position in respect to this matter”.

On 26 June 2007 at 8.24am, Mr Purss replied to the Mr Finucan’s email and copied in Mr Johnstone. That email is extracted below:

That same day, at 8.36am, Mr Johnstone replied to Mr Purss’ email. That reply is extracted below:

At 8.39am, Mr Purss sent a further email to Mr Kelly, which stated:

At 4.12pm, Ms Tinson provided a reply to Mr Lambert’s email, on behalf of City Pacific, which is extracted below:

The terms proposed by Mr Lambert (in the email dated 25 June 2007) were not agreed and were not accepted by City Pacific. It was not controversial that at least in part those terms were subject of negotiation and variation.

On 26 June 2007 at 1.40pm, Mr Kelly sent an email to Mr Purss a valuation report prepared by CBRE, which valued the Marina at $27.3 million (“the 26 June 2007 Email”), which stated:

The plaintiffs contended that the valuation report attached to the 26 June 2007 Email was the Amended Indigo Valuation. I now turn to that valuation and the factual controversies in that respect.

The Amended Indigo Valuation was also prepared by the defendants, and the date of valuation is stated to be “30 January 2007” and in response to MCD’s letter of instruction dated 14 February 2007. It contains very few changes to the Indigo Valuation. Notwithstanding an acceptance by the defendants that both the Indigo Valuation and the Amended Indigo Valuation were produced by the defendants, the defendants contended that “the evidence before the Court does not permit the Court to conclude with any level of confidence which of the Indigo valuations was prepared first”. For reasons that I will set out below, I have found that the Indigo Valuation was produced first and the Amended Indigo Valuation second.

On the plaintiffs’ case, which I accept, the Amended Indigo Valuation was not a fresh valuation report prepared by the defendants but rather merely some amendment made to the Indigo Valuation. It bares the same title and date of valuation as the Indigo Valuation, and makes reference to the same letter of instruction from MCD dated 14 February 2007 (that appears in at Appendix I of the Indigo Valuation). The plaintiffs submitted that “very few changes” are incorporated into the Amended Indigo Valuation save for “the valuation is adjusted reflecting the changed configuration referred to in Mr Kelly’s 13 June email”. The bulk of the paragraphs remain the same and, most notably, as already mentioned, the client and date of the valuation remained unchanged.

For the purpose of these plaintiffs’ claim, the relationship between the Amended Indigo Valuation and the June Valuation is of greater significance. Following an outline of the relevant components of the Amended Indigo Valuation, I will return to the principal factual controversy, namely, the characterisation of the Amended Indigo Valuation as an update of the June Valuation.

Under the heading “Valuation Summary”, the valuation for the Marina was provided on a “Gross Realisation ‘As If Complete’” basis: $27.3 million.

The client listed on the Amended Indigo Valuation was “MCD Australia on behalf of Indigo (Martha Cove Harbour Precinct Land Owner) Pty Ltd”. CBRE charged $25,000 (plus GST) for the valuation.

The relevant instructions informing the valuation report for the Amended Indigo Valuation appear at s 1.1 and are extracted below:

The definitions of “Market Value”, “Gross Realisation” and “As If Complete” appeared again at s 1.6. The definitions adopted for the purposes of the June Valuation and Indigo Valuation were repeated in the Amended Indigo Valuation. In my view, s 1.1 demonstrates that the defendants were instructed to provide a current market value “as is” valuation for the Marina (and, for completeness, the Other Properties) and its express purpose was “for first mortgage security purposes”.

At s 3.1, the land that was subject to the valuation was set out. Under the heading “Overall Proposal” the following appeared:

An extract appears below:

Section 3.2 is titled “Development Timeline”. The section is a repetition of what appears in s 3.2 of the Indigo Valuation. It confirms that CBRE “have been provided with a detailed development timeline for the subject development”, which “form part of Stage 2 and Stage 3”. Following a table that sets out the timing for development from Stage 2 to Stage 6, the following is recorded:

Under the heading, “Sales Evidence for “As is” Values”, at s 5.2.1, the following appeared:

At s 5.5, the following appeared:

Under the heading “Valuation Rationale”, the following appeared at ss 6.1 and 6.2:

It may be noted that the valuation amount of the Marina (namely, Lot S17) is represented inconsistently throughout the Amended Indigo Valuation as either $27.3 million or $26 million. In particular, both ss 5.2.1 and 6.2 describe the valuation by reference to an “As If Complete” basis but include the two different amounts. The $27.3 million figure is the arithmetically correct figure: the source of the $26 million figure is not apparent.

As to the differences between the Indigo Valuation and the Amended Indigo Valuation, the plaintiffs appropriately relied upon the summary appearing in the expert report of Mr Lane dated 18 February 2019 (“the Lane Reply Report”) at para 7.1, as an accurate reflection of the differences, which is extracted below:

Whilst the defendants do not dispute that differences between the Indigo Valuation and the Amended Indigo Valuation are summarised in para 7.1 of the Lane Reply Report, the defendants contended, albeit without development, that the differences are not limited to the opinion evidence of Mr Lane. Further, it was submitted that the evidence before the Court does not permit the Court to conclude with any level of confidence which of the Indigo valuations was prepared first. As earlier mentioned, I have rejected that submission.

Two disclaimers within the Amended Indigo Valuation attracted significant controversy in the context of the parties’ respective cases vis-à-vis reliance. The relevant disclaimers are found on page vi and s 1.4 of that valuation.

The disclaimer on page vi appears next to the heading “Assumptions, Disclaimers, Limitations & Qualifications”. It is extracted below:

Section 1.4 is also described as a disclaimer. Under the heading, “Extension of Liability & Confidentiality”, the following appears:

As to the first disclaimer, the plaintiffs submitted:

As to the second disclaimer, the plaintiffs submitted:

I will return to the submission advanced by the parties as to the effect of those disclaimers in the consideration of the issues in dispute.

On 25 June 2007, Mr Gillam and Mr Nicodimou exchanged emails regarding “an indicative rate p/sqm” for the land in the Marina. The exchange, which consists of a series of short emails sent and received within a relatively short time frame, is outlined below:

On 26 June 2007 at 8.41am, Mr Gilliam forwarded his 25 June 2007 email exchange with Mr Nicodimou to the following City Pacific representatives: Ms Amanda Aitken, Mr Johnstone and Mr Donaldson; together with the following message:

On 27 June 2007, Mr McCormick sent an email to Mr Nicodimou with the subject line “Please ring me asap”. In the email he stated: “[n]eed to talk to you asap, can you ring me this arvo please”. The plaintiffs contended that plainly the conversation was about valuing the Marina. There is no other reason apparent from the evidence and Mr Nicodimou has not given evidence to contradict that inference. It may be inferred that he could say nothing to the contrary. Whilst I accept that, if such a conversation eventuated, the inference sought to be drawn by the plaintiffs appears to be sound, the plaintiffs have not pointed to any evidence to support a basis for finding that Mr Nicodimou did, in fact, make a subsequent telephone call to Mr McCormick upon receipt of the email. As such, little weight can be attached to that specific inference.

At this juncture I turn to deal with three factual controversies with respect to the Amended Indigo Valuation. They are as follows:

Turning to the alleged timing of the Amended Indigo Valuation, the plaintiffs contended that the Amended Indigo Valuation was prepared and, subsequently, provided by CBRE sometime after the 13 June 2007 email. That submission is supported by a comparison of the information included and attached to that email, which included information as to berth configurations and lease terms, which same information, it was contended, appeared in ss 3.1, 5.2 and 5.2.1 of the Amended Indigo Valuation. Particular attention was given to the Excel spreadsheet (see tabs “Allocations” and “Offering Model”) attached to the email.

As to the issue of the date of preparation or publication, in written submissions the plaintiffs’ submitted:

As to the same, the defendants submitted:

In reply, the plaintiffs contended:

In my view, the reply submission of the plaintiffs above is factually correct and in its terms should be accepted. Thus, whilst it is true that the value of the property was valued at 30 January 2007, the Amended Indigo Valuation was prepared in June 2007.

As to when the valuation was provided to MCD, the defendants’ contended that there was no evidence before the Court as to when the Amended Indigo Valuation was provided by CBRE to MCD, save that it must have been provided by or before the 26 June 2007 Email. The defendants’ further submitted that there is no evidence before the Court as to when the information recorded in the Amended Indigo Valuation, at ss 3.1, 5.2 and 5.2.1 was first provided to CBRE. As earlier set out, the defendants submitted that the 13 June 2007 Email only drew Mr Nicodimou’s attention to the “Cashflow” worksheet of the attached file “Martha Cove Marina All Sales Master”.

Prior to turning to my conclusions, in that respect, I turn to consider the principal controversy concerning the characterisation of the Amended Indigo Valuation as an “update” of the June Valuation.

The defendants contended that the Court would not accept the Amended Indigo Valuation as an “update” but rather an entirely separate valuation. In support of that contention, the defendants submitted:

During closing submissions, counsel for defendants advanced the following supplementary submission:

The section being referred to by the defendants is s 3.2 of the valuations. Whilst extracted earlier in this judgment, for convenience and ease of comparison, a relevant extract from each report appears below:

In reply to the defendants’ written submissions, the plaintiffs submitted:

In light of the evidence before the Court, I make the following findings:

In these respects, I consider the Amended Indigo Valuation to be an update in that the Amended Indigo Valuation derived directly from the June Valuation and the nature of the changes were more in the nature of refinements or updates to the June Valuation.

Thus, I accept the nature of the differences between the June Valuation and the Amended Indigo Valuation, putting aside contentions as to errors at this stage, may be properly categorised as “updates”.

As mentioned above, I accept that the Amended Indigo Valuation included information that was first made available to Mr Nicodimou on 13 June 2007 (via the All Sales Master file attached to that email). The sum of those findings support the conclusion that the updated valuation attached to the 26 June 2007 email to MCD attached the Amended Indigo Valuation. I make that finding.

At this juncture, it may also be noted that the valuation attached to the 26 June 2007 email did not include the appendices referred to therein. As such, the letter of instruction referred to in s 1.1 of the Amended Indigo Valuation was not included in the attachment. However, the contents of that letter, in my view, are reflected in both covering email attaching the valuation, together with s 1.1 of the valuation.

As to whether Mr Nicodimou “admitted” to having known the Indigo Valuation or the Amended Indigo Valuation would be provided to and relied upon by City Pacific, in the absence of Mr Nicodimou being called in these proceedings, the plaintiffs relied upon his evidence in earlier public examinations.

The plaintiffs, in this respect, relied upon transcript from a public examination conducted on 9 May 2016 in matter number 2015/371848 (T44.4-44.24), which is extracted in part below:

The plaintiffs further relied upon transcript of a public examination conducted on 11 May 2016 in matter number 2015/371848 (T40.7-40.34), which follows:

Conversely, the defendants contended that the above transcript passages, as relied upon by the plaintiffs, did not provided an accurate depiction of the evidence of Mr Nicodimou. The height of Mr Nicodimou’s evidence, it was contended, was that City Pacific “may” be the first mortgagee, or that it “may” have been someone else that the Indigo Group might be seeking to mortgage funds from.

In my view, the evidence relied upon by the plaintiffs is relevant to whether or not Mr Nicodimou had conversations with City Pacific representatives and, for that matter, representatives of the Indigo Group with respect to valuations of the Marina and Other Properties. However, it does not rise to the extent of an admission, in particular, a specific admissions vis-à-vis the valuations provided to a separate client of CBRE, namely, MCD, that was not City Pacific.

As to the factual controversy vis-à-vis whether in the lead up to signing the Key Terms Agreement (set out below) on or about 29 June 2007, Mr Nicodimou corresponded with Mr Gillam and Mr McCormick regarding the Marina, the plaintiffs relied upon the above email correspondence from 25 to 27 June 2007 (extracted above).

Whilst accepting the existence of the emails, the defendants contended both groups of emails were exchanged regarding the “Martha Cove Development”, as opposed to “the Marina” specifically. Further, it was submitted there was no evidence before the Court as to whether that telephone call, requested by the 27 June 2007 email, took place or, if it did, the substance of that call. As to that latter submission, I repeat my finding set out earlier with respect to the same.

As to the differentiation sought to be drawn by the defendants between the Martha Cove Development and the Marina, in my view, it does not advance the position of the defendants very far. As stated at the outset of the judgment, the Marina forms part of the Martha Cove Development; which is not a controversial statement.

Thus, in the broad, I accept that in the lead up to the signing of the Key Terms Agreement, which I will turn to below, Mr Nicodimou had engaged in correspondence with Mr Gillam. The contents of the 25 June 2007 emails with Mr Gillam provide insight as to the substance of part of those discussions, which, as identified by the respective parties, focused more broadly upon the Martha Cove Development (as opposed to the Marina specifically). However, as to the content of any discussion with Mr McCormick with respect to the same, in the absence of evidence of a phone call or a reply to the 27 June 2007 email, there is not enough material before the Court to reach a conclusion as to the nature of telephone conversation sought to be had with Mr Nicodimou by Mr McCormick (if it ever, in fact, eventuated). However, the inference is available that Mr McCormick was seeking to discuss an issue with respect to the Martha Cove Development with Mr Nicodimou.

As mentioned above, on 26 June 2007, Ms Tinson sent an email to Mr Lambert attaching a draft Put and Call Option Deed and Contract of Sale for the Marina. Ms Tinson forwarded that email and its attachments to Mr Donaldson, Mr Finucan, and Mr Sullivan of City Pacific and to Mr Mackay of IPC.

On about 28 June 2007, City Pacific prepared a short due diligence report (“the due diligence report”). The report twice referred to the $27.3 million valuation. The relevant extracts appear below:

The plaintiffs submitted, correctly in my view, that an analysis of City Pacific’s due diligence report supports the following factual conclusions:

I will return to the parties submissions vis-à-vis the issue of reliance in my consideration of the issues in dispute.

On 29 June 2007, Mr Finucan on behalf of City Pacific and Lawrence Truce on behalf of ILO signed a letter containing the key terms of the sale and purchase of the Marina for $30 million (“the Key Terms Agreement”), and City Pacific paid the Call Option Fee of $2.1 million to or at the direction of ILO as required by the Key Terms Agreement.

As at the time of the Put and Call Option Agreement, drafting of some of the minor parts of the Contract for Sale of the Marina had not yet been completed. As such, by a letter dated 29 June 2007, addressed to Mr Sullivan, Managing Director of City Pacific, Mr Truce sought confirmation as to the “the major terms” of the contract, which appear below:

Mr Finucan provided confirmation on behalf of City Pacific by signing the letter. At this juncture, the defendants sought that the Court note the following about the sale price of $30 million:

On 3 July 2007, Ms Tinson sent an email to representatives of City Pacific attaching, inter alia, the draft Put and Call Option Deed and Contract of Sale for the Marina, and sought instructions on changes requested by “Indigo” (this reference, it may accepted, was a reference to ILO). In written submissions the plaintiffs noted that the Put and Call Option was in fact executed later than it was dated. However, it was submitted that the circumstances did not impact upon the resolution of the issues in dispute. I accept that submission. On 9 July 2007, Mr Purss sent an email to Mr Sullivan summarising his understanding of the agreement with ILO for the purchase of the Marina. That email is extracted below:

Later that day at 3.43pm, Mr Purss forwarded the Amended Indigo Valuation to Mr Garry Sladden of City Pacific (namely, he forwarded Mr Kelly’s email of 26 June 2007, which I have earlier found attached the Amended Indigo Valuation).

Mr Sladden replied to Mr Purss’ email at 6.49pm. His email consisted of a series of comments with respect to the Amended Indigo Valuation, which are extracted below:

At this juncture, it may be noted, the defendants contended that the observations made by Mr Sladden “challenged the assumptions made in the Amended Indigo Valuation, and noted the costs not considered in the Amended Indigo Valuation”. Similarly, the plaintiffs observed that Mr Sladden’s comments were in part critical of the Amended Indigo Valuation. However, the plaintiffs contended that the criticisms made by Mr Sladden do no amount to a “disregard” of the report. I accept the submission of the plaintiffs in that respect. Thus, this evidence is relevant when considering the plaintiffs’ case as to City Pacific’s reliance on the Amended Indigo Valuation.

On 17 July 2007, City Pacific and ILO exchanged revised drafts of the draft Put and Call Option Deed. On about 23 July 2007, City Pacific and ILO executed the Put and Call Option Deed, and inserted the effective date of the document, being 29 June 2007.

The Put and Call Option, relevantly, provided:

The plaintiffs also contended that “payment of the option fee and the entry into the Put and Call Option was in reliance on the June Valuation as updated by, and also in reliance on, the Amended Indigo Valuation”. I will return that issue.

On 8 August 2007, Ms Tinson sent an email to Mr Finucan attaching a revised draft contract of sale for the Marina, and sought instructions on changes requested by Indigo.

On 7 September 2007, Mr Purss sent an email to Robert Friggi at City Pacific, copying Mr Johnstone, attaching a number of documents including the Amended Indigo Valuation and the Put and Call Option Deed. The email stated: “[a]ttached is a val[uation] dated Feb 07 & the acquisition agreement regarding the Martha Cove Marina which CPL will acquire from Indigo Group… Steve J is liaising with CBA who we expect will put forward a term sheet, but we were also hoping that you may be able to source funding through your contacts”. The plaintiffs submitted: “That the valuation was being circulated is consistent with reliance by City Pacific and Martha Cove”. Again, I will return to that issue.

On 25 September 2007, Mr Johnstone sent an email to Mr Mackay, stating, “I have received a copy of the valuation of Martha Cove Marina done on Indigos behalf by CBRE … We have a meeting tomorrow with CBA to discuss funding for the marina acquisition. They have requested the appendices attached to the valuation”. As to the provision of the Amended Indigo Valuation to the Commonwealth Bank of Australia, the plaintiffs contended: “City Pacific provided the valuation to the CBA because it thought the valuation was of market value and reliable” and, thus, rely upon that correspondence as further evidence of City Pacific’s reliance upon the Amended Indigo Valuation (which submissions I will return to below). As to the subsequent provision of the appendices, the defendants contended there is no evidence before the Court that they were ever provided in answer to the request. It is true that the Court was not directed to any evidence with respect to the provision of appendices, however, such evidence would not advance the position of either the plaintiffs or the defendants, nor is any finding required. It is unnecessary to make such a finding. Again, the plaintiffs contended this provides further evidence of City Pacific’s reliance on the Amended Indigo Valuation.

On 2 October 2007 at 8.59am, Mr Purss sent an email to Mr McCormick, Mr Johnstone, Mr Finucan and Mr Sullivan titled “Martha Cove Marina”. That email stated:

Later that day, Mr Purss sent an email to Mr Kelly requesting certain information in relation to the Marina to enable City Pacific to progress its funding of the purchase of the Marina. That email stated:

On 5 October 2007, Mr Kelly responded to Mr Purss and provided some of the information requested, which included, inter alia:

As to the relevance of the October 2007 correspondence, the plaintiffs submitted:

On 3 October 2007, Mr Mackay sent an email to Mr Purss, which stated:

On the same day, Mr Purss responded by email to Mr Mackay, which stated: “The $2m should be ok, I’ll need to catch up with Phil on the CPPF investment”.

On about 8 October 2007, City Pacific nominated Martha Cove to exercise the call option under the Put and Call Option Deed, and Martha Cove exercised the call option and entered into the Contract of Sale (dated 8 October 2007) to buy the Marina for $30 million.

Relevantly, it may be observed:

Two further points may be observed, which are contrary to some of the statements made in later documents:

On 10 October 2007, City Pacific paid the Further Deposit of $2 million to or at the direction of ILO as required by the Contract of Sale. The defendants accept that “City Pacific (on behalf of Martha Cove Marina) paid an additional $2,000,000 to ILO … as a further deposit and/or as part of the consideration for the acquisition of the [Marina]”. The defendants submitted that the sum “was immediately released to the vendor”.

On 2 November 2007, Mr Purss sent an email to Mr Finucan, Mr Johnstone, Mr McCormick and Will Hattingh of City Pacific stating that City Pacific (meaning Martha Cove the contracting party) would not be in a position to complete as bank finance had not been obtained, and that the CBA and the valuer (namely, CBRE) were waiting on information from ILO. That email stated:

On 22 November 2007, Mr Johnstone and Mr Purss exchanged emails regarding obtaining finance from CBA for the purchase of the Marina. In reply to an enquiry from Mr Purss on that date, concerning an update as to progress with CBA on the Martha Cove Marina debt, Mr Johnstone stated:

On the same day, Mr Purss and Mr McCormick exchanged further emails regarding the need for City Pacific to withdraw $13 million from its cash reserves with CPMT to settle the purchase of the Marina. After Mr McCormick indicated that it would take time for CPMT to meet the withdrawal request, Mr Purss stated: “We can probably delay Martha Cove Marina settlement, but will still need to stump up with $7.5m for them”.

On 23 November 2007, Mr Curran from CBA sent an email to Mr Johnstone at City Pacific which attached a valuation of the Marina prepared for CBA. Mr Johnstone forwarded the email from Mr Curran and the valuation to Mr Purss, Mr Hattingh and Mr Mackay. The email from Mr Johnstone stated:

On about 23 November 2007, it was agreed with ILO that Martha Cove would make a further part payment of $7 million to ILO on account of the purchase price for the Marina.

On 28 November 2007, City Pacific paid a total of $7 million to or at the direction of ILO in part payment of the purchase price for the Marina.

Notwithstanding a Joint Statement of Fact that “City Pacific” paid the further amount of $7 million, a dispute remained as to which entity agreed to pay the deposit.

The plaintiffs contended that on about 23 November 2007, Martha Cove and ILO agreed that Martha Cove would make a further part payment of $7 million to ILO on account of the purchase price for the Marina. The plaintiffs relied on an email correspondence chain between Mr Kelly to Mr Purss, dated 27 November 2007, which relevantly stated:

In reply to Mr Kelly’s email, Mr Purss “confirm[ed] the funds will be transferred tomorrow”.

The plaintiffs further relied upon the correspondence between Mr Mackay to Ms Carla Avery, on 28 November 2007. At 9.14am, Ms Avery sent the following communication:

In reply to that email at 10.22am, Mr Mackay sent the following:

On the plaintiffs’ case, City Pacific made the payment on behalf of Martha Cove. It was further submitted:

The defendants underscored that the above email exchanges are dated 27 and 28 November 2007. The defendants contended that the email of 28 November from Ms Avery to Mr Mackay records that the payments will be from “CPL”, which ought be taken as a reference to City Pacific.

Whilst I accept the reference to “CPL” is a reference to City Pacific, that fact does not reduce the effect of the submissions of the plaintiffs. I accept that City Pacific made the payments but did so on behalf of Martha Cove.

In early 2008, CBA appointed PPB Pty Ltd (“PPB”) as an investigating accountant to City Pacific. Following the appointment of PPB, City Pacific and ILO joined together to pursue the sale of the Marina to Anne Street Partners Ltd (“ASP”). To the extent the defendants have contended that the events after 28 November 2007 are not relevant, I reject that submission and find the events are relevant as factual background.

On about 6 May 2008, City Pacific entered into a term sheet for the sale of a number of assets, including the Marina, to ASP. On about 30 September 2008, the Marina Mortgage was transferred from PTQ to City Pacific.

On 25 June 2009, Trilogy Funds Management Ltd replaced City Pacific as the responsible entity of the CPMT.

On 28 August 2009, liquidators were appointed to City Pacific, and on 23 October 2009, liquidators were appointed to Martha Cove. The Contract of Sale was not terminated. At that stage the money payable by Martha Cove to City Pacific remained outstanding, and Martha Cove’s ability to repay uncertain because of the uncertainty surrounding either purchase of the Marina, or sale to a third party.

On 20 May 2015, ILO transferred the Marina to Denarke Pty Ltd for a purchase price of $12,946,693. The Martha Cove Property Monies were never repaid, and have been lost. ILO is now deregistered. It is admitted that ILO and Martha Cove are incapable of repaying those monies.

As mentioned at the outset, the claims brought by the plaintiffs in the FASOC can be grouped broadly into two categories:

The parties produced a joint statement of 19 issues (“the Joint Statement”) which relevantly provided the parties’ respective positions as to the representation and duty case, with respect to the June and Amended Indigo Valuations, as well as set out the issues in dispute with respect to defences and damages.

Prior to turning to an outline of the parties’ positions with respect to each issue, the 19 issues in dispute are outlined seriatim below:

The numbering system adopted by the parties, as to the identification of the issues, will be maintained throughout this judgment (namely, “Issue 1” through to “Issue 19”).

I now turn to an outline of the parties’ positions with respect to each issue, noting that I will return to a consideration of the parties’ submissions as to each issue at a separate juncture.

The plaintiffs contended that the defendants made a series of representations by providing both the June Valuation (Issues 1 and 2) and the Amended Indigo Valuations (Issues 3 and 5). An outline of the parties’ positions, in that respect, follows.

As to representations made in the context of the June Valuation (Issue 1), the position of the plaintiff is that by providing the June Valuation on 30 June 2006, CBRE and Mr Nicodimou made the following representations to City Pacific:

The defendants admit the Valuation Representations were made, save for the representations listed above at (1) and (5).

As to whether the Valuation Representations were misleading or deceptive or likely to mislead or deceive (Issue 2), the plaintiffs submitted that the Valuation Representations were misleading because the June Valuation was not:

The defendant contended, with reliance upon its defence to the duty case (specifically the question of breach), that the Valuation Representations were neither misleading or deceptive or likely to mislead or deceive. In further support of that position, the defendant submitted that the June Valuation plainly set out the basis upon which the valuation was provided. The plaintiffs have adduced no reliable expert evidence that the June Valuation was defective. They have adduced no lay evidence that a reasonable person in the position of the plaintiffs would have been misled by the clear statements in the valuation.

Turning to representations made in the context of the Amended Indigo Valuation (Issue 3), the plaintiffs’ position is that by providing the Amended Indigo Valuation, CBRE and Mr Nicodimou made the following representations:

The plaintiffs also contended that by providing the Amended Indigo Valuation, CBRE and Mr Nicodimou made two further representations:

As to whether the Continuing Representations and/or the Market Value Representations were misleading or deceptive or likely to mislead or deceive (Issue 4), the plaintiffs contended they were. The plaintiffs position, in that respect, was that the two groups of representations were misleading because the June Valuation and the Amended Indigo Valuation were not:

The defendants deny that they made any of the Continuing Representations or Market Value Representations to the plaintiffs. Further, as to the contention that such representations were misleading and/or deceptive, the defendants relied upon its submissions vis-à-vis the June Valuation (in particular its submissions dealing with the question of breach). It was also submitted that the Amended Indigo Valuation plainly set out the basis upon which the valuation was provided.

The plaintiffs contended that the defendants owed a duty of care to the plaintiffs with respect to both the June Valuation (Issues 5, 6 and 7) and the Amended Indigo Valuation (Issues 8, 9, 10 and 11). I now turn to a summary of the parties’ respective positions as to the duty case.

Commencing with the June Valuation, the plaintiffs contended that the defendants owed a duty of care to City Pacific, which duty was admitted by the defendants (Issue 5). In supplementation of that admission, the defendants stated that the duty was owed “at the time the June Valuation was prepared and provided to City Pacific”.

As to the content of that duty of care (Issue 6), the defendants accept the summary of general principles provided by the plaintiff at paras 203-205 of the plaintiffs’ closing submissions, which summary has been adopted later in this judgment.

Finally, as to the issue of breach (Issue 7), the plaintiffs’ position is that both CBRE and Mr Nicodimou breached the duty of care, which breach is denied by the defendants.

As to whether a duty existed in the context of the Amended Indigo Valuation (Issue 8), the plaintiffs’ position was that a duty of care was owed by the defendants to City Pacific and Martha Cove. In the alternative, the plaintiffs’ position was that the defendants owed a duty of care to City Pacific. The defendants denied that a duty of care was owed by either CBRE or Mr Nicodimou to City Pacific or Martha Cove.

As to the content of the duty (Issue 9), the plaintiffs’ repeated their position adopted with respect to the June Valuation, directing reference to paras 204-205 of the plaintiffs’ closing submissions. As to the issue of breach (Issue 10), the plaintiffs submitted that CBRE and Mr Nicodimou breached their duty of care.

In light of the defendants position, with respect to Issue 8, it was contended that the issue of content and breach of duty do not arise. However, in the event the Court found that a duty did arise, the defendants relied on its written submissions addressing the question of breach.

Finally, as to whether CBRE or Mr Nicodimou were entitled to rely on the disclaimer in the Amended Indigo Valuation to excuse either or both of them from liability (Issue 11), the plaintiffs submitted that there was no entitlement. In contrast, the defendants submitted that there was an entitlement.

The parties positions as to the issues of reliance and causation were made jointly under the heading “Representation and duty cases”. Each issue referred to the conduct set out in paras 31-37 of the FASOC, which the plaintiffs allege was “caused by breaches and contraventions”. For convenience, those paras are extracted below:

For completeness, the defendants response to those paras, is also extracted below:

As to the issue of reliance in the context of the June Valuation (Issue 12), the plaintiffs’ position is that City Pacific and/or Martha Cove relied upon the June Valuation and the Valuation Representations in engaging in the conduct alleged at one or more of paras 31-37 of the FASOC (extracted above).

The defendants denied that such reliance occurred and, further, contended that “the plaintiffs have not established factual reliance or, if they have (which is denied), any such reliance was not reasonable”.

As to the issue of reliance in the context of the Amended Indigo Valuation (Issue 13), the plaintiffs’ position is that City Pacific and/or Martha Cove relied upon the Amended Indigo Valuation and the Continuing Representations and the Market Value Representations in engaging in the conduct alleged at one or more of paras 31-37 of the FASOC (extracted above).

The defendants denied that such reliance occurred and, once again, contended that “the plaintiffs have not established factual reliance or, if they have (which is denied), any such reliance was not reasonable”.

As to whether the conduct referred to in Issues 12 and 13 (and the subsequent loss of the Martha Cove Property Monies) was caused by any misleading conduct or breach by CBRE or Mr Nicodimou (Issue 14), the plaintiffs adopted an affirmative position. The defendants disputed the position taken by the plaintiffs.

Issues 15 to 18 were grouped under the heading “Defences” and traversed the following topics: limitation period(s), reduction to damages, proportionate liability legislation and the application of s 601FS of the Corporations Act.

As to whether any cause of action relied on by the plaintiffs was time-barred by any limitation period (Issue 15), the plaintiffs answered no. However, that answer was qualified by the following statement: “however, the analysis differs for City Pacific and Martha Cove and it is possible that the answer to this question differ for each plaintiff”.

The defendants position was that both plaintiffs are impacted by a time-bar in light of limitation periods. In this respect, the defendants provided a detailed outline of their position, which is set out below:

Issue 16 posed the following question:

The plaintiffs’ answer with respect to both questions was “no”. In the event the Court found the defendants are liable for damages, the defendants position was that a reduction in the award of damages should occur.

I will return to the parties submissions as to the respective defences of failure to mitigate and contributory negligence at a separate juncture.

As to the effect (if any) of proportionate liability legislation upon orders for damages against one or more of the defendants (Issue 17), the position of the plaintiffs is that proportionate liability does not apply.

Turning to the defendants position, the defendants accept that the concurrent wrongdoers defence overlaps with the contributory negligence defence to the extent that the actions of Mr Sullivan and/or Mr Finucan are, through the principles of attribution, actions of the plaintiffs.

As to whether the cause of action brought by the first plaintiff is maintainable in light of s 601FS of the Corporations Act, the position of the parties was once again in opposition.

The plaintiffs’ position was that the cause of action was maintainable. It was submitted that City Pacific’s claims were not part of CPMT’s scheme property for the purposes of s 601FS. Further, City Pacific also carried on business and made investments in its own right and used its own money to make each of the First, Second and Third Payments comprising the Martha Cove Property Monies.

The defendants contended that the cause of action brought by the first plaintiff was not maintainable. It was submitted that on the evidence, (at least) $9 million of CPMT funds was advanced by City Pacific for the acquisition of the Marina.

As to what damages should be awarded to the plaintiffs (Issue 19), the plaintiffs position is extracted below:

The defendants position is that the plaintiffs are not entitled to any damages.

The principles of liability for misleading and deceptive conduct are, for present purposes, the same for each statutory provision relied upon by the plaintiffs and are discussed in Ryan Wealth Holdings Pty Ltd v Baumgartner (2018) 131 ASCR 236; [2018] NSWSC 1502 (“Baumgartner”) as follows (at [574]-[575]):

Conduct is misleading or deceptive, or likely to mislead or deceive, if it has a tendency to lead into error. Thus, there must be a sufficient causal link between the conduct and the error on the part of persons exposed to it: Australian Competition and Consumer Commission v TPG Internet Pty LTD (2013) 250 CLR 640; [2013] HCA 54 (“TPG Internet”) at [39]. It is at that stage of the enquiry that the conduct of, or the carelessness of the person or persons to whom the representation is made is taken into account. As was stated in TPG Internet (at [39]):

Conduct is misleading or deceptive, or likely to mislead or deceive, if it has a tendency to lead into error. That is to say there must be a sufficient causal link between the conduct and error on the part of persons exposed to it. It is in that sense that it can be said that the prohibitions in ss 52 and 18 were not enacted for the benefit of people who failed to take reasonable care of their own interests.

The question of characterisation as to whether conduct is misleading is logically anterior to the question whether a person has suffered loss or damage thereby. Characterisation of the conduct generally requires consideration of whether the impugning conduct viewed as a whole had a tendency to lead a person into error. Questions of carelessness are relevant to that question of characterisation: TPG Internet at [49].

Having regard to the observations of the High Court in Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45; [2000] HCA 12 at [102]-[103], the plaintiffs’ submission that the causal connection to which attention is directed is complex going beyond a “but for” analysis may be accepted.

Section 52 of the Trade Practices Act 1975 (Cth) (“TPA”) is not confined to conduct which is in intended to mislead or deceive. A corporation could contravene the section even though it acted reasonably and honestly: Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1 at [9] (per French CJ, Crennan and Kiefel JJ).

A valuer acting with due care and skill must employ an accepted and appropriate valuation methodology, and cross check that method with an alternative method: Singer & Friedlander Ltd v John D Wood & Co [1977] 2 EGLR 84 (“Singer”) at 85 (per Watkins J). Accordingly, a valuer may be negligent or engage in misleading conduct if he or she uses an incorrect or inappropriate valuation methodology: Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd (1997) 148 ALR 271 (“Flemington”). The first step in analysing whether a particular valuation methodology is appropriate is to consider how a valuation of the kind contemplated is to be undertaken: Flemington at 285-6 ( per Lehane J). To those propositions it may be added that when a valuer is instructed to carry out a valuation for mortgage purposes, the valuer should consider the value of the property on a forced sale basis: Coris and Investments Ltd v Druce & Co [1978] 2 EGLR 86 at 91 (per Gibson J). The methodology adopted was inconsistent with those requirements.

The plaintiffs’ submission addressed principles applicable to representations made to a third party. These issues did not concern the June Valuation as the Valuation Representations were made to City Pacific. However, the principles are applicable to the Amended Indigo Valuation where City Pacific was not the addressee of the valuation.

In that context some general principles may be stated as follows:

In my view, those conclusions are consistent with the statutory prohibition on engaging in misleading and deceptive conduct which is not dependant on concepts such as the assumption of responsibility. In this case, I have noted that the defendants, in any event, were on notice that City Pacific and its subsidiaries would or may receive and rely on the Amended Indigo Valuation.

In ABN Amro Bank NV v Bathurst Regional Council (2014) 309 ALR 445; [2014] FCAFC 65 (“ABN Amro”), the Full Federal Court held that ABN Amro’s agency, Standard & Poors and a bank, ANB Amro, which created the relevant product, were liable to certain Capital Councils for misleading conduct in relation to the rating, publication and dissemination of investment ratings, despite the fact that neither the ratings agency nor the Bank dealt with the Councils. It was sufficient to ground liability in misleading conduct for the misleading ratings to be published and disseminated to a class of investors which included the Councils: ABN Amro at [754]-[773], [1304]-[1308] and [1361]-[1367].

Finally, I turn to the question of disclaimers as a matter of principle. The defendants’ relied upon, inter alia, the disclaimer in s 1.4 of the Amended Indigo Valuation and correctly contended that a disclaimer of that kind cannot simply be ignored: BT Australia Ltd v Raine & Horne Pty Ltd [1983] 3 NSWLR 221 (“BT Australia”) at 235 (per Wootten J).

However, attention should be directed to the observation of the full Federal Court in ABN Amro at [771] as follows:

An evaluation will ordinarily embody an implied representation that it is the product of a reasonable application of the valuer’s skills (see MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 at 355-357 (“MGICA”) (per Lindgren J); Australian Breeders Co-operative Society at 59-60; Amadio at 223-224).

The disclaimer does not, again as a matter of general principle, ‘effectively negate’ the representation conveyed by a valuation, to a reader, that the valuation is prepared with due care and skill; ABN Amro at [717]. Similarly, even though the alleged victim of misleading conduct ordinarily must prove actual reliance upon a breach, the mere presence of a disclaimer executed a plaintiff will not defeat a finding of reliance which is otherwise supported by the evidence (See the discussion in Colin Lockhart, The Law of Misleading or Deceptive Conduct (2019, 5th ed, Lexis Nexis Butterworths) at 446 [10.20]).

I will return to the question of reliance but the plaintiffs’ submission to the effect that, if there is a limitation on the extent of conduct which may be characterised as misleading, the limitation does not exclude reliance with respect to which the defendants were on notice has substance. So too is the proposition that the evidence in the present matter does not exclude the ordinary position that the disclaimer will not effectively negate the representation conveyed by a valuation to the reader and the valuation is prepared with due care and skill.

I note at this junction that the defendants contended that any reliance by City Pacific on the Amended Indigo Valuation in the light of the disclaimer in s 1.4 of that valuation was not reasonable because City Pacific obtained or used the valuation as a purchaser not as a mortgagee. I shall in due course reject that submission as in my view, City Pacific obtained the valuation in the capacity as the existing and potential future lender or potential investor in the Marina. Relevant to that conclusion is my finding that the amended indigo valuation was prepared as an update of the June valuation As I will discuss, and as submitted by the plaintiff, there was a known contemplation of a transaction, the transaction would involve City Pacific at least as the existing lender. However, on the facts of this case and in the light of its ongoing involvement with the broader development; City Pacific had been provided with the June valuation of which the Amended Indigo Valuation was an update and City Pacific’s reliance on the Amended Indigo Valuation was within the reasonable contemplation of the parties given that sharing the valuations was both an expected and a known fact between the parties: Ta Ho Ma Pty Ltd v Allen [1999] NSWCA 202 (“Ta Ho Ma”) at [4]-[5] and [9].

The plaintiffs alleged that, by providing the June Valuation, the defendants made the Valuation Representations (as defined in para 28 of the FASOC), and that those representations were misleading or deceptive in contravention of s 52 of the TPA, s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“the ASIC Act”), or s 18 of the Australian Consumer Law (“ACL”) (each contains the same prohibition but apply to conduct in relation to different subject matter).

I accept the submission of the plaintiff that the relevant prohibition for the purpose of these proceedings is that contained in s 12DA of the ASIC Act for the following reasons:

Ultimately, the prohibition that applies does not inform the analysis. Section 12DA is a prohibition on a “person” engaging in conduct of the identified quality, and consequently applies to each of the defendants. The defendants also admitted that, if the TPA creates the prohibition which applies, then Mr Nicodimou is subject to the extended application of that Act because he communicated (engaged in the relevant conduct) by telephone and email attracting the extended operation of the TPA (beyond corporations) by s 6 of the TPA.

The plaintiffs alleged relevantly that, by providing the June Valuation, the defendants made the Valuation Representations as follows:

The defendants admitted the above representations were made, except the representations in sub-paras (1) and (5) above, but denied that the representations were misleading or deceptive. The defendants’ stance as to subparagraphs (1) and (5) are mentioned in the Joint Statement provided by the parties (earlier set out). However, in the defendants’ closing submissions, the defendants’ accepted the June Valuation conveyed the pleaded representations.

In any event, the representation in subpara (1) above flows from the fact that the June Valuation was provided for mortgage security purposes. As for the representation in subpara (5) above, the provision of the June Valuation in response to the Valuation Retainer, including the Valuation Guidelines, without specifically qualifying any of their opinions given in response to the Valuation Retainer, represented, in my view, that the June Valuation had been conducted in accordance with the Valuation Retainer, including the Valuation Guidelines. That conclusion also follows from s 1.1 of the June Valuation, which expressly stated that the valuation was prepared in accordance with the attached letter of instructions.

The defendants recognised, in this respect, that the essential point of difference between the parties was whether there was a departure from the exercise of reasonable care by the defendants to adopt an “as if complete” gross realisation methodology in valuing the Marina (the defendants’ case is that there was very little difference between the issues of breach of duty of care and the question of whether representations were misleading or deceptive).

From this point, the defendants advanced two primary submissions:

Thus, as to the essential difference between the parties, as the defendants described it, the defendants’ broadly submitted that the June Valuation did precisely what it said it was going to do – provide an “as if complete” gross realisation value for Lots S22, S23 and S24. It was submitted that the client, City Pacific, by what it had asked for in the email exchange between Mr Gillam and Mr Nicodimou on 1 June 2006, altered the instructions given in the letter dated 25 May 2006. City Pacific was a highly sophisticated party which, particularly in light of the evidence of the draft valuation, knew precisely what was conveyed by the June Valuation. There was no evidence led by the plaintiffs to the contrary, and it is for the plaintiffs to prove that the defendants breached the duty they owed to City Pacific. It may also be noted that the plaintiffs contended the June Valuation was obtained by City Pacific for the purposes of the 2006 transaction, as set out above. No loss is pleaded as a result of that transaction.

In order to sustain those propositions, the defendants contended:

Finally, and in a sense in the alternative, it was submitted by the defendants that an “as if complete” gross realisation valuation does give some indication as to market value for three reasons:

As earlier mentioned in the summary of the positions of the parties, the essential position of the plaintiffs as to the Valuation Representations was that they were misleading because the June Valuation was not:

It may also be noted that the plaintiffs correctly submitted that s 12DA of the ASIC Act was a prohibition on a person engaging in conduct of the identified quality and, consequently, applied to each of the defendants. The plaintiffs submitted that if the TPA creates a prohibition which applies, then Mr Nicodimou is subject to the extended operation of that Act because he communicated (engaged in the relevant conduct) by telephone and email, thus attracting the extended operation of the TPA (beyond Corporations) by s 6 of the TPA.

It is appropriate to commence consideration of the representation case of the parties, in this respect, by assessing the expert evidence.

The defendants’ case with respect to Issue 2 proceeds upon the basis that there is little difference between the issues of breach of duty of care and the issues of whether representations were misleading or deceptive. The defendants also contended that expert opinion was central to the determination of this (and other issues). However, it was contended that the expert opinion of Mr Lane should not be accepted (and, therefore, the plaintiff had failed to discharge their onus with respect to the representation case). The challenge to the expert opinion of Mr Lane by the defendants was based upon the following contentions:

I do not accept those criticisms of Mr Lane’s evidence. I do not consider the defendants have succeeded in challenging Mr Lane’s evidence. I generally prefer Mr Lane’s evidence to Mr Wright’s evidence, except to the extent that Mr Wright made concessions consistent with Mr Lane’s evidence.

As will be discussed below, these criticisms need to be understood, in part, in the light of my finding that both the Valuation Representations and the Continuing and Market Value Representations are expressed as identifying market value, including by reference to instructions to perform a market valuation (in contradistinction to a gross realisation approach). To that may be added my overall favourable impression of Mr Lane’s evidence, directed as it were to practical and common sense approach to the evaluation question.

Turning, however, to the particular criticisms, I will discuss below that the 1 June 2006 email exchange does not refer to the valuation of the leasehold interest in the Marina or the provision of the gross realisation value. As already discussed, there is a conflation in the defendants’ case of concepts of “as if complete” and “gross realisation”. Further, as I will discuss, the June Valuation contains the express statement as to the effect that it is provided with accordance to the written instructions attached to the valuation and is a market valuation. Further, as I will find below, the defendants overstated the relevance of the draft valuation which was provided on a wholly different set of instructions relating to the Marina than the June Valuation. As to the sophistication of City Pacific, I accept the submission of the plaintiffs that it was entitled to take that expression of expert opinion in the June Valuation as accurate and without “second guessing the valuation”.

The defendants do not clearly identify the relevant post-valuation material which Mr Lane is said to have taken into account or how that material is said to effect his reports so as to make them erroneous.

Mr Lane’s evidence was that the berth rental evidence used by him in the Lane Report was “virtually the only source of rental evidence” and the date range of the evidence (concerning Patterson Lakes Marina and Anchorage Marina) was reasonably considered of assistance and relevance. Further, I accept the submission that for the plaintiffs that Mr Lane was entitled to use post-valuation date data, at least to the extent that it formed the basis for an opinion as to value at a point time: Propell National Valuers (WA) Pty Ltd v Australian Executor Trustees Limited (2012) 202 FCR 158; [2012] FCAFC 31 (“Propell”) at [5] (per Stone J) and [81] (per Collier J). Further, Mr Lane appropriately observed that it is reasonable to have regard to subsequent evidence for the reason that the market was not moving quickly. In that, I accept his evidence that he adopted an acceptable valuation practice.

It is true, as the plaintiffs submitted, that Mr Wright made a number of concessions, some of which have been earlier referred to in this judgment. The list prepared by the plaintiffs in this respect is, in my view, correct. That list is as follows:

Beside from those concessions, there were, however, significant difficulties with the reports in the evidence of Mr Wright.

In the Retrospective Report, for the period leading up to the first valuation date of 25 May 2006, Mr Wright relies on 62 pre-sales in the Marina as comparable sales. Mr Wright appears to have taken those sales from:

The excel spreadsheet contained details of 62 contract sales comprising 67 berths in Stage 1 and 2D of the Martha Cove Development. There were 66 sales of properties with attached berths in Stage 1, including 5 dual berth purchases. There was one sale in Stage 2D (berth 462). Neither of those stages are located within the Marina. The excel spreadsheet does not identify whether those sales were leasehold or freehold, however each of the berth sales was attached to the sale of a house and land package.

Section 5.6 of the CBRE valuation demonstrates that the sales referred to in the table appearing on page 29 of that report are sales of freehold berths. For example, on page 29, immediately above the table, reference is made to the sale of “freehold marina berths” in the Martha Cove Development ranging in price from $76,000 (9 metre berth) up to $200,000 (15 metre berth). Those sales are contained in the table. The sale of the 9 metre berth appears in the table against Lot 39 and the sale of the 15 metre berth appears in the table against Lot 43.

The June Valuation and the Amended Indigo Valuation each refer to there being only approximately a dozen leases of berths in the Marina being entered into.

In paragraphs 84-95 of the Retrospective Report, Mr Wright also referred to “Leasehold Marina Berth Sales in the Subject Property”, calculating 57 berth sale prices on rates per metre for different berth lengths. The sales referred to in those paragraphs are taken from Table 2 on pages 20-23 of the Retrospective Report (which is drawn from the material referred to in paragraph 112 above). For example:

There is real substance in the plaintiffs’ criticism of Mr Wright’s evidence regarding the 62 pre-sales, at least insofar as Mr Wright assumed that those sales were within the Marina. Mr Wright’s assessments proceeded upon the basis that the sales were of leasehold interests within the Marina. The evidence reveals, however, that the sales were freehold berths wholly or substantially sold as part of a home or land package and outside the Marina located within the broader Martha Cove Development. Mr Wright used those sales to criticise Mr Lane for not relying on the sales as comparable sales for his valuation.

The correction of this erroneous approach would necessarily require Mr Wright (as he conceded) to reconsider the valuation because a freehold berth is likely to have a higher value than a leasehold berth and if a freehold berth was sold as part of a house and land package, the value attributed to the berth may not be reflective of what the berth would sell for itself.

Further, in the Retrospective Report, for the period after the first valuation date but before the second valuation date of 30 January 2007, Mr Wright relies on 6 berth pre-sales within the “subject property” as comparable sales, as follows:

However, berth number 51 is not within the Marina, and involves the sale of a freehold berth, not a leasehold berth. Berth 51 appears against Lot 14 in Stage 1 of the Martha Cove Development in the excel spreadsheet. Berth 462 is associated with a house and land package in Stage 2D of the Martha Cove Development. Further, the 4 marina berth sales referred to by Mr Wright are associated with house and land packages and are referred to in the table on page 31 of the CBRE valuation (also including berth 51, which Mr Wright had double counted). The sales figures referred to in the excel spreadsheet and in the CBRE valuation involve the sale of freehold berths outside the Marina, not leasehold berths in the Marina.

As Mr Wright’s reports proceeded on a false assumption, the weight that may be attributed to them is significantly reduced.

Similar problems arose with respect to other berth sales relied upon by Mr Wright in the Yarra’s Edge and Pier 35 marinas as comparable sales. He did not explain why those marinas or berth sales within those marinas were, in fact, comparable but rather assumed they were so. It would appear that Mr Wright conceded that the Yarra’s Edge and Pier 35 locations were superior to the Marina and some adjustment would need to be made in that respect. I do not accept Mr Wright’s evidence as credible that Pier 35 was, on the evidence, an inferior property.

Finally, I accept the plaintiffs’ submission that Mr Wright’s evidence ultimately does not disclose his reasoning for moving from comparable sales data to his adopted values. He does not properly explain how he used the purported comparable sales data to arrive at his concluded values. For example, in the Retrospective Report, Mr Wright adopted a value for the Marina as at 25 May 2006 reflecting a rate of $7,542 per metre, and a value for the Marina as at 30 January 2007 reflecting a rate of $10,026 per metre. I agree with the submission of the plaintiffs that this failure meant that the Court is unable to properly determine how Mr Wright had used the comparable sales data which was the foundation for his adopted valuation methodology: Bone v Wallalong Investments [2012] NSWSC 137 at [28] (per McDougall J) (see also Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2004] WASC 85 at [78] (per Pullin J)).

The defendants relied on the evidence of Mr Gordon, a professional expert witness. Mr Gordon prepared an expert report dated 4 October 2018 (“the Gordon Report”), and a supplemental report dated 2 August 2019 (“the Supplemental Gordon Report”). The Supplemental Gordon Report largely corrects a substantial number of errors in the Gordon Report and does not advance the analysis.

In the Gordon Report, Mr Gordon addressed six questions. His answers to questions 1 to 3, relating to the Indigo Loan Facility and the Indigo Mezzanine Facility, are not relevant to the proceedings and can be ignored. Following the Court’s rulings on evidence on the balance of the report, Mr Gordon’s answer to question 4, paras 137-139 of Question 6 and his concluding opinion at paras 140-142 remain in evidence.

In answer to Question 4, Mr Gordon failed to identify and apply any meaningful standard or criteria of reasonableness or prudence against which to assess the conduct of City Pacific. Mr Gordon’s answer to that question went no higher than a series of conclusory statements about the conduct of City Pacific. Further, in cross-examination, when Mr Gordon was asked to identify that standard or criteria, he was unable to do so. For the same reasons, Mr Gordon’s evidence in paras 137 to 139 and his conclusions in paras 140 and 141 are problematic. In Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, Heydon JA observed (at [59]) that the prime duty of experts in giving opinion evidence is to “furnish the trier of fact with criteria enabling evaluation of the validity of the expert’s conclusions”. Without an identifiable standard of reasonableness, Mr Gordon’s evidence can attract little weight.

Finally, Mr Gordon’s opinion in paras 2 and 141 that City Pacific’s conduct caused it to suffer loss is not a proper matter for expert evidence and should also be given little weight: Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291 at [28] (per Austin J).

In my view, Mr Gordon’s evidence attracts little weight.

From this starting point, reference may then be made to aspects of Mr Lane’s oral evidence, which I accept as part of his expertise, as a pre-cursor to returning to the resolution of Issue 2. Those aspects are as follows:

It follows from Mr Lane’s evidence and Mr Wright’s concession that the capitalisation approach adopted by Mr Lane was an appropriate way to value the Marina (even if Mr Lane preferred, himself, a discounted cashflow approach). On the evidence, that conclusion is available having regard to the absence of sufficient comparable sales, the fact that the gross realisation method sheds little or no light on market value and from the fact that one class of potential buyers of the Marina would be investors who were interested in the likely income and costs of the Marina.

Mr Lane’s evidence as to the reason why the Marina should have been valued using the capitalisation approach is now further instructive in this respect:

Proceeding from that analysis, I have come to the view that the June Valuation was not based on reasonable grounds and was not a reliable opinion of the value of the Marina and is not the product of due care and skill.

The reasons for those conclusions may, in the light of the foregoing analysis, be briefly stated:

Before turning to my ultimate conclusion, it is appropriate to note that the Marina was overvalued by the defendants, even if the defendants’ methodology was found appropriate. Using the capitalisation approach, Mr Lane concludes that the market value of the Marina as at 18 May 2006 and 30 June 2006 was $10.3 million. Using the leasehold gross realisation approach, the defendants valued the Marina at $22.5 million as at 18 May 2006. By way of comparison, the defendants’ valuation is 118.4% greater than the value arrived at by Mr Lane. On the basis contrary to his primary opinion that the gross realisation approach could not be used, Mr Lane also valued the Marina using the leasehold gross realisation approach. Using that approach, Mr Lane concluded that the market value of the Marina as at 18 May 2006 was only $18.21 million, and not $22.5 million as reported by the defendants. By way of comparison, the defendants’ valuation is 23.5% greater than the value arrived at by Mr Lane using the same valuation methodology.

Although relevant to later sections of this judgment, it may be observed that gross overvaluation, unless explained, is strong evidence of negligence: Trade Credits Ltd v Baillieu Knight Frank (NSW) Pty Ltd (1985) Aus Torts Rep 69 at 529-30 (“Trade Credits”); MGICA at 336-7 (per Lindgren J); Hann Nominees Pty Ltd v National Australia Bank Ltd [2000] FCA 454 at [26]-[29] (per the Full Court). Further, as stated by Lindgren J in MGICA at 357, the propounding of an expert valuation may amount to misleading or deceptive conduct if it is “so far removed from the true value… as to be misleading or deceptive”.

Before concluding this issue, I propose to turn to some particular issues raised by the defendants in their submissions as to duty of care and in particular the breach thereof, so far as they bear upon the issue.

The defendants contended that it was not a departure from the exercise of reasonable care by the defendants to adopt an “as if complete gross realisation” methodology in valuing the Marina because the methodology adopted was requested by Mr Gillam in an email exchange he had with Mr Nicodimou on 1 June 2006 (it was contended, this changed all of the instructions given in a letter of instruction dated 25 May 2006) and City Pacific was a highly sophisticated party which, in the light of the draft valuation, knew precisely what was conveyed in the June Valuation.

I accept the submission of the plaintiffs that the defendants’ approach in this respect conflates two different concepts. There is a relevant difference between the concept an “as if complete” valuation and the concept of a “gross realisation” analysis. As earlier mentioned, there were indications of a communication with Mr Nicodimou consistent with an “as if complete” valuation but the evidence does not allow for a finding that he was instructed to adopt a gross realisation assessment for market value. In short, I do not consider that there, as earlier stated, was any instruction by Mr Gillam that Mr Nicodimou was to value the leasehold interest in the Marina or to provide a gross realisation value.

A further difficulty with this contention by the defendants was the terms of the June Valuation itself. As I have mentioned, the valuation contained express statements to the effect that it was provided in accordance with the written instructions attached to the valuation and that it provided a market valuation. As I have found, the valuation achieved neither outcome. Mr Gillam was not the sole recipient of the valuation nor the ultimate decision maker. Again, as earlier mentioned, City Pacific was a large corporation where many people other than Mr Gillam were likely to rely upon the June Valuation. I do not consider the June Valuation should be considered other than in its own terms, that is, within the four walls of the valuation given by the defendants.

The defendants did place some reliance upon the draft valuation. As earlier mentioned, the instructions for the draft valuation were to assess both “current Capital Market Value ‘As Is’” and “gross realisation ‘As If Complete’” for Stages 2A-H, 57, S8, 3 and Stages 4A-C, 5, 6. This stands in contradistinction to the instructions for the June Valuation and the Amended Indigo Valuation. In those cases, no reference was made to the valuation of the Marina on a gross realisation basis. Rather than the draft valuation giving rise as to the defendants’ submissions as to a basis upon which it may be known or implied that the June Valuation was based on a gross realisation methodology, the distinction between the draft valuation and the June Valuation, in my view, underscored that the June Valuation would have been understood differently by City Pacific. The draft valuation correctly drew a distinction between market valuation and a gross realisation analysis.

Further, as earlier mentioned, in the June Valuation, the defendants expressly identified that the opinion expressed was of market value. The Valuation Guidelines defined “market value” broadly in line with the definition of that concept as articulated in Spencer. Those same guidelines instruct the defendants to determine the market value using the most appropriate method of valuation showing adequate substantiation and compliance with the relevant API Expected Practice CE Standards and API Guideline notes. The Valuation Guidelines made it clear that the defendants were being asked to provide an opinion on the market value of the Marina.

Nor do I accept that Mr Lane conceded that the email exchange of 1 June 2006 changed the instructions given to Mr Nicodimou as he did not give that evidence.

The defendants disputed that a gross realisation valuation does not reveal anything about market value. As I have observed that contention is inconsistent with the opinion of Mr Lane and Mr Wright. As to the contention that the relevant ANZ Valuation Guidance notes support the use of a gross realisation methodology in providing a market valuation of the Marina, it must be observed that, in Guidance Note 1, the only reference to gross realisation methodology was in para 4.21 which deals with the valuation of multiple properties in one development. In contrast, there is no reference to gross realisation methodology in Guidance Note 2 which deals with valuations for mortgage and loan security purposes. In any event, Guidance Note 1 expressly states that “the valuation of multiple properties in one development should be completed on the basis of a single transaction or sale in one line to one buyer”. The note proceeds to indicate that the gross realisation approach should incorporate an appropriate discount to reflect the costs incurred in realising the proceeds from the sale of individual properties such as market and sale costs, holding costs, and profit and risk factors. As earlier observed, Mr Nicodimou did not apply these discounts and in the June Valuation (or for that matter, the Amended Indigo Valuation), which represents a lack of due care. (Mr Lane conceded that in preparing the Lane Report, he did not refer to section eight of Guidance Note 1 and Guidance Note 2, which refer to “as if complete” valuations but that concession appears to be of little significance as he was concerned with the question of the validity of the gross realisation methodology and not a distinction between “‘as is” and “as if complete” valuations).

Finally, it was submitted by the defendants that definitions were incorporated in the June Valuation as to both “gross realisation” and “market value”. However, that definitional approach says nothing about the fact that it was the opinion as to market value, also defined in the valuation, that was requested and, perhaps more importantly, stated as what was being provided by the defendants in the valuation.

It follows that the question posed in Issue 2 should be answered in the affirmative.

Turning to whether the defendants made the Continuing and Market Value Representations, the defendants relied upon their case vis-à-vis duty (to which I will return to more comprehensively when considering Issues 8-11 below).

Broadly speaking, the defendants contended that they did not owe a duty of care to the plaintiffs in preparing the Amended Indigo Valuation. The defendants, in that respect, relied upon the following factual premises that were said to distance the plaintiffs from the defendants:

I note before some turning to other factors of the defendants case that, whilst it is not contentious that ILO was the owner of the Marina, the plaintiffs submitted that the Amended Indigo Valuation was requested by IHPO, the owner of the Other Properties, not ILO, the owner of the Marina. It was contended, in that respect, the defendants’ submissions proceeds upon a false premise.

The defendants further contended that the Court should not make the following findings as “there is no evidence” to sustain the following factual conclusions:

The defendants also contended that no duty was owed because:

Those contentions should be rejected, for the following reasons:

The real issue appears to be whether the Continuing Representations pleaded at para 28A(b), (c), (e) and (f) of the FASOC were made when the Amended Indigo Valuation was addressed to someone other than the plaintiffs and the valuation contained the disclaimers.

The evidence makes clear that the Amended Indigo Valuation was not addressed to the plaintiffs. However, in the circumstances of this matter, the plaintiffs should be found to have received the representations as third parties for the following reasons:

In light of the factual findings earlier made in this judgment, in my view, the defendants knew or were on notice that City Pacific (and its subsidiaries) would or may receive and rely on the Amended Indigo Valuation.

I shall turn to particular considerations regarding the Continuing Representations and the Market Value Representations.

I accept the submission of the plaintiffs that the Continuing Representations as pleaded (at para 28A(b), (d) and (e) of the FASOC) were made when the defendants provided the Amended Indigo Valuation, without qualification, in response to an express instruction to “update” the June Valuation. It is that conduct which is misleading. For ease of reference, I extract the relevant paragraphs below:

For the reasons explained in paragraphs earlier in this judgment, the Amended Indigo Valuation contained the representations (and distribution or publication of it constituted misleading or deceptive conduct) to a broader class of persons than the addressee. Hence, the Amended Indigo Valuation did not cease to speak to the plaintiffs because it was addressed to someone else. In any event, I have found, the defendants knew or were on notice that the Amended Indigo Valuation was to be provided to, and relied on by, City Pacific.

I will return to this issue in the discussion of the duty case, but for present purposes I observe the defendants owed the plaintiffs a duty of care in preparing the Amended Indigo Valuation as, prior to providing the Amended Indigo Valuation to a company in the Indigo Group, the defendants either knew, or ought to have known, that a company within the Indigo Group would provide the Amended Indigo Valuation to the plaintiffs (or members of a class including the plaintiffs) and that members of that class would act or rely on the Amended Indigo Valuation in connection with some matter of business or of serious consequence, such as purchasing the Marina or funding the purchase of the Marina.

Further, it was reasonable in all the circumstances for the plaintiffs to rely upon the Amended Indigo Valuation. The nature of the valuation, the circumstances in which it was provided, the expertise of the defendants and the fact that the defendants held themselves out as expert valuers and were engaged on that basis, all point to it being reasonable for the plaintiffs to rely upon the Amended Indigo Valuation. Further again, in the present circumstances, in light of the defendants’ knowledge as to the likely use of the Amended Indigo Valuation and the limited utility of the valuation absent third party reliance, and that it was prepared by a reputable firm for reward, the disclaimers (to the extent they impact the representation case) do not negative a duty to exercise reasonable care in preparing the opinion.

In the result I answer Issue 3 in the affirmative, but note I will return to the consideration of duty more fully below.

Overall, the following propositions advanced by the plaintiffs are sound with respect to the Amended Indigo Valuation as to both forms of representations made (and, it may be noted, apply equally to the June Valuation; noting the sections on the Amended Indigo Valuation below, correspond to the equivalent section in the June Valuation):

As I have found, the Amended Indigo Valuation was based on and “updated” the June Valuation. In my view, the contraventions identified in relation to the June Valuation should result in a finding that the defendants engaged in misleading conduct in relation to the Amended Indigo Valuation with respect to the Continuing Representations. My earlier findings with respect to a failure to adopt an appropriate valuation methodology and a failure to explain and cross-check the methodology apply with equal force here. Further, for the same reasons as provided earlier, and having regard to Mr Lane’s evidence, the defendants grossly overvalued the market value of the Marina as at the valuation date of 30 January 2007. Mr Lane concluded that, as a result of adopting an incorrect methodology, CBRE ascribed a value to the Marina that was twice the figure that should have been reported or, at the very least, was misleading (I have earlier discussed why the Marina was overvalued, even if the defendants methodology was appropriate).

One further matter should be mentioned in this respect concerning the Inland Harbour sales. In s 5.2 of the Amended Indigo Valuation, the defendants relied on nine reported leasehold sales within the Inland Harbour Marina. However the defendants failed to explain and identify appropriate enquiries as to whether those sales constituted appropriate or reliable comparable sales evidence, and the Amended Indigo Valuation failed to provide any or any comparative commentary on those reported sales.

As to the Market Value Representations I accept the submission of the plaintiffs that the representations were misleading or deceptive or likely to mislead or deceive because the value of the Marina had not increased from the valuation in June and because the market value of the Marina as at 30 January 2007 was not $27.3 million (or, as otherwise appeared in the representations, $26 million).

I would answer the question raised by Issue 4 in the affirmative.

For the foregoing reasons, the valuations in the Amended Indigo Valuation were misleading or deceptive. Publication or distribution by the defendants of the valuations constituted misleading or deceptive conduct. They were prepared and published in contravention of s 12DA of the ASIC Act and/or s 52 of the TPA.

Before addressing the duty case, it is convenient to address the proper law governing the plaintiffs’ negligence case in relation to both the June Valuation and the Amended Indigo Valuation. It is common ground between the parties that the law of Victoria governs these claims and, in particular, the Wrongs Act 1958 (Vic). That issue only arises in relation to the tort claim, the misleading conduct claims arises under Commonwealth legislation.

In the present case, the defendants’ alleged negligence has several interstate elements, as follows:

In Baumgartner, the Court summarised the principles that are applicable in deciding the proper law where a tort has several interstate elements (at [861]-[863]):

The Court continued (at [872]):

Applying the above principles to the present case, although the June Valuation and the Amended Indigo Valuation were received and acted on in Queensland, the essential act or omission that initiated the plaintiffs’ claims was the preparation of the valuations. The preparation of those valuations took place in Victoria and, therefore, the law of Victoria applies to the plaintiffs’ negligence claims. This conclusion is reinforced by the location of the Marina valued. This means that questions of breach of duty and causation are governed by the law of Victoria.

The plaintiffs’ submissions as to whether CBRE and Mr Nicodimou owed a duty of care with respect to the June Valuation may, in light of the foregoing analysis, be readily accepted.

The defendants admitted that CBRE owed a duty to City Pacific in relation to the June Valuation. They also admitted that Mr Nicodimou owed a duty, although the content of that duty was subject to some likely immaterial dispute. However, as they deny owing a duty to City Pacific and Marina Cove in relation to the Amended Indigo Valuation, it is convenient to here identify why the admission of a duty is correct.

The starting point is the principles governing the imposition of a duty of care in relation to the provision of information or advice. The authorities recognise that the duty is imposed in relation to prevention or avoidance of economic loss, and that care is taken in imposing a duty to avoid economic loss. In ABN Amro, the Full Court summarised the applicable principles as follows (at [573]-[578]) (some internal references omitted):

The Wrongs Act, which governs the negligence claims, does not affect the common law rules in relation to duty (subject to certain particular rules and defences which have no application to the present case), breach and causation, and therefore the above principles are applicable in determining duty.

Consequently, the principles identified in ABN Amro apply. The June Valuation was requested and provided on an occasion on which the criteria identified in Tepko Pty Ltd v Water Board (2001) 206 CLR 1 (“Tepko”) and applied in ABN Amro in the passage cited are satisfied. At common law a duty is owed. (I note that the defendants made reference to the judgment of Brennan CJ in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at 252, but ultimately I have approached the question of duty and negligent misstatement trough the prism of Tepko).

That duty was owed by Mr Nicodimou as well as by CBRE. An employed valuer may also owe a personal duty of care to the recipient of a valuation provided by his or her employer. Under Australian law, it is not necessary for an employed valuer to have assumed some personal responsibility before a duty of care will be imposed: Propell at [113]-[115] (per Collier J, with Stone J agreeing); Interchase Corporation Ltd v ACN 010 087 573 Pty Ltd [2003] 1 Qd R 26 at [9] (per McMurdo P) and [77] (per McPherson JA).

For these reasons, I answer Issue 5 in the affirmative.

A valuer’s liability in contract will be governed by the terms of the valuer’s retainer, including the instructions given to the valuer. That contract, similarly, informs the duty in tort.

The content of a valuer’s duty of care is informed by the instructions given to the valuer: Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 (“Kenny & Good”) at [58] (per McHugh J) and [116] (per Kirby and Callinan JJ). Those instructions can include instructions to comply with particular guidelines or practice standards, such as the API Guidelines: Genworth Financial Mortgage Insurance Pty Limited v Hodder Rook & Associates Pty Limited [2010] NSWSC 1043 at [53] (per Einstein J).

A valuer may owe a duty of care to a person on whose account, or for whose benefit and use, it prepares a valuation. The standard of care imposed is that of the ordinary skilled person exercising and professing to have the skills of the valuer performing such work: Adelaide Bank Limited v DTS Property Services Pty Ltd [2008] NSWSC 1328 at [5] (per McDougall J). Irrespective of whether a valuer’s duty arises in tort or contract, the valuer’s duty is to take reasonable care as a trained professional valuer to give a reliable informed opinion on the open market value of the land in question at the date of valuation: I & L Securities Pty Limited v R S Melloy Pty Limited [2002] QSC 306 (“I & L Securities”) at [134] (per Ambrose J).

The significance of the breach of retainer is not that a separate claim is pursued for breach of contract. As time runs from breach in a contract case it is accepted that the contract claim is statute barred. Rather, the retainer informs duty and breach of the retainer informs the inquiry as to breach of duty in relation to the June Valuation.

Under the terms of the Valuation Retainer, admitted on the pleadings, CBRE made at least four relevant promises.

Those provisions constitute the answer to the Issue 6 as they constitute the relevant content of the duty of care with respect to the June Valuation.

The defendants’ case as to breach of duty, as earlier noted, substantially overlapped with the case brought with respect to misleading and deceptive conduct. Nonetheless, and without repeating the earlier references to the defendant’s case, the primary proposition advanced by the defendants, in this respect (apart from contending that it was not correct to say that a gross realisation valuation tells one little or nothing about market value), was as follows:

The standard of care and breach of duty of care are governed by s 48 of the Wrongs Act.

The starting point for determining breach of duty is to identify the relevant risk of harm: Roads & Traffic Authority of NSW v Dederer (2007) 234 CLR 330; [2007] HCA 42 at [59] (per Gummow J).

In the present matter, there was no real dispute that, when the June Valuation was provided to City Pacific, the defendants knew or ought to have known that there was a risk that City Pacific would suffer harm including economic loss if they failed to exercise care and skill in the preparation of the June Valuation. In any event, the defendants knew or ought to have known that the risk of one or more of the plaintiffs would make a financial investment in relation to the Marina based on a perceived higher value than the true value of the Marina, to pay monies under the investment and not be able to recover all of those monies.

That conclusion follows from the fact that the loss to City Pacific arose from a transaction analogous to lending money to Martha Cove, lending specifically being in the contemplation of CBRE and Mr Nicodimou. More broadly, the nature of the plaintiffs’ business, which was ultimately an investment business, whether in debt or equity, would result in the same conclusion.

By derivation from the findings as made in relation to the June Valuation with respect to the representation case, I conclude that there was a breach of duty by the defendants in relation to the June Valuation. That consideration commences with the following:

Overall, I find:

It follows the defendants breached their duties by failing to take precautions against the above risks.

I accept the submission of the plaintiffs that that conclusion is not diminished by the passage of time. The valuation was agreed to be provided as forward looking and was intended to contain an opinion expressed over a 3-5 year timeframe. Thus, the defendants assumed responsibility and owed a duty of care in relation to expressing value as at the date of valuation and also an opinion as to whether the Marina would hold value over a 3-5 year period.

This case may be distinguished from Ta Ho Ma because the terms of Valuation Retainer were such that the valuation was not one that went stale after 6 months (see Ta Ho Ma at 8).

I do not accept the defendants’ contention that the June Valuation could not be relied upon approximately one year later. The defendants assumed responsibility for which they are paid. As was stated in Kenny & Good at [87] (per Gummow J), the defendants took on an obligation, limited only by the contracted period, of expressing an opinion which retained validity. There was no express condition which would limit that obligation.

I would answer Issue 7 in the affirmative.

For a duty to a third party recipient to be recognised, the valuer must know that the third party was a member of a class of person who might reasonably rely upon the valuation: see for example Kestrel Holdings at [94]; Tepko at [47]. Further, it is plain that this must be known at the time the valuation is prepared.

Further, as noted above, it is settled that it would be unreasonable to hold a valuer liable for reliance on a stale valuation: Ta Ho Ma at 25-26. As with the June Valuation, the Amended Indigo Valuation stated:

The defendants submitted that the Amended Indigo Valuation was prepared by the defendants in response to a request by MCD to Mr Nicodimou bearing a date 14 February 2007 (the contents of that request being unknown to the plaintiffs). The valuation was dated 30 January 2007. It was submitted that the letter of instruction made it clear that MCD was acting on behalf of the Indigo Group. As noted, there was no evidence to suggest that, at the time the defendants were asked to prepare that valuation, they had in contemplation that the plaintiffs were in the position of a prospective purchaser or might rely upon the valuation for their own purposes.

It was also contended, in the circumstances, that there was no basis to recognise a duty on the part of the defendants to a person in the position of the plaintiffs. The interest of the vendor was very different to the interest of a potential purchaser. Recognition of a duty owed by a valuer retained by a vendor to a prospective purchaser, it was contended, was likely to impose an impossible burden on the valuer.

The defendants further submitted that the Amended Indigo Valuation was stale by October and November 2007. The defendants contended that the Amended Indigo Valuation was said to be valuing the property as at 30 January 2007. To the extent that the Amended Indigo Valuation was an “update” to the June Valuation, the June Valuation included the same premise regarding the absence of any warranty as to the maintenance of the value of the property.

The defendants then advanced the following submission in their written submissions:

It was submitted by the defendants that the authorities made clear that it is the class of persons rather than the particular person that needs to be identified and to whom the plaintiffs must prove the defendants owed a duty: Ta Ho Ma at [16]-[20]. In that matter, the judgment drew attention to the question of the status and poor position of the party who may assert reliance on the valuation. It was submitted that in the present case the class on which City Pacific and Martha Cove belonged was purchaser of the property. It had not been suggested that either of them belonged to a different class, even though City Pacific belonged to a different class in 2006 with respect to an unrelated transaction.

Thus, it was submitted that there is a second element which is critical to the question of whether a duty was owed, namely, whether the valuer knew or should have known that it was likely to lead the plaintiffs to enter into the transaction of the kind that the plaintiffs entered into. The statements of principle in Ta Ho Ma, which are plainly correct and in any event binding, are to the effect that one of the central issues is the class to which City Pacific belongs, and reasonable foreseeability on the part of the valuer about the nature of the transaction entered into.

It is apparent from these submissions, and as earlier discussed, that the question of duty arising in relation to the Amended Indigo Valuation differs from the June Valuation in that the relevant question is whether a duty was owed by the defendants (or either of them) to City Pacific and Martha Cove in relation to the opinions expressed in that valuation, notwithstanding that the Amended Indigo Valuation was not addressed to City Pacific or Martha Cove. The relevant principles in that respect were discussed earlier in this judgment.

A valuer may owe a duty of care to a third party recipient of a valuation, even in the absence of any contractual relationship. However, as was stated in Kestrel Holdings at [94], the duty of care is recognised to exist where the valuer actually knows or ought to have known that the person in question would rely upon the valuation so prepared. That issue does not probe into the subjective knowledge of the particular recipient or the purpose to which the valuation would be put but rather is an objective formulation. That is not to suggest that the subjective knowledge does not enter the equation. There is a further requirement that a finding of a duty of care be reasonable in all of the circumstances. The subjective knowledge, actual potential or indirect potential of the valuer is a relevant consideration in determining reasonableness.

In my view, it was reasonable in all the circumstances for the plaintiffs to rely upon the Amended Indigo Valuation having regard to the nature of the valuation, the circumstances in which it was provided, the expertise of the defendants and the fact that the defendants held themselves out as expert valuers and were engaged as such.

The following factual premises deriving from my earlier factual analysis directly bears upon that conclusion and the further conclusion I will reach below:

In that light, I reject the contention by the defendants that no duty was owed and that the defendants did not know and should not have known that it was likely that the plaintiffs would rely on the valuation to enter into the transaction of a kind that the plaintiffs entered into.

My particular reasons for that conclusions are as follows:

As I have earlier discussed and will further deal with, the disclaimers have no contractual significance to City Pacific and Martha Cove as they were not parties to the contract to prepare the Amended Indigo Valuation. In any event, in the light of the defendants’ knowledge as to the likely use of the Amended Indigo Valuation and that it was prepared by a reputable firm for award, the disclaimers did not negative, in my view, the duty to exercise reasonable care in preparing the valuation.

I answer the question raised by Issue 8 in the affirmative.

A valuer may owe a duty of care to a person on whose account, or for whose benefit and use, it prepares a valuation. The standard of care imposed is that of the ordinary skilled person exercising and professing to have the skills of the valuer performing such work: Adelaide Bank Limited v DTS Property Services Pty Ltd [2008] NSWSC 1328 at [5] (per McDougall J). Irrespective of whether a valuer’s duty arises in tort or contract, the valuer’s duty is to take reasonable care as a trained professional valuer to give a reliable informed opinion on the open market value of the land in question at the date of valuation: I & L Securities at [134] (per Ambrose J).

Having resolved the Issue 8 in the affirmative, there was no basis identified, in my view, to treat the content of the duties, with respect to the Amended Indigo Valuation differently to those found for the June Valuation and I answer the issue raised accordingly.

The defendants contended that their submissions as to the absence of a duty apply with equal force to the question of breach. It was submitted that in that respect the case that there was a breach of duty in the preparation of the Amended Indigo Valuation should be rejected.

The defendants further contended that the plaintiffs’ case for breach based upon the Amended Indigo Valuation was adversely affected by their inability to identify the risk of harm or the reasonable precautions that should have been taken in a case where the valuation was commissioned and prepared for the party on “the other side of the transaction”.

The plaintiffs’ correctly contended that the defendants breached their duties by failing to take precautions against the identified risk of harm (see FASOC at paras 27E and 27F). They relied upon their contentions as to the Continuing Representations and the Market Value Representations.

I also agree with the plaintiffs’ response to the defendants’ submission as to a failure to identify the risk or reasonable precaution because the valuation was commissioned and prepared for the party “on the other side of the transaction”, proceeded on a false premise that the Amended Indigo Valuation was commissioned and prepared by the owner/vendor for the Marina.

In light of the above finding that the defendants did owe the plaintiffs a duty of care, and having regard for the otherwise conflation in the plaintiffs’ case of the representation case and the duty case with respect to the Amended Indigo Valuation, it follows that my earlier conclusions with respect to the Continuing Representations and the Market Value Representations apply with equal force in answer to this issue. In that light I find the defendants breached their duties by failing to take precautions against the identified risks of harm per the pleadings in the FASOC at paras 27E and 27F (which were manifest in the findings as to the Continuing Representations and the Market Value Representations).

I answer Issue 10 in the affirmative with respect to both CBRE and Mr Nicodimou.

As earlier mentioned, the defendants relied upon the disclaimer set out in

s 1.1.4 of the Amended Indigo Valuation. They contended that this reliance was not based in contract but related to the duty question. That was posed in terms of an issue: would the defendants owe a duty to someone outside those identified in the disclaimer clause in the valuation?

It was contended that the Amended Indigo Valuation could not be relied upon unless the “third party” sought and obtained authorisation and that consideration is relevant to both the duty question and reasonable reliance.

Again, as earlier mentioned, the defendants relied upon BT Australia.

The defendants’ contended that, even if the plaintiffs’ submission that an inference can be drawn that the defendants intended that, in addition to IHPO, the Amended Indigo Valuation to be used by and relied on by ILO and City Pacific were accepted (a proposition resisted by the defendants), that had no effect in the present circumstances. City Pacific did not obtain (nor use), to the extent that it was used, the Amended Indigo Valuation in 2007 as a mortgagee in the 2006 transaction. As earlier mentioned, it was contended that the plaintiffs’ obtained the report in circumstances where they were a member of a different class, namely, purchaser.

I have earlier discussed various considerations with respect to misleading conduct and breach.

I agree with the submissions of the plaintiffs that the first disclaimer is contractual, unilaterally framed and cannot extend to a non-contracting party (namely, City Pacific and Martha Cove), particularly when the defendants were on notice that the valuation was to be used by third parties (the valuation is not to be characterised as a meaningless exercise, particularly as CBRE charged $25,000 plus GST for the valuation: BT Australia at 236-7.

There is merit in the plaintiffs’ submission as to the second disclaimer. The first and second sentences limit use of the valuation to use by an identified company for first mortgage security purposes. In circumstances in which that identified company owned only part of the land and was not a lender, that sentence must be understood as being a permission to use the valuation by providing it to lenders for the purpose of obtaining finance. That must extend to the lender relying on it, otherwise the permitted use is contentless. The third sentence is a contractual limitation between addressee and valuer.

I also accept the submission of the plaintiffs that the final sentence demonstrates the contractual effect of the disclaimer. It is a promise (consistently with the first and second sentences) by the addressee only to use and reproduce the Amended Indigo Valuation for the permitted purpose.

It follows that breach of that promise will mean CBRE has a claim for damages against the addressee, for breach of contract, but does not affect the otherwise misleading character of the Amended Indigo Valuation or the duty assumed in all of the circumstances.

As to the misleading conduct, I have found that the defendants were aware or were on notice that the Amended Indigo Valuation would be read and relied upon by City Pacific. In those circumstances the Amended Indigo Valuation disclaimers do not effectively negate the representations conveyed by a valuation, to a reader, that the valuation is prepared with due care and skill.

As to the question of reliance, to which I will next turn, I accept the proposition advanced by the plaintiffs that a disclaimer is unlikely have the consequence that the opinion expressed in the valuation is to be understood to be other than the product of due care and skill. This has the consequence that the disclaimer does not negative reliance. Nor do the disclaimers operate to exclude the valuer’s liability for misleading or deceptive conduct: Derring Lane Pty Ltd v Fitzgibbon (2007) 16 VR 563 at [23] (per Ashley JA, with Buchanan JA and Kellam AJA agreeing). The same conclusion arises with respect to the question of unreasonableness. A disclaimer of the kind here in question cannot avoid the prohibitions in the ASIC Act and the TPA.

I do not consider BT Australia assists the defendants’ contentions in this respect. The third sentence of the disclaimer on page vi, impliedly accepts responsibility for the use of the valuation by IHPO but not for its use for any other person. The fourth sentence disclaims responsibility to any third party. In the light of the defendants’ knowledge that IHPO proposed to use the valuation, in essence, to raise money, thus potentially affecting the rights of ILO and its mortgagee City Pacific, the fourth sentence should be read as not disclaiming responsibility for damage to a third party by the very use of the valuation by IHPO for which the defendants in the third sentence impliedly accepted responsibility. That approach conforms, in my view, with the reasoning in BT Australia. In particular, Wootten J’s construction of the equivalent of the third and fourth sentences of the four disclaimers are consistent with the above construction. His Honour observed (at 236):

It follows that I do not consider that CBRE and Mr Nicodimou were entitled to rely upon the disclaimer in the Amended Indigo Valuation to excuse either or both of them from liability.

I answer the questions posed by Issue 11 in the negative.

Before turning to the issues with respect to reliance and causation, I will deal with some general topics. These topics are canvassed in Issues 12, 13 and 14. Each issue referred to the conduct set out in paras 31-37 of the FASOC, which the plaintiffs allege was “caused by breaches and contraventions”. For convenience, those paragraphs are extracted below:

Overall, the defendants contended that the plaintiffs had not established factual reliance or, if they had, any such reliance was not reasonable.

The parties divided their cases with respect to reliance as between the June Valuation (Issue 12) and the Amended Indigo Valuation (Issue 13). Issue 14 dealt with the issue of causation and concerned each of Issues 12 and 13. I shall now to each of those three issues in turn.

The defendants stated at the outset of their submissions two propositions of principle which may be readily accepted, namely:

As to the principles of reasonableness, Gleeson CJ, Gummow and Hayne JJ stated in Tepko as follows (at [47]):

The defendants submissions then traversed some factual areas previously the subject of discussion in this judgment, which for convenience I will briefly summarise:

As to factual reliance with respect to the June Valuation, the Valuation Retainer and Valuation Guidelines contained an express acknowledgment by the defendants that City Pacific would place reliance on the June Valuation. As I have earlier discussed, in my view, the Amended Indigo Valuation was an update of the June Valuation and was not responsive to fully detailed instructions. The plaintiffs did not cease relying on the June Valuation merely because they were provided the Amended Indigo Valuation and, in my view, again, they were entitled to proceed upon the basis that the two valuation reports should be read together.

As previously discussed, the June Valuation did not become stale as contended for by the defendants, because the plaintiffs contracted with the defendants to provide a valuation over a period of 3-5 years. The Amended Indigo Valuation was an update of the June Valuation such that the June Valuation continued to speak to the valuations after the provision of the June Valuation. In those circumstances, City Pacific was not prevented from relying upon the June Valuation as a matter of fact merely because the purchase price under the Put and Call Option was greater than the June Valuation.

As I have previously noted the fact that the June Valuation and the Amended Indigo Valuation were stated to be for first mortgage purposes did not prevent Martha Cove reasonably relying upon the valuation for the purposes of purchasing the Marina. The test for market value did not apply differently if the valuation was for a purchaser rather than a mortgagee (see Spencer at 431-432). In any event, all other things being equal, a valuation for mortgage purposes will be conservative and, therefore, probably lower than one for a purchaser: APF Properties at [194] and [346].

To the extent it was suggested by the defendant that reliance was unreasonable because the approach required was not to determine market value for the Marina, I reject the defendants’ contentions. I will deal with that issue further with regard to the Amended Indigo Valuation.

Further, the reports in various places assert that the valuation is of market value of the Marina. In the absence of a clear warning that the assessment undertaken was not that requested and not of a market value the plaintiffs were entitled to take those statements at face value namely a statement of market value without analysis of the reasoning.

Overall, I consider that the plaintiffs’ reliance on the June Valuation (and, as I will come to it, the Amended Indigo Valuation) was reasonable, as I have previously noted, having regard to the nature of the valuations, the circumstances in which they were provided, the expertise of the defendants and the fact that they held themselves out to be expert valuers. In the result, I answer Issue 12 in the affirmative.

The defendants contended that the plaintiffs could not establish factual reliance with respect to the Amended Indigo Valuation, notwithstanding that they provided an opinion that the Marina was valued at $27.3 million (exclusive of GST) in order to pay the Call Option Fee to secure the right to enter a contract to acquire the Marina for $30 million.

The defendants also contended that the plaintiffs’ reliance upon the due diligence report and the payment on 10 October 2007 (namely, the further deposit, which was the Second Payment of the Martha Cove Property Monies) were misplaced. Four reasons were stated in this respect:

In this context it was submitted that these factors tell against a proposition that City Pacific relied upon the Amended Indigo Valuation to enter into the Put and Call Option on the next day before any further research was undertaken.

As to reasonableness, it was contended that it was not reasonable to rely on a valuation of about $27 million to acquire the right to acquire a property of $30 million, and further, by the time of the exercise of the option in October 2007, the Amended Indigo Valuation was eight months old and was stale. The same contention was made with respect to the November 2007 payment (being a reference to the Third Payment of the Martha Cove Property Monies).

It was further contended that the plaintiffs’ submission that the Amended Indigo Valuation was published in June 2007 should be rejected. I have earlier indicated my rejection of the defendants’ submissions in that respect.

The defendants’ repeated the contention the plaintiffs belong to a class of purposes who is a purchaser.

Nextly, it was submitted that to the extent a Jones v Dunkel inference might be available (a proposition that was denied), it was submitted that the only inference that could be drawn is that the evidence of Mr Nicodimou would not have assisted the defendants’ case.

Lastly, it was contended that the plaintiffs had elected to adduce no oral evidence of factual reliance with respect to the Amended Indigo Valuation.

I have earlier partially dealt with factual reliance in context in dealing with the factual background, particularly in the context of the agreement to purchase the Marina. CBRE was recompensed because it knew or intended that people would reply upon its opinions expressed in its valuations such that reliance might be readily inferred: Gould v Vaggelas (1985) 157 CLR 215 at 236 (per Wilson J) and 250 (per Brennan J). It may be reasonably inferred that City Pacific relied on the valuations in entering into the Key Terms Agreement and entering into and exercising its rights under the Put and Call Option and paying the First, Second and Third Payments (namely, the Martha Cove Property Monies) on behalf of Martha Cove. Martha Cove relied on the valuations in entering into the Contract of Sale and making those payments to ILO.

I do not consider that that assessment is weakened because the purchase price was about 10% above the express market value, as that was the price that ILO demanded and the valuation showed that price to be within the range of value. Further, City Pacific intended to borrow to fund the acquisition and needed a reliable known market value to obtain finance.

Those conclusions comfortably establish a basis for factual reliance by the plaintiffs with respect to the Amended Indigo Valuation. However, that conclusion may be reached by reference to relevant correspondence which has each been substantially referred to in the factual background as follows:

Nor do I consider the plaintiffs’ reliance on the due diligence report was misplaced. The document was prepared by City Pacific for a proposed investment in the Marina, including because it attached to a facility study for City Pacific’s proposed Marina Trust. It may be readily inferred that it was provided to decision making officers of City Pacific. Further, the document actually refers to the valuation figure from the Amended Indigo Valuation. The fact that the report may contain a critique of the Amended Indigo Valuation does not detract from those inferences but rather adds force to them.

As to the question of reasonableness, the fact the Amended Indigo Valuation was stated to be for first mortgage purposes does not prevent Martha Cove reasonably relying upon the valuation for the purpose of purchasing the Marina. As I have earlier noted, all things being equal, the valuation for mortgage purposes would be conservative and, hence, more likely to be lower than one for a purchaser: APF Properties at [194] and [346].

As earlier observed, the suggestion by the defendants that reliance was unreasonable because it was obvious from the valuations the approach was not to determine market value of the Marina has been rejected. With some measure of repetition, I accept the contention of the plaintiffs, in this respect, which are of real substance and summarised below:

Finally, I do not consider that the Amended Indigo Valuation was stale. If the correct date to measure reasonable reliance from is the date of the valuation, then the decision to enter the Put and Call Option and make the First Payment was less than six months after the valuation date. The valuation was also expressed to be (by reference to the letter of instruction) an “update” of the June Valuation, which City Pacific knew to speak to a period of 3-5 years from the valuation date (a standard term of valuations obtained by City Pacific). Further, as I have earlier found, the Amended Indigo Valuation was in fact published in June 2007, albeit by reference to a value as at 30 January 2007, and on that basis was less than one year old at the time of reliance.

I answer Issue 13 in the affirmative, but note that in doing so that I consider both City Pacific and Martha Cove relied upon the Amended Indigo Valuation and the Continuing Representations and Market Value Representations.

Causation in negligence is to be approached by reference to s 51 of the Wrongs Act. That analysis invokes consideration of both factual causation and the scope of liability.

It is appropriate at this juncture, and in the light of the latter discussion of contributory negligence and damages, to briefly recap some of the central factual considerations as follows:

It is reasonably clear that, at least the primary position of the plaintiffs, so far as a case in tort is concerned, is a “no transaction case” deriving from the defendants’ overvaluation of the security provided in the case of City Pacific as lender and the inappropriate valuation methodology (although the claim for damages is also pursued in the alternative with respect to specific individual payments made by the plaintiffs).

The plaintiffs contended that they would have not entered into the Key Terms Agreement or entered into or nominated Martha Cove under the Put and Call Option but for the negligent overvaluation (I have found breach of duty in that respect). There was a disparity between the true value of the Marina (on the expert evidence, I have accepted, at namely, $10.3 million) and the values represented in the June Valuation of $25.5 million and the Amended Indigo Valuation of $27.3 million.

The plaintiffs called no witness evidence to the effect that neither of the plaintiffs would have entered into and exercised their rights under the respective contracts if the true value of the Marina was known. Nor is there such evidence as to the exercise of rights under the contracts which resulted in City Pacific funding the purchase of the Marina or Martha Cove contracting to purchase it. The circumstances of the absence of such evidence (vis-à-vis the position of the potential witness) was discussed earlier in this judgment and do not stand against the Court nonetheless drawing an inference with respect to that question.

In my view, a strong inference may be drawn and one particularly related to the question of causation (also when seen in the light of any findings regarding reliance) that that is exactly the decision the plaintiffs would have taken if they had known the true (market) value of the property.

It is also clear that, at least in early October 2007, before exercising the call option and entering into the Contract of Sale, Martha Cove intended either to obtain finance from the CBA to complete the acquisition of the Marina, or to assume ILO’s debt under the Indigo Loan Facility and refinance that debt with the CBA after the acquisition. The plaintiffs also knew that the CBA required a “new valuation” in connection with that finance. However, in those circumstances, in my view, the value of the Marina reported in the June and Amended Indigo Valuations was significant to Martha Cove’s ability to raise funds to acquire the Marina, even if the question of contributory negligence may well arise in the context of the Third Payment.

I find that if the defendants properly (that is, with due care and skill) performed the function they were engaged to and paid to perform, and reported the true value of the Marina, Martha Cove and City Pacific would have known finance could not be obtained, would not have entered into any of the above contracts, and City Pacific would not have made any payment on behalf of Martha Cove as part of the purchase price.

Fundamentally, the defendants contend that the plaintiffs had failed to identify the reasonable precautions which the defendant had failed to take. In any event, it was contended that the plaintiffs could not establish causation having regard to the principles stated by the High Court of Australia in Wallace v Kam (2013) 250 CLR 375 at 385-387. It was contended that the damage alleged to have been suffered by the plaintiffs in advancing the funds in their capacity as purchaser of the Marina in June, October and November 2007, was remote from any breach of duty in relation to the June Valuation.

However, the reasonable precautions are precisely those pleaded by the plaintiffs and are specifically relevant to the issue of causation (and its resolution in favour of the plaintiffs). Further, the Martha Cove Property Monies (namely, the First, Second and Third Payments) are not remote (as I have discussed) from the Amended Indigo Valuation (co-extensive as it is with the June Valuation). City Pacific acted in the capacity of an existing and potential future lender.

Thus, the defendants’ wrongdoing “materially contributed” to the plaintiffs’ loss. This is sufficient to demonstrate causation. Each of the payments were made in reliance on and the wrongful conduct materially contributed to those payments being made. City Pacific would not have otherwise paid any of the three payments comprising the Martha Cove Property Monies on behalf of Martha Cove.

As for the First Payment ($2.1 million paid on 29 June 2007), the reliance on the valuation resulted in entry by City Pacific into the Key Terms Agreement (or the then existing draft Put and Call Option incorporating the Key Terms Agreement) and payment of the Call Option Fee, which became part of the deposit, as required by the express terms of that agreement. Similarly, the entry by City Pacific into the Put and Call Option, the nomination of Martha Cove and simultaneous exercise of the call option and entry into the Contract of Sale led to the Second Payment ($2 million paid on 10 October 2007) being made on behalf of Martha Cove. That payment was required by the terms of the Contract of Sale which then required a $4.1 million deposit. As for the Third Payment ($7 million paid on 28 November 2007), it was submitted by the plaintiffs, that the Third Payment was made to preserve the transaction in circumstances where it was still thought to be commercially sound and was made to address concerns as to delayed completion. It is sufficient for the purposes of establishing causation that the plaintiffs acted to preserve the transaction in reliance, in substance, upon the valuations (although the taking of that step raised questions for the purposes of contributory negligence).

As to the scope of liability, the defendants effectively relied upon remoteness. However, it should be first commented that causation proceeds on the hypothesis of duty and breach, and once a duty is owed by the defendants, as I have found, it is difficult to see how scope of liability can apply to protect a negligent professional who is paid for the production of a report, from liability of breach and factual causation have been as in this case, been established.

Finally, liability for misleading or deceptive conduct is to be determined, in my view, based on findings of reliance.

City Pacific and Martha Cove relied upon the June Valuation and the Amended Indigo Valuation and the Valuation Representations, Continuing Representations and Market Value Representations in engaging in the conduct referred to in the FASOC at paras 31-37 and such conduct was caused by the misleading conduct of the defendants and their breach of duty.

It follows that an affirmative answer must be given to the question raised by Issue 14.

Issues 15 to 18 were grouped under the heading “Defences” and traverse the following topics:

I shall deal with each issue in turn under this heading.

It is convenient to recap the positions of the parties, albeit with some repetition, in this respect.

As to whether any cause of action relied on by the plaintiffs was time-barred by any limitation period (Issue 15), the plaintiffs answered no. However, that answer was qualified by the following statement: “however, the analysis differs for City Pacific and Martha Cove and it is possible that the answer to this question differ for each plaintiff”.

The defendants contended that the plaintiffs’ claims are time-barred because the plaintiffs first suffered loss more than 6 years before the proceedings were commenced on 27 August 2015. In that respect the defendants relied upon s 5 of the Limitation of Actions Act 1958 (Vic), and/or s 263(2) of the Australian Consumer Law, and/or ss 12GF(2) and 12GM(5) of the ASIC Act and/or s 82 of the TPA and/or s 1041I(2) of the Corporations Act.

The defendants’ position is thus, that both plaintiffs are impacted by a time-bar in light of limitation periods. In this respect, the defendants provided a detailed outline of their position, which is set out below:

The defendants bear the onus of establishing that actual and measurable loss first occurred outside the limitation period: Segal t/as Segal Litton & Chilton v Fleming [2002] NSWCA 262 at [27] (per Hodgson JA; Handley JA and Young CJ in Eq agreeing). Importantly, there must be objective evidence of loss having occurred prior to the limitation date, not only the risk of loss: Wardley Australia Limited v Western Australia (1992) 175 CLR 514 (“Wardley”) at 529; Winnote at [41] (per Mason P).

In Wardley, the plurality of the Hight Court said (at 527):

It was emphasised in authorities, particularly Astonland and Kenny & Good, that in order to ascertain when measurable loss and damage was suffered, it is necessary to enquire as to what was the interest that was infringed by the negligent act. Davies J in Ross v Cook [2009] NSWSC 671 (“Ross”) conveniently summarised the principles with respect to transactions involving the advance of monies secured by mortgage in reliance on a valuation (at [31]):

The defendants accepted that, in a conventional case brought against a valuer by a lender who has advanced a loan secured by mortgage, the relevant enquiry for the purpose of determining when measurable loss and damage is suffered is when it was the interest of the lender was infringed, which is when “recoupment is rendered impossible”.

The defendants contended that this case is far removed from a conventional case brought against a valuer by a lender who has advanced a loan secured by mortgage. From this foundation point, the defendants made a number of contentions as follows:

From those contentions, the defendants argued, when properly considered, the relevant principles in this case concern when measurable loss and damages suffered by purchasers of real property who have incurred expense in acquiring the real property at an under value (based on the propositions in Ross at [33]-[34]). It was contended that in the present case, the question of when measurable loss or damage was suffered by the plaintiffs is unaffected by the fact that the transaction did not complete. On the plaintiffs’ case, they paid the Call Option Fee in June 2007 to acquire the right to purchase a property at what they allege is a gross overvalue. That constitutes immediate and measurable loss and damage.

There was a further component to the defendants submissions with respect to this issue. It is convenient to extract those submissions:

Reference was also made to the observations of Mason J in Winnote at [59]-[61], as follows:

The plaintiffs contended that similar circumstances arose here, as the plaintiffs paid money to solicitors with respect to the Put and Call Option, paid the Call Option Fee, lost the use of the funds paid over to Indigo and paid all of those monies to acquire the right to purchase the Marina, on their case, as earlier mentioned, at a gross overvalue.

It is on these premises that the defendants contended time commenced to run with respect to the losses pleaded by both plaintiffs on 29 June 2007. Time expired 6 years after the cause of action accrued, and that is well before the date on which these proceedings were commenced.

The defendants also advanced this defence on a further (and, it would appear, alternative) basis, which commenced with two further propositions:

From this starting point it was contended that, if the Court were to treat “the monies paid by City Pacific in truth [as being] characterised as a loan of some kind”, in that event, it was contended that it would be necessary to consider when the amendments introduced by the Amended Statement of Claim took effect.

Again it is convenient to extract the defendants submissions in this respect which were as follows:

A cause of action for damages for negligence or contravention of s 52 of the TPA and cognate statutory provisions accrues on the date when damage is first suffered: Hawkins v Clayton (1988) 164 CLR 539 at 587-588; Wardley at 525. Where loss is suffered on the happening of (or the failure of) a contingency loss is not suffered until that contingency occurs.

I accept the submissions of the plaintiffs’ that, in determining the type of loss, the Court should have regard to the following principles:

In this case the plaintiffs’ claim damages for economic loss. In determining the character of that loss for the purposes of dealing with the defence, I consider the following to be established on the evidence and available at law:

These considerations stand in contradiction to the defendants contention that City Pacific sued in the capacity of purchaser and not a lender or creditor (a submission that has been repeated in many parts of the defendants’ submissions).

In order to further attend to that consideration, it is necessary to again consider some issues of principle. Whilst it is true that loss arising from a loan will generally arise not earlier than default and typically only on sale of a security for a loss and an effective exhaustion of the covenant to repay, those circumstances do not arise because the transaction is a loan. Rather the circumstances arise because the loan is contingent until the security is sold and the covenant to repay exhausted. I accept the submissions of the plaintiffs, based as they are on the judgment of the High Court in Wardley, that where the loss is that a plaintiff pays money it is entitled to recover, the contingency is non-recovery regardless of the character of the right to recoup. It is the contingency of non-recoupment and when that contingency occurs to which attention should be directed. Thus, to refer to the decision of Davies J in Ross at [31], the relevant question is when recoupment is rendered impossible as it is then that time starts running in a relevant sense. In circumstances in which there is an effective contingency to the obligation, the categorisation as purchaser does not assist in a relevant sense.

When the substance of the obligations and transactions are looked at in the present matter as required in Winnote at [64], I consider that the plaintiffs should be treated, as observed above, as separate legal entities with different rights and liabilities as separate corporations. The proposition advanced by the defendants that City Pacific sues in the capacity as a purchaser (rather than a lender) is erroneous as the contractual documentation relating to the purchase of the Marina shows Martha Cove as the purchaser and not City Pacific. This follows from the fact that City Pacific nominated Martha Cove to purchase the Marina and Martha Cove exercised the Call Option and entered into the Contract of Sale as earlier found in this judgment.

The position of Martha Cove is different; it did contract to buy the Marina. The analysis of the loss of time question should, therefore, be treated differently as between it and City Pacific. It was submitted that the contract was entered into in circumstances where the parties “dealt ex-contractually” and ultimately there was never completion but that does not relevantly alter the character of Martha Cove’s involvement or loss.

That brings to consideration the time of loss. Turning firstly to City Pacific in the light of that aforementioned analysis, I do not consider that City Pacific’s claim is time-barred for the following reasons:

The analysis is different and considerably more difficult in the case of Martha Cove. Where a claimant is misled into buying a property for more than its true value at the time of the contract, the claimant usually suffers loss on exchange of contract: Astonland at [15] and [28] (per Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ). However, there is authority for the proposition that in such a situation, the claimant does not suffer loss until the purchase is settled and the claimant has parted with its money: Pine River Pty Ltd v Scorda [2001] WASC 105 (“Pine River”) at [115]-[118] (per Steytler J).

The plaintiffs sought to distinguish Astonland from the present case. It was submitted that it is implicit in the High Court’s statement of principle that completion of the relevant contract had, in fact, taken place. The present case it was submitted was different. In the present case, unlike Astonland, the Contract of Sale did not complete. It was submitted not only did the Contract remain executory, but neither party sought to issue a notice to complete or to terminate the Contract at any time. In fact, ILO did not seek to terminate the Contract until it did so in effect by selling the Marina in 2015.

The plaintiffs also made the following contentions:

Whilst the plaintiffs refer to authority for the proposition that the claimant does not suffer loss until the purchase is settled and the claimant has parted with its money: Pine River at [115]-[118] (per Steytler J), in my view, the defendants contentions so far as they concern Martha Cove, as a purchaser, amply demonstrate why the distinctions sought to be drawn, in this respect, cannot be sustained. Further, in my view, the case of Martha Cove is not relevantly distinguishable from Astonland. I do not consider the statements of principle therein necessarily revolve around the completion of a contract having taken place or that the absence of the termination of the contract in this matter is a particularly relevant distinction.

I do not consider that the cause of action by City Pacific was time-barred by any limitation period with respect to Martha Cove. However, the cause of action by the second plaintiff, Martha Cove, is time barred, under the statutory provisions specifying limitation periods which are referred to at the outset of the discussion of this issue.

The defendants submissions in this respect were relatively short and dependent upon the evidence of Mr Gordon. Those submissions are extracted below:

I do not consider those submissions can be sustained for two reasons.

First, I have found that Mr Gordon’s evidence should be given little or no weight. Secondly, I agree with the submissions of the plaintiffs that it is difficult to conceptualise what the plaintiffs should have done once the various payments had been made.

In terms of failure to mitigate, the evidence discloses that the plaintiffs acted with the object of avoiding loss including by keeping the purchase on foot and attempting on-sales of the Marina.

The defendants written submissions with respect to this submission were as follows:

Reference should also be made in this respect to some other aspects of the defendants’ submissions as follows:

In reply, the plaintiffs made the following submissions:

During the course of oral submissions, counsel for the defendants sought to rely upon a report titled: “City Pacific Limited: Due Diligence Observations”, dated August 2007 (“Due Diligence Observations Report”). The report was produced by Equity & Advisory Limited. That document formed part of Ex 10 and was subject to objections concerning admissibility, which I will turn to below.

The defendants contended that the Due Diligence Observations Report was relevant to the issue of contributory negligence, as well as the issues of causation and concurrent wrongdoer, for the following reasons:

It is useful to set out the passage relied upon by the defendants. Section 6 of the report is titled “Observations and Issues Requiring Resolution”. Next to the heading, “Martha Cove and ‘Cashless’ Profits”, the following observations appeared on page 26:

Whilst not referred to by the parties, for completeness, the following recommendations immediately followed those observations:

Counsel for the defendants submitted the Due Diligence Observations Report, on the evidence, was commissioned and received before the plaintiffs “parted” with most of the money telling them that their conduct is commercially risky. It was contended that such evidence supported the contributory negligence defence and further, that the defence “is so significant in this case as to defeat the plaintiff's claim is one of a number of the legal issues which is affected by this”.

The document was tendered as a business record under s 69(5) of the Evidence Act 1995 (NSW). The foundation for admissibility vis-à-vis that provision was contended to be found at page 3 of the Due Diligence Observations Report, which sets out the circumstances in which the document came to be prepared. Relevantly, the following introductory remarks appear at page 3:

The defendants submitted: “If your Honour is satisfied that the person preparing the business record would have sufficient knowledge of the matters then it remains an exception to the hearsay rule and is admissible”. Counsel for the defendants further submitted:

It was noted that its admissibility was challenged by reference to s 79 of the Evidence Act.

In reply to those contentions as to admissibility, counsel for the plaintiffs contended:

As to the relevance of the information on page 3 of the Due Diligence Observations Report, counsel for the plaintiffs submitted it does not cure the problem identified in the above submission. This is because, notwithstanding the reference to Equity & Advisory Limited, there is no evidence of fact as to the specific author.

In reply to that submission, counsel for the defendants briefly returned to the due diligence report that was tendered without objection and relied upon by both parties, as it suffered the same problem, namely, an absence of author. As such, it was submitted:

Not wishing to re-agitate an earlier ruling of the Court, counsel for the defendants confirmed their position with respect to the due diligence report:

The Due Diligence Observations Report is plainly a business record, that is evident on its face. By reference to page 3 of the document, I accept that the document was commissioned by City Pacific for the specific purpose of conducting a due diligence assessment of the corporation in response to an unsolicited take-over offer by another entity. No issues were raised as to the authenticity of the document. Nor were any argument advanced as to prejudice. I accept that the document was authored by an agent of Equity & Advisory Limited, however, no further specificity as to identity of the person or person(s) that authored the report was provided. The evidence is not tendered as to the veracity or validity of the opinions expressed but as to the publication of those opinions at a point in time when reviewed in the context of other evidence bearing upon the position adopted by the plaintiffs at or about the time of the publication of that document. The absence of a specific author does not defeat its admissibility.

Whilst the document is admissible, the weight it attracts is necessarily impacted by the absence of evidence as to the precise means and manner by which the document was communicated to City Pacific and to whom the document, and the information therein, was disseminated to within City Pacific. It is true that the document casts several observations and includes recommendations, however, there is also no evidence before the Court as to how the information was used. It attracts very little weight then with respect to the issue of causation. It is relevant to the question of contributory negligence.

Neither party suggested the appropriate approach to contributory negligence was dependent upon which cause of action succeeded. In any event, I have found that both causes of action in the present matter have been made out.

In those circumstances, I propose to rely upon the statement of principles in Baumgartner at [931]-[941]:

In my view, the acts of the defendants in causing damage in the present matter are, for the reasons given earlier in this judgment, significant. That consideration needs to be borne steadily in mind in drawing a comparison between that lack of care (or misrepresentation) and, as I have considered to be the case, a lack of care of by the plaintiffs who, in my view, share part of the responsibility for the damage occasioned with respect to the Third Payment.

Thus, central to the consideration of contributory negligence is the Third Payment made by the plaintiffs. By the time of the making of the Third Payment, the plaintiffs acting carefully must have been possessed of real doubts regarding the advice received through the June Valuation and the Amended Indigo Valuation and were otherwise possessed of information which, at least, required greater care before making the Third Payment.

Significantly, the plaintiffs pleaded that the Third Payment was made to ILO “in consideration for the acquisition of the Martha Cove Property”. In written submissions, it was contended the payments were made to preserve the purchase having regard to the worth established by the Amended Indigo Valuation. However, that payment was not required under the Put and Call Option or the Contract for Sale. I agree with the submission of the defendants that this part of the consideration was paid before completion where City Pacific had no contractual obligation to make the payment and when the surrounding circumstances would have called for greater care. There was no documentation explaining the basis for the taking of this step.

Further, the Due Diligence Observations Report emphatically identified the risk associated with the transactions of this kind. It is clear that further finances were being sourced in the period leading to the Third Payment, with a precursor to such funds being provided by the CBA to City Pacific being subject to receipt of a “new” valuation. The surrounding circumstances, in particular, the steps taken by City Pacific in making the Third Payment, notwithstanding concerns raised in internal correspondence about the valuation and the processes associated with the transaction, exhibit the conduct identified as both “commercially risky” and concerning on the part of City Pacific within the Due Diligence Observation Report.

I find no contributory negligence on the part of the plaintiffs with respect to the First and Second Payments of the Martha Cove Property Monies. Those payments do not attract, in my view, these issues.

Having regard to the above considerations, I find contributory negligence with respect to the loss occasioned through the Third Payment. Having regard to the significance of the defendants’ duties and the representations made by them, I nonetheless consider that as to the loss occasioned with respect to the Third Payment the loss should be apportioned 60% to the plaintiffs and 40% to the defendants.

The defendants’ primary position was that Phillip Sullivan and James Finucan were concurrent wrongdoers, although they accepted that the concurrent wrongdoers defence overlapped with the contributory negligence defence to the extent that the actions of Mr Sullivan and/or Mr Finucan, through the principles of attribution, the actions of the plaintiffs.

The alternative submission of the defendants involved reliance upon the concurrent wrongdoer defence to the extent that the actions of Mr Sullivan and/or Mr Finucan involved breaches by them of their obligations to one or other or either of the plaintiffs. It was said that this defence was set out in the commercial list statements and the evidence of Mr Gordon.

I accept the contentions of the plaintiff that, to the extent the defence is raised, it is unsustainable for a number of reasons. This is because:

It follows that the answer to Issue 17 is that proportionate liability legislation does not have an effect on any orders for damages the Court will make against one or more of the defendants.

Section 601FS of the Corporations Act provides as follows:

The defendants contended that the cause of action brought by the first plaintiff is not maintainable. It was submitted that on the evidence, (at least) $9 million of CPMT funds was advanced by City Pacific for the acquisition of the Marina. It was submitted that when City Pacific advanced the Martha Cove Property Monies, it did so in its capacity as a responsible entity of the CPMT. Reliance was placed on the evidence of Mr Cathro that City Pacific’s principal activity was to act as the responsible entity of three registered managed investment schemes, one of which was CPMT (it was then contended by the defendants that City Pacific was replaced as reasonable entity of the fund by Trilogy Funds Management Limited on 25 June 2009 such that the rights of City Pacific become the rights of Trilogy Funds Management Limited as at that date).

It was contended that the evidence did not show that City Pacific used its own funds to pay the Martha Cove Property Monies but rather the payment of $2 million on the 7 October 2007 was transferred from CPMT and the further payment of $7 million on 7 November 2007 was “redeemed” from CPMT to cover “MCM Settlement”.

It was contended, therefore, that City Pacific did not have standing to bring the claim against the defendants as they did not suffer the pleaded loss.

The factual contest between the parties in this respect revolves around the defendants establishing on the evidence that the claims, the subject of the proceedings, were part of CPMT’s scheme property for the purposes of 106FS of the Corporations Act. This is because it is only the scheme property to which section 106FS applied.

The evidence reveals that City Pacific carried on various businesses, some in its own right and some as the responsible entity for various managed investment schemes. So much is clear from the City Pacific’s annual report for the year 30 June 2007. Further, PTQ held the property of CPMT so that investments undertaken by City Pacific were not done as responsible for CPMT.

The separation of City Pacific’s financial affairs between transactions in its own account and as responsible entity of the CPMT are illustrated through City Pacific’s bank accounts which were managed both in its own name and on behalf of its managed entities including CPMT. The evidence revealed the existence of separate bank accounts for that purpose in the CBA, the issuing of separate account statements for each of the accounts as well as the issuing of a report entitled “Diamond Cash Management – Statement Report” which reported on a number of these accounts in one document but with a separation relevant to the separate financial transactions.

To return to the role of PTQ as custodian of the CPMT, PTQ would periodically withdraw money from the CPMT funds account and deposit that money in the CPMT redemptions account. When CPMT acted on a redemption request from a unit holder, or investor in the fund, it would transfer the proceeds of the redemption of the unit holder or investor from the CPMT redemption fund.

With that background in mind, attention may then be directed specifically to the payment of Martha Cove Property Monies by City Pacific.

On 29 June 2007, City Pacific made the First Payment of $2.1 million from a “cash deposit account” operated by City Pacific. That account was operated separately to accounts held by City Pacific on behalf of CPMT.

On 10 October 2007, City Pacific made further payment (the Second Payment of $2 million) from the City Pacific cheque account, which was operated by City Pacific for its own purposes.

Previously, on 28 September 2007, PTQ had withdrawn these funds from the CPMT funds account and deposited them into the City Pacific cheque account.

In my view, it is clear that the aforementioned withdrawal and deposit constituted proper payment by PTQ to City Pacific in its own right.

Next, reference may be made to an email to Mr McCormick sent to Mr Purss entitled “CPL Cash from CPMT”. That email demonstrates that City Pacific invested in the CPMT and, on that particular occasion, redeemed part of its investment. I agree with the submission of the plaintiffs that, in part, the defendants submission proceeded on the premise that City Pacific made no investments in CPMT, but this email stands to the contrary.

On 28 November 2007, City Pacific redeemed part of its investment in CPMT and directed PTQ to make the Third Payment directly to ILO (or IPC on behalf of ILO) from the proceeds of that redemption that were deposited into the CPMT redemption account. On that date, the following transactions occurred:

In City Pacific’s transaction detail ledger dated 11 December 2007, the Third Payment of $7 million is recorded as being “[f]unds redeemed from CPMT to cover MCM Settlement”.

In addition, the Martha Cove Property Monies are recorded in:

In my view, the aforementioned analysis of the evidence establishes that City Pacific used its own money to fund Martha Cove and did not pay the Martha Cove Property Monies in its capacity as responsible entity of the CPMT. Ultimately, the transactional ledger and balance sheets record the Martha Cove Property Monies as an investment by City Pacific in respect of Martha Cove.

In this light, Issue 18 should be answered in the affirmative.

In the FASOC, the plaintiff relevantly claimed the following relief:

Having established the causes of action in damages for tort and under s 52 of the TPA and its analogues, damages may be awarded to put the plaintiff in the position they would have been in if the relevant wrongs had not occurred.

With respect to misleading and deceptive conduct, the appropriate approach to damages in this case is to identify what the plaintiffs have suffered by way of prejudicial disadvantage in consequence of altering their position by reason of the breach of the relevant statutory provisions as I have found: Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [132] (per McHugh J). In any event, the measure of the plaintiffs’ loss at law and under statute are in this case relevantly identical.

The case for damages in this respect focused upon:

The position of the plaintiffs with respect to damages was stated thus. Recognising that the plaintiffs cannot recover twice, the Court should award City Pacific or Martha Cove damages in the total amount of $11.1 million (being the total of the First, Second and Third Payments), or alternatively in the amount of one or more of those payments (that is $2.1 million paid on 29 June 2007; $2 million paid on 10 October 2007; and $7 million paid on 28 November 2007). In each case, the plaintiffs also claim interest, costs and interest on costs.

The basis upon which the claims were made in that respect were correctly and succinctly expressed. The Martha Cove Property Monies had been lost and ILO was deregistered. Martha Cove is incapable of paying the Martha Cove Property Monies to City Pacific. It was claimed, therefore, that damages should primarily represent the sum of the First Payment, Second Payment and Third Payment, as earlier mentioned, in the total amount of $11.1 million.

The plaintiffs also claimed interest on each of the separate amounts comprising the Martha Cove Property Monies calculated from the date of payment or, alternatively, the date of accrual of the cause of action to the date of judgment. The plaintiffs also claim costs and interest on costs.

Having regard to my conclusion as to reliance and causation, the damages in the matter should be calculated on the loss occasioned for the Martha Cove Property Monies as adjusted in accordance with my findings as to contributory negligence.

The Court has determined that Martha Cove is time-barred under the statutory provisions specifying limitation periods as earlier specified in this judgment. City Pacific should have an award of damages from the defendants who are liable for the losses occasioned by the payment of the Martha Cove Property Monies, apportioned 60% for City Pacific and 40% for the defendants for contributory negligence of City Pacific with respect to the Third Payment.

The Court has not heard the parties on interest and costs. In the result, the Court proposes to make orders for the plaintiffs to provide short minutes of order reflecting this judgment. If there is an agreed position as to interest or costs that position may be reflected within the short minutes of order. The Court will make provision to resolve any dispute, as to interests and costs in the following orders. In the event, the Court will receive submissions on both interests and costs in accordance with those orders.

The Court makes the following orders: