Ackers v Austcorp International Ltd

NEW SOUTH WALES DISTRICT REGISTRY NSD 1460 of 2006

1. On or before 8 May 2009 the parties file agreed short draft minutes of the orders which they propose be made to give effect to these reasons and, in default of agreement, draft short minutes of the orders which each party proposes for that purpose. 2. The proceedings stand over to 8 May 2009 at 9:30am. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 1460 of 2006

TABLE OF CONTENTS THE PARTIES AND STRUCTURE OF THESE PROCEEDINGS........................... [3] PRINCIPAL ISSUES..................................................................................................... [4] (1) Misleading or deceptive representation............................................................ [4] (2) Disclosure statement........................................................................................... [5] (3) Valuation and Damages...................................................................................... [6] (4) Limitation Issue................................................................................................... [7] STRUCTURE OF THESE REASONS......................................................................... [8] 1. HOW THE MARKETING WAS DONE IN 1999-2000......................................... [10] 1.1 THE BROCHURE.................................................................................................. [14] 1.2 THE LEAFLET........................................................................................................ [20] 1.3 APPROACH TO REPRESENTATIONS AND CONDUCT................................ [22] 2. THE EVOLUTION OF THE PROJECT................................................................. [31] 2.1 THE INITIAL PHASE - THE DEVELOPMENT STALLS................................. [31] 2.2 AUSTCORP IS INVITED TO BECOME A PROMOTER................................. [39] 2.3 AUSTCORP'S GENERAL INVOLVEMENT IN ITS GROUP'S AFFAIRS..... [55] 2.4 AUSTCORP ENGAGES PRD AND MR WALKER........................................... [57] 2.5 AUSTCORP BECOMES A PROMOTER............................................................ [62] 2.6 AUSTCORP BEGINS WORK............................................................................... [67] 2.7 THE USE OF AUSTCORP'S LOGO AND BRAND............................................ [73] 2.8 THE CONTRACT OF SALE TO THE APPLICANTS......................................... [84] 2.9 THE LEASE............................................................................................................. [89] 2.10 THE PENRHYN PARKER CONTRACT SUMMARY..................................... [91] 2.11 THE DEVELOPMENT PROGRESSES.............................................................. [94] 2.12 THE DISCLOSURE STATEMENT.................................................................... [105] 2.13 WAS MUSTARA A SUBSIDIARY OF PACIFIC INTERNATIONAL HOTELS?............................................................................................................ [116] 2.14 COMPLETION AND MUSTARA'S LATER COLLAPSE............................... [129] 2.15 OTHER ASPECTS OF AUSTCORP'S GENERAL CONDUCT....................... [143] 2.16 THE IMPACT OF THE MARKETING MATERIAL....................................... [157] 2.17 AUSTCORP'S CONDUCT................................................................................... [179] 2.18 AUSTCORP'S ARGUMENT THAT IT COULD EXPECT AN INVESTOR'S SOLICITOR TO EXPLAIN THE CONTRACTUAL DOCUMENTS............ [203] 2.19 EXCLUSIONS AND THE DISCLOSURE STATMENT................................... [207] 2.20 A LATE CHANGE IN THE PROMOTIONAL ADVERTISING..................... [211] 2.21 THE EFFECT OF S 84(2)(B) OF THE TRADE PRACTICES ACT.................. [215] 3. THE EFFECT OF THE REPRESENTATIONS ON THE APPLICANTS............ [218] 3.1 THE APPLICANTS................................................................................................. [230] 3.1.1 BRIAN OWERS................................................................................................... [230] 3.1.2 MR OWERS SIGNS THE CONTRACT........................................................... [237] 3.2 SEAR TAN-BOUNKEUA....................................................................................... [251] 3.2.1 MR BOUNKEUA PASSES HIMSELF OFF AS A SOLICITOR..................... [256] 3.2.2 MS TAN-BOUNKEUA DECIDES TO PROCEED........................................... [271] 3.3 LUCIANI/TALDARMAR...................................................................................... [288] 3.3.1 LUCIANI/TALDARMAR ENGAGE SHEPHARD & SHEPHARD AS THEIR SOLICITOR.......................................................................................... [296] 3.3.2 THE CONFERENCE WITH MR FULLERTON ON 17 MARCH 2000......... [307] 3.3.3 DID LUCIANI/TALDARMAR RELY ON THE REPRESENTATIONS?...... [314] 3.3.4 ASSESSMENT OF MR AND MRS DI GIULIO'S AND MR LUCIANI'S EVIDENCE......................................................................................................... [319] 4. WERE THE REPRESENTATIONS MADE IN TRADE OR COMMERCE CORRECT?........................................................................................................ [337] 5. WERE THE REPRESENTATIONS RELIED ON AND WERE THEY MISLEADING OR DECEPTIVE..................................................................... [339] Representations (a) and (h): each applicant would be assured of a 7% p.a. net rental return of the purchase price for 10 years......................................... [339] Representation (b): net rental return would be achieved through the lease of apartments to Pacific International Hotels for a term of 10 years with two 10 year options......................................................................................................... [345] Representation (c): the entity that would lease the apartments in the resort was a well known and/or well respected, successful, profitable, financially worthy provider of hotel management services................................................. [346] Representation (d): the entity that would lease the apartments in the resort was a leading manager of resort and apartment............................................... [347] Representation (e): the purchase of an apartment in the resort would be an outstanding investment with no hidden risks..................................................... [349] Representations (f) and (i): those responsible for the marketing of the resort were so confident of the success that they could and were prepared to say, without qualification, that investment in the complex would lead to a guaranteed 7% p.a. return for at least 10 years............................................... [351] Representation (g): "Pacific International" was so confident in the development success that it was prepared to guarantee for a 10 year period a 7% p.a. net return on the investment together with annual CPI reviews and 5 year market adjustments.......................................................................... [352] 6. SECTION 51A - REASONABLE GROUNDS FOR THE REPRESENTATIONS WITH RESPECT TO A FUTURE MATTER........... [353] 6.1 WERE ANY OF THE REPRESENTATIONS WITH RESPECT TO A FUTURE MATTER?......................................................................................... [358] 6.2 DID AUSTCORP HAVE REASONABLE GROUNDS?..................................... [374] 7. SALES ATTEMPTS BY THE APPLICANTS......................................................... [406] 7.1 Mr Owers' attempts to sell his apartment.................................................. [406] 7.2 Ms Tan-Bounkeua's position...................................................................... [415] 7.3 Luciani/Taldarmar........................................................................................ [421] 8. VALUATION OVERVIEW...................................................................................... [428] 8.1 PROJECTIONS FOR THE OPERATING PERFORMANCE OF THE RESORT............................................................................................................. [432] 8.2 VALUATION - PRINCIPLES............................................................................... [444] 8.3 SALES HISTORY IN THE RESORT................................................................... [450] 8.4 VALUATION - THE EXPERT VALUATION METHODOLOGIES................. [457] 8.5 THE EXPERTS' JOINT REPORTS...................................................................... [463] 8.6 MR TEW CHANGES HIS OPINION................................................................... [469] 8.7 FLAWS IN MR TEW'S COMPARABLE SALES ANALYSIS........................... [475] 8.8 MR DUPONT'S "KNOWN FACTORS" APPROACH....................................... [482] 8.9 VALUATION APPROACH.................................................................................... [484] 8.10 CONCLUSION ON VALUE................................................................................ [493] 9. ARE THE APPLICANTS' CLAIMS STATUTE BARRED?................................. [501] 10. DAMAGES.............................................................................................................. [516] (a) Tax benefits............................................................................................. [517] (b) Mr Owers $33,000 cash deposit............................................................. [522] 11. CONCLUSION................................................................................................... [526]

REASONS FOR JUDGMENT 1 The applicants each bought apartments off the plan in a resort development on the waterfront at The Entrance, a town on the Central Coast of New South Wales. The Entrance and other locations were, and are, popular holiday destinations within a relatively short driving distance from Sydney. The promotional material which got them interested in purchasing promised them a guaranteed 7% p.a. net return "with the security of strata title and a ten year lease to Pacific International Hotels'. They were told this was a "five star investment". They borrowed most, if not all, of the purchase price. But, less than 2 years after completing their purchases, the lessee, Mustara Holdings Pty Limited a subsidiary of Pacific International Hotels Pty Limited, went into administration. Subsequent operators of the resort paid the applicants a return of far less than 7% p.a. before expenses. 2 One or more companies in the group of companies controlled by the fifth respondent, Austcorp International Limited (Austcorp), was or were involved in developing the resort and promoting the sale of apartments in it. Senior Austcorp group executives wrote or approved the promotional material. A critical issue of causation involve the assessment of responsibility of Austcorp, as opposed to one of subsidiaries, in, and the impact of, the marketing of apartments in the resort to potential investors and the decision making process of each investor. The applicants claimed that Austcorp itself engaged in conduct that was misleading or deceptive and caused them to purchase their apartments and thus incur loss. Austcorp both denied that it, rather than a subsidiary, was liable and that the applicants were misled or deceived. It said that if the applicants were misled or deceived they should have sued one or more of its subsidiaries that actually carried out the development rather than Austcorp itself. The parties also are in dispute as to how any loss should be quantified.

THE PARTIES AND STRUCTURE OF THESE PROCEEDINGS 3 A considerable number of investors began these proceedings. These reasons deal with three test cases. Originally I had made orders for a separate hearing of five claims which the parties had selected as raising questions representative of most issues common in a variety of situations involving the various other applicants and respondents. During the early part of the hearing those investors who had dealt with Landillo Pty Ltd, the first respondent, in its initial marketing and its real estate agent, D & B Project Marketing Pty Ltd, the second respondent, and those with claims against a real estate agent at The Entrance, Lamont Bros PRD Realty, resolved their disputes. PRD was operated by Xepa Pty Limited, the fourth respondent. I will refer to this agent as PRD. Warren Walker worked as a real estate agent at PRD. (In 2002 Pacific International Hotels, changed its name to Frisbo Holdings Pty Ltd. It was named in the application as the third respondent but was then in liquidation and the applicants never sought leave to proceed against it.) This left as active parties in the overall proceedings only those investors who had claims against Austcorp. The three test cases are claims by: · Brian Owers in respect of his purchase of a one bedroom loft style apartment for $330,000; · Sear Tan-Bounkeua in respect of her purchase of a one bedroom studio apartment for $190,000; · Joseph Luciani and Taldarmar Holdings Pty Ltd (the family company of his sister Marie Di Giulio and her husband, Dino) in respect of their purchase of a one bedroom loft style apartment for $340,000. For simplicity I will refer to these investors as "Luciani/Taldarmar".

(1) Misleading or deceptive representation 4 Each of the three claims requires individual consideration of the circumstances leading to the investors' entry into and completion of their contracts for purchase. In addition to the issue of whether Austcorp itself, as opposed to one or more of its subsidiaries, engaged in the conduct complained of, this also involves assessing whether each investor was misled by that conduct into making the purchase. Both Mr Owers and Luciani/Taldarmar engaged solicitors to act for them on their purchases, while Ms Tan-Bounkeua did not. There is a dispute as to whether the solicitors explained, or could reasonably have been expected (by Austcorp) to have explained to their clients the true nature of the proposed investment, as disclosed by the contract for sale, so as to dispel any claimed deficiencies and alleged misrepresentations in the marketing material (including Mr Walker's and PRD's statements to like effect). And, in Ms Tan-Bounkeua's case, there is an issue as to whether her failure to retain a solicitor to advise her resulted in her not being able to claim that she was misled or deceived by the conduct complained of when she entered into the contract for sale.

(2) Disclosure statement 5 There is also a dispute as to whether a disclosure statement by Landillo provided to Luciani/Taldarmar had a dispelling effect. In addition, Austcorp claimed that it is likely that a disclosure statement was provided to Mr Owers, although there is no direct evidence that this occurred.

(3) Valuation and Damages 6 There were also significant questions as to whether the apartments were worth less than what each investor paid under the contract. The expert witnesses dealing with valuation and related issues had substantively different methodologies. Finally, there are questions whether Mr Owers is entitled to damages in respect of some cash savings he invested in his purchase and his net gain after taking into account the effect of the tax benefits he received.

(4) Limitation Issue 7 Austcorp alleged that the investors' claims were statute barred, being commenced only on 1 August 2006, more than six years after they had entered into their contracts to purchase. It also argued that in early 2000 Mr Owers and Luciani/Taldarmar had incurred liability for their respective solicitors' legal fees and that this was damage incurred more than six years before the expiry of the limitation period.

STRUCTURE OF THESE REASONS 8 In order to understand the context in which most of the issues arise, at the outset I will briefly describe the general nature of how the apartments were marketed and the principal representations which the applicants claimed were made to them. I will outline first, the marketing activities (consisting of the promotional brochure, a similar leaflet and the confirmatory statements by the real estate agent, Mr Walker) and the representations complained of. Secondly, I will deal with the evolution of the project, Austcorp's involvement and the other circumstances leading up to when the applicants entered into their contracts to purchase their apartments and the related documentation. This will involve ascertaining whether Austcorp itself was a party to any conduct complained of. Thirdly, I will examine whether each applicant established that any of the representations was misleading or deceptive and if any relevant representation was in fact a cause of the applicant's decision to purchase. 9 Fourthly, I will consider whether Austcorp had reasonable grounds for making any representations as to future matters. Fifthly, I will deal with Austcorp's limitation defence. Sixthly, I will examine each applicant's conduct after Mustara collapsed in respect of his, her or its failure to sell in 2002 or 2003 when sales of apartments in the resort were realising prices in excess of the earlier purchase price. Then I will consider the valuation issues to determine whether the apartments were worth less than the purchase price at the time of completion of the contracts. Last I will deal with damages.

1. HOW THE MARKETING WAS DONE IN 1999-2000 10 The Austcorp group's business was founded at the beginning of 1992. Trevor Chappell was and remains the managing director of Austcorp. He was a certified practising accountant and an experienced company director. During the period between 1999 and 2001 the group's business was property development. As Mr Chappell described, by early 1999 the group had extensive experience in that field. Moreover, Mr Chappell, himself, by that time had over 25 years experience in property development and the investment industry. Mr Chappell worked closely with Edgar Hung, who was an executive director of Austcorp. He was an experienced and qualified engineer. Mr Hung had been involved in the property development and investment industry for about seven years. 11 By late 1999, construction of the resort was underway. Signs were displayed on the building site, including a large and prominent one with "Austcorp" in black block letters against a white background with a small Austcorp logo at the top right and the words, in smaller block letters, "development by" at the top left. The logo had Austcorp's name in white against a dark brown background with a light golden kangaroo below the name. Each applicant (except Mrs Di Giulio) described how in late 1999 or early 2000 he or she was at The Entrance, noticed the development and then went to the PRD sales office adjacent to the building site. There he or she met with Mr Walker. He gave them a brochure and, in some cases, a leaflet, which I will describe shortly. He also gave them a price list with the apartments then on offer, their prices, size, entitlement to carspaces and, under the heading "Rent Guarantee", the amount of the yearly rent. 12 Additionally, Mr Walker gave Ms Tan-Bounkeua two indicative depreciation schedules for a two bedroom apartment, one with and one without furniture and a pro forma negative gearing worksheet. These showed that if a large part of the purchase price were borrowed on an interest only loan, the tax deductions for interest and depreciation would result in a not insubstantial positive flow after tax. 13 Generally, most applicants had two meetings with Mr Walker in which he, in substance, repeated what was in the written promotional material he had given them. While these discussions emphasised or reinforced that material, the applicants did not suggest that he added anything new of substance to the representations that they alleged were conveyed in writing. Usually after the second meeting the applicant paid a holding deposit of $1,000 for their chosen apartment and gave Mr Walker details of their solicitor, or person to whom the contract should be sent.

1.1 THE BROCHURE 14 Mr Chappell and Mr Hung participated in preparing the brochure which was used to attract, and interest, potential purchasers in the resort. The brochure was printed on glossy paper folded in three so that it appeared as the size of an A4 page turned on its side. On the front cover of the brochure there is a theme of star fish, with four displayed towards the bottom right and a fifth in the hands of a snorkeller who is surfacing in the water. To the left of the snorkeller are the words: "A 4-star waterfront serviced apartment returning 7% net?" 15 Below this "The Entrance" is written in the sand. When the reader opens the brochure, two pages initially appear. On the left page, forming the underside of the front cover, are pictures of The Entrance area, and some text. On the right page is an artist's impression of the resort building. Across the bottom of the two pages, written in sand, are the words "That's a 5 star investment" and next to that are five star fishes. Above the star fishes and the word "investment" is an artist's impression of the hotel showing it facing the waters at The Entrance with its well-known bridge in the background and some pelicans in the foreground. On the left hand page there is a logo of Pacific International Waterfront Resort (which uses the first two words and the logo of Pacific International Hotels). On the right hand side of the left hand page the following text appears: "Position, potential and performance The Central Coast is booming. And right in the heart of the area at The Entrance, where several lakes meet the ocean, a new waterfront resort is being built in a prime position. The Pacific International Waterfront Resort investment apartments will capitalise on the Coast's growing reputation as a tourism and conference destination. Each comes with the security of strata title and a ten year lease to Pacific International Hotels, with options for renewal for two further ten year periods." 16 When the right hand page is opened two more pages appear. In the centre there are four columns with a total of five star fish. Above or beside the entries are various photographs of activities associated with The Entrance and the following text: "An investment package without equal It's hard to imagine a real estate investment offering so much. From day one your return will be a guaranteed 7% p.a. Rents are subject to annual CPI linked reviews, with provision for market adjustments every five years. Also, above average depreciation allowances are part of the picture. Choose from studios, one or two bedroom apartments All apartments are completely furnished and feature a large balcony or terrace. Many will feature a dual-key format providing many options for travellers. No outgoings, levies or maintenance Outgoings and levies will all be paid by the operator (except for land tax and capital items if they occur). The operator, Pacific International Hotels, will fully maintain the apartments and the resort to a 4-star standard including redecorating and replacement of furnishings. No managing agent When you invest in Pacific International Waterfront Resort, you won't pay between 7% and 10% to a managing agent, because Pacific International Hotels takes care of it all for you. They have advanced accounting and reporting systems in place enabling direct rental payment and owner reporting. Spoil yourself with a free week, every year Feel like a break? Each year of the lease period, you or your friends can enjoy a FREE 7 day off-peak stay at the Pacific International Waterfront Resort. You'll also qualify for * Free membership to Pacific's International Club, with accommodation discounts up to 50% off published rates at other Pacific properties, discounts at retail establishments, cinemas and on Hertz rental cars. * Free membership to Flag's Inn Club, with benefits including discounts at any of Flag's 450 properties Australia-wide." 17 On the far right hand page, on the right hand side are more pictures of The Entrance with another five starfish and the word "investment" written in sand. Thus, when the whole brochure is folded out, the words "That's a 5 star" and "investment" appear respectively on the left hand and right hand pages. Again, there are two pages with five star fish on each of them in this form of the brochure. On the right hand page on the right hand side there are more pictures of scenes from The Entrance. The text on that page is set out as follows: An experienced and successful operator Invest now - 70% already sold Pacific International Hotels are leaders in resort apartment management. They are supported by a substantial international bookings network as well as being members of Flag Choice. Pacific International has been awarded "Best Property" and "Best Hotel" Australia-wide within the Flag Group. Pacific International Waterfront Resort is currently under construction and due for completion mid 2000. The Central Coast's premier resort However, with 70% of the apartments already sold, your prompt action is recommended if you wish to take advantage of this prime investment opportunity. The Pacific International Waterfront Resort will make the most of its sensational waterfront position. It has been designed from the outset to provide guests with the ultimate getaway and to become the Central Coast's premier conference destination. It offers guests the chance to do as little or as much as they like, enjoy facilities including:

•                                                                                                                                                                                                                                                                                                                                                       heated swimming pools & spas                                                                                                                             *  child care facilities, kids' club & children's aquatic recreation area
  

•                                                                                                                                                                                                                                                                                                                                                       pool bar                                                                                                                                                 *  restaurant and coffee shop
  

•                                                                                                                                                                                                                                                                                                                                                       fully equipped conference centre                                                                                                                         *  Resort shops and tour desk
  

•                                                                                                                                                                                                                                                                                                                                                       Gymnasium                                                                                                                                                *
  

18 On the back of the brochure, a second but smaller reproduction of the artist's impression of the hotel appears with an arrow locating it on a map of The Entrance, showing it as proximate to the channel, the pelican feeding area and The Entrance Bridge. To the right of that is another map showing the F3 freeway as being 45 minutes drive from Hornsby, a northern suburb of Sydney. There are five starfish below that map. On the left underneath the artist's impression are the following words: "A unique investment in tourism and waterfront property available now at Pacific International Waterfront Resort … and remember, the views last forever." 19 Below the drawings and maps there is a white band with printing. On the left of the band are the display's office hours of 9am to 5pm seven days a week and PRD Realty's address. To the right of that is the PRD Realty logo with its telephone number and the mobile telephone number of Warren Walker. To the right of this is a logo of Pacific International which has the words "Hotels-Inns-Resorts-Apartments" as part of it. To the right of that are the words "DEVELOPMENT BY" and underneath that Austcorp's logo. To the right of that is the logo of Great Pacific.

1.2 THE LEAFLET 20 Mr Walker gave to Ms Tan-Bounkeua and Messrs Luciani and Di Giulio a leaflet printed on glossy A4 paper. On the top third of the page in white print on a blue background there was printed in large letters: "A RELAXING WAY TO EARN 7% NET … FROM WATERFRONT PROPERTY" 21 Underneath that, on the left hand side of the page was the following wording which appeared adjacent to an artist's representation of the resort, under which were pictures of a snorkeller with a starfish in his hand, an angler fishing at The Entrance with the bridge visible in the background and some golfers: "The Pacific International Waterfront Resort investment apartments will capitalise on the Central Coast's growing reputation as a tourism and conference destination. It's a combination of factors. Like its prime waterfront position at The Entrance, on the booming Central Coast, the security of a 10-year lease +2x10 year option, and a guaranteed 7% net return. Other advantages of investing in Pacific International Waterfront Resort include: Individual Strata Title for each apartment Above average depreciation allowance Choose from 145 studios, one bedroom apartments and two bedroom apartments Annual 7 day free off-peak stay for owners Priced from $145,000" At the foot of the leaflet were contact details for Mr Walker and the logos of PRD, Pacific International, Austcorp and Great Pacific.

1.3 APPROACH TO REPRESENTATIONS AND CONDUCT 22 The applicants pleaded that Austcorp engaged in misleading or deceptive conduct in three ways, based on the contents of the brochure, the leaflet and Mr Walker's repetition or reinforcement of some of the representations in those two documents. 23 First, the applicants pleaded that by providing the brochure which Mr Walker gave them at PRD, and causing it to be published to them, Austcorp engaged in conduct in contravention of s 52 of the Act. They alleged that Austcorp represented to him or her, as a potential purchaser of real property in relation to apartments in the resort, that: (a) they would be assured of a net rental return of 7%p.a. of the purchase price for 10 years; (b) this net rental return would be achieved through the lease of apartments in the resort to Pacific International Hotels for a term of 10 years with two further 10 year options; (c) the entity that would lease the apartments in the resort from purchasers was a well known and/or well respected and/or experienced and/or successful and/or profitable and/or financially worthy provider of hotel management services; (d) the entity that would lease the apartments in the resort was a leading manager of resorts and apartments; (e) the purchase of an apartment in the resort would be an outstanding investment with no hidden risks; (f) those responsible for its marketing were so confident of its success that they could and were prepared to say, without qualification, that investment in the complex would lead to a guaranteed 7% p.a. return for at least 10 years; (g) "Pacific International" was so confident in the development's prospects that it was prepared to guarantee for a 10 year period a 7% p.a. net return on the investment together with annual CPI reviews and five year market adjustments. 24 Each representation in the brochure was alleged to be misleading or deceptive or likely to mislead or deceive because of the following factors: 1. Mustara was not a leader in resort apartment management and had no involvement in hotel or apartment management, had not received any awards for hotels or properties that it managed and had no significant assets other than its proposed interest as manager of the resort and lessee of the apartments in it. 2. There was a real risk that purchasers would not receive the promised rental return from their leases if Mustara did not make a sufficient net profit from its operation of the resort to meet the obligations under the leases. 3. The receipt of the 7% net return would depend on occupancy levels being sufficient to generate enough profit for Mustara to meet its rental obligations and that there was a real risk that Mustara might not be able to meet all of the outgoings under the lease if it did not make a sufficient net profit. 4. There was also a real risk that Mustara might not be able to maintain the apartments to a four star standard, replace carpets, furniture and the like if it did not make a sufficient net profit and that depended, again, on occupancy levels. 5. There was a real risk that Pacific International might transfer its shares in Mustara to a company with little or no reputation, experience or success in the management of hotels or serviced apartments. 6. Mustara was a company with $2 paid up capital first incorporated in May 1997 and Pacific's obligations to the applicants, as purchasers, were limited to those in cl 20.9 of the lease. 25 Secondly, Ms Tan-Bounkeua and Luciani/Taldarmar also pleaded that by providing the leaflet which Mr Walker gave them at PRD and causing it to be published to them, Austcorp engaged in conduct in contravention of s 52 of the Act by representing to him, her or it as a potential purchaser of apartments in the resort that: (h) they would be assured of a net rental return of 7% p.a.of the purchase price for 10 years; (i) those responsible for the marketing of the resort were so confident of its success that they could and were prepared to say, without qualification, that investment in the complex would lead to a guaranteed 7% p.a. return for at least 10 years. 26 Each representation in the leaflet was alleged to be misleading or deceptive because of factors 2 and 3 complained of in respect of the brochure and a (truncation of factor 1, namely) that Mustara had no significant assets other than its interest as manager of the resort and as lessee of the apartments in the resort. 27 In addition, the applicants also pleaded that PRD, through Mr Walker, informed each of them that a return of 7% p.a. was guaranteed for 10 years. The evidence satisfies me that Mr Walker made such a statement to each applicant [see 3. below]. That statement is no different in substance to representations (a) and (h) and I will not deal separately with it for that reason. 28 Each of the applicants gave evidence to the effect that he or she understood that the 7% net guaranteed return was "guaranteed" because the lease provided for a fixed return, rather than a return ascertained from or dependent upon occupancy rates of the resort[see 3. below]. In other words, the lease itself guaranteed the return. Each also said that, taken in isolation, if Mustara were known to them to be a $2 company with no substantive assets, but was a subsidiary of Pacific International Hotels, that would not have troubled them. However, if it were not known to have been a subsidiary of Pacific International Hotels, they would not have gone ahead. 29 Likewise, each of the applicants said that they would not have gone ahead if he or she had realised that Pacific International Hotels' guarantee was limited to a maximum of 12 months' rent under cl 20.9 of the lease to Mustara. That was, in effect, because they were intending to borrow 90% or 100% of the purchase price and then obtain the benefit of negative gearing under the income tax legislation using the "guaranteed" rent to finance most of their expenses it being (in the sense of it being fixed at 7% of their purchase price). There were also other taxation benefits such as depreciation and a small amount of amortisation. 30 Austcorp argued, however, that each applicant received all contractual documents which, if properly read and understood, revealed the true position in respect of the limitation of Pacific International Hotel's preparedness to guarantee the venture. There are issues between the parties concerning the ongoing effect of the representations juxtaposed against the receipt of the whole of the contract, the use, by some of the applicants, of solicitors to give them legal advice, the provision to some of the applicants of disclosure statements and the capacity of the representations to continue to influence the applicants at the time they entered into the contract or completed it.

2.1 THE INITIAL PHASE - THE DEVELOPMENT STALLS 31 By early 1997, Landillo was seeking to develop its land at The Entrance as a resort style serviced apartment hotel. It prepared a strata plan for the development and in May 1997 obtained development consent from Wyong Shire Council for a building with over a hundred and forty apartments, a restaurant, hotel lobby and conference facilities. The effect of the development would nearly double the supply of rooms in The Entrance area: room supply would increase by about 10% in the Central Coast area generally. 32 Importantly, the council imposed a condition on the consent that required the apartments to be used solely as serviced apartments, providing short term stay accommodation. Thus, a person considering the purchase of an apartment would be likely to consider it as an investment property with which to earn a return, rather than as a holiday home, except perhaps for intermittent short term breaks. Each apartment would be a separate strata title unit registered in the investor's name. 33 On 9 June 1998 Landillo entered into a management agreement with Mustara Holdings and Nigel Corne, personally, for the operation of the resort. Mustara was to be the operator of the resort. It was then a wholly owned subsidiary of Pacific International Hotels. Mr Corne guaranteed Mustara's obligations under the management agreement. He was then the sole director of Mustara. He was also the chief executive and, at least, 50% beneficial owner of Pacific International Hotels. 34 In broad terms, the management agreement contemplated that Mustara would enter into a number of leases in order to operate the resort. First, it would lease all the apartments from Landillo's purchasers. Secondly, Mustara would lease from Landillo, or the registered proprietor of each strata title unit, two areas on the ground floor of the building, known respectively as the manager's lot, and the restaurant lot. The manager's lot comprised the hotel reception desk and some office space. (Later in September 1999 it also came to include most of the common area on the ground floor). The restaurant lot included the restaurant and kitchen (which would enable the resort to provide room service food and beverages). 35 The important features of these arrangements for present purposes are that first, Landillo could sell either or both of the management lot and restaurant lot to one or two, different purchasers, and, secondly, Mustara might not be in a position in the future to transfer or assign its interest as lessee in all its leases (i.e. of the apartments, management and restaurant lots) to any incoming operator, e.g. if Mustara were insolvent and its leases were terminated. In that latter case, any new operator would have to negotiate new leases with all the landlords in order to operate the resort, without any assurance that it could obtain similar or commercially acceptable terms from all or any of those landlords. 36 Landillo engaged D & B to devise and conduct the initial marketing campaign for the sale of the apartments to investors. But Landillo never obtained finance. By April 1999 construction of the resort had not started, while Landillo had entered into many conditional contracts to sell apartments off the strata plan. Each purchaser had paid a deposit. Their contracts initially provided that the purchaser had a right of rescission if the strata plan was not registered in the Land Titles Office of New South Wales before 31 December 1999. And the contracts provided that once the strata plan was registered, completion had to occur within 14 days after that event. 37 For a period preceding May 1999 Mr Corne had been dealing with Alfred Wong and the Great Pacific Finance group (which Mr Wong appears to have controlled) in pursuing the development of other hotel projects to be operated by Pacific International Hotels. They and their companies had been involved in developing a serviced apartment project in Kent Street, Sydney, for Pacific International Hotels to operate. The two had also continued to work on developing an apartment hotel in Parramatta which would also be operated by Pacific International Hotels. Neither Mr Corne nor Mr Wong gave evidence. I infer that they discussed the difficulties Landillo was experiencing but were unwilling to take on the burden of financing the development themselves. They decided to approach Austcorp. 38 Sometime in 1998 Mr Wong had raised with Mr Hung the possibility of Austcorp being involved in the Parramatta project his group was developing for Pacific International Hotels. But that proposed co-operation did not go ahead. By then Mr Hung had known Mr Wong for over four years and considered Mr Wong to be a very capable businessman. Mr Wong's companies had assisted the Austcorp group with finance for its developments and Mr Hung and Mr Wong had met regularly since 1995 to discuss potential projects that one or the other had come across.

2.2 AUSTCORP IS INVITED TO BECOME A PROMOTER 39 In about late April 1999 Mr Wong approached Mr Hung with a proposal for Austcorp to become involved in the development of the resort. Mr Wong told Mr Hung that Mr Corne had described the resort as being a project at a fantastic site that he really liked. He said that he had worked with Mr Corne for the previous two or three years. Mr Wong described the project to Mr Hung, telling him that Pacific International Hotels had been signed up to manage and operate the hotel. Mr Wong told him that the operator would lease the apartments from investors with the restaurant, office areas and conference areas on the ground floor. Mr Wong explained that originally it had been planned to open the resort before the Sydney Olympics in August 2000, but the current developer was unable to finish the project. He told Mr Hung that he wanted the resort to happen and sought Austcorp's help. Mr Wong outlined that Mr Corne had gained his experience in the hotel industry initially through working in his family's business, operating the Cosmopolitan Hotel in Double Bay, close to Sydney. He said that Mr Corne held a high position on the Australian Hotels Association and that he trusted Mr Corne's judgment because he was a very good and very conservative operator. 40 Next, Mr Hung related to Mr Chappell his conversation with Mr Wong. Mr Chappell had met Mr Corne previously in connection with the Parramatta project. He was impressed by Mr Corne and considered him to be an experienced operator with a long track record of experience in the industry. Mr Chappell understood that Pacific International Hotels were then operating six or more hotels and proposed to operate up to twelve. 41 In about late April or early May 1999 Mr Chappell and Mr Hung met with Mr Wong. Mr Wong told them that he was keen for Mr Corne to proceed with the venture at The Entrance. He encouraged Mr Chappell and Mr Hung to get Austcorp to enter into a joint venture with his group to develop the building so that Pacific International Hotels would be able to operate the completed resort as part of its hotel chain. Mr Wong told them that he had conducted his own investigations and was satisfied that the project was sound and viable. He provided then with a pamphlet which summarised various hotels that Pacific International Hotels then operated and those it was proposing to operate in Victoria and New South Wales. 42 That pamphlet was a double side printed A 4 page headed "Flash Facts", with Pacific International Hotel's logo at the top. It described 12 hotel, apartment and resort projects. Only six of those projects were actually operating businesses. As the pamphlet described, the others were proposed to be opened, the first from about March 1999. Three of the operating businesses were in Sydney and Bankstown. Two more were proposed to be in Sydney, one in George Street, another in Kent Street and a third in Parramatta. Two properties were on the Central Coast, one being the resort which was described as being proposed to be opened in April 2000, the other was a resort at Toukley. The two other properties were operating in Central Melbourne with a further two proposed to open in Melbourne later. Thus, the pamphlet demonstrated that in mid 1999 Pacific International Hotels was engaged in a very considerable expansion of its business and operations. 43 Mr Chappell said that the pamphlet was the only information concerning Pacific International Hotels which he received other than what he learnt at the meeting that he attended with Mr Hung and Mr Corne shortly afterwards. At this time the Austcorp Group, Mr Chappell and Mr Hung had no experience in the operation of hotels. 44 An experienced businessperson in the position of Mr Chappell and Mr Hung would have appreciated immediately that Pacific International Hotel's financial position was critical for the purposes of it being able to undertake the development and operation of six new properties over the period of about one and a half years as described in the pamphlet. It would be obvious to such a person that the establishment costs of each business would be substantial and that each of the hotels, apartments or resorts would take some time to develop a goodwill or reputation from which any reliable return and occupancy rate would be achieved. New businesses need time and access to substantial working capital while they develop a reliable income stream. Experienced businesspersons like Mr Chappell and Mr Hung must have appreciated this, and I find they did. However, this issue was of no concern to them because Austcorp was examining the proposal as a developer that would earn its profit by selling all the units in the development. 45 In early May 1999, probably at their meeting with Mr Corne, Mr Chappell and Mr Hung received a five year forecast for the operation of the resort prepared by Pacific International Hotels. In giving evidence, they identified a copy of a contemporaneous forecast as either the one, or similar to the one, they saw then. This forecast projected profits of about $1.4 million before interest, rent and taxes commencing in the year ending April 2000 and rising to about $3.9 million in 2004. 46 Mr Chappell said that he understood that the first year's operations in the projected figures showed that the project was "marginal at best". The projection allowed $1,223,000 to be contributed to the operator by Landillo for half of the first year's rent together with a further sum of $500,000 for pre-opening expenses as provided in cl 22 of the management agreement, at cll 22.3 and 22.6. After the rent the operator paid to the owners of the apartments (the investors) to generate their returns, its net profit in the first year was $4,000. By the year 2004 in the projections, the hotel profit, after payment of rent to investors, was projected at being $877,000. The key aspects of the projections are in the following table: OLYMPICS ($ 000) YEAR ENDING APRIL 2000 2001 2002 2003 2004 NO. ROOMS 143 143 143 143 143 OCCUPANCY 40.0% 57.0% 65.0% 65.0% 65.0% AVERAGE TARIFF $145.00 $166.80 $166.80 $175.10 $183.90 ….. …. …. …. …. …. NET PROFIT B4 [BEFORE] 1410 3053 3494 3679 3891 INTEREST, RENT & TAXES BASE RENT 1223 2447 2447 2557 2557 HOTEL PROFIT 4 247 637 801 877

47 That projection evidently had been prepared some time before because it proceeded on the basis that by April 2000 the resort would have been operating for a year which was impossible since Mr Chappell and Mr Hung received it in May 1999 in connection with a discussion as to whether the construction of the resort would proceed at all. Mr Chappell said that one of Pacific Hotel International's senior managers attended the meeting and they all spent about half an hour going through the projections. However, Austcorp did not make or obtain any independent analysis of Pacific International Hotels' overall financial position, or market analysis of the area in which the resort was to operate. Austcorp made no attempt then or later to obtain any updated projections for its own use. And, it was a five year, and not a ten year, projection. 48 Mr Corne told them that the Crown Plaza Hotel at Terrigal (a beach resort not far from The Entrance) had been achieving better occupancy levels than were forecast in the projection for the resort. He also gave them an Australian Hotels Association set of confidential statistics showing that the Terrigal hotel's 196 rooms achieved an average occupancy of 71.45% with a gross revenue per room of $204.55 and a net revenue of $146.14. 49 Austcorp argued that it could not be expected to examine projections of this kind with any particular expertise or knowledge of the hotel industry because it had no experience in that industry. I reject that argument and deal with it in more detail below[see 6. below]. Broadly, Austcorp simply accepted the projections at face value for the purposes of making representations relating to a projected return over a ten year period for an investment in a resort to be operated by Pacific International Hotels. Both Mr Chappell and Mr Hung knew that Pacific International Hotels was then undergoing the very considerable proposed expansion of its activities. While each said that he considered that the projections he had seen in May 1999 seemed to be reasonable or conservative, I do not accept that either of them gave any detailed attention to them. They took the view that Austcorp could rely on the projections as a sufficient analysis of the likely financial operation of the resort once the development had been built, and as a basis on which to proceed because of Mr Wong's and Mr Corne's assertions of comfort with them. This was despite them being aware that the projections were out of date, for the shorter period of five years, lacked independence and were put forward by Mr Wong and Mr Corne who were seeking to involve Austcorp in the project after others had failed to raise sufficient capital to enable it to proceed. 50 In late May 1999, Mr Hung received legal advice from one of Austcorp's solicitors, Tzovaras Yandell, concerning the application of the Managed Investments Act 1998 (Cth) (which inserted Ch 5C into the Corporations Law). Tzovaras Yandell discussed issues which are not of any present relevance but observed emphatically in their advice of 31 May 1999 that the guarantor (i.e. Pacific International Hotels) "… is not a public company of substance". 51 The reason for Austcorp's casual approach to the accuracy and reliability of the projections was explained by each of Mr Chappell and Mr Hung in his evidence. Each said that Austcorp's involvement was to be relatively short-term. It would develop the building and then take its share of revenue from sales. After that point, he said that Austcorp would not be involved in the ongoing operation of the resort or derive any further revenue from it. Thus, the projections had no apparent bearing on Austcorp's decision to invest, because it would not be involved with the operation and financial performance of the completed development. 52 Austcorp was not intending to expose itself to any risk from the actual operations of the resort once built. As Mr Chappell said, his overriding concern at the time of deciding on becoming involved in the development of the resort was whether or not it would be a profitable exercise for Austcorp. 53 Austcorp did not confine its role in the development merely to building the resort project. It involved itself in selling apartments to investors including the applicants. To achieve those sales, from which its ultimate profit would derive, Austcorp put forward the marketing material in the brochure and leaflet stating that the financial return generated by an investment in the resort would be 7% p.a. net "guaranteed" over the period of ten years. For the reasons I will explain below it was not reasonable for Austcorp, without any independent analysis by it, to place any reliance on the projections [see 6. below]. 54 Moreover, the return to an investor was far from a "sure thing" as Mr Hung confirmed in the following evidence: "… but you did know that to the extent a guarantee was there, it was only for 12 months? --- Yes, correct. Such that if Pacific International formed the view that the hotel was not operating successfully, it could effectively walk away from the hotel after paying out 12 months rent? --- Yes. And because of that possibility, you were aware, weren't you, that whether or not the investors would receive seven per cent net on their investment each year for ten years was not a sure thing? --- Yes." (emphasis added)

2.3 AUSTCORP'S GENERAL INVOLVEMENT IN ITS GROUP'S AFFAIRS 55 In his evidence in chief Mr Chappell referred to a group policy that general correspondence and communications were made on Austcorp's letterhead because it was the holding company. He said: "Did you in 1999 have any practice which you followed concerning the use of letterhead for companies with the Austcorp group? --- Yes, we did. We had a … company policy, that general correspondence and communications were communicated on the holding company letterhead, and every project that we undertook there would be a separate company formed for that activity, either as an outright development on our own or in joint venture with other people. And in every case there would also be an appointment of an Austcorp development management as the developer manager of the respective development project. I can't recall the number of subsidiary companies we had at the time but I think currently we have got something 250 and 300 subsidiary companies. So from a practical standpoint it would be difficult to have a letterhead for every individual company when communicating, particularly under the signature of the managing director or chairman. So it has been my practise unless there involves some formal, covering some formal legal agreement or some contractual arrangement, to use the holding company letterhead." (emphasis added) 56 In light of that state of affairs, Austcorp, as the holding company, cannot complain that members of the public who saw a document or a hoarding bearing the Austcorp logo could not associate that logo with Austcorp itself, whether or not it could also be associated with one of the up to 250 or 300 subsidiaries which Mr Chappell mentioned.

2.4 AUSTCORP ENGAGES PRD AND MR WALKER 57 Mr Chappell met with Mr Walker at The Entrance in late April or early May 1999. They were old friends and had worked together many years before, just after they both had qualified as accountants. Mr Chappell was aware that Mr Walker had a full real estate licence. Mr Walker took Mr Chappell for a tour of the site and they then visited other sites in the area which had recently been, either, developed, or were the subject of development applications or consents. Mr Chappell said that he then formed the view that the prices achieved by Landillo on its presales and those sought on the about 50 unsold apartments were within a range justified by what Mr Walker had shown him of the market. 58 On 3 June 1999, Mr Walker wrote to Mr Chappell reporting on his review of the asking prices for the unsold apartments, suggesting increases resulting in about $1 million extra revenue if the proposed prices were achieved. He stated that "… the guaranteed return on investment is a prime consideration to prospective purchasers". Mr Walker made an extra allowance (or increment in price) for "perceived value" for apartments on the eastern wing. Mr Chappell gave this letter to Mr Hung. Both of them agreed with Mr Walker's conclusion as to the importance of the guaranteed return. 59 On 30 July 1999 Mr Chappell discussed with Mr Walker terms of the appointment of PRD as exclusive selling agents. This led on 3 August 1999 to Mr Walker writing to Mr Chappell, as managing director of Austcorp, proposing a reduction in PRD's commission "… in recognition of the extensive marketing campaign to be undertaken by Austcorp and the support this will provide for our sales staff". Subsequently, in October 2000, when Mr Walker was about to cease his association with PRD, he resent the letter of 3 August 1999 to Anthony Zantiotis, a development manager at Austcorp, as the "listing agreement" for PRD. He used this to negotiate terms on which he was appointed as the selling agent by Austcorp. 60 Ordinarily, a vendor of land will engage a real estate agent to market the land and, so, any commission would have been paid by Landillo, as vendor, out of the proceeds of sale. On 28 March 2000, Mr Hung on letterhead with both Landillo's and Austcorp's names on it wrote "for and on behalf of Landillo" to Mr Walker. The letter sought his confirmation that the maximum commission to which he and PRD were entitled was 2.25% of the purchase price of each apartment and that he would pay any forfeited deposits to the financier, Credit Agricole Indosuez Australia Limited. Mr Walker signed and returned the letter to Mr Hung. I accept the evidence of George Tan, Austcorp's finance director, that no Austcorp group company paid any money to PRD or Mr Walker. But here, Austcorp, through Mr Chappell, agreed the terms on which PRD would be retained to sell Landillo's land. Although he said that he could not recall seeing or signing a formal sales agency agreement with PRD or Mr Walker, I am satisfied that Austcorp, through Mr Chappell, appointed PRD as selling agent for apartments in the resort on the terms of Mr Walker's letter of 3 August 1999. 61 Even though Austcorp itself did not pay any commission to PRD, the terms of its agreement to the 3 August 1999 letter reflect Austcorp's position of control over the marketing of the unsold apartments in the resort. And, later, when Mr Walker was engaged on 30 October 2000, Austcorp agreed that it and he would each pay $150 on settlement to any staff member of Pacific International Hotels who initiated a sale. Again, there is no evidence that any such payment was ever made.

2.5 AUSTCORP BECOMES A PROMOTER 62 On 5 July 1999 a unit trust was established to take over the conduct of the development from Landillo. The trustee was Dalnick Pty Limited. It later changed its name to Austcorp Waterfront Resort Pty Limited. That company is now deregistered. The trustee issued 100 units in the unit trust. Austcorp Group Pty Limited acquired 50 units. The remaining 50 units were acquired by Richfield Developments Australia Pty Ltd, a company associated with Mr Wong. Also on 5 July 1999, Austcorp Group Pty Limited entered into a deed with Landillo, the unit holders of the Landillo unit trust, Richfield and Dalnick. That deed, in effect, gave Austcorp Waterfront (i.e. Dalnick) and its directors control over the beneficial interest in the site at The Entrance and the development of the resort including the proceeds of the contracts for the sale of apartments previously entered into by Landillo. Austcorp Waterfront agreed to meet some of Landillo's existing mortgages and debts and to pay Landillo a small fee as the price of that control and beneficial interest. 63 Subsequently, on 8 September 1999 Austcorp Waterfront entered into a development management agreement under which it engaged Austcorp Development Management Pty Ltd to manage the project. That agreement had a recital that Austcorp Waterfront had agreed to provide consultancy services to, and financial accommodation in respect of, the project. Austcorp Waterfront agreed to pay Austcorp Development Management a fee of $300,000 and 20% of the net profits for the performance of services under the development management agreement. Austcorp Development Management agreed to be responsible for, among other matters: · the marketing and promotion of the sale of apartments; · procuring and supervising construction of the resort, obtaining any approvals or consents necessary and administering the project; · effectuating the sale of apartments and settlement of sales. 64 Austcorp relied on the provisions of the development management agreement to refute the applicants' allegation that Austcorp itself engaged in any conduct complained of that was alleged to contravene s 52 of the Act. 65 The applicants pleaded that: (a) PRD and Austcorp caused each of the leaflet and brochure to be published and that in doing so: · Austcorp acted on its own behalf and for its own benefit; or · PRD acted as agent of Austcorp pursuant to Austcorp; (1) having engaged PRD in the letter of 3 August 1999 to act as its and Landillo's real estate agent in the marketing and sale of the apartments; (2) consenting or agreeing to PRD doing so within the meaning of the s 84(2) of the Act; (b) PRD caused each of the leaflet and the brochure to be distributed to potential purchasers including each of the applicants and that in doing so it acted pursuant to Austcorp: (1) having engaged PRD in the letter of 3 August 1999 to act as its, and Landillo's, real estate agent in the marketing and sale of the apartments; (2) consenting or agreeing to PRD doing so within the meaning of s 84(2) of the Act. 66 In the context of the conduct complained of, it is not obvious what distinction the pleader sought to make between publishing, on the one hand, and distributing, on the other. That is because the pleading went on to assert that in the case of the leaflet the relevant applicants read it prior to entering into the contract, and in the case of the brochure he, she or it was "… provided with" it by PRD. There was no dispute that PRD engaged in the conduct which led to the leaflet, brochure and other promotional material being communicated to each applicant. The critical issue was whether Austcorp itself had engaged in the conduct of making the representations thus communicated so as to have contravened s 52 of the Act.

2.6 AUSTCORP BEGINS WORK 67 Earlier on 30 July 1999, Mr Chappell, using his title of managing director, wrote and signed about 100 letters on Austcorp letterhead to purchasers of apartments from Landillo informing them that construction of the resort had commenced on 19 July 1999. The letter said: "… Earlier this month Austcorp International Limited, as part of a consortium formalised an agreement with Landillo Pty. Ltd. (the owner of the land) for the delivery of your new serviced apartment together with a guaranteed net annual return on your investment (a rental guarantee). … Austcorp is a successful development company with projects in New South Wales, Queensland, Victoria and Northern Territory. … We at Austcorp are delighted to now be involved in this very exciting development and outstanding investment opportunity which will become a major attraction at The Entrance for years to come." (emphasis added) Mr Hung, using his title as executive director, wrote similar letters to other purchasers on 6 August 1999. 68 The portions of the letter I have quoted ascribed a role in the development to Austcorp itself which it vigorously denied at the hearing. The letter conveys a colloquial understanding of the role of the principal operating company in a group where many activities of the group are conducted by subsidiaries. But the brand or name of the operating principal or parent is usually used in publicity and identified by the public, as Mr Chappell's letter showed. Here, Austcorp Development Management, not Austcorp, entered into a design and contract agreement with the resort's builder, St Hilliers (NSW) Pty Ltd. 69 In the witness box Mr Chappell read the whole letter and agreed that its contents were true and accurate. But, when taken specifically to his express identifications of Austcorp as the company undertaking the development, he claimed that he "… was referring to the Austcorp group as the proposed development manager of this joint venture" and to "the Austcorp brand". Mr Chappell did not suggest he made a mistake in his letter. On the other hand, Mr Hung did say that he made a mistake in the letter's first reference to Austcorp. Neither was a convincing witness. I am satisfied that they wrote their words to convey the commercial reality of Austcorp's position in a way which the investors would understand. 70 Mr Chappell was responsible for the issue of press releases in late July 1999 concerning the project. One draft press release was prepared announcing that: "Sydney property developer Austcorp International Limited has commenced construction of the much-anticipated $36 million Pacific Waterfront Resort, located at 91 The Entrance Road, The Entrance." 71 The draft press release said that an executive director of Austcorp, Mr Hung, was confident that the resort would breathe new life and excitement into The Entrance. Mr Hung and Mr Chappell at "Austcorp International" were named as two contacts for further information. It referred in extolling terms to the nature of the development and said that Austcorp had contracted a successful builder, St Hilliers, to construct the resort. It then referred to a number of successful projects that Austcorp had conducted and concluded with a statement by "Managing Director of Austcorp, Mr Trevor Chappell", that said: 'We are very pleased with Wyong Council's refreshing can-do attitude towards this important tourism project, which will bring many benefits to the Central Coast."' 72 That draft appeared to be the basis of an article highlighting Austcorp's role in the development of the resort that was published in the Sydney Morning Herald on 18 August 1999. Mr Chappell asserted in cross-examination that the description of Austcorp was inaccurate and "… should be interpreted as Austcorp International [Limited] acting on behalf of Austcorp Development Management". I reject that evidence.

2.7 THE USE OF AUSTCORP'S LOGO AND BRAND 73 Austcorp argued that I should find that the use of its logo in the brochure, the leaflet and on the building site, did not refer to it, but to a subsidiary, as the company responsible for the logo on each. I reject this argument. 74 In early 1998 Austcorp applied to register a trademark consisting of its whole corporate name with the words "Austcorp" and "International Limited" separated by a depiction of a leaping kangaroo figure similar to that used in the promotional material. That application was, however, for a mark distinctly different to the logo used on the promotional material. There was no evidence that any applicant was aware of any particular trademark - rather, they were aware of the general existence of the Austcorp brand or name. That level of awareness of brand or name by members of the public is a common feature of modern life. Ordinarily, the precise name of the owner of the brand or name is not known to those in the public to whom it has been promoted, nor is it usually of any concern to them. Austcorp argued that, it as a distinct entity, would not be identified by the use of the logo in the promotional material, and thus an ordinary reasonable person would not consider that it was involved in the publication of the brochure. 75 In my opinion Austcorp associated itself with development projects conducted by the group of companies which it controlled throughout Australia. A number of the applicants said that they recognised Austcorp as a developer or a name or large company with which they were familiar. Thus, Austcorp's name and logo appeared on the hoarding of the development site as well as on its own letterhead and in letters written by Mr Chappell and Mr Hung on behalf of Austcorp in connection with the resort project. 76 Austcorp argued that the presence of its logo on the back of the brochure and on the leaflet could not be understood as indicating that it, rather than some other company within the group, had published the brochure. It argued that people would understand that the Austcorp group member company in fact responsible for developing the project was the publisher of the brochure, or authorised the Austcorp logo to be placed on it. Austcorp argued in that context that the publisher was Austcorp Development Management. In my opinion these arguments are untenable. 77 Mr Chappell, as managing director, used Austcorp's letterhead and name to associate the company with the resort project. Moreover, the Austcorp logo and name were intended to be a brand which members of the public would identify as the generic developer. While Austcorp was happy to have references to "Pacific International Hotels" in the brochure read as being to an organisation, rather than to Pacific International Hotels Pty Limited, it contended that the ordinary reasonable reader of the brochure would not understand that Austcorp was associating itself with what was said in the brochure. In my opinion, the failure of the brochure to identify a particular Austcorp group member in express terms, demonstrated that Austcorp was content to have itself associated with the development by use of its logo and its encouragement of others to invest in the apartments. Indeed, that is how Mr Chappell and, through him, Austcorp behaved. 78 Mr Chappell wrote much of the wording of the brochure. He wrote letters to the investors saying that Austcorp was the developer. While he may not have done this with any intention to mislead people, he did it to publicise the fact that Austcorp was the active parent company responsible for the Austcorp group's overall development activities throughout Australia, including that of the resort. Austcorp was prepared to allow a loose and ambiguous representation, connecting Austcorp with the development, to be made in the brochure. In my opinion, this is a case where it is clear that any Austcorp company which in fact had an association with the development could be taken to have published the brochure: Webb v Bloch (1928) 41 CLR 331 at 363-366 per Issacs J; see also Abigail v Lapin (1934) 51 CLR 58 at 70-71 per Lord Wright. 79 Austcorp's accountant, George Tan, said that although work, including the design and production of the brochure, was invoiced to Austcorp and paid for by it, those payments were loans by Austcorp to Austcorp Development Management. In my opinion, the reality of how Austcorp presented itself to the outside world can be seen in its letters of 30 July and 6 August 1999 to the existing investors. 80 Those letters demonstrated the way in which the logo was used by Austcorp as what they referred to as branding for "our projects". That is the "Austcorp" which the public would associate with the use of its name and logo in the brochure, leaflet and on the site. 81 Austcorp's direct or indirect (through subsidiaries) involvement was a crucial reason that the development had begun to be built. No-one seeing the Austcorp signs on the building site, or its logo on the brochure or leaflet, would stop to ask or think about if these identified a special purpose subsidiary. Rather, the use of the Austcorp name on these branding symbols, created an association with the group and, importantly, with the common company involved in the group's projects -- Austcorp itself. Mr Chappell and Mr Hung emphasised that associative use, namely that Austcorp was now behind the resort project, by their deliberate explanation of its role in their letters of 30 July and 6 August 1999. Now, Austcorp has been sued as responsible for the contents of the brochure and leaflet, as well as PRD's and Mr Walker's statements. It, through Mr Chappell and Mr Hung, sought to throw up a corporate veil to shield Austcorp from responsibility for the very project they, and the promotional material they crafted in 1999, said was its doing. I reject this attempt by Austcorp to evade recognition of the norm of conduct imposed by s 52 of the Act. 82 In early September 1999 one of Austcorp's development managers, Nelson Rainey, placed a post-it note for Mr Hung next to the statement on a draft of the brochure that "From day one your return will be a guaranteed 7% p.a." asking "Edgar is this correct?". Later in September 1999, Mobius, Austcorp's advertising and marketing agency, asked Messrs Hung, Walker and Corne to approve the final version of the brochure. It also sought Mr Hung's and Mr Walker's approval of the leaflet. These contained the Austcorp logo, as I have described. 83 Next, on Austcorp letterhead, Mr Rainey asked architects to prepare amendments to the strata plan. In the meantime Mr Hung, who, had primary charge of this project as between himself and Mr Chappell, as well as Mr Zantiotis, corresponded on Austcorp letterhead, and received correspondence addressed to Austcorp from, Mr Walker and Mobius.

2.8 THE CONTRACT OF SALE TO THE APPLICANTS 84 The contract for purchase had a colour cover page in the same livery as the brochure and the leaflet. It was headed "Pacific International Waterfront Resort CONTRACT" with a representation of the same snorkeler as on the brochure and leaflet. There were five starfish and the apartment number. At the foot of the cover page Pacific International Hotel's logo appeared with the words "Waterfront Resort". The contract offered investors a cognate structure for the operation of the hotel and their return on their investment. 85 The contract used the template of the 1996 edition of the contract for the sale of land commonly used in New South Wales. The first page was in the usual form of that edition. PRD was named as the vendor's agent and deposit holder, Landillo as vendor, with Coudert Bros (for Ms Tan-Bounkeua and Luciani/Taldarmar) and Teys McMahon (for Mr Owers) as its solicitor. The purchasers' details and name of their solicitor were included as was the price, 10% deposit and balance due on completion. In addition, there was a figure for the yearly rent which worked out as 7% of the price. 86 The contract had a considerable number of annexures, including many pages of special conditions, schedules of finishes, fixtures, fittings and equipment, draft by-laws, floor and strata plans. The final two annexures were a draft services agreement between the owners corporation (for the strata plan when registered) and Mustara, and a draft lease of the apartment to Mustara. 87 The special conditions included cl 39. That provided first, that the contract contained the entire agreement between the parties "… notwithstanding any negotiations or discussions held or documents signed or brochures produced or statements made by the Vendor or any agent or person on behalf of the Vendor prior to the execution of this contract" (emphasis added). Next cl 39.2 contained a series of acknowledgments by the purchaser including that: "… (b) in entering into this contract he has not relied upon any warranty or representation made by or any other conduct engaged in by the Vendor or any agent or person on behalf of the Vendor except such as are expressly provided in this contract but has relied entirely upon his own enquiries relating to and inspection of the property: (c) neither the Vendor nor any agent or person on behalf of the Vendor has made any representation or warranty upon which the Purchaser relies as to: (1) the fitness or suitability for any particular purpose of the property or the Common Property; (2) any financial return or income derived or to be derived from the property; or (3) as to any tax benefits or depreciation allowances in respect of the property or the Common Property; … (f) he has obtained his own independent legal advice in respect of this contract; (g) he has satisfied himself regarding the financial and tax aspects of the transaction comprising the purchase of the property, and the Purchaser will not make any Objection in respect of any of the matters referred to in this clause." 88 Under the draft services agreement Mustara was obliged to maintain, clean and generally keep the common property in good condition and repair. Mustara was permitted to assign its interest if its assignee was respectable and financially sound to meet is obligations under the services agreement with experience in, a good reputation for and had "… the capability of conducting the business of motel/serviced apartments (sic)" from the resort (cl 10.1). And, if Mustara underwent a change of control, its incoming controlling shareholder(s) would have to satisfy the criteria for an acceptable assignee (cl 10.2).

2.9 THE LEASE 89 In cl 44 of the special conditions of the contract the purchaser agreed on completion to enter into a lease to Mustara of the apartment in the form annexed to the contract. The draft lease was relevantly in the same terms as the final one. The lease required Mustara to pay a net rent for the first year equivalent to 7% of the purchase price. The rent would be reviewed annually in later years to increase at least at the same rate as the consumer price index. The lease contained a guarantee given by Pacific International Hotels of the performance by Mustara of its obligations over the term of 10 years. However, cl 20.9 limited the maximum liability of Pacific International Hotels over the term of the lease to no more than the total sum of the first year's rent. 90 Mustara was to be the operator of the resort and that business was to be its only relevant asset. It was also to be the lessee of those areas on the ground floor of the building which were required for the reception area, office and restaurant. The draft lease and the lease permitted the lessee to assign, provided that it simultaneously assigned the management services agreement with the lease of the manager's lot and gave 28 days notice to the lessor. The lessee had to give full details about the proposed assignee and any further information that the lessor might reasonably require (cl 14). Additionally, the lease provided that if the lessee was not a listed company, then a proposed change in its controlling shareholding or that of its holding company could only be made if the person acquiring control had taken an assignment of the management services agreement and the lease of the manager's lot (cl 14.5). Each of the applicants entered into a lease on these terms about the time of completion around August and September 2000.

2.10 THE PENRHYN PARKER CONTRACT SUMMARY 91 In late October 1999, Mr Zantiotis had discussions with Penrhyn Parker, solicitors. On 21 October 1999, Mr Smith of that firm sent him a summary of the contract as Mr Zantiotis had requested. Mr Smith said that the summary was meant to be a guide only and suggested that any purchaser should still see his firm in conference to go through the contract in full. Penrhyn Parker quoted a fee for acting on a purchase of $1,000 plus likely disbursements of $400. Mr Zantiotis responded the next day suggesting that some amendments needed to be made to the draft. He deleted reference to an explanation about a special condition relating to goods and services tax (which in late 1999, was foreshadowed to be introduced the next year). After they had a discussion on the phone, and a final version was produced, Mr Zantiotis sent a facsimile to Mr Walker on 22 October 1999 saying: "Please find attached a summary of the purchase contract that should be made available to realistic prospective purchasers. It is a reasonably concise summary of a somewhat large document that is easy to read." 92 The contract summary prepared by Penrhyn Parker extended for a little over five pages. Both the draft and final versions contained the following explanation under the heading "Leases": "The Lease is guaranteed by Pacific International Hotels. Therefore if the lessee was to default you have the comfort of a guarantor to pursue if you wish to do so for any damages you incurred because of the default. (emphasis added) 93 The summary contained no suggestion that cl 20.9 of the lease existed or that it limited the liability of Pacific International Hotels to the total of one year's rent over the 10 year term. Of course, Austcorp and Mr Zantiotis knew of the existence of that limitation as did Mr Chappell and Mr Hung. However, Austcorp allowed this solicitor's summary to be given to prospective purchasers even though it omitted reference to the significant qualification in cl 20.9 of the "guaranteed return". None of the applicants received that summary.

2.11 THE DEVELOPMENT PROGRESSES 94 Later in 1999, Austcorp Development Management arranged for the strata plans to be amended and for the development approval to be modified. All of the investors in the current dispute entered into contracts for purchase that provided that the time before which the strata plan had to be registered was 30 August 2000. (As a result of agreed variations, the contracts made before Austcorp became involved also had the date for registration of the strata plan extended to that time.) 95 On 2 November 1999, Mr Zantiotis sent to Mr Walker indicative annual tax depreciation entitlement schedules for the various apartments on offer to be provided to prospective purchasers. 96 In mid November 1999 Mr Chappell approved a draft press release in which he was described as "… managing director of Pacific Waterfront Resort's developer, Austcorp International Ltd, Mr Trevor Chappell". In the margins of the draft Mr Chappell wrote out some details of media publicity for the development which he was considering, including paid newspaper, an advertorial and the involvement of Alan Jones, a well-known radio personality. 97 The second paragraph of that draft press release stated that there were "… over $200 million of accommodation developments, totalling 800 apartments, currently approved by Wyong City Council and under construction". One of the approved developments was for an apartment building with about 200 apartments located within a few hundred metres of the resort. Mr Chappell knew that if this development were constructed it would be in direct competition with the resort. Yet Austcorp did not undertake any study or analysis of how the overall increase in potential supply of accommodation at The Entrance would, if all the other 655 approved apartments were developed, affect the capacity of the operator of the resort to meet the guaranteed 7% net return over 10 years. 98 There were in evidence a number of drafts created in late November 1999 for "live reads" by Alan Jones, a well-known radio personality. The "live reads" were advertisements to be read by Mr Jones live on air during his daily radio show. The scripts named "Austcorp's Pacific International Waterfront Resort" as offering a "guaranteed 7% net return" for a minimum of 10 years and emphasised that "your 7% net return is guaranteed". Mr Jones was asked to emphasise the guaranteed return when he did the "live read" on air. Mr Chappell based the use of that emphasis on his long experience in marketing developments. Mr Chappell's reasons for emphasising the guaranteed return as part of Austcorp's general marketing strategy, were: · it was a very powerful and forceful means of marketing; · it was designed to give real assurance to potential purchasers as to the safety of their investment; · it allowed those who were thinking of borrowing funds to purchase the investment to have some real certainty in their assessment of whether they could offer to borrow and to repay those funds; · it broadened the developer's (i.e. Austcorp's) market considerably and make the investment far more attractive than ones not offering a guaranteed return. 99 Although only drafts of press releases and "live reads" were in evidence, I am satisfied that Austcorp used and published, or caused publication of, final versions of press releases and live reads in the same or substantially similar terms. These had been approved by Mr Chappell or Mr Hung and they were prepared with assistance on occasion from other employees, Mobius, and a media or public relations agency, City Public Relations. Mr Chappell accepted that final versions of these drafts were used by Austcorp itself to market the project. He gave this evidence which I accept as revealing the true position: "And Austcorp International Limited did issue press releases about the project, didn't it? --- It did. Thank you? --- As the manager of the project. Austcorp International Limited? --- Yes." (emphasis added) 100 Austcorp argued that Mr Chappell's evidence and conduct were not admissions by it. Where I have expressed my findings to have been made in reliance on that evidence as in the passage above, I have acted on his oral evidence as probative of the facts I have found. It is not necessary to decide that he was authorised to make these statements as admissions by Austcorp. However, Mr Chappell's extra curial conduct is evidence in a different category. That conduct is capable of being found to be conduct by Austcorp through Mr Chappell as one of its officers. And he was also capable of verifying that he acted in that capacity when giving his evidence. 101 Austcorp argued that in the above passage and similar evidence, Mr Chappell was "… giving evidence as a businessman and not a lawyer". I reject that submission. Mr Chappell was an astute and experienced businessman. When giving his evidence, he was fully aware of the significance of corporate personality, corporate names and the issue about whether Austcorp itself had engaged in the conduct complained of. I do not accept that he used that language loosely. Having seen and heard him over an extended period, I am satisfied that when Mr Chappell referred to Austcorp in the witness box such as in the above passage, he was doing so consciously and advisedly. Mr Chappell was fully capable of naming any other subsidiary which did some act if he considered that it were truly the actor. After all, Mr Chappell volunteered that Austcorp issued press releases "as the manager of the project" in the context that this was what the press releases expressly stated themselves. Austcorp cannot disavow the contemporaneous public admissions it had made, through Mr Chappell's conduct, of its role in 1999 in publicising the resort and generating sales. 102 Later, on 29 November 1999, Mr Hung wrote on Austcorp letterhead to existing purchasers from Landillo advising them of the latest progress. He enclosed photographs which clearly depicted the large sign on the site saying "Development by AUSTCORP" and using its kangaroo logo in the same colours and scheme as on the brochure and leaflet. Mr Hung wrote: "All of us involved in the project are confident of having the building finished prior to 31st July 2000, the final completion date under your Sales Contract." 103 He referred to a recent review of the strata plan and amendments to the development consent and asked for the purchasers to sign deeds of variation and the new strata plan "… and return to us". He noted that 20 apartments had been sold since the final stage had been released in October 1999 and enclosed the brochure and the article based on a press release approved by Mr Chappell published on 18 August 1999 in The Sydney Morning Herald which commenced: "Austcorp International is to open up the Central Coast with a $36 million serviced apartment and retail development, Pacific Waterfront Resort at The Entrance". The article referred to Mr Hung as an executive director at Austcorp and quoted some enthusiastic remarks he had made. 104 Mr Hung's 29 November letter left no room to doubt that Austcorp was the developer of the resort. Of course, none of the present applicants received it, but it makes Austcorp's defence that it did not engage in the conduct complained of ring hollow. A similar line of defence seeking to exculpate a principal for the act of its agent was criticised by the Earl of Halsbury as being like the schoolboy's game of "I did not take it, I have not got it" in S. Pearson & Son, Ltd v Dublin Corporation [1907] AC 351 at 357. After all its activity in promoting the development and the sale of apartments in the resort, it would be extraordinary if Austcorp now could hide behind its previously hidden corporate veils.

2.12 THE DISCLOSURE STATEMENT 105 Mr Zantiotis discussed the guaranteed return and the lease with investors from time to time. In early December 1999, he obtained a letter of advice from Chris Mitchell of Corrrs Chambers Westgarth, solicitors, about the application of Ch 5C of the Corporations Law to Austcorp in relation to its involvement with the development of the resort. Mr Zantiotis was then unaware that on 26 August 1999 the Australian Securities and Investments Commission (ASIC) had granted Landillo an exemption for offers made to investors before 1 January 2000. Coudert Bros had acted on Mr Hung's instructions to obtain this. Mr Mitchell recommended seeking an exemption from ASIC. Mr Mitchell reviewed a number of documents including the contract, the lease and the brochure. 106 Corrs Chambers Westgarth's letter referred specifically to the statement in the brochure that "your return will be a guaranteed 7% per annum". Mr Mitchell advised that this "… seems inconsistent with the limitation of the guarantee under the Lease". Mr Zantiotis was not concerned by this inconsistency at the time. He took the view that when asked by potential investors about how the 7% return related to the lease and the guarantee for the 10 years that "… I was always responsible enough to refer the contract and all its contents to their solicitors". I formed the impression that Mr Zantiotis was a fairly straightforward witness and that he chose this response to investors' questions to enable him to avoid giving them the direct answer (exposed in Mr Mitchell's letter) while giving them access to the full contractual position through their own solicitors' advice. Mr Zantiotis reviewed the letter from Corrs Chambers Westgarth with Mr Hung who told him that it was not necessary to get an exemption. 107 On 16 February 2000, Coudert Bros sought an exemption from ASIC from having to prepare a disclosure statement. However, ASIC granted limited relief on 18 February 2000 and required that a disclosure statement be provided to intending purchasers that provided specific information. ASIC required the statement to describe the main features and terms and conditions of the investment as well as to set a number of specific questions and to answer them. 108 Austcorp engaged Coudert Bros to prepare a disclosure statement, purportedly by Landillo. It was signed on 6 March 2000 by Mr Hung as attorney of Landillo. Mr Hung was identified in par 8 of the statement as the person from Landillo to be contacted for more information that gave his address and contact phone number as care of Austcorp at its head office address. Although Landillo was notionally Coudert Bros' client, they reported directly to Austcorp, through among others, Mr Zantiotis. 109 The statement appeared to have been printed on A4 paper with two columns on each of its pages of text. However, if anyone read the statement they would be struck by the fact that on page 3 the text in the columns dealing with "what is being offered" did not flow naturally from the base of one to the top of the next. This dysfunction of intelligibility continued on its later pages. This made the statement difficult to follow and in some parts it did not seem to make much sense. The problem was calculated to frustrate the very class of readers for whom the statement notionally was provided. It appears that the drafters of the statement, including their solicitors, had not bothered to read its final form to see if it was correct and made sense. The document should never have been sent out in its confusing and obviously unproofed state. 110 And that was not the only confusing aspect of the statement. Its substantive text was also less than pellucid. In section 4, headed "What are the risks and returns of the Investment?", the statement set out the following (original emphasis and setout): (iii) Are Investors in the Scheme guaranteed or promised that they will receive a particular rate of return from the Scheme? Yes. If so, (A) What are the conditions for receiving the benefits of this guarantee or promise? Pursuant to clause 20 of the Lease, the guarantor unconditionally and irrevocably guarantees to the Lessor the due and punctual performance and observance by the Lessee of its obligations under the Lease. (B) What (if any) are the circumstances in which the person providing the guarantee or promise may be unable to honour it? (a) In the event that the Operator/Lessee did not pay the rent and the guarantor was also unable to pay the rent, then the Guarantor would be unable to honour the guarantor. (b) The liability of the guarantor under this Guarantee and Indemnity is limited so that the total amount that the Guarantor may be required to pay under the terms of the Lease is limited to an amount equal to the rent per month payable at the date of commencement of the term x 12 (c) Accordingly, if the rent was in arrears for more than 12 months, then the amount payable by the Guarantor would be limited to the 12 months rents.

111 Austcorp argued that the information in (B)(b) and (c) above would disabuse anyone who read the statement about the effect of cl 20.9 and the nature of the guarantee involving Pacific Hotels International. I reject this argument. First, the unequivocal terms of (A) in the extract set out above emphasised that cl 20 did not contain any qualification of Pacific International Hotel's liability. "[U]nconditionally and irrevocably guarantees" were plain, clear words. They meant what they said. And, those words were used in answer to question (A) to explain that there were no conditions to prevent investors receiving the benefit of the plenary guarantee. The qualifications in (B)(b) and (c) did not identify conditions for receiving that benefit. Rather, question (B) was directed to providing an answer on a different subject, namely inability (not absence or limitation of liability) to honour the guarantee. However, if the reader went beyond the obvious instance in (B)(a), they would have seen in (B)(b) and (c) a formal explanation of the effect of cl 20.9. 112 Next, the disclosure statement dealt with the question in par 4(c) "What is the financial position of the person giving the guarantee or promise" by saying merely that the guarantor was "… part of the Pacific International Hotel Group which currently manage the following …" five named properties. The answer also noted that that group was affiliated with Flag International. 113 Significantly, the statement did not give any information at all about Pacific International Hotel's financial position. Later, it also said that the only way that occupancy rates could affect the rate of return would be if they "… were so bad that the Lessee was unable to pay the rent. In that instance, the Investor has the protection of the Guarantee offered by the Guarantor" (emphasis added). 114 Under the heading "6 Who is the Operator?" the statement simply read: "The money of the Scheme will be held and distributed by the Operator." It is likely this was the answer to an earlier question and appeared where it did because of the printing dysfunction. Nonetheless, this further detracted from an ordinary person in the position of an investor thinking that this document was significant or required careful reading. The disclosure statement asserted: "The Operator [Mustara] is a wholly owned subsidiary of the Guarantor [Pacific International Hotels]." (emphasis added) 115 The disclosure statement was no match to disabuse anyone who had the patience to read through its dense and confused terms for the powerful simplicity of the messages in the promotional material.

2.13 WAS MUSTARA A SUBSIDIARY OF PACIFIC INTERNATIONAL HOTELS? 116 Originally, in the agreement made on 9 June 1998 Landillo had agreed to lease the manager's and restaurant lots to Mustara for $225,000 p.a. But on 14 January 2000 a deed of variation increased the rent to $335,000 p.a. in consequence of the variation of the strata plan and Mr Wong's company Richland Investment (Australia) Pty Ltd agreeing to acquire what became the three lots on the ground floor of the varied plan necessary to operate the hotel (the manager's, restaurant and the new hotel lots). The new lots comprised most of the lobby area, the back of house or office area for the operator and the restaurant. 117 Richland agreed to buy these lots for $3,680,000 and contracts were exchanged on 29 December 1999. I infer that as part of the same overall transaction, Mr Wong's group acquired control and ownership of Mustara from Pacific International Hotels in the following way. 118 On 13 June 2006, a notice of change in Mustara's members name or address was received by ASIC. That change recorded a transfer of the two issued shares in Mustara to Parkes Street Pty Limited, another company associated with Mr Wong. It noted that the shares were beneficially held by Mustara. Earlier on 28 November 2000, ASIC received a notification of change of office holders in Mustara. That gave an effective date of 23 December 1999 for the resignation of Mr Corne as Mustara's sole director and the appointment in his place of Mr Wong. Mustara was deregistered by ASIC on 10 July 2006. 119 On 4 August 1999 Mr Corne completed Mustara's annual return for the year ended 30 June 1999. This recorded that the two issued shares in Mustara continued to be owned legally and beneficially by Pacific International Hotels. This was lodged with ASIC later in August 1999. He completed the 2000 annual return on 6 October 2000 and lodged it with ASIC in early November 2000 recording the same details of Mustara's shareholding. Next, on 9 November 2001, Mr Wong, as a director, completed Mustara's 2001 annual return and lodged it with ASIC on the same day. It continued to record that Pacific International Hotels was the legal and beneficial owner of the two issued shares in Mustara. 120 Just before Mustara appointed administrators on 14 May 2002, Mr Wong lodged with ASIC three correcting documents on 1 May 2002 and a correction of one of those on 3 May 2002. Each of the three corrections lodged on 1 May 2002 dealt with the identity of Mustara's shareholders in the 1999, 2000 and 2001 annual returns. The three corrections commenced by stating: "Share members details was not updated at the time of lodgement. It should be as follows." 121 These documents then recorded that each of Pacific International Hotels and Parkes Street held one share in Mustara legally and beneficially. In the further correction of 3 May 2002, Mr Wong changed the shareholding information in the 2001 annual return significantly by recording that both shares in Mustara were held by Parkes Street legally but not beneficially. Also on 2 May 2002 Mustara executed a fixed and floating charge in favour of Parkes Street which was registered with ASIC on 8 May 2002. The administrator was of the view that this charge would be void against a liquidator. 122 On 11 June 2002 Mustara's creditors resolved that it be wound up under s 439C(c) of the Corporations Act 2001 (Cth)on the administrator's recommendation. In his second report to Mustara's creditors of 30 May 2002 the administrator said that he was in receipt of a share transfer form in which Pacific International Hotels transferred its shareholding to Parkes Street. The administrator reported that: "The transfer of shares was effected on 23 December 1999. I am advised that the reason for the transfer of the shares was due to a change in the overall structure of Pacific International Hotels Pty Ltd within the group. This restructure included Pacific International Hotels Pty Ltd divesting itself of all interests in leasehold properties and focusing on management agreements only on a national basis. The principal [sic] was to structure the company to allow it to expand nationally without having any contingent liability on its balance sheet, as this would have restricted development." (emphasis added) 123 Pacific International Hotels' divestiture of its leasehold assets would have radically altered its net assets by removing about $3.5 million from its balance sheet and, if the 1998 special purpose accounts were substantially similar as at December 1999, Pacific International Hotels' unaudited net assets would have consisted of a capital profits reserve of $110,992. 124 Thus, in 1999 and 2000 no public record revealed that Mustara was legally or beneficially owned by Parkes Street. There was no evidence of any public revelation prior to May 2002 that Pacific International Hotels no longer owned or controlled Mustara. And until ASIC processed the notification of Mr Wong's appointment as the sole director of Mustara on 5 December 2000 (a week after it had been lodged), there was no public record that Mr Corne was not a director of Mustara or that any connection of Pacific International Hotels with the ownership and control of Mustara had then ceased. 125 None of the applicants (including their solicitors) was aware of these changes in Mustara's ownership structure prior to completion. Indeed, the publicly available records did not reveal any change in the management of Mustara until early December 2000. I also am satisfied that Austcorp and its officers were not aware of these significant changes in Pacific International Hotels shareholding position prior to Mustara's collapse. There was no suggestion that Mr Chappell and Mr Hung had any contemporaneous knowledge of these matters. 126 The branding of the resort as the "Pacific International Waterfront Resort" remained in place until after Mustara's collapse. There was also no evidence about the relationship between Parkes Street or Mr Wong's group and Pacific International Hotels or about how the latter was or was intended to be involved in the operations of the resort beyond the use of its name. 127 I find that from 23 December 1999 Mustara was not a subsidiary of or controlled by Pacific International Hotels. There was no revelation of any of these significant changes in the disclosure statement signed on 6 March 2000. It contained the false statement that Mustara was a wholly owned subsidiary of Pacific International Hotels. 128 Although the evidence is wholly documentary and somewhat scanty, it is likely that Mr Wong had sought to secure his group's investment in the manager's, restaurant and hotel lots. Mustara's 2000 annual return, the first which could have been filed after those dealings, recorded Mr Wong as Mustara's director although it continued the old recording of shareholding. But, it is unlikely that Mr Wong would have become a, or the, director of Mustara without his group acquiring a shareholding or that Mr Corne would have relinquished his directorship if he or his group still had an interest. The administrator's explanation makes commercial sense in the context of Richland's entry into the contracts to acquire the three lots in the resort in late December 1999. I infer that Mr Wong's corrections in May 2002 were genuine and resulted from earlier sloppiness. No reason was suggested why he would have made these corrections if they were not accurate. And, the administrator noted that he had a copy share transfer form with the same date, 23 December 1999, as the change of directors for Mustara recorded by ASIC, albeit on 28 November 2000.

2.14 COMPLETION AND MUSTARA'S LATER COLLAPSE 129 The strata plan was registered on 1 August 2000. Shortly after, Mr Zantiotis wrote on Austcorp letterhead to the investors advising them of this saying: "[w]e intend to progressively hand over the serviced apartments to the hotel operator from the end of August onwards … once we hear from your solicitor we may extend settlement throughout September without penalty to assist you." (emphasis added) 130 Once again, this letter conveyed to the applicants and other investors that Austcorp itself was in control of the development and sale of the apartments. Most investors, including the applicants, completed their purchases and executed formal leases to Mustara in the following month. The whole development was completed and Mustara commenced operating the hotel as part of the Pacific International brand. 131 In October 2000, again on Austcorp letterhead Mr Zantiotis wrote to the investors advising them of the grand opening on 9 December 2000 to which they would receive a formal invitation. The letter said that they would be welcomed by the "[d]irectors of Austcorp and Pacific International Hotels" and that those two named entities offered a 50% discount off the room rate for the weekend of the opening. 132 The expert valuation evidence revealed that in the year ended 30 June 2001 the resort had a 29.2% occupancy rate which rose to 40.9% in the next year. For over one year rental returns to investors were paid at the promised level of 7% of the purchase price net of expenses. But, in May 2002 payment of rent ceased and an administrator was appointed to Mustara. The administrator observed in his report to creditors that his appointment followed a number of events which he had been told (presumably by Mr Corne or Mr Wong) adversely affected the tourism market in Australia generally, including the terrorist attacks in New York City on 11 September 2001, and the concurrent collapse of Ansett Airlines, a major airline company in Australia, together with the development of a large carpark opposite the hotel. 133 The administrator said that he had been advised by the operators that the indirect effect of the events occurring on 11 September 2001 led to a downturn in overseas travellers to Australia with a consequent oversupply of holiday accommodation for the internal market in Sydney. That, in turn, "… led to a plunge in prices charged for rooms and increased market aggression". He said that the shareholder of Mustara, Parkes Street, had been injecting funds into Mustara to enable it to continue to trade but as soon as that financial support was withdrawn Mustara appointed an administrator. He also said that the development of the car park adjacent to the functions rooms at the resort had also resulted in the reduction of local guests attending the hotel due to there being no car parking facilities and that additionally, noise pollution and the presence of heavy equipment had affected the hotel's business. He concluded by saying that "the director [of Mustara] has indicated that these factors combined with the current rental obligations in the depressed hotel industry had led to the appointment of the administrator". 134 The administrator reported that the company had made an average monthly loss of $161,483 in the nine month period from 1 July 2001 to 30 April 2002 totalling $1,614,826, compared to a net loss for the previous financial year of $420,678. He commented that although it appeared the revenue of the hotel increased marginally, the costs of operating it had increased "dramatically" and that the rent, management fees and property taxes had more than doubled in the last 12 month period ending 30 April 2002. He prepared a summary of the financial results, part of which is in the table below. 1 July 2000 to 30 June 2001 1 July 2001 to 30 April 2002 Revenue Rooms 1,719,631 2,582,178 Food & Beverage 1,093,943 1,556,244 … … … TOTAL REVENUE 2,838,219 4,193,106

Departmental Expenses … … … Food & Beverage 1,189,430 1,562,971 … … … Rent, Property Taxes & Insurance 664,208 2,397,624 … … … TOTAL EXPENSES 3,258,897 5,807,932

NET INCOME/LOSS -420,678 -1,614,826.00

135 Also on 14 May 2002 Mustara wrote to the apartment owners. It asserted that the hotel and tourism industry in general had been very volatile and difficult over the preceding 18 months particularly with the unexpected tragedy of September 11, the collapse of Ansett Airlines and financial strains for corporations due to the introduction of the Goods and Services Tax. Mustara asserted that the resort, like most hotels within the industry had been undergoing tremendous financial pressures which had been exacerbated principally by: · the loss of enthusiasm of the Wyong Council for the promotion of The Entrance as a conference destination. This had declined since development had commenced; · the large scale construction activities taking place immediately opposite the front entrance outside the conference rooms and function areas had been disruptive to the hotel guests' quiet enjoyment ; · conference bookings did not proceed due to the real and perceived disturbance from the development site; · an over supply of accommodation in Sydney generally through "a massive reduction in room rates" which encouraged conference organisers to stay in the city areas. 136 Mustara said that it had responded by significantly lowering its room rates and increasing marketing activities and that over the preceding 18 months associated companies had provided it with funding of over $1.6 million. Mustara said that it had become abundantly clear that it was no longer commercially viable or in the best interests of its associated companies to continue that assistance. 137 On 14 May 2002 Pacific International Hotels, through Mr Corne, told the investors that although no administrator had been appointed to it, it was still in financial difficulties. He said that, in essence, Pacific International Hotels had been supporting the return paid by Mustara until it had satisfied in full its maximum liability (of a total of the first year's rent) under the guarantee. 138 The financial collapse of Mustara raised another unexpected problem. Because Mustara had leased the manager's, restaurant and hotel lots, its collapse meant that any new operator of the resort would need to negotiate a new lease with Richland for the lobby area, hotel administration offices and restaurant. And, on 14 May 2002 yet another company associated with Mr Wong, The Entrance Resort Pty Limited, wrote offering investors a new deal in which they would receive 40% of their present rent but without any guarantee. That would equate to a new return of just under 3% for those investors who had a guaranteed of 7% return. 139 Soon, after conducting his preliminary enquiries, Mustara's administrator wrote to the investors informing them that Mustara had lost about $420,000 for the period ended 30 June 2001 and $1.6 million for the period to 30 April 2002. The owner's corporation (for the strata plan) retained Horwath Asia Pacific Pty Ltd, who were consultants to the tourism, hotel and leisure industries, to seek an alternate operator for the resort. Ultimately, Mirvac Hotels, a well known hotel operator, entered into an agreement with the owner's corporation to manage the hotel. Horwath reported that there was considerable difficulty in finding an operator to take on this burden because of the fact that Richfield owned the manager's and restaurant lots and was not under any obligation to agree terms with any operator. 140 In late September 2002, Howarth reported that Pacific International Hotels, Mirvac and Accor had provided proposals which included trading forecasts, although Mirvac and Accor did so with a limited knowledge of the property and its trading history and reserved their right to change those forecasts if they became aware of more information. The following table sets out the forecast revenues by (I infer) calendar year commencing in 2003 summarised by Horwath: Pacific International Mirvac Accor Occ ADR [average daily rate] Revenue Occ ADR Revenue Occ ADR Revenue % $ $'000 % $ $'000 % $ $'000 Year 1 50 142.00 3.1 52 144.73 3.3 55 140.00 3.4 Year 2 57 151.90 3.8 60 149.79 3.9 60 150.00 3.9 Year 3 68 162.50 4.8 65 155.78 4.4 65 165.00 4.7 Year 4 74 172.30 5.6 67 162.02 4.7 65 169.95 4.8 Year 5 74 180.90 5.9 67 168.50 4.9 65 175.05 4.9

141 In comparison the actual results by calendar year were: Year Operator Actual occupancy rate Operator's forecast occupancy rate Actual average room rate Operator's forecast average room rate 2001 Mustara 29.2% 57.0% $ 166.80 2002 Mustara/Mirvac 40.9% 65% (Pacific International Hotels) $ 166.80 2003 Mirvac 38.8% 52% (Mirvac) $139.67 $144.73 2004 Mirvac 43.1% 60% $174.85 $149.79 2005 Mirvac 51.2% 65% $136.72 $155.78 2006 Mirvac/The Oaks 54.2% (Detailed results from the Oaks were not in evidence) 2007 The Oaks 58.8%

142 More recently, another hotel operator, The Oaks Group, bought the manager's, restaurant and hotel lots from Richland in 2006. Then, Mirvac found it could not continue to operate the resort and the operations were taken over by The Oaks Group.

2.15 OTHER ASPECTS OF AUSTCORP'S GENERAL CONDUCT 143 Austcorp also argued that in giving instructions for the publication and distribution of the brochure (and other promotional material) Mr Hung was acting only in his capacity as a director of Austcorp Development Management. It contended that he had sent facsimile transmissions to Mobius for the preparation and printing of the brochure and that Mr Walker and PRD probably distributed the brochure on Mr Hung's instructions. (I have also understood this submission to extend to conduct by Mr Chappell and, even if they were not directors of Austcorp Development Management, other Austcorp employees such as Mr Zantiotis and Mr Rainey. I consider that their position was indistinguishable from Mr Hung's for the purposes of this argument.) When the Austcorp companies' internal accounting was done the payments made by Austcorp for the brochures and Mobius' involvement were posted to ledgers of Austcorp Development Management. In addition, Austcorp argued that the deed of 5 July 1999 (to which Austcorp itself was not a party) between Austcorp Group Pty Ltd, Landillo, Richfield, Austcorp Waterfront Resort and others provided that Austcorp Waterfront Resort had responsibility for marketing and sale of the lots. Austcorp contended that that responsibility was passed to Austcorp Development Management under the project management deed of 8 September 1999. Mr Hung was a director of the latter company. Austcorp argued that these facts required a finding that Austcorp Development Management and not Austcorp engaged in the conduct complained of relating to the use of the brochure, its publication and distribution. 144 Mr Tan gave a number of examples of how payments for the development were made. Some supported Austcorp's contention that Austcorp Development Management was the usual contracting party in the Austcorp group. Mr Tan said that at the time of the development of the resort, Austcorp used its bank account as the main operating cash account. Payments were made from that account to suppliers of goods and services to the project. A number of those suppliers addressed their invoices to Austcorp, rather than Austcorp Waterfront or Austcorp Development Management. After Austcorp paid those invoices from its account, Mr Tan or his staff raised book entries internally allocating the payment to the company Austcorp regarded as the entity to which the supply had been made and debiting that entity's loan account in one of the Austcorp companies' debtors' ledgers. He said that Austcorp Waterfront had a bank account but, because Austcorp was financing the project, there were never sufficient funds in that account. Mr Tan said that since Austcorp Group was the holder of 50% of the units in the unit trust, it provided Austcorp Waterfront (the trustee) with funds and Austcorp itself, as the investor, provided funds to Austcorp Group to finance the project. He asserted that it was convenient for Austcorp to cause the third parties with whom the relevant Austcorp group company dealt to issue invoices to Austcorp. And it was Austcorp's practice to pay those invoices As he said: "Most of the suppliers that we have dealt with, we have dealt with for quite some time and therefore they know Austcorp very well. And secondly, is the person who deals with the suppliers usually will carry an Austcorp International business card and that is why on normal circumstances it is very easy for them to just render an invoice to which they can refer to very quickly which is Austcorp International Limited." (emphasis added) 145 Mr Tan sought to explain some evidence of payments by Austcorp itself including those made to Photobition Pty Ltd, a printer for work in November 1999 which was associated with the development of the resort. There were invoices issued by Photobition to Austcorp in its name. Austcorp paid Photobition monthly with a cheque drawn by it for all printing work done in respect of Austcorp group projects for the previous month. There was nothing to indicate that Photobition had a contractual relationship with any member of the Austcorp group other than Austcorp itself. 146 In late 1999 Mobius rendered invoices to Austcorp for designing and supplying the brochure, at a cost of about $17,000, the leaflet at a cost of about $3,000, letterhead, the covers for the contracts at a cost of about $1,600 and signage at a cost of about $14,000. Austcorp paid those invoices. Mr Tan identified internal accounting entries that posted these as expenses to a ledger code for promotional materials in Austcorp Development Management's accounts related to the resort project and debited them to the latter's loan account with Austcorp. Mobius was paid by a single Austcorp cheque each month in respect of all individual invoices it had rendered to Austcorp for work done on various Austcorp projects. Again, on their face these dealings appeared to be ones in which Mobius would regard Austcorp as its customer. 147 The significance of this method of doing business, which had a number of practical attractions to Austcorp as Mr Tan explained, is that third parties with whom it dealt may not always have been aware of the underlying web of relationships. Austcorp was the apparent contracting and paying party. The invoices were addressed to and paid by it. But more significantly, the various individuals acting for Austcorp, were in fact its actual officers or employees and gave people with whom they dealt their personalised Austcorp business cards. Hence, Mr Walker wrote to Mr Chappell in the capacity that his business card identified, namely the managing director of Austcorp. Of course, the mere fact that Austcorp did not disclose to the third party the name of any subsidiary for which it was acting as an agent, did not mean that Austcorp necessarily became a party to the contract provided it disclosed that it was acting as an agent: Carminco Gold & Resources Ltd v Findlay & Co Stockbrokers (Underwriters) Pty Ltd (2007) 243 ALR 472 at 473 [1], 479 [22]-[23] per Finn, Rares and Besanko JJ. If a person is to be found objectively to have no personal liability as a party under a contract he, she or it has made, it is because the person has disclosed at or before the time of contracting that they do so as an agent, even if the identity of the principal is not then disclosed. 148 The general principle in contract is that " … if a man signs a written contract, he is considered as the contracting party, unless it clearly appears that he executes it as agent only": Cooke v Wilson (1856) 1 CB (NS) 153 at 164 per Crowder J, see too at 162 per Cresswell J; Minister for Youth and Community Services v Health and Research Employees' Association of Australia, NSW Branch (1987) 10 NSWLR 543 at 558E-F per McHugh JA; H O Brandt & Co v H N Morris & Co Ltd [1917] 2 KB 784 at 793-794 per Viscount Reading CJ, 796-797 per Scrutton LJ. The same principle must apply where the contract is made orally. The question of whether a person so acts as to be a party is determined objectively: Carminco 243 ALR at 479 [23]. 149 Thus, it appears on the objective material here, that Austcorp was not involved in its dealings with third parties as a mere agent or conduit for a separate and disclosed, or undisclosed, principal. Its chosen method of doing business is likely to have made Austcorp a principal in many transactions it effected for the purposes of the project because it does not appear to have disclosed any intention to contract as an agent. When Mr Chappell or Mr Hung made decisions, wearing their Austcorp hats, their position was distinguishable from that of acting as an agent for an Austcorp subsidiary. In Yorke v Lucas (1985) 158 CLR 661 at 666 Mason ACJ, Wilson, Deane and Dawson JJ said: "... even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive: .... That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive." (references omitted) 150 Austcorp was the guiding hand and ultimately benefited from what its subsidiaries did. It argued that its conduct vis a vis its subsidiaries should be viewed as akin to a real estate agent who passes on the vendor's instructions. I reject that argument. Austcorp did not confine itself to communicating what its subsidiary said, did or represented, without adopting or endorsing it: cf: Butcher v Lachlan Elder Realty Pty Limited (2004)218 CLR 592 at 605 [38]-[40] per Gleeson CJ, Hayne and Heydon JJ. To the contrary, the reality was that the subsidiaries were Austcorp's vehicle for realising its investment in the project. The subsidiaries acted as Austcorp caused them to act. While each of Austcorp and its subsidiaries was a separate legal person, acting through the individuals who were employees of Austcorp, all acted in dual capacities: cf: Hamilton v Whitehead (1988) 166 CLR 121 at 128 per Mason CJ, Wilson and Toohey JJ. The activities of each member of the Austcorp group involved in the development and marketing of the resort were interlocking and Austcorp controlled each of them: cf: NSW Mutual Real Estate Fund Ltd v Brookhouse (1978) 38 FLR 257 at 263 per Franki J, 264 per St John J, 266 per Deane J. 151 Austcorp argued that the perception of its officers as to who was wearing what corporate hat at the time affected the objective relationship which was created with a person outside of the Austcorp group organisation. In my opinion, that subjective perception is not determinative in ascertaining whether Austcorp engaged in the conduct complained of by the use of the promotional material. The conduct of Austcorp created a situation in which people would associate it in trade or commerce as a promoter of the resort. It argued that Mr Chappell's written communications and press releases should be understood in the context in which they appeared, namely as: "… in communications being made in business by businessmen, not in a legal context by lawyers." 152 That may be so but its consequence is that Austcorp's submission fails at its threshold. Austcorp conducted itself in trade and commerce as a promoter of the resort. It did so in clear language using its exact name. It also associated itself by the use of the logo on the promotional material. The logo was not used in a legal document by lawyers. It was used in trade or commerce by Austcorp to convey its association with the project, whatever may have been the legal formalities and structures in which subsidiaries of Austcorp may have participated. The message which Austcorp wished to pass to the public was, that it, as the ultimate owner of the brand, was responsible for the development. It cannot accept the credit and refuse to take responsibility under the Trade Practices Act for its conduct: cf: see Gardam v George Wills & Co (1988) 82 ALR 415 at 427-428 per French J; Cassidy v Saatchi & Saatchi Australia Pty Ltd (2004) 134 FCR 585 at 593 [39] per Moore and Mansfield JJ, 599 [65] per Stone J; see too Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [40], [48] per Keane JA (Williams JA and Atkinson J agreeing at [1], [145]). As Keane JA observed the presence of a logo and name in a brochure or similar material can mean that a reader will be entitled to conclude that the contents of the brochure state the reasons for the involvement of the person whose logo and name were used. 153 Mr Chappell gave evidence, which I accept, that the use of the logos of well established companies such as Pacific International Hotels and Austcorp on the brochure gave considerable weight to the representations made in it and real assurance to potential investors that the promised net 7% p.a. return for 10 years would be paid. He agreed that: "... the imprimatur of companies such as Pacific International Hotels and Austcorp on the brochure through their logos would give real assurance to potential investors that they would receive seven per cent net return on their investment every year for 10 years? --- Yes. And you appreciate[d] the fact that the imprimatur of those substantial organisations, the fact that those organisations were prepared to advertise or market the property on that basis gave them comfort that those companies were absolutely confident that the guaranteed return would be achieved? --- Yes." (emphasis added) 154 I am satisfied that Austcorp made the representations even if one or more of its subsidiaries did too. Two entities can contravene s 52 of the Act simultaneously: Cassidy v Saatchi & Saatchi 134 FCR at 592 [31], [37] per Moore and Mansfield JJ, see too at 588 [13], 591 [28], 599 [65] per Stone J. 155 After all, a fundamental purpose of the Parliament prescribing the norm of conduct enacted in s 52 of the Act is to ensure the protection of the public, particularly consumers. I reject Austcorp's argument that it did not engage in the conduct of providing to the applicants the brochure, leaflet and their repetitions by Mr Walker. Austcorp was the hands and brains of its subsidiaries' conduct and Austcorp cannot evade responsibility for any contravention of s 52 by seeking to draw down between itself and them a corporate veil for the contraventions it perpetrated: cf: Hamilton 166 CLR at 128; Campomar Sociedad Limitada v Nike International Limited (2000) 202 CLR 45 at 88 [108]. 156 Austcorp argued that it could not be liable for Mr Walker's or PRD's conduct in distributing the brochure or leaflet or making the representations in the promotional material simply because of its involvement in their preparation or printing. It contended that Saatchi 134 FCR at 585 [32]-[39] supported this argument. Nothing that Moore and Mansfield JJ said there suggested that a promoter or principal (as opposed to an advertising agency that was an independent contractor) could not be liable in circumstances like the present. Nor does any delay between Austcorp's design of the brochure and leaflet, and their dissemination to the applicants prevent Austcorp being held to have made the representations complained of. Austcorp's conduct, when viewed as a whole, taking account of all the surrounding circumstances, brought about what it wanted; namely that the promotional material would be given to persons in the position of the applicants and that they would be induced to purchase an apartment: Barton v Croner Trading Pty Ltd (1984) 3 FCR 95 at 106-107 per Bowen CJ, Beaumont and Wilcox JJ. PRD and Mr Walker, as much as Austcorp's subsidiaries, were intermediaries in Austcorp's marketing plan: Barton 3 FCR at 107.

2.16 THE IMPACT OF THE MARKETING MATERIAL 157 The brochure presents as a powerful marketing tool. So too does the leaflet. Because each of the applicants is an individual, who received and read the brochure and claimed to have been misled and deceived by it and Mr Walker's repetition or reinforcement of its contents, it is necessary to consider its effect on two levels. (The same considerations apply to the leaflet.) I will consider later how each of Mr Owers, Ms Tan-Bounkeua, Mr Luciani and Mr and Mrs Di Giulio understood the material [3.1, 3.2 and 3.3]. 158 The brochure was a document prepared for distribution to the public, but in circumstances where particular members of the public would read it and, as a consequence, be interested in pursuing the "prime investment opportunity" which it promoted. In Butcher 218 CLR at 604-605 [36]-[40], Gleeson CJ, Hayne and Heydon JJ discussed the principles to be applied where an alleged misrepresentation is made to a particular individual, even though the individual is one of a class of other persons to whom the same representation may have been made. They held that even though a representation may have been made to a class of persons, in a case like the present it is the individuals who claim to have been mislead and the person by whom they claim they were mislead whose relationship must be examined. The applicant for relief must establish a causal link between the impugned conduct and the loss that is claimed. They said that this depended on analysing the conduct of the alleged wrongdoer in relation to the applicant alone and continued (Butcher 218 CLR at 604-605 [37]): "So here, it is necessary to consider the character of the particular conduct of the particular agent in relation to the particular purchasers, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known. Indeed, counsel for the purchasers conceded that the mere fact that a person had engaged in the conduct of supplying a document containing misleading information did not mean that that person had engaged in misleading conduct: it was crucial to examine the role of the person in question." 159 And, Gleeson CJ, Hayne and Heydon JJ observed that it was relevant to consider the circumstances of the representor: Butcher 218 CLR at 604 [42]. Here, the claim against Austcorp was not alleged simply to be that it passed on to PRD and Mr Walker or through him to the applicants information from a vendor. Rather, the applicants alleged that Austcorp itself engaged in the conduct of making the representations to them through the promotional material (including what Mr Walker told them). 160 In June 1999, Mr Walker had written to Mr Chappell saying that "the guaranteed return on investment is a prime consideration to prospective purchasers". And, Mr Chappell agreed with that assessment based on his then experience in selling property over nearly three decades. Mr Chappell considered a guaranteed return on an investment was obviously attractive to potential purchasers and sent a message to them that their investment was secure. He said that, based on his experience, he held the view in 1999 that marketing an investment as having a guaranteed return was a very powerful and forceful means of marketing. He acknowledged that one reason why it was attractive to investors to have a guaranteed return was because it told the investor that whatever happened in the market they would get the guaranteed return, even if there were some unforeseen circumstance. I accept that evidence. 161 Before the brochure's wording was settled, Austcorp had used Coudert Bros, solicitors, to discuss with ASIC the use of the word "guarantee" and "net return 7%p.a. guaranteed ten years minimum lease" in an earlier form of marketing of the resort. With Mr Hung's approval, Coudert Bros had told the Commission, in August 1999 that the word "guarantee" was often used colloquially simply to mean '"assured" - "a sure thing"'. They told the Commission that, in a strict sense, the return was guaranteed. That was because the lease which was accepted from each purchaser would provide the agreed percentage return in the amount of the rent identified by the contract (being 7% of the purchase price, payable each year). The Commission was told that "the rent (as with all lessee obligations) is guaranteed by Pacific International Hotels Pty Limited", although Coudert Bros did not mention that guarantee was limited to a maximum of 12 months of the initial rent. Coudert Bros addressed a concern of the Commission about a sticker that asserted a net guaranteed return with a 10 year minimum lease saying: "Further the return is guaranteed (assured) in the colloquial sense. The rent payable is a predetermined amount in no way dependant on the serviced apartment business of others. We suggest there is no sense in which the 'sticker' can be seen as making a claim which is not backed up on sale." 162 Austcorp was a very experienced developer skilled in marketing its projects. It was essential that it have that skill, and exercise it, so as to ensure the commercial success of the significant projects it undertook. The significance of the resort to Austcorp can be seen from draft press releases Mr Chappell prepared in November 1999, describing the resort project as involving Austcorp constructing a $36 million development. That figure had been used, earlier, in an article publicising the project in the Sydney Morning Herald in August 1999. Mr Chappell and Mr Hung spent some time considering the form and wording of the brochure before it was printed. 163 The marketing strategy, using the brochure, for the sale of the remaining 30% of the apartments in the resort was an integral component of the Austcorp group's involvement in the development. The statements made in the brochure (and the leaflet) were deliberately and carefully structured by the experienced hands and eyes of Mr Chappell and Mr Hung in such a way as to attract investors to the resort. In addition to their own skills they had expert assistance in that task from Mr Walker, solicitors and, Austcorp's advertising agency, Mobius. Mr Rainey also assisted in drafting the brochure and reviewing it with Mobius, Messrs Chappell and Hung. 164 Mr Chappell understood that the statements in the brochure about the guaranteed return conveyed the meaning that the resort would be so successful that any investor would get 7%p.a. net of expenses. He thought that representation was lent considerable weight by the fact that well established companies like Pacific International Hotels and Austcorp were prepared to allow their logos be shown on the marketing material. He knew the imprimatur of those companies in the brochure, through the use of their logos, would give real assurance to potential investors that they would receive 7% net return on their investment every year for 10 years. Mr Chappell agreed that because those organisations were prepared to market the resort on that basis, investors would obtain comfort that those companies were absolutely confident that the guaranteed return would be achieved. And Mr Chappell also agreed that the statement in the brochure that "from day one your return will be a guaranteed 7%p.a." was unequivocal and communicated to an investor that notwithstanding any vicissitudes in the market, they would receive that guaranteed return net of all expenses each year for 10 years. He considered that a guaranteed return on the investment was a prime consideration for a potential purchaser. As Mr Hung said, the use of the phrase "guaranteed return" in the promotional material was an important aspect of the marketing and enhanced Austcorp's ability to sell apartments in the resort. 165 The impact of the brochure (and the repetition or emphasis of some or all of its messages by the leaflet and or Mr Walker) on each applicant was immediate and, I find, lasting. Its whole tenor was assurance, first of a 7% p.a. net return on the purchase price, secondly, of the good location of the resort, thirdly, of the good standing of the named operator, "Pacific International Hotels" and, last, of the absence of any thing which might go wrong with the earning of the 7% net return. The brochure presented, as it said, "a 5 star investment" and "an investment package without equal". The guaranteed return was, in Coudert Bros' phrase "a sure thing". 166 Yet, despite the care and deliberation with which it was prepared, Austcorp submitted that the brochure was marketing material that contained a degree of puffery in the sense that Davies and Einfeld JJ had explained in General Newspapers Pty Limited v Telstra Corporation (1993) 45 FCR 164 at 178; Gummow J agreeing at 194. They said that in the ordinary course of commercial dealings, "… a certain degree of 'puffing' or exaggeration is to be expected. Indeed, puffery is part of the ordinary stuff of commerce". A puff is something that is not meant to be taken seriously or acted on: see also Downey[2005] QCA 199 at [92] per Keane JA. 167 The Courts have long employed commonsense in determining whether or not a statement is a mere puff, as Lindley LJ explained in the great case of Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 at 261 in relation to the defendant's assertion that its promise to pay a Ł100 reward to anyone who contracted influenza after having used its smoke ball was a mere puff which meant nothing. He said (Carlill [1893] 1 QB at 261-262): "Was it a mere puff? My answer to that question is No, and I base my answer upon this passage: '1000l. is deposited with the Alliance Bank, shewing our sincerity in the matter'. Now, for what was that money deposited or that statement made except to negative the suggestion that this was a mere puff and meant nothing at all. The deposit is called in aid by the advertiser as proof of his sincerity in the matter - that is, the sincerity of his promise to pay this 100l. in the event he has specified. I say this for the purpose of giving point to the observation that we are not inferring a promise; there is the promise, as plain as words can make it." (emphasis added) 168 AL Smith LJ dismissed the suggestion that the reference to the deposit of Ł1,000 could be construed as a mere expression of confidence in the wares which the defendant had to sell: Carlill [1893] 1 QB at 273. And, as Black CJ, von Doussa and Cooper JJ said in Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 483E-G, the use of an expression such as "free" in connection with shares, depending on the context, can create a notion that the shares might be acquired without significant loss or outgoing, even though in other contexts in ordinary life people might understand similar usages differently. It depends on the context in which words are used as to whether or not their use is misleading or deceptive or likely to mislead or deceive. 169 The overall impression created by the brochure in its ordinary and natural meaning is that of confidence. That is why the brochure recognised, and reassured a reader "its hard to imagine a real estate investment offering so much. From day one your return will be a guaranteed 7% p.a.". This reinforced the message of assurance. The reader was not to imagine that the promises in the brochure were a mere puff or simply an expression of confidence in the likely result of an investment. I reject Austcorp's submission that the brochure and the representations it conveyed were puffery which investors would recognise as such. Rather, the reader was being reassured that they were not imagining a real estate investment which offered so much - instead the reader was told it was true; "a sure thing". 170 The brochure stated in terms that there would be "… the security of strata title and a ten year lease to Pacific International Hotels". This conveyed that the entity named in the brochure as "Pacific International" or "Pacific International Hotels" would provide the assurance of accepting liability to the purchaser for the promises in a ten year lease, the most important of which was the rent generating the guaranteed return. The powerful marketing tool of a guaranteed return was an assurance of solidity of the investment. The repetitions of the theme of a 5 star investment throughout the brochure both in words and illustrations, again, reinforced the assurance the reader would take from it. 171 Having considered terms of each of the brochure, and the leaflet, I find that each was, both, capable of conveying each of the representations pleaded (reading representations (b) and (g) as referring to "Pacific International" in the generic sense in which the brochure refers to that organisation or entity) and in fact would convey them to an ordinary reasonable reader. The question, of course, is not merely whether the brochure or the leaflet is capable of conveying those representations, but whether it did in fact convey them, or any of them, to the applicants as individuals. 172 Austcorp argued that the potential investor would realise that whatever was said in the promotional material (the brochure, leaflet and Mr Walker's explanations) as Mr Walker foreshadowed, a formal process would ensue. This would involve the potential investor receiving the contract, with all the rights and obligations offered by the promoters set out in detail. The contract was over 170 pages in length and nearly 2 cm thick. 173 The serious act of an investor signing and exchanging such a document knowing that it related to an interest in property, in general, will operate to bind the purchaser to the terms of the contract: Toll (FGCT) Pty Ltd v Alphapharm (2004) 219 CLR 165 at 182 [47] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. The act of signature ordinarily conveys a representation that the person signing either has read and approved the contents of the document or is willing to take the chance of being bound by the contents whatever they may be: Toll 219 CLR at 180-181 [45]. Where the person who signs a contract to purchase an interest in property has a solicitor acting for him or her on the transaction, this representation will ordinarily be enhanced by the addition of the fact that the solicitor will have considered and advised his or her client on the legal effect of the document. 174 Of course, where fraud or misrepresentation has operated to affect the contracting party's decision to sign, the Court may find that he or she will not be bound by the contract or the effect of the signature: Toll 219 CLR at 181 [46]. One reason for this is that the effect of the misapprehension induced, or caused, by the fraud or misrepresentation may have caused the innocent party either not to advert to a subject matter in the contract, at all, or to understand it in a sense different to that induced by the misapprehension. In other words, the effect of the misapprehension may affect the context in which the contract or document is understood by the person who signs it. Just as the construction of a contract is affected by the objective matrix of facts known to both parties, so too, a misapprehension induced or caused by fraud or misrepresentation will affect the quality of the assent ordinarily evinced by a signature. 175 It is important to assess whether a misrepresentation was an operative cause of the decision of a person to enter into a contract. Ordinarily, a person who has made a false representation is under a duty to correct it before the representee acts to his or her detriment in reliance upon it. This is so in cases of fraudulent misrepresentation as Lord Reid explained in Briess v Woolley [1954] AC 333 at 349. Equally, in cases of unintentional contraventions of s 52 of the Act, a representee who relies on an uncorrected misleading representation (even where the representor does not know of the facts which make the representation incorrect) is entitled to relief under Pt VI of the Act: Campomar 202 CLR at 85 [103]. Whether something is a cause of something else is ultimately a question of fact although it can involve considering and applying difficult value judgments. 176 When a person claims to recover loss or damage under s 82(1) of the Act, the question of causation is whether he, she or it has suffered that loss or damage "… by conduct of another person that was done in contravention of …" here, relevantly, s 52. In Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 Mason CJ, Dawson, Gaudron and McHugh JJ said that the word "by" as used in s 82(1) clearly expressed the notion of causation without defining or elucidating it. They held that, in general, this required using the common law practical, or common-sense, concept of causation unless the provisions of the Act operated to modify or supplement that concept. They said that where the claim under s 82(1) was to recover for loss or damage by misleading conduct consisting of misrepresentations done in contravention of s 52(1), as at common law, "… acts done by the representee in reliance on the misrepresentation constitute a sufficient connexion to satisfy the concept of causation": see too Travel Compensation Fund v Tambree (2005) 224 CLR 627 at 639 [30] per Gleeson CJ, 642-643 [44]-[49] per Gummow and Hayne JJ, 645-647 [53]-[60] per Kirby J, 653-654 [78]-[81] per Callinan J. 177 In Gould v Vaggelas (1984) 157 CLR 215 at 236 Wilson J identified four principles which are frequently used as a practical guide to assess the issue of whether a person has been induced to contract based on a misrepresentation (cf: Ricochet Pty Ltd v Equity Trustees Executors and Agency Company Ltd (1993) 41 FCR 229 at 234 per Lockhart, Gummow and French JJ; Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471 at 482-483 per Beaumont, Foster and Hill JJ; Sutton v AJ Thompson Pty Ltd (1987) 73 ALR 233 at 240 per Forster, Woodward and Wilcox JJ), namely: "1. Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case. 2. If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation. 3. The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation. 4. The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract." 178 Before considering these issues, it is necessary first to understand the contractual relationship which each investor would enter and the objective context in which that occurred, including whether the representations were correct or not.

2.17 AUSTCORP'S CONDUCT 179 Austcorp argued that it was wrong to view the brochure in isolation as being the conduct for which it was to be held responsible. Rather, it said that the brochure was distributed to prospective purchasers in a context where they could be expected to receive a detailed contract and get legal advice from their solicitors. Moreover, in the case of the Luciani applicants and Mr Owers there was evidence that each had been sent a disclosure statement further explaining the nature of the transaction into which they were proposing to enter. 180 Austcorp argued that whatever the brochure may have communicated, each of the applicants would have understood that it could not possibly have contained the full nature and extent of the contractual relationship which they were to effect. It said that each of them would have understood that the guaranteed return was the rent payable under the lease. They would not have understood, so it contended, that Austcorp was providing any guarantee of the commercial success of the hotelier, Pacific International Hotels, or the operator of the hotel. Austcorp argued that no-one would think that it, as a developer, had commissioned some independent feasibility study of the long-term viability or success of the resort. 181 It argued that the applicants' case was built on an illusion created with the benefit of hindsight and self-serving assertions. The fact that the brochure conveyed confidence in the prospects of the development, Austcorp argued, did not mean that there was a high level of assurance that the project and the resort would succeed. I reject that argument. The words of the brochure were calculated to convey assurance. The admissions by Austcorp that that was the purpose of using the words of the brochure, of a 7% net guaranteed return for 10 years, namely that it was the "sure thing" referred to in Coudert Bros' letter to the Commission in August 1999 make it clear beyond doubt that the power of this message was realised and deliberate. Of course, liability under s 52 does not depend on the intention of the corporation which engages in the conduct: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197. 182 Mr Chappell gave this evidence: "And you knew at the time that the company Mustara Holdings was not offering any guarantee. Correct? --- It was through the lease they were proposing to enter into with the investor for a 10 year period. […] Which was the whole basis of the offer. Mr Chappell, do you own any rental property? --- Not at the moment. You have in the past? --- I have, yes. And you've rented it out to people? --- I have. And if they enter into a lease that doesn't guarantee you payment of the rent, does it? --- It doesn't. There are certain obligations under the lease which they enter into, the lessee and the lessor, which you can rely on depending on the person. That doesn't guarantee you payment of the rent under the lease, does it? --- Well, no, it's not guaranteed. No, and the promise to pay under the lease, well, as I think you would accept, depends on the lessee's ability to pay from time to time? --- Correct. And the lessee might fall on hard times? --- Yes, it could. The lessee might encounter unforeseen circumstances? --- It may. And that might affect its ability to pay? --- Correct. And the lessee may simply walk away and choose not to pay? --- It's possible, yes. And if it does whether or not you get your payments depends on the financial position of the lessee? --- That's true. .... You're not suggesting seriously to his Honour, are you, that the mere fact of entry into a lease with a tenant involves a guarantee of payment of rent under the lease? --- No. Thank you, and you knew therefore that Mustara as the lessee under the proposed leases wasn't guaranteeing payment of the rent under the lease? --- It wasn't guaranteeing it, no. ..... Pacific International Hotels Pty Limited was not guaranteeing payment of the rent at seven per cent net return per annum for 10 years? --- No. HIS HONOUR: When you say 'No' you are agreeing with Dr Bell? --- I'm agreeing that it didn't." 183 I am satisfied that the brochure achieved, objectively and in the subjective minds of each of the applicants who gave evidence before me, the purpose of instilling in them the belief that the rent would be paid as a "sure thing" [See 3. below]. However, I am also satisfied that the applicants' were worldly enough to realise that no-one would be able to give them a guarantee against the vicissitudes of the marketplace. No-one for example could have predicted the shocking events of 11 September 2001, or other economic events which might affect the Australian or international economies generally. It would be quite unreasonable for anyone to believe that a promoter of a resort hotel project in the Central Coast of New South Wales would be able to predict the outcome of the world economy over the succeeding 10 years and given assurance that nothing could happen which might so impact on the operations of the hotel that rent would not in any circumstances cease to be paid at the guaranteed rate. 184 As Gibbs CJ said in Puxu 149 CLR at 199 (see also Campomar (2000) 202 CLR at 85 [102]-[103] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ): "The heavy burdens which [s 52] create cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all the circumstances." 185 So, the confidence which the brochure exuded could not reasonably have been understood as boundless or applicable in all circumstances. The applicants relied on the analysis by Keane JA in Downey [2005] QCA 199 at [107]-[108] where he found that a representation that an established hotel operator, Radisson, considered the project was a guaranteed success would have been easily seen as of importance to an investor. The role which a representation can play in the formation of a state of mind is critical. 186 In Butcher 218 CLR at 606 [43] Gleeson CJ, Hayne and Heydon JJ observed that it was a matter of common experience that questions of title to land could be complex, both legally and factually. Dealing with legal complexity was the role of solicitors, acting, where appropriate, on the advice of other specialists, such as surveyors. The question in that case was whether purchasers were entitled to rely upon a diagrammatic plan of the land being sold in a brochure prepared by a real estate agent. The brochure contained an express disclaimer by the agent of any belief in, or guarantee of, the accuracy of the information in it. Their Honours held that the brochure, read as a whole, in effect told the purchasers to rely upon their own enquiries and that it would then be plain to a reasonable purchaser that the agent was not the source of the information alleged to be misleading. They said that the agent there did not purport to do anything more than pass on information supplied by another or others and expressly, as well as implicitly, disclaim any belief in the truth or falsity of that information: Butcher 218 CLR at 608-609 [50]-[51]. 187 Their Honours also observed that in a situation where a purchaser was intending to make use of statements or representations made in a brochure before entering into an important transaction, it was not inappropriate to look closely at the contents of the brochure before deciding whether a particular representation was made and by whom: Butcher 218 CLR at 616 [76]. In his dissenting judgment, McHugh J also said that in determining whether a contravention of s 52 has occurred, the task of the Court is to examine the relevant course of conduct as a whole, by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. He observed that the Court was not confined to examining a document, relied on as being the conduct or conveying a representation amounting to the conduct alleged to have contravened s 52, in isolation, saying that the Court "… must have regard to all of the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document": Butcher 218 CLR at 625 [109]. 188 Austcorp submitted that the effect of Butcher 218 CLR 592 was that whatever had been pleaded as the cause of action by an applicant or plaintiff, the Court nonetheless had to look outside that, at all of the conduct of the respondent or defendant corporation to determine whether or not a contravention of s 52 had occurred. However, here, this issue does not arise because Austcorp had pleaded expressly the need to do so. It pleaded, in its defence, that the consideration of what was represented or not disclosed to the applicants by the brochure needed to be considered in the context of the applicants' actual knowledge and the knowledge of those acting on their behalf as to the nature and character and investments proposed, including in the particular apartment in the resort, the nature and character of the brochure and the entire course of dealings between the applicants, and their advisors in relation to the nature and characteristics of an investment in an apartment in the resort including the contract of sale and, where relevant, a disclosure statement. 189 Austcorp asserted that when viewed as a whole, assuming that it had been involved in the making of the representations alleged, its conduct could not be described as misleading or deceptive. This was because the applicants could be expected to have a solicitor act for them and advise them as to the terms of the contract for sale, including the lease and the disclosure statement, thus disabusing them of any misconception which may have been generated by reading the brochure by itself. 190 I am of opinion that on the evidence here the mere fact that the contract may have set out the full terms and conditions of the relationship which was to exist between the purchaser and the various parties with whom it was proposed the purchaser would enter into a relationship (the vendor (Landillo), the lessee (Mustara) and guarantor (Pacific International Hotels)) cannot, of itself, be enough to break a chain of causation from representations or impressions made by the brochure. Obviously, context is critical. But where the method for inducing persons to enter into consideration of a business proposition is to make assertions and valuations of the proposition in the form in which the brochure was expressed, a person who promotes the sale through the brochure cannot complain if a purchaser takes the promoter at his word. The whole point of having the brochure was to make people interested in the commercial proposition of the purchase of an apartment in the resort. What was the commercial proposition if not a promise or assurance that that the investment would return 7%p.a. net for 10 years to the purchaser? And, lest the intending purchaser might think otherwise, he or she was assured by the statement that "its hard to imagine a real estate investment offering so much. From day one your return will be a guaranteed 7%p.a.". 191 The purpose of telling a prospective purchaser that the return was hard to imagine was to assure him or her that they were not imagining it, that it would be assured to them by means of a lease that would be granted providing that return. And, they were assured that a reputable hotel operator, Pacific International Hotels, would be the organisation providing the lease. 192 I am of opinion that there is a material difference between the unqualified assertion in the brochure that the operator of the resort and lessee of the apartments was Pacific International Hotels and the actual position where Mustara was to be the operator and its performance was guaranteed to the limited extent provided by cl 20.9. It would have made no material difference to a person proposing to enter into the transaction had the guarantee been unlimited and cl 20.9 not been present. But, the presence of the limitation in cl 20.9 changed the nature of the investment. That limitation conveyed a lack of complete confidence and commitment to the long term success of the resort on the part of Pacific International Hotels. No longer was there an unconditional guarantee or promise of Pacific International Hotels' continuing support of the payment of the rent. Rather, cl 20.9 conveyed the clear understanding that Pacific International Hotels did not stand fully behind the investment which it was promoting with Austcorp. In other words, cl 20.9 conveyed that Pacific International Hotels did not have the confidence portrayed in the brochure of the "security of a 10 year lease to Pacific International Hotels". There was no such lease at all. Instead there was a 10 year lease to a $2 company, Mustara, which Pacific International Hotels had guaranteed to the limited extent of cl 20.9. 193 The brochure was designed by Austcorp, with the considerable expertise of Mr Chappell and Mr Hung with a view to attracting investors. Indeed, it was critical for Austcorp's purposes to obtain sales of the remaining 30% of the units referred to in the brochure to make their project a commercial success. The brochure was not a mere puff intended to be treated by purchasers or potential purchasers as something which could be put to one side when the contract for sale arrived. The brochure, rather, was expressed in unqualified, optimistic and prospective terms. It was intended to lead investors to make a decision to purchase based on the belief that the investment was a sound one. I agree with the observations of Keane JA in Downey [2005] QCA 199 at [92]: "In the ordinary course of commercial behaviour some results are guaranteed and some are not. The concept of "guaranteeing a result" is not something that is usually associated with puffery but with the making of a firm commitment for which responsibility will be taken. The phrase 'guaranteed success' cannot be construed as a puff." 194 After all, the intended market for this investment were people holidaying at The Entrance who were attracted to walk into PRD's office at the site, as each of the applicants here did. These applicants were ordinary members of the public, not professional landlords or real estate investors or developers. They were the very class of persons who were intended to be attracted by the brochure viz: namely the kind of investor who would be looking for a return in something which it was hard to imagine could be offered at that level. In another context, to do with the law of defamation, Lord Devlin once observed tellingly in Lewis v Daily Telegraph Limited [1964] AC 234 at 285 (and see also Mirror Newspapers Limited v Harrison (1982) 149 CLR 293 at 304 per Brennan J): "A man who wants to talk at large about smoke may have to pick his words very carefully if he wants to exclude the suggestion that there is also fire; but it can be done. One always gets back to the fundamental question: what is the meaning that the words convey to the ordinary man: you cannot make a rule about that." (emphasis added) 195 The issue for consideration is whether any contravention of s 52 has arisen by the conduct of the promoters in putting forward the brochure and leaflet and authorising Mr Walker to speak as he did consistently with them, when the contract appears to contain different provisions, materially as to the identity of the lessee and the nature of Pacific International Hotels' financial and commercial confidence in the venture promoted. In Campomar 202 CLR at 83 [98], Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ emphasised the need to enquire why any misconception had arisen in the mind of the person claiming have been misled or deceived. A sufficient nexus must exist between the conduct complained of and the misconception or deception. 196 Austcorp argued that the nexus was, in effect, broken because the contract was a legal document which set out with considerable precision and at length the actual relationship that would exist if a person entered into the contract and the lease. For example, it argued that it was not reasonable for a person in the position of Ms Tan-Bounkeua not to have had a solicitor advising her and that, had she done so, the solicitor would have broken the chain of causation, even if he or she negligently failed to advise the purchaser of the provisions of cl 20.9 or the existence of Mustara. I discuss this specific issue below [See 2.18]. Gibbs CJ observed in Puxu 149 CLR 191 at 199 that the Act did not impose burdens which operated for the benefit of persons who failed to take reasonable care of their own interests: see too Campomar 202 CLR at 85 [102]. 197 Of course here, I must consider the impression that the words of the brochure made upon each of the applicants, in light of the context, including the fact that there would be a contract sent to them or their solicitor. And, in the ordinary course it could be expected that a solicitor would act, although in Ms Tan-Bounkeua's case that did not eventuate. But a solicitor is not a commercial advisor. Having set out to assure people that the guaranteed return would be earned, it ill lies in the mouth of Austcorp to say that they should not have believed that when they entered into the contract because their solicitors should have disabused them of those impressions. I reject that submission. It is reminiscent of Lord Macnaghten's characterisation of a similar argument in Gluckstein v Barnes [1900] AC 240 at 251-252 where he said: "But then," says Mr. Gluckstein, "there is something in the prospectus about 'interim investments,' and if you had only distrusted us properly and read the prospectus with the caution with which all prospectuses ought to be read, and sifted the matter to the bottom, you might have found a clue to our meaning. You might have discovered that what we call 'interim investments' was really the abatement in price effected by purchasing charges on the property at a discount." My Lords, I decline altogether to take any notice of such an argument. I think the statement in the prospectus as to the price of the property was deliberately intended to mislead the shareholders and to conceal the truth from them." 198 The norm of conduct provided by s 52 is intended to require corporations to adhere to an appropriate level of behaviour in trade or commerce. Austcorp was prohibited from engaging in conduct which was misleading or deceptive or likely to mislead in this trade or commerce, namely the sale of apartments in the resort. The brochure was not a mere puff. The statements about the resort, the quality of the investment and the prospective earnings to be achieved from it were advanced as serious business propositions. Moreover, it is difficult to see how the brochure could have been read in any other way. If, on examination, the nature of the project or the returns promised in the brochure were overstated or not supported, the investor would not proceed. He or she would then mistrust the promoters. 199 Had Austcorp wished to disclaim liability for what was said in the brochure or to have advised investors or members of the public who read it that they could not rely on it, it would have been easy to put a disclaimer on the document. But, there is not a word of caution in the brochure. It is full of optimistic predictions and assurances of a long term and significant return. And, of course, a disclaimer might undermine the message of a "sure thing". Austcorp or the other promoters did not exhort the applicants to make their own inquiries about the "guaranteed" return or the certainty of its receipt unlike in Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd (2005) 220 ALR 211 at 232 [104] per Branson, Nicholson and Jacobson JJ. 200 While I am satisfied that it would be unreasonable to read the brochure as offering an assurance against anything that might happen in the market, the use of an apparently reputable hotel operator's name, Pacific International Hotels, in connection with the promise of a 7% p.a. return for 10 years from the investment was calculated to induce confidence that the promoters of the venture had a foundation for the confidence expressed concerning future matters. Those who were named in the brochure as organisations, rather than particular identified corporate identities, included the hotel operator, as "Pacific International", and a developer, "Austcorp". Ordinarily, a statement which involves the state of mind of the maker will convey the meaning expressly, or by implication, that the maker of the statement had a particular state of mind when it was made and, commonly, that there was a basis for that state of mind: Global Sportsman Pty Limited v Mirror Newspapers Limited (1984) 2 FCR 82 at 88 per Bowen CJ, Lockhart and Fitzgerald JJ; RAIA Insurance Brokers Limited v FAI General Insurance Co Limited (1993) 41 FCR 164 at 172-175 per Beaumont and Spender JJ, with whom Davies J generally agreed at 165-166. 201 Significantly, the brochure did not contain any reference to cl 20.9 of the lease. There was no hint of a qualification that those backing or promoting the investment, the subject of the brochure, had any reservations about it. I am of opinion that the limitation in cl 20.9 was an important one. It indicated that Pacific International Hotels, as the parent company of Mustara, was not prepared to commit itself to supporting the resort and the "guaranteed return" in the sense of an assured return secured by the lease, beyond a maximum of the total of the first year's rent (unadjusted for CPI or market increases). 202 In one sense, as Austcorp urged, the giving of that guarantee was a valuable promise, and overall committed Pacific International Hotels to an expenditure somewhere in the order of 7% of the total price which, in itself, was a substantial sum of money. But the existence of the qualification, that Pacific International Hotels was not prepared to go beyond such a guarantee, qualified the confidence with which the promotion was being made. As a matter of commonsense a reference to that qualification in the brochure would have substantially diluted its marketing impact. It was a qualification which the promoters of the venture, and in particular Austcorp, did not put into the brochure.

2.18 AUSTCORP'S ARGUMENT THAT IT COULD EXPECT AN INVESTOR'S SOLICITOR TO EXPLAIN THE CONTRACTUAL DOCUMENTS 203 Rather, Austcorp said that it could be expected that the purchasers would receive the contract and be advised by solicitors as to its terms, including that the lease proposed would contain the limitation of liability. In other words, Austcorp submitted, in effect, that it was free to make the unqualified and confident assertions of the success of the venture in the brochure in the hope that a solicitor would draw to the prospective purchasers' attention the nature of the limitation of the guarantee, which might otherwise diminish the confidence the brochure conveyed. The assertion by Austcorp, that it could expect a solicitor to advise about this matter so as to disabuse purchasers of the very impression which the brochure was calculated to convey, is unattractive. It suggests that it is possible for corporations to make misleading and deceptive statements in such brochures which, of themselves would contravene s 52 of the Act, but then rely upon the professional advisors of the person misled by the brochure to correct the wrong impressions. 204 While I accept that a careful solicitor ought to have picked up the significance of cl 20.9 of the lease, the evidence before me indicates that solicitors did not always do so. Indeed, Austcorp recommended that Mr Walker distribute to purchasers the memorandum prepared by Penhryn Parker, solicitors, identifying the significant features of the transaction. That memorandum in itself did not pick up the limitation in cl 20.9. Nor did Mr Owers' solicitor pick it up. While Mr Fullerton, who advised the Luciani/Taldarmar applicants did pick it up, I am satisfied that by failing to advert in the brochure itself to any limitation of confidence by those promoting the venture such as is contained in cl 20.9, should sound against Austcorp where solicitors for purchasers or the purchasers themselves did not pick this up. After all, Austcorp set the misleading representations in motion. It cannot simply rely upon the overstatements in the brochure to be corrected where they were seriously made and used as powerful marketing tools by it in preparing the brochure with the knowledge that they had that affect. And as Mason J observed in Puxu 149 CLR at 210-211 in a passage applied by Jacobson and Bennett JJ in National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 61 IPR 420 at 437 [52]-[53] (a case where the communication was made in a letter of offer to individual shareholders in a company): "There may be situations where to exploit the mistaken views of the public would contravene s 52 and would not be corrected by an inconspicuous accurate representation e.g. in a concealed label or the 'fine print' of a contract." (emphasis added) 205 I am of opinion that the use of the Austcorp logo in the brochure, leaflet and at the site was conduct by Austcorp, in trade or commerce, that it be seen as a developer of the resort together with whatever other Austcorp companies might also have been involved. No attempt was made by Austcorp to guard against any misunderstanding by persons who read the brochure or leaflet or saw the sign that some other Austcorp company might have been the developer or involved in the development and that Austcorp had no such involvement. The reality was the contrary. Austcorp was involved in many detailed ways, albeit for the group's internal purposes and for some important formal purposes, care was taken to ensure that when making contracts with third parties, one or other subsidiaries of that company was the contracting party. That does not deny that Austcorp itself engaged in the conduct in trade or commerce allowing itself to be associated as a promoter in the promotional material. 206 The promoters' lack of commercial ethics of including such provisions as cl 39 is self-evident when the apartments were being marketed to potential purchasers in the way I have described. Even more remarkable, having regard to cl 39, was the content of the disclosure statement which expressly said in par 4(iii): "Are Investors in the Scheme guaranteed or promised that they will receive a particular rate of return from the Scheme? Yes." And, as appears above [2.12], the disclosure statement referred to the guarantee as unconditional and irrevocable, albeit that it separately and confusingly dealt with cl 20.9.

2.19 EXCLUSIONS AND THE DISCLOSURE STATMENT 207 Having marketed the apartments to the applicants, and the public at large, with unequivocal promises of a guaranteed return, Austcorp also sought to rely on the terms of cl 39 of the contract and, where the relevant applicants received it, the disclosure statement to excuse itself from liability. 208 I reject this argument. First, Austcorp was not a party to the contract or disclosure statement even if it were the puppet master behind them. Secondly, a corporation cannot engage in a contravention of s 52 of the Act and then seek to excuse itself from liability to relief being granted against it under Part VI on the basis that it, or another person, has sought to negate the effect of the contravention by provisions like cl 39 or the disclosure statement without, at least, making full, intelligible, and frank disclosure of the true position so as to negate its earlier contravention. Thirdly, in honest trade and commerce contractual exclusions like cl 39 and documents like the disclosure statement may have some effect. The courts have recognised that they may be given effect, depending on all the circumstances, as evidentiary of the complaining party's state of mind having been disabused of any relevant misleading or deceptive conduct: cf: Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd (2005) 224 ALR 134 at 147-148 [59]-[60] per Steytler P, 164 [133] per McLure JA and 164-165 [135]-[141] per Pullin JA. 209 It is a question of fact whether a disclaimer or a contractual provision modified the antecedent or other conduct as Gleeson CJ, Hayne and Heydon JJ illustrated in Butcher 218 CLR at 613-614 [70]-[72] in discussing what Burchett J had said in Benlist Pty Ltd v Olivetti Australia Pty Limited [1990] ATPR¶41-043 at 51,590. In both those cases there were disclaimers in marketing material. Burchett J said: "It has been held on many occasions that the perpetrator of misleading conduct cannot, by resorting to such a clause, evade the operation of [the Act]. Of course, if the clause actually has the effect [of] erasing whatever is misleading in the conduct, the clause will be effective, not by any independent force of its own, but by actually modifying the conduct. However, I should think it would only be in rare cases that a formal disclaimer would have that effect. ... In the present case, the suggestion of the suitability of the building for strata title conversion might continue to influence the mind of a prospective purchaser notwithstanding his awareness of the existence of a disclaimer clause, which did not single out the particular representation, but purported to apply generally to every detail stated in the investment report. If it were permissible to avoid the operation of [the Act] by such a clause, it would be all too easy to make representations in the confidence that they would be acted upon, and then withdraw them in the confidence (equally important for the securing of the desired business) that the withdrawal would not be acted upon." (emphasis in bold added) 210 The assessment which s 52 requires to be made is whether the conduct complained of was misleading or deceptive at the time it was acted upon in all the circumstances, including after consideration of what was and was not disclosed, the nature of the transaction (here, the purchase of a significant asset, real property), whether the purchaser acted reasonably to protect his, her or its own interests and the purpose of s 52 itself.

2.20 A LATE CHANGE IN THE PROMOTIONAL ADVERTISING 211 By May 2000, all but seven of the apartments had been sold. Austcorp then changed its advertising material by removing all references to a "guarantee", "guaranteed return" and the claim of "lucrative minimum 7% net return guaranteed". The theme changed to "Top up your Super. Waterfront apartments with 7% return". Messrs Chappell, Hung and Zantiotis made annotations on drafts for the new material which was also discussed with Mobius. None of them had any recollection of why the change was made. 212 Mr Chappell suggested that the change, removing all reference to "guarantee", may have been for stylistic reasons. At one point, while the annotations on the draft copy of the advertisement were being made, Mr Zantiotis was on leave. Austcorp suggested that this explained why Mobius sent a revision of the artwork with some of these changes to Mr Chappell. I reject that. Sales of the last seven apartments were important to Austcorp securing a profit from the development. Mr Hung observed that at this stage in developments, when construction of the building was close to completion, it is hard to sell apartments off the plan. He said that purchasers prefer to wait for the finished product. So, he said that the purpose of this particular advertising in May 2000 was to keep the public aware of the apartments' availability for purchase. But, as Mr Hung acknowledged, removing the expression "guaranteed return" made the marketing message less attractive and less persuasive. 213 The applicants argued that this significant change in the marketing approach occurred because Austcorp was conscious of the misleading and deceptive nature of its use of "guarantee" in promoting the sales of apartments in the resort. Austcorp contended that the reason for the change was not related to that explanation. It relied on the fact that Mr Zantiotis, who was no longer employed by Austcorp, and was disinterested, had no recollection of any contemporaneous concern about the use of "guarantee" in promotional material. 214 This debate is not as material as the parties made it. Liability under s 52 does not depend on the state of mind of the corporation whose conduct is impugned. Nonetheless, I consider that the likely reason for the change was to adjust the focus of the promotion to catch the eye of potential purchasers: that is to put a new emphasis, rather than being seen by readers as repetitious of what they had already seen that had not been sufficient to interest them. It is unlikely that after ignoring the earlier legal advice, to which I have referred, and approving the use of the disclosure statement that referred to the guaranteed return, Austcorp began to have second thoughts about the validity of the concept of its earlier marketing campaign.

2.21 THE EFFECT OF S 84(2)(B) OF THE TRADE PRACTICES ACT 215 Section 84(2)(b) of the Trade Practices Act provides that "any conduct engaged in on behalf of a body corporate…by any other person at the direction or with the consent or agreement (whether express or implied) of a director, servant or agent" where that consent is within the "actual or apparent authority of the director, servant or agent shall be deemed…to have been engaged in also by the body corporate." The applicants argued that Austcorp was also liable for the conduct of its subsidiaries, PRD and Mr Walker by force of s 84(2)(b) of the Act. They contended that the conduct complained of was engaged in "on behalf of" Austcorp within the meaning of s 84(2)(b) by one or more of those other persons (each of subsidiaries, PRD and Mr Walker) who acted at the direction or with the consent or agreement of Austcorp (or its directors Messrs Chappell and Hung, or officers Messrs Zantiotis and Rainey). Thus, the applicants argued that s 84(2)(b) deemed the conduct of those other persons to have been engaged in by Austcorp. 216 After extensively reviewing the authorities in NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 at 550 [1244] Lindgren J concluded that an act is done "on behalf of" a corporation for the purpose of s 84(2) if either the actor engaged in the conduct intending to do so as representative of or for the corporation, or the actor did so in the course of the corporation's business, affairs or activities. He also concluded that it is not necessary to show that the actor engaged in the conduct for the benefit of the corporation: see too Walplan Pty Ltd v Wallace (1985) 8 FCR 27 at 37-38 per Lockhart J, (Sweeney and Neaves JJ agreeing); Downey[2005] QCA 199 at [56]-[60] per Keane JA. 217 Austcorp's business, affairs and activities were centred on property development. Mr Chappell's managing director's review in Austcorp's 1999 annual report identified the resort as a joint venture project with Great Pacific being developed on prime Central Coast waterfront land. He noted (as at 17 September 1999) that 70% of the 145 apartments had been pre-sold. I am satisfied that the course of Austcorp's ordinary business, affairs and activities in relation to the development and marketing of apartments in the resort involved it in the range of activities in which, its officers, and any subsidiary, PRD and Mr Walker acted in its or his dealings with each applicant. The conduct complained of in making the representations was engaged in on behalf of Austcorp by those, officers, subsidiaries, PRD and Mr Walker. Thus s 84(2) has the consequence that it is deemed to have been engaged in by Austcorp.

3. THE EFFECT OF THE REPRESENTATIONS ON THE APPLICANTS 218 The recollections of each witness when giving evidence as to what was said, thought or done by him or her in 1999 or 2000 were all affected by the passage of time and the place they found themselves in as a result of the litigation. 219 Inevitably, each of the applicants who gave evidence and Messrs Chappell and Hung were giving an account of events that happened years before and about which they had not given much, if any, thought until recently for the purpose of this litigation. I agree with the caution expressed by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319 concerning evidence of this kind. He said: "Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consider­ation of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience." 220 Austcorp argued that, to varying degrees, the applicants' oral evidence of their continuing reliance on the representations complained of at the time they executed or completed the contracts and leases should be discounted or rejected. It claimed that the important nature of the transactions and the fact that a solicitor could be expected to explain the contractual documents accurately, so as to dispel any misapprehension or misrepresentation, weighed against a finding that the representations complained of were relied on at all by the time of execution or completion. And, Austcorp argued that the failure of the applicants, other than Ms Tan Bounkeua (who had no solicitor), to call the solicitor acting for them was a powerful factor undermining the reliability of their evidence. 221 Here, however, there is the objective evidence of the contents of the brochure and other promotional material (including the unchallenged, and inherently likely evidence of Mr Walker's repetition and reinforcement of its messages in his discussions with each applicant). There is no doubt that these conveyed the powerful messages of assurance and success of the investment contained in the representations. In general, these factors lend force to the applicants' claims that the representations were relied on by them at the time they entered into their contracts, completed them and executed their leases. I will, of course, consider each applicant's individual circumstances separately below. But, as a matter of ordinary human experience, powerful marketing messages tend to have a sustained effect. 222 I have had regard to Austcorp's arguments in assessing each applicant's evidence. Of course, each transaction was important to the individual applicants. But Austcorp was asserting that other people (solicitors) or other factors (the full contractual documentation and, where relevant, the disclosure statement when read and properly understood) would undo completely the very state of mind its marketing activities had induced by conveying the representations complained of so as to induce the applicants to proceed. It is not an attractive argument. Marketing messages are simple and powerful. While legal fine print may be contractually decisive, it is usually far less interesting to a lay person. The six lucid pages of the brochure (and the equally lucid other promotional material) had no fine print or qualifications. Austcorp was using the same forensic tactic as Mr Gluckstein did a century ago - it was asking the applicants to read, in court in 2008, with distrust and cynicism what it wanted them to read, believe and act on in late 1999 and 2000. Lord Macnaghten's rejection of that approach remains entirely apposite: Gluckstein [1900] AC at 251-252. 223 Austcorp submitted that an adverse inference should be drawn against the applicants for failing to call their solicitors: Jones v Dunkel (1959) 101 CLR 298; Blatch v Archer (1774) 1 Cowp 63. Austcorp argued that the applicants could and should have called the solicitors who acted for them on the transactions and that their failure to do so could be used, not only to support the proposition that the solicitors' evidence would not advance their cases but also to suggest that they had not discharged their onus of proof. It that it was within the applicants' power to call their solicitors and their evidence should be assessed as Lord Mansfield CJ described in Blatch 1 Cowp at 65: "[i]t is certainly a maxim that all evidence is to be weighed according to the proof which it was within the power of one side to have produced, and in the power of the other to have contradicted." 224 I reject this argument. First, the applicants had waived legal professional privilege on their solicitor's contemporaneous files. Indeed, Austcorp itself called one of those solicitors, Mr Fullerton, who acted for Luciani/Taldarmar. Secondly, the likelihood that any solicitor, eight years later, would retain any recollection of an unremarkable conveyancing transaction let alone the detail of any advice or conversation with his or her client is remote if not fanciful. Mr Fullerton and the firm he had worked for had detailed file notes. There were no comparable file notes tendered from Mr Joseph's file (who acted for Mr Owers). It is safe to infer that Mr Joseph, like Mr Fullerton, would have had no recollection independent of the material in his file. Solicitors who practise in conveyancing routinely carry out many transactions every year and could not be expected to retain some memory of these particular conveyances for the applicants so long after the event. 225 Nor was there any inhibition in Austcorp calling Mr Joseph, had it wished. While no doubt it is fair to infer that his evidence would not have assisted Mr Owers' case, that inference is tempered by the concomitant inference that I would not expect him to have any recollection of what occurred in his advising Mr Owers without contemporaneous notes. I also infer that the absence of such notes from the evidence, suggests that Mr Joseph's evidence would not be likely to have had any real bearing on establishing what he and Mr Owers said to each other. 226 Mr Owers instructed Mr Joseph to act for him again in 2006 on a conveyance, although he was disappointed with the job Mr Joseph had done in 2000 in explaining the lease to him. I do not consider that this affects my conclusion relating to Mr Owers not calling Mr Joseph and his likely inability to recall anything of substance from his acting in 2000. In effect, Austcorp suggested that Mr Owers should have called Mr Joseph to confirm that he had not informed his client of the limitation in cl 20.9 either when advising on the entry into, first, the contract, and later, the lease. In my opinion, if that argument were correct, Mr Joseph would have had a potential exposure to a claim for professional negligence by Mr Owers. That provides a reason why he would not be in the same interest as his former client and would be available to be called by either party. I do not see that Mr Joseph was in Mr Owers' camp. It was open to Austcorp to call him, and indeed it called Mr Fullerton who had acted for Luciani/Taldarmar. 227 Even so, Austcorp wished to have the inference found in its favour that a solicitor would draw attention to a provision it had not included in the promotional material so as to undo the effect of the very representation its conduct conveyed. I am not satisfied that this would be appropriate or serve the purpose for which s 52 was enacted. 228 A cause of Mr Owers' and Ms Tan-Bounkeua's loss was their reliance on the representations complained of. Those representations did not suggest the existence of the limitation in cl 20.9. Moreover, solicitors such as Penryhn Parker did not always draw cl 20.9 to potential clients' attention. The most that Austcorp can suggest here is that another cause of these applicants' losses may have been their failure to obtain legal advice that cl 20.9 had the effect of limiting Pacific International Hotels' liability under the guarantee. In Mr Owers' case, Austcorp contended that his failure to call oral evidence from Mr Joseph 8 years after the event compels an inference that, first, Mr Joseph's evidence would not have assisted Mr Owers' case (which I have drawn) and, secondly, that evidence would have told against Mr Owers or that I should not accept his evidence that he was unaware of the effect of cl 20.9 (which I decline to draw). 229 Section 82(1) of the Act permits recovery by an applicant for loss or damage notwithstanding his, her or its failure to mitigate or contributory negligence unless the applicant's own carelessness or disregard of his, her or its interests is the cause of some or all of the loss or damage: Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274 at 286G-287C per Fisher, Gummow and Lee JJ applying what French J had said in Pavich v Boira Nominees Pty Ltd [1988] ANZ Conv R 556 at p 23; see too Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 517B-E per Heerey J, Sundberg J agreeing at 521F. The misrepresentations were a link in the causal chain between Mr Owers' entry into the transaction and his loss: cf: Henville v Walker (2001) 206 CLR 459 at 469 [14] per Gleeson CJ. At best, from Austcorp's perspective, there may have been two concurrent causes of the imprudent decisions of Mr Owers and Ms Tan-Bounkeua to buy their apartments and lease them to Mustara. Austcorp's conduct was one of the causes, the other being those applicants' failure to receive legal advice exposing to them the effect of cl 20.9.

3.1.1 BRIAN OWERS 230 Brian Owers was a mining engineer who lived near Lithgow. In late April 2000 he was about 38 years old, married with two young children. He has subsequently divorced. He and his family were on holiday at The Entrance. He and his wife owned their family home and he owned an investment property in Lithgow. At the time he was looking for another investment property and had engaged a local Lithgow estate agent to alert him to potential acquisitions. Mr Owers had some friends who had invested in Defence Force housing in Townsville which had a guaranteed return of about 5% to 6% for 3 to 9 years. 231 Only after the proceedings had commenced in late 2006 did Mr Owers first have occasion to turn his mind to recalling the events of 2000, including any understanding he gained of his contractual rights from discussions with John Joseph, his solicitor. Mr Owers was an honest, careful, and generally reliable witness. Nonetheless, his memory of events in 2000 was affected to some degree by the lapse of time between then and when he gave evidence. 232 During the holiday he was with his family in a row boat near the bridge at The Entrance and saw the development under construction. Later they walked past the site and he went to PRD's offices where they met Mr Walker. He gave Mr Owers a copy of the brochure and a schedule with details of units still available, their asking prices and the rent guaranteed. At first, Mr Owers was interested in two apartments, a one bedroom one offered at $330,000 and a two bedroom one that he was told, initially, was offered at $380,000. (On the next day Mr Walker corrected the latter price to $395,000.) Mr Owers noticed the amount of the rents on the schedule and did some calculations on it. He worked on an assumed interest rate of 9% on the balance of the purchase prices for each of the units after an initial payment of $30,000 in cash. He calculated that he would be liable to the financier for a net sum of $80 per week for the one bedroom apartment and $100 per week for the two bedroom one. 233 During the first meeting with Mr Walker, Mr Owers enquired about the aspects of each of the two apartments in which he was interested. Mr Walker told him that each had a north east aspect with water views and a car parking space. Mr Walker said that the resort was in a boom area and that The Entrance was going well. He said that the Council had done a lot of work to improve the area. Mr Walker told Mr Owers that there was a 7% net return guaranteed after all outgoings had been met by the operator, the guaranteed return was for 10 years and there were two options for further leases, each of 10 years. Mr Walker said that the operator would have to pay for refurbishing the unit and was responsible for maintaining it to a four star rating. He said that the operator was "Pacific International" which had a good reputation and it also operated other properties. Mr Owers thought that Pacific International appeared to be a professional organisation and was impressed that it would make direct deposits into his bank account. 234 Mr Owers worked on the schedule and his calculations overnight. The brochure appealed to him and gave every indication to him that the development would be a success. It depicted The Entrance to him as a thriving environment which was going through good capital growth. The resort had conference facilities and would be the only development of its kind in The Entrance area. It appeared to him to be a very sound investment. He was impressed by the brochure's reference to the guaranteed rental. He used this to calculate the amount that he would be out of pocket if he made a long term investment. He understood that the guarantee was for a minimum 10 years, the rental was linked to the consumer price index and was re-valued to market from time to time. He also read in the brochure that the area was growing. This led Mr Owers to consider that an apartment in the resort was a solid investment because of the guarantee of a minimum return for 10 years. 235 The next day Mr and Mrs Owers met again with Mr Walker who took them for a drive to look at other possible investment properties. He showed them one that was about 30 years old. Mr Walker told them it was worth between $250,000 and $280,000 and would provide a return of between 2% and 3% if let for the holiday market. Mr Owers thought that was a low return. They went back to Mr Walker's office where he outlined his career in real estate and discussed The Entrance and the Central Coast. He said that he was the sole selling agent for the resort, that the apartments were in pretty high demand and there were not many left unsold out of the 145. Mr Waker went through reinforcing aspects of the brochure with Mr and Mrs Owers. He confirmed that there was a 7% net return with a minimum lease of 10 years with two 10 year options and it was being run by "Pacific International". Mr Walker referred also to the CPI and market value adjustments for the rent. Mr Walker told them that it was a good opportunity. 236 As a result of studying the brochure and his conversations with Mr Walker, Mr Owers saw no risk in proceeding with the investment. Mr Owers felt assured that the investment would be in a booming area and the return was guaranteed by a large professional hotel operator. Consequently, during the second meeting with Mr Walker on 28 April 2000, Mr Owers decided that he wished to make the investment. He left his wife with Mr Walker and went to his bank to withdraw $1,000, in cash, returning to pay this to Mr Walker as a deposit.

3.1.2 MR OWERS SIGNS THE CONTRACT 237 Mr Owers signed the contract in Lithgow at the office of his solicitor, Mr Joseph. The contract was exchanged in June 2000 but it had been sent to Mr Joseph by Teys McMahon in early May. Teys McMahon also sent Mr Joseph a copy of the disclosure statement on 2 May 2000. That letter said: "When exchanging the contract, please confirm that the Disclosure Statement has been received by your client." 238 There is no direct evidence of what, if anything Mr Joseph did with the statement. He did not give evidence, nor did anyone from Teys McMahon. No document is in evidence recording the giving or receipt of the confirmation sought in Teys McMahon's letter of 2 May to Mr Joseph. Mr Owers said that he did not see the statement. He said that he first saw the letter and disclosure statement in the year before he gave evidence and he was not challenged on this in cross examination. I accept Mr Owers' evidence. 239 On 5 May Mr Joseph wrote to Mr Owers advising him that he had received the contract. Mr Joseph asked Mr Owers to contact his office "… to make an appointment to sign (sic) same [contract] as soon as convenient". The letter does not refer to the disclosure statement, though it may have been sent before Teys McMahon's letter had been received by Mr Joseph. 240 Even if Mr Owers (and I) were mistaken about his not having seen the disclosure statement in 2000, all that Mr Joseph was asked to do by Teys McMahon was to give it to Mr Owers. The document was so unhelpful and difficult to read that it is unlikely that Mr Owers would have spent any time on it. For the reasons I have given I do not consider that the disclosure statement would have modified or extinguished the powerful, but misleading and deceptive representations in the brochure and other promotional material had Mr Owers seen it. 241 Mr Owers had spoken to Mr Joseph once to inform him that he was in the process of making the purchase and saw him a second time to sign the contract. He spent about 15 to 20 minutes in a short meeting with Mr Joseph when he signed the contract. Mr Joseph went through the contract details with him concerning the unit number, the location and the price. The next time he just dropped in to give Mr Joseph a cheque to conduct searches in connection with the purchase. 242 Mr Owers said that at the time he first saw Mr Joseph, he was not aware that Mustara would be the lessee and that "Pacific International" would be the guarantor. However, he said that he became aware of those matters later in 2000 when Mr Joseph explained the lease to him prior to him having to execute it. 243 While I consider that Mr Owers was giving that evidence to the best of his recollection, I find that it is inherently likely that Mr Joseph did explain to Mr Owers that Mustara would be the lessee and that Pacific International Hotels would guarantee Mustara's performance of the lease. Those matters would have been obvious to any solicitor looking at the contract for the purpose of advising his or her client on it. Mr Owers said that when Mustara's role was first raised he suggested to Mr Joseph that it was a subsidiary of "Pacific International". I find that this discussion occurred prior to his entering into the contract. Mr Owers then "… believed [Mustara] were part of the Pacific International company or acted on behalf of the Pacific International company". His understanding of that being the relationship between Pacific International Hotels and Mustara was the natural result of what the brochure expressly said namely: that the unit came with "the security of strata title and a 10 year lease to Pacific International Hotels". 244 I have rejected above [3.] Austcorp's argument that Mr Owers should have called Mr Joseph to confirm that he had not told him about the limitation in cl 20.9 of the lease, either at the time of contract or later when the lease was executed. 245 I accept Mr Owers' evidence that his understanding of the lack of risk in the investment did not change at any time before he completed the purchase and signed the lease to Mustara. I am satisfied that if Mr Owers had been told (by Mr Joseph or any one else) that "Pacific International" was only prepared to guarantee 12 months worth of rent he would not have proceeded because he would have regarded his potential exposure as unacceptable. 246 Austcorp argued that there was no basis to find this because Mr Owers only expected to get a lease from Mustara which was a subsidiary of Pacific International Hotels. I reject that argument. Mr Owers also understood that companies in a group used their assets to support one another to meet their obligations. He worked for a company in a coal mining group. Mr Owers' understanding based on his own experience was that Mustara was part of the Pacific International Hotels' group and that, in effect, each group member would support one another financially. That understanding was consistent with the terms of the brochure and, reflected in a practical way a lay person's working out of the usual position of corporate groups. He understood that "… Pacific International … was a big company that had multiple operations and they would act as a company …" He also understood that Pacific International Hotels guaranteed Mustara's performance and that, therefore, for practical purposes it was not important that Mustara was the lessee. This understanding (which I accept) was unequivocally conveyed by the brochure. It would have been broken down had he appreciated that Pacific International Hotels had limited its guarantee by cl 20.9. 247 Because I believe Mr Owers, I am satisfied that Mr Owers was not made aware of cl 20.9 or its effect by Mr Joseph or otherwise prior to his completion of the contract and entry into the lease. Mr Owers read the lease only after Mustara failed in May 2002 and then came to realise that Pacific International Hotels liability was limited by cl 20.9. 248 He did not turn his mind to what level of occupancy his apartment might achieve because the guaranteed 7% net return had no provisos. Mr Owers understood that there was a risk that the hotel operator might be unable to pay the rent. But he thought that this was very unlikely to occur because the resort would be operated by a credible operator, Pacific International Hotels, a large company with several other hotels and resorts throughout Australia. Thus, Mr Owers understood that there was a risk, though (he thought) very remote, that Pacific International Hotels might not be able to ensure that the guaranteed 7% net return would be paid for the 10 years. 249 Mr Owers did not spend time thinking about any relationship between the return he was promised and the profit being generated by the operator of the resort. This was because he understood that he would get his net return whether the operator made a profit or not. He assumed that in some months the operator would make a loss and, in others, a profit but that overall the resort would make money. Had he been made aware that the company which was to operate the resort was not part of the Pacific International Hotels' group, or was just a two dollar company incorporated in 1997, Mr Owers said that he would not have proceeded if the operator had no credibility. I infer that he would have weighed up what he knew of the operator to make an assessment of how that affected the risk of achieving the promised return and the other benefits of the investment. 250 I find that Mr Owers went ahead with the purchase of his apartment because he considered it to be a good, solid, long-term investment in real estate that had a guaranteed return and little risk. I find that he relied on representations (a)-(g) as conveyed by the brochure and Mr Walker's reinforcement of them in coming to that assessment.

3.2 SEAR TAN-BOUNKEUA 251 Sear Tan-Bounkeua and her husband Sombat Bounkeua were making a day trip to The Entrance in November 1999 with an overseas relative when they saw building activity on the site of the resort. Ms Tan-Bounkeua was a finance manager with the Commonwealth Bank at the time and had a bachelor of business degree. She was 34 years old and had just fallen pregnant with their first child. Mr Bounkeua also was 34 and worked in the finance industry. At the time of meeting Mr Walker he worked in the conveyancing section of the same bank as his wife, but he was not a qualified solicitor or conveyancer. He later worked for a finance broking business. 252 The couple approached Mr Walker who handed them the brochure and the leaflet. They had a discussion with him in which, again, he, in effect, repeated the substance of what was in the brochure. He told them that Ms Tan-Bounkeua could get taxation advantages and gave her sample depreciation calculations. 253 Ms Tan-Bounkeua said that the key matter for her was that Mr Walker explained that the investment was a guaranteed 7% net return for a 10 year lease and that the operator would be Pacific International who would guarantee the lease and offer two further 20 year options in a growth area. She understood that Pacific International was a chain of hotels but did not know whether the lessee would be a subsidiary or parent in that chain or the lessee's relationship with other companies in that group. 254 However, she understood that her actual prospect of obtaining the guaranteed rent over the period of the lease depended upon the financial strength and wellbeing of the lessee. Ms Tan-Bounkeua understood at the time she was considering the purchase of her apartment that the lessee took the risk that it would have to pay the guaranteed rent of 7% net of the purchase price, whether or not it would trade well from its operations. In that way the rent was "guaranteed". She did not understand the "guarantee" to involve some other third party guaranteeing the lessee's obligations. However, she understood that the lessee would be "Pacific International" as the brochure stated. That understanding was reinforced by the get up of the cover sheet of the contract which Ms Tan-Bounkeua received from the solicitors for the vendor. 255 After the first meeting with Mr Walker, Mr Bounkeua and Ms Tan-Bounkeua discussed going ahead and agreed that, because she was in a higher tax bracket on her salary than he, the purchase would be made in her name. She paid $1,000 as a holding deposit to PRD.

3.2.1 MR BOUNKEUA PASSES HIMSELF OFF AS A SOLICITOR 256 Ms Tan-Bounkeua and her husband said that they told Mr Walker that they would be acting for themselves and that he should send the contract to Mr Bounkeua. Both Mr Walker and Coudert Bros, the solicitors acting for the vendor, sent letters to Ms Tan-Bounkeua and her husband indicating that they understood that Mr Bounkeua was a solicitor acting for her. Ms Tan-Bounkeua and her husband asserted that, in response, they informed Mr Walker and the solicitors that Mr Bounkeua was not a solicitor. I do not accept that evidence. 257 Mr Bounkeua falsely completed and returned to Coudert Bros, as Landillo's solicitors, a certificate under s 66W of the Conveyancing Act 1919 (NSW) dated 14 December 1999. It certified that he was a solicitor/barrister currently admitted to practice in New South Wales and that he had given the certificate in accordance with that legislation, with reference to the contract for the purchase of the property. He certified having explained to the purchaser, his wife, the effect of the contract for sale, the nature of the certificate and that the effect of giving the certificate to the vendor meant that there would be no cooling off period provided for Ms Tan-Bounkeua to withdraw from the contract after exchange as provided in s 66W. 258 I am satisfied that Mr Bounkeua knew that what he signed was false at the time he signed it. I do not accept that Mr Bounkeua's evidence that before he signed the s 66W certificate he spoke to someone from the offices of Coudert Bros and disclosed that he was not a solicitor but was told by that person that nonetheless he could sign the certificate. The certificate was signed by him in order to ensure that contracts would be exchanged in circumstances where he was well aware that he was certifying falsely that he was a solicitor and had given an explanation in that capacity to his wife of the terms of the contract. 259 In addition, he wrote again to Coudert Bros as the solicitors acting for Landillo on 14 August 2000 in solicitor's language. His letter requested that Coudert Bros should telephone him to let him know when the lease had been prepared and was ready for execution "by my client". This correspondence satisfies me that Mr Bounkeua knew quite well that he was representing himself as a legal practitioner when he was not so qualified. He used the plural "we" and "us" when referring to his enclosing the transfer in this letter, writing: "We enclose the transfer for execution by the vendor and return to us for stamping in due course." 260 Both Ms Tan-Bounkeua and her husband asserted that it was possible to avoid the expense of engaging a solicitor to act for them on the purchase of the apartment in the resort because the contract had already been reviewed by solicitors acting for the many previous purchasers of other apartments. They felt that had there been some legal or other problem with the contract, solicitors would have ascertained them and the problem would have been corrected. And, in answer to the proposition put to her in cross-examination that she understood that the words in the brochure and leaflet were not sufficient to deal with all of the legal rights and obligations that were created by the contract and the lease, she said: "Why not? These pamphlet that was given to me, I assume that the company would have had it assessed for the accuracy. It needs to compliance for them to put the logo on to it to be offering me this investment deal, so why can't I rely on it? … I didn't expect the contract to be any different to these information that was given to me." 261 Then she was asked whether, accepting that she had assumed that what was in the contract was consistent with what was in the brochure and leaflet, she nonetheless understood that the words of the contract would create the legal rights that affected her. She said: "I didn't think that a company this big would produce a pamphlet that say something and then a document to get me to sign that contractually say something else." 262 Austcorp argued that this was an unreasonable attitude for her to take. It asserted that because she and her husband had taken the risk that they would act for themselves and made the false representation that solicitors were acting for them, they had only themselves to blame for the contract not delivering the same bargain that they understood from the brochure and leaflet was being offered to them. I reject that argument. 263 Austcorp itself was, by then, aware that solicitors might not notice or understand the limited nature of the guarantee which Pacific International Hotels offered of Mustara's performance under cl 20.9. That was patent from the failure, in late October 1999, of Penrhyn Parker to mention that limitation in the proposed legal explanation for purchasers. Mr Zantiotis sent that explanation to Mr Walker to give to potential purchasers. Although it assumed significance in the context of the proceedings, cl 20.9 was a minor clause contained within a vast array of documentation. 264 While it may have been negligent for a solicitor not to have explained the effect of it, the limitation in cl 20.9 was a matter which Austcorp was conscious had not been any part of its marketing presentation. The unqualified terms in which the brochure stated that the guaranteed return was offered by the operator "Pacific International Hotels" would reasonably have been understood in the sense that Ms Tan-Bounkeua said she understood it. That is, whether or not some subsidiary would be the actual lessee, Pacific International Hotels as a group would stand fully behind the actual lessee. There was no qualification in any of the marketing material of the limited nature of Pacific International Hotels' guarantee. Such a limitation, had it been properly communicated, would have undermined the security which the investment itself offered. 265 And, once Austcorp became aware that Penrhyn Parker had missed the critical limitation posed by cl 20.9 in their purported explanation, it took no steps to bring that matter to the attention of potential purchasers. Rather, Austcorp relied on its own silence and on the solicitor for the purchaser to draw the limitation to his or her client's attention when explaining the effect of the contract and draft lease. But the marketing material and Mr Walker's presentations had created an aura of confidence in the security of the investment. That material supported the view formed by Ms Tan-Bounkeua that the promoters, apparently large reputable concerns, would not say something significantly different in the contractual documents than they had represented in their marketing materials. 266 In effect, Austcorp in its defence asserted that it should not have been taken at its word in the representations it made to sell the apartments to the applicants, including Ms Tan-Bounkeua. Austcorp's argument is no sounder than the unsuccessful promoter's in Gluckstein [1900] AC at 251-252. The argument must fail. 267 A person in Ms Tan-Bounkeua's position was entitled to assume, as I find she was, that those who put forward the promotional material she received knew what they were saying in it and were telling her that an investment in an apartment in the resort was a sound one with the characteristics in the representations complained of. Of course, she would realise that the contract, when she received it, was a complex legal document. But there was nothing to alert her that the contract propounded a relationship with the significant differences between the representations complained of and her legal rights if she signed. 268 Ordinarily a solicitor would explain the effect of the contract to his or her client. This might have led to Ms Tan-Bounkeua being informed of the true position before she entered into the contract and lease, although, on the evidence before me, some solicitors did not highlight or inform their clients of the existence or effect of cl 20.9. The question remains why that true position was not in any of the promotional material. 269 The fact that a solicitor might have discovered this different position does not mean that the representations complained of were not a cause of Ms Tan-Bounkeua being misled into believing that if she signed the contract and lease she would get what had been represented to her. 270 I have approached Ms Tan-Bounkeua's and Mr Bounkeua's evidence with some caution. Both she and her husband were intelligent. I formed the impression that each sought to give answers that suited their case. Assessing their evidence has been difficult. However, I am satisfied that I should accept her evidence as to the basis upon which she proceeded to enter into the contract and lease. This is because that evidence is consistent with how she in fact acted, namely, she did not engage a solicitor, saved money by doing so, and relied on what she had been told, there being no apparent reason why she should not have done so.

3.2.2 MS TAN-BOUNKEUA DECIDES TO PROCEED 271 Ms Tan-Bounkeua said that she did not read the contract in detail. She checked the details on the front page of the standard form section of the contract, looking at whether her name, the price and the rent were correctly recorded and flicked through it to see whether there had been any manual insertions into the typed provisions. She said that she did not notice that Mustara was the lessee, either when she signed the contract or, later when she signed the lease. In the course of discussing the contract with her before she signed it, Mr Bounkeua told his wife that the lease provided a 10 year term and a net rent of 7% of the purchase price. He told her at that time that the lessee was Mustara. They assumed it to be a Pacific International company, but made no enquiry to determine the precise relationship. 272 I accept Mr Bounkeua's evidence that he did not read carefully the section of the draft lease as contained in the contract headed "Guarantee and Indemnity", being cl 20. Given his lack of legal training, desire to ensure that the contract was entered so as to secure the investment and failure to take care to make accurate statements about explanations (such as for s 66W), I am satisfied that he either did not read or, if he did, he did not understand cl 20. I formed the clear impression that both he and his wife were shrewd enough that if they knew of the existence of the limitation in cl 20.9, they would not have gone ahead with the transaction because warning bells would have rung out to them. Hence, I am satisfied that it is inherently likely that they are telling the truth when they said that they were not aware of the limitation on the guarantee in cl 20.9. 273 Mr Bounkeua told his wife that Mustara was the lessee prior to her signing the contract. I find they both understood that it was a Pacific International Hotels company and that there was no reason to think that this changed or qualified the representations complained of in the sense that Pacific International Hotels would be running the resort. I infer that they understood its relationship to Mustara as one in which it would stand behind the operator which was the source of the guaranteed rent. 274 It is likely that Mr Bounkeua thought this difference (the lessee was Mustara but it was a Pacific International Hotels' company) did not detract from the force of the representations. I do not think that Ms Tan-Bounkeua was being untruthful in saying that in December 1999 she did not notice that Mustara was the lessee. She may have forgotten or not taken notice of what her husband told her, but it is likely that whatever he said (because of his own impression of its unimportance) did not convey to her that that fact had any significance. In addition, while she did not recall receiving it, on 29 May 2000 Austcorp wrote a letter to her which stated: "Construction of Pacific International Waterfront Resort has kept pace with our target for completion by no later than August this year. Not only is the building close to finishing, just seven apartments remain unsold. In addition, Pacific International Hotels Pty Limited who is leasing your apartment and managing the Resort has finalised the design of the internal fitout and this will commence soon. As there are only seven apartments remaining … The remaining apartments are priced from $145,000 to $495,000. We would like to offer you, as an existing purchaser, a very special deal on the remaining apartments and ask that you call us to discuss this. …" (emphasis added) 275 I infer that she and Mr Bounkeua read this letter when they received it and that it reinforced their understanding that Pacific International Hotels would stand behind the operator. The letter attached Austcorp's Autumn 2000 newsletter which had an article on the Pacific International Waterfront Resort. It reported that the resort construction was on time for completion in mid 2000 and made a prominent use of the Pacific International logo. 276 I accept that later, in about August 2000, at the time that Ms Tan-Bounkeua signed the lease she had just given birth to her first child and was likely not to have paid any particular attention to the name of the lessee. Indeed, in a real sense at that time the lease was simply a formality which was required in order to finalise the contractual arrangement that there would be a tenant to "guarantee" payment of the net 7% p.a. over the 10 year term. 277 Austcorp contended that Ms Tan-Bounkeua entered into the transaction without any understanding that the lessee company itself would be a leader in resort apartment management or had received awards for hotels and properties it managed. It based this on her evidence that she understood Pacific International Hotels might have different companies running different hotels within its group. I reject Austcorp's submission that she did not know whether her lessee was to be a subsidiary company and did not care as long as "Pacific International Hotels", as an "organisation" was going to be overseeing the management of the resort. 278 In substance, the applicants' case was that Pacific International Hotels was far from having the full commitment and involvement conveyed by the representations complained of. They said that if a correct picture had been conveyed in the promotional material and representations they would not have gone ahead, and they were not disabused of their erroneous perception by anything in the contractual documents or, where relevant, the disclosure statement. The questions put to them in chief as to their reaction had they known various matters, such as Mustara being a $2 company which had no awards or other credentials to operate the resort in its own right, were directed to parts of the overall effect of the representations conveyed by the promotional material. The overall effect would have been different had the true position been painted. 279 Ms Tan-Bounkeua was not concerned if Mustara, rather than Pacific International Hotels, was her lessee. This was because the representations conveyed that, in substance, Pacific International Hotels would be fully behind Mustara and the two were indistinguishable in the practical sense that the Pacific International Waterfront Resort would operate. Thus it did matter to her that they were separate legal persons as long as they were related. In fact, the promoters knew that this mattered because they had provided for that legal result in the contractual documents. Yet, Austcorp promoted a different proposal in the promotional material, without making any reference to the effect of cl 20.9. 280 I am satisfied that Ms Tan-Bounkeua understood that, as a matter of substance, she was going to lease her apartment to Pacific International Hotels, which was to her a well-known operator. As I have found she was not concerned with the legal form of the transaction, including the interposition of Mustara, so long as Pacific International Hotels stood fully behind it. This was because the brochure unequivocally conveyed that the position was that Pacific International Hotels had the lessee's responsibilities to run the resort and ensure the rent was paid. 281 Subsequently to entering into the contract to purchase her apartment in the resort, Ms Tan-Bounkeua embarked upon the gradual acquisition of another 19 investment properties which she negatively geared. Some had guaranteed returns and others did not. I formed the view that Ms Tan-Bounkeua was a shrewd and careful person. She planned her investment activities with considerable calculation. 282 Although Ms Tan-Bounkeua appreciated that she was taking a risk not engaging a solicitor, I do not consider that the risk involved guarding against the falsity of the representations complained of contained in the promotional material. No doubt there were legal complexities inherent in any conveyancing transaction that would be lost on lay persons such as Ms Tan-Bounkeua and her husband. However, that was not the kind of risk to which she had been exposed by the substantive disconformity between the promotional material and the position in the contractual documents. It was not suggested to Ms Tan-Bounkeua, or any of the other applicants, that they should have given solicitors a copy of the promotional material to see whether it matched the offer in the contract. After all, this was a relatively straight forward conveyancing transaction involving the sale of the strata lot and the entry into a lease on standard terms for the future operation of the resort. As she observed, by the time she entered into the contract over 100 apartments had been sold and technical conveyancing details in the contract were likely to have been resolved by them. 283 Austcorp attacked the claim by Ms Tan-Bounkeau. It contended that no-one would think that advertisements, brochures or the other promotional material would contain terms or representations that could be relied on as the basis of a serious investment in real property. It argued that she had failed to take reasonable care of her own interests relying on Puxu 149 CLR at 199 per Gibbs CJ and Poulet Frais 220 ALR at 233 [107] per Branson, Nicholson and Jacobson JJ. I reject that submission. Austcorp, the author of the false descriptions of the investment, should not be able to say that its representations could not be taken at face value. It had made misleading and deceptive representations of a guaranteed 7% p.a. return relying on the perception of the investors that "Pacific International Hotels" was the lessee. Yet, Austcorp was conscious that cl 20.9 of the lease made a fundamental qualification to this assertion and that its marketing message would have been far less compelling if accurate information had been conveyed about cl 20.9. The assurance of a return would have been undermined if Austcorp had complied with s 52. Potential investors, including Ms Tan-Bounkeua, would have been less enthusiastic had the promotional material revealed that the only promoter offering any long term financial commitment to an investor, Pacific International Hotels, was not prepared to back its judgment beyond the limited extent of cl 20.9. As Mr Hung acknowledged, the consequence of cl 20.9 meant that it was not a "sure thing" that the investors would receive their promised 7% p.a. net return for 10 years. 284 While her own carelessness in not engaging a solicitor was a cause of Ms Tan-Bounkeua's loss, I am not satisfied that it was the only cause. As I have found, a solicitor might, but would not necessarily, have advised her about the existence and effect of cl 20.9. Although the representations were made in order to interest investors in purchasing apartments in the development, their message would be undone only if a solicitor in fact advised his or her client of the effect of cl 20.9. And the risk to Austcorp, if that happened, was that it might lose the benefit of the sale: Sydney Harbour Casino Properties Pty Ltd v Coluzzi[2002] NSWCA 74 at [43], [57] per Mason P (with whom Giles and Heydon JJA agreed on this point at [92] and [93]). 285 Moreover, had Ms Tan-Bounkeua been informed before completion that Mustara had ceased to be a subsidiary of Pacific International Hotels since she had entered into the contract, she would not have proceeded because that would have exposed her to risk of loss. 286 In the context of the unqualified powerful assertions in the representations, the terms of cl 20.9 were inconspicuous and part of the "fine print" of the contract in the sense referred to by Mason J in Puxu 149 CLR at 210-211. As Jacobson and Bennett JJ said in National Exchange 61 IPR at 437 [50] (applied by Keane JA in Downey [2005] QCA 199 at [83]): "A document which, when read as a whole, is factually true and accurate may still be capable of being misleading if it contains a potentially misleading primary statement which is corrected elsewhere in the document but without the reader's attention being adequately drawn to the correction." 287 I am satisfied that each of the representations was a cause of Ms Tan-Bounkeau entering into the contract and the lease. As a matter of common sense they were the, or, at least a real, inducement for investment.

3.3 LUCIANI/TALDARMAR 288 In early 2000, Mr Di Giulio was about 37 years old, as was Mr Luciani while Mrs Di Giulio was about 34. Mr Di Giulio had qualified as an accountant in 1991, was a Bachelor of Economics and a member of the National Institute of Accountants, a fellow of the Taxation Institute of Australia and a fellow of the National Tax and Accountants Association. His wife was a part-time administrative assistant and homemaker. Mr Luciani was also an accountant. He obtained his certificate in 1987 and shortly afterwards became a member of the National Institute of Accountants. He then worked for two businesses in a costing and accounting role before going into public practice in September 2000. He already owned two rental properties at The Entrance. 289 Around the New Year holiday in early 2000, Mr and Mrs Di Giulio, their children, and Mrs Di Giulio's brother, Mr Luciani and their parents were all holidaying at The Entrance. They had had family holidays there for many years. Mr Di Giulio and his brother-in-law went for a walk one morning to buy milk and noticed development work on the site of the resort. They saw scaffolding around the building, a demountable sales office, large billboards displaying an artist's impression of the development and others with company logos including those of "Pacific International", "Austcorp", "Great Pacific" and "PRD". They went into the sales office where they saw brochures and other literature lying around and a plan on the wall with dots indicating the units that had been sold and those on which there had been a deposit paid but contracts not yet exchanged. 290 Mr Di Giulio had stayed in Pacific International Hotels' branded properties at Parramatta and in Sydney and was familiar with another of its operations on the Gold Coast. He was also familiar with Great Pacific Finance, through his work and was aware that Austcorp was a developer that had done a number of developments around Australia. Mr Luciani also knew Austcorp as a major builder or developer and considered that its participation in the project gave him confidence. He knew of PRD and Pacific International. The mention in the brochure of the awards that Pacific International had earned also gave Mr Luciani confidence. 291 Mr Walker gave them the brochure and leaflet together with price lists. He outlined the project to them and, in substance, repeated the principal assertions in the brochure. Mr Di Giulio received the leaflet while he was there. Mr Walker told them that the resort would be managed by one of the premier hotel chains, "Pacific International", and because of that it would attract a lot of additional tourism, including conferences. Mr Di Giulio said that Mr Walker told them that it would be an investment that would have significant capital growth and that investors could not go wrong. Afterwards, the two men returned to the apartment where there families were staying. They read the material Mr Walker had given them. 292 The family had a discussion in the apartment, but it was principally between Mr and Mrs Di Giulio and Mr Luciani. Each of them said that they felt that the entities whose logos appeared on the brochure must have "done their homework" on the investment and, in Mr Luciani's words, that gave them a "sense of security" since it would not be a "fly-by-night operation". Mr Di Giulio said that he looked at the fact that Pacific International Hotels were going to be the manager and that there would be a 10 year lease. He thought that if it would be involved for that period of time, "then obviously the viability must be there … they must have done their own studies in order to make those decisions". Mrs Di Giulio said that she understood that Pacific International Hotels were going to manage the hotel and look after their apartment and that Austcorp and the others on the brochure would be "… behind them, knowing that these companies were big companies and having a solid investment for the future". Mrs Di Giulio said that she also obtained a sense of security from reading the brochure and seeing that Pacific International would be managing the hotel and Austcorp was participating in the development. They all liked the location, because of their long familiarity with The Entrance area, and thought that it would be a good investment with a 10 year lease and a guaranteed 7% net rental return. 293 Just after the initial discussions with Mr Walker, Mr Di Giulio worked out that the hotel operator would be able to pay the guaranteed return if it traded successfully. From that he understood that the 7% return involved a risk that if interest rates increased on their borrowings made to purchase the apartment, they would be exposed for the difference between the 7% return and what they had to pay to the bank. 294 Mr and Mrs Di Giulio and Mr Luciani went to see Mr Walker within the next day or so. In essence, Mr Walker confirmed the substance of the representations to them. Mrs Di Giulio said that she understood that the guaranteed rental in the brochure and leaflet meant that there was no doubt that they would receive the rental. They asked Mr Walker what happened if the apartment was not occupied and whether they would still receive the guaranteed 7% net rental over the period of 10 years. He told them that they would. So far as Mrs Di Giulio was concerned, Mr Walker's confirmation of the important points in the brochure, concerning the guaranteed return and Pacific International Hotels' management, led her to think that their investment had no risks at that time. She thought the resort would be successful. According to her: "We were told that it was going to be managed by Pacific International and we would be receiving a rental return from them and there was no risks involved and that's what made our decision to go ahead." 295 At a subsequent meeting with Mr Walker, they decided to purchase a unit for $340,000 and paid a holding deposit in the first few days of January 2000.

3.3.1 LUCIANI/TALDARMAR ENGAGE SHEPHARD & SHEPHARD AS THEIR SOLICITOR 296 Mr and Mrs Di Giulio and Mr Luciani were very cautious about going ahead with the investment. They did not have any spare cash and would be borrowing the whole of the purchase price to negatively gear their acquisition. They engaged Shephard & Shephard, solicitors, to act on the purchase. Initially, one of the partners, Chris Dunn, was advising them. However, in March 2000, Mr Dunn left the firm and Mr Fullerton took over the file and continued to advise them. 297 Coudert Bros sent Shephard & Shephard the contract for sale on 14 January 2000, but contracts were not exchanged until 17 April 2000. On 19 January 2000, Mr Di Giulio and Mr Luciani sent Mr Dunn a list of 28 questions about the proposed investment. The ninth question was: "What happens if the hotel manager goes bad/broke? (i.e. in the changeover period who covers the insurance, also the guarantee net 7% return?)" 298 Mr Dunn reviewed the contract. He wrote to Coudert Bros on 4 February 2000 making requests for alterations to the draft contract. He did that on his client's instructions. At that stage the correspondence he referred to Taldarmar as Shephard & Shephard's client but I am satisfied that they were instructed by all of Mr and Mrs Di Giulio and Mr Luciani throughout the transactions. Specifically, Mr Dunn asked that cl 39.2(c)(i) and (ii) should be deleted saying: "The property has been marketed as being suitable for a particular purpose and on the basis of a particular financial return being available." 299 He also observed in the letter: "The brochure provided to our client and the statements made by the selling agent represent that the nett [sic] return on investment is expected to be 7% per annum …" 300 On 7 February 2000 Mr Dunn wrote to Taldarmar enclosing a copy of his letter of 4 February to Coudert Bros. He indicated that he would be in contact again when he had a reply, set out an estimate of fees and then answered the 28 questions. His reply to question 9 was as follows: "If the hotel operator goes into liquidation, the obligations to continue to pay rent to the owners of units is guaranteed by Pacific International Hotels. Of course such a guarantee is as relevant as the liquidity of the guarantor." 301 Significantly, at that stage, Mr Dunn did not refer in writing to the provisions of cl 20.9. I am unable to make any finding whether he did so orally at any point. 302 On 9 February 2000 Coudert Bros responded to the request for changes in the contract, agreeing to some but refusing to agree to any change to cl 39(2)(c). 303 Mr Dunn had a conference with Mr and Mrs Di Giulio and Mr Luciani and advised on the contract which they went through together. Mr Di Giulio remembered discussing in a lengthy conference with Mr Dunn cl 39.2(c) of the draft contract and the fact that Mr Dunn thought the clause was inappropriate and should be deleted. He also recalled he had been informed that Coudert Bros had rejected a request to delete it. At that time Mr Di Giulio understood that cl 39.2(c) negated that a promise of a financial return had been made and that the clause was not correct because of the guaranteed 7% return. He had asked Mr Dunn to have the clause deleted because it was inconsistent with what they had been told. 304 When Mr Fullerton took over the file in late February or early March 2000, Mr Dunn gave him a general briefing about the matter. Mr Dunn had prepared notes, some for his own use and others for the benefit of Mr Fullerton. Mr Fullerton's practice was to review the contract and prepare his notes as he thought necessary prior to seeing clients. He arranged a meeting with Mr and Mrs Di Giulio and Mr Luciani. Mr Di Giulio left a telephone message with Mr Fullerton's secretary on 7 March 2000 saying that Mr Dunn had already been through the contract with all three of them and Mr Di Giulio could not see why Mr Fullerton needed to see them again. However, a conference occurred on 17 March 2000. 305 In the meantime, on 10 March Mr Fullerton sent a letter to Taldarmar and Mr Luciani enclosing three copies of the disclosure statement. He asked his clients to read it carefully and contact him if they had any questions. He asked for Taldarmar's seal to be placed on one copy, for that to be witnessed and for Mr Luciani to sign it, saying that the two other copies were for their records. Ultimately, on 7 April 2000 both Mr and Mrs Di Giulio witnessed the affixation of the common seal of Taldarmar and Mr Luciani signed the disclosure statement. 306 Before the conference on 17 March 2000 Mr Fullerton prepared an agenda and a detailed file note of matters about the contractual documents which he saw as important to explain to his clients. He also used an earlier note in the file made by Mr Dunn setting out his detailed observations about the contract and lease. Mr Fullerton also made his own notes on that note to assist him when he saw his clients.

3.3.2 THE CONFERENCE WITH MR FULLERTON ON 17 MARCH 2000 307 Mr Fullerton had no independent recollection of the meeting of 17 March 2000 itself, unaided by a review of his file. He said that his practice was never to get clients to sign documents that he had not reviewed himself and therefore he believed that he would have reviewed the disclosure statement. His normal practice was to take clients through his pre-prepared notes point by point. I accept Mr Fullerton's evidence of his practice concerning his use of his notes and I find that he followed it on the occasion in the conference with Mr and Mrs Di Giulio and Mr Luciani. Mr Fullerton had no note of having summarised or explained or taken his clients through the disclosure statement. He thought it was a summary of the contractual terms. I accept that Mr Fullerton did not take his clients through the disclosure statement. There was no need because he explained to them fully the terms of the contractual documents. 308 In the conference, Mr Fullerton went through the annexures to the contract and advised his clients, in accordance with the notes that he attached to his file note. One of those notes identified provisions in the lease and noted that the lease was "G'eed by Pacific Int'l Hotels Pty Limited - limited to amount of 1st year's rent". 309 Mrs Di Giulio said that Mr Fullerton had told them that the lessee's obligations were guaranteed by Pacific International Hotels Pty Limited limited to the amount of the first year's rent. Mr Luciani recalled having been told by Mr Fullerton that there was some limitation of liability to pay 12 months rent. However, he claimed to recall that this limitation was made with respect only to Mustara's obligations. Mr Luciani's evidence on this point made no commercial sense. He asserted: "Can you elaborate as to what your recollection is of the conversation you had with your solicitor about the hotel operator having some 12 months limitation? --- My understanding was that Mustara Holdings, who was the hotel manager, if they were to go broke or their limitation is to 12 months, my understanding was always that that wouldn't apply to Pacific International. How was the Mustara Holdings liability to be limited to 12 months? What did that mean? --- Well, in actually paying us the rent. Do you say that you had a conversation with a solicitor who told you that Mustara Holdings had some limitation of obligation to pay rent for only 12 months? --- This is why before I asked the question I knew of Mustara Holdings had come to my attention. That's why I asked that question before, but I was always satisfied in speaking to my solicitor, that Pacific International would be the guarantor. So if Mustara couldn't meet the repayments to me as an investor, Pacific International would guarantee the seven per cent net return." (emphasis added) 310 I tried to explore with Mr Luciani what he meant in giving that evidence as follows: "Can you just tell me how you understood that the operator was Mustara [and the] 12 months if it's a $2 company? --- Well, Mustara was the -- as far as I recall, was appointed as the hotel manager by Pacific International to manage the apartments but I was always under the understanding that Pacific International was the guarantor. What I'm asking you is what you mean -- or what you understood at the time was this 12 months limitation and how it worked with Mustara? I'm not following what you're telling me about that? --- Yes, my understanding was Pacific International would cover for Mustara. They were the guarantor. That was my understanding. I understand that, but you've told me something about Pacific [and] Mustara and a 12 month limitation and I just wanted you to tell me what you understood Mustara and the 12 month limitation was. What was this limitation? --- Well, your Honour, I don't know what that meant. I don't know. The fact was that I was comfortable when I went through this transaction that Pacific International was the guarantor. I'm not sure in regards to Mustara." (emphasis added) 311 Another instance of his unreliability occurred later in his evidence. Mr Luciani identified handwriting on a bank loan application form, initially as his own and then asserted that it was not his handwriting. Mr Luciani was not a reliable witness. I do not accept his evidence of being told by Mr Fullerton that the lessee, Mustara, was liable only for 12 months rent on the 10 year lease, while Pacific International Hotels was liable as guarantor for a larger liability than Mustara, namely the full 10 years. Mr Fullerton understood cl 20.9 and did not give any such inaccurate explanation of it. Mr Luciani's asserted recollection was commercial nonsense. But it demonstrates that he had an explanation of cl 20.9 on 17 March 2000. 312 Where Mr Luciani's evidence conflicted with contemporaneous documents or the evidence of Mr Fullerton, I prefer the evidence in the contemporaneous documents and that of Mr Fullerton. I am satisfied that before signing the contract, the disclosure statement and the lease Mr Luciani was aware that Pacific International Hotels' guarantee of Mustara was limited to a maximum of 12 months rent and that Mr Fullerton had carefully and fully explained this to him and Mr and Mrs Di Giulio. 313 Mr Fullerton was a careful and honest witness. While he did not have any independent recollection of the conference with Mr and Mrs Di Giulio and Mr Luciani, I am satisfied that he followed his usual practice of taking his clients through the notes which he made, and in particular the note concerning the explanation of cl 20.9. Mrs Di Giulio's evidence, Mr Fullerton's note and the confused evidence of Mr Luciani, that I have set out above, satisfy me that there was such an explanation.

3.3.3 DID LUCIANI/TALDARMAR RELY ON THE REPRESENTATIONS? 314 The significance of the evidence to which I have referred is that Mr and Mrs Di Giulio and Mr Luciani were concerned about what would happen if the operator failed, given that they were relying upon an income stream based on 7%p.a. net return for 10 years to finance their 100% borrowing. That was an important question for them to have asked Mr Dunn. His explanation, that if the operator went into liquidation there would be a guarantee, was equally important. Moreover, Mr Fullerton clarified that Pacific International Hotels' guarantee was limited to a maximum of 12 months rent. Thus, the worst case commercial result about which they asked, was explained by Mr Fullerton to them before they entered into the contract. They had also given their solicitors the brochure and sought to have the exclusion in cl 39 removed from the contract, only to be told that it would not be. 315 I do not accept their evidence that they would not have gone ahead had they realised that the guarantee was limited to 12 months rent. I am satisfied that they did realise the guarantee was limited in that way before they entered into the contract and the lease and signed the disclosure statement. 316 They also said that they would not have proceeded had they realised that Mustara was not a subsidiary of Pacific International Hotels. As I have found [see above 2.13] Mustara was not and there was no evidence of any publicly available information that disclosed its change of ownership and director that had occurred on 23 December 1999. Thus, Shephard & Shephard were not aware of this and could not have discovered it. Nor was this disclosed in the disclosure statement. Indeed, that document expressly stated that Mustara was a wholly owned subsidiary of Pacific International Hotels. The identity of the lessee was an important matter for Mr and Mrs Di Giulio and Mr Luciani and they assumed, reasonably, that Mustara was a subsidiary of Pacific International Hotels. While that assumption was incorrect, I am not satisfied that knowledge of Mustara's true position would have made any difference to their decision to enter into the contract and the lease. Mr Fullerton's notes record that he advised that the lease could be assigned by the lessee in certain circumstances. I infer that he informed his clients of this during the meeting of 17 March 2000. Mr Di Giulio accepted that he may have but could not recall. 317 I am not satisfied that at the time Mr and Mrs Di Giulio caused Taldarmar to execute, and Mr Luciani executed, those documents they were under any misapprehension which led to them suffering any loss or damage for the purposes of s 82 of the Act. In my assessment, they made a considered decision conscious of the risk that Mustara might fail to pay the promised return of 7%p.a. net for the full 10 years and that if it did Pacific International Hotels had given them the limited guarantee in cl 20.9. They made an assessment that the risk was worth running and they would take it. Because I cannot rely on their evidence, I do not feel satisfied that they were induced to proceed by the misrepresentations in the promotional material which I have found. 318 Although the representator did not remove the effect of the misrepresentations, I am satisfied that Mr and Mrs Di Giulio and Mr Luciani turned their mind to these questions and considered the advice from each of Mr Dunn and Mr Fullerton carefully before taking a considered but deliberate risk to proceed with the investment based on their own confidence in the outcome. This is a particularly apposite instance of the need for the exercise of caution, expressed by McLelland CJ in Eq in Watson v Foxman 49 NSWLR at 318-319, in accepting evidence of persons claiming many years later to have been misled by representations in entering into a contract.

3.3.4 ASSESSMENT OF MR AND MRS DI GIULIO'S AND MR LUCIANI'S EVIDENCE 319 Mrs Di Giulio was emphatic that she was not aware that the guarantee by Pacific International Hotels was limited to 12 months worth of rent as opposed to 10 years. She said: "Well, there's a big difference from 10 years to 12 months. This was suppose to be a solid future investment, not something that was suppose to be for 12 months and we weren't told that at the time. It wasn't said here in the brochures or the leaflet, it wasn't told by Warren Walker and, you know, our solicitors reassured us everything would be okay. When you say solicitors reassured you that everything would be OK, what are you referring to? --- That it would be a solid future investment to, you know, to carry on with that." (emphasis added) 320 She denied that she was aware of the 12 months limitation and said: "It wouldn't be logical to go into something that's 12 months when you're thinking of a future investment." 321 She said that she would not have authorised, as a director of Taldarmar, going ahead with the investment: "Not if I knew it was 12 months. Again, it just wouldn't make sense. It wouldn't have been a secure investment anymore. I mean, this was wholly on a future investment for us, not a 12 month investment. It just wouldn't have made sense to go ahead with that." 322 Mrs Di Giulio exaggerated her evidence to some degree. She admitted that Mr Walker did not say words to the effect: "There are no risks involved in this investment." She asserted that they went ahead with the investment because they had been reassured that they had nothing to worry about by their solicitors. I do not accept that evidence. She understood that the word "guarantee" was used in the promotional material in the sense that if they went ahead with the purchase, the operator would promise to pay 7% net for 10 years irrespective of how well the hotel was doing, including whether it was at any particular level of occupancy. She read the disclosure statement briefly but claimed that she relied on her solicitors to tell her that everything was all right. Mrs Di Giulio also said that before she signed the contract she was not aware that the lessee was going to be Mustara. I do not accept that evidence. It is inconsistent with Mr Fullerton's evidence which I prefer. 323 Mrs Di Giulio left it to her husband and brother to organise the technical side of the purchase including dealing with issues arising from the contract. In giving her evidence she sought to portray that she had been misled and never properly advised. I do not accept that evidence. I find that Mr Fullerton did give proper advice, but Mrs Di Giulio, her husband and brother ignored it. She did however, understand, as with any matter in ordinary life, there was an element of commercial risk in going into the proposed transaction. Her own experience has told her that even buying a house, could involve the price going up or down in the future. Mrs Di Giulio was not a reliable witness. While I do not consider her to have been deliberately untruthful, I think that she had difficulty in accepting her own role in entering into the transaction and sought to blame others, including her solicitors, for her decision to enter into the contract and lease. 324 Taldarmar and Mr Luciani borrowed 100% of the purchase price from St George Bank. Mr Di Giulio said that had he known about a 12 month limitation on Pacific International Hotels' guarantee at the time he would "definitely … not" have chosen to gone ahead with the investment. He asserted that was because he was conservative by nature and he would not have gone to the extent of borrowing 110% [sic] of the money needed to finance the purchase for a year's rent. He then asserted that if he had been told by Mr Dunn in answer to question 9 that the limitation of 12 months rent was contained in the lease "we would have definitely pulled out of the contract". He claimed not to have recalled Mr Fullerton giving him an explanation of the effect of cl 20.9. He did not deny that Mr Fullerton told him that the lessee's obligations were guaranteed by Pacific International Hotels limited to the amount of the first years rent. He said only that he did not recall this. I am satisfied that Mr Fullerton explained cl 20.9 to Mr Di Giulio at the meeting on 17 March 2000. 325 In 1998 Mr Di Giulio had commenced giving financial planning advice as part of his business. I am of opinion that his caution in asking the questions of his solicitors and taking the considerable time of three months in which to finally decide to enter into the contract arose because he appreciated there the investment carried a risk. Once he learnt of the role of Mustara and the effect of cl 20.9, he nonetheless concluded that he could afford to take that risk based on his own perception of the likely success of a hotel at The Entrance. 326 Mr Di Giulio's view was that the resort would be a success because it would have no trouble attracting customers and that there was every likelihood that it would be an ongoing generator of income managed by a recognised hotel operator. I accept that evidence, but I also infer that he realised that the operator needed to be successful in order to be able to continue to meet the future rent obligations. Mr Di Giulio hoped that there would be a significant capital gain from the investment when he entered into it. 327 Mr Di Giulio said he undertook no investigations to find out who the proposed lessee was. I do not accept that evidence. By the time he received Mr Dunn's response in early February 2000 Mr Di Giulio knew that the lessee would be Mustara and that there was a guarantee by Pacific International Hotels. He said that if he had understood at the time of entering the contract and the lease that the proposed lessee was a subsidiary within the Pacific International Hotels group, he would have had no concern at all about that situation. I find that he had that understanding about Mustara and that he had no concern that it was the lessee. 328 Mr Di Giulio fully appreciated that there was a risk that the hotel operator would "go broke" because he asked that that as question 9 of Mr Dunn. I do not accept his evidence that he did not understand that the rental guarantee to which the question referred was different to cl 20.9. The question clearly separated the concept of the manager going "bad/broke", there being a change of manager and, hence, the reference to "the change over period" and "… also the guarantee net 7% return". If he had understood the return to be a sure thing for 10 years, that question simply could not have arisen in his mind. 329 I do not accept Mr Di Giulio's evidence that the disclosure statement was given to them "at the eleventh hour". In fact, Mr Fullerton sent it to Taldarmar and Mr Luciani about one month before it was signed. They had all the time they needed to understand it, including the opportunity to discuss it in conference with Mr Fullerton on 17 March 2000. Mr Di Giulio said that he did not read the disclosure statement, only briefly looking at the first few pages. 330 Mr Di Giulio's assertion that the disclosure document was sent so late that he did not have a proper opportunity to consider it, is a further reason why I am cautious about the quality of his evidence over all. I did not regard Mr Di Giulio as a reliable witness. In addition, where his evidence conflicted with that of Mr Fullerton or the contemporaneous documents, I prefer the other evidence. 331 Mr Luciani said that he was not aware of the 12 month limitation in Pacific International Hotels' liability until May 2002. He claimed that at the time of entry into the contract his understanding was that Pacific International Hotels would guarantee the 7% net return for 10 years and that he would not have proceeded if the guarantee was limited. He claimed that after speaking to Mr Fullerton he was satisfied the guarantee would be in place and that he did not appreciate that there were any commercial risks because he had confidence the guarantee was in place. He also claimed that he did not think that Pacific International Hotels would go broke because of the size of the company. I do not accept that evidence. 332 He understood by the use of the word "guaranteed" that the operator would pay him a 7% net return irrespective of the level of occupancy by way of hiring out the apartment. Mr Luciani gave this evidence: "And you regarded it as being a sure thing because from our own experience there were high vacancy rates in The Entrance? --- I thought that The Entrance was screaming out for a place like this because of the high no vacancies that were present at The Entrance and, as I said this morning, the light industry that was moving up around The Entrance I thought it would be a winner." (emphasis added) 333 He also considered it would be a good tax effective investment for himself in the future. Mr Luciani said that he understood that the hotel manager might go broke. But he claimed that did not apply to Pacific International Hotels and it did not cross his mind that it might go broke. Mr Luciani asserted that the reason why he asked question 9 in the letter to Mr Dunn was that Mr Dunn had told him Mustara had a $2 paid up capital. He said that they had assumed that Pacific International Hotels were putting someone in place to manage the hotel, but that Pacific International Hotels would be the guarantor. I formed the view that he was being evasive about the clear answer that Mr Dunn gave that the guarantee was as relevant as the liquidity of the guarantor. Mr Luciani was seeking to eschew any possibility of admitting an awareness that there was any commercial risk, and I do not accept that he was unaware of there being risks. 334 Mr Luciani understood that Mustara was a $2 company and that Pacific International Hotels would guarantee its obligations. He asserted that the limitation of the first 12 months rent did not apply to the guarantor, Pacific International Holdings, but to Mustara. The incomprehensibility of Mr Luciani's evidence on this point demonstrated that he was not reliable witness. When I asked him how he understood Mustara and the 12 month limitation were related, he simply asserted that he did not know what it meant and that he was comfortable because Pacific International Hotels was the guarantor. I find that he was comfortable with a guarantee of Mustara by Pacific International Hotels limited in amount to the first 12 months rent when he entered the contract and the lease. He was then conscious of the substance of cl 20.9 because Mr Fullerton had told him about it. 335 In the process of receiving detailed advice from first, Mr Dunn, and secondly, Mr Fullerton, Mr and Mrs Di Giulio and Mr Luciani received a full and clear understanding of the nature of the investment and its risks. In their evidence-in-chief, each said that he or she would not have gone ahead had they been aware of the limitation of Pacific International Hotels guarantee under cl 20.9. Mr and Mrs Di Giulio also said in chief that they would not have gone ahead had they been aware of the possibility that Pacific International Hotels could cease its entire involvement with the resort but Mr Luciani did not address this in chief. However, as I have found, he was comfortable because Pacific International Hotels was the guarantor and said, "I'm not sure in regards to Mustara" That is, I find that he was not concerned with details concerning Mustara so long as the 12 month guarantee under cl 20.9 was in place. Each asserted that they saw no risk in the investment which is why they proceeded. 336 For the reasons I have given I do not accept their evidence. I think that each of Mr and Mrs Di Giulio and Mr Luciani have persuaded himself and herself that they must have believed that there was no risk in the development, since and because of the financial stress which they have suffered as a result of Mustara's demise. Also, I am not satisfied by their evidence that had they been aware that Mustara was not a subsidiary of Pacific International Hotels they would not have proceeded. However, I am comfortably satisfied that at the times they entered into the contract and the lease, as a result of their enquiries and investigations, they were aware of the effect of cl 20.9 and that the ability to obtain the return depended upon the viability of the operation of the resort. The significance of their evidence-in-chief that they would not have gone ahead had they been aware of the effect of cl 20.9 and my conclusion that they did go ahead with an accurate awareness of its existence explained to them by Mr Fullerton, has led me to conclude that I am not satisfied by their evidence that they were misled by any of the representations or conduct alleged against Austcorp into proceeding with their investment.

4. WERE THE REPRESENTATIONS MADE IN TRADE OR COMMERCE CORRECT? 337 I am satisfied that when making each of the representations complained of Austcorp was engaged in conduct in trade or commerce within the meaning of s 52 of the Act. The promotion and sale of developments in which it had an interest was a fundamental business activity of Austcorp. That conduct was quintessentially of a trading and commercial character. It included promotional activities in relation to, or for the purposes of, the supply of goods or services including land: Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 604 per Mason CJ, Deane, Dawson and Gaudron JJ; see too Braverus Maritime Inc v Port Kembla Coal Terminal Ltd (2005) 148 FCR 68 at 108 [142] per Tamberlin, Mansfield and Allsop JJ. 338 As explained above, it is necessary to consider whether Austcorp's conduct in making each representation to each of Mr Owers and Ms Tan-Bounkeua was misleading or deceptive: Butcher 218 CLR at 604-605 [36]-[37]; Campomar 202 CLR at 85 [103]. It is not necessary to consider the position of Mr and Mrs Di Giulio and Mr Luciani because I have not accepted their evidence that they relied on any of the representations.

5. WERE THE REPRESENTATIONS RELIED ON AND WERE THEY MISLEADING OR DECEPTIVE

Representations (a) and (h): each applicant would be assured of a 7% p.a. net rental return of the purchase price for 10 years 339 Austcorp argued that each applicant did not articulate in chief what he or she understood by the expression "guaranteed return". It said that each accepted in cross-examination that the source of the guarantee was the fixed net rent paid by the lessee (i.e. the investor was certain of, or "guaranteed" by entry into the lease, a net 7% p.a. return for 10 years paid by the lessee). Austcorp emphasised that the applicants all understood that the guarantee was not a third party guarantee of the lessee. It then argued that the applicants had failed to make out their case on representations (a), (h) (which were the same but conveyed by the brochure and leaflet respectively) and (b) because they all agreed that they would enter a lease with a subsidiary of Pacific International Hotels. 340 I reject this argument. It ignores the reality that each applicant was induced by the promotional material into believing that Pacific International Hotels was leasing the apartment. In their lay understanding, if Mustara was a subsidiary, that did not affect the substance that the parent was standing fully behind the subsidiary. The presence of cl 20 in the lease to some extent reinforced this. However, Austcorp created the wrong impression in the applicants' minds by using unequivocal and false statements in the promotional material which conveyed the representations complained of. Austcorp never corrected these; it even repeated that Pacific International Hotels was the lessee in correspondence with the applicants after the contract was entered into and before completion. 341 Austcorp saw value in marketing the apartments as leased by Pacific International Hotels. It certainly did not use a marketing campaign that the unknown Mustara was the lessee and operator while its parent, Pacific International Hotels, was prepared only to offer a very limited guarantee of its subsidiary. Austcorp expressed disdain that its marketing was so effective that the applicants did not undertake a detailed legal analysis to expose its marketing falsehoods, but gave their evidence, which I accept, that they had the very understanding of Pacific International Hotels being in substance, or practical reality, the operator and lessee which that marketing created. 342 The correctness of these representations depended on the nature of the "assurance" of the net rental return of 7% of the purchase price for 10 years. (Mr Owers did not receive the leaflet so only representation (a) is relevant to his position.) At the time of entering into the contracts each of the applicants understood that the way in which they would be paid the return was through their lease of their apartment to Mustara on terms that it pay the rent at the rate of 7% of the purchase price net of deductions for 10 years. The "assurance" came from this understanding and, in Mr Owers' and Ms Tan-Bounkeua's cases, the connection that Mustara was a subsidiary of Pacific International Hotels which guaranteed the performance of Mustara. In other contexts the word "guarantee" can have a range of connotations, but as Mason P observed in Coluzzi [2002] NSWCA 74 at [46] (Giles and Heydon JJA agreeing on this issue at [92]-[93]) it can certainly include a firm assurance as to a state of affairs. 343 Thus, since I have found that, when entering the contract and signing the lease, Mr Owers and Ms Tan-Bounkeua were not aware of the nature and effect of cl 20.9 of the lease, limiting the guarantee, it was false to represent to them that payment of the rent for the entire term was "assured" in the sense that they understood the representations. That is, it made no difference to either of them that Pacific International Hotels was not the lessee if Mustara were its subsidiary and, in substance, Pacific International Hotels would stand completely behind Mustara. If that were the case then, as a matter of substance, the statements in the promotional material of the "security of a lease to Pacific International Hotels" would have been true, even though the technical legal mechanism of a lease to Mustara with a guarantee by its parent was utilised. They saw themselves dealing with, and receiving assurance from, the involvement of Pacific International Hotels for the lease of their apartments and the operation of the resort. But, that was not the true position. Mustara had ceased to be a subsidiary on 23 December 1999. And, as they understood the position, if Mustara failed they could still look to Pacific International Hotels to honour the promise for the full 10 years. 344 Because cl 20.9 of the lease qualified their entitlement to look to Pacific International Hotels for payment, one means by which Mr Owers and Ms Tan-Bounkeua understood that the return would be assured, namely that Pacific International Hotels would be liable to pay it in full for the whole 10 year term, was falsified. Additionally, Austcorp's failure to correct the position in relation to Mustara not being a subsidiary of Pacific International also falsified the basis of the assurance.

Representation (b): net rental return would be achieved through the lease of apartments to Pacific International Hotels for a term of 10 years with two 10 year options 345 This representation was equally false to both Mr Owers and Ms Tan-Bounkeua because, first, there was no lease to Pacific International Hotels and, secondly, cl 20.9 limited its liability. Mustara was a $2 company and, in effect, a special purpose vehicle incorporated for the purpose of running the resort. It had no assets at the time of the making of the representations and other than what it would need to operate and manage the resort, it could not expect to acquire any. In effect, it was a shell and was in no position to promise any "guarantee" or assurance of a net return of 7% of the purchase price of apartments in the resort for 10 years with two further 10 year options regardless of the operating revenues of the resort itself.

Representation (c): the entity that would lease the apartments in the resort was a well known and/or well respected, successful, profitable, financially worthy provider of hotel management services 346 This representation was false too. Mustara, itself, had no qualifications in the conduct or operation of hotels or resorts and was wholly reliant on its connection with Pacific International Hotels. Mustara was a corporate shell and had never traded. It had no financial substance independent of Pacific International Hotels' limited support in cl 20.9 and what it might earn in the future from operating the resort. Moreover, Mustara was not a subsidiary of Pacific International when each of the applicants entered into the lease and, with the exception of Ms Tan-Bounkeua, when they entered into their contracts to purchase. Austcorp failed in its duty to correct this representation to Ms Tan-Bounkeua after it had become falsified on 23 December 1999 when Mustara was taken over by Mr Wong's group: cf: Briess [1954] AC at 349.

Representation (d): the entity that would lease the apartments in the resort was a leading manager of resort and apartment 347 As I have found Mustara was not a leading manager of resorts and apartments. And, after 23 December 1999 it was not a subsidiary of Pacific International Hotels. Therefore, the representation was false by the time each of Ms Tan-Bounkeua and Mr Owers acted on it by completing their contracts. Mr Wong's group were financers, not resort or hotel operators. And cl 20.9 significantly limited the financial responsibility of Pacific International Hotels in respect of Mustara. Thus, there was a real separation between the two so that Mustara could not be said to be the same entity as Pacific International Hotels. Had they known the true position created by cl 20.9, neither Mr Owers nor Ms Tan-Bounkeua would have regarded the two companies, in a lay sense, as the same entity. 348 As I have found, they would not have been troubled, and would have regarded Mustara and Pacific International Hotels as one entity, if there were no limitation of the latter's responsibility for Mustara's financial commitment to them as found in cl 20.9 of the lease. Of course, as a matter of law the two companies were different legal persons. Ms Tan-Bounkeua was not told of the change of Mustara's relationship to Pacific International Hotels following her entery into the contract, when the representation had been substantively accurate. In fact, at the time Mr Owers entered into his contract and at the time he and Ms Tan-Bounkeua completed, Mustara was not a subsidiary of Pacific International Hotels. Thus, this representation was also false.

Representation (e): the purchase of an apartment in the resort would be an outstanding investment with no hidden risks 349 This representation was false because cl 20.9 was a risk hidden by the brochure, leaflet and all of the promotional material given to Mr Owers and Ms Tan-Bounkeua. 350 Austcorp contended that, even so, the risk in cl 20.9 was patent both in the draft and actual versions of the lease (the former being part of the contract) and, if properly advised, they would have been informed of it. Austcorp also argued that Mr Owers should have learnt of cl 20.9 from the disclosure statement and Ms Tan-Bounkeua or her husband could have read it for themselves in the transaction documents. Since I have rejected these arguments [see above 2.11, 2.18 and 2.19], the risk in cl 20.9 was hidden from both of them.

Representations (f) and (i): those responsible for the marketing of the resort were so confident of the success that they could and were prepared to say, without qualification, that investment in the complex would lead to a guaranteed 7% p.a. return for at least 10 years 351 This representation was false. The promoters, including Austcorp, could not say, without making the qualification in cl 20.9, that the investment would lead to a guaranteed 7%p.a. return for at least 10 years. The transaction documents included cl 20.9, which reflected a caution that the representation concealed. Moreover, Mr Chappell was conscious that at the time of the marketing in 1999, Mustara as a $2 company was not in a position to give a meaningful or substantial 10 year guarantee to anybody. I accept that evidence. It accords with commonsense.

Representation (g): "Pacific International" was so confident in the development success that it was prepared to guarantee for a 10 year period a 7% p.a. net return on the investment together with annual CPI reviews and 5 year market adjustments 352 This representation was obviously false since Pacific International Hotels made no mention in the promotional material of the effect cl 20.9 and that its guarantee was limited.

6. SECTION 51A - REASONABLE GROUNDS FOR THE REPRESENTATIONS WITH RESPECT TO A FUTURE MATTER 353 The applicants alleged that the representations (a)-(e) and (h) were representations as to future matters concerning the identity of the future lessee of apartments in the resort, the future rental return that would be achieved by a purchase of those apartments and the future profitability of the purchase of any investment in the resort. They alleged, somewhat inelegantly, that those representations were taken to have been misleading by virtue of s 51A of the Act. 354 However, s 51A is a qualified and complex deeming provision: McGrath v Australian Naturalcare Products Pty Limited (2008) 165 FCR 230. What the section does is, first, provide that where a corporation makes a representation with respect to any future matter and it does not have reasonable grounds for making the representation, the representation shall be taken to be misleading: s 51A(1). 355 Secondly, s 51A(2) provides that for the purposes of s 51A(1) the corporation is deemed not to have had reasonable grounds for making the representation "… unless it adduces evidence to the contrary". If the alleged representor does adduce evidence to the effect that it had reasonable grounds for making the representation, the deeming provision does not operate: Australian Naturalcare 165 FCR at 242 [44] per Emmett J and 283 [191]- [192] per Allsop J. That throws back onto an applicant the ultimate onus of proof to make good a claim that there were no reasonable grounds for making the representation. The Court then decides in the ordinary way, on the balance of probabilities whether the representee has established that the representor did not have reasonable grounds for making the representation. And, the representor must have had reasonable grounds for a representation as to a future matter at the time he, her or it made the representation: Australian Naturalcare 165 FCR at 284 [198] per Allsop J. 356 Genuine or honest belief in a representation is not sufficient to amount to having reasonable grounds for making it: Cummings v Lewis (1993) 41 FCR 559 at 565 per Sheppard and Neaves JJ. They said in obiter dicta (Cummings 41 FCR at 566): "Evidence of reasonable grounds may be established by evidence other than that of the persons who are alleged to have made particular representations as to a future matter. Indeed, as in so many other areas, a court may find the overall probabilities to which the circumstances of a given case give rise, the background to it and the conduct of parties prior to conversations taking place as providing better guides to whether or not they had particular states of mind or whether particular factors existed which would establish evidence of something such as reasonable grounds. It was the overall circumstances of the case which enabled his Honour to say, in relation to both Mr Leckie and Mr Lewis, that each genuinely believed the encouraging assertions which his Honour found them to have made. If one changes the exercise to an inquiry, not into genuine or honest belief, but into whether there were reasonable grounds, it is again the overall circumstances of the case which will provide more reliable guidance than would oral evidence on the part of interested parties." 357 The quality of the evidence adduced by the representor under s 51A(2) must be sufficient to be capable, if accepted, of amounting to providing the representor with reasonable grounds for making the representation at the time it was made. The Court must determine whether the evidence is "evidence to the contrary" so as to throw onto the representee the onus of proving that the representor did not have reasonable grounds for making the representation: Australian Naturalcare 165 FCR at 282-283 [191]-[192] per Allsop J. In the context of a trial, the representee will not need to lead evidence in chief on the issue since he, she or it can rely on the deeming in the provision which is only displaced by the representor adducing evidence to the contrary. That evidence, if adduced, will lead to a case in reply. The Court still has to decide whether the evidence relied on as being "to the contrary" adduced by the representor is capable of amounting to reasonable grounds for making the representation. Then, if it is so capable, the Court assesses whether the representee has proved, on the whole of the evidence, that the representor did not have reasonable grounds for making it.

6.1 WERE ANY OF THE REPRESENTATIONS WITH RESPECT TO A FUTURE MATTER? 358 Austcorp argued that none of representations (a)-(e) and (h) were with respect to future matters. In Sykes 88 FCR at 514D-515A Heerey J and at 519F-520D Sundberg J (see too per Emmett J at 535B) approved what Hill J had said in Ting v Blanche (1993) 118 ALR 543 at 552-553. Hill J, as an example, suggested that a representation as to future rental will be with respect to a future matter although it may at the same time be a representation as to the maker's state of mind. The context and circumstances in which a representation is conveyed will affect its characterisation for the purposes of s 51A: Sykes 88 FCR at 521E per Sundberg J, 535B-E per Emmett J. 359 When, as here, the representation is an assurance of an income stream over a period, it has the character of a prediction or forecast. It is about a future state of affairs which can only be verified by future experiences over the term of 10 years. Such a representation has a character distinct from that of a statement about rent which is currently due and payable. The latter is a statement with respect to an existing or present state of fact. The maker of a representation with respect to a future matter cannot know, however sure he or she is, that it will come true. There can also be a qualitative distinction between stating: the weather will be fine tomorrow or that the sun will rise at a particular time and stating "I believe that …" one or other will occur. The first way of putting it may be understood as a prediction while the second may be understood as no more than a revelation of the speaker's then present state of mind. If a 5 year old child or a senior meteorologist made either statement it could be understood differently, as it might if it were made as a joke. 360 Context and circumstances are important features to an assessment of the substantive characterisation of a representation for the purposes of s 51A. The 5 year old's view, whichever way it was put (either absolutely or as a belief) would be likely to be given little credence as a prediction simply because most adults would consider that, in the context, the child was in no position to provide a prediction; rather the child would be understood as making a statement about his or her state of mind. The meteorologist could be understood, even when using the preface "I believe", as basing the statement on his or her qualifications, knowledge and experience so as to convey more than just his or her present state of mind. That is, the meteorologist could be understood to assert a conclusion or a fact with respect to a future matter. 361 Just as the ascertainment of whether a particular representation was made to a representee, or any other issue concerning the meaning of words, the task of evaluating whether s 51A(1) applies to a representation requires the Court to ascertain the meaning conveyed by the words in the context. There can be no prescriptive rule that any particular form of expression must be, or not be, a representation with respect to a future matter: cf: Lewis [1964] AC at 285 per Lord Devlin. 362 And, for the purposes of evaluating the issues arising under s 51A, in a case like the present, the understanding of each applicant is crucial. First, the representation objectively must be capable of being characterised as made with respect to a future matter. Secondly, the applicant must have understood it in that way. Thirdly, if the applicant did understand the representation to be with respect to a future matter, he, she or it will need to establish that, understood, in that way, he, she or it suffered loss of damage "by" the contravening conduct under s 82. 363 Section 51A recognises that representations with respect to a future matter can be objectively misleading or deceptive if the prediction turns out in due course to be wrong. If s 52 operated in that unqualified way, because of the consequence of future error it would create liability for every representation about future matters, however responsibly the representation may have been made at the time. So, s 51A ordinarily affords a representor an important protection in making such a wrong prediction if, when making it, the representor had reasonable grounds for doing so. 364 The protection is not absolute as s 51A(3) recognises. The existence of reasonable grounds will not excuse the making of a misleading or deceptive representation as to a future matter, when, say, the maker's opinion is a part of the representation, and the maker, in fact, did not have that opinion. 365 Representations with respect to the future reliability or success of a business, as with other matters in daily life, involve a mix of accumulated experiences and prediction; the experiences being the foundation on which the predictive element is based. In substance there is no difference between saying that a person who (in the future) signs a lease is assured of the payment of the rent by the tenant over the term and saying that the tenant will pay the rent over the term. Each statement predicts or forecasts that a presently expected behaviour or series of events will occur in the future. 366 Austcorp argued that representations (a), (h), (b) and (e) were not representations with respect to future matters but rather they were made as to the structure of the investment being offered. I reject that argument. The context in which these representations were made in the promotional material and the way in which they were conveyed were powerfully suggestive of a prediction or long term future outcome. The "guaranteed" return was not only guaranteed because the lease provided for that rent - it was "guaranteed" because the representations to Mr Owers and Ms Tan-Bounkeua conveyed that it would be paid. The assurance was at both levels - it was not just a five star investment because the contractual documents established a set of enforceable promises. Mr Owers and Ms Tan-Bounkeua had that understanding because of the involvement of Pacific International Hotels for the long term of 10 years and the location and potential of the area, as reinforced in the promotional material. And, while their return did not depend on occupancy rates, the fact that this was offered by the apparently experienced and successful promoters conveyed assurance and certainty not simply for the present, but for the term of the investment: 10 years with two 10 year options. The brochure strikingly said: "From day one your return will be a guaranteed 7% p.a." 367 That was a key selling point. It worked on Mr Owers and Ms Tan-Bounkeua. They understood that from day one for 10 years they would receive that return. The promise of a guaranteed return was a prime consideration for them, as Austcorp understood it used this as its marketing strategy based on the experts assessment of each of Mr Walker (in his letter of 3 June 1999), Mr Chappell and Mr Hung. In Coluzzi [2002] NSWCA 74 at [57] Mason P observed of a similar representation, that it may be reasonable to make a qualified estimate or prediction but quite unreasonable to make "… an unqualified and firm prediction such as is conveyed by the word 'guaranteed' in the present context". That context was a guaranteed net 7% p.a. return on capital invested in a serviced apartment bought off the plan. 368 The assurance, here, was no doubt reinforced by the understanding (unrealised because of cl 20.9) that the legal structure of the lease to the entity referred to as "Pacific International Hotels" and "Pacific International" in the promotional material would reflect these representations. 369 Last, representation (e) was also predictive of the outcome of the investment. Its verification was dependent on what would transpire after the representation was made. The assessment of how the investment would turn out could only be made after the making of that representation. 370 I am satisfied on the basis of the findings I have made above when considering their individual positions, that each of Mr Owers and Ms Tan-Bounkeua understood representations (a), (h), (b) and (e) as containing a prediction. However, none of those four representations ceased to be predictive when the contracts were entered into or the leases executed. They remained, in character, forecasts of what would occur thereafter during the term of the lease or life of the investment. 371 Representations (c) and (d) were different in the sense that they referred to an entity that would become the tenant. At the time that representations (c) and (d) were made, the brochure, leaflet and promotional material were understood by the applicants to have some ambiguity; each said that he or she was not sure who the lessee would be and each accepted that it could be a subsidiary or related company of whatever was "Pacific International" or "Pacific International Hotels", the brand names used in the promotional material. 372 However, the lessee's identity was objectively certain and a matter of existing fact by the time that each applicant entered into each of the contract and the lease. And at each of those moments both representations (c) and (d) would have been understood by the applicants to speak of Mustara in the context of whatever they knew or understood of its relationship with Pacific International Hotels. So, at the time of entry into the contract and lease, each applicant knew something present and certain about that entity. At that moment, the entity (as so understood) either matched the descriptions in representations (c) and (d) or it did not. Despite the use of the conditional tense, "would", each of representations (c) and (d) referred to the then existing characteristics of the lessee (including its relationship with Pacific International Hotels as understood by the applicants by reason of the representations) at the time each applicant entered into the contract and the lease. That result follows from the use of the past tense "was" in each of those representations before the description of the presently existing laudatory features of the lessee entity. 373 It follows that I am of opinion that representations (a) (h), (b) and (e) were with respect to a future matter, while representations (c) and (d) were not. I will now consider whether Austcorp has adduced sufficient evidence to displace the deeming in s 51A(1) and to cast the onus on the applicants to establish that Austcorp did not have reasonable grounds for making representations (a) (h), (b) and (e).

6.2 DID AUSTCORP HAVE REASONABLE GROUNDS? 374 It was common ground that the promotional material did not disclose the following: · Mustara had never operated, was a $2 company with no significant assets other than its proposed interest as manager of the resort and lessee of the apartments in it and had never obtained any awards for properties or hotels it managed. · There was a real risk that purchasers of apartments in the resort would not receive the advertised rental return from the lease of their apartments if Mustara did not make a sufficient net profit from operating the resort to meet its obligations under the leases it had entered into or to meet the other outgoings, and if it did not do so then the investors would have to make the payments of the outgoings. · That risk also bore on whether Mustara would be able to maintain the apartments to a four star standard. · There was also a real risk that Pacific might transfer its shares in Mustara to a company with little or no reputation, experience or success in the management of hotels or serviced apartments. · The limitation of Pacific International Hotels' liability in cl 20.9. 375 Austcorp relied on a number of matters in support of its contention that it had adduced sufficient evidence to discharge its evidential burden under s 51A(2). It argued that the applicants had failed to prove that it did not have reasonable grounds for making the representations I have found were made as to future matters. 376 In essence the substantive issue on this aspect of the case was whether there were reasonable grounds for making the assertion that a guaranteed net 7% p.a. return would be paid over 10 years in the terms of the various representations. If there were a basis for the first 10 years, there is nothing in the evidence to suggest any contravention of s 52 with respect to one or both option periods. 377 The answer to the essential question depends upon identifying what basis Austcorp had for making the representations as to future matters. If Mustara, or any subsequent operator and lessee, were to meet the guaranteed rent for 10 years then the operating revenues and profits of the resort would have to be sufficient to ensure that the payments could be made. If there were a shortfall, then Pacific International Hotels had to have a sufficiently strong financial position to make up that shortfall for as long as was necessary during the 10 year term. (For simplicity in these reasons I have not referred specifically to the additional costs to Mustara or the lessee of maintaining the standard of the resort and the individual apartments. These were additional financial burdens that Mustara, or its assignees, and Pacific International Hotels would have to meet over the term of the lease. I have had these extra costs in mind, however, when considering the ability of Mustara and Pacific International Hotels to meet the guaranteed rent for the term.) This is another way of putting the concept in representation (e), that the purchase of an apartment in the resort would be an outstanding investment with no hidden risks. 378 Austcorp argued that Mr Chappell and Mr Hung did not take success of the resort for granted, but made enquiries to satisfy themselves that it would be successful. It relied on the evidence it adduced from Mr Chappell and Mr Hung about the previous discussions in about 1998 between them on behalf of Austcorp and both Mr Wong and Mr Corne to which I referred earlier as a basis on which it could have reasonable grounds for making the representations. I reject those assertions. The earlier discussions and whatever work Austcorp did in relation to them did not bear on the proposal for the resort or the financial position of Pacific International Hotels at the later time when the representations were made. At best this was background information. 379 Austcorp relied on the following further matters for saying there was a reasonable basis for making representations (a), (h), (b) and (e). It asserted that: (1) Pacific International Hotels was a reputable, capable and experienced manager and operator with an existing and expanding portfolio of hotels and serviced apartment complexes around Australia. And, since 1997 the Pacific International Hotels group had been the manager of the Beachcomber Pacific Resort at Toukley, located on the Central Coast not far from The Entrance. Austcorp asserted that this gave the Pacific International Hotels group "on the ground experience in the area"; (2) Pacific International Hotels had prepared projections for the expected operating performance of the resort. These included the projections examined by Mr Chappell and Mr Hung in May 1999, that I have discussed above, as well as a fax Mr Corne sent to Mr Zantiotis on 29 November 1999 that contained what Mr Corne described as Pacific International Hotels' five year forecast (being two pages of projections said to be revised on 29 November 1999) and special purpose accounts comprising a balance sheet and profit and loss account of Pacific International Hotels for the year ended 30 June 1998; (3) a third forecast that was contained in some documents tendered by Austcorp. It is a single page headed "Pacific International Resort - 5 year forecast" commencing with the year ending June 2001. 380 The accounts and 29 November 1999 projections have no real probative value. There is no evidence how those projections were arrived at or of the underlying valuations in the accounts or their basis. They assume that the resort will have 149 rooms, whereas the draft strata plan attached to the applicants' contracts had only 145 apartments shown on it. That plan had been amended just before these projections were sent to Mr Zantiotis and on 29 November 1999 Austcorp sent earlier purchasers from Landillo a letter (which I have referred to above) enclosing the same draft plans with a deed of variation replacing the earlier draft strata plan in their contracts with this new version. There was no explanation for the use in the projections of 143 rooms in May 1999 or 149 rooms in November 1999 when the strata plans provided for 140 and 145 rooms respectively. Mr Zantiotis said that he sent the documents he received from Mr Corne in November 1999 to prospective purchasers who asked about them. But senior counsel for Austcorp did not examine Mr Zantiotis in chief on what he did with these documents, apart from forwarding them to prospective purchasers and reviewing the projections. After objection from the applicants, senior counsel for Austcorp desisted in questioning Mr Zantiotis in respect of these documents saying that they were "… not going anywhere". Mr Zantiotis did not give any evidence about any conclusions he drew from his review or what he did after reviewing the documents and neither Mr Chappell nor Mr Hung gave any evidence about them. 381 Pacific International Hotels' operating profit after tax in the special purpose accounts for the year ended 30 June 1998 was about $171,000 and it had retained profits of about $285,000. Pacific International Hotels' total income for the year ended 30 June 1998 was about $1.35 million and its total expenses about $1 million dollars. According to the May 1999 projections Mustara's annual base rent was $2.45 million. Although the net assets of Pacific International Hotels were disclosed in the accounts at around $4 million, over $3.5 million comprised assets described as "intangibles" being the value of the leaseholds of "Bankstown Pacific Apartments" and "Pacific International Extension". The basis of these valuations was not explained in the accounts. It is not clear whether this was a value of goodwill or the difference between the agreed and market rents or of something else. The accounts were not audited but were prepared as a special purpose financial report for use by members of the company (note 1). 382 Austcorp argued that Mr Hung was impressed by Mr Corne, saw him as a "down to earth operator" who knew what he wanted and what he could do. It argued that Mr Hung also considered that Mr Corne's business model was a good one. Mr Hung claimed that he had seen some financial accounts for Pacific International Hotels for 1997/1998 which showed net assets of around $4 million. This is likely to have been a reference to the 1998 special purpose financial statements. Austcorp asserted that because of these matters Mr Hung was entitled to consider the projections he had seen in May 1999 to be reasonable. However, a cursory review of those financial statements would have revealed that the only substantial asset was the intangible comprising two leaseholds which Pacific International Hotels said were worth about $3.5 million. 383 The third forecast was not referred to during evidence or address, other than in a reference in the written submissions of Austcorp. There is no evidence as to how it was prepared and what, if any use, was made of the document. It appeared in Austcorp's tender bundle behind a page being a fax from Richfield to Robertson & Robertson, valuers dated 16 October 2000. I give the document no weight. 384 Austcorp argued that these projections showed that the business was viable and Mustara would be able to meet its obligations under the proposed transactions and leases. Austcorp argued that there was no reason to believe that the projections were other than the work of competent professionals in the hotel/serviced apartment business. 385 In my opinion there is no evidence that Austcorp made any use of the second and third sets of projections for the purposes of forming any view of its own as to the reasonableness of the subject matter of the representations. The first set, which may be the projections Mr Chappell and Mr Hung saw in May 1999, had a format that appeared to be repeated in the latter two, but the numbers changed. No explanation for those changes appeared in the evidence. I have found that it was unreasonable for Mr Chappell and Mr Hung, on behalf of Austcorp, to have placed any reliance on the first projections without conducting an independent analysis of them. I find that none of these matters provided reasonable grounds for Austcorp to make the representations as to future matters making assertions as to the future capability of Pacific International Hotels or Mustara to pay the promised guaranteed return for 10 years. 386 Austcorp argued that on the basis of those projections, Pacific International Hotels was prepared to commit its corporate reputation to the business of operating the resort knowing, that if it failed the damage to its business and future plans would be likely to be significant. If this argument had any weight, every applicant for finance, by giving the financier its projections, would provide the financier with reasonable grounds for concluding that the projections would be met. It should not obscure the absence of evidence that Austcorp did no substantive analysis to see whether these projections, accounts or other information were reliable. A quick review of the May 1999 projections by Mr Chappell and Mr Hung in a meeting and some awareness of Pacific International Hotels and Mr Corne was not an adequate foundation to make the representations as to future matters carrying the degree of assurance that they did. Austcorp did not make any substantive check or assessment of the capacity of Pacific International Hotels and Mustara to achieve the guaranteed return for 10 years. 387 Apart from a general awareness that Pacific International Hotels had an association with managing the Toukley property there is no evidence that Austcorp had any information about that operation itself. Mr Chappell said that he was aware that Pacific International Hotels had been operating a hotel at Toukley, about 20 or 30 minutes north of The Entrance which he "understood" was making a profit. But he and Austcorp did not examine any operating or other accounts for that business and none was tendered. They simply took at face value what Austcorp repeated in the promotional material, namely that Pacific International Hotels was reputable, capable and experienced in managing and operating hotels and serviced apartments around Australia. 388 Austcorp submitted that Pacific International Hotels' liability under cl 20.9 of the leases to pay up to one year's rent provided a reasonable basis for Austcorp's confidence that the resort would be able to meet its rental obligations under the leases entered into with the applicants. However, in 1999 Mr Hung thought that the guarantee in cl 20.9 was an important part of the transaction because it showed to him that Pacific International Hotels would give a commitment to back the $2 company, Mustara. And he thought that Pacific International Hotels' balance sheet could support a 12 month commitment which was very important to him in deciding to go ahead. This showed that Mr Hung was concerned by Mustara's lack of substance to meet long term financial commitments but regarded the limited support of its parent in cl 20.9 as important. That evidence can be juxtaposed with what Mr Hung knew was in the promotional material and the unequivocal nature of the representations. I am satisfied that cl 20.9 provided no reasonable ground for Austcorp to make the representations as to future matters. 389 Mr Chappell and Mr Hung thought that Mr Corne and his managers were competent. But as I have found Austcorp did not do any due diligence or analysis to see how Mustara or Pacific International Hotels could meet the guaranteed return over 10 years. Moreover, Austcorp knew of, but did not examine, Pacific International Hotels' business. That business was apparently committed to or contemplating other, equally unexamined, expansion plans. 390 Austcorp argued that the advice that Mr Walker gave Mr Chappell when he visited The Entrance and Mr Chappell's own impressions of the site, the work that the council had done there and the following evidence from Mr Chappell was evidence of reasonable grounds that it and he had for making the representations as to future matters. Mr Chappell said: "And I looked at the projections and the hotel projections were indicating it was going to be profitable and plus I was relying on the fact that I was dealing with a person [Mr Corne] who had had extensive experience in the industry and had well researched the whole proposition and was prepared to commit money to buy the hotel lot and provide a guarantee to the investors to top up their rent based on the 10 year lease that they were - that Mustara was entering - would enter into with all of the investors." (emphasis added) 391 That answer is replete with unsubstantiated assertions. First, Mr Chappell said he looked at the projections and they indicated a profitable hotel. Secondly, he trusted Mr Corne's experience. There was no evidence beyond attendances at a meeting that Mr Corne's work was "well researched". But tellingly, Mr Chappell asserted that Mr Corne, or (I infer) a member of the Pacific International Hotels group, had committed money to buy the manager's and or restaurant lots at the resort. 392 In fact, no member of the Pacific International Hotels group committed any money to buy the management or restaurant lots (to which Mr Chappell, in the answer above, referred as the "hotel lot"). Mr Chappell was aware that originally Mustara had agreed to lease the manager's and hotel lots from Landillo for $225,000p.a.. He was also aware of the transaction in which Richland had agreed in late December 1999 to purchase the manager's, restaurant and hotel lots for $3,680,000 and of the increase in the rent payable by Mustara to $335,000 p.a. for the lease of those lots because it was financially significant to Austcorp as a major sale. 393 Mr Chappell acknowledged that it would have been in Austcorp's financial interest for Mustara to have entered into a contract with Landillo to acquire the manager's and restaurant lots in 1999. Instead, Mustara entered into a variation to the management agreement (in January 2000) increasing the rent for those lots that it had agreed to pay Landillo from $225,000 to $335,000p.a.. Mr Chappell was aware at the time the representations were being made that Pacific International Hotels and Mustara had not purchased the manager's lot, or the restaurant lot, but, rather, would be leasing those lots, thereby increasing the ongoing recurrent liabilities to operate the resort. Thus, if Mr Corne had told Mr Chappell that his group would buy those lots and later did not, in my opinion that would have raised a concern for Austcorp to understand why Mr Corne had changed his mind. The real possibility that the Pacific International Hotels group was not later able to or, perhaps, prepared to invest in this project with its "guaranteed" returns for investors should have rung warning bells to Mr Chappell and Mr Hung. 394 I did not accept Mr Chappell's evidence that he took into account that Mr Corne (or one of the Pacific International Hotels group) had committed money to buy either manager's or restaurant lots or both at the time of Austcorp making the representations. The objective evidence gives no support to this assertion. In my assessment, given his extensive commercial experience, Mr Chappell gave that answer in order to bolster the flimsy bases he was conscious he claimed that he had for making the representations. 395 The applicants argued that the base rent of $225,000 as at May 1999 for which Mustara would be liable to Landillo in respect of the restaurant and manager's lots had not been included in the projections, thus making them inaccurate. Austcorp contended that the figure in the projections of $2,447,000 as the "base rent" included the $225,000. The base rent figure appears to accord roughly with the rent payable by Mustara of $2,262,664 for 140 apartments as at May 1999 when added to approximately $225,000. There is a discrepancy of $40,664, but the figures appear close enough. This demonstrated a further difficulty in Austcorp using those projections, because, once it became involved, a redesign occurred. There were five further apartments added to the development. That resulted in more rent being payable by Mustara and an increased rent for the manager's and restaurant lots. Of course, there was a potential increase in income receivable by Mustara but, unlike its lease liabilities to the investors, that income was dependent on the market. And in June 1999 Mr Walker had suggested increased selling prices, which would again have changed the rents due when those apartments were sold and thus required new projections. 396 Austcorp also argued that it was entitled to rely on what Mr Wong had done by way of due diligence for his group's purposes together with what Mr Corne had done in making the representations. However, there is no evidence of what Mr Wong or his companies did, let alone how that activity provided reasonable grounds for the representations as to future matters. In effect, Austcorp was trusting the judgment of each of those persons. However, there was no evidence of the reasonableness of what either Mr Wong or Mr Corne or their organisations had done, or of any investigation that Austcorp had undertaken, as to the financial viability of the project for the purposes of providing the guaranteed return. Austcorp's enquiries were perfunctory and did not provide it with reasonable grounds for making the representations of a guaranteed return for 10 years. Additionally, no projections were prepared for any period beyond the first five years. For the reasons I have given the projections and other contemporaneous matters which Austcorp claimed it had relied on were inadequate to provide any evidence of reasonable grounds it had for making representations. 397 I am not satisfied that any of these matters amount to evidence to meet Austcorp's preliminary burden of proof under s 51A(2). And I am not satisfied that they provide evidence of Austcorp having had reasonable grounds for making the representations as to future matters. 398 Moreover, Austcorp had received legal advice on two occasions before the representations were made to the applicants that they were dubious, namely: (a) in late May 1999 Tzovaras Yandell advised Austcorp that the guarantor, Pacific International Hotels, "… is not a public company of substance". That position never changed. Austrcorp did not establish any basis for ignoring that warning. The special purpose accounts for the year ended 30 June 1998 did not assist matters. Moreover, by May 1999 Austcorp was aware that Pacific International Hotels was in the course of a significant expansion of its activities which would be likely to affect its financial position as compared to that about 10 months before as reflected in the accounts; (b) on 6 December 1999 Corrs Chambers Westgarth advised Austcorp that these representations were inconsistent with cl 20.9 of the lease, as they plainly were. Austcorp ignored that advice and made the representations thereafter to each of the applicants. 399 It was unreasonable for Austcorp to ignore those common sense warnings from its independent solicitors and persist with making misleading and deceptive representations about the strength of the investments. After all, these were its solicitors informing it of the danger of asserting that there would be a guaranteed return. 400 Mr Chappell was aware in 1999 that there had been a huge growth in accommodation in the Sydney region to take advantage of the 2000 Olympic Games. And he knew that a lot of that development included conference facilities. He was aware also that by November 1999 Wyong Council had given development consent for 800 new apartments at The Entrance (including those in the resort). He was aware that these other developments were bound to generate competition for the resort. Indeed, within a few hundred metres of the site of the resort another development, the Waldorf, was planned which if constructed would be in direct competition with the resort. It had 200 rooms and faced north over the water. 401 Additionally, Mr Chappell was aware in 1999 that at Ettalong, close to The Entrance, a 10 storey 228 luxury resort apartment development, to be called the Grand Mercure Ettalong Beach Club Resort, worth $93 million was under construction. He understood that this too would be in direct competition with the resort if it were built. As Mr Chappell said, the obvious conclusion was that if the operator of the resort did not make a sufficient net profit to meet its obligations under the leases, there was a real risk that the lessor purchasers of the apartments would not receive their guaranteed return over the 10 year term. 402 Yet Austcorp did not do any study or analysis to ascertain the possible impact on the resort and the returns it might be able to guarantee in light of all the other actual and potential development at The Entrance or in the resort's likely market area. There was no evidence that Austcorp had made any effort or enquiries to ascertain or understand what, if any, impact on demand for accommodation and prices this significant development activity would have over the 10 year term of the lease. 403 These matters satisfy me that Austcorp did not have reasonable grounds for making the representations as to future matters. 404 Austcorp also argued that it was entitled to rely on Mr Ronald de Wit's evidence to establish that at the time of making the representations the projections afforded reasonable grounds. He was the expert it called in relation to hotel and resort forecasts and financial viability. However, because I am not satisfied that Austcorp has adduced any evidence that it had any reasonable grounds in 1999 or 2000 for making the representations as to future matters, Mr de Wit's evidence is not relevant to the issues under s 51A. Austcorp had no information from Mr De Wit in 1999 or 2000. What an expert witness such as Mr de Wit might identify as being reasonable grounds on which to make a representation as to a future matter cannot convert a guess made on an inadequate basis by the representor into a guess which happens to be supported by what someone else, after the event, identifies as being a reasonable ground on which the representor, had it done the work or possessed the information, might have based his, her or its representation. In any event, for the reasons given below [see 8.1], I am not satisfied by Mr de Wit's evidence that the projections were reasonable. 405 I have considered the overall circumstances of what Austcorp did and the information which it had at the time of making the representations. I am satisfied that Austcorp did not have reasonable grounds for making any of the representations as to future matters. As Sheppard and Neaves JJ indicated the inquiry is still directed to the representor's state of mind or to the existence of particular factors which would establish something as to the representor's reasonable grounds: Cummings 41 FCR at 566.

7.1 Mr Owers' attempts to sell his apartment 406 After the collapse of Mustara, Mr Owers decided to accept the recommendation of the owners corporation of the resort to lease his apartment to operators it had found including Mirvac and later the Oaks group. 407 In early October 2003 Mr Owers approached Mr Bignold of Raine & Horne at The Entrance to assist him in selling the property. Mr Bignold advised him that he was confident of achieving a sale at over $400,000 and would be working to achieve a price of around $450,000. Mr Owers signed an agency agreement shortly afterwards in which the agent's opinion as to the apartment's current estimated selling price was given as that range. However, when the property was put to auction before Christmas in 2003, it was passed at about $400,000 in with no registered bidders and no interest shown in it. 408 After the auction he left the apartment in the hands of Raine & Horne in order to see whether he could secure a sale by private treaty. Initially he had an asking price of $389,000 and then lowered it to $379,000 in 2004. He had some telephone contact with Mr Bignold over the next year or so but no interest was being shown in the apartment. Ultimately, Mr Bignold stopped telephoning him. After a period, Mr Owers rang the agency in early 2006 and was told that Mr Bignold no longer worked there, and they had no record or file concerning his property. He then signed another agency agreement with Raine & Horne in late March 2006. Mr Check, the agent, told him that his opinion of the current selling price was between $300,000 and $330,000. Mr Owers wanted more. Mr Check said that there were about 30 or 40 apartments in the resort on the market and that he could not sell them because no-one wanted anything to do with them. Mr Check recommended that he drop the price. Mr Owers dropped the asking price to either $349,000 or $339,000 and received an offer. A purchaser was interested at a price of $320,000 which, by then Mr Owers would have accepted. However, subsequently, the purchaser lost interest and informed Mr Check that their solicitor had uncovered information in the owners' corporation's minutes about defects in the building and exposure to substantial expense. The interested purchaser then decided not to go ahead. 409 Austcorp argued that because Mr Owers had purchased the apartment with a view to capital gain, as well as using it for family holidays, he displayed little urgency in seeking to sell it. It argued that during a lengthy period Mr Owers could easily have sold his apartment at prices at or above his purchase price but chose not to do so. Austcorp contended that this was because after May 2002 Mr Owers perceived that there was a significant capital gain in the value of his apartment and he saw the prospect of further capital gains. 410 In my opinion, Mr Owers continued to be affected by the erroneous perception of the market which had been, and remained, distorted by the representations until he received the advice from Mr Check that there was little prospect of any sale. This was because, initially, the market had not appreciated the true value of the apartments - a matter it came gradually to understand. Mr Owers' evidence was consistent with the picture that emerged from the agreed evidence of sales and sales attempts not resulting in a sale which I have summarised in the table below. Year Total of apartments put on the market Sales (by contract date) Failed sales (by date of agency agreement) 2001 2 2 (no evidence) 2002 9 8 1 2003 28 25 3 2004 27 10 17 2005 20 5 15 2006 13 6 7 2007 9 3 6 2008 5 2 3 Total 113 61 52

411 This shows that in 2004 a marked change occurred. More than 25 apartments were offered for sale but less than 40% of them were sold. And in 2005, only 25% of the 20 apartments offered were sold. By early 2006 sales of the apartments began occurring at prices less than over 5 years before. While about 25 apartments had been sold in 2003, most of those had cost less than $200,000 off the plan although some had been purchased for larger prices. After December 2003, no apartment originally purchased for more than $255,000 was sold until early 2008. Then, one that had been purchased for $465,000 in January 2001 was sold for $350,000 (about 75% of its original sale price). This suggests, at least, that from late 2003 it was difficult to sell the more expensive apartments, such as Mr Owers'. A number of apartments were offered for sale on more than one occasion. 412 Austcorp argued that it was unreasonable for the applicants not to have sold because the market was apparently rising when they realised that the representations had been falsified on Mustara's collapse. I reject this argument. It seeks to have things both ways, when Austcorp itself created the difficulty for the applicants. In Banco de Portugal v Waterlow & Sons Limited [1932] AC 452 at 506 Lord Macmillan tellingly observed that it was often easy, after an emergency had passed, to criticise the steps which had been taken to meet it, but that such criticism did not come well from those who themselves had created the emergency. He said: "The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken." 413 Although his Lordship spoke of the principle apposite to an action for damages for a breach of contract, I am of opinion that his remarks also apply to an action to recover loss or damage under s 82. That principle accords with the statutory purpose. It would be unreal to argue that every purchaser who had been misled, as the present three applicants claim, into buying an apartment in the resort should have put their property on the market in 2003 for sale. The market would have been flooded as it was from 2004 onwards. 414 In my opinion, Mr Owers acted reasonably in his decision to offer the property for sale when he did and the steps he took in the difficult situation in which he found himself.

7.2 Ms Tan-Bounkeua's position 415 I find that Ms Tan-Bounkeua saw it to her advantage to retain her property immediately after Mustara collapsed. She was aware of two people who had sold their apartments after May 2002. She had taken a keen interest in real estate and the market. In the year following June 2002 she claimed that she perceived that there was no market for the apartments because there was no longer a guaranteed return and they were not selling. However, over 20 apartments were sold in that period of which she was aware of two. None of the apartments sold in this period sold for less than their purchase price, and indeed most of them sold for a substantive increase. Ms Tan-Bounkeua asserted that had she tried to sell the price would have been a lot less than her purchase price. 416 I do not accept Ms Tan-Bounkeua's evidence about why she chose not to offer her apartment for sale. I think that she wanted to see how the situation developed after Mustara's collapse so as to ascertain what value she could get for her apartment. In the meantime, she was prepared to utilise the apartment as her own holiday accommodation, because it suited her family situation at the time. She was pregnant with their second child who was born in May 2003. Then she realised that the best commercial result was offered by Mirvac and accordingly she decided to have Mirvac manage her apartment. In August 2003, Ms Tan-Bounkeua and her husband informed their bank that her apartment had a value of $280,000, when they were seeking a further loan. At the same time she represented to the bank that the apartment was earning a 7% net return on her initial purchase price. In my opinion, the distortion of the market price (above the true value), which I have found, was what influenced Ms Tan-Bounkeua into her consideration that her apartment was worth more than she had paid for it and was the reason she retained it. Of course later, after the market turned, a sale would not have yielded any profit. 417 Despite my misgivings about her evidence, I do not accept Austcorp's argument that Ms Tan-Bounkeua was the author of her own loss in not making an attempt to sell. As Austcorp argued, she considered that her apartment was increasing in value. That consideration was supported by what was happening in the market. 418 I am satisfied that a cause of Ms Tan-Bounkeua's loss was her initial reliance on the misleading representations. I do not consider that it was unreasonable for her to have perceived the market to have risen after May 2002 and that the rise was continuing. Indeed, this was Austcorp's case and the objective evidence supported that perception. It was reasonable for her to retain the property with a view to seeing if she could recoup her position in due time. The risk of loss when the market ultimately attributed a true value to the apartments in the resort was hidden by the rising market. 419 In the period following May 2002 apartments were sold at a profit that had originally been purchased in the same price range as Ms Tan-Bounkeua's apartment. However, I am not satisfied that, had every apartment owner in the resort put their apartments on the market at that time, they would all have been able to sell at a profit. The likelihood is that the market would have been flooded and they would have sold at a loss or not sold at all. Nor am I satisfied that Austcorp has established that Ms Tan-Bounkeua was likely to have sold her apartment at a profit at this time. It was a possibility that she could, but as Mr Owers' evidence demonstrates, it was also possible that she may not have succeeded. 420 It is difficult to make a finding about Ms Tan-Bounkeua's thinking processes given my rejection of her stated reason for not investigating the possibility of selling her apartment in the period after Mustara's collapse. However, I am satisfied that she retained her apartment initially because she saw market prices rising. I suspect that Ms Tan-Bounkeua conflated her reasoning process when giving her evidence by asserting, as was later the case, that apartments had been put to market and were not selling. Looking at her position as a matter of commonsense, I infer that by the time she realised that the true value of her apartment was less than its previous market value, it was too late for her to sell and make a profit. She was in this position because of her initial decision to purchase. I am not satisfied that she acted unreasonably in retaining her apartment.

7.3 Luciani/Taldarmar 421 Although I have concluded that Mr and Mrs Di Giulio and Mr Luciani were not misled at the time they entered their contract and the lease, I will nonetheless make findings about their possible loss, in the event that a different view is taken on appeal. 422 Mr Di Giulio did not give any evidence on the question whether Taldarmar decided to retain or sell the apartment. However, Mrs Di Giulio, who gave evidence before him, said that they seriously thought about selling the property at the time that Mustara collapsed. She said that they were told that things would improve under Mirvac's management of the resort and they decided to retain their property. 423 Mr Luciani gave similar evidence. He thought that things would get better eventually. He claimed to have spoken to some people at the annual general meeting of the owners corporation on one occasion and to have walked down the street at The Entrance seeing that a number of apartments in the resort were being offered for sale by real estate agents. Mr Luciani thought that the value of the property had increased, despite that the collapse of Mustara in mid 2002 and that it was increasing in value thereafter. 424 In June and July 2003 Mr Luciani signed applications to St George Bank for an increase in his credit facility. He ascribed two different values to the apartment in both documents, one, for his half-share of $225,000 (i.e. $450,000 in full) and at another point in the documents he described the value as $480,000. Mr Luciani gave some unsatisfactory evidence about this discrepancy. I think it is likely that he was careless in filling out the form. Mr Luciani accepted that by June 2003 he had perceived that their property had increased in value, despite the problems with Mustara and the fact that Mirvac was not then promising a guaranteed return in respect of its management of the property. 425 In July 2004 Mr Luciani applied to St George Bank to increase his facilities. The form described his half-share in the resort as worth $230,000 (i.e. the apartment was worth $460,000). In March 2005 he made a further application to St George Bank giving an estimated value of the apartment as $400,000. Mr and Mrs Di Giulio signed this latest application as guarantors. 426 Mr Luciani's perception of the market movements reflected the objective evidence of sales prices achieved in the resort. By early 2005, Mr and Mrs Di Giulio and Mr Luciani perceived that the value of their apartment had fallen. That appears to accord with the contemporaneous sales evidence from the latter part of 2004 when most of the properties sold realised about the same as their purchase price or slightly more, though some were realising lesser prices. 427 While I have not found that Mr and Mrs Di Giulio and Mr Luciani were reliable witnesses on the issue of inducement, I accept that, like Ms Tan-Bounkeua, they perceived initially that the market was rising and were unaware that the true value of their apartment was less than that being shown in the market. The rise in the prices of apartments sold in the resort was not as great as the increase in value of other apartments sold in Wyong Shire generally. I do not draw any adverse inference from their decision to retain their property. The original price and value of their apartment was similar to Mr Owers'. There was no contemporaneous evidence of any apartments in the resort purchased off the plan in that price range being sold at all. In my view, it was not unreasonable for them to have retained their apartment. They would have had no better prospect of selling it had they chosen, than Mr Owers.

8. VALUATION OVERVIEW 428 On the whole I have found, for the reasons which follow, that I am not able to accept the actual valuations of any of the valuers. That has made it difficult to arrive at an assessment of the value of each applicant's apartment at the time of the registration of the strata plan on 1 August 2000 and on completion of their purchases which occurred shortly afterwards in 2000. The values at both dates were materially the same. 429 By early 2008, the prices of apartments in the resort had fallen to about 20% below the purchase prices agreed in the period before August 2000. The recent price level was radically different from the general trend of an increase in prices in The Entrance over that period of about 55%. I have concluded that the original purchase prices paid by the applicants in 2000 did not reflect the true value of apartments in the resort both at completion and at the time of registration of the strata plan, which was substantially less than the prices paid for them. 430 The applicants called Robert Dupont as an expert valuer. Austcorp called Mr de Wit and Robert Tew on issues related to valuation. Mr de Wit was not a valuer. His expertise was, relevantly, in the preparation of forecasts and projections for developments like the resort. Mr Tew was an expert valuer. Mr Dupont and Mr de Wit gave concurrent evidence on hotel and resort performance issues, and for a time they did so with Mr Tew. On a later day Mr Dupont and Mr Tew also gave concurrent evidence on valuation issues. All three were experienced in their fields. 431 The parties relied on their expert witnesses to establish: (1) whether or not Pacific International Hotels' projections provided to Austcorp in May and November 1999 evidenced reasonable grounds on which the representations as to future matters had been made; and (2) the value of each applicant's apartment at the time of registration of the strata plan on 1 August 2000. I have already touched on the legal and some other aspects of the first topic [see 6.2 above]

8.1 PROJECTIONS FOR THE OPERATING PERFORMANCE OF THE RESORT 432 In a joint report Mr de Wit and Mr Dupont agreed that an income split of 55% to the operator and 45% to the owner of the apartment was appropriate. They also agreed on the average tariff or room rates to use in calculating revenue for the resort. However, they disagreed about occupancy rates. The long term level of occupancy rates has a critical bearing on the income of an accommodation property such as the resort and on its overall financial viability. Both Mr de Wit and Mr Dupont agreed that calculation of occupancy rates was very subjective and complicated. This made it difficult to determine with precision what occupancy rate was appropriate. These matters were relevant to assessing, first, how the resort could be expected to perform financially and, secondly, whether the projections could be relied on by Austcorp as evidence of it having had reasonable grounds for the purposes of making representations as to future matters. Hence, the importance of this issue to the two aspects for which this evidence was led. 433 Austcorp relied on Mr de Wit's evidence that he would comfortably have concluded in mid to late 2000 that the resort would be likely to perform at higher than average occupancy levels. He opined that it should have been able to achieve occupancy rates in the region of 65%. He also relied on his work in arriving at these opinions to conclude that the occupancy rates in the November 1999 projections made by Pacific International Hotels were relatively close to his own. 434 Mr de Wit was not aware of any proposed developments as at 2000 in the area of the resort when preparing his report. He agreed that knowledge of these would be "absolutely critical" in making an assessment of occupancy rates. Thus, his opinion that the resort would achieve a stabilised occupancy rate of 65% was arrived at on the assumption that it would not have any new competition. Since he was not aware that at the time development approvals existed for another 650 apartments at The Entrance including a proposed nearby competing resort, I am not satisfied that Mr de Wit's opinions in respect of occupancy rates for the resort or as to Pacific International Hotels' projections should be given weight. He did not make any study of The Entrance area itself to prepare his report but relied on an earlier study by KPMG about the proposed Grand Mercure at Ettalong. I am not intending to criticise Mr de Wit by saying this; he simply was not aware of and, about 8 years after the event, was not able to find the development approval information of which Austcorp was aware in 1999 and 2000. Indeed, Mr Dupont did not refer to these matters in his reports either. However, that information was relevant in 1999 or 2000 to any informed or reasonably based assessment made of likely occupancy levels for the resort or for use in projections made at that time. That information was readily available in 1999 as Mr Chappell's November 1999 press release and his evidence revealed. 435 Austcorp argued that Mr Chappell had asserted that the other 650 proposed or approved apartments were simply apartment buildings, in contrast to the 145 in the resort which he said would be in a serviced apartment hotel. That answer overlooked the Waldorf development which was a potentially competing property at The Entrance in close proximity to the resort. The effect of its presence in the market, as then proposed, obviously required analysis in order to assess the reliability of the November 1999 projections. So too did the other developments because they were potential competition, unless analysis or knowledge of their nature enabled them to be put to one side. 436 Since Austcorp knew of this level of proposed or approved development, Mr de Wit's opinion is of little assistance in assessing first, whether Austcorp had reasonable grounds for the representations as to future matters and, secondly, what occupancy rates would have been appropriate to use in preparing a projection or valuation in August 2000. 437 Austcorp argued that Mr de Wit had examined the 29 November 1999 projections and opined that the expense figures arrived at by Pacific International Hotels were reasonable. Mr de Wit selected as comparable properties for the resort for the purpose of comparing expenses, a number of city and metropolitan hotels, and one at Alice Springs. When cross-examined, he accepted that none of those were resorts, not even the one at Alice Springs. He did not obtain comparable data about regional resorts. 438 I am not satisfied by Mr de Wit's evidence that Pacific International Hotels' projections of expenses for the resort were reasonable. He did not engage in any comparative analysis of the style of operation of each of his selected comparable hotels with the style of operation of the resort. He stated that he would "… need a lot more data, a lot more information" to assess their comparability. 439 The expert evidence identified that one difficulty in such comparisons is that the comparative data is not always readily available. Mr de Wit said that in assessing a forecast for a hotel that has not been built, one was looking to a future situation. It would be perhaps two years before the hotel would begin operating. Thus, the person making the assessment has to assume in a general way the style of operation of a proposed hotel and compare the promoter's forecast projections with selected benchmark data. The latter data may be publicly available but may not be of strictly comparable properties. Mr de Wit normally gave advice on forecasts at an indicative rather than detailed level. He was not a valuer. He described his approach as more optimistic and Mr Dupont's more conservative, saying: "I don't have to concern myself with whether at the end of the day the property will stack up as the developers say or not or whether the valuation will come in hard or not or high, it's a view that we take, that I take on the basis of the accumulated expertise in dealing with hoteliers, market variables, property variables, location variables and then you stand there in front of the property and you say, you know what, this thing could do this." (emphasis added) 440 I prefer the evidence of Mr Dupont to that of Mr de Wit. Mr Dupont's selection of comparable properties, his research, and his experience of the area in which the resort was located were more impressive and reliable than Mr de Wit's. For example, Mr de Wit agreed that the four comparable properties used by Mr Dupont were superior choices to the ones he (Mr de Wit) had selected with which to assess occupancy rates for the resort. Mr Dupont said that Mr de Wit's examination of comparable properties offered an overall view of the market at the time (2000). However, Mr Dupont had been more specific and had analysed the market in 2000 at The Entrance in detail, as, Mr de Wit appeared to agree. In addition, Mr de Wit made no allowance in his calculation for risk, possibly because he was not a valuer, unlike Mr Dupont. 441 Mr Dupont's opinion was that at August 2000 one would expect a stabilised occupancy rate for the resort of 50%, in line with Central Coast averages. (Such a projected rate represents a likely level of sustainable, medium to a long term performance after the first three or so years of operation in which the property builds up its goodwill and reputation.) He considered that The Entrance was not a popular tourist area and that a resort development of 145 rooms would not generate enough enthusiasm within the market to create a high stabilised occupancy rate. 442 In his reports, Mr Dupont explained that although the resort was classified as four star, about 90% of the rooms had layouts like large motel rooms rather than serviced apartments. He thought the size of the rooms was not suited to the family holiday market because they were too small and also criticised the room mix. He noted that on completion the resort would increase room supply on the Central Coast by 10% but would almost double it at The Entrance. Occupancy rates in the initial start up phase of a resort usually begin at a lower level before building up over time to a long term stabilised rate after the property has established itself in the market and attracted goodwill. 443 I am satisfied that in 1999 and 2000 it was unreasonable to postulate a stabilised occupancy rate of 65% for the resort. That rate was not supported by contemporaneous data. And, given the very significant amount of competing development which was then approved in, both, The Entrance and surrounding areas, including Ettalong, the way in which the accommodation market in that area would respond to the substantial increases in room supply was uncertain. I accept the thrust of Mr Dupont's view that stabilised occupancy rates would have been assessed, by reasonable analysts, in 1999 to 2000 at around 50%. The scale of actual and proposed development in the area suggested a degree of market optimism that would have allowed reasonable minds to choose a stablised occupancy rate up to 55%. I consider that the range of occupancy rates which it was reasonable to use in projections for the resort at this time was between 50% and 55%.

8.2 VALUATION - PRINCIPLES 444 The applicants seek damages for their capital loss assessed as the difference between the price paid for their units and their true value at the time of the transaction. This is a common measure of damage in claims under s 82 of the Act where land has been acquired in consequence of a contravention of s 52: see HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at 656 [35]. However, the rule is not inflexible or rigid and, as Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ went on to point out, the test depends on the difference between price and the real or fair or intrinsic value of the asset, as opposed to its market value: Astonland 217 CLR at 656-657 [35]-[36]. 445 In Astonland 217 CLR 658-659 [38]-[40] the Court indicated that subsequent events could be used to arrive at an assessment of the real value of an asset for the purposes of calculating compensation under s 82 of the Act in respect of a claim of overpayment at the time of acquisition. Events after the date of acquisition can be taken into account but when that is done care must be taken in distinguishing among possible causes of the decline in value of what had been bought. Thus, there is a fundamental distinction between causes inherent in the property acquired, and independent or extrinsic causes. To the extent that the latter causes have affected the value, then loss flowing from them would not have been caused by the inducement of the misleading or deceptive conduct. But if the value of the property acquired was always going to fall when some inherent cause began to operate (e.g. when a competing property, not adverted to by the negligent valuer in performing the valuation for the acquisition, commenced operation) that would be indicative of the true value. Such a loss in the value was, accordingly, inherent in the nature of what was purchased namely, that it would decline in value because of the operation of the competing property in close proximity: Astonland 217 CLR at 660 [43]. 446 Their Honours said that the rental levels and, therefore the value of, Astonland's property were doomed from the start because, so long as the construction of the neighbouring shopping centre continued to completion, the plaintiff's loss would be inevitable. In such a case the court is not limited to the assessment of risk of loss at the time of purchase "… but is entitled to take account of how those risks had evolved into certainties at dates after the date on which the comparison of price and true value was being made": Astonland 217 CLR at 661 [45]-[46]. The Court continued: "[46] Figures worked out by analysing what willing but not anxious buyers and willing but not anxious sellers would agree on, without taking account of subsequent events, may correspond with market value; but they do not necessarily correspond with true value because the market can operate under some material mistakes. In particular, some material factor may not be apparent to it. A mistake of this kind, it seems likely, was present here. Though the market value on 21 April 1997 was $400,000, and in July 1997 it was $375,000, one matter was not apparent then which was apparent later. The trial judge found that $130,000 was "the value of the land more or less since it became apparent that tenants were largely unavailable except at minimal rentals" (footnote omitted). That unavailability was an inevitable consequence of the Beach Road Shopping Centre once it was completed, but the perception of the likely effect of that completion was obscure in 1997, and only became clearer from the latter part of 1998 on." 447 Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ considered an alternative approach to the assessment of damages under s 82. That approach was to allow a plaintiff to recover the purchase price of the asset less whatever was "left in its hands": Astonland 217 CLR at 666-668 [63]-[67]. They concluded that once the plaintiff had been induced to buy the property "… at a time when it was perceived to be valuable, and was forced to retain it because it increasingly became to be perceived as being of declining utility and value": Astonland 217 CLR at 668 [67]. In such a situation the plaintiff's property was not a readily marketable asset. 448 It is important for this purpose to have regard to the statutory subject, scope and purpose of the Trade Practices Act, as Gummow, Hayne and Heydon JJ observed in Allianz Australia Insurance Limited v GSF Australian Pty Limited (2005) 221 CLR 568 at 597 [99]. Thus, s 2 of the Act states: "The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provisions of consumer protection." 449 Their Honours explained the principles of assessment of loss under s 82 as follows (Allianz 221 CLR at 597-598 [100]): "[100] In I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 119 [26]), Gleeson CJ said of the construction of s 82: 'When a court assesses an amount of loss or damage for the purpose of making an order under s 82, it is not merely engaged in the factual, or historical, exercise of explaining, and calculating the financial consequences of, a sequence of events, of which the contravention forms part. It is attributing legal responsibility; blame. This is not done in a conceptual vacuum. It is done in order to give effect to a statute with a discernible purpose; and that purpose provides a guide as to the requirements of justice and equity in the case. Those requirements are not determined by a visceral response on the part of the judge assessing damages, but by the judge's concept of principle and of the statutory purpose.' The upshot in I & L Securities was the holding stated by Gaudron, Gummow and Hayne JJ (I & L Securities (2002) 210 CLR 109 at 128 [57] (footnotes omitted)). (See also at 121-122 [33], per Gleeson CJ; at 132 [69] per McHugh J.): '[T]he question presented by s 82 of [the TP Act] is not what was the (sole) cause of the loss or damage which has allegedly been sustained. It is enough to demonstrate that contravention of a relevant provision of [that] Act was a cause of the loss or damage sustained.' (Original emphasis.)"

8.3 SALES HISTORY IN THE RESORT 450 A large number of apartments in the resort were sold after Mustara collapsed. Some were comparable with Ms Tan-Bounkeua's apartment. The pattern that emerged after Mustara's collapse until about mid 2004 was that market prices realised for apartments in the resort were generally greater than the purchase prices. In about mid 2004 they became similar. However, considerable difficulty was experienced in achieving sales of quite a number of units, including Mr Owers'. And, the number of properties which had been listed for sale, but not sold, had increased markedly since the turn of the market in mid 2004. By mid 2005 the market had turned down and almost all the properties in the resort were sold at a price less, and sometimes up to about 25% less, than their acquisition cost. 451 Mr Dupont noted that the more recent sales results were in marked contrast to movements in median sale prices of apartments in Wyong Shire during the period between 2000 and 2007. He said that, although sale prices in the resort were slightly erratic, there was a general weighting indicating an increase in value of apartments in the resort of around 40 from 2000 to the peak of the market in 2004. In comparison, median values of ordinary residential units (without a restriction on use similar to that affecting the resort) in Wyong Shire increased by 84% in the same period. He said that the reduction in values in recent years was partly a result of over supply in The Entrance unit market, as well as a general softening of the property market due to interest rate rises, affordability and macro economic conditions. 452 Mr Dupont said that generally a lower capital gain was not unusual in serviced apartments because that was off-set by the prospect of higher returns (such as 6% or 7%) as compared to a return of 3 for general residential real estate. He concluded that this consideration was especially relevant for apartments such as those in the resort because full-time occupancy was prohibited. 453 Importantly, Mr Dupont opined that the latest sales in the resort indicated a fall in value of around 20% below that of the 2000 prices which he said: "… is unprecedented in my experience. Although unit prices have fallen in recent years, median unit prices in Wyong are still 55% over 2000 values and this is consistent with my observations in the general market." 454 Mr Tew observed (without analysing the return paid to owners) that the fall in values corresponded with the period of highest occupancy under the management of the Oaks group. He said: "This occurrence reinforces my consideration that broader factors than just rental return were being applied by the market in making a determination of value/purchase price for the subject units." 455 Mr Tew said that the small number of sales in the resort since July 2006 on which Mr Dupont relied were insufficient to support his conclusion. Mr Tew observed that most of those sales were of apartments with less attractive aspect or amenity or little or no water view. He suggested that the market's expectation of capital gain had changed, leading to the present prices. I do not accept that this provides an adequate explanation for the dramatic fall in prices of apartments in the resort. Mr Tew did not explain satisfactorily how or why any "broader factors" were not inherent in the apartments. Nor did he identify in any report market evidence of other comparable property which experienced such falls. I do not give Mr Tew's evidence on this point any weight. 456 Thus, by the end of 2007 general prices of apartments in Wyong Shire were about 55% above their 2000 level, but prices in the resort were materially below their 2000 level by the end of 2007. I accept Mr Dupont's evidence that this indicates a fundamental flaw or an unsustainable assumption in the motivation of purchasers underlying the earlier sale prices.

8.4 VALUATION - THE EXPERT VALUATION METHODOLOGIES 457 Both Mr Dupont and Mr Tew began by making an assessment of market value as at, among other dates, 1 August 2000. That was the date on which the strata plan was registered. Mr Dupont also valued the apartments by taking into account subsequent events specific to the property to arrive at what he said was a value to each applicant "according to known factors". Their valuations were as follows: Owner Lot Contract Price Mr Dupont's Mr Dupont's Mr Tew's market value at 1/8/200 market value "known factors" at 1/8/2000 value at 1/8/2000 Tan-Bounkeua 101 190,000 165,000 145,000 190,000 Owers 3 330,000 230,000 245,000 330,000 Luciani 6 340,000 235,000 250,000 340,000

458 Each valuer approached his task in a substantively different way. Mr Tew adopted a comparative sales analysis based on actual sales both of properties within the resort and other properties which he assessed as being comparable. He used a rate per square metre of floor area to calculate the value of the applicants' apartments. 459 On the other hand, Mr Dupont rejected using sales of apartments in the resort as comparable sales. He had adopted a capitalisation of income analysis as his chosen method of valuation. Mr Dupont referred to the Principles and Practice of Valuation published in 2007 by the Australian Property Institute to support his approach. That text stated that a rate per square metre of floor area, which Mr Tew used, was not a reliable guide to valuing small accommodation establishments such as motels and hotels. That was because of, first, their limited uses as specialised accommodation and, secondly, accommodation properties are not bought let or sold on floor area, but on income. Important assumptions in Mr Dupont's analysis were the occupancy rate, the room rate, the capitalisation rate and the discount rate. Capitalisation and discount rates involve the application of a valuer's judgment as to the risks of achieving the return expressed in each rate. 460 In his reports, Mr Tew disagreed with Mr Dupont's use of the capitalisation of income approach. However, initially in his oral evidence he accepted that this was an appropriate method with which to check a comparable sales valuation but ultimately he accepted that Mr Dupont had used an appropriate primary method of valuation. 461 I accept Mr Dupont's evidence that a capitalisation of income approach is more appropriate to use in valuing the apartments in the resort. His reasoning to support this method is more cogent than Mr Tew's. These apartments were assets sold on the basis that they offered a guaranteed return and had planning constraints preventing their use as residences or long term accommodation for a single user. 462 Mr Dupont also used a method that he described as being one "in accordance with known factors". I explain later why I have rejected this latter approach, which assessed the value of the cash flows generated by the property together with a notional receipt after time of the sale proceeds and discounted them back to a present value at 1 August 2000 [see 8.8 below].

8.5 THE EXPERTS' JOINT REPORTS 463 Although they disagreed in their reports about the appropriateness of the other's methodology, in their first joint report Mr Dupont and Mr Tew agreed that a discount rate of between 8% and 9% would be appropriate for the apartments in the resort, assuming the existence of a 10 year lease to Mustara but without any agreed return (hence the need to work out appropriate occupancy and average room rates). Mr Dupont considered that the more appropriate range for a discount rate was 8.5% to 9% which included an allowance of about 2.5% for inflation over the general return from real estate of 6% to 7%. 464 In that joint report Mr Dupont had assessed a yield, and consequently a capitalisation rate, of 7% for Ms Tan-Bounkeua's apartment and 6.5% for Mr Owers' and Luciani/Taldarmar's while Mr Tew had assessed a yield of between 6. At the time that report was prepared there were three more applicants' apartments in issue, two owned by a couple and one by another applicant whose proceedings settled during the course of the hearing. In his earlier reports Mr Dupont had examined returns from other resorts in the region in order to arrive at his rates. Later, Mr Tew participated in preparing a second joint report with Mr Dupont. 465 Mr Dupont and Mr Tew prepared calculations in their first joint report to reflect a discount factor of 9% and a terminal value of the property (i.e. sale price at the end of the 10 year lease) based on direct comparisons, supported by a 7% capitalisation rate on stabilised income. (Stabilised income was the income which could be expected once occupancy rates and average room rates had stabilised after the first three or so years of operation. By then the property would have developed an established trading pattern and goodwill.) They also prepared an alternative table using a discount rate of 8% and a capitalisation rate of 6% on the same assumptions. They used stabilised occupancy rates of 50%, 55%, 60% and 65% for each of their two sets of calculations (together with the other variable factors agreed between Mr de Wit and Mr Dupont for tariff or room rates and the 45% return paid to the owner). Their results were: Table 1 Discount factor 9% Terminal value based on direct comparison and supported by a 6.5% for Lot 101, 7% for Lots 3 and 6% capitalisation rate STABILISED OCCUPANCY 1/08/2000 Market Valuations SUMMARY Lot 50% 55% 60% 65% Dupont Tew Tan Lot 101 $158,652 $174,529 $192,153 $206,290 $165,000 $190,000 Owers Lot 3 $207,889 $228,694 $251,787 $270,311 $230,000 $330,000 Luciani Lot 6 $207,889 $228,694 $251,787 $270,311 $235,000 $340,000

Table 2 Discount factor 8% Terminal value based on direct comparison and supported by a 6% capitalisation rate STABILISED OCCUPANCY 1/08/2000 Market Valuations SUMMARY Lot 50% 55% 60% 65% Dupont Tew Tan Lot 101 $189,433 $204,487 $229,152 $246,286 $165,000 $190,000 Owers Lot 3 $248,223 $273,105 $300,268 $322,720 $230,000 $330,000 Luciani Lot 6 $248,223 $273,105 $300,268 $322,720 $235,000 $340,000

466 Mr Dupont arrived at his valuations on the assumptions that there was no 10 year or other lease in place promising any return and the representations had no effect on the market. Austcorp argued that this would result in a valuation of a different asset from that each applicant purchased. It argued that this necessarily would produce an under valuation since the existence of a lease would have added value to the asset. While there is some superficial force in this criticism, I am not satisfied that there is likely to be a distortion of the true value of the apartments by use of this methodology. The experts were not asked to address the factual scenario that Austcorp suggested ought to have been put to them. The lease to Mustara, in fact, realised about 18 months of income based on 7% return on the purchase price. However, the lease also resulted in the applicants experiencing subsequent difficulties in earning a return. The value of the lease would be diminished because Mustara was a bad tenant in the first place. In my opinion, the evidence of what the apartments were worth without a lease in place, but with the potential for them to be leased, is relevant to assessing damages in the circumstances of this matter. 467 Mr Dupont arrived at his capitalisation rates after taking into account the following factors that he considered were significant risks. He considered that a potential purchaser would assess that: (1) a high risk existed that the apartment would not generate sufficient income to justify paying Landillo's asking prices based on his assessment of the occupancy and room rates for the resort; (2) there was further risk, if the purchase was made with no guaranteed rental or that the operator was a $2 company or not substantial; (3) additional risks existed because of: (a) the restriction as to user so that if anything went wrong with the resort or operator, the purchaser would not be able to live in the apartment and would have to let it out; (b) difficulty in selling these types of apartments, especially the smaller studio ones; (c) the reluctance of banks at that time to lend on properties under 50m2; (d) the additional 145 apartments completion of the resort would bring onto the market, thus doubling the existing supply in The Entrance. 468 Mr Dupont considered that these factors required use of a high capitalisation rate. Mr Tew disagreed based on the sales history of apartments in the resort in the period following Mustara's collapse. He argued that those sales showed that the market was prepared to pay increased prices without any guarantee of a return from Mirvac after it took over operation of the resort.

8.6 MR TEW CHANGES HIS OPINION 469 In their first joint report Mr Tew had agreed with Mr Dupont on the range of 6% to 7% for capitalisation rates in a valuation for apartments in the resort. In a second joint report and at the hearing Mr Tew changed his evidence from that to a range of 5% to 6%. Use of a capitalisation rate of 5% results in a larger value than 7%. Mr Tew said that the reason for this change was that the first joint report dealt with six properties, three of which were owned by applicants whose proceedings settled during the trial. Mr Tew asserted that he changed his range because the three remaining apartments were in a superior location, and two were larger with better aspects and views. 470 Mr Tew gave no reasoning process about what risk factors he considered or how he took them into account when he changed his view as to the appropriate capitalisation rates for the three apartments now in issue. Most of the properties that he asserted were comparable for the purpose of his new view had been referred to by Mr Dupont in his initial reports as supporting his selections of 6.5% for the two larger apartments and 7% for Ms Tan-Bounkeua's. Nor was Mr Tew able to articulate a reasoning process as to his assessment of risk in his oral evidence, even though he agreed it was an important component in arriving at a capitalisation rate. I accept Mr Dupont's evidence that he and Mr Tew arrived at the range of 6% to 7% for the resort as a development after considering capitalisation rates between 5% and 7% that varied throughout New South Wales. The experts agreed that a discount rate of between 8% and 9% was appropriate. Mr Tew preferring 8% and Mr Dupont 9%. 471 In my opinion, if differing capitalisation rates were appropriate for the different apartments (as they were in respect of Ms Tan-Bounkeua's) Mr Tew, as a professional valuer, should have used them in the first joint report. I am not satisfied that he has expressed any reasoned basis for changing his evidence. I reject his revised range of 5% to 6%. As Mr Dupont pointed out, if 5% were the appropriate capitalisation rate on which to value these apartments, that would show that their sale on a return of 7% was out of the market. The market evidence he used in his reports supported Mr Dupont's view. 472 Neither expert gave any closely reasoned explanation for selecting these percentage ranges or the individual percentages based on detailed comparison with other properties. I infer that each applied the understanding he had given in evidence of the market and conditions in which the hypothetical value was to be assessed. The selection of such rates is a matter of judgment based on experience. In order for me to choose between such projections it would be more satisfying to have greater detail. But the Courts cannot impose an unreal standard on expert evidence when to do so would rob the expert of the right to use his or her judgment based on not only knowledge, analysis and training but also on a professional "feel" for the right or better answer that has no rational or externally verifiable justification. A surgeon performing emergency surgery draws on that well of background to make a choice of what to do. There is no time to run every test and if asked why he or she so acted, the honest answer, as so often in life, will be that it seemed like the right way to proceed. The values which underlie such judgmental behaviour cannot always be exposed, not because of a lack of candour, but because the person may not be aware of them. 473 Here the two experts gave evidence about a range of rates. Neither explained in detail exactly how he arrived at his conclusion, yet each looked at a number of properties and had years of experience in forming such views. In that context is their evidence, though imperfect in the legally technical sense, worthless? The best expert in a field may not be able to give a textbook explanation of the basis for his or her opinion; does the Court discard it as worthless evidence? A reasoning process provides transparency as to how the conclusion has been revealed. Often a tribunal of fact will say that a witness was not satisfactory or reliable. That conveys a conclusion based on an overall assessment of the person as seen and heard. Yet a fully transparent reassessing process for the conclusion is not always possible because, in part, it may depend on the values, perceptions and prejudices of the fact finder, some known by that person, some not. Courts recognise this in the way discretionary judgments are treated on appeal: House v The King (1936) 55 CLR 499. 474 I have been conscious that the two experts have not given enough reasoning to enable me to dissect or analyse which end of the range is more likely to be correct. On the other hand, I am satisfied that the market for apartments in the resort between 1999 and 2004 was not operating in a fully informed manner and that the prices paid then did not reflect the true value of the asset. And I am satisfied that the more recent 2006 to early 2008 sales were reflective of the, then, current true values. (There was no suggestion that conditions in the Australian or world economies were deteriorating at this time or otherwise having an impact on these values of the disportion they reveal as against movements in value in the area around the resort.) That is, I am satisfied the influences which distorted the market earlier for apartments in the resort were no longer operative at the time of the more recent sales in evidence.

8.7 FLAWS IN MR TEW'S COMPARABLE SALES ANALYSIS 475 Mr Tew's approach had a number of flaws which were exposed by his attempt to assess comparable properties outside the resort. He chose properties as his comparable sales in established four star holiday destinations, such as Nelson Bay, when they were not reasonably comparable. His principal choices were two resort apartments in the Landmark at Nelson Bay. However, unlike The Entrance as Mr Tew was aware, in 2000 Nelson Bay had both about four or five established 4 star resorts together with a reputation for that class of accommodation and appropriate local restaurants for such a market. He said that he gave consideration to the income streams of the two Landmark apartments (104 and 117) he used as comparators for the two larger apartments of Mr Owers and Luciani/Taldarmar. But, he said that he did not refer to their income streams in his reports because he used the direct comparison method. At the hearing, he said these two apartments "… are the two most reliable" for his comparable sales analysis. Mr Tew agreed that a sample of two was not ideal to use as basis for a comparable sales analysis. 476 In their joint report, Mr de Wit and Mr Dupont agreed that the mean of differences between the latter two's average room rates was reasonable for calculating projected income. Mr Tew was party to that report but did not offer a view on this issue at that time. Mr de Wit had calculated an average room rate of $157.50 over the whole range of rooms in the resort as at 1999. Mr Dupont had calculated $140 for Ms Tan Bounkeua's studio which had no views and $185 for the other two one bedroom loft apartments which had views. However, in his second joint report with Mr Dupont, Mr Tew set out a table showing that the Landmark, which opened in 2000, had occupancy rates of between 71% and 77% between 2001 and 2003 and average room rates in that period between $86 and $99. The room rates for the Landmark were very different from those the experts projected for the resort. In my opinion they were not comparable. The difference in room rates signifies that the market in Nelson Bay was different to that projected for the resort. 477 Mr Owers' apartment was 55m2 (including a 5m2 deck) and Luciani/Taldarmar's was 62m2 (including an 8m2 deck) and each had a car space. Apartments 104 and 117 in the Landmark were 81m2 and 84m2 respectively. Each had two car spaces, were on the top floor and had north facing broad views of the water, though some distance away. These apartments had been sold off the plan without a rental guarantee. In cross-examination, Mr Tew agreed that apartments 104 and 117 were about 25% larger than the two comparators in the resort. He said that he allowed "in the order of 5% to 10%" to adjust for that 25% difference in size. He could not identify any valuation principle or literature, apart from his experience, to support that "adjustment". It did not sit easily with his valuation approach of using a rate square metre. Mr Tew did not give any explanation or reasoning process in his reports as to how he adjusted the significant differences I have mentioned to make his comparison. I reject Mr Tew's comparison as made without a rational or transparent basis. I accept Mr Dupont's evidence that the two Landmark comparators were significantly superior. 478 When first asked whether there was an established golf course very close to the Landmark, Mr Tew said: "… In the broader environment, yes. Is there an established golf course very close to the Landmark? --- Probably not even as close proximity as perhaps Salamander is to Nelson Bay but Wyong is similar in distance." 479 Later he claimed that he had forgotten that the Landmark backed onto Nelson Bay Golf Course but said he was well aware of this. He was evasive in his evidence about what, if any, weighting he gave to the Landmark's proximity to the golf course in making use of it as a comparator. He accepted that a golf course in or next to a conference and resort centre was a popular development that might attract a different market to the resort at The Entrance but he made no allowance for this difference in markets of potential purchasers. He then gave this evidence: "MR TEW: I weighted the Landmark inferior to the Pacific. Even though Nelson Bay was a far more established four star destination? --- Well, the other way of looking at that is that the Pacific has greater opportunity. But greater risk, don't you agree? --- Possibly. Well, it's not just possibly. It's definitely, isn't it? --- It's possibly. It's unknown, isn't it? --- That's exactly right. And that's what risk is, the unknown factor? --- What weighting one applies then comes down to a personal interpretation of it." 480 Mr Tew also used sales in the Landmark as comparators to value Ms Tan Bounkeua's apartment at the date of purchase in December 1999. The comparator apartments he used were between 56m2 and 63m2 and had a car space, as opposed to her apartment which was 36m2 with a deck of 5m2 and had no car space. In his own reports Mr Tew did not use Landmark apartments of 37m2 as comparators. However, at Mr Dupont's suggestion, he included these smaller apartments in a joint report. There can have been no reason for Mr Tew to have ignored apartments of a similar size and location to Ms Tan-Bounkeua's open plan apartment in the Landmark and to have selected far larger ones with a separate bedroom, kitchen and car space that could not have provided a reasonable comparator. Mr Tew said that he did not even check on these or similar comparators after Mr Dupont drew his attention to the 37m2 Landmark apartments. I find it difficult to accept that a professional valuer would not have found the strata plan with apartment sizes and lot numbers and then searched for the comparable size sales but rather used, as his prime comparators, apartments that were obviously not comparable in size, layout or location. And he used no comparators, outside of sales in the resort to value Ms Tan-Bounkeua's apartment as at 21 September 2000, the date of her lease. In my opinion those latter sales did not provide a proper basis for comparison because their purchasers were likely to have been affected by the representations. 481 Mr Tew chose significantly larger apartments in a different market with different amenities (including the neighbouring golf course) with which to make his comparisons, even though there was no apparent justification for doing so. He made no allowance in his valuation as at 2000 for actual and pending competing development at The Entrance. I am not prepared to accept his evidence as being reliable: see Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 at 121 [18] per McHugh, Gummow, Kirby, Hayne and Callinan JJ. I consider that it indicates that Mr Tew did not select appropriately the properties which he used to arrive at or support his valuations. His approach did not identify properties that reasonably assist in indicating values of a comparable kind to those in the resort. In addition, because the apartments in the resort were purchased for the, or a, purpose of earning investment returns, I am of opinion that Mr Dupont's approach is generally to be preferred.

8.8 MR DUPONT'S "KNOWN FACTORS" APPROACH 482 Austcorp criticised Mr Dupont's methodology in his valuation according to known factors. It argued that the method produced a different value depending on when the exercise was done and that he had arbitrarily selected an unspecified date in 2007 and an unreasoned sale price for the purposes of preparing this valuation. I think there is force in these criticisms. Mr Dupont made a calculation of the 2007 net present value of cash flows from each applicant's apartment. But he said that in order to assess the apartments' values based on events that became known after their purchases, it was necessary to take into account both the actual income they guaranteed from 2001 to 2007 and the apartment's "potential value at today's date". Those potential values were, in the case of Mr Owers $300,000 (as compared to a $330,000 purchase price in 2000), Luciani/Taldarmar $310,000 (as compared to a purchase price of $340,000 in 2000) and $190,000 for Ms Tan-Bounkeua (the same as her purchase price in 2000). His valuation was made in March 2008. Mr Dupont gave no basis explaining how he arrived at those potential values for three properties on this assumed basis. 483 Mr Dupont's failure to set out in full his reasoning process for selecting the potential values which he put into his value according to known factors calculation undermined the alternative methodology he adopted. I am not satisfied that this was an appropriately explained or reasoned methodology and I reject it.

8.9 VALUATION APPROACH 484 Market value is not a value arrived at by an ill informed market. The test was stated by Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259 at 276-277 [51] as: "Value is determined by forming an opinion as to what a willing purchaser will pay and a not unwilling vendor will receive for the property (Spencer v The Commonwealth (1907) 5 CLR 418). In determining that value, there must be attributed to the parties a knowledge of all matters that affect its value. Those matters will include the predicted impact of future events as well as the experience of the past and the rates of return on other investments. As Isaacs J pointed out in Spencer v The Commonwealth ((1907) 5 CLR 418 at 441): 'We must further suppose both to be perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property. (Emphasis added.)' The market for the property is, therefore, assumed to be an efficient market in which buyers and sellers have access to all currently available information that affects the property." (final emphasis added) 485 I am of opinion that prior to recent times the market was operating in an inefficient manner. Initially, the market was created and affected, in part, by the misleading and deceptive representations. These attributed to apartments in the resort an aura of being good, solid investments with the prospect of a guaranteed return for many years. After Mustara's collapse, a substantial number of sales occurred at higher price levels which have not been sustained since 2004. Even then, as Mr Dupont's analysis showed, from 2000 to 2004 the rise in sale prices for apartments in the resort was around 40% to 50%, while the rise of 84% in Wyong Shire for that period was substantially greater. Thus there was some, but not a full, appreciation that the value of an apartment in the resort was not as good as in the general area. But the subsequent drop of prices to levels generally materially below the original purchase prices off the plan, demonstrates that the market was not operating efficiently before this later time. Mr Dupont concluded that by March 2008 the value of apartments, based on the latest sales, had fallen to around 20% below their 2000 level while median apartment prices in Wyong Shire had increased 55% in the same period. I accept that evidence. 486 I am satisfied that the present level of prices reflects the true value now of the apartments. The consequence is stark. The real value of the applicants' original investments in comparison to similar property in the surrounding area has decreased markedly over the eight or more years since they entered into their contracts to purchase. That decrease and its very different direction to the significant increase in value of immediately surrounding properties were not explained by any evidence. I discount the suggestion made to Mr Owers of a concern that some costly remedial work may be needed for the resort. There was no evidence of what that was or of any effect on the value of the apartments. No expert referred to it and I am not satisfied that, whatever the basis of the concern conveyed to Mr Owers was, it affords any explanation of this marked decrease in the market price of apartments in the resort. 487 Rather, commonsense suggests that the reasons for this recent reflex of value were that the apartments cannot generate a sufficient return on the previous price levels and their value to an owner as accommodation is severely restricted by the condition of use as a serviced apartment in the development consent for the resort. It took a considerable time for the market to appreciate the true impact of the misleading conduct. The difference in price levels is so marked that I am comfortably satisfied that there is no explanation other than that the true value in 2000 of an apartment in the resort was substantially less than what was paid at that time. 488 It is counter intuitive to think that the value of the apartments in the resort increased (as they did) after they ceased to have any guaranteed return following the collapse of Mustara in circumstances where the market had a correct, or fully informed, perception of their worth. The apartments had inherent and significant limitations on their utility and value. First, they had to be used, if they were to produce income for their owners, within the scheme of the overall resort. Of course, it was an advantage of ownership that the owners could visit and stay for short periods each year, without residing, at their apartment whenever they wished. However, that was not the principal basis upon which the apartments were sold initially. Nor could this right have provided a sufficient basis to support the value reflected in the purchase price. 489 Secondly, the loss of a guaranteed net return of 7% p.a. coupled with the much lower actual returns generated by the subsequent operators Mirvac and The Oaks and the restriction on use, suggests that the apartments in the resort were not, overall, an attractive investment. Nonetheless, the market evidence up to early 2004 suggested that the resort was to some degree attractive for capital gain. However, I am of opinion that such an attraction was fundamentally misguided. Moreover, not all apartments put onto the market sold quickly and some did not sell at all. In the long-term it had become evident that ownership of the apartments had not realised a sufficient capital gain as compared to property generally in the area of The Entrance. The market had an appreciation that, irrespective of who operated the resort, there was no significant income or capital return to be achieved from an investment. Thus, up to early 2004 market values of apartments in the resort did not keep pace with the rises in the general market in Wyong for serviced apartments, although they still increased. Since then, market prices in the resort have declined in the unprecedented way identified by Mr Dupont. Again, this indicates that there was some unusual factor at work in the market for these apartments over the whole period. Mr Dupont opined that the resort was an over-development of the site. He said that had led to poor occupancy rates and, in turn, poor returns to owners, thus reducing each apartments' value in the market. I accept that evidence. 490 Mr Dupont accepted that if the apartments in the resort had been sold before 2004 the owners would have made a profit. But he said that profit would not have been as much as if they originally had purchased another property nearby. He said, and I find, that if they were to have sold their apartments in September 2008 they would have made a loss. And, Mr Owers tried to sell his apartment at auction in late 2003 with a reasonable reserve that he had placed on the property having regard to the current state of the market, but it failed to attract a single bid. On the other hand, there were over 30 sales of apartments between Mustara's collapse and the end of 2003. Each of those sales was at a price above the original purchase price. But, there was a certain amount of serendipity in which units were sold and which were not. This is evident from the agreed evidence of sales and sales attempts. 491 It is because this extraordinary reduction in prices for apartments in the resort has occurred but has not been otherwise explained on the evidence, that I reject Mr Tew's direct comparison approach between other sales of properties in the resort and the applicants' apartments as an appropriate way of valuing them at an earlier time than the present. Those earlier prices, while genuine market prices, did not reflect the true value of the apartments. I find that the market was not then operating as an efficient market: cf: Walker Corporation 233 CLR at 276-277 [51]. It may be that the purchasers who paid increased prices for apartments in the resort from the time of Mustara's demise till the current trend emerged were acting under a misconception that there was a real prospect of capital growth. But, even then those prices were generally significantly less than the increase in median prices in the immediate area. This is a sure indication that the values in the resort were affected by some factor outside ordinary market forces: i.e. by factors other than those bearing on the true value of the apartments. Significant (as opposed to normal market) capital growth was not a real possibility for these particular properties. They were in a resort with substantive restrictions on their use, either as a long-term residence for their owners or when let short term to other individuals. They had to be part of a resort complex if they were to be likely to earn any shorter term significant investment return. But the actual operations of the resort have been desultory compared to what was necessary in order to support a net return paid by a lessee over 10 years of 7% of the purchase price. 492 I am satisfied, having considered the evidence for myself, that the true value of the apartments in the resort at the time each applicant purchased is better reflected by reference to the current and more recent sale prices. Since these are materially less than the purchase prices some seven to eight years later, I am satisfied that each of the applicants acquired on completion of their purchase an apartment which was worth less than what was paid for it.

8.10 CONCLUSION ON VALUE 493 I prefer Mr Dupont's adoption of a capitalisation approach as opposed to Mr Tew's comparable sales approach. However, the methodology each valuer used and his reasoning process do not enable me to adopt either's ultimate valuation using their respective approaches. The market in 1999 and 2000 ascribed values to apartments in the resort that were distorted by the effect of the misrepresentations, including the earlier assurances by Landillo of guaranteed returns of 8%, then 7.5% (before Austcorp's involvement) and finally 7%p.a. 494 The apartment of each applicant was worth less than what was paid for it at the time of contract and of completion. There is no reason to think that the value of apartments in the resort changed in any material way between 1 August 2000 when they lost their contractual rights to rescind and the respective completion dates of each applicant's purchase. Nor is there evidence of any significant increase or change in value to that time from their respective dates of contract. 495 The latest market evidence suggested a decline from the purchase prices in 1999 and 2000 of about 20%. Making a rough allowance for inflation in the intervening eight years, the real decline in 2000 prices is likely to be in the order of 30. That, however, would not allow for any value actually derived by the applicants from the leases to Mustara and the limited guarantee. Such a range would only reflect the relative uncertainty of a return under the present arrangements with the Oaks group, and possibly also the earlier returns after Mustara's collapse. On the other hand, the value of the lease in 2000 was fragile, given the over optimistic projections on which the promoters proceeded and the limited financial worth of both Mustara and Pacific International Hotels' guarantee. There is no evidence of the worth of Parkes Street (Mustara's owner after 23 December 1999) or its capacity to support Mustara, except that its support was withdrawn in May 2002. Balancing these factors, I should allow that some value would have been attributed in an efficient market in August 2000 for the lease and limited guarantee by Pacific International Hotels. I find that the true value of the apartments in the resort on 1 August 2000 and at the time of completion was, in general, 30% less than the purchase price. 496 A reduction of 30% from the purchase price would result in values of Ms Tan-Bounkeua's apartment at $133,000, Mr Owers' at $231,000 and Luciani/Taldarmar's at $238,000. As a check of the reasonableness of these values, I note that the latter two are close to the upper end of the range agreed (at one point) by Mr Dupont and Mr Tew if a capitalisation approach were used to value the apartments. That joint report gave values based on stabilised occupancy rates of 50% to 55% and a 9% discount rate between about $159,000 to $175,000 for Ms Tan-Bounkeua's apartment (on a 7% yield or capitalisation rate) and about $208,000 to $229,000 for the other two (on a 6.5% yield). 497 Ms Tan-Bounkeua's smaller apartment was likely to attract a higher yield and thus a crude reduction of 30% is likely to produce too small a final value. The evidence of recent sales of apartments since about September 2006 showed that 7 of the 9 sales were at prices between 75% and 90% of their purchase prices paid in late 2000 or January 2001. One sold for just more (104%) than its original price. Of these, the smaller ones with good east or north facing views achieved the relatively higher prices. Mr Dupont said that Mr Owers' east facing sixth floor apartment had panoramic views over The Entrance, the beach and promenade. Mr Dupont described Ms Tan-Bounkeua's apartment as having an easterly waterfront aspect with excellent lake, beach and promenade views. 498 The recent reductions in value confirm the general trend but do not identify any precise basis on which I can arrive at a value for Ms Tan-Bounkeua's apartment. Nonetheless, I again note the joint report used a higher capitalisation rate and range of values for Ms Tan-Bounkeua's apartment significantly above the value of $133,000 which would result from a crude reduction of 30% of her purchase price. This has caused me to consider whether, despite my reservations about the actual valuations arrived at by Mr Dupont and the agreed calculations using the capitalisation and discount rates, I should apply a reduction of 30% to arrive at the true value of Ms Tan-Bounkeua's apartment in 2000. 499 I accept Mr Dupont's evidence that a higher capitalisation rate was appropriate to use in valuing Ms Tan-Bounkeua'a apartment. This results in a lower value for it than is realised by the use of a lower capitalisation rate for other apartments. This suggests that I should be cautious in reducing the value of her property by as much as the 30% I have used in valuing the others. Of course, my use of a general 30% reduction is a use of simple arithmetic based on the reasons I have given and is not any attempt to use capitalisation or discount rates. In Ms Tan-Bounkeau's case, doing the best I can, I find the true value of her apartment was 20% less than what she paid for it. 500 I find that the true value of the applicants' apartments as at 1 August 2000 and on completion, and their damages, representing the difference between the price they paid at the values I have found, are: Price Paid Value Damages Mr Owers $330,000 $231,000 $ 99,000 Ms Tan-Bounkeua $190,000 $152,000 $ 38,000 Luciani/Talmarmar $340,000 $238,000 $102,000

9. ARE THE APPLICANTS' CLAIMS STATUTE BARRED? 501 Section 82(2) provides that an action for damages under s 82(1) must be brought within 6 years after the day on which the cause of action that relates to the misleading conduct accrues. 502 Mr Owers exchanged contracts on 14 June 2000, Ms Tan-Bounkeua on 14 December 1999 and Luciani/Taldarmar on 10 April 2000. Mr Owers settled his purchase and entered the lease on 18 September 2000, Ms Tan-Bounkeua on 21 September 2000 and Luciani/Taldarmar on 22 December 2000. The applicants argued that the first time they could have suffered loss or damage was on the registration of a strata plan on 1 August 2000. The application was filed six years later, to the day. 503 Austcorp pleaded that the claims were time barred because each applicant entered into the contract more than six years before the commencement of the proceedings. Austcorp also argued that the applicants had become committed to, first, the contracts which they had entered prior to 1 August 2000 and, secondly prior to that date, to paying legal fees incurred and other costs. However, the applicants did not claim any damages in respect of transaction costs incurred before the registration of the strata plan. Austcorp argued that an applicant will be found to suffer loss immediately upon entering into a contract for the purchase of land if the true value of the land at that time is less than the contract price. Accordingly, it contended that the applicants' causes of action under s 52 of the Act accrued at that moment relying on Astonland 217 CLR at 654-655 [28] and 656 [33] per Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ. 504 In Astonland the plaintiff had relied on the advice of a valuer before entering into a contract to purchase an income producing shopping arcade. The valuer advised that the construction of a new shopping centre nearby was not likely to affect adversely the arcade's existing retail tenancy levels. But, there was unchallenged evidence that on the date of the contract, and the date of completion, the land was worth less than the price payable or paid under the contract. That was because the valuer on whose valuation the plaintiff had relied advised the plaintiff incorrectly: Astonland 217 CLR at 655 [28]-[29]. Their Honours distinguished that situation from the category of case where a contingency, which might or might not come to pass, was hidden by a representor's conduct. They said that the plaintiff could have found out at once that the market value of the arcade was less than it had agreed to pay. Thus, the risk of the catastrophic effect on rent levels of the plaintiff's land to which the defendant valuer had not alerted the plaintiff, in fact, had already had an impact on the value of the plaintiff's land at the time of the purchase. 505 Austcorp argued that on the applicants' cases, their apartments must have been worth less than the price paid for them at the dates of entry into the contracts for sale. I reject that argument. The applicants were not obliged to complete the contracts until after registration of the strata plan pursuant to cl 33 of the contract which provided the following: "33.1 Completion of this contract is conditional on the consent of the Council to, and the registration of, the Strata Plan. 33.2 If the Strata Plan is not registered by the Registration Date [defined as 31 December 2000] either party may at any time after the Registration Date until registration rescind this contract by written notice to the other." 506 I am of opinion that until the registration of the strata plan on 1 August 2000 it was not certain that loss would be suffered by any of the applicants, because before then they were not obliged and could not be compelled to complete the contract. Indeed they were entitled, if that registration had not occurred by 31 December 2000, to rescind their contracts. It was only when the strata plan was registered that the applicants were faced with the obligation to complete the contracts and deprived of the opportunity to rescind under cl 33.2. Thus, when each of the applicants became bound to complete or later completed their contracts, they would suffer loss or damage because only then would they pay or be liable to pay more for their apartment than it was worth: Scarcella v Lettice (2000) 51 NSWLR 302 at 309 [32] per Handley JA, 310 [41] per Giles JA and cf per Powell JA at 310 [37]. 507 Until 1 August 2000 the applicants had only a contingency of suffering loss depending on whether they completed their contracts. The economic interest of the applicants that would be infringed by Austcorp's misleading conduct was their obligation to complete their purchase consequent upon the registration of the strata plan and the loss of their right to rescind: Wardley 175 CLR at 532-533 per Mason CJ, Dawson Gaudron and McHugh JJ. 508 Austcorp contended that this analysis overlooked the liability for legal costs before 1 August 2000 that the applicants (other than Ms Tan-Bounkeua) incurred. I reject that argument. First, Austcorp did not plead those matters as material facts. Secondly, the applicants in any event may have incurred a contingent liability for the legal costs of receiving advice on whether or not to enter into the contract. No solicitor rendered an invoice for those fees before 1 August 2000 and, thus, the applicants had no legal obligation to pay those fees before that date. Had Mr Owers been advised not to enter into the contract or of the effect of cl 20.9, he would have followed the advice. There is no evidence whether he would have been charged by Mr Joseph for the advice. The question was not in issue. 509 Next, Austcorp argued that Luciani/Taldarmar had incurred legal fees of $1,700 as at 7 February 2000. However, Shephard & Shephard, in the course of giving their fee estimate on that date advised, them that they would charge that amount for acting on the purchase. Shephard & Shephard only invoiced that sum on 15 December 2000, being the day when the contract was completed. On 7 February 2000 Shephard & Shephard had asked only for a sum of $200 on account of anticipated immediate disbursements. I am not satisfied payment of this sum (if it were paid) would amount to loss or damage, since it was sought to enable the solicitors to investigate and advise upon whether the applicants should go ahead with the purchase by binding themselves to a contract. That is, the expense would have been incurred in investigating whether the applicants could rely on Austcorp's representations. 510 Austcorp relied on the payment by each of Mr Owers and Ms Tan-Bounkeua of the $1,000 holding deposit and their later payments of the balances of their respective deposits prior to 1 August 2000 as damage suffered by them. However, those moneys would have been refunded if the contracts had been rescinded. In that event they would not have suffered any loss. Therefore, those deposits were in the category of contingent loss or damage. 511 Austcorp also argued that Luciani/Taldarmar suffered loss or damage on 14 March 2000 when they paid St George Bank $352 for a deposit bond of $34,000. Leaving aside that this too was outside Austcorp's pleaded defence, I am of opinion that the outlay of $352 on the deposit bond was not loss or damage suffered by Luciani/Taldarmar more than six years before 1 August 2006. This is because the economic interest they claimed was infringed was the overpayment of the purchase price representing the difference between that price and the true value of the apartment which they paid to Landillo. 512 The applicants' claim was for damage caused by their entry into contracts which they became obliged to complete only on 1 August 2000. That was the first occasion of any relevant infringement of the applicants' economic interests, for they were then legally obliged to pay the price which the wrongdoer (misrepresentor) had misled them to agree to pay: Wardley 175 CLR at 533. 513 In Wardley 175 CLR at 527 Mason CJ, Dawson, Gaudron and McHugh JJ explained the distinction between detriment, in a general sense, and damage suffered on entry into an agreement induced by a misrepresentation which is, or proves to be, to an applicant's disadvantage. The applicant will sustain a detriment in a general sense because the agreement subjects him, her or it to obligations and liabilities which exceed the value or worth of the benefits which it conferred on that person. But such a detriment will not necessarily amount to more than a contingency of future loss. In general, it is only when the contingency is fulfilled that an applicant will be found to have suffered loss or damage sufficient to infringe his, her or its economic interests for the purposes of an action under s 82(1): Wardley 175 CLR at 533. It is self-evident that the applicants would not have been able to sue for damages in respect of the losses they claim here before they completed or were legally bound to complete their contracts. Risk of loss is not actual loss. The mere entry into the contract did not, of itself, require each applicant to complete it since that obligation would only arise, or be able to be enforced by or against the applicant, once the strata plan was registered: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at 407-409 [46]-[54]. In Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35 at 43C-D Burchett and Hill JJ (Sackville J agreed at 45C; see too at 48E) held that where a lessee had been induced by the lessor's misrepresentations as to takings into entering into a lease, the question for limitation purposes was "… when was it that the loss which the [applicants] ultimately suffered (or a more than negligible part of it) was either ascertained by them or reasonably ascertainable?" 514 Here, the small amounts paid for the deposit bond and other disbursements were negligible in comparison to the price payable to Landillo. Moreover, no issue was raised on the pleadings that some other matter, such as legal costs and disbursements or the cost of a deposit bond created a time bar. I reject Austcorp's reliance on these matters as being outside its pleadings. 515 But, in any event, the relevant loss or damage that the applicants claimed under s 82 of the Act was that "by" Austcorp's contravention of s 52 they paid Landillo more for their apartments than they were worth: Wardley 175 CLR at 527, 532-533. I am of opinion that Mr Owers and Ms Tan-Bounkeau are not prevented by s 82(2) from recovering that loss

10. DAMAGES 516 The parties agreed (by the end of final address) the quantum of damages (before interest) that would be recoverable as expenditures incurred (other than the loss of value on the purchase price which I dealt with under the heading "Valuation") if the applicants succeeded except in two respects concerning Mr Owers. These were: (a) whether he made a recoverable loss since, after paying $48,837 more than he earned in returns from the apartment, Mr Owers obtained taxation deductions which left him a net $2,335 better off; (b) whether Mr Owers should recover damages on the $33,000 deposit that he paid from his bank account and did not borrow.

(a) Tax benefits 517 In final address Austcorp accepted that up to 31 March 2008 Ms Tan-Bounkeua and Luciani/Taldarmar had incurred agreed amounts that they would not have spent or become liable to pay as a result of their financing the acquisition of their apartments. Those amounts were agreed by the parties' expert accountant witnesses in a joint report. On this basis, Ms Tan-Bounkeua had incurred a loss of $52,473 and Luciani/Taldarmar had incurred a loss of $116,868. This recognised that those applicants had incurred these losses before taking account of income tax deductions or benefits which they obtained in consequence of their expenditures included in the total sums. The parties accepted that any taxation consequences for those applicants were not relevant to the amount of damages to which they were entitled. The individual applicants will have to deal with the taxation consequences of any award in due course. 518 However, Austcorp claimed that after taking into account taxation, Mr Owers was $2,335 better off for having made his investment even though it conceded that he incurred $48,837 (before tax) in expenses of the same nature as it accepted were recoverable by Ms Tan-Bounkeua and Luciani/Taldarmar were they to succeed. Austcorp gave no satisfactory explanation as to why Mr Owers' damages should be assessed differently in respect of the money which he had had to expend in holding his property which he would not otherwise have spent. In my opinion, the fact that Mr Owers achieved a position, after tax, in which he was $2,335 better off ignores his having to expend the $48,837 which he would not otherwise have spent. No doubt if he receives damages in the latter sum he will need to account for that for his current taxation purposes. 519 Tax savings, if any, made by an applicant should not be taken into account in reduction of a claim made under s 82 of the Act: Milner v Delita Pty Limited (1985) 9 FCR 299 at 304, per Lockhart J. Lockhart J held that money contributed by an applicant who was induced by conduct that contravened s 52 to enter into a partnership for the processing and growing of guavas had been applied for the purposes of the partnership. He said that it had been envisaged in the misleading promotional brochures that the expenditures would give rise to tax losses that could be claimed as deductions against their income by the investor tax payers. But Lockhart J held that that was an irrelevant consideration for the purposes of an assessment of damages under s 82. He found that there was no relevant nexus between the contravention of the Act by the respondent and any benefit gained by the applicant by reason of the allowability of the claimed losses. Lockhart J applied Simpson Ltd v Hubbards Pty Limited (1982) 44 ALR 695 at 702-703. There Bowen CJ, Franki and McGregor JJ held that since damages were compensatory, the question of deducting probable taxation did not arise. They said that an applicant could not be required to set off past tax losses against an award of damages so as to reduce the total sum of damages ordered by the Court. They regarded the tax losses as being, in one sense, an asset of the applicant who should not be required to dissipate that asset for the benefit of the person who contravened s 52 of the Act: Simpson 44 ALR at 703. 520 In Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488 at 543-545 Wilcox and Lindgren JJ (with whom Lee J agreed on this point (at 560)) noted that the trial judge (Davies J) found that taxation benefits, which applicant investors in a horse breeding syndicate had obtained, should be taken into account in reduction of damages for their losses up to the time at which they terminated the breeding partnership. However, in that case, Davies J had refused to make an allowance for those taxation benefits in relation to the years of income after termination and awarded compensation on the basis that those damages not be taxable in the hands of the applicants. There was no issue in the appeal as to the question of taking into account taxation benefits. 521 Mr Owers had continued to incur the expenses in order to hold the asset that he acquired "by" the misleading conduct for which Austcorp is liable. He expended money because of the position in which he had been placed by Austcorp's contravention of s 52 of the Act. Although Mr Owers has achieved a small net taxation saving over a number of years that has come at the expense of his being involved in an investment which he would not otherwise have pursued. I am of opinion that it is not appropriate to require Mr Owers to use his own money to pay the cost of financing a venture he would not have undertaken had he not been misled by Austcorp's contraventions of the Act: see also Henderson v Amadio Pty Limited (No 1) (1995) 62 FCR 1 at 200A-D per Heerey J. He has lost the opportunity of using the $48,837 paid by him for which he claimed tax deductions and received a net benefit, in other ways. He is entitled to damages in the whole sum claimed, without making allowance for taxation benefits.

(b) Mr Owers $33,000 cash deposit 522 Mr Owers said that he would have invested in another long term income producing property had he not been induced to purchase the apartment. I accept that evidence. Instead of borrowing the whole of the purchase price, he used initially $33,000 of his cash savings to pay the deposit. Ultimately, he borrowed $31,000 from his bank and paid about $10,000 of that to pay back into his other bank account. Thus, he borrowed about $31,000 of the $330,000 price, and claimed damages for the loss of opportunity to invest the balance of either $20,000 or $30,000 in a better investment. 523 Originally, Mr Owers sought damages for loss of a chance to obtain a better investment outcome from a possible purchase of investment property in Lithgow for this sum. But in the applicants' written submissions in reply, Mr Owers abandoned that argument and sought compensation such as simple interest on that sum. He does not now claim any substantive damages for the loss of the opportunity to invest beyond the amount which Austcorp agreed he should be allowed as interest on the net capital sum he invested from his own savings. Austcorp conceded in final address that if he were entitled to recover damages, some sum in the nature of interest should be awarded on the $20,000 to $30,000 figure. 524 In my opinion Mr Owers should recover damages in the nature of interest on $20,000 (being the difference between the purchase price and what he borrowed). I am not satisfied that he has established that the appropriate figure is the larger sum of $30,000 originally used for the deposit. In reality, he used the $10,000 difference for other purposes ultimately unrelated to the purchase of the apartment. In light of Austcorp's concession that Mr Owers is at least entitled to interest on the $20,000 he should receive interest on that sum at the rate payable on a judgment from 14 June 2000. This takes some account of the vicissitudes of investment and recognises that Mr Owers still retains the apartment and will recover other damages including for the loss of value suffered. 525 The applicants raised a suggestion in a footnote to their submissions that they were entitled to compound interest on a basis and in a sum that was not made clear. The argument was not explored orally. It is not clear to me whether, and if so how, it is pressed. I will leave the parties to address issues about interest and the form of final relief after they have considered these reasons.

11. Conclusion 526 In my opinion Mr Owers and Ms Tan-Bounkeua have established that they are entitled to relief, while Mr Luciani and Taldarmar have not. The appropriate way to compensate the successful applicants for their loss is as follows: (1) Calculate the difference between the purchase price and the true value of the apartment. (2) Add the agreed net loss before tax (and in Mr Owers' case the interest on $20,000). (3) Calculate interest from the relevant dates of the loss on the totals of each of (1) and (2). 527 I will direct the parties to bring in short minutes of the appropriate orders necessary to give effect to these reasons. Some provision will need to be made to deal with the still unresolved outstanding claims of other applicants with whose claims I have not yet dealt. I certify that the preceding five hundred and twenty-seven (527) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

Associate: Dated: 1 May 2009 Counsel for the Applicants: Mr A S Bell SC and Ms N Bearup Solicitor for the Applicants: Maurice Blackburn

Solicitor appearing for the Second Respondent: Mr M Corbin of Corbin Legal Services (2-4, 7-11, 14 July 2008)

Counsel for the Fourth Respondent: Mr S Donaldson SC and Ms A Horvath (30 June, 1-4, 7-11 July 2008) Solicitor for the Fourth Respondent DLA Phillips Fox

Counsel for the Fifth Respondent: Mr S D Robb QC and Mr J Steele Solicitor for the Fifth Respondent: Tzovaras Legal

Dates of Hearing: 30 (June), 1-4, 7-11, 14-18 (July), 5, 16-18, 23-26, 29-30 (September), 1 (October) 2008

Date of Last Written Submissions: 7 October 2008

Date of Judgment: 1 May 2009