Amadio Pty Ltd & Anor v Henderson, Russell Fraser & Ors [1998] FCA 823

2. NATURE OF ORDERS OF TRIAL JUDGE To understand the nature of the appeals, it is helpful to give a brief summary of the orders made by the trial Judge which are set out in Annexure B to these reasons. It is not necessary at this stage to identify each of the applicants who are among the respondents to the appeals. They include the purchasers, sub-partners of some of the purchasers and guarantors. For present purposes, the groups can be identified by reference to the names of the purchasers, namely the Hendersons, the Gordons, the H F Deans, the W S Deans, the Greens, the Lees, the Turners, the Haarsmas, the Schoemans, the Arthursons, the Phelps, the Tranters and the Trengoves. The structure of the orders of the Court was, by Order 1, to make a declaration that the mortgage and the guarantee and indemnity were each unenforceable and that the Coles Myer property be re-transferred to Amadio. Orders 3 to 15 inclusive were to the effect that there be judgment for the H F Deans and the W S Deans (collectively referred to as "the Deans") in accordance with Schedule B, for the Turners in accordance with Schedule C, for the Gordons in accordance with Schedule D, for the Hendersons in accordance with Schedule E, for the Greens in accordance with Schedule F, for the Lees in accordance with Schedule G, for the Haarsmas in accordance with Schedule H, for the Schoemans in accordance with Schedule I, for the Arthursons in accordance with Schedule J, for the Phelps in accordance with Schedule K, for the Tranters in accordance with Schedule L and for the Trengoves in accordance with Schedule M. The other orders need not be referred to at this stage. In summary, Schedules B to M inclusive provided that there be judgment for each of the applicants against Amadio for restitution in the amounts paid by them respectively plus interest, that there be judgment for the members of the various groups against some or other of the respondents Amadio, Hudson Conway, Gray & Winter, James William Gray, Huntley McArdle & Glass Pty Ltd, Robert Hugh Glass, Bird Cameron, Nevett Ford and Richard Ellis (Victoria) Pty Ltd, now Dunyack Pty Ltd, ("Richard Ellis") (collectively, "the respondent debtors"), for specified amounts, that there be contribution between the debtors in specified proportions and for costs. Many other orders were made which need not be referred to at this stage. Ultimately the main claims by the applicants were directed against Amadio and Hudson Conway on the prescribed interest issue. These two companies, in appeal No VG 245 of 1996, inter alia, challenge the judgment based on these claims and, in particular, the declaration and the orders made for restitution. A consideration of the prescribed interest issues raised on the appeals by Amadio and Hudson Conway will provide a helpful foundation for the consideration of all the appeals including the cross-appeals and contentions.

3. THE PRESCRIBED INTEREST ISSUES Heerey J concluded that: · the sale of the Coles Myer building by Amadio coupled with the mortgage back to Amadio and the associated guarantees contravened the prescribed interest provisions of the Companies Code; · Hudson Conway and Amadio would be unjustly enriched if they were to retain the benefit of those transactions; · the transactions should be set aside on terms that the present registered proprietors execute transfers of their respective interests in favour of Amadio and that the mortgage and guarantees be discharged. His Honour then made final orders which gave effect to the conclusions. The appeals against those orders challenge each of the conclusions and raise complex issues of fact and law. In order to appreciate those issues it is necessary to consider in detail the factual basis for his Honour's conclusions. 3.1 The Facts The Parties

The vendor of the Coles Myer building, Amadio, was a company whose sole function was to hold title to the building. It had no commercial existence separate from its parent, Hudson Conway. Hudson Conway had retained Richard Ellis as an agent to sell the Coles Myer building and also an adjoining building at 31-47 Barry Street owned by another subsidiary and leased to Telecom Australia ("the Telecom building"). After Richard Ellis had failed to sell the buildings, Hudson Conway was approached by Mr Garrick Gray ("Gray") of the firm of solicitors called Gray & Winter. The partners in that firm were Gray and Mr Michael Winter ("Winter"). Mr James Gray, the son of Gray, was an employee of the firm. Mr James Gray is not a solicitor. A company called Australian Investment Management (Holdings) Pty Ltd ("AIMH") was controlled by the Gray & Winter interests. Mr James Gray and Winter were directors of that company but Gray was not. The persons who were persuaded to invest in the Coles Myer building, save for Winter and Mr James Gray, all lived in country areas of Victoria, New South Wales, South Australia and Tasmania. They are mainly farmers, small business people and doctors. Most of them were introduced to the scheme by firms of chartered accountants to whom Gray & Winter had promoted the scheme. One of those firms was Bird Cameron. The accountancy practice under that name is actually conducted by a company, BPM Pty Ltd. Its headquarters are in Perth. It had, at the time, some thirty-eight branches in cities and towns throughout Australia including Ballarat and Geelong in Victoria and Millicent and Port Lincoln in South Australia. The other firm of chartered accountants was Huntley McArdle & Glass which carried on practice in Ballarat.

The Option Agreement The agreement had its genesis at a meeting on 15 May 1990 between Gray and Mr Lloyd Williams ("Williams"), the Chief Executive Officer and Managing Director of Hudson Conway. Williams was aware that Gray was involved in the promotion of tax driven investment schemes, including negatively geared investments in commercial property. Williams' understanding was that Gray packaged such investments for his clients for a fee. At the meeting Williams indicated that the "bottom line" price for the Coles Myer building was $13.8 million. Gray responded that he proposed to syndicate, for a group of investors, both the Coles Myer building and the Telecom building which was being offered for sale at the same time by another Hudson Conway subsidiary. Gray expressed an intention to take an option over each property for his clients whom he proposed to charge a fee for securing the properties. He then enquired of Williams whether his company would provide finance equal to 100% of the sale price for up to five years. Williams replied that Hudson Conway would provide 100% vendor finance at 14% for three years but only if it were satisfied that the purchasers had sufficient asset backing and capacity to service the borrowings. Williams expected Gray to syndicate the buildings to a "range" or "group" of investors. Gray said he wanted an acquisition fee of $760,000 for the Coles Myer building. Williams stated that he was prepared to "capitalise" the fee by adding it to his sale price. The trial Judge found that it is likely that Gray mentioned the figure of $6 million of net assets and $2 million of income for a proposed purchaser of the Coles Myer building without identifying the purchaser. On 16 May 1990 Gray & Winter sent a fax offering to take an option for the acquisition of the Coles Myer building "by a client with net assets of at least $6 million and net annual income in excess of $2 million at a purchase price of $14.56 million of which acquisition fees for Gray & Winter of $760,000 would be paid by Hudson Conway at settlement". The option would result in an effective purchase price of $13.8 million and was to include provision for vendor finance of $15.4 million for three years with interest at 14.0% paid six monthly in advance. The vendor finance included finance for the purchase price, interest and stamp duty payable by the purchasers. Williams instructed Mr Hamilton ("Hamilton"), the company secretary of Hudson Conway, to assume responsibility for the transaction. Hamilton learned, probably from Gray, that the client for whom Gray proposed to acquire the building was Mr A Myers QC. Hudson Conway agreed to grant the option as requested on the understanding that the contemplated purchaser was Mr Myers. Thereafter an option agreement, prepared by Gray and dated 17 May 1990, was executed on 17 May 1990 by Hudson Conway and AIMH. The agreement contained the earlier agreed stipulation as to the net asset and income position of any "nominated Purchaser or Purchasers" and provided that the vendor would pay an acquisition fee of $760,000 to AIMH if the option was exercised and settlement of the sale occurred on 24 June 1990. Syndication of the Building On 21 May, Mr Myers decided not to purchase the Coles Myer building. Gray & Winter decided to syndicate the Coles Myer building as a negatively geared investment to investors and thereupon set about assembling a syndicate of purchasers. Gray told Hamilton that he was forming such a syndicate. The structure of the investment devised by Gray & Winter was as follows. The Coles Myer building was to be acquired by a partnership in which the partners held twenty equal shares. Where it was desired by an investor that a given share be less than a 1/20th share it was necessary for one holder to become the sole legal owner of the 1/20th share and to execute a declaration of trust to the effect that the legal interest was held on behalf of the investor and any other "sub-partners" beneficially entitled thereto. There was to be a declaration of trust and a sub-partnership agreement in respect of each share to which such an arrangement applied. The limitation of twenty shares was dictated by the prohibition in s 33 of the Companies Code against partnerships consisting of more than twenty persons. Investors were also able to hold an interest greater than a 1/20th share. It was made clear to investors that the acquisition of the building was to be by a proposed partnership of twenty 1/20th shares. As an aid in marketing the Coles Myer building, Gray & Winter prepared a brochure in which a price of $14.835 million was ascribed to the building. The brochure included, in a modified form, the text of an earlier information memorandum which had been prepared by Richard Ellis. The brochure was for distribution, primarily, to accountants to interest their clients in the project. It explained the supposedly tax effective investment potential of the property and contained five sections; photographs, a property summary, the original Richard Ellis brochure with some modifications, a copy of the Coles Myer Lease and a projected cash flow. The brochure gave details of the lease to Coles Myer and noted that the rent was reviewable "at the expiration of every two years from the commencement date of the lease to comparable market evidence". An analysis of the net income currently yielded by the Coles Myer building was followed by the note that "analysis of comparable rentals for similar office premises indicate the present rental for this property has significant potential for growth" (brochure's emphasis). Then followed a number of financial projections based on various assumptions including a "property cost" of $14.835 million and progressive increases in annual rental at review from $1,279,800 in June 1990 to $3,281,525 in March 2001. An anticipated value at June 1993, of $19,457,620, was ascribed to the property for the purpose of obtaining bank finance in substitution for the assumed vendor finance of $16.2 million. It was also indicated that a bank would lend up to 85% of the anticipated value of $19,457,620 being $16,538,977. Other spread sheets, included in the brochure, were a cashflow summary to 30 June 2000 showing the property attaining a value of $31,163,577 by applying a capitalisation rate of 9% to an assumed rent increase equal to a movement in the consumer price index (the "CPI") of 8.5% per annum. There were also interest calculations, a statement of owners' contributions required, proposed debt reductions and monthly cashflow projections for the whole ten year period. In addition to the brochure, a single separate sheet of paper ("the one page summary") projected an annual cost to each of the proposed partners holding a 1/20th share. After imputing a particular tax deduction claimable by each partner during each of eleven years, the one page summary set out for each year the after-tax cost for each investor. The one page summary includes this note: "Assuming a tax rate of 48.25% the following table applies for a partnership of 20 owning the above building Year Cost to Tax After Tax After Tax Partner Deductions Cost at Cost at 48.25% 39.0% 1 (to 30/06/90) 40,350 61,900 10,484 16,209 2 46,330 62,325 16,255 22,024 3 39,505 55,505 12,724 17,858 4 40,427 56,427 13,201 18,420 5 37,068 53,768 11,125 16,098 6 32,224 48,924 8,618 13,144 7 22,370 39,070 3,519 7,133 8 16,702 33,402 586 3,675 Subtotal 274,976 411,321 76,512 114,561 9 5,174 21,876 (5,380) (3,358) 10 (1,457) 14,543 (8,474) (4,215) 11 (16,045) (45) (16,023) (16,063) TOTAL 262,648 447,695 46,635 90,925 Note: The deductions are an average of $1.70 for each $1.00 paid out. Assuming the property is sold at the end of 10 years. The net tax free gain per partner should be $717,000 for an after tax cost of $46,635 based on a tax rate of 48.25% or $703,307 for an after tax cost of $90,925 at a 39% tax rate." The after tax projections were a major selling point to potential investors. The after tax costing was that "for a partnership of 20 owning the [building]" the tax deduction averaged $1.70 for each $1 paid out. It also stated that, on the assumption that the property would be sold at the end of ten years, the net tax free gain per partner should be $717,000 for an after tax cost of $46,635 to $57,750 at a 48.25% tax rate or $703,307 for an after tax cost of $90,925 at a 39% tax rate. On 1 June, Hamilton agreed to extend the option period to 29 June, and to increase vendor finance from $15.4 million to $16.2 million which was to include an increased acquisition fee from $760,000 to $1.035 million. The increased fee is significant. When it became apparent that Mr Myers was not proceeding with the purchase, Gray realised that syndicating the property would involve considerable additional work and endeavour on his part. Gray asked Hamilton to increase the acquisition fee to $1.035 million and to increase the vendor finance accordingly. Previously, Hamilton had questioned the size of the initial acquisition fee with either Gray or Winter and was told that the transaction would involve Gray & Winter spending a great deal of time on the project. Hamilton agreed to the increased fee on the basis that, to syndicate the property, Gray would now be doing more work than he originally envisaged. Hamilton was content for Gray to "put a lot of hard work" into finding buyers for the property and pay the increased acquisition fee as it did not change the net return to Hudson Conway of $13.8 million for the property. Hamilton emphasised that the syndicate members would need to have sufficient asset backing or the sale would not proceed. Hamilton sent two letters to Gray on 1 June 1990 agreeing to extend the option period to 29 June 1990 and agreeing to increase the vendor finance from $15.4 million to $16.2 million to accommodate the increased acquisition fee and the additional interest. By a letter dated 5 June, Gray confirmed the changes to the option and indicated that he was "confident of exercising it." As from late May 1990 Messrs Gray & Winter recruited investors. The brochure and the one page summary were used by them in making presentations to the clients, principally by the two firms of accountants, Bird Cameron and Huntley McArdle & Glass who introduced some of their clients to the investment. The trial Judge gave the following description which, whilst not true of all investors, gives some understanding of the Gray & Winter modus operandi. Gray, Mr James Gray or Winter visited the various offices of Bird Cameron, or the office of Huntley McArdle & Glass in Ballarat, and there made a presentation to clients of those firms in the presence of the accountant with whom the client usually dealt. Gray & Winter had already sent copies of their brochure to those offices. Frequently, a copy of the brochure and the one page summary was given to the prospective investor. If an investor stated a wish to proceed, the Gray & Winter representative asked that person to sign an "Application for Finance" and a power of attorney in favour of William Ernest Balcam of the Melbourne office of Bird Cameron authorising him to execute a wide range of documents in connection with the Coles Myer building. The Documentation The investors who participated in the project executed the following documents: 1. An "Application for Finance" for "Proposed Partnership Scheme 20 x 1/20th shares in Coles Myer Building" (application's emphasis). The application was for the proposed vendor finance. It provided details of the income, assets and liabilities and business history of the proposed borrower as well as that of the borrower's family entities such as family companies, trusts or partnerships. 2. A power of attorney in favour of William Ernest Balcam ("Balcam"), Chartered Accountant, who was a partner in Bird Cameron, Melbourne. The power of attorney, which was irrevocable for three months, conferred extensive powers on the attorney who was appointed to execute a wide range of documents in connection with the Coles Myer building including a contract of sale, transfer, a mortgage or mortgages, assignment of rental income and a "Deed of Partnership between the owners of the land." The documents executed by the attorney were to be "...upon and subject to such terms covenants conditions and provisions as the Attorney in his absolute discretion determines;". An additional power to execute a guarantee and indemnity was added at a later stage.The power of attorney entrusted Balcam with the task of committing each investor to the proposed acquisition and partnership on the terms set out in the documents which he, in his discretion, elected to execute in his capacity as attorney. 3. An undated letter of instruction by investors to Gray & Winter. The letter was substantially in the same form for all investors. The following is a typical example: "Messrs Gray & Winter Barristers & Solicitors 1st Floor 474 St. Kilda Road MELBOURNE VIC 3004. Dear Sirs, re: Acquisition of the Coles Myer Building 258 Queensberry Street, Carlton I confirm the instructions from Bird Cameron [...............] Accountants for you to acquire the above building for a partnership including the undersigned for $17,072,000 including the costs set out below and to arrange a vendor loan on my behalf for an amount of $16,264,764 for 3 years at 14% per annum on security of a first mortgage of the property and joint and several guarantees of all the partners. I undertake to promptly provide all financial documentation required for obtaining the loans to you when requested. I confirm that the cash flow shown to me has been explained and I am satisfied to proceed. We authorise you to direct disbursement of the sum of $17,072,000 as follows at settlement:- Property Cost (including acquisition fee of 7.5% to Gray & Winter) $14,835,000 Stamp Duty 816,000 Legals - Nevitt, Solicitors 15,000 Capital Acquisition Cost 15,666,000 Accounting Fees (1.5% of Purchase Price) 207,000 Stamp Duty - Mortgage 64,764 First Six Months Interest 1,134,000 Balance: Clients Account 236 Total Funds Required 17,072,000

We are aware that there is an acquisition fee of $1,035,000 which will be paid to Australian Investment Management (Holdings) Pty Ltd. a company associated with Gray & Winter which currently holds the option over the property. The balance will be paid out as follows Accountants Fees $207,000

I undertake to meet my share of the cost of any adjustment of rates and taxes which may be due to the purchasers at settlement together with any other costs certified by the Management Committee of the Partnership. I authorise you to instruct solicitors on behalf of the partnership to act in the conveyance of the property and the mortgages. I undertake to execute such documentation as is necessary to complete the purchase and mortgage of the property prior to settlement. I authorise you to hand all documentation in respect of the acquisition to Huntley McArdle & Glass, Accountants to be held in trust for the partnership or to be handed over to any other trustee nominated by the management committee of the partnership elected by the partners. The abovenamed building and the prospect of purchasing a part of it in partnership with others was brought to my attention by my accountant and I have decided to invest having received my accountant's advice and as a result of my own appraisal. I requested that your firm should further explain the legal documentation and the taxation consequences resulting from the cash flow and the proposed loan for the purchase and I confirm that you did not approach me or canvass my interest in any way. Yours faithfully, .........." Later, a revised form of letter which, inter alia, more fully explained the break up of the "Accountant's Fees" of $207,000 was signed by a number of the investors. 4. A Declaration of Trust and sub-Partnership agreements were executed by investors applying to acquire an interest which was less than a 1/20th share. Where this occurred the interest was to be held on a bare trust by a partner holding the relevant 1/20 share. The sub-partnership agreement recorded that the holding of the interest of the trustee partner for the sub-partners was with the consent of the other "partners" in the "Coles Myer Building Partnership". Each of the documents was required to be delivered to Gray & Winter prior to settlement with the agreed contribution to initial partnership capital of $40,500 for each of the twenty 1/20th shares. The ledger of Gray & Winter records that twenty contributions of $40,500, totalling $809,700, were made between 22 June 1990 and 29 June 1990.

Settlement of the Sale By 22 June 1990 Gray & Winter had become confident that the acquisition would proceed. By a letter dated 22 June 1990 Hamilton was informed by Gray & Winter that "A partnership to be known as C.M. Building Partnership will acquire the [building]." A financial summary statement for fourteen "clients", proposing to participate in the partnership, was enclosed with the advice that the balance of the "financials" will be forwarded in the following week. On 25 June 1990 Hamilton agreed to a request by Gray to increase the vendor finance by $65,000 to $16.265 million to assist the purchasers with fees payable on registration but on the condition that the Telecom building was also sold prior to 30 June 1990. As that property was also sold the loan facility was increased accordingly. On 29 June 1990 eighteen sets of investors (including two who each held two 1/20th shares) holding twenty 1/20th shares, agreed to participate in the project by paying the purchase price and all legal, accounting and other costs and expenses. Their attorney, Balcam: · executed the contract of sale to acquire the Coles Myer building for $14.835 million; · executed the mortgage to secure vendor finance of $16.265 million for three years at an acceptable rate of interest at 14% per annum payable six monthly in advance; and · executed guarantees in respect of the principal sum and interest due under the mortgage where the investor was a corporate entity or trust. By the Contract of Sale, Amadio sold the land and improvements known as Building No 1, 258-274 Queensberry Street Carlton to the individual persons or companies set out in the Schedule (ie the eighteen investors) as tenants in common. The contract of sale, containing the loan agreement, provided for vendor finance of $16.265 million to be secured by a mortgage over the building. The building was sold subject to the Coles Myer lease which was annexed to the contract. A transfer of the property was executed by Amadio and each of the purchasers as tenants in common in the shares set out in the contract. The mortgage secured repayment on 29 June 1993 of the principal sum of $16.265 million lent by Amadio and contained common convenants by all of the purchasers save for what became known as the Terrey clause. Under the mortgage the purchasers mortgaged their respective shares in the building to secure the repayment of the principal sum and interest at 14% per annum. In addition to the usual covenants the mortgage provided that the principal sum, for which each mortgagor was jointly and severally liable, included any sums owing on any account whatsoever by any mortgagor to Amadio or any "associated company" which was defined as a related company within the meaning of the Companies Code. The guarantee and indemnity guaranteed the performance by each of the mortgagors of their obligations under the mortgage. In the result, each investor and guarantor, with the exception of Terrey, became jointly and severally liable for the whole of the principal sum and interest due under the mortgage. Settlement of the sale of the Coles Myer building took place on 29 June 1990 at the offices of Corrs Chambers and Westgarth ("Corrs"), solicitors for Amadio. By 29 June 1990 two of the 1/20th shares had not been taken up by investors. The two remaining shares were taken up by Mr James Gray and Winter so that the matter could proceed to settlement prior to the end of the financial year. The partners, sub-partners and the guarantors associated with them were as follows: LEVELS OF PARTICIPATION IN INVESTMENT The Gordons 1. Partner: H.A. Gordon 2. Sub Partners: P. Gordon, H. Glass 3. Guarantors: P. Gordon, H. Glass, Bredtar Pty Ltd and Fifth Varona Pty Ltd The Frank Deans (Two partnership shares) 1. Partner: Bactbuild Pty Ltd 2. Guarantors: H.F. Dean, K. Dean, W.S. & H.F. Dean Pty Ltd The Stan Deans (Two partnership shares) 1. Partner: Lonihire Pty Ltd 2. Guarantors: W.S. Dean, N. Dean, W.S. & H.F. Dean Pty Ltd The Turners 1. Partner: Garkat Pty Ltd 2. Guarantors: G.L. Turner, D.W. Turner and Turnbross Pty Ltd Lee 1. Partner: B. Lee 2. Guarantors: Asska Pty Ltd Green 1. Partner: M.J. Green 2. Sub Partners: R. Green, B. Green and G. Green 3. Guarantors: R. Green, B. Green and G. Green The Arthursons 1. Partner: J.P.G. Arthurson 2. Guarantors: J.P.G. Arthurson and S.L. Arthurson The Haarsmas 1. Partner: L.F. Haarsma 2. Sub Partners: J.A. Haarsma and M.P. Haarsma 3. Guarantors: J.A. Haarsma and M.P. Haarsma The Hendersons 1. Partner: R.F. Henderson 2. Sub Partner: N.M. Henderson 3. Guarantor: N.M. Henderson The Schoemans 1. Partner: D.J. Schoeman and J. Schoeman The Phelps 1. Partner: Ackina Pty Ltd 2. Guarantors: I.D. Phelps, G. Phelps and C. Phelps The Tranters 1. Partner: T.E. Tranter 2. Sub Partner: P.F. Tranter 3. Guarantor: P.F. Tranter The Trengoves 1. Partner: Marican Pty Ltd 2. Guarantors: R.F. Trengove and L. Trengove The Walkers 1. Partner: P.R. Connell 2. Sub Partners: J.A. Connell, P.J. Walker, J.A. Walker 3. Guarantors: J.A. Connell, P.J. Walker, J.A. Walker Terrey 1. Partner: M.D. Terrey J. Gray 1. Partner: J. Gray M. Winter 1. Partner: M. Winter 2. Guarantors: L.F. Winter and Mt. Duneed Pastoral Co Pty Ltd The Morgans 1. Partner: E.C. Rutt 2. Sub Partner: Glincraft Pty Ltd 3. Guarantors: R.C. Morgan and D. Morgan Mr James Gray and Winter were associated with Gray and Gray & Winter. Neither was an applicant. The Morgans settled their claim. Another firm of solicitors, Nevett Ford, had been retained by Gray & Winter to act for the investors and did so act prior to and at the settlement on 29 June and thereafter. In the course of preparing for the settlement, Mr Stephens, a partner in Nevett Ford, worked from the office of Gray & Winter. He examined a draft contract of sale which had been prepared by a solicitor, Ms McCallum of Corrs, and submitted a draft version of the power of attorney to be executed by the purchasers and guarantors. Ms McCallum was involved in settling that draft and later undertook a check to ensure that, in its final version, it had been executed by each purchaser and, where others had an interest in that purchaser's share, by those others as guarantors as set out above. Ms McCallum of Corrs acted as the solicitor for Hudson Conway and Amadio in the transaction and was responsible for the preparation or settling of all of the legal documentation executed by the direct participants, the sub-partners and the guarantors to enable the settlement to proceed on 29 June. In acting as solicitor and agent for Hudson Conway and Amadio the knowledge gained by, and conduct of, Ms McCallum was clearly that of her clients: see Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 659 per Mason J. Ms McCallum was fully aware of the syndication of twenty 1/20th shares in the Coles Myer building and was also aware, from the documentation prepared or settled by her, of the proposed legal structure, including the partnership, for the acquisition. This finding has some significance as many of Amadio's submissions as to its state of awareness ignored the detailed knowledge held by Ms McCallum as to the legal structure being offered by Gray & Winter to investors. The proposed deed of partnership was specifically referred to in the Power of Attorney and the fact that the holders of the twenty 1/20th shares held those shares in the "Coles Myer Partnership" was set out in all of the loan applications for vendor finance and was the express basis upon which the sub-partnership interests were to be created and held. Shortly prior to settlement the legal advisers of Mr and Ms Terrey insisted on a limitation of their clients' liability. Mr and Ms Terrey, who were brother and sister, had agreed to take a share of the Coles Myer building. They had not been introduced through either Bird Cameron or Huntley McArdle & Glass but were clients of a Sydney firm of accountants, Phillips McSweeney, who procured for them separate legal advice from a Sydney firm of solicitors, Gillis Delaney. Those solicitors negotiated the insertion of the following clause ("the Terrey clause") in the mortgage executed by the eighteen investors: "It is expressly agreed by and between the Mortgagor and the Mortgagee that the liability of MICHAEL DAVID TERREY shall be limited to the extent of his interest in the Land but without in any way affecting or limiting the joint and several obligations of all other parties comprising the Mortgagor or any Guarantors of the Mortgagor." The learned trial Judge construed the Terrey clause as confining the mortgagee's recourse against the mortgagor to the extent of his interest in the land: see 62 FCR 168. Balcam, as attorney for all other participants, accepted the Terrey clause. Accordingly, the rights and obligations of the participants and Terrey were subject to the exception provided for in the Terrey clause. Otherwise Terrey was an equal participant in respect of his 1/20th share in the project. Settlement was able to occur on 29 June because a transfer was executed in escrow by Amadio and held on terms stipulated in a letter from Corrs to Nevett Ford: "We advise that the Transfer has been executed by Amadio Pty Ltd in escrow. We record that the Purchase monies have been paid to Amadio Pty Ltd and settlement has taken place today, subject to the condition subsequent, that if within 45 days from today, Amadio Pty Ltd or its solicitor is not entirely satisfied as to the legal capacity of all of the parties in connection with the Contract of Sale, Transfer, Mortgage and Guarantee and Indemnity of the Mortgage, in relation to the abovementioned property and to the Power of Attorney relating to the execution of such documents, then the Transfer executed in escrow will not be released as the condition subsequent will not have been fulfilled and the Vendor reserves the right to cancel the sale, destroy the Transfer and transfer back to the Purchasers the monies paid, in excess of the amount of the mortgage loan." The conditions giving rise to the escrow were gradually satisfied by Mr Stephens' procuring various documents including original certificates under s 230(8) of the Companies Code, amendments of certain deeds of family trust and the execution by Mr and Mrs Morgan of the guarantee and a power of attorney. On 13 August, Ms McCallum was able to confirm to Mr Stephens that Corrs "now held all documentation which we required to be provided in respect of this transaction". On 9 August a formal partnership agreement was executed by Balcam as attorney for the eighteen investors holding the twenty 1/20th shares. After the Coles Myer building had been acquired, administrative matters necessary for the management of the partnership were attended to by a management committee, the original members of which were Messrs Balcam, Glass, Lynch and Henderson. The secretary to the committee was Ms Mason, an accountant employed in the Melbourne office of Bird Cameron, who attended to day-to-day accounting and administrative matters by preparation of tax returns, accounts, requests for contributions to syndicate members, payment of accounts, arranging maintenance of the building and the like. Save for Terrey, as from the date of acquisition common rights and obligations existed for all of the partners, all guarantors and all of the sub-partners in relation to the assets, income and liabilities of the project. Even Terrey's rights and obligations, save for liability under the mortgage, were common to those of the other partners. As a consequence, as from 29 June 1990 each investor (save for Terrey) and guarantor was liable for the whole of the principal sum and interest. Rights of contribution arose at law against any defaulting party. Such rights arise at law when "one of several persons has paid more than his proper share towards discharging a common obligation": see Davies v Humphreys (1840) 6 M & W 153 at 168-9; 151 ER 361 at 367-8. In summary, the rights and obligations of the investors and guarantors in relation to the Coles Myer building as set out in the documents executed by or on behalf of the parties, subject to the escrow, came into existence on 29 June 1990. On that date the contributions of $40,500 by the investors in respect of each of the twenty 1/20th shares in the proposed partnership were applied to meet the shortfall between the projected "partnership" liabilities of $17.072 million as set out in the letter of instruction (for the purchase price, stamp duty etc) and the $16.265 million advanced by Amadio under the mortgage. In the result on 29 June 1990 as set out above: · eighteen individuals and companies acquired twenty 1/20th shares in the project and became the principal debtors under the mortgage; · thirteen individuals and companies (some of whom were holders of 1/20th shares interests for the sub-partnership) executed sub-partnership agreements and became sub-partners; · thirty-four individuals and companies (some of whom were dual participants) executed the guarantee and became guarantors. Prior to 29 June 1990 each of the partners, sub-partners and guarantors had authorised their attorney, Balcam, to enter into the transactions entered into by him on 29 June 1990 and thereupon to appropriate their capital contributions to meet liabilities of the proposed partnership. Before those transactions were entered into the participants had authorised their attorney, Balcam, to take the necessary steps to enable their participation in a partnership to acquire the Coles Myer building subject to: · the twenty 1/20th shares in the proposed partnership being taken up; · Balcam exercising his power as attorney to execute the documents enabling the acquisition of the building on terms authorised by the participants. Both conditions were satisfied on 29 June 1990 thereby crystallising the proposed legal relationship between the participants into an actual legal relationship.

3.2 Did a Partnership Acquire the Coles Myer Building?

It is an inescapable conclusion from these facts that a partnership was entered into on 29 June 1990. The existence of a partnership is determined by reference to the true contract and intention of the parties as appearing from all of the facts and circumstances relevant to the relationship of the parties: see Cox v Hickman (1860) 8 HLC 268; Jolley v Federal Commissioner of Taxation (1989) 86 ALR 297 at 306-8 per Burchett and Lee JJ, and ss 5 and 6 of the Partnership Act 1958 (Vic). The documentation to which we have referred demonstrates that the transaction into which each of the participants was intending to enter was the purchase of the Coles Myer building by a partnership of twenty 1/20th shares to be taken up by investors. In our view, it is not realistic to conclude that, on 29 June 1990, when that very transaction was implemented, the acquisition was by the holders of the twenty 1/20th shares on some other basis. The letters of instruction were given, the powers of attorney were executed, the contributions to partnership capital were made, the sub-partnership structures were created and the loan applications were executed on the basis of the acquisition being by a partnership. We are satisfied that prior to 29 June 1990 there was a proposed partnership; and on 29 June 1990 there was an actual partnership. That was the common intention and true agreement of the parties as at that date. We have reached that conclusion by viewing events as they had occurred prior to and on 29 June 1990. To the extent that the conduct of the parties after that date might be relevant: see Lindley and Banks on Partnership, (R C I'Anson Banks, 17th ed, 1995) at 123-7; Higgins and Fletcher, The Law of Partnership in Australia and New Zealand (K L Fletcher, 17th ed 1996) at 39-40, 60 and Robinson v Federal Commissioner of Taxation (1986) 17 ATR 1068 at 1071-2, that conduct confirms our conclusion. The partnership agreement entered into on 9 August 1990 was expressed to be as from 29 June 1990. Further, the income tax returns of all of the partners and sub-partners, including those for the year ended 30 June 1990, were all based on the partnership having come into existence on 29 June 1990. Not only is there no reason to infer any contrary intention by any of the participants but the matters to which we have referred afford good reason to infer that their common intention was to bring a partnership into existence as at 29 June 1990. The trial Judge found against the existence of a partnership on 29 June 1990 but that appears to have been mainly in response to Hudson Conway's contentions that a partnership had been created prior to 29 June 1990 and that all that happened on that day was the sale by Amadio of the property to a pre-existing partnership. For the reasons we have set out, his Honour was clearly correct in rejecting those contentions. However, we respectfully disagree with his Honour's additional conclusion that there was no partnership on 29 June. That conclusion is inconsistent with the contemporaneous documentation and the conduct of the parties which demonstrates that each of the investors had intended to enter into the Coles Myer partnership for the purpose of acquiring the Coles Myer building before the end of the 1990 financial year. Balcam, as attorney for all of the partners, had been irrevocably authorised to execute a deed of partnership. He was authorised to execute all necessary documents to acquire the building for the Coles Myer partnership. The fact that the deed only came into existence at a later date does not preclude an agreement by the investors to become partners upon the acquisition taking effect on 29 June 1990. The common intention of the investors, their overt acts and all of the contemporaneous documentation confirms that such an arrangement was to take effect, as it did, by the end of the 1990 financial year. On 29 June 1990 the partnership was created; the subsequent partnership deed was to be consistent with and give effect to the terms of the partnership brought into existence on 29 June 1990. Heerey J was of the view that important details relating to the administration of the partnership remained to be determined as at 29 June 1990 and, accordingly, no partnership came into existence until 9 August 1990 when those details had been agreed upon in the deed of partnership executed by Balcam on that date. His Honour, relying on the reasoning of Brooking J in Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 130-134, concluded that the parties were not to be taken as having intended that a partnership agreement would come into existence until they (or their attorney) had executed a document dealing with "matters which are ordinarily agreed upon in transactions of the class in question". In our view, the matters to which we have referred above demonstrate that, in the present case, the parties can be taken to have intended that a partnership between them would come into existence upon their acquisition of the property. They had specifically authorised their common attorney, Balcam, to determine the terms of, and to enter into, the partnership agreement on their behalf, to acquire the property on behalf of the partnership, and to reflect the terms of the partnership in a deed of partnership. The fact that the deed was executed after the attorney had acquired the property did not have the consequence of defeating the common intention of the parties if, as we have found, the acquisition was always intended to be made by the investors as partners. To the extent that details relating to administration may be of importance in the interim period we are satisfied that the establishment, with the agreement of the investors, of the management committee, the attorney's wide powers and the provisions of the Partnership Act 1958 (Vic) would govern or provide for those matters. In any case, the failure to agree on those matters as at 29 June 1990 did not have the consequence of defeating the common intention of the partners to which we have referred. 3.3 Statutory Provisions - Prescribed Interest The statute applicable at the relevant time was the Companies Code. The Victorian and South Australian versions were in identical terms. That legislation has now been replaced by the Corporations Law. In combination, ss 169, 170 and 171 of the Companies Code provided that a person or company should not issue to the public, offer to the public for subscription or purchase, or invite the public to subscribe for or purchase, any "prescribed interest" without registration of a prospectus. In the present case no prospectus was registered. Under s 174(1)(a), contravention of ss 169, 170 or 171 was an offence punishable by a fine of $20,000, or imprisonment for five years, or both. Section 174(2) provided: "A person is not relieved from any liability to any holder of a prescribed interest by reason of any contravention of, or failure to comply with, a provision of this Division." Accordingly, a person who was liable to the "holder of a prescribed interest" remained liable notwithstanding that the holder of the prescribed interest acquired the interest as a consequence of a contravention of ss 169, 170 or 171. However, if a holder of a prescribed interest incurred obligations or liabilities in respect of the prescribed interest which was acquired as a consequence of a contravention of ss 169, 170 or 171 that would raise the question of whether the obligations or liabilities were unenforceable under the doctrine of illegality. A "prescribed interest" was defined in s 5(1) of the Code to mean, inter alia, a "participation interest" which, in turn, relevantly, was defined to mean: "... any right to participate, or any interest - (a) in any profits, assets or realisation of any financial or business undertaking or scheme whether in the State or elsewhere; (b) in any common enterprise, whether in the State or elsewhere, in relation to which the holder of the right or interest is led to expect profits, rent or interest from the efforts of the promoter of the enterprise or a third party; or (c) in any investment contract, whether or not the right or interest is enforceable, whether the right or interest is actual, prospective or contingent, whether or not the right or interest is evidenced by a formal document and whether or not the right or interest relates to a physical asset, but does not include - (d) ... (e) ... (f) ... (g) an interest in a partnership agreement, unless the agreement or proposed agreement - (i) relates to an undertaking, scheme, enterprise or investment contract promoted by or on behalf of a person whose ordinary business is or includes the promotion of similar undertakings, schemes, enterprises or investment contracts, whether or not that person is, or is to become, a party to the agreement or proposed agreement; or (ii) ..." An interest in a partnership agreement, or a proposed partnership agreement was likely to be a prescribed interest under sub-paragraph (a), (b) or (c) if sub-paragraph (g)(i) was satisfied. An "investment contract" was defined in s 5(1) as meaning: "... any contract, scheme or arrangement that, in substance and irrespective of the form of the contract, scheme or arrangement, involves the investment of money in or under such circumstances that the investor acquires or may acquire an interest in or right in respect of property, whether in the State or elsewhere, that, under, or in accordance with, the terms of investment will, or may at the option of the investor, be used or employed in common with any other interest in or right in respect of property, whether in the State or elsewhere, acquired in or under like circumstances;". There is no relevant definition of "offer" or "invitation" but s 5(1) defines "issue" to include: "circulate, distribute and disseminate". Section 5(4) made provision for an offer, invitation or issue to the public to include an offer etc to "any section of the public". The sub-section provided: "A reference in this Code to, or to the making of, an offer to the public or to, or to the issuing of, an invitation to the public shall, unless the contrary intention appears, be construed as including a reference to, or to the making of, an offer to any section of the public or to, or to the issuing of, an invitation to any section of the public, as the case may be, whether selected as clients of the person making the offer or issuing the invitation or in any other manner and notwithstanding that the offer is capable of acceptance only by each person to whom it is made or that an offer or application may be made pursuant to the invitation only by a person to whom the invitation is issued, ..."

3.4 The Prescribed Interest Issues In the present case we propose to follow an approach similar to that adopted by another Full Court of this Court in Australian Breeders Co-operative Society Ltd v Jones & Others (1997) 150 ALR 488 where Wilcox and Lindgren JJ (at 503), after commenting upon the numerous issues and the multitude of arguments which they had considered, confined their reasons to the issues raised by submissions that were both significant and consequential as to do otherwise would have made the reasons for judgment unacceptably long. The appeals raise the following questions:

1. Was a prescribed interest offered or issued?
2. Was the prescribed interest offered by Gray & Winter to the public?
3. Was a prescribed interest issued by Amadio to the public? 4. What is the consequence of the offer of the prescribed interest to the public?
4. What relief is appropriate?

3.5 Was a Prescribed Interest Offered or Issued ? The definition of a "prescribed interest" - the case law. Amadio and Hudson Conway contended that the legislature could not have intended that certain everyday transactions such as the sale of a rental property to a syndicate of investors can constitute a prescribed interest. Mason J (with whom Stephen J agreed) in Australian Softwood Forests Pty Ltd v Attorney-General (NSW) (1981) 148 CLR 121 at 129-30 said in rejecting an analogous contention: "Apart from any considerations which may be derived from the general context in which the statutory definition appears, there is no very good reason for reading the words down. The context is that of prohibitions against issuing or offering to the public for subscription or purchase or inviting the public to subscribe for or purchase "interests" unless there is in force in relation to them an approved deed and unless there is provided information similar to that which is prescribed in connexion with an offer to the public of shares. Indeed, the prospectus provisions of the Act are applied to offers to the public of "interests" as if they were shares (s. 82(2)). This context supplies no reason for denying that the proposed activities constitute a "financial or business undertaking or scheme" within the meaning of the statutory definition. That a very wide meaning should be given to "interest" is attested by the exclusion from the statutory definition of shares and debentures (par.(d)), interests in life assurance policies (par.(e)) and, subject to some qualification, interests in partnership agreements (par. (f)). The presence of the power to exempt by regulation other rights or interests from the definition (par. (g)) is also of telling significance. There are real difficulties in the suggestion that the court can read down the very comprehensive definition of "interest" by reference to the supposedly unintended consequences of a literal reading on everyday commercial transactions. The definition is so general and all-embracing that it is impossible to say that it necessarily excludes particular transactions which appear to be covered by the general words. The hazards of adopting such a course are not dispelled by the absence of supporting context. It would be different if we could glean from the legislative provisions an overall purpose which, being limited in scope, justified a reading down of the definition. Unfortunately in this case the search for a legislative purpose takes us back to the very words of the definition for the intended scope of the operative provisions depends so heavily on the comprehensive language of that definition. As Young C.J. observed in A Home Away Pty Ltd v Commissioner for Corporate Affairs, in discussing the meaning of "interest" as defined in s. 76(1): 'If it were said that we should give effect to the purpose Parliament wished to achieve, we must first ascertain the purpose and that can only be ascertained from the language used.'" In Carragreen Currencies Corporation Pty Ltd v. Corporate Affairs Commission of New South Wales (1986) 7 NSWLR 705, it was argued that the introduction of interpretative provisions in relation to the Codes which require a court to prefer a construction which promotes the statutory purpose or object or enables the court to take into account extrinsic materials (see ss 5A, 5B, 5C of the Companies (Interpretation and Miscellaneous Provisions) Code and now ss 109H and 109J of the Corporations Law) reduced the authority of Australian Softwood Forests. Hodgson J responded to this argument (at 725-6) with the view that the effect of the interpretative provisions was "insufficient to rob cases such as Australian Softwood Forests of authority", on the basis that: "In my view, the best guide to the purpose of the legislation, in particular in the provisions concerning prescribed interests, is to be found in the words of those provisions." We agree with the view expressed by Hodgson J. It is now well settled, therefore, that the words in the relevant paragraphs are to be given the meaning they naturally bear. It is also accepted that, in determining whether a prescribed interest is offered or issued, the courts look to the substance, rather than the form, of what is offered or issued although the documentary form will be a guide to the substance: see Corporate Affairs Commission v M G Securities A/Asia Ltd (1975) 1 ACLR 157 at 158 per Moffitt P. This appeal is concerned with paragraphs (a) and (c) of the definition of "participation interest".

Paragraph (a): any right to participate, or any interest in any profits, assets or realisation of a financial or business undertaking or scheme To fall within this aspect of the definition, the three elements of the definition must be satisfied: "(1) a right to participate, or an interest; (2) in any profits, assets or realisation; (3) of any financial or business undertaking or scheme": Corporate Affairs Commission v Australian Softwood Forest Pty Ltd & Ors [1978] 1 NSWLR 150, per Helsham CJ in Eq. It is appropriate to consider the third element first. "...of any financial or business undertaking or scheme..." In Australian Softwoods, Mason J noted (at 129) that the scope of the words "financial or business undertaking or scheme" are "of very wide import". His Honour said: "For example, all that the word "scheme" requires is that there should be "some programme or plan of action" (Clowes v Federal Commissioner of Taxation (1954) 91 CLR 209 at 225). ......... It is not an objection to an enterprise qualifying as an undertaking or scheme that it consists of a number of parts or elements, the participation of individual parties being limited to one of these parts or elements, their profits or remuneration being derived from the particular activities in which they engage. There is nothing in the notion of an undertaking or scheme that requires or implies that there is joint participation in everything comprised in the plan....". The expression "business undertaking" does not require repetition of the relevant activity. A "single venture" may constitute a "business undertaking": Wade v A Home Away Pty Ltd [1981] VR 475, at 492 per Jenkinson J. "A right to participate or any interest..." The requisite "interest" in the financial undertaking or scheme is not limited to a proprietary interest: Australian Softwood Forests at 133 per Mason J; see also Van Reesema v Flavel (1987) 5 ACLC 751 and Australian Securities Commission v United Tree Farmers Pty Ltd (1997) 24 ACSR 94. "Participation" requires more than a mere right of use of property. Nicholson J stated in Butterworth v Lezemo Pty Ltd (1983) 8 ACLR 737, 749: "I think that participation goes beyond a mere right of use and bears a connotation that the participant, even if he has no proprietary interest in the asset, has an eventual right or expectation of receiving something in respect of it." Participation may also require some distribution of the profits, assets or realisation as there will be no "participation" if the profits obtained are derived solely as a result of that person's efforts: Butterworth v Lezemo at 749; Streeter v Pacific-Seven Pty Ltd (1985) 9 ACLR 790 at 793-4. A partner's share in a partnership which carries on a business undertaking or scheme would constitute participation or an interest in the relevant sense. "...in any profits, assets or realisation" In Brisbane Unit Development Corporation v Deming No 456 Pty Ltd No 2 [1983] 2 Qd R 92, Connolly J observed that the question posed by paragraph (a) of the definition is whether there is an acquisition of an interest ina financial undertaking or a scheme - it will not be sufficient, to fall within the words of the definition, for there to be an acquisition froman undertaking or a scheme. Therefore, if the only interest to be acquired is an interest in an asset which then ceases to be an asset of the scheme or undertaking, there will be no prescribed interest within the meaning of paragraph (a) of the definition. "Profits, assets or realisation" is to be interpreted broadly. "Profits" has been interpreted as the income of invested property - including any benefit, gain or pecuniary advantage accruing from the management use or sale of property or from the conduct of business: see Waldron v MG Securities A/Asia Ltd [1975] VR 508 at 530, per Pape J cited by Brinsden J in Maunder-Hartigan v Hamilton (1984) 2 ACLC 438. An interest in only one asset will suffice to constitute an interest in "profits, assets or realisation": see Wade v A Home Away (supra). Paragraph (c) of the definition: "any right to participate, or any interest...in any investment contract, whether or not the right or interest is enforceable": It has been observed that, where an owner of an interest in property has no right to enjoyment of possession for a substantial period of time, it is likely that the purchase of the interest has been made as an "investment": see Co-operative Building Society of South Australia v Australian Securities Commission (1993) 10 ACSR 89 at 100. The element imported by the definition of "investment contract" in s 5(1) of the Companies Code that the interest in or right in respect of property will or may be used in common with any other such interest or right must not arise from any ad hoc arrangement made after the contract, scheme or arrangement has been entered into. It must, according to the definition, arise "under or in accordance with, the terms of the investment": see also Munna Beach Apartments [1983] Qd R 151 at 154. What was the interest offered? "Offer" is used in its popular, and not its contractual or legal, sense: see Australian Softwood Forests at 134 per Mason J and Hurst v Vestcorp Ltd (1988) 12 NSWLR 394 at 438 per McHugh JA. It includes an invitation to make an offer: see Attorney-General (NSW) v The Mutual Home Loans Fund of Australia Ltd [1971] 2 NSWLR 162 at 165 per Sugerman ACJ. As Street CJ in Eq said in Australian Fixed Trusts [1974] 1 NSWLR 110 at 117 the phrases "offer to the public" and "invite the public to subscribe for or purchase any interest": "... encompass any solicitation of the public to enter into a course of negotiations calculated to result in the issue of an interest. It is not necessary to pause to examine the possible distinction between the concept of offering an interest to the public and inviting the public to subscribe for or purchase an interest. If what was intended to be "issued" to a member of the public was an "interest" within s 83, then in the present case the communications I have mentioned (advertisement, circular and booklet) would fall within the prohibitions in s. 83(1)." In Australian Softwood Forests (at 134) Mason J rejected an argument that "issue" in this context means no more than "proffer". In rejecting such a "limited meaning" his Honour said that the word "is sufficiently large in content to embrace the process by which" a binding contract is secured. The statutory definition of "issue" is that it includes "circulate, distribute and disseminate". In using the words "offer", "invite" and "issue" in ss 169-171 the legislature is seeking to encompass the process by which the public might subscribe for or purchase a prescribed interest commencing with the first solicitation and concluding with a binding contract pursuant to which the interest might be acquired. In that sense the words "offer", "invite" and "issue" do not constitute mutually exclusive categories; rather, they suggest a process any part of which might be caught by the statutory prohibition. In the present case it was sufficient that the trial Judge focused on the conduct of Gray & Winter in offering an interest, although, in reality, Gray & Winter was involved in each step in the process from the first solicitation up to the binding contract. The essential limiting element is the requirement that the offer, invitation or issue be to the public. In the context of considering whether the transaction involved an offer or issue to the public of a prescribed interest within the meaning of s 5(1) of the Companies Code his Honour the trial Judge observed (62 FCR 177) citing authority: "What Gray & Winter were offering (in the popular or commercial rather than the legal sense: Hurst at 438; O'Brien at 37) was the opportunity to acquire a one-twentieth share (or two or more shares, or a fraction of a share) in the Coles Myer building. The acquisition of this building in shared ownership was the general intention and common understanding of both Gray & Winter and the investors. The fact that some investors were not to become legal co-owners or mortgagors on title does not alter the fact that, commercially considered, this was a co-ownership scheme. On the title 18 co-owners are noted, including Dr and Mrs Schoeman as joint proprietors of one share. Of those co-owners, five (Terrey, Henderson, Green, Haarsma and Tranter) held on behalf of themselves and family members and three held on behalf of "stranger" co-partners (Connell/Walker, Gordon/Glass and Rutt/Morgan). Of this last group, Connell and Gordon also held their half shares on behalf of their spouses and themselves. But the investors not on title had enforceable equitable rights against the legal owners of the respective shares. Because the fruits of ownership were only to be realised over a substantial period of time, during which co-owners would be faced with complex demands of building management as well as financial and other issues as between themselves, a management structure such as a partnership, company or unit trust was essential. So viewed, the partnership was a necessary adjunct to co-ownership in the particular circumstances of this case, including the wide geographical dispersion of the co-owners and the lack of any pre-existing association between themselves or any appropriate expertise." We agree with the substance of the observations of Heerey J but would add that further and integral parts of the co-ownership undertaking or scheme offered to investors were: · the loan agreement which provided for vendor financing of the acquisition of the Coles Myer building by a loan of $16.265 million to be secured by a mortgage and associated guarantees; · the co-ownership was to be as partners (and sub-partners) in the Coles Myer Partnership. On the question of an "undertaking or scheme" within par (a) of s 5(1) of the Companies Code, his Honour identified the scheme in the present case as being "to acquire the Coles Myer building, hold it for a period during which the excess of interest charges over rental, together with depreciation allowances, would yield tax deductions, and then sell it for a capital profit". That was said to be self-evidently of a financial or business nature. On this aspect, his Honour concluded (62 FCR 180): "The investors obtained a 'right to participate' in any profits (whether of an income or capital nature) of the undertaking or scheme either because they became co-owners or because they would acquire equitable rights against co-owners. For the same reason, they obtained an 'interest' in 'assets' of the undertaking or scheme, viz the building itself." As well, his Honour found that there was an "investment contract" within par (c) noting (62 FCR 180): "There was also an 'investment contract'. There was a 'scheme or arrangement' (see above). There was the investment of money - the initial subscription of $40,500 and subsequent contributions as predicted in the one-page summary. There was the acquisition of an 'interest in or right in respect of property' - an undivided share as a tenant in common in the Coles Myer building or equitable rights against a holder of such a share. That interest was to be 'used or employed in common with any other interest or right in respect of the property' - the undivided shares of the other co-owners." In our view the conclusions reached by his Honour are correct save that the co-ownership undertaking or scheme included the vendor financing and the Coles Myer Partnership as integral elements of it. However, those additions do not in any way detract from his Honour's conclusion that, under paras (a) and (c), the interest offered was a prescribed interest. If anything, the broader description reinforces his Honour's conclusion, which is equally applicable and correct if the interest of co-owners is that of co-owners as partners and the financial contribution includes the vendor financing for which each partner was to be jointly and severally liable. If, contrary to our view, the partnership was not formed until 9 August 1990, that does not affect our opinion that in marketing the scheme Gray & Winter was offering an interest in a proposed partnership that was to acquire the Coles Myer building. The offer of an interest in a partnership or a proposed partnership raised the application of s 5(1)(g)(i) which excludes from the definition of "participation interest" any interests in a partnership or a proposed partnership agreement unless it is promoted as part of a scheme by a person whose ordinary business includes the promotion of similar undertakings. The evidence established that Gray & Winter offered the interest to the investors on the basis that their acquisition of the interest was to be as partners in the Coles Myer partnership. But the interest does not fall within the exception in s 5(1)(g) because the ordinary business of Gray & Winter included the promotion of "similar undertakings, schemes, enterprises or investment contracts". Consequently, the potential exclusion of an interest, which might otherwise fall within sub-paragraphs (a) and (c), is not applicable. We agree with his Honour's observations about the application of s 5(1)(g)(i) to the offer of Gray & Winter (62 FCR 183-185): "But in any case subpar (i) applies. On the evidence, Gray & Winter's ordinary business included the promotion of similar undertakings, schemes, enterprises or investment contracts but the business of Hudson Conway and Amadio did not. However, subpar (i) in my opinion applies because the undertaking or scheme was 'promoted by' Gray & Winter. In other words, subpar (i) applies if the person whose ordinary business includes the promotion of such undertakings or schemes either promotes the scheme himself or has someone else promote it on his behalf. Such a construction is consistent with the principle established by Australian Fixed Trusts that the absence of agency of promoter on behalf of issuer does not prevent the issue being caught. Conversely, if the promoter is the agent of the issuer, and the issuer's ordinary business includes the promotion of such schemes but the promoter's does not, the issue would also be caught. The concluding words of par (i) - 'whether or not that person [ie the promoter] is, or is to become, a party to the agreement or proposed agreement' - support the conclusion reached. They expressly contemplate that the statute will apply where, as in the present case, the promoter drops out after recruiting investors and does not become a party to the partnership agreement. As originally enacted (as par (f) of the definition of 'interest' in the 1961 Act), interests in partnership agreements were excluded without qualification. The predecessor to subpar (i) was inserted in the Victorian legislation in 1975. The purpose of the regulation of prescribed interests generally is the protection of investors. In narrowing the scope of the exclusion for partnership interests, the legislature must be taken to have determined that the exclusion went too far where professional promoters were involved. It would be an odd intention to impute to Parliament that exclusion of a partnership interest promoted by a professional promoter depended on whether or not it was being done on behalf of another. That distinction would make no difference to the investor. The mischief is promotion to the public without registration of a prospectus." (Emphasis in original) The trial Judge, having accepted the proposition that an offer may be made by a company other than that which would issue the interest to those accepting the offer, was led to hold (62 FCR 180): "Applied to the present case, this principle means that even though, as I have found, Gray & Winter were not acting as the agent of Hudson Conway or Amadio, the statute will have been infringed even if it was Gray & Winter who made the 'offer' to the public and Amadio who issued the 'prescribed interest'. As already noted, 'offer' in this context does not bear a technical contractual meaning; it encompasses, in the words of Street CJ in Eq (Australian Fixed Trusts at 117), 'any solicitation of the public to enter into a course of negotiations calculated to result in the issue of an interest'. Thus 'offer' does not mean only a promise which is capable on acceptance of constituting a contract: Softwood at 134." In our view the interest the subject of the offer by Gray & Winter to potential investors was correctly held by his Honour to be a "participation interest" within s 5(1)(a) and (c). The residential unit cases

Amadio and Hudson Conway placed strong reliance on a series of decisions which have held that the offer and subsequent sale as an investment to members of the public of strata title or residential units together with undivided shares in common areas or in a body corporate which is responsible for managing those areas is not the offer or issue of a prescribed interest: see Munna Beach Apartments Ltd v Kennedy (supra) and Brisbane Unit Development Corporation Pty Ltd (supra). The appellants contended that the same conclusion is to be reached even if the offer includes provision for the buyers to appoint agents to manage and let the units which they are acquiring as investments as part of a "pooling" arrangement: see Jones v Acfold Investments Pty Ltd (1983) 8 ACLR 488 and on appeal (1984) 6 FCR 512. In Maunder-Hartigan v Hamilton (1984) 2 ACLC 438 Brinsden and Pidgeon JJ (Wallace J dissenting) held that sales of residential units and a share in common property in a holiday complex did not breach the prescribed interest provisions notwithstanding that the investors were to lease back, with a common management agreement, the units to the vendor for renting with a guaranteed return of not less than 7.04% on the investment in respect of their own residential units. It was important to the decision of the majority that the management and leaseback arrangement was with and for the benefit of the individual owners who were separately entitled to the rent for their units. However, in Co-operative Building Society of South Australia Ltd v Australian Securities Commission (supra) Jenkinson J found that a similar scheme constituted a prescribed interest. His Honour distinguished Maunder-Hartigan (at 98) by reason of the different contractual arrangements in each case and concluded (at 99-100) that the purchasers of a strata unit, who acquired their interest in the strata unit as unit holders in a unit trust, had a right to participate in the profits of a business undertaking or scheme or a common enterprise which was not merely an interest deriving from the interest in the unit trust. The right to participate in the profits derived, in his Honour's opinion, from the specific terms of the contract of sale of the strata unit which incorporated an "implied term...that the vendor warrants that each unit previously sold has been sold under a contract the express terms of which are the same". His Honour said that it was an implied term that: "... the vendor warrants that each unit previously sold has been sold under a contract the express terms of which are the same as those of that contract and that the vendor promises that all the other units not yet sold will be sold under contracts in the same terms. It is that implied term which confers, on the purchaser his right to participate in the profits of the scheme: without that term the scheme and the common enterprise as I have described them would not exist." (at 99) His Honour described the implied term as being not only the source of the purchaser's right to participate in an enterprise, but also as contributing "an important definitional element of the common enterprise" pursuant to paragraph (b) of the definition of participation interest. He was also of the view that there was an offer of a right to participate in an "investment contract" pursuant to paragraph (c) of the definition. His Honour arrived at that conclusion on the basis that, because interests in the units had been acquired by purchasers who had no right to enjoy possession for the first thirty years of ownership of the fee simple, a "not insubstantial part of the period during which possession might be enjoyed", that suggested that an investment of the purchase price in return for profits was being made during the ensuing ten years by the carrying out of what the contract contemplated. These last two decisions demonstrate how easily the boundary of prescribed interests may be crossed where the rights or interests offered are to be used or employed in common with the rights or interests offered to other investors and are to result in common and interrelated rights, benefits and obligations between the investors. In cases such as Munna Beach or Brisbane Unit Development Corporation, the owners of interests held the title to a specific apartment, as well as to a share in the common property. Thus, where separate interests in an investment are to be held by individuals and there are to be separate benefits and obligations on the part of the holder of each interest the separate and discrete interest offered to the participants may not be a prescribed interest. However, where investors hold title to an asset with no separate or discrete interest which they could use or employ for their own benefit and will be obliged to use and mortgage their interest in common with the other investors if they wish to make a profit from it, the interest held is more likely to have the requisite interaction of rights, benefits and obligations and therefore constitute a prescribed interest under sub-paragraphs (a) and (c). The present case, which falls into the latter category, is clearly distinguishable from the co-ownership and residential unit cases relied upon by the appellants for several reasons: · the offer to the investors was of an interest in a partnership; · the interest "offered" involved use by the partnership of the co-owned property interests in common for profit and also to obtain and to secure the principal sum for which the partners were jointly and severally liable with rights of contribution as between all of the parties, ie partners, sub-partners and guarantors and their respective interests; · each partner or sub-partner was not free to deal with his, her or its interest which was encumbered by that partner's obligations as a partner and the inter-related rights of contribution (and where applicable, of subrogation) of all other persons directly or indirectly liable for the whole of the principal sum and interest; · the interest was offered on the basis that investors who accepted the offer would do so as the partners of the Coles Myer partnership and not as persons who were to hold separate or discrete and unrelated interests solely as tenants in common; · accordingly, the partners' respective interests in the building were to be held subject to the obligations of the co-owners as partners and not separately or solely for the benefit or at the will or direction of the co-owners.

The offer - by whom? Paragraphs (a) and (c) of the definition of "interest" are not concerned with the identity of the persons who carry on the undertaking or scheme or are parties to the investment contract. Therefore, as was pointed out by Mason J in Australian Softwood Forest at 129, it is not material that "the person who offers the 'interests' to the public does not himself carry on the undertaking or scheme." Although Mason J was referring to an offer of an interest as defined under paragraph (a) we see no reason why the same observation cannot be made in respect of an interest in an investment contract as defined in paragraph (c). In Attorney-General for New South Wales v Australian Fixed Trusts Limited (supra) at 117 Street CJ in Eq observed that it matters not that the company which made the offer or invitation to the public did not issue the interest. His Honour added: "The relevant inquiry is to be directed towards determining whether there has been a solicitation, and, if so, what it is that the member of the public is to receive, should he yield to the recommendations urged upon him, regardless of the identity of the person from whom he will receive it." Australia Fixed Trusts was cited with approval and applied by the Full Court in Australian Breeders Co-operative Society. If Australia Fixed Trusts is to be applied it would not be material to the prohibition in ss 169-171 that: · the offer of a prescribed interest was by Gray & Winter which did not itself participate in and was not a party to the undertaking, scheme or investment contract; · a prescribed interest offered by Gray & Winter was to be issued or contracted to be provided to investors accepting the offer by Hudson Conway or Amadio. Counsel for Amadio and Hudson Conway contended that Australian Fixed Trusts should not be followed or was distinguishable by reason of the fact that, in that case, the interest was offered to the public by the holding company of the company participating in the scheme whereas in the present case their clients' participation in the scheme was as innocent third parties. We do not accept that Australian Fixed Trusts should not be followed. The decision of Street CJ accords with the relevant statutory provisions and the decisions applying them and is consistent with the underlying statutory policy to protect investors. That protection would be significantly undermined if the relevant provisions were interpreted as requiring that, for a contravention to have occurred, the offeror also be, or have acted in concert with, the issuer or provider of the interest. Further, in our view the principle established by the cases to which we have referred does not allow the distinction suggested by counsel: see for example Kirby P in Hurst at 412. It seems to us that whether a vendor of an interest is an innocent third party is not relevant to whether a breach has occurred by reason of the offer to the public of that interest by a scheme promoter. Finally, we do not accept that Hudson Conway or Amadio was an innocent third party. They were associated with, and agreed to pay a substantial fee for the promotion of the scheme by, Gray & Winter. Although in a loose sense the fee was "paid" by the investors paying an increased purchase price to Amadio, the simple fact is that Amadio or Hudson Conway agreed to pay the acquisition fee out of their own funds and did so out of the purchase price paid to Amadio. Amadio "issued" or provided the interest offered by Gray & Winter (save for the partnership interest) and, when it did so, was well aware that the interest it was issuing was to a partnership of investors whom it and Hudson Conway had commissioned Gray & Winter to locate. In arriving at this conclusion, we have treated Hudson Conway as acting as agent for Amadio and the knowledge of Williams, Hamilton and Ms McCallum acquired in the course of acting as agents of Hudson Conway and Amadio as being the knowledge of their principal: see Krakowski v Eurolynx Properties Limited (1995) 183 CLR 563 at 582-3 per Brennan, Deane, Gaudron and McHugh JJ. Whether the innocence of a vendor of property, sold as part of a scheme which breaches ss 169-171 by reason of a prior offer of a prescribed interest by a third party, is material to relief is a question to which we will turn later in these reasons. It follows from the foregoing that Gray & Winter offered a prescribed interest in contravention of ss 169-171 if the offer was "to the public".

3.6 Was the Prescribed Interest Offered by Gray & Winter to the Public ? Section 5(4) provides for an offer to the public to include an offer to any section of the public whether "selected as clients of the person making the offer or issuing the invitation or in any other manner". Whether an offer, invitation or issue is made to the public is a question of fact. The criteria for acceptance of the offer, invitation or issue have often been critical in the resolution of this question. In Australian Softwood Forests, Mason J, in discussing the solicitation of individuals to participate in a pine plantation scheme said (at 135-6): "Although the company through the brokers negotiated with members of the public individually, the persons signed up were approached as members of the public. The facts do not suggest that the company or the brokers looked to a particular class of person as growers. The documents contain no hint of any restriction to a class or group of persons having some common characteristic or qualification, except that of possessing the money with which to buy the trees. It is worth recalling the remarks of Kitto J, in Lee v Evans. His Honour there said: 'I see no reason to doubt that the statement of an invitation even to one person only may be seen, when considered in the light of all the circumstances, to be part of, even though only the first step in, the communication of the invitation to the public generally, so that if the lone hearer were to tell some stranger of it the stranger would be right in treating it as open to acceptance by him no less than by the hearer .... I think it is going too far to say that proof of an invitation given to a person as a member of the public is necessarily proof of an invitation to the public. If a person, wishing to obtain a loan, makes his request to a stranger whom he picks at random in the street, it remains, I think, a question of fact whether his invitation is to the public or to the selected individual only ...[T]he distinction must not be overlooked between the case of an invitation which itself is open to acceptance by any member of the public who may be interested and the case of an invitation which itself is open to acceptance by a specific individual only but, if declined by him, is likely to be followed by similar invitations to other specific individuals in succession until an acceptor is found. The first of these is a case of an invitation to the public; the second, in my opinion, is not.'" This question was further considered by the High Court in Corporate Affairs Commission (S.A.) v Australian Central Credit Union (1985) 157 CLR 201, where Mason ACJ and Wilson, Deane and Dawson JJ said: "In a case where an offer is made by a stranger and there is no rational connexion between the characteristic which sets the members of a group apart and the nature of the offer made to them the group will, at least ordinarily, constitute a section of the public for the purposes of the offer. If, however, there is some subsisting special relationship between offeror and members of a group or some rational connexion between the common characteristic of members of a group and the offer made to them, the question whether the group constitutes a section of the public for the purposes of the offer will fall to be determined by reference to a variety of factors of which the most important will ordinarily be: the number of persons comprising the group, the subsisting relationship between the offeror and the members of the group, the nature and content of the offer, the significance of any particular characteristic with identifies the members of the group and any connexion between that characteristic and the offer." (at 208) "...No particular number of persons can be designated as being, of itself, necessarily sufficient or inadequate to constitute the public or a section of the public for every purpose. 'Anything from two to infinity may serve: perhaps even one, if he is intended to be the first of a series of subscribers, but makes further proceedings needless by himself subscribing the whole': Nash v Lynde." (at 209) and: "...It is legitimate to consider, in addition to the matters already mentioned, whether the relevant group of persons is one which Parliament could reasonably be expected to have had in mind as part of the investing public to be protected by the disclosure requirements." (at 211). Their Honours concluded that the subsisting special relationship of the Credit Union and its restricted and well defined membership, together with the rational connexion between the common characteristic of the members and the offer made, resulted in the offer not being an offer to the public or a section thereof. It is necessary to emphasise that the cases establish that, in determining whether an offer has been made to the public, the focus is upon the audience actually targeted rather than the persons who ultimately invested: see Hurst v Vestcorp at 405 per Kirby P. That approach has led to a different conclusion from that arrived at in Australian Central Credit Union in respect of offers which have been made to clients of solicitors or accountants to participate in tax avoidance schemes. In Hurst v Vestcorp McHugh JA said at 438: "An offer is made to the public when it is apparent from the terms of the offer or the circumstances in which it is made that it may be accepted by any member of the public who wishes to do so." Of particular relevance to the issues in the present case are the observations of McHugh JA at 440: "...the facts of this case demonstrate to the relevant degree of satisfaction that the offer was made to the public. An exhibit (exhibit 10) showed that investors in the film scheme came from every State of Australia and from places as far apart as Townsville in Northern Queensland and Perth in Western Australia. The bulk of investors were from New South Wales, Queensland and Western Australia. As counsel for the appellants pointed out, a variety of marketing techniques were used to obtain investors. They included the publication of circulars, attending meetings with potential investors, and offering commissions to accountants for introducing investors. At least four investors heard of the scheme by word of mouth and were accepted as investors. Another investor with no previous association with Mr Fox received the circular letter through the mail. ... Among the findings of the learned trial judge were findings that no applicant for investment was rejected and that there was no restriction on any person being accepted. When those findings are coupled with the marketing methods used by the respondent, the most probable conclusion is that investment in the scheme was open to any member of the public. By itself the offer of commission to accountants in return for introducing investors is a powerful, if not decisive, factor in favour of that conclusion. Employment of agents for commission to introduce suitable investors seems almost conclusive evidence of an offer to the public. It is no answer to that proposition to say that the agents themselves came from a specially selected group or that many of the investors came from their clients. The overwhelming inference is that persons were accepted as investors, not because they were clients of accountants or had participated in previous tax schemes or were partners or members of the families of such persons but because, as members of the public, they had the funds to invest in a scheme which gave them tax advantages." and at 441: "...the making of the offer in the first place to persons who looked to Mr Fox or to accountants having some association with him and close associates of those persons is irrelevant in the light of his Honour's findings that 'the evidence establishes no restrictions on those who would be accepted as investors'." Kirby P arrived at the same conclusion. His Honour said (at 409) that the offer: "... was open to those members of the investing public who came into possession of the second "Dear member" circular letter. That letter was open to the public and represented an offer to investors, not as friends or past associates, but as members of the public. As such, it attracted the obligations imposed by s 82." In O'Brien v Melbank Corporation Ltd (1991) 7 ACSR 19 the Court was concerned with an offer to acquire an interest in a cattle breeding venture as part of a tax minimisation scheme. The interests were sold mainly to people who had earlier bought interests and by letting it be known among tax advisers, particularly certain solicitors and accountants, that the investment was available. Fullagar J (at 28-30) and McGarvie J (at 36-48) rejected the contention that the offer, being made only to a private network of established clients or investors, constituted an offer to persons in a subsisting special relationship and therefore was not an offer to the public. Their Honours were satisfied that the offers or invitations were to the public as they were open to be acted upon by members of the public who became aware of them and there were no criteria by which the offers or invitations were restricted to any particular persons or class or group of persons having some common characteristic or qualification. After referring to the observations of McHugh JA (at 440) and Kirby P (at 408) in Hurst, Heerey J arrived at the following conclusions on this issue (at 62 FCR 182-3): "In the present case there is the element of payment of commission. The stock of interests that Gray & Winter had available on offer (O'Brien at 41) was available to anybody who could satisfy the vendor's financial requirements. Since any investment scheme requires investors who have money or who can borrow it to invest, that in itself can hardly constitute a restriction sufficient to prevent the offer being one made to the public: see the comment of Mason J in Softwood cited by McHugh JA in Hurst. There is no evidence in the present case of any applicant for investment being rejected. Gray & Winter were constantly on the lookout for prospective investors, whether or not they were clients of any, or any particular, accountants. Mr Winter, in the course of soliciting the investment of his client, landlady and friend Mrs Lee, also tried (successfully) to recruit her brother Mr Green and (unsuccessfully) her cousin Mr Stephen Kerrison. Mr Garrick Gray sought to interest clients of Nevett Ford through Mr Stephens. To adopt and adapt a test applied by Kirby P in Hurst at 408, if a wealthy patient of the Investigator Medical Clinic at Port Lincoln had wandered by mistake into the doctors' lunchtime meeting and, becoming impressed by Mr Garrick Gray, had expressed a desire to invest, can it be seriously suggested that Mr Gray would have politely declined the patient's request on the ground that he was not a client of Bird Cameron? This is a stronger case than Hurst. In that case there was some basis for an argument, albeit one that did not succeed on the facts (at 440) (and may not have mattered even if it did: O'Brien at 47), that investors were all part of a network or circle, viz clients of the promoter Mr Peter Fox or investors in similar schemes promoted by him, or accountants who had previously dealt with him, or partners or family members of persons in those categories. In Lee at 292 Windeyer J cited with approval Palmer's Company Precedents (16th ed, 1951), p 10 where it is said: 'The test seems to be this - is there a sufficiently intimate subsisting connection between the company or the person making the offer and the persons to whom the offer is made as friends, customers, or otherwise to make the offer a domestic concern.' Although his Honour dissented as to the result, the passage from Palmer appears consistent with the reasoning of the majority. In the present case there was no subsisting network or circle connecting potential investors to the promoters Gray & Winter. The theory obviously underlying Gray & Winter's modus operandi was that they were only dealing with clients of accountants at the latter's' invitation. Hence investors were required to subscribe to the fictional assertion in the Gray & Winter instruction letter that the firm 'did not approach [the investor] or canvass [his or her] interest in any way'. But Mrs Lee and Mr Green were not, in connection with the solicitation of their investments, clients of any accountant at all. Of the others, some were clients of various offices of Bird Cameron and some were clients of Huntley McArdle & Glass, but there was no connection between those firms. Apart from the coincidence of Mr Lynch having moved from Millicent to Port Lincoln, there was no relevant connection between the various offices of Bird Cameron or their respective clients. Gray & Winter did not set out to recruit investors from among some existing circle or network or other existing group of people defined by some common characteristic. Rather, they hoped that accountants and solicitors, spurred on by the hope of large commissions for not much work, would find potential investors. And if anybody suitable was encountered along the way, like Mrs Lee or Mr Green or Mr Kerrison or clients of Nevett Ford, they would be targets too." We respectfully agree with his Honour's observations and conclusions. They accord with the evidence and the case law to which we have referred, are clearly correct, and are also fully supported by the reasoning of Wilcox and Lindgren JJ (with whom Lee J agreed) in Australian Breeders Co-operative Society at 531-534, where a similar conclusion was reached in analogous circumstances. Accordingly, contrary to the submissions of Amadio and Hudson Conway, a prescribed interest was offered by Gray & Winter to the public. 3.7 Was a Prescribed Interest Issued by Amadio to the Public ? At trial the primary basis on which the applicants put their case against Amadio for breach of the prescribed interest provisions was that it was liable for the conduct of its agent Gray & Winter. His Honour concluded (62 FCR 180) that Gray & Winter did not act as agent for Amadio or Hudson Conway. His Honour appeared to conclude that as a consequence of that finding, the applicants' case for breach by Amadio failed, as his Honour said (62 FCR 180): "the statute will have been infringed even if it was Gray & Winter who made the 'offer' to the public and Amadio who issued the 'prescribed interest'." We have already concluded that, save for the interest in the partnership agreement, Amadio issued the prescribed interest offered by Gray & Winter, as the interest Amadio issued to investors was, in substance, that which Gray & Winter had offered and each was a prescribed interest. However, importantly, his Honour in his detailed reasons in the first judgment did not find that the prescribed interest issued by Amadio was issued to the public. That was a contentious issue which would require clear and explicit findings. Once agency (of Gray & Winter) was rejected by his Honour, the question of whether Hudson Conway or Amadio offered or issued a prescribed interest to the public was a discrete matter which required consideration of issues of fact and law that differed from, but overlapped with, the issues of fact and law relevant to whether Gray & Winter made an offer to the public. His Honour found that it had been Gray & Winter, rather than Amadio, which breached the prescribed interest provisions. That finding is also consistent with his Honour's discussion of the issue of Amadio's innocence, or more accurately, the lack thereof. His Honour, in discussing that issue (at 62 FCR 189), did not suggest that Amadio had breached the statutory provisions; rather he observed that the circumstances were such that Hudson Conway ought to have been on notice that a breach of the prescribed interest provisions by Gray & Winter was likely. In these circumstances, although he did not expressly say so, we would have assumed that his Honour did not find that Amadio breached the prescribed interest provisions. However two other statements of his Honour suggest otherwise. In his summary of findings in the first judgment (62 FCR 217) Heerey J said: "I find the sale of the Coles Myer building by Amadio to those of the applicants who were purchasers, coupled with the mortgage back to Amadio and associated guarantee, contravened the prescribed interest provisions of the Companies Code. Hudson Conway and Amadio would be unjustly enriched if they were to retain the benefit of those transactions." Strictly speaking, his Honour's earlier findings were that it was the offer of Gray & Winter rather than the sale by Amadio that breached the relevant provisions. In his second decision, in dismissing Amadio's contribution claims (62 FCR 236), his Honour said: "In the present case the cause of action raised by the cross-claims now under consideration must necessarily rely on the transactions which I have held to be unlawful, that is to say the offer (by Gray & Winter) and the issue (by Amadio) of prescribed interests to the public: Gollan v Nugent (1988) 166 CLR 18 at 46." In the last two passages his Honour appears to have treated Amadio as having breached the prescribed interest provisions by issuing a prescribed interest to the public. We have some difficulty in reconciling these last two passages with the substantive findings of his Honour in the first judgment. The passage cited by his Honour in Gollan v Nugent relates to the general proposition that relief will be denied to a plaintiff who has to rely upon an unlawful or immoral transaction to establish a cause of action. Reading his Honour's detailed and carefully expressed reasons in his first decision as a whole, our view is that his Honour did not find that Amadio had breached the prescribed interest provisions. As pointed out above, for his Honour to have arrived at the conclusion that Amadio breached the provisions he would have had to make factual findings in relation to whether Amadio offered or issued a prescribed interest to the public. We are satisfied that no such findings were made. Accordingly, notwithstanding some understandable confusion on this issue we are satisfied that his Honour dealt with the substantive matters of breach and relief as between Amadio and the investors on the basis that: · Gray & Winter offered a prescribed interest to the public; · Amadio issued a prescribed interest to the investors located by Gray & Winter as a consequence of Gray & Winter's offer to the public; · the transactions entered into between Amadio and the investors (ie the prescribed interest issued by Amadio) as a consequence of the unlawful offer to the public were unenforceable. To the extent that his Honour proceeded on a different basis in relation to the prescribed interest issues in his second decision, then in our respectful view his Honour erred in doing so. However, for reasons which are set out later in these reasons that error did not vitiate the relief granted by his Honour. We would add that, although in the first decision his Honour did not find that Amadio had breached the prescribed interest provisions, it does not follow that there was no evidence to support a finding of breach. The circumstances in which the increased acquisition fee was agreed to be provided, and the activities of Gray & Winter to earn the fee, when coupled with the combined conduct and knowledge of Williams, Hamilton and Ms McCallum in relation to the transactions, might have been sufficient to justify a finding of breach against Amadio. In that regard it might be an oversimplification to say, as Amadio's counsel did, that Amadio's target was not the "public or a section thereof" but was merely the purchasers selected or nominated by Gray & Winter. The acquisition fee was paid to Gray & Winter to locate offerees from whom the purchasers were to be selected or nominated. However, it is unnecessary to pursue that matter further as we are satisfied that, even if the finding of the breach by Amadio or Hudson Conway was open, the preferable view is that no such finding was intended to be made by his Honour. 3.8 What are the Consequences of the Offer by Gray & Winter of a Prescribed Interest to the Public ? It is now well established that, subject to s 174(2) and the possibility of severing parts of a transaction, the consequence of a contravention of the prescribed interest provisions is that the contracts which resulted from acceptance of the offer of the prescribed interest are unenforceable: see Hurst per Kirby P at 412-413, Mahony JA at 429 and McHugh JA at 443; and O'Brien per Fullagar J at 31-32 and McGarvie J at 48. On the issue of illegality, Heerey J said at 62 FCR 184: "All the members of the court in Hurst, and a majority in O'Brien (Fullagar and McGarvie JJ), held that a contract which results from the offer of an interest made in breach of the prescribed interest provisions is unenforceable. Their Honours gave detailed reasons why the application of the principles in Yango should produce such a result: Hurst per Kirby P at 410-413, per Mahony JA at 428, per McHugh JA at 441-443; O'Brien per Fullagar J at 31, per McGarvie J at 48. It is sufficient to say that I respectfully agree and find the present case relevantly indistinguishable. I should only add that I see particular significance (as did McHugh JA in Hurst at 443) in s 174(2). That provision assumes that otherwise a contract made in breach of the provisions would be unenforceable. Also it removes an obvious unfairness and absurdity of the kind which influenced the decision of the High Court in Yango, viz that innocent parties would lose the benefits of contracts they sought to enforce." This matter was also considered by the Full Court in Australian Breeders Co-operative Society. At 538 Wilcox and Lindgren JJ (with whom Lee J agreed on this issue) considered O'Brien and Hurst and other cases on this issue and agreed with the conclusion of Heerey J: "...that the consequence of a contravention of s 169 is to render void and unenforceable all transactions made in consequence of that contravention." We have reservations about their Honours' use of the word "void" in the context of a contravention of the prescribed interest provisions, particularly in view of s 174(2) which provides that a person is not relieved from any liability to any holder of a prescribed interest by reason of the contravention. In Restitution Law in Australia, (K Mason and J W Carter, Butterworths, 1995) the authors note at 317: " the contrast between 'void', 'unenforceable' and 'illegal' contracts is not easy to draw in the abstract or in practice." In the present context it is more accurate to say that transactions entered into in consequence of a contravention of the prescribed interest provisions are unenforceable except by the holder of the prescribed interest. Accordingly the contract of sale, mortgage and associated guarantees were transactions entered into by Amadio and the investors as a consequence of the contravention of ss 169-171 which occurred by reason of the offer to the public of a prescribed interest by Gray & Winter. Subject to the issue of severance, these transactions were correctly held by his Honour to be unenforceable. On the issue of severance Heerey J concluded (at 62 FCR 184): "In my opinion the contract of sale, mortgage and guarantee formed 'an indivisible whole which cannot be taken to pieces without altering its nature': McFarlane v Daniell (1938) SR (NSW) 337 at 345; Hurst at 443. The finance from the vendor was an integral part of the investment package. It enabled entry with a relatively small initial payment compared to the total value of the property and was essential for the taxation advantages. It was a special condition of the contract of sale (condition 2) that the vendor should advance to the purchasers the sum of $16.265 million to be secured upon a mortgage in the form of a draft annexed to the contract. In reality, the 'offer' or, in legal terms, the invitation to treat, was to subscribe $40,500 and to enter into the mortgage back to the vendor. It was the same entity, Amadio, that was the vendor and the lender. No third party lender was involved. In marketing of the scheme, especially as presented in the cashflow, the finance offered was an integral part of the scheme, not a facility available to investors which they might or might not take up. There was never the slightest suggestion that anyone could or would buy without borrowing from Amadio, or borrow from Amadio without buying." In Australian Breeders Co-operative Society at 538-540 Wilcox and Lindgren JJ also considered the issue of severability and at 540 concluded that: "Having regard to the interdependence of the documents, it seems to us that the illegality of the management agreement necessarily infected the loan agreements and mortgages. Inevitably, in the words of Jordan CJ, the elimination of the invalid promises changes the kind of contract made between MANL and the Investors. We hold MANL is not entitled to enforce against the Investors any of the documents dated 30 June 1989. This conclusion is consistent with that reached by Heerey J in the Henderson cases." (Emphasis in original) In our view Heerey J was clearly correct in concluding that the doctrine of severance has no application to the contract of sale, mortgage or the associated guarantees. The consequences of that conclusion, which are dictated by the legislative scheme and in particular s 174(2), are as follows: · notwithstanding that the contract of sale was unenforceable by the vendor, the vendor remained liable to the purchasers under the contract by reason of s 174(2), with the consequence that the transfer of the property to the purchasers pursuant to the contract was valid; · the mortgage and the associated guarantees are unenforceable; · notwithstanding that the mortgage and associated guarantees were unenforceable by the mortgagee it remained liable to advance the principal sum to the mortgagors (ie the purchasers) and accordingly it was validly advanced, although the obligation by the mortgagors to repay it with interest was unenforceable. However, it does not follow that these consequences, and the substantial losses they would entail for Amadio and the corresponding enrichment of the investors who would receive property without being liable to repay the money they borrowed from the vendor to acquire it, are the end of the matter. As in Hurst, O'Brien and Australian Breeders Co-operative Society, the consequences flowing from a breach of the prescribed interest provisions raise the question of the relief, including restitutionary relief, that is appropriate in all the circumstances of the case.

3.9 What Relief is Appropriate ? In the present case Amadio sought, either directly or indirectly, the repayment of the moneys which it had lent to the investors essentially on the ground of restitution for unjust enrichment. Amadio contended that the investors have had the benefit of their bargain and ought to be liable for the loan made in good faith by Amadio to enable them to acquire the property. The claim is analogous to that considered by Wilcox and Lindgren JJ (with whom Lee J agreed on the issue) in Australian Breeders Co-operative Society at 540-541 where their Honours said, in relation to a claim for restitution by Mortgage Acceptance Nominees Limited ("MANL"), the financier of a venture which was held to have breached the prescribed interest provisions: "Restitution By a notice of contention MANL asserts that, if its leases, loans and mortgages are held to be unenforceable, it is entitled to recover, "on a quantum meruit basis on the ground of restitution for unjust enrichment", the moneys paid by it on behalf of the syndicate members or lent to them. Counsel refers to a number of cases, including Hurst, O'Brien and Davies, in which it was held that a lender in the position of MANL was entitled to recover moneys paid pursuant to an illegal contract where there would otherwise be unjust enrichment. As explained by the High Court in Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 and David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, the concept of unjust enrichment is a recognition by the law that, in certain categories of cases, an obligation arises for a person who has been enriched to make a compensatory payment to a person who has sustained a countervailing detriment. The right to an order for such a payment depends on proof that the case falls within an appropriate category of case, such as mistake, duress or illegality. If there is enrichment in such a case, prima facie, the enrichment is unjust and an order will be made that the enriched party compensate the party at whose expense the enrichment was obtained. This prima facie situation will not apply if the enriched party shows matters or circumstances that make receipt (or retention) of the payment not unjust. See David Securities at 379 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ. Where a statute discloses that Parliament intended to exclude restitution, perhaps for the better enforcement of the terms of the statute, no prima facie obligation to make restitution will arise from the illegality flowing from contravention of the statute. See Pavey at 229 per Mason and Wilson JJ and at 262 per Deane J. The Code does not expressly indicate that a lender of money, under a transaction made unenforceable by s 169, may not obtain a restitution order against the borrower. In Henderson, Heerey J considered whether the identical provisions of the Victorian statute implied an intention to exclude restitution. His Honour did not reach a conclusion about the matter and, in effect, determined that, if a prima facie obligation to make restitution arose, it had been displaced in that case by other circumstances recognised by the law as making an order for restitution unjust. In Stammers v Akron Securities Ltd the appellant contended 'the taint of illegality blocked the respondent both on a contractual and a restitutionary basis' (see 499) but the contractual claim succeeded. In our opinion there is nothing in the Code that suggests an intention to exclude the remedy of restitution, in the case of a breach of s 169. We respectfully agree with the observations by McHugh J in Hurst (at 445) in relation to provisions analogous to those of s 169. The reasoning of Mason and Wilson JJ in Pavey (at 229) is as applicable to this case as it was in that." Their Honours' conclusion that there is nothing in the Companies Code that suggests an intention to exclude restitutionary relief in the case of a breach of ss 169-171 is consistent with Hurst and, in our view, correctly states the law which is applicable in the present case. The conclusion is also consistent with the fact that the Code does not prohibit the making of a contract pursuant to which a prescribed interest is sold. Rather, it prohibits the process by which a prescribed interest is offered or issued to the public without, amongst other things, a registered prospectus. Thus, as Hurst, O'Brien and Australian Breeders Co-operative demonstrate, the unenforceability of a contract entered into as a consequence of a breach of the prescribed interest provisions arises by reason of the policy of the statute and not by reason of a direct statutory prohibition against such contracts. The issue of relief had a troubled history before his Honour mainly because of the complex and widely divergent submissions of the parties as to how the illegality doctrine should be applied to a breach of the prescribed interest provisions. In our view, the decision of the Full Court in Australian Breeders Co-operative, which was handed down after the conclusion of the appeal, has greatly assisted in clarifying the uncertainty that might have existed previously. It has done so, not so much by establishing any new principle, but by clarifying the principles which have been established by the decisions referred to in the passage set out above (most of which were the subject of submissions by the parties). The conclusion that restitutionary relief is not excluded in a case of a breach of the prescribed interest provisions is sufficient to resolve many of the difficult issues of illegality considered by Heerey J in his second decision. In that decision, his Honour appeared initially to adopt the view that the statute forbids restitutionary relief in favour of Amadio in respect of the loan but that it is available in favour of Amadio in respect of the land (62 FCR 228). In the final orders his Honour granted restitutionary relief in favour of Amadio by ordering that the land be re-transferred to it. Likewise, in his second decision his Honour said at one point that the applicants were not seeking equitable relief (62 FCR 228) but ultimately concluded that equitable restitutionary relief should be granted to them (62 FCR 232). In our view those difficulties arose as a consequence of the parties putting a series of complex proposals on the basis that, in ascertaining how the losses were ultimately to be borne, his Honour was to do what was fair and just in all of the circumstances. At the heart of Amadio's restitutionary claims was the proposition that it was innocent and accordingly, other respondent debtors, who were not innocent, should bear their share of the losses. That led its counsel to contend, before his Honour and on appeal, that although Amadio accepted that as a consequence of his Honour's first reasons for judgment the applicants were entitled to a declaration that the mortgage was unenforceable, it was nevertheless entitled to an order for repayment of the principal of $16.265 million and interest less rent. Amadio also sought that any loss suffered by the applicants as a consequence of the orders be, in effect, paid by the other respondents. However, issues of relief must be resolved in accordance with equitable principle rather than the abstract notions of fairness called upon by Amadio. That requires an examination of the relief in truth being sought by the parties. In the final analysis, the primary claims of the applicants and Amadio were restitutionary. The applicants sought restitutionary relief to restore themselves to the position which they would have occupied had they not entered into the transactions which were made in consequence of the contravention. Amadio sought restitutionary relief, which directly or indirectly would have allowed it to enforce a loan which had been rendered unenforceable by the prescribed interest provisions. The applicants, accepting that they who seek equity must do equity (Vadasz v Pioneer Concrete (S.A.) Pty Ltd (1995) 184 CLR 102 at 114-115), sought the following relief: · declarations that the mortgage and the associated guarantees are unenforceable; · orders that the property be re-transferred to Amadio; · restitution for the losses incurred being, primarily, the interest paid to Amadio under the mortgage less the rent received by the investors under the Coles Myer lease. The equitable relief sought by the applicants was consistent with the statutory scheme which is for the protection of investors. Prima facie, investors entering into transactions which are illegal under the scheme ought to be entitled to restitutionary relief restoring them to the position they would have been in had they not participated in the scheme. We say "prima facie" as there may be circumstances in which equity may not grant full restitutionary relief. An example would be where, because of the conduct of investors, restitution would be unconscionable or where some act or default on their part has made it impossible to restore them to the position originally occupied: see Robinson v Abbott (1894) 20 VLR 346 at 365-6. This approach also accords with equitable principle. In considering a claim for equitable relief by a borrower in Maguire v Makaronis (1997) 144 ALR 729 at 747, Brennan CJ, Gaudron, McHugh and Gummow JJ said: "There was a well-developed body of principle in suits in which borrowers sought equitable relief in respect of contracts rendered void by the old usury laws. Equity intervened, but on terms that the plaintiff pay the defendant what was 'bona fide due' after disallowing the interest above the permitted statutory rate. In Langman v Handover Rich and Dixon JJ cited a passage in the judgment of Lord Selborne LC in Jervis v Berridge. There, in the course of dealing with a bill in Chancery for delivery up and cancellation of an agreement, the Lord Chancellor said: 'There are, indeed, certain cases where a defendant has incurred forfeitures or penalties, or where the controversy relates to usurious or other unlawful transactions, in which the whole locus standi in curia of the plaintiff is dependent on an election, which must be declared by the bill, to forgo legal rights for the sake of equitable remedies.' Rich and Dixon JJ went on to consider the decision to the same effect of Chancellor Kent in Fanning v Dunham. There the Chancellor held that, where a borrower seeks relief in equity (such as delivery up and cancellation) in respect of a security on the ground of illegal usury, the plaintiff must, before being entitled to relief, pay or offer to pay the principal and so much of the interest as is lawfully due. There also are authorities which indicate that unconscientious transactions, particularly mortgages of reversionary interests, stipulating an exorbitant, albeit not illegal, rate of interest may be set aside on terms that the plaintiff pay interest at a reduced and reasonable rate." (Footnotes omitted). In the present case the applicants stand in the shoes of a purchaser/borrower (rather than just a borrower) seeking restitutionary relief against the vendor/lender. As was noted by Heerey J (62 FCR 228) this is not a case where A borrows from B in order to acquire a property from C and, establishing that the loan is illegal, keeps the property without repaying the loan. In the present case the applicants are foregoing "legal rights for the sake of equitable remedies". In these circumstances, rather than just seek cancellation of the security and of the obligation to pay the amount due, the applicants are also offering to deliver up the property acquired by them as part of the scheme rendered unlawful for their protection. Had they not done so that would have raised the question of whether they, having elected to retain the property, would be liable to Amadio to repay the loan (or part thereof) on the ground of restitution for unjust enrichment: cf Australian Breeders Co-operative Society Limited at 540-542. However that situation has not arisen. As was observed by Deane, Dawson, Toohey, Gaudron and McHugh JJ in Vadasz a Court of Equity is to use its broad discretionary powers to do "what is practically just". Their Honours said at 113-114: "The idea of a Court of Equity using its powers to do 'what is practically just' was referred to by Lord Blackburn in Erlanger v. New Sombrero Phosphate Company well over 100 years ago. In contrasting the relief available in law and in equity on rescission of a contract, in particular the ability of equity to take account of profits and make allowance for deterioration of property, his Lordship said: 'And I think the practice has always been for a Court of Equity to give this relief whenever, by the exercise of its powers, it can do what is practically just, though it cannot restore the parties precisely to the state they were in before the contract'." (Footnotes omitted) Their Honours noted at 114 that when the Court fixes its eyes on the goal of doing "what is practically just" the idea is: "... that restoration is essential to the idea of restitution and that the 'purpose of the relief is not punishment, but compensation'." (Footnote omitted) In the present case the compensatory object of restitution, as far as the applicants are concerned, is satisfied by the imposition of liability on Amadio to restore the benefit it unjustly received rather than the imposition of liability to pay compensation as such: see Restitution Law in Australia (K Mason and J W Carter, 1995) at 79-80. There was no relevant conduct on the part of the applicants which disentitled them to the relief they were seeking nor was there any reason why the property could not be returned to Amadio. In that regard his Honour said (62 FCR 189-190): "In the present case the property can be returned to the vendor. The vendor/mortgagee has already taken possession. There is no suggestion the building has suffered any physical deterioration. The tenant is still in occupation under the original lease. If Amadio is put back in the position that it would have been in 1990 had it not sold the building in a difficult market for vendors through a scheme which infringed the Code, it is not unjust that the risk of the drop in values that occurred between then and now should be to its account. Looked at another way, the change of position of the applicants, that is to say their investment in the building, is bound up with the promotion of the investment by a means which infringed the law. The loan was, for the reasons already mentioned, an integral feature of that promotion. That circumstance provides the applicants with a "defence" to the claim that their retention of the loan money (which, after all, was for the purpose of buying the property from the vendor itself) is unjust: David Securities at 379, Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673. Conversely, it can be said that Hudson Conway have been enriched by the conversion of the building into well-secured debt bearing interest at what is by now a high rate. That enrichment is unjust because it arose out of a breach of the law. The present case is one where the applicants are members of a class (viz investors) for whose protection the infringed provisions were enacted. As such they can recover monies already paid, as well as having protection against any further enforcement of the mortgage. They are not in pari delicto: Browning v Morris (1778) 2 Cowp 790, Ch 98 ER 1364, Barclay v Pearson [1893] 2 Ch 154, Gray v Southouse [1949] 2 All ER 1019, South Australian Cold Stores Ltd v Electricity Trust (SA) (1965) 115 CLR 247 at 257. Practical justice can be done by making it a term of the relief that the applicants execute transfers of their interests in the land in favour of Amadio and procure similar execution by co-owners who are not applicants. Thus Amadio can become registered proprietor as it was on 29 June 1990 and not merely mortgagee in possession." In our view Heerey J, "fixing his eyes on the goal" of doing what is "practically just", ultimately granted restitutionary relief on the basis of restoration. In the result the basic principle applied by his Honour was to place the parties in the respective positions they would have occupied had the relevant transactions not taken place without any unjust enrichment of any of them. On that basis, his Honour (62 FCR 189 and 227-9) rejected the claims of Hudson Conway and Amadio to be entitled to repayment of the principal sum with interest. In substance his Honour was of the view that it is not fair or just that persons who have suffered loss as a result of a breach of the prescribed interest provisions should be put "in a position where the beneficiary of the breach achieves the same benefit as if the law had not existed". His Honour was also of the view that it was not unfair or unjust that the diminution in value of the property should fall to Amadio's account (62 FCR 229). We are unable to perceive any error in either of the views expressed by his Honour. Several alternative proposals were put to his Honour by Hudson Conway, Amadio and Richard Ellis but in our view they were all correctly rejected by his Honour on the basis that, either directly or indirectly, the proposals reconstituted the rights of Hudson Conway or Amadio in a manner which was inconsistent with his Honour's findings as to the relief to which the applicants were entitled as a result of the breach of the prescribed interest provisions. Some of the proposals sought practical justice for Amadio by allowing it greater contribution to its losses from the other respondents. However, the problem for his Honour on this aspect of the case was to resolve the grant of relief as between Amadio and the applicants in a way which would accord with principle. The issue of contribution as between the respondents, including Hudson Conway, was a separate and subsequent issue which had to be dealt with in the context of the cross claims of those respondents. In dealing with the restitutionary issues as between the investors and Amadio his Honour: · declared the mortgage and the guarantees to be unenforceable; · ordered the retransfer of the land to Amadio; · ordered that there be judgment against Amadio for restitution in the sum of $91,014 for each partnership share. The sum of $91,014 was arrived at on the following basis (at 62 FCR 232): "There are two categories of payments made by the applicants which Amadio says it should not be obliged to repay because it did not receive them beneficially. I accept this argument. The first category covers what may be conveniently called transaction costs. It consists of the amounts paid for stamp duty, Titles Office fees, the acquisition fee of AIMH, 'accounting fees' (in reality the secret commissions of Bird Cameron and Huntley McArdle & Glass) and the legal fees of Nevett Ford. The amounts are as set out in the Gray & Winter instruction letter. The second category consists of rents received by the applicants and passed on to Amadio as part of their interest payments under the mortgage ('rent passed on'). Such amounts were not, as the applicants accept, paid by the applicants themselves. On Hudson Conway's submissions, the figures are: Interest received by Amadio $6,843,789 Rent passed on (July 1990-Aug 1993) (4,471,503) Part of initial six months (552,016) interest lent by Amadio Balance $1,820,270 ($91,014 per full partnership share)

The amounts therefore repayable to the applicants are: $ Henderson 91,014 Gordon 45,507 Bactbuild (Frank Dean) 182,028 Lonihire (Stan Dean) 182,028 Green 91,014 Lee 91,014 Garkat (Turner) 91,014 Haarsma 91,014 Schoeman 91,014 Arthurson 91,014 Ackina (Phelps) 91,014 Tranter 91,014 Marican (Trengove) 91,014 Walker 11,962 $1,331,665

These figures assume that Amadio will repay $225,455 to Coles Myer being overpayment of rental received by the applicants from that company. The Walker calculation is based on an apportionment of the amounts paid by other applicants and which were received by Amadio: ie 59 per cent Amadio; 41 per cent others." It has not been demonstrated that his Honour made any error of law or fact in arriving at the amount of $91,014 for each partnership share. The relief granted by his Honour followed as a matter of course from his conclusion that the investors were entitled to be restored to their previous position, there being no factors that precluded them from that entitlement. We are satisfied that his Honour did not err in principle in arriving at that result. A difficult question arose in respect of the tax benefits enjoyed by the investors because the deductions for interest paid considerably exceeded the rental received. In dealing with that issue (at 62 FCR 200) his Honour said: "In my opinion an award of damages should not be reduced by the amount of tax benefits obtained by applicants as a result of payments under the scheme. I repeat what I said in Jaldiver Pty Ltd v Nelumbo Pty Ltd (unreported, Federal Court, Heerey J, 2 December 1992) at p109: 'The respondent argued that an allowance must be made for the benefit of tax losses which the applicants have already received or will have the benefit of claiming. Reference was made to Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302 at 314. However the Full Court appears to have decided to the contrary in Simpson Ltd v Hubbards Pty Ltd (1982) 69 FLR 392 at 400, which was not cited to the learned trial judge in Neilsen. I would respectfully adopt the view of Lockhart J in Milner v Delita Pty Ltd (1985) 9 FCR 299 at 303-304 that there is no relevant nexus between the contraventions of the Act by the respondent and any benefit gained by applicants by reason of the allowability of the claimed losses. As counsel for the applicants demonstrated in cross-examination of Mr Stewart, the respondent's contention would mean that a contravener could cause $1000 worth of loss or damage by misleading or deceptive conduct at a net cost to it of $370. In the result, the general taxpaying community would be subsidising misleading and deceptive conduct. I do not think the law compels such a consequence.' I have no reason to doubt that the applicants as law-abiding citizens will, in respect of any recovery of losses by way of damages, make such disclosure to the tax authorities and pay such tax as the law requires." The tax benefit argument appears to have been put to and dealt with by his Honour in the context of whether an award of damages should be reduced by the amount of tax benefits rather than whether the tax benefits were a factor to be taken into account in ascertaining restitutionary relief. In an appropriate case involving restitutionary relief, the taxation benefits received by an applicant or a respondent might be taken into account as a factor which is relevant in determining the amount that is to be payable by one party to another in restoring the latter party to the position originally occupied. It seems to us that the object of achieving practical justice would permit that to be done in a case involving restitutionary relief as a consequence of a breach of the prescribed interest provisions. In Hurst, Kirby P (at 417) and McHugh JA (at 445), regarded the tax benefits received by the borrowing investors as material to the claim for restitutionary relief by the lender whose loan was unenforceable by reason of the contravention of the prescribed interest provisions: see also Australian Breeders Co-operative Society at 542. In the present case we are not satisfied that it is appropriate for the tax benefits to be taken into account as a factor in reducing the amount of restitutionary relief payable to the applicants. It is far from clear what the tax outcome will be. If the investors, as his Honour was entitled to assume, make such disclosure to the Commissioner as the law requires, it will be to the effect that they have fully recouped the deductible interest paid under a mortgage that is unenforceable on the basis of an accounting which treats them as having disgorged the previously assessed rent which they had received. The tax consequence of the award of restitutionary relief is likely to be a vexed question. The discussion of the income tax consequences of the reimbursement of deductible expenses in Federal Commissioner of Taxation v Rowe (1997) 143 ALR 406 and of the potential capital gains tax consequences of damages awards in an article entitled The Capital Gains Tax Consequences of Litigation by Professor Richard Krever ((1997) 71 ALJ 699) demonstrates how difficult the issue can be. The difficulty is not reduced by the fact that the interest has been paid under a contract which was unenforceable by the lender but enforceable by the investors by reason of s 174(2). It is relevant to observe that the tax benefits were an integral aspect of the scheme unlawfully promoted by Gray & Winter and that, by reason of the matters set out both earlier and later in these reasons, we are satisfied that Hudson Conway and Amadio were not innocent third parties in relation to that promotion. In these circumstances, we are not satisfied that it is just that the investors' restitutionary relief should be reduced by the tax benefits they received. That is particularly so as we do not accept that there is no tax risk for the investors as a result of the orders made by Heerey J. Senior Counsel for Hudson Conway and Amadio contended that it was unjust that ultimately his clients were to suffer the very substantial losses that would result from the setting aside of the transactions. Particular emphasis was placed on the alleged innocence of his clients as, in effect, the financiers of the scheme promoted by Gray & Winter. Although we accept that the illegality doctrine, as applied to a breach of the prescribed interest provisions, can result in hardship to persons who did not cause the breach, as was pointed out by Kirby P in Hurst at 412, that consequence is necessary to avoid emasculating the effective operation of the statutory scheme and the achievement of its purpose of protection of the public. Thus, in our view innocence of a vendor or a financier cannot alone disentitle a plaintiff to restorative relief although it may be a factor having a bearing on aspects of restitutionary relief: see Kirby P in Hurst at 412-413. However, it is unnecessary to explore this aspect further in the present case as his Honour found that Hudson Conway and Amadio were not innocent in relation to the circumstances which constituted the breach. His Honour, in rejecting Amadio's description of itself as no more than "an innocent financier" said at (62 FCR 188-9): "...I do not think counsel's description of Amadio as no more than 'an innocent financier' is accurate. Amadio's role as vendor, as well as lender, must not be overlooked. It is true that, as I have found, Gray & Winter were not the agents of Hudson Conway or Amadio and also that there is no basis for an unconscionable conduct claim. Nevertheless Hudson Conway was able to dispose of a property which it had been trying to sell on the open market by conventional means without success for more than twelve months. It was able by this sale to implement its strategy of converting real property assets, not otherwise saleable for cash at a satisfactory price, to well-secured debt at interest rates which are now well above market. It was able to dispose of the property in circumstances where its agent had informed it the property was 'competing with distressed sales' in a market which 'many purchasers perceived (would) soften even further'. Objectively considered, the circumstances in which a sale was at last achieved should have put Hudson Conway on notice that a breach of the prescribed interest provisions were likely. Mr Williams was aware that Mr Garrick Gray packaged negatively geared investment schemes in commercial properties for a fee. As the applications for finance came in to Mr Hamilton, it was obvious that Gray & Winter had travelled to provincial and country towns in south eastern Australia and had signed up farmers, doctors, abalone fishermen and others who on the face of it had no experience with the Melbourne commercial property market, and no obvious connection with Gray & Winter or with each other. Further, Gray & Winter were, to the knowledge of Hudson Conway, to be rewarded for these efforts, and by the time of settlement it was known that that reward was in excess of $1 million. Not to put too fine a point on it, Gray & Winter were hawking the Coles Myer building around the countryside of Victoria and South Australia. This should have been obvious to Hudson Conway." Save that we would add that it was also obvious to Amadio that the sale was proposed to be made by Gray & Winter in the conduct of its business of promoting the scheme to investors who were to acquire the property as partners in the "Coles Myer Partnership", we respectfully agree with his Honour's conclusions which were clearly open to him on the evidence. For the above reasons we are satisfied that the appellants have not established that his Honour erred in law in relation to the relief he granted as a consequence of the breach of the prescribed interest provisions which he found had occurred. The appellants' appeals in respect of his Honour's findings in relation to the breach of the prescribed interest provisions and the relief granted by reason of the breach fail and are to be dismissed.

3.10 Cross-Claims of Amadio and Hudson Conway Amadio and Hudson Conway claimed that the other respondents were responsible for the loss they suffered by reason of the orders which restored the investors to their original position and cross-claimed for that loss or contribution to it. In substance the claims sought the exercise of the Court's discretion to grant appropriate relief to Hudson Conway and Amadio. His Honour dismissed the claims on two bases (62 FCR 234-237). The first was that the relief flowing from the breach of the prescribed interest provisions was a matter between the investors and Amadio and that there was no statutory or other legal basis for the Court, whether as a matter of discretion or otherwise, to order contribution or payment of damages against any of the other parties in relation to it. The second was that as Hudson Conway's and Amadio's cause of action required them to rely upon a breach of the prescribed interest provisions the Court would not lend its aid to them. On the first basis, reliance was place on s 574(8) of the Companies Code which empowers the Court to grant damages in lieu of, or in addition to, the grant of an injunction in relation to conduct that constitutes, amongst other things, a breach of the Code. His Honour, in our view, was correct in concluding (62 FCR 235) that the section was not intended to confer a general right to damages and has no application to the restitutionary relief granted, or the other circumstances arising, in the present case. Reliance was then placed on ss 23B(1), 24(2) and 23A(1) of the Wrongs Act 1958 (Vic) which entitle the Court to order such contribution as is just and equitable from persons liable in respect of the same damage. His Honour concluded (62 FCR 236) that having regard to the nature of the restitutionary relief awarded against Amadio, it could not be said that it is "liable" in respect of "damage" suffered by the applicants. In our view, his Honour correctly concluded that the Wrongs Act provisions relied upon did not apply to the restitutionary relief awarded in favour of the applicants in respect of the breach of the prescribed interest provisions. Amadio and Hudson Conway could not point to any other ground for the contribution sought and, accordingly, they failed to establish their claims. We would add that although a broad view has been taken of the operation of the Wrongs Act provisions in the recent decision of the Full Court in Bialkower v Acohs Pty Ltd (1998) 154 ALR 534 at 540-545 that view does not extend to providing for contribution to restitutionary relief rather than damages. Restitutionary relief is not a liability in respect of damage suffered. Rather, it is restorative relief in respect of a benefit unjustly received. Although causes of action for damages and for restitution against the same defendant for the same loss may each have the object of compensation in common, in general, they are alternative remedies: see United Australia Limited v Barclays Bank Limited [1941] AC 1, 18-19, 30, 34 and Tang Man Sit v Capacious Investments Ltd [1996] 1 AC 514 at 521-523 per Lord Nicholls. The second basis on which the claims were dismissed raises greater difficulty as his Honour appeared to regard Amadio and Hudson Conway as impermissibly relying upon their own breach of the prescribed interest provisions to establish their causes of action under the cross-claims. For the reasons already set out, in our view, his Honour erred in approaching the claims on that basis as, from a reading of his reasons as a whole, he appeared to stop short of making findings which would warrant the conclusion that Hudson Conway or Amadio had been in breach of the prescribed interest provisions. However, even if the Court had a discretion to grant contribution, we would arrive at the same ultimate conclusion as his Honour but would prefer to do so on discretionary grounds for the following reasons. The transactions in question were unlawful and unenforceable as they were made as a consequence of a breach by Gray & Winter of the prescribed interest provisions. Hudson Conway and Amadio not only were not innocent of the matters constituting the breach for the reasons set out above but were also on notice of the circumstances that made a breach of the prescribed interest provisions by Gray & Winter likely. Restitutionary relief, restoring the investors to their original position, was a foreseeable consequence of the breach. In these circumstances it is not just, equitable or appropriate for the Court to exercise any discretionary powers it might have to assist Hudson Conway and Amadio to recover the loss suffered as a consequence of the breach. We have referred to the conduct of Hudson Conway and Amadio but strictly speaking the issue of restitution only involves the imposition of liability on Amadio. However, no distinctions were drawn by counsel between the role of each and, in any event, it appears to be fairly clear that, in general, Hudson Conway, and its officers, acted as agents for Amadio in the matter. If Amadio had been in breach of the prescribed interest provisions by offering or issuing a prescribed interest to the public or a section thereof, then we would be in agreement with his Honour's reasons in relation to the second basis upon which he refused contribution. However as we have concluded that the detailed findings of his Honour did not go that far, if the Court had power to order contribution on discretionary grounds, we would refuse the relief sought in the cross-claims in any event on the discretionary grounds set out above. We deal with the relationship between the restitutionary awards in favour of the applicants and damages payable to the applicants by various respondents, including Amadio, in dealing with the orders made by Heerey J for the payment of damages and the liability of the respondent debtors to contribute to the damages to be paid. For the reasons given, the appeal by Amadio against the declaration and orders made in paragraph 1 of the order of 2 April 1996 must be dismissed. The declaration was based on the conclusion that the mortgage and guarantee were each unenforceable. The orders provided for the transfer of the Coles Myer building by the purchasers to Amadio. For the same reasons, the appeals against the orders for restitution contained in Schedules B, C, D, E, F, G, H, I, J, K, L and M of the order are to be dismissed.

4. SUMMARY OF OTHER ORDERS RE LIABILITY AND DAMAGES In addition to restitution, under which each investor applicant was entitled to $91,014 plus interest in the sum of $29,612 for each 1/20th interest in the partnership, the Schedules contained orders that various respondents pay damages to various applicants for varying amounts but, in all cases, the total amount that could be recovered by way of damages and restitution was not to exceed the amount of the damages. In general, the liability to pay arose as a result of a finding that the relevant respondent had been in breach of a duty of care owed to the relevant applicant, or had engaged in misleading conduct, by reason of which the relevant applicant had suffered loss and damage. The restitutionary payments were to be taken into account in ascertaining the amounts payable for damages. The orders also contained provisions relating to contribution in defined proportions between various respondents with respect to the damages. Costs orders were also made. Because the orders contained in the Schedules B to M vary as to the respondents ordered to pay damages, it is not possible to consider the question of liability to pay damages as if the facts were the same with respect to each Schedule. However, there is a basic similarity between the facts supporting each order. At this stage it is helpful to identify the parties affected by the orders for damages with respect to each Schedule. Schedule B relates to the Deans. Each group of the Deans acquired two 1/20th interests in the property. The actual investors were Bactbuild Pty Ltd and Lonihire Pty Ltd. Bactbuild Pty Ltd and Lonihire Pty Ltd were each awarded damages in the sum of $294,590 and interest in the sum of $97,090 against the debtors Amadio, Hudson Conway, Gray & Winter, James William Gray, Huntley McArdle & Glass Pty Ltd, Robert Hugh Glass, Nevett Ford and Richard Ellis. Schedule C relates to the Turners. The actual investor was Garkat Pty Ltd which was awarded damages in the sum of $152,840 and interest in the sum of $48,545 against the debtors Amadio, Hudson Conway, Gray & Winter, James William Gray, Huntley McArdle & Glass Pty Ltd, Robert Hugh Glass, Nevett Ford and Richard Ellis. Schedule D relates to the Gordons. Henry Arnold Gordon was awarded damages in the sum of $76,495 and interest in the sum of $24,272 against the debtors Amadio, Hudson Conway, Gray & Winter, Huntley McArdle & Glass Pty Ltd, Robert Hugh Glass, Nevett Ford and Richard Ellis. Schedule E relates to the Hendersons. Russell Fraser Henderson was awarded damages in the sum of $152,990 and interest in the sum of $48,545 against the debtors Gray & Winter, James William Gray, Nevett Ford, BPM Pty Ltd and Bird Cameron - Ballarat. Schedule F relates to the Greens. Perpetual Trustees Tasmania Limited, as the representative of the estate of Max Joseph Green, deceased, was awarded damages in the sum of $152,990 and interest in the sum of $48,545 against the debtors Gray & Winter and Nevett Ford. Schedule G relates to Barbara Lee who was awarded damages in the sum of $152,990 plus interest in the sum of $48,545 against the debtors Gray & Winter and Nevett Ford. Schedule H relates to the Haarsmas. Leo Francis Haarsma was awarded damages in the sum of $152,990 and interest in the sum of $48,545 against the debtors Gray & Winter, BPM Pty Ltd, Daryl Lynch and Nevett Ford. Schedule I relates to the Schoemans. Dick Jacobus Schoeman and Judith Schoeman jointly were awarded damages in the sum of $152,990 and interest in the sum of $48,545 against the debtors Gray & Winter, BPM Pty Ltd, Daryl Lynch and Nevett Ford. Schedule J relates to the Arthursons. John Paul Gerrard Arthurson and Suzanne Lovitt Arthurson jointly were awarded damages in the sum of $152,990 and interest in the sum of $48,545 against the debtors Gray & Winter, BPM Pty Ltd, Daryl Lynch and Nevett Ford. Schedule K relates to the Phelps. The actual investor was Ackina Pty Ltd which was awarded damages in the sum of $152,990 and interest in the sum of $48,545 against the debtors Gray & Winter, BPM Pty Ltd, Daryl Lynch and Nevett Ford. Schedule L relates to the Tranters. Thomas Tranter and Pauline Tranter jointly were awarded damages in the sum of $152,990 and interest in the sum of $48,545 against the debtors Gray & Winter, BPM Pty Ltd, Joseph Korczak and Nevett Ford. Schedule M relates to the Trengoves. The actual investor was Marican Pty Ltd which was awarded damages in the sum of $145,540 and interest in the sum of $46,181 against the debtors Gray & Winter, BPM Pty Ltd, Bird Cameron - Geelong and Nevett Ford. The damages awarded against the various debtors named in the Schedules are based on a number of grounds including claims under the TPA and the State Fair Trading Acts as well as negligence. As each of the debtors appealed against the orders on different grounds it is necessary to deal with each debtor or group of debtors. However, it is desirable to reiterate that in doing so we are confining our reasons to the significant and consequential issues raised on the appeals. We also point out that, in what appears to have been the culture developed in this litigation, there were scarcely any points, whether of fact or law, that were not taken. In large part many of the appeals were run as if the Full Court was hearing the matter de novo. Such an approach was misconceived and paid scant regard to the well established caution exercised by appellate courts before reversing the trial Judge's evaluation of the facts.
5. NEVETT FORD - LIABILITY OF THE SOLICITORS Damages were awarded against Nevett Ford in favour of thirteen of the groups of partners which had entered into the transactions on 29 June 1990. These groups represented fifteen 1/20th shares in the partnership and are identified in Schedule B (the Deans, two groups each taking two 1/20th shares), Schedule C (the Turners), Schedule D (the Gordons), Schedule E (the Hendersons), Schedule F (the Greens), Schedule G (Barbara Lee), Schedule H (the Haarsmas), Schedule I (the Schoemans), Schedule J (the Arthursons), Schedule K (the Phelps), Schedule L (the Tranters) and Schedule M (the Trengoves). The award for damages against Nevett Ford was based on the finding that Nevett Ford had acted as the solicitors for the thirteen groups of partners. Nevett Ford has appealed against these orders. It is noted that by paragraph 26 of Heerey J's orders, any judgment against Nevett Ford includes a judgment against the following persons: (i) Peter Russell Wilson; (ii) Francis Joseph Vagg; (iii) Arthur Paul Stephens; (iv) David Francis Stratton; (v) Philip Harry Brewin; (vi) Andrew Thomas Lumb; (vii) Peter Gilchrist Lumb; (viii) David Keith Llewellyn; (ix) Gavin Joseph Burns.

5.1 The Trial Judge's Reasons Heerey J held that Nevett Ford's clients were not Gray & Winter but the individual investors including those who came to give guarantees because they were sub-partners. Nevett Ford's retainer from those clients was held to be to act in the conveyance of the property and the mortgage and, where relevant, the guarantees. Although it was contemplated that instructions, in the sense of the provision of information, would pass from Gray & Winter and the accountants to Nevett Ford, his Honour held that there was nothing in the retainer which restricted the right or obligation of Nevett Ford to communicate with their clients directly or through the relevant accountants should such communication be necessary or appropriate for the discharge of their obligations to their clients. It was further held that a letter of advice as to some matters "such as pitfalls in the transaction" could and should have been prepared at the outset and sent to each investor upon his, her or its identity being revealed. His Honour also held that the obligation arising from the retainer extended to advising the clients as to the terms of the lease of the Coles Myer building, and particularly any unusual terms which might work to their disadvantage. In this context his Honour noted (62 FCR 142): "It is true that the lease was in existence at the time of the purchase and that substantial variations against the tenant's interest were unlikely to be achieved. But by the same token the clients were not legally bound to the purchase until the exchange of contracts at settlement on 29 June. Proper advice to the clients as to the terms of the lease was needed because a proper understanding of the benefits or otherwise of the lease was essential to the making of an informed decision whether to invest at all. The retainer duties discussed above are concerned with the lawyer's duty to give legal advice. Commercial advice, for example as to the market value of a property or the likely profitability of a business, is not ordinarily the function of a solicitor: cf Orszulak v Hoy [1989] Aust Torts Reports 69,181. But the applicants' claim against Nevett Ford does not, properly considered, involve a complaint concerning such advice. The duty to advise existed as a matter of law whether or not the particular investors expected to receive a letter of advice from a solicitor. Since the investors were in relevant respects ignorant of their legal rights and obligations, it is no answer for the solicitor to say that their clients did not know enough of the extent of their ignorance to ask for advice." On the way to reaching that conclusion, his Honour considered first who was the client of Nevett Ford. He concluded that Gray & Winter had never assumed the responsibility of acting as solicitors for the investors in relation to the conveyance of the property and the execution of the requisite mortgage and guarantees. The undated letter of instruction from each investor, which the learned primary Judge found had been shown to Mr Stephens of Nevett Ford before he agreed to do the conveyancing work, contained this statement: "I authorise you to instruct solicitors on behalf of the partnership to act in the conveyance of the property and the mortgages." (62 FCR 33) In the light of that passage and the way in which Nevett Ford carried out their retainer and rendered an account for their costs to "The Partners Coles Myer Building", his Honour concluded that they were acting, not as the agents of Gray & Winter, but as solicitors for those individuals and entities who were to become purchasers and mortgagors and those who, by reason of being sub-partners or otherwise, guaranteed the liabilities of the prospective partners. In his summary of findings on liability the trial Judge, with respect to Nevett Ford, said at 62 FCR 218: "Nevett Ford were retained generally to act as solicitors for the applicants in relation to the purchase, mortgage and guarantee. They were not merely subcontractors of Gray & Winter and their obligations were not confined to conveyancing. Amongst other things they owed a duty to their clients to advise them as to the nature of the legal rights and obligations that would arise upon making the investment. Nevett Ford breached that duty by not giving adequate and timely advice as to the joint and several liability which their clients were undertaking. However in the circumstances of this case that breach was not an effective cause of their clients' loss. But Nevett Ford is liable in respect of another breach of duty, namely failing to advise their clients of the absence of a ratchet clause in the Coles Myer lease and the effect that would have on the security of the investment. Nevett Ford did not in the circumstances breach their duty in the way they dealt with two problems which arose at settlement, namely the Terrey clause and the condition subsequent. The claim by the Deans alleging negligent advice by Peter Wilson of Nevett Ford is not made out."

5.2 Who were Nevett Ford's Clients ? On the appeal, counsel for Nevett Ford first contended that his Honour should have found that the retainer of that firm was to act as agent for Gray & Winter. That submission was premised on the finding that Mr James Gray had asked Mr Stephens "to assist his (Gray's) firm with the conveyancing aspects." That finding was said to preclude reference to Nevett Ford's subsequent actions to identify the principal or principals for whom the retainer had been accepted. The characterisation of Nevett Ford as the agent of Gray & Winter was supported, so it was said, by the fact that Mr Stephens' instructions to act came from Gray & Winter who assumed responsibility for payment of the agreed fee whether or not the transaction was completed. Reference was also made to the absence of any direct contact between Nevett Ford and any of the individual investors, many of whom were unknown to Nevett Ford and were unaware of the engagement of that firm to act as solicitors. As well, it was pointed out that Nevett Ford did not sign at settlement any of the documents such as a borrower's acknowledgment, which would customarily have been signed by solicitors for the borrowers. In the same context, it was urged that various aspects of the conduct of the parties at and leading up to settlement were consistent with a retainer confined to assisting Gray & Winter with the conveyancing. This Full Court was invited to assimilate the position of Nevett Ford to that of one legal practitioner who acts as a consultant or "town agent" to another in relation to a matter in which the other has been retained by a lay client. In support of the application of that analogy, it was rhetorically asked whether Nevett Ford could claim its fees from the investors if the transaction did not proceed. The answer was said to be clearly no. However, in our view, that answer begs the question. If Gray & Winter as agent had brought into existence the relationship of solicitor and client between Nevett Ford and the investors, it is by no means clear that Nevett Ford would have been precluded from looking to the investors for the agreed fee if it were not paid by Gray & Winter. The fact that an agent undertakes to pay a contractor's remuneration does not exempt his principal from liability to make the payment if, on a proper construction of the contract made by the agent, the principal has assumed an obligation to pay it. It has been suggested by Bowstead & Reynolds on Agency (16th ed, W Bowstead, 1996) at 550 that: "The question whether an agent who has made a contract on behalf of his principal is to be deemed to have contracted personally, and, if so the extent of his liability, depends on the intention of the parties to be deduced from the nature and terms of the particular contract and the surrounding circumstances, including any binding custom. As in all matters of formation of contract, the test is objective." Even if, on a proper construction of the contract brought into existence by Gray & Winter as agents for the investors, Nevett Ford were confined, in seeking to recover their remuneration to recourse to Gray & Winter, it would not follow that a contractual relationship had not been created between Nevett Ford and the investors which subjected Nevett Ford to a duty of care to the investors.

5.3 What was the Scope of Nevett Ford's Retainer ? It was next argued on behalf of Nevett Ford that, if a retainer had come into existence between Nevett Ford and the investors, it was limited to performance of the mechanical tasks involved in obtaining a registered title to the property subject to the contemplated mortgage. It did not extend, on this argument, to the giving of advice about features of the lease or explaining the effect of the liability which the investors were assuming. This understanding of the limited nature of their retainer was said to be reflected in Nevett Ford's facsimile letter of 29 June 1990 to the accountants which recited: "We are instructed that it has been clearly explained to all investors that their liability under the mortgage and that of their Guarantors is joint and several. In the event of a default an investor's liability is not limited to his share." (62 FCR 35) There was also an express acceptance by his Honour of Mr Stephens' evidence that Mr Garrick Gray had told him that Gray & Winter had explained to each of their clients the entire project, including the joint and several liabilities, and that everything had been or would be explained. The suggested limitation on the retainer, assuming one to have existed, was also said to have been implied by the severe time constraints between the giving of first instructions to Nevett Ford in early June and the deadline for settlement on 29 June 1990. That implication was said to have been reinforced by the fact that the draft contract was not prepared until 25 June, only ten investors had committed to the project by 26 June and the final list of partners was not known until 28 June. Moreover, the individual investors were widely scattered and communication with them for the purpose of conveying advice in any meaningful way up to 29 June would have been almost impossible. In the same context it was argued that the retainer should not be construed as requiring Nevett Ford to advise each of the individual investors of his, her or its rights and obligations under the various aspects of the transaction because those rights and obligations varied from one investor to another. Accordingly, it was submitted that the trial Judge had accorded the retainer too much width when he said: "Once it is accepted that a solicitor is acting for a lay client in relation to a transaction involving, after the retainer commences, the execution of technical legal documents, it must follow in my opinion that the solicitor is obliged to explain and advise the client as to the effect of those documents." (62 FCR 139) The trial Judge was criticised by counsel for Nevett Ford for disregarding the expert evidence of Mr Brett, an experienced conveyancing solicitor. That evidence was to the effect that Nevett Ford were entitled to accept instructions from Gray & Winter, and, treating the latter firm as the client, were obliged to follow such instructions. As agent for Gray & Winter, Mr Brett opined, Nevett Ford were not obliged to give advice to the lay clients even if some aspect of the transaction excited the concern of Nevett Ford. However, it is clear that Mr Brett's evidence proceeded from the premise that Nevett Ford were the agents of Gray & Winter. Whether that was so or not was a question of law which his Honour resolved, correctly in our view, by holding that there was a direct solicitor-client relationship between Nevett Ford and the individual investors and guarantors. It was also found at first instance that Gray & Winter were not instructed to act as solicitors for the purchasers or otherwise in relation to the purchase. It was submitted on behalf of Nevett Ford that Gray & Winter were in fact a firm of solicitors, had given legal advice to the investors, had drawn at least one legal document (the partnership agreement) and had commented on others. We do not understand his Honour's findings to have contradicted any of those facts. Rather, he was concerned with the effect on the ambit of Nevett Ford's retainer of the presence of another firm of solicitors as a participant in the transaction. In that respect it was necessary to disentangle, in the way indicated by Brennan J in Leary v Federal Commissioner of Taxation (Cth) (1980) 47 FLR 414 at 434-435, the extent to which that participation occurred in the capacity of entrepreneur and how much was attributable to the discharge of the duties of a legal adviser. It was not necessary to consider, as was done in cases like Cornall v Superannuation Systems (Aust) Pty Ltd [1989] VR 43, Cornall v Nagle [1995] 2 VR 188; Law Society of NSW v Ramalca Pty Ltd (1988) 12 NSWLR 34 and, in particular, The Solicitor's Liability Committee v Gray & Anor (1997) 147 ALR 154, whether any part of Gray & Winter's activities as a participant amounted to practising as a solicitor so as to come within the prohibition on unqualified persons contained in various Legal Profession Practice Acts. On the appeal, Nevett Ford invoked the doctrine of estoppel in support of the contention that the investors were precluded from asserting that Nevett Ford's retainer went beyond the mechanical tasks required to achieve registration of a transfer of the property and the necessary mortgage. The short answer to that contention is that on the evidence, neither the individual investors, nor Gray & Winter as their agents, made any representation to induce an assumption or expectation by Nevett Ford that they were not required to furnish advice about any particular aspect of the transaction. The extent of the retainer was to be gathered from the express statements of Gray & Winter and what could be inferred from the surrounding circumstances.

5.4 The Extent of Nevett Ford's Duty to Advise The trial Judge found that Nevett Ford were under a duty to advise each of the investors as to the effect of the imposition on them of joint and several liability and on the terms of the lease. That finding was disputed on appeal because, first, of the shortness of time between the giving of instructions and the deadline for settlement. We accept that pressures of time may abbreviate the duty of communication and advice which a solicitor would otherwise owe to a client. As Young AJA said in MacIndoe v Parbery [1994] Aust Torts Reports 61,532 at 61,543, it is relevant to take into account the factual circumstances, including pressures of time, in making an assessment as to whether a solicitor has been negligent. See also W C W Pty Ltd v Bolster (unreported, Full Court of Federal Court of Australia, 6 January 1993) at 14. In the present case, a draft of the contract of sale of the property was forwarded to Mr Stephens by the vendor's solicitors on 25 June 1990. It is not disputed that the obligations of the solicitors for the purchasers extended to perusing that contract and advising the purchasers, at least through their respective accountants or Gray & Winter, of any unusual provisions which might be regarded as onerous or disadvantageous for the purchasers. The draft contract recited in the particulars of sale that the sale was subject to: "The Lease to Coles Myer Ltd a copy of which is annexed ("the Lease"), and the Sub-lease from Coles Myer Ltd to Ian McCudden and Lorene Margaret Kelly a copy of which is also annexed." The special conditions forming part of that contract included the following: "Property sold subject to a Lease 7.(a) The Purchaser acknowledges that prior to entering into this Contract it has inspected the lease and the Purchaser agrees that it shall be deemed to be aware of and satisfied with the terms and conditions in respect of the lease and further acknowledges that the details of the lease are correct as at the date hereof." (62 FCR 142) In all the circumstances it was incumbent on Nevett Ford to have perused the lease and satisfied themselves that it conformed in essential respects with the lease to which the purchasers and Gray & Winter thought the property would be subject. We also consider that Nevett Ford were obliged to bring to the attention of their principals, or if necessary their attorney, any aspect of the mechanism for adjustment of the rent which, in the circumstances prevailing, could be regarded as unusually onerous to a landlord or favourable to a tenant. It was open to his Honour on the evidence to find that the absence of a "ratchet clause" and the facility for the rent to be reduced, as well as increased, to market rates at annual reviews were in that category. There was no evidence that Mr Stephens ever turned his mind to these matters let alone brought them to the attention of Gray & Winter, the accountants or any of the investors or their attorney. In any event, as we have pointed out earlier in these reasons, under the power of attorney given by the investors to Balcam he was entrusted with the task of committing each investor to the venture on the terms set out in the documents which he, in his discretion, elected to execute in his capacity as attorney. In the event that a decision was required as a matter or urgency then Balcam was authorised to make it. He did so in respect of the Terrey clause. Clearly, any advice given to Balcam by Mr Stephens on such matters as might have needed to be dealt with urgently would discharge Mr Stephens from any responsibility to give the advice directly to each investor.

5.5 To Whom was the Duty Owed? It was also contended on behalf of Nevett Ford that, in so far as there may have been a retainer between them and the investors, their duty was owed to the investors as a group or partnership and did not extend to advising the individual investors of their rights and obligations inter se. We accept that any duty which there may have been to advise on the effect of the terms of the lease or other provisions of the contract was owed to the investors as partners or a group and was not affected by different interests which they may have had as individuals.

5.6 Advice as to Joint and Several Liability Under the Mortgage (i) Should Nevett Ford have advised on this aspect? It may be that Nevett Ford were not required to draw attention to the fact that the proposed contract imposed joint and several liability on each of the partners. There was evidence, which his Honour appeared to accept, that Gray & Winter had told Nevett Ford that joint and several liability had already been explained. Moreover, Nevett Ford sought independent confirmation of that fact by reciting in a facsimile letter to the respective accountants for each of the proposed mortgagors: "We are instructed that it has been clearly explained to all investors that their liability under the mortgage, and that of their Guarantors is joint and several. In the event of default an investor's liability is not limited to his share." (62 FCR 35) That facsimile message was not sent until 5.40 pm on 29 June 1990. For reasons which will appear later, it is unnecessary to resolve whether the sending of that message was sufficient to discharge Nevett Ford's presumptive duty of advising the investors that they were each attracting joint and several liability. However, the sending of that message is an example which demonstrates that Nevett Ford had the facility, had they considered it necessary, to communicate, at least to the accountants for the investors, any reservations which they had about the transaction to be concluded on 29 June 1990. There is no evidence that Mr Stephens even considered the provisions which might give rise to those reservations let alone communicated their effect to the investors, or to the accountants or Gray & Winter on their behalf. By their notice of contention, the applicant investors have argued that there was uncontested evidence that, had they known that they were to be jointly and severally liable for the mortgage loan, they would not have invested in the scheme and would not have sustained any loss. In our view, this contention is met by our earlier conclusion that Nevett Ford were retained to act for and advise the investors as a group or partnership. In the absence of a clear stipulation to the contrary, a liability undertaken by partners is at least joint and renders each partner answerable for the debt up to the limit of his or her assets. As Lord Lindley, quoted in Lindley & Banks on Partnership (17th ed, N Lindley, 1995) at 384, explained: "By the common law of this country, every member of an ordinary partnership is liable to the utmost farthing of his property for the debts and engagements of the firm. The law, ignoring the firms as anything distinct from the persons composing it, treats the debts and engagements of the firm as the debts and engagements of the partners, and holds each partner liable for them accordingly. Moreover, if judgment is obtained against the firm for a debt owing by it, the judgment creditor is under no obligation to levy execution against the property of the firm before having recourse to the separate property of the partners; nor is he under any obligation to levy execution against all the partners rateably; but he may select any one or more of them and levy execution upon him or them until the judgment is satisfied, leaving all questions of contribution to be settled afterwards between the partners themselves." We consider that it was an understanding of this feature of the liabilities of partners which informed the observation of the trial Judge when he said (62 FCR 152): "In terms of damage, there has been no attempt to make out a case that any applicant has suffered damage by reason of his, her or its rights of contribution being worthless because the other applicants have insufficient assets. There is no evidence of any demand for contribution having been made by any applicant. The applicants' problem is not joint and several liability, but several liability, due to the fact that the value of the building has declined far below that of the mortgage debt." Separate issues arise under "joint", "several" and "joint and several" liability. The fact that an obligation is several as well as joint does not expose each promisor to a different or higher measure of liability. It simply confers on the promisee the procedural advantage of seeking recourse, if necessary, against each promisor until the total liability has been satisfied. With the possible exception of the Terrey clause, there was nothing in the instructions given to Nevett Ford, as we have found, on behalf of the investors as a group or partnership, to suggest that the purchase of the property might proceed on any different basis, for example that the liability of each investor was to be "capped" to a specified monetary amount or a particular proportion of any deficiency which might arise on a mortgagee's sale of the property.

(ii) Was damage suffered as a result of the failure to advise that liability would be joint and several? Even if the conclusion just expressed be wrong, we regard as open to his Honour to conclude that the evidence did not support a finding that provision of an explanation of joint and several liability to each investor would have induced any investor to withdraw from the venture. Nor, for the reasons explained by his Honour, did the applicants establish that any failure to explain joint and several liability was causative of loss to them.

5.7 The Terrey Clause in Relation to the Liability of Nevett Ford The preceding discussion makes it appropriate at this point to consider the contention by the applicants in their notice of contention against Nevett Ford that once those solicitors became apprised of the Terrey clause, they should have notified the investors for whom they acted of its insertion and effect and sought their instructions as to whether they wished to proceed with the transaction without obtaining similar protection. It was further contended that Nevett Ford's failure to take that course had resulted in loss and damage to the investors other than Mr Terrey. It is clear from the findings at first instance that Mr Stephens had only a very limited opportunity late on the afternoon of 29 June 1990 to consider the Terrey clause. To have sought and obtained effective instructions about it from the individual investors would almost inevitably have meant postponing the settlement until after the deadline of 30 June. That consideration against the background of all of the relevant evidence leads us to conclude that the learned trial Judge was correct when he said (62 FCR 154): "Plainly the Terrey clause on the face of it altered the rights of Nevett Ford's clients because it affected their rights of contribution. Moreover, it would raise the suspicion that if Mr Terrey had not been informed until a very late stage about joint and several liability, perhaps Gray & Winter had not, as they claimed, informed other investors about the matter. It cannot be doubted that if time was available Mr Stephens should have sought instructions. But I think counsel for Nevett Ford was correct in arguing that it was too late to obtain meaningful instructions. There would be no point in merely contacting the accountants because they would in turn have to obtain instructions. Most of the clients lived in or near country or provincial towns. Nevett Ford would have had to not only contact them, on their farms or fishing boats, but explain the implications of the Terrey clause to them. Even if Hudson Conway agreed to adjournment of the settlement over to the following day (a Saturday), the time available would hardly have been adequate. Unless settlement was achieved on the 29th or 30th the clients would lose what at that stage they perceived to be a good investment and a major tax deduction. They were unlikely to thank Nevett Ford. In any case, it seems highly unlikely that Hudson Conway would have agreed to any significant number of applicants getting the same benefits as Mr Terrey, and certainly not all applicants. And how were Nevett Ford to distinguish between those of their clients who were to get a Terrey clause for themselves and those who were not? My conclusion is that in allowing the settlement to go ahead in the particular circumstances with which they were faced, Nevett Ford were not departing from the standard to be expected of a reasonably competent solicitor. And moreover, for the reasons already discussed in relation to the joint and several liability issue, Nevett Ford's judgment proved to be correct. A hypothetical and fully informed consideration of the Terrey clause by the applicants would include: (i) advice as to the extent of the pool of assets available for contribution even without Mr Terrey; (ii) advice that if everyone insisted on a Terrey clause, the mortgagee would almost certainly refuse and the transaction with its expected tax and investment benefits would collapse; and (iii) advice that it was not practicable to give a Terrey clause to some but not others. In that setting the applicants may have been disgruntled at Mr Terrey stealing a march, but I am not persuaded they would have pulled out of the investment. As to damages, it has not been shown that the applicants suffered any damage by reason of their loss of contribution rights against Terrey. Their remaining contribution rights remained very substantial. The applicants' loss flows from the fall in value of the building, which has nothing to do with the Terrey clause." We would add that in any event, Balcam as attorney for the investors, accepted the Terrey clause. There is no reason to conclude that advice as to the matters adverted to by Heerey J would have resulted in any different course. Finally, as we state later, we have taken a different view from his Honour on the effect of the Terrey clause. In our view, on its proper construction, it does not limit Terrey's liability to his interest in the land. Rather, it limits it to a 1/20th liability for the principal sum and interest due under the mortgage. Thus, the effect of the clause is considerably less disadvantageous to the other investors than his Honour concluded it to be.

5.8 Advice as to the Absence from the Lease of a "Ratchet" clause (i) The duty to advise Another attack on the judgment below was based on the distinction between giving legal advice and advising about commercial or economic matters. It was said that the trial Judge had correctly held that it is not part of a solicitor's retainer, however wide, to give commercial advice unless the solicitor has expressly undertaken to do so. His Honour's observations about this aspect (62 FCR 142) are quoted above and include a reference to Orszulak v Hoy [1989] Aust Tort Reports 69,181 where Williams J, with whom Connolly and McPherson JJ agreed, said at 69,184: "The thrust of the argument of counsel for the appellants was that, having found that the appellants asked about the proposal which led Robbins to check on the profit Beasley was making, the respondents were under a duty to give what was in effect commercial advice as to the advisability of entering into the transaction. The argument must fail. As Mason CJ and Wilson J pointed out in Hawkins v. Clayton (1988) Aust. Torts Reports 80-163 at p. 67,480; (1988) 164 C.L.R. 539 at p. 544, the extent of a solicitor's duty to his client depends upon the terms and limits of the retainer. Here the only retainer was to act in the conveyances. On the earlier date, when the appellants had arguably sought commercial or business advice, the respondents had sent them off to an accountant; therefore it could not be said that by prior conduct the respondents had held themselves out as being willing or able to offer commercial advice. Further, on the evidence the appellants did not put the respondents in a position enabling them to give meaningful commercial advice as to the transaction. The evidence clearly establishes, as found by the learned trial Judge, that the respondents did not know at the material time details of the appellants' financial standing. Finally, it is hardly likely that the appellants would have placed any weight on commercial advice from the respondents because they had already been advised by their bank manager and accountant against entering into the transaction and had specifically refused to make the respondents aware that they had received that advice." In the present case, the failure imputed to Nevett Ford was to advise of the possibility that the rent payable under the lease could fall instead of rise. That, it was argued, was a failure to give commercial or economic advice which, on the principles explained in Orszulak v Hoy, was not part of the retainer of a solicitor engaged to act in the conveyance. However, in our view, his Honour drew a clear distinction between the duty to advise on the legal effect of provisions in the lease and advice about the commercial or economic consequences of that legal effect when he said (62 FCR 141): "The lease was fundamental to the commercial viability of the investment, and the rental income to be derived from it had obviously been a major feature in the selling of the investment, particularly by use of the cashflow. The contract of sale contained the following special condition: 'Property sold subject to a Lease 7.(a) The Purchaser acknowledges that prior to entering into this Contract it has inspected the lease and the Purchaser agrees that it shall be deemed to be aware of and satisfied with the terms and conditions in respect of the lease and further acknowledges that the details of the lease are correct as at the date hereof.' It is true that the lease was in existence at the time of the purchase and that substantial variations against the tenant's interest were unlikely to be achieved. But by the same token the clients were not legally bound to the purchase until the exchange of contracts at settlement on 29 June. Proper advice to the clients as to the terms of the lease was needed because a proper understanding of the benefits or otherwise of the lease was essential to the making of an informed decision whether to invest at all." We do not consider that his Honour imputed to Nevett Ford a failure to advise on the likelihood or degree of risk in the prevailing economic climate that the rent might be adjusted downwards. Rather, he imposed on them a duty to advise the purchasers that the lease, as a matter of law, exposed them to that risk to which they would not have been exposed had the lease contained a "ratchet" or "no reduction" clause. Had Nevett Ford discharged that duty, the investors, as his Honour implied, would have been alerted to the need to make the commercial or economic "decision whether to invest at all". In any event, any commercial aspects of advice as to the absence of a ratchet clause are inextricably interwoven with the professional aspects of the advice. As a result advice on that issue, given by a solicitor wearing a solicitor's hat is still professional legal advice notwithstanding that it has commercial aspects to it: see The Solicitor's Liability Committee v Gray at 196-197. Senior Counsel for Nevett Ford next sought to draw a distinction between advice about the contract which was to be executed after the retainer had commenced and advice about the terms of the lease which was already in binding form. That submission was founded on this passage from the reasons of the trial Judge (62 FCR 139): "Once it is accepted that a solicitor is acting for a lay client in relation to a transaction involving, after the retainer commences, the execution of technical legal documents, it must follow in my opinion that the solicitor is obliged to explain and advise the client as to the effect of those documents." However, his Honour is not to be understood as holding in that passage that a solicitor's obligation to explain, and advise the client as to, the effect of legal documents arises only in respect of those documents which are to be executed after the solicitor has been retained. In the present case, as we have already pointed out, the draft contract of sale forwarded to Nevett Ford expressly recited that the property was subject to a lease and required the purchasers to acknowledge that they had inspected the lease and were satisfied with the terms and conditions in respect of it. In those circumstances, we consider that it was part of Nevett Ford's retainer to peruse the lease and advise their principals, either directly or through Gray & Winter or their accountants, of any unusual benefits which it conferred on the tenant or any unusual burdens or detriments which it imposed on the purchasers as landlords. In this respect, the obligation on Nevett Ford is not dissimilar from that undertaken by a solicitor for a purchaser to advise about the effect of a restrictive covenant notwithstanding that the contract pursuant to which it has been created long antedated the solicitor's retainer. We consider that the proposition enunciated by Harman LJ in Sykes v Midland Bank Executor and Trustee Co Ltd [1971] 1 QB 113 at 124 that "When a solicitor is asked to advise on a leasehold title it is, in my judgment, his duty to call his client's attention to clauses in an unusual form which may affect the interests of his client as he knows them" applies no less when an existing lease is incorporated by reference in a proposed contract of sale than when a new lease is to be entered into by the client. The next attack by Nevett Ford as appellants was on the following finding by his Honour (62 FCR 141): "There are particular circumstances in the present case relevant to the question whether Nevett Ford's retainer included an obligation to explain to the clients the legal effect of the transaction (and also the question whether that obligation was adequately and properly discharged). Part of Mr Stephens' task was to obtain documents from the investors as required by Corrs, including financial statements. He was in frequent contact with the investors' accountants. The following was information which was or should have been apparent to Nevett Ford, or at the very least was readily ascertainable by them: (i) none of the clients had experience with large commercial property investments; (ii) most of the clients' occupational backgrounds - farming, fishing and medical practice - were not such that familiarity with relevant basic concepts of commercial law or practice could be readily assumed; (iii) most of the clients did not know each other; (iv) the investment had been marketed to the clients by a promoter with a large financial incentive in the scheme proceeding; (v) that promoter (and accountants who were also expecting a substantial success fee) were the only other persons suggested to have been sources of advice to the clients; (vi) the investment had been promoted hurriedly over a short period of time; (vii) the investment involved a very large commitment and potential risk for the clients in the light of their individual circumstances." It was pointed out that Mr Stephens had no personal contact with any of the investors and knew nothing of their personal financial affairs. It was also contended that Mr Stephens knew nothing of the marketing of the property but that contention loses some of its force when it is recalled that Mr Stephens had been present at the second meeting at the office of Huntley McArdle & Glass at the end of May or early in June 1990 when the proposed purchase was outlined in considerable detail and much of Gray & Winter's marketing technique was exposed. In any event, the presence or absence of the features listed by the trial Judge went to the extent of the duty to advise and how the advice should have been communicated to particular clients. Those features could not negative the existence of a duty for, as Karminski LJ observed in Sykes v Midland Bank (supra) at 130: "Clients rely on their solicitors to draw their attention to unusual clauses or dangers in conveyancing matters. This is so even if the clients concerned are experienced professional men, including architects and surveyors. The solicitor is consulted as an expert in conveyancing matters. Those in other professions have usually no knowledge or experience in this field; that is why they consult solicitors. I have no doubt at all that Mr. Rignall's failure to call his client's attention to clause 2(xi) was in breach of his duty as a solicitor to these clients, and therefore, negligent." His Honour was also criticized for relying on the evidence of Mr Dudakov, a valuer, as to the frequency with which "ratchet" clauses appeared in leases. The relevant part of his Honour's reasoning in this context is in these terms (62 FCR 152): "It is admitted that no advice was tendered about the lack of a ratchet clause. Mr Stephens said in his witness statement: 'Since the rent review provision reflected what was said in the property summary I considered that it reflected the understanding on which the purchasers were entering into the transaction. I considered it was no part of my task to advise any of the purchasers on the lease ... [Garrick] Gray said that everything had been and would be explained. He told me ... that the lease and its terms had been or would be explained to all the potential partners.' I find the failure to advise in this respect was a breach of the retainer. Reliance on what Mr Gray claimed to have done was not an adequate discharge of the obligations which Nevett Ford assumed. The absence of such a clause was an unusual feature in leases of this kind. Mr Dudakov said that in his experience 90 to 95 per cent of commercial office leases contained such clauses. This was a matter peculiarly calling for a solicitor's skill because it depended on knowledge as to what usually appeared in documents of this type. It was thus something even the most diligent lay person was unable to discover simply by reading the lease. Nevett Ford should have drawn this feature to their clients' attention." It was suggested that whether Nevett Ford should have advised the investors that the lease did not contain a "ratchet" clause was a matter requiring the expression of expert evidence from an appropriately experienced solicitor. His Honour's reliance on Mr Dudakov was said to indicate a concern with the financial impact of the absence of a "ratchet" clause rather than its legal effect. That was said to have resulted in requiring Mr Stephens to have explained the financial implications of the absence of a "ratchet" clause instead of confining the retainer to one to explain the legal consequences of an unusual clause: see County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 All ER 289 at 294. It is true that in some cases expert conveyancing opinion has been adduced in an effort to establish the nature and scope of a solicitor's duty to advise in relation to a particular transaction. That was done in Sykes v Midland Bank (supra) but a failure to adduce such evidence, or a court's reluctance to accept it, does not invalidate a finding that a solicitor has or has not been negligent. See, for example, Goody v Baring [1956] 1 WLR 448 and Neagle v Power [1967] SASR 373 where Bray CJ said, at 376: "Such evidence has not been thought necessary in the case of actions against solicitors. The Court presumably knows for itself what the ordinary reasonably prudent and careful solicitor ought to know and to do." Both of those authorities were cited with approval by a Full Court of this Court in Fox v Everingham and Howard (1983) 76 FLR 170 at 178-179. See also Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 at 654 and MacIndoe v Parbery (supra) at 61,543. Moreover, we have already held that his Honour correctly applied the distinction between advising on the legal effect of provisions in the lease and advising about the commercial or economic consequences of that effect. The difficulty of drawing that distinction in a context like the present was noted by Bingham LJ in County Personnel (Employment Agency) Ltd v Alan R Pulver & Co (supra) where his Lordship observed, at 296: "It follows that I cannot agree with the approach of the deputy judge to this matter. I accept the inference which he drew 'that Mr Rose would have explained its effect, namely that the original rent would be reviewed upwards in step with the increases in market value in the headlease'. This explanation was not itself entirely accurate, if the headlease rent was below the open market level, but, more importantly, it did nothing to alert Mrs Feldman to the possible risks I have mentioned. The deputy judge found that Mr Rose gave no further or fuller explanation, but I (unlike the judge) think he was bound in law to do so. I cannot accept the distinction drawn between legal consequences and financial implications, because in this case the significance of the legal consequences lay in the financial implications. Even accepting that Mrs Feldman was not a naive innocent in the commercial world, I regard this as a classic case in which the professional legal adviser was bound to warn his client of risks which should have been apparent to him but would, on a simple reading of the clause, have been most unlikely to occur to her." Even if the distinction between legal consequences and financial implications can be drawn with clarity in this case, we are not persuaded that his Honour has purported to fix Nevett Ford with liability for failing to draw the attention of investors to the financial implications of the absence of a "ratchet" clause. On the other hand, to accept the argument advanced on behalf of Nevett Ford that the lease was to a "blue chip" tenant for a long term so that the absence of a "ratchet" clause was not particularly hazardous, would be to excuse them on the ground of travelling outside the implied limits of their retainer and advising on the basis of the selfsame financial implications.

(ii) Did the breach of duty to advise about the absence of a "ratchet" clause cause damage? On the issue of causation, it was contended on behalf of Nevett Ford that the trial Judge should have found that, had the investors been advised of the legal consequences of the absence of a "ratchet" clause, they would still have proceeded with the transaction because the property was subject to a long lease to a "blue chip" tenant and, given the imminent approach of 30 June, any delay would have precluded them from obtaining the tax benefit which was the rationale of the transaction. Any reliance for advice was said to have been solely on Gray & Winter and the various accountants to the investors. It was acknowledged that the learned primary Judge had made findings that, if each investor had known that the rent would fall, he or she would not have invested. However, that was said to have been predicated on knowledge of the commercial implications of the absence of a "ratchet" clause, not its legal consequences on which Nevett Ford were presumptively retained to advise. It was argued on behalf of Nevett Ford that most of the individual investors had "committed" themselves to the project before Nevett Ford were retained. To evaluate this argument requires examination of the concept of "commitment". Given our conclusion that Nevett Ford's retainer was to act for and advise the partnership or group of investors in relation to the conveyancing aspects of the transaction, it remains conceivable that settlement would not have occurred had the partners as a group been able to make an informed appreciation of the absence of a "ratchet" clause. A related contention of Nevett Ford was that the investors relied on the advice of either or both of one of the firms of accountants and Gray & Winter, that the investment was sufficiently secure. That advice depended in part on the provisions for rent review contained in the lease and was within the area of expertise of the accountants and Gray & Winter. Accordingly, on this argument, any failure by Nevett Ford to advise them of the absence of a "ratchet" clause did not cause the investors to proceed with the purchase. In support of this contention, reference was made to Norris v Sibberas [1990] VR 161 where Marks J said at 174: "A consequence of San Sebastian is that the relationship of proximity between the parties (not reasonable foreseeability) determines the existence or otherwise of a duty of care in the area of negligent misstatement torts. In turn, the required degree of proximity is to be determined by reference to the "reliance" which the representee to the knowledge of the representor places on what is said (that is, the statement, information, advice, prediction or whatever be the type of communication). In the instant case, the plaintiffs said that they intended to rely on advice from an accountant. Mrs. Norris did not possess or purport to possess the expertise of an accountant and the plaintiffs did not allege that she did or that they relied on her for the kind of advice which they expected to receive from an accountant. The relevant topics of her "special skill" were motel management, the motel market and demand or need in the Bonnie Doon area for the motel facility. If, as appears to be their case, the plaintiffs did not place reliance on Mrs. Norris for accountancy skill and advice they did not establish that anything said by her that was clearly within that category of "special skill" was the subject of a duty of care on the part of Mrs. Norris. There was, to use the language of prevailing legal principle, no sufficient proximity between the plaintiffs and Mrs Norris concerning matters of financial viability (if that were within the area of expertise of the accountant as, according to the evidence, it was in this case) because it was indeed expressly excluded from the area of any expertise which Mrs. Norris purported to have or in respect of which the plaintiffs were to look to her for information, advice or prediction." By contrast with Mrs Norris in that case, Nevett Ford did possess, or purport to possess, a particular expertise. Their expertise was that of solicitors skilled in conveyancing. Upon their being retained to act in that aspect of the transaction, it was implied that they would use that expertise and give appropriate advice in the interests of their clients. The fact that most or all of the clients looked to their accountants or Gray & Winter for the same or similar advice did not, in our view, relieve Nevett Ford of the obligation to give the advice. Nor did any expectation that the advice, if given, would be disregarded in preference to that which had been received from the accountants or Gray & Winter. The fact remains that Nevett Ford gave no advice at all about the absence from the lease of a "ratchet" clause. Had such advice been given, the investors or some of them might not have proceeded to settlement. The issue of causation, whether relevant damage has been suffered as a consequence of a respondent's breach of duty, is not to be resolved by a strict application of a "but for" test. It requires also the taking of "the 'commonsense' approach which the common law has always favoured." (March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 per Mason CJ at 515; see also Medlin v The State Government Insurance Commission (1995) 182 CLR 1 at 6.) On this approach, it was open to the trial Judge, we consider, to find, as he did (62 FCR 167): "As to Nevett Ford, no question of reliance arises. The applicants in cross-examination said they did not expect to receive a letter of advice from a solicitor. But proper professional advice from accountants and solicitors should have included a warning as to the particular hazard caused by the absence of a ratchet clause. Nevett Ford's negligence in not giving this advice was in my opinion a contributing cause, albeit one of a lower order of magnitude than the negligence of the accountants."

(iii) What was the measure of damage flowing from Nevett Ford's failure to advise on the absence of a "ratchet" clause? On behalf of Nevett Ford it was contended that, to answer this question, one has to ask what would have happened had advice been given about the legal effect of the absence of a "ratchet" clause. It was submitted that the investors would still have proceeded with the transaction because the absence of such a clause, on the evidence, did not diminish the value of the property in June 1990. Nor would it have resulted in the application of any discount to the cashflow projections. The authorities in this area, including County Personnel (Employment Agency) Ltd v Alan R Pulver & Co (supra) and Sykes v Midland Bank (supra) suggest that a plaintiff client can only succeed by proving that the solicitor's negligence was probably a cause of the client's execution of the relevant document. If that is established on the balance of probabilities, no question arises of evaluating, in accordance with the principles discussed, for example, in Chaplin v Hicks [1911] 2 KB 786, the loss of a chance of not proceeding with the transaction. It was argued for Nevett Ford on the appeal that the measure of loss attributable to their negligence, assuming against their principal submission, that it had played a part in the investors' entering into the transaction, was not the total loss suffered by the investors including the diminution in the value of the property from $12.8 million on 29 June 1990 to the present value at the time of trial of $8 million. The fall in the value of the property, it was said, occurred well after 29 June 1990 and was not attributable to any breach of duty by Nevett Ford on or about that date. We deal with that submission although, as a consequence of the restitutionary relief granted, the issue of loss of value no longer arises. However, our discussion of the authorities supports our view that the loss and damage awarded against the debtors falls within the well established principles of reliance and of causation referred to and applied by Heerey J at 62 FCR 166-168. In our view, the correct approach to this question is to ask whether loss of the kind actually suffered was foreseeable at the time of the breach of duty. In the present case it was contemplated that the investors would retain the Coles Myer building for some years so that it was foreseeable that they would suffer any loss which might be sustained should the building diminish in value during that period. Diminution in value can arise from an increased capitalisation rate or a reduced rental return. Similar reasoning seems to have commended itself to Cooke P in McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 at 44. We have specifically referred to the diminution in the rental return as a not insignificant element in the loss suffered as a result of the absence of a ratchet clause. In Banque Bruxelles Lambert SA v Eagle Star Insurance [1995] QB 375 actions were brought in negligence and breach of contract by mortgagees against valuers of property on the security of which the plaintiffs had made advances. A sixth action was brought against a firm of solicitors alleging a failure to inform the plaintiff that the subject property had recently been sold twice before and that the vendor was selling at a profit. There was a general fall in the property market and, after the borrowers had defaulted, the plaintiff lenders recovered considerably less on sale than the amounts at which the properties had been valued. On appeal, the Court of Appeal upheld the plaintiffs' contention that they were entitled to recover damages in respect of that part of the losses which they had sustained that was attributable to market fall. The case was characterised by the Court of Appeal as a "no transaction case" in the sense that, but for the negligent advice, the lenders would not have entered into the transaction at all. From a considerable body of authority examined at length their Lordships distilled the following propositions relevant to the present appeal: "2. In a no-transaction purchase case, it seems clear on English authority that effect will be given to the restitutionary principle by awarding the buyer all he has paid out less what (acting reasonably to cut his losses, including selling the property) he has recovered. In no case before the Banque Bruxelles case has any head of foreseeable damage been excluded from the calculation." (at 419) and: "5. In no-transaction mortgage lending cases it has been the practice since Baxter v F W Gapp & Co Ltd [1939] 2 All ER 752 to award the lender his net loss sustained as a result of entering into the transaction, which may be expressed as the difference between what the lender advanced and what the lender would have advanced if properly advised (which is always nil) plus related expenses of sale and realisation less sums recovered. It may also, depending on the facts, be relevant to take account of a mortgage loan the lender would have made if he had not made it to the borrower. If, in assessing the lender's damages in such a case, it appears that he has suffered no loss because he has received the capital sum advanced with reasonable interest, he will have no more than a nominal claim against the valuer. Should a rise in the market have contributed to that outcome then, as in the successful-transaction case, that contribution will not be ignored so as to treat the lender as sustaining a financial loss which in fact he has not sustained. 6. If in such a case a fall in the property market between the date of the transaction and the date of realisation contributes to the lender's overall loss sustained as a result of entering into the transaction, it would seem to us, on a straightforward application of the restitutionary principle, that the lender should be entitled to recover that element of his loss against the negligent party. If the market fall were of modest proportions - say, 5 per cent - it is hard to think that the point would be regarded as arguable. But once a fall in the market is accepted, inevitably, as foreseeable, nothing can in the ordinary way turn on the extent of the fall. Any distinction between large and small market falls would lack any basis in principle. 7. Since the valuer's negligence caused the lender to enter into the transaction, which he would not otherwise have done and because he cannot escape from the transaction at will, we regard that negligence as the effective cause of the loss which the lender suffered as a result. The market fall cannot realistically be seen as a new intervening cause. In Iron and Steel Holding and Realisation Agency v Compensation Appeal Tribunal [1966] 1 WLR 480, 492 and Royscot Trust Ltd v Rogerson [1991] 2 QB 297, 307 the foreseeability of a cause was treated as a strong indication that that cause was not to be treated as a new intervening cause. In the result, we do not think that a fall in the market can be said to have broken the link between the valuer's negligence and the damage which the lender has suffered." (at 420) In relation to the action against the solicitors, their Lordships observed, at 430: "It is of course correct that the lenders would have had no ground of complaint against the solicitors if they had entered into this transaction having received the advice which they should have received and had thereafter suffered loss due to a fall in the market. But that is not this case. The essence of their complaint is that they did not receive the advice which they should have received and which would have meant that they did not suffer from the general fall in the market; as it was, they entered into a transaction which they would not have entered into, and did suffer damage. They did make their own investment decision, but it was not a decision made after receiving proper advice and not the decision which they would have made had they received proper advice. For the reasons already given we have concluded that the decision reached in the Banque Bruxelles case was not correct, and in our view the same reasoning governs this case also. The lenders were in our judgment entitled to reimbursement of their loss without deduction of such part of that loss as was attributable to the fall in the market." There were appeals to the House of Lords in three of the actions but not in that against the solicitors. In the speech of Lord Hoffmann, with whom the rest of their Lordships agreed, it was first observed [1997] AC 191 at 211: "I think that this was the wrong place to begin. Before one can consider the principle on which one should calculate the damages to which a plaintiff is entitled as compensation for loss, it is necessary to decide for what kind of loss he is entitled to compensation. A correct description of the loss for which the valuer is liable must precede any consideration of the measure of damages. For this purpose it is better to begin at the beginning and consider the lender's cause of action." His Lordship then drew the following analogy, at 213, to illustrate the point at which he disagreed with the reasoning of the Court of Appeal: "I can illustrate the difference between the ordinary principle and that adopted by the Court of Appeal by an example. A mountaineer about to undertake a difficult climb is concerned about the fitness of his knee. He goes to a doctor who negligently makes a superficial examination and pronounces the knee fit. The climber goes on the expedition, which he would not have undertaken if the doctor had told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee." It was then suggested that "on the Court of Appeal's principle" the doctor would be responsible for the mountaineer's injury "because it is damage which would not have occurred if he had been given correct information about his knee". Lord Hoffmann then drew a distinction, said to be derived from Banque Keyser Ullmann SA v Skandia (UK) Insurance Co Ltd [1991] 2 AC 249 between a duty to provide information to enable the recipient to decide upon a course of action and a duty to advise someone as to what course of action he should take. His Lordship admitted certain exceptions to the principle which he had erected, including one predicated on liability for fraud. None of those exceptions is relevant here. In Lord Hoffmann's view, at 218, "the distinction between the 'no transaction' and 'successful transaction' cases is of course quite irrelevant to the scope of the duty of care. In either case, the valuer is responsible for the loss suffered by the lender in consequence of having lent upon an inaccurate valuation." Whether or not the distinction is irrelevant in that way to loss flowing from a negligent valuation, we consider that it remains significant in determining the extent of a solicitor's liability to a client who would not have entered into a transaction had the solicitor's breach of duty not occurred. Lord Hoffmann seems to acknowledge as much in his discussion, at 219, of McElroy Milne v Commercial Electronics Ltd (supra) County Personnel (Employment Agency) Ltd v Alan R Pulver & Co (supra) and Hayes v James & Charles Dodd [1990] 2 All ER 815. Because of the distinction we have just identified, we regard the reasoning of the House of Lords in Banque Bruxelles as inapplicable to the present case. Even if that view be wrong, we note that serious reservations have been expressed about that reasoning, eg, by Professor McLauchlan (1997) 12 Journal of Contract Law at 114, "A Damages Dilemma" and (1997) 113 LQR 421, "Negligent Valuer Liability: the Paradox Remains?", Dr J Stapleton (1997) 113 LQR 1, "Negligent Valuers and Falls in the Property Market" and Lindgren J who, in a detailed and careful judgment in MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 at 370-374, declined to follow it. Lindgren J's approach was upheld on appeal by another Full Court of this Court sub nom Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 147 ALR 568. Although the reasoning in the latter case has not entirely escaped criticism by Professor McLauchlan in an addendum to his article in the Journal of Contract Law (op cit at 143) and Professor S M Waddams (1997) 5 Torts Law Journal 218 "Liability of Valuers: Kenny & Good Pty Ltd v MGICA (1992) Ltd", we prefer it to that of the House of Lords in Banque Bruxelles. In particular, we regard Lord Hoffmann's analogy with the medical advice to the mountaineer as inapt for the reasons explained as follows by Lindgren J in MGICA (1992) Ltd v Kenny & Good Pty Ltd (supra) at 374: "Before parting with the House of Lords decision in South Australia Asset Management Corp v York Montague Ltd [1996] 3 WLR 87; [1996] 3 All ER 365, I return to Lord Hoffmann's mountaineer analogy. Possible causes of his injuries, having nothing to do with his knee, which suggest themselves are an avalanche, an injury freshly sustained in the course of climbing and a failure of climbing equipment. In my view, injury suffered from any such cause is a class of injury too remote from the range of losses which might foreseeably be suffered if the doctor examining the mountaineer's knee did not exercise due care and skill, to be the subject of an award of damages against the doctor. Similarly, in a no-transaction case, financial loss suffered by a mortgagee or mortgage insurer as a result of the mortgaged property's being destroyed or damaged by fire, earthquake or vandalism, would be a class of loss too remote from the range of losses which might foreseeably be suffered if a valuer providing a valuation report did not exercise due care and skill, to be the subject of an award of damages against the valuer." See also the exposition in the same context by the Full Court in Kenny & Good Pty Ltd v MGICA (1992) Ltd (supra) at 581-583 of the principles of causation applicable to a "no transaction" case. For these reasons, we conclude that the trial Judge, having found a breach of duty by Nevett Ford, was correct when he held that firm liable for the whole of the applicants' losses flowing from their entry into the transaction. Accordingly Nevett Ford's appeal in relation to its liability to pay damages is to be dismissed.

6. RICHARD ELLIS, HUDSON CONWAY AND THE 31 MAY 1990 LETTER Damages were awarded against Richard Ellis in favour of three groups of partners which had entered into the transactions on 29 June 1990. These groups are identified in Schedule B (the Deans), Schedule C (the Turners) and Schedule D (the Gordons). It is noted also that damages were awarded against Amadio and Hudson Conway in favour of the same three groups of partners. The award for damages was based on the letter written by Richard Ellis and described as the 31 May letter. Richard Ellis, Amadio and Hudson Conway have appealed against this part of the order and this issue will be considered now. In his summary of findings on liability, the trial Judge, with respect to Richard Ellis, said at 62 FCR at 217: "Hudson Conway and Amadio ... are liable for the use by Gray & Winter of the Richard Ellis letter of 31 May 1990. ... The letter contained an opinion by Mr Chiminello, a director of Richard Ellis, that the value of the Coles Myer building on a cash sale was $14.8 million. I find that opinion was, to the knowledge of Hudson Conway and Richard Ellis, not held honestly or on reasonable grounds. Hudson Conway and Richard Ellis are liable for damages for misleading and deceptive conduct to the applicants Turner, Gordon and Dean who relied on the contents of that letter." Unfortunately, the facts upon which the findings were based are complex and require careful consideration as the basic submission of Richard Ellis and Hudson Conway was that the trial Judge not only misconceived the evidence on this issue but, in fact, there was no evidence to support the findings.

6.1 Background On 31 May 1990, Mr Anthony Chiminello ("Chiminello"), a director of Richard Ellis, sent a letter on "Richard Ellis" letterhead to Gray & Winter ("the 31 May letter") advising that the estimation of current market value on a cash sale for the Coles Myer building was $14.8 million. Gray, acting on behalf of Gray & Winter, had requested the letter from Richard Ellis. Before sending the letter to Gray, Chiminello sought and obtained the authorisation of Mr Anthony Rafaniello, the Hudson Conway executive responsible for the sale of the building. Richard Ellis was one of Melbourne's leading estate agents and property consultants and had one of the largest commercial property valuation practices in Victoria. Chiminello was a registered valuer and was in charge of Richard Ellis's Suburban Investments Division. He was responsible for the marketing of the Coles Myer building by Richard Ellis as agent for Hudson Conway and Amadio. Several of the investors gave evidence to the effect that, directly or indirectly, they relied on the letter in deciding to participate as members of the syndicate purchasing the building. They contended that the current market value of the building was substantially less than the value estimated by Richard Ellis and that, in sending the letter, Richard Ellis breached the duty of care it owed to the investors relying upon it and also engaged in misleading and deceptive conduct in breach of s 52 of the TPA and equivalent provisions in the Fair Trading Acts of Victoria and South Australia. As no additional relief can arise under the State legislation, we will confine these reasons to the TPA causes of action. Claims were also made against Hudson Conway and Amadio in relation to the letter. The claim was that they authorised Richard Ellis to send the letter to Gray & Winter for use in putting together a syndicate of purchasers and, in doing so, engaged in misleading and deceptive conduct or were persons involved in the misleading and deceptive conduct of Richard Ellis in relation to the letter. Claims in relation to misleading and deceptive conduct made against Gray & Winter relied on the 31 May letter amongst other things. Heerey J found that the opinion expressed by Chiminello in the letter that the current market value of the Coles Myer building on a cash sale was $14.8 million was, to the knowledge of Hudson Conway and Richard Ellis, not held honestly or on reasonable grounds. His Honour concluded that Richard Ellis and Hudson Conway were liable for damages for "misleading and deceptive conduct" to the investors Turner, Gordon and Dean who, his Honour found, relied on the letter. Hudson Conway's and Amadio's liability appears to have been founded on the basis that they were persons involved in Gray & Winter's misleading and deceptive conduct in using the letter. Richard Ellis was also found to be liable to the same applicants for negligence in relation to the 31 May letter. As pointed out above, many of the findings his Honour made against Hudson Conway, Amadio and Richard Ellis were strongly disputed on the appeal. However, before considering his Honour's findings, it is appropriate to make certain observations. His Honour's three sets of reasons for judgment were 524 pages long. They had to deal with numerous and multifarious claims. As on the appeal, all possible points were taken and argued. In the ultimate outcome at trial the role of the 31 May letter did not loom large. His Honour's reasons deal with the claims relating to the letter at 62 FCR 19-21, 37-39, 131-2, 143-146, 159, 166-7, 202, 217. Rather than repeat all of the matters set out in his Honour's reasons we propose to focus only on the matters relevant to the disposition of the appeals. Understandably, his Honour's reasons are not as complete or self-contained as might have been expected if the 31 May letter had been more significant to the outcome. The reasons of the trial Judge need to be read as a whole with due regard being paid to the considerations outlined above. As with the grounds of appeal related to the breach of the prescribed interest provisions, numerous, voluminous and extensive submissions have been made by various parties in support of their appeals and cross appeals in relation to the letter. We have confined our reasons to the issues raised by the parties' submissions that were both significant and consequential.

6.2 Findings of the Trial Judge Richard Ellis After early attempts to sell the Coles Myer building had proved unsuccessful, Richard Ellis was invited to make a marketing submission for the Coles Myer and the Telecom buildings, which it did on 13 February 1990. The submission included a "likely" realisable value for the Coles Myer building of $14-15.5 million. On 2 March Amadio and a second Hudson Conway company appointed Richard Ellis as sole agent for sixty days for a cash sale of the respective properties. Richard Ellis prepared and distributed to potential purchasers an "Information Memorandum" which indicated, amongst other things, that the Coles Myer building was available for a cash sale at a price of $15.5 million or on vendor terms to an approved purchaser. Richard Ellis circulated the information memorandum as well as a single page coloured flyer for the building in Australia and overseas. The learned trial Judge summarised the evidence in respect of Richard Ellis's activities in respect of the Coles Myer building (62 FCR 19-20) as follows: "On 14 March Richard Ellis advised Hudson Conway of interest from a number of parties in Australia and overseas. Among these were said to be 'private investors' represented by Gray & Winter, Solicitors ...... On 6 April Dr Eugene Chu, a Hong Kong resident, sent a fax to Richard Ellis expressing interest in buying both buildings for a yield of 11.5 per cent, the equivalent of a cash price of about $11.2 million for the Coles Myer building. On 10 April Mr Anthony Rafaniello, the Hudson Conway executive responsible for the sale noted in his internal weekly report to his superiors that there was 'strong interest from Gray & Winter solicitors'. On 1 May the Richard Ellis sole agency came to an end. By a fax of that date Mr Anthony Chiminello, a director of Richard Ellis reported to Hudson Conway as follows: 'Following our telephone discussion today we advise of our marketing progress as follows: In summary, the people who have formally made offers on the property and shown definite interest are outlined below: Prospect Comment Mr Lai Te Wood Verbal offer of $9,650,000 balance 60 days. Mr Chu Written offer for both buildings at yields of 11.5%. Mr Baker Serious interest in the property. However, yet to formalise an offer. Gray & Winter Solicitors Have expressed serious interest and we are still awaiting offer. Mrs Tilley Still considering properties. Mr Alfred Abrahams Still considering details. As you are aware the subject properties are competing with distressed sales on the market which we believe are being offered at yields in excess of 10%. Coupled with the above, many purchasers perceive the market to soften even further and therefore are adopting a wait and see approach. Obviously, we are attempting to secure the highest price for the properties within the shortest period of time. Therefore we need to respond to the relevant purchasers where necessary at lower sale prices in order to encourage them to further increase their offers. In addition to the existing purchasers, we have commenced a further mailout to the south east Asian region and are contacting all large private investors on the basis of a reduced sale price which would need to be further discussed with yourselves. Although sales evidence in this current market is limited, we have outlined recent sales as follows: Address Type Building Size Market Rental Sale Price Yield Assessed 224 Queen Street Melbourne 12 Level 5,430 sq m $1,200,000 $10,400,000 11.5% 17-21 Malvern Rd 2 Level 1,988 sq m $ 479,325 $ 5,120,000 9.36% Glen Iris Office

We are aware of additional sales currently being negotiated at yields of approximately 9.5% - 10% and shall relay these to you as soon as they come to hand.' Mr Rafaniello noted in his internal weekly report on 1 May that there was '(l)imited domestic interest in the two buildings' and that a '(n)ew approach (was) required'. On 2 May Mr Chiminello sent a fax to Dr Chu stating that Richard Ellis had 'specifically been advised to respond to your offer of 6/4/90 on the following terms and conditions: Sale Price: 31-47 Barry Street $10,750,000 258 Queensberry Street $14,000,000 Balance: 60 days from sale or exchange.'

After pointing out some attractive features of the properties the fax concluded 'We believe that you are in an excellent negotiating position at this particular point in time however, we cannot push the vendor until such time as we can meet with you in Melbourne' There was no response. There was no evidence that this offer was authorised by Hudson Conway. It was put to Mr Chiminello in cross-examination that his statement as to being 'specifically advised to respond' was a lie. Mr Chiminello said: '... it could be construed as a lie. I construe it as strategy.' However, I am satisfied that Mr Chiminello's belief at the time was that the Coles Myer building was worth something less than $14 million on a cash sale. Mr Chiminello did say in evidence that he had discussed Dr Chu's offer with Mr Rafaniello and had told him the Hudson Conway asking price was too high. Mr Rafaniello encouraged him to get firm offers." As a result of Richard Ellis's marketing endeavours, Gray & Winter approached Hudson Conway directly after becoming interested in both the Coles Myer and the Telecom buildings. At a meeting on 21 May 1990 Chiminello and Mr Hemingway of Richard Ellis sought details of the approach from Rafaniello of Hudson Conway. His Honour said (62 FCR 37): "At the meeting the Richard Ellis men pressed Mr Rafaniello for further details of the option, and in particular the price, but without success. The price was important to Richard Ellis because their commission depended on it. Richard Ellis believed, quite justifiably in my opinion, that a sale consequent upon Mr Gray's option would entitle them to commission." On 30 May 1990 Gray sought a letter of valuation of the Coles Myer building from Mr Hemingway who, not being a registered valuer, passed on the request to Chiminello. Chiminello told Gray that he could not prepare a sworn valuation in the time available but would furnish a letter setting out his opinion of the market value of the property. Before preparing the letter, Chiminello spoke several times to Rafaniello because he was concerned not to do anything which might conflict with the interests of Hudson Conway as vendor of the property and the principal of Richard Ellis as selling agent. Rafaniello was prepared to assent to the provision of a letter of valuation by Chiminello to Gray & Winter provided that it stated a value which "was above a price at which we were prepared to sell". Accordingly, Chiminello prepared a letter dated 31 May, read it to Rafaniello over the telephone and obtained his approval for its transmission to Gray & Winter. A copy of the letter was sent to Rafaniello on 14 June. The letter was in these terms: "258 Queensberry Street, Carlton Further to recent conversations between yourself and representatives of Richard Ellis (Victoria) Pty Ltd, we write to advise you as to our estimation of the current market value of the property located at 258 Queensberry Street, Carlton. Our analysis has indicated a current market value for the building of $14,800,000 (fourteen million, eight hundred thousand dollars) being based upon standard sale terms of 10% deposit with the balance payable in 60 days. In arriving at this estimate of value, consideration has been given to the properties [sic] current level of rental and its anticipated rental level upon its next review in March 1991. Further attention must also be shown to the strength and length of the lease covenant which encumbers the property. Should favourable vendor terms be obtained as part of the purchase agreement, this will have the net effect of increasing the present value of the purchase price for the building. Consideration should also be given to the current state of the property market and this has been reflected in the analysis used to arrive at the value for the property. During a strong property market, it would be fair to assume that the value of the subject property would increase. Although this is an opinion of value only, careful consideration has been given to the relevant evidence to arrive at this figure. We stress that this is not a sworn valuation and therefore should not be relied upon as such. Yours faithfully Richard Ellis (Victoria) Pty Ltd Anthony Chiminello (sgd) Anthony Chiminello AAIV Director" In arriving at the valuation expressed in that letter, Chiminello recorded in writing his working calculations which concluded with the following values: Range $14,831,090 - 14,466,031 Say $14,500,000 - 14,800,000 On 31 May Chiminello also sent a facsimile to Richard Ellis' Taiwan office stating that he believed the vendor would accept an offer of $14 million for the Coles Myer building. His Honour discussed (62 FCR 131-132) the evidence relevant to the awareness of Richard Ellis of the use which Gray was likely to make of the letter of 31 May and made the following findings: "I am satisfied that Mr Hemingway and Mr Chiminello knew that Mr Gray was not acting as a principal. The two properties were being offered for sale at a total price of some $27 million, a proposition for only exceptionally wealthy individuals. Richard Ellis seems to have had no particular information or belief as to Mr Gray's personal wealth, and as far as the evidence shows, never enquired about it. Moreover in the Richard Ellis reports to Hudson Conway, and in particular the letter of 1 May, Gray & Winter are referred to as solicitors, in contradistinction to other potential purchasers who have their names alone given. In other words, the reference to Gray & Winter shows that they were likely to be acting on behalf of others. Finally, there is the circumstance that a prospective purchaser would not need to go to all the trouble to get formal letters from the vendor's agent. The obtaining of such letters by Mr Gray only made sense as a way of getting someone else interested in the purchase. As Mr Chiminello said: 'It was assumed that Gray & Winter were acting on behalf of a potential purchaser or purchasers.' In cross-examination he was asked: 'Q. Why did you think [Mr Gray] needed [the letter of 31 May]? A. Very hard to say. I presumed it would have been either for finance purposes or may be to pass on to another prospective purchaser, I really didn't know at the time. Q. Yes, but you knew he was going to make some use of it to some other person? A. There's no doubt about this.' Mr Chiminello had been selling property in the City of Melbourne since 1983. As at May 1990 he was aware of syndicates buying properties, although he had never heard of Gray & Winter before. He agreed he did not try to exercise any control over the use Mr Gray might make of the 31 May letter. While I accept that, as at 31 May, Richard Ellis were not aware of the details of the syndicate Mr Gray was organising or of the identity of its proposed membership, they knew he was likely to be, in Mr Hemingway's words, 'putting together some sort of a group'. The syndicate of purchasers that in fact emerged was just such a group. Further, Richard Ellis must be taken as having been aware, that (i) the group of purchasers might well include persons who were not professional investors, or knowledgeable concerning the Melbourne commercial property market; (ii) Mr Gray in using the 31 May letter probably would not dilute its effect by informing potential purchasers that Richard Ellis were the vendor's agent, a fact which did not appear on the face of the letter; (iii) Mr Gray would be standing to gain some significant personal benefit if the group became a purchaser (albeit that the amount of that benefit was not known); and (iv) the 31 May letter was likely to be treated as a serious and considered opinion as to value given by a leading Melbourne firm of real estate agents and valuers and signed by a director of the company who was a qualified valuer."

Hudson Conway and Amadio His Honour discussed his findings in relation to Hudson Conway and Amadio in several different parts of his reasons. The relevant background to the findings is set out above in the section relating to Richard Ellis. At the expense of some repetition, the critical findings in relation to Hudson Conway and Amadio were contained in the following passages. (a): "While I accept that, as at 31 May, Richard Ellis were not aware of the details of the syndicate Mr Gray was organising or of the identity of its proposed membership, they knew he was likely to be, in Mr Hemingway's words, 'putting together some sort of a group'. The syndicate of purchasers that in fact emerged was just such a group. Further, Richard Ellis must be taken as having been aware, that (i) the group of purchasers might well include persons who were not professional investors, or knowledgeable concerning the Melbourne commercial property market; (ii) Mr Gray in using the 31 May letter probably would not dilute its effect by informing potential purchasers that Richard Ellis were the vendor's agent, a fact which did not appear on the face of the letter; (iii) Mr Gray would be standing to gain some significant personal benefit if the group became a purchaser (albeit that the amount of that benefit was not known); and (iv) the 31 May letter was likely to be treated as a serious and considered opinion as to value given by a leading Melbourne firm of real estate agents and valuers and signed by a director of the company who was a qualified valuer. From the point of view of Hudson Conway, the matters referred to in the preceding two paragraphs are matters of which they were aware. This is not just a matter of imputing to Hudson Conway the knowledge of its agent Richard Ellis. Nor am I concerned with questions as to whether the usual or apparent authority of a selling agent extends to providing opinions as to market value. Hudson Conway, through Mr Rafaniello, knew of the terms of the 31 May letter and expressly authorised its being made available to Mr Gray. Moreover, Hudson Conway knew Mr Gray was organising a syndicate. They also knew that the best price they had been able to achieve on the open market after 18 months effort was $13.8 million with generous vendor finance, whereas the letter was putting a value of $14.8 million on a cash sale. They also knew that Richard Ellis, and in particular Mr Chiminello, would have been aware of the marketing history of the property. Counsel for Hudson Conway submitted that the opinion of value in the letter of 31 May was 'not given by Richard Ellis on behalf of Amadio in its capacity as selling agent, rather it was given by Richard Ellis in its own professional capacity after Chiminello had obtained clearance from Rafaniello to provide such an opinion'. The only significance of Mr Rafaniello's clearance was, it is said, to avoid the conflict of interest that would otherwise have arisen for Richard Ellis as selling agent. With respect, I think this analysis ignores the reality that both Mr Rafaniello and Mr Chiminello wanted a sale to take place to the person or persons to whom Mr Gray was likely to show the letter. Hudson Conway expressly approved the letter and were aware that it was to be used by Mr Gray as a marketing tool." (62 FCR 131-2) It is also to be noted that before Rafaniello approved of the letter he told Chiminello that he wanted to know the value which would be stated "to make sure it was above a price at which we were prepared to sell." At 62 FCR 133 his Honour referred to the above findings in relation to the 31 May letter, and said that on that basis Hudson Conway "is liable" in respect of the 31 May letter. (b) In the context of discussing secondary liability of Hudson Conway under s 75B of the TPA for misrepresentation in relation to the 31 May letter, his Honour said (62 FCR 165): "Hudson Conway, through Mr Rafaniello, were aware of the contents of the Richard Ellis letter of 31 May and expressly authorised the provision of it to Gray & Winter. Hudson Conway must also be taken to have authorised its use in circumstances where recipients were not aware that Richard Ellis were the vendor's agent. That did not appear on the face of the letter and Hudson Conway had no ground for believing that Gray & Winter would volunteer the fact. Hudson Conway of course knew the terms of the option agreement and thus the fact that the true price to Hudson Conway was $13.8 million. As was strongly urged by Hudson Conway in relation to other issues, the "acquisition fee" of $1.035 million was not a commission payable by Hudson Conway out of the price received by it. Moreover the generous vendor terms meant that the cash equivalent of $13.8 million was a figure substantially less. Hudson Conway also knew the marketing history of the property and knew that after prolonged and vigorous exposure to the market $13.8 million on vendor terms was the best price obtainable. They also knew that Richard Ellis, and in particular Mr Chiminello, would have been aware of the marketing history of the property. In the circumstances, Hudson Conway became involved in the contravention of the Act by Gray & Winter. Hudson Conway had the requisite knowledge required by Yorke." A difficulty that arose in respect of this conclusion is that the investors pleaded a case against Hudson Conway and Amadio on the basis that they had been persons involved in the misleading conduct of Richard Ellis rather than that of Gray & Winter. (c) In rejecting the respective cross-claims between Hudson Conway and Richard Ellis based on agency in relation to the 31 May letter, his Honour said (62 FCR 202): "I do not think either claim is made out. Richard Ellis did not purport to provide the letter to Gray & Winter as agent for Hudson Conway. The existence of the agency explains the motivation of Richard Ellis in providing the letter in that Richard Ellis hoped a purchase organised by Gray & Winter would give rise to commission. But the letter was not written in the capacity as agent - on the contrary it appeared to be that of an independent expert valuer. Hudson Conway specifically approved the terms of the letter and thus had actual notice of the role being adopted by Richard Ellis." Earlier in his reasons, Heerey J had said that the investor's case that Gray & Winter had acted as agent for Amadio or Hudson Conway was "untenable". We are unable to perceive any error of law or fact in the reasons given by his Honour (62 FCR 128-130) for arriving at that conclusion. Although strong reliance was placed by the investors on s 84(2) of the TPA, that sub-section still requires that conduct be engaged in "on behalf of" a body corporate. As was said by Merkel J in Gregg v Tasmanian Trustees Pty Ltd (1997) 73 FCR 91 at 105: "The subsection has been accepted as intending to extend, and not merely reflect, the common law. Even in its widest application it is necessary that the conduct be 'on behalf of' the principal in the sense that something is done 'for' it or is carried out 'in the course of the body corporate's affairs or activities': see Lisciandro v Official Trustee in Bankruptcy [1995] ATPR 40,897 at 40,903 and on appeal Lisciandro v Official Trustee in Bankruptcy (1996) 69 FCR 180." For the reasons set out by Heerey J, the necessary elements of both statutory and common law agency are absent. Accordingly, that part of the investors' case which relied on agency in respect of the 31 May letter must fail. (d) Finally, in his summary of findings (62 FCR 217 ) Heerey J said: "In respect of the various respondents, findings as to liability are as follows. Hudson Conway and Amadio did not owe any duty of care to any of the applicants. They were not guilty of unconscionable conduct. However they are liable for the use by Gray & Winter of the Richard Ellis letter of 31 May 1990 although not for the use of the Richard Ellis information memorandum. The letter contained an opinion by Mr Chiminello, a director of Richard Ellis, that the value of the Coles Myer building on a cash sale was $14.8 million. I find that opinion was, to the knowledge of Hudson Conway and Richard Ellis, not held honestly or on reasonable grounds. Hudson Conway and Richard Ellis are liable for damages for misleading and deceptive conduct to the applicants Turner, Gordon and Dean who relied on the contents of that letter."

The Investors His Honour described in detail how the various investors came to be members of the Coles Myer syndicate which purchased the building and, in particular, the manner in which three sets of investors, the Turners (62 FCR 59-64), Gordons (62 FCR 64-67) and Deans (62 FCR 67-71) came to rely upon the 31 May letter. In respect of each of these sets of applicants his Honour found: (a) Turner (62 FCR 61): "During the meeting Mr Winter handed round a copy of a letter from Richard Ellis which he said was an 'estimated valuation' by Richard Ellis. This would have been the 31 May letter. Mr Daryl Turner recalled the letter confirmed the value of the property as $14.8 million. He knew Richard Ellis to be a major real estate agent and valuer in Melbourne and their opinion impressed him. At the conclusion of the meeting Mr Glass spoke briefly. He said words to the effect 'There it is - plain and straightforward'." (b) Gordons (62 FCR 66): "Dr Gordon asked Mr Glass whether he thought any further opinion was required concerning the value of the building. Mr Glass said that Richard Ellis had looked at it and that was good enough for him. Dr Gordon was aware that Richard Ellis was a major real estate agent and valuer in Melbourne and was satisfied that they had confirmed the value of the property. (Dr Gordon had no recollection of seeing the Richard Ellis 31 May letter at the first meeting.)" Later in his reasons (62 FCR 159) Heerey J observed that, although Dr Gordon did not see the letter himself, the substance of it was conveyed to him by Mr Glass. The use of the letter in that way was held by his Honour to be a natural and probable consequence of Richard Ellis having provided it. (c) Deans (62 FCR 68): "However there was one document the brothers did note. While discussing the purchase price of $14.835 million Mr Winter handed around a copy of a letter from Richard Ellis which would seem to have been the 31 May letter. Mr Winter said that Richard Ellis was one of the leading valuers in Melbourne. The brothers noted that the letter said the value of the building was about $14.8 million. Mr Winter said that in fact the building was worth more than the price the partnership was paying and the partnership would be getting an excellent buy." Evidence was given to the effect that had the investors known the property was valued at less than the price they agreed to pay they would not have invested. On the issues of reliance and causation his Honour found (62 FCR 166) that the 31 May letter, as an expression of opinion by a purportedly independent expert valuer, was likely to induce investors to invest and did operate as an inducement to those clients of Huntley McArdle & Glass who saw it or were told of it. His Honour found that the investors would not have entered into these transactions at all but for the negligence and misleading and deceptive conduct of the various respondents (which included Richard Ellis) against whom liability had been established. His Honour noted under the heading "Assessment of damages" (62 FCR 200): "The assessing of damages is subject to the primary relief granted in respect of the prescribed interest claim. While that relief holds, Amadio is obliged to refund all payments together with interest and the applicants are relieved from further liability under the mortgage and guarantee." His Honour added, amongst other things, that damages were to be assessed on the basis that the investors would not recover any amounts ordered to be repaid by Amadio. On that basis, his Honour awarded damages against Richard Ellis and Hudson Conway/Amadio respectively of $152,840 plus interest in favour of each of the Turners, Gordons and Deans. As between all of the respondents responsible for these investors' loss the percentage apportionment was 15% respectively for Richard Ellis and Hudson Conway/Amadio. 6.3 Liability of Richard Ellis The trial Judge's findings It is necessary to summarise the reasoning that led his Honour to the conclusion, which we have just summarised, that three sets of applicants, the Turners, Gordons and Deans, should succeed in their claim against Richard Ellis for loss suffered as a result of a negligent, misleading and deceptive expression of value in the 31 May letter. The proposition was distilled from the authorities that liability for economic loss sustained by another may attach to the maker of a statement, where the statement is made with the intention of inducing the relevant person to act in reliance on the statement in a particular way, in circumstances where the maker of the statement should have realised that economic loss might be suffered if the statement were not true. It was then indicated that, if the maker of the statement has a direct pecuniary interest in the transaction in the course of which the statement is made, that may support a finding of proximity, or at least assist in determining whether such proximity exists. Applying those principles to the facts of the present case, the learned trial Judge said (62 FCR 145): "In my opinion there was, in connection with the making and publication of the 31 May letter, a relationship of proximity between Richard Ellis and the applicants. Mr Chiminello prepared the letter knowing, as I find to be the case, that Mr Gray was going to show it to a limited and specific class of persons namely potential investors in the purchase of the Coles Myer building organised by Mr Gray. The expression of an opinion by a registered valuer who was a director of one of the State's leading real estate and valuation firms was inherently likely to be an inducing factor in a decision to purchase the building. That conclusion is not affected by the circumstances that Mr Chiminello and Richard Ellis were not aware of the actual state of expertise of the investors or the details of Mr Gray's proposed scheme (including what counsel for Richard Ellis not unfairly called 'its outrageously high gearing'). Nor does it matter in my view that Richard Ellis might reasonably have expected a higher degree of competence being exercised by accounting and legal advisers than turned out to be the case. The fact remained that a purportedly expert and independent assessment of market value was likely to be fundamentally relevant to any decision to invest. I find Richard Ellis intended that the letter would be relied on by potential investors organised by Mr Gray. Indeed it is hard to see that the letter had any other purpose. Further, Richard Ellis had a pecuniary interest in the sense discussed above. If Mr Gray was successful in organising a sale, Richard Ellis would be entitled to a commission under the applicable scale of the order of $200,000. I think that was so as a matter of law; in fact Richard Ellis were subsequently paid a commission by Hudson Conway, albeit a reduced amount negotiated after an initial refusal. In any event at the relevant time Richard Ellis believed they would be entitled to commission. Richard Ellis did not ask for or receive any fee or other payment for providing the letter. There is no reason why Richard Ellis would wish to act out of pure philanthropy, merely to do Mr Gray a good turn. The obvious purpose of Richard Ellis in providing the letter was the encouragement of persons organised by Mr Gray into a decision to purchase, an event which would result in commission for Richard Ellis." and at 62 FCR 166: "The Richard Ellis' letter of 31 May, conveying as it did an expert opinion by a purportedly independent expert, was also likely to induce investors to invest and did, I find, operate as an inducement to the Huntley McArdle & Glass clients who saw or were told of it." As pointed out above his Honour found that the letter was not written by Richard Ellis in its capacity as agent for the vendor. Rather, his Honour found that the 31 May letter was brought into existence at the request of Mr Gray for the specific purpose of influencing purchasers being gathered together by him. It was, in his Honour's words, a 'bespoke document'. If it was to operate at all, it was to do so within a determinate period of time. Having thus identified the nature and content of the duty which he concluded was owed by Richard Ellis to one or more of the applicants, his Honour then proceeded to consider whether there had been a breach of any duty so found. Richard Ellis was held to have breached its duty of care by writing the 31 May letter. That breach was described by his Honour in these terms (62 FCR 157): "Given Mr Chiminello's experience of the marketing of the Coles Myer building, and in particular the faxes of 1 May to Hudson Conway and 2 May to Dr Chu, I am satisfied that the opinion contained in the letter of 31 May was not one that he honestly held, nor did he have reasonable grounds for holding it. A valuer without Mr Chiminello's particular experience with the property might honestly and reasonably have come to that opinion, but not Mr Chiminello. Therefore Richard Ellis breached their duty of care." His Honour also found that Richard Ellis engaged in misleading and deceptive conduct. He concluded that Richard Ellis had represented that, in its opinion, the current market value of the building was $14.8 million for a cash sale and that the representation was false. The finding of falsity was based on his Honour's findings that Chiminello had misrepresented his opinion and had no reasonable grounds for it. In his summary of findings Heerey J said at 62 FCR 217: "The letter contained an opinion by Mr Chiminello, a director of Richard Ellis, that the value of the Coles Myer building on a cash sale was $14.8 million. I find that opinion was, to the knowledge of Hudson Conway and Richard Ellis, not held honestly or on reasonable grounds. Hudson Conway and Richard Ellis are liable for damages for misleading and deceptive conduct to the applicants Turner, Gordon and Dean who relied on the contents of that letter." In addition his Honour had concluded that $13.8 million, on vendor terms, was the best price available in the market for the building on 29 June 1990. That price was the price at which Hudson Conway, as a willing, prudent, but not anxious vendor, in effect gave an option to buy the building during May and June 1990. Chiminello had stated in the 31 May letter that a value based on "favourable vendor terms" would be greater than one based on a cash sale. Accordingly, the market value on a cash sale was likely to have been less than $13.8 million. A great deal of evidence, including that of independent valuers, was called by the parties to establish the market value of the Coles Myer building in June 1990. After considering the property market in 1990, his Honour concluded (62 FCR 121): "I am satisfied that by June 1990 the Melbourne commercial property market was in serious trouble. This fact was then well known amongst informed participants in that market and their professional advisers." After reviewing the evidence, his Honour regarded as compelling the fact that the building was sold at arm's length on 29 June 1990 for an effective price of $13.8 million on generous vendor terms in consequence of the option granted on 17 May 1990. After making what he regarded as an appropriate allowance for the vendor finance, his Honour found that the market value on a cash sale as at 29 June 1990 was $12.8 million. Although there may be some force in the submissions which challenged his Honour's methodology and conclusion ultimately they failed to deal with the gravamen of his Honour's findings in relation to Richard Ellis. The misrepresentation found by his Honour to have been made by Richard Ellis was as to its opinion of value and the absence of reasonable grounds for the opinion it expressed. The findings were based on the particular experience of Richard Ellis, and, in particular, Chiminello, in relation to the market for the sale of the building of which they each had first-hand experience. The particular experience, as far as was relevant to market value, formed part of the information and therefore, relevant evidence available to Richard Ellis and Chiminello in valuing the building. As was said by Lord Hoffmann in Banque Bruxelles S.A. v Eagle Star [1997] AC 191 at 221 a correct valuation means: "... the figure which it considers most likely that a reasonable valuer, using the information available at the relevant date, would have put forward as the amount which the property was most likely to fetch if sold upon the open market." Objective views of value based on general market evidence unrelated to the property are relevant to an inquiry into whether an opinion expressed by an independent valuer, without Richard Ellis' particular experience with the building, was reasonably held or was wrong. Such views are likely to carry significantly less weight if the particular experience in respect of the property being valued suggests an outcome which differs significantly from that suggested by other market-based factors which are unrelated to the property. His Honour appeared to accept the significance of the extensive independent valuation evidence which supported the valuation of $14.8 million when he said (62 FCR 157) that a valuer without Chiminello's particular experience might honestly and reasonably have come to the opinion that the value was $14.8 million. However, his Honour added "but not Mr Chiminello". The 31 May letter contained statements of fact and opinion. The implicit statement of fact was that the valuation was that of an independent valuer. The explicit statement of fact was that it was based on the relevant evidence available to the valuer. The current market value of $14.8 million was a matter of opinion in respect of which Richard Ellis professed to have expertise. In such circumstances, as his Honour found, the expression of opinion will usually convey a representation that the opinion expressed is held honestly and based on reasonable grounds: see also MGICA v Kenny & Good supra at 355-6 per Lindgren J. It will be apparent from what we have already said that Richard Ellis's liability in respect of the 31 May letter depended on his Honour's findings of fact and, in particular, on his Honour's findings that Chiminello's belief as to value was not held honestly or on reasonable grounds. It is quite clear that if that finding be upheld on appeal, Richard Ellis' conduct in sending the letter to Gray & Winter for use in their marketing of the building to a group of investors will be conduct in contravention of s 52 of the TPA. Was Chiminello's belief as to value held honestly and on reasonable grounds? In substance Heerey J concluded that: · a valuer without Chiminello's particular experience with the Coles Myer building might honestly and reasonably have come to the opinion that its market value as at 31 May 1990 was $14.8 million; · Chiminello's particular experience in respect of the building led him to believe as an expert valuer that as at 31 May 1990 the market value of the property was less than $14 million on a cash sale; · accordingly, in expressing his opinion as to value in the 31 May letter Chiminello did not express an opinion which he "held honestly or on reasonable grounds". Heerey J summarised the particular experience of Chiminello and Richard Ellis with respect to the market for the sale of the property. On 1 May 1990 Chiminello reported by facsimile to Hudson Conway, amongst other things, that: · the subject properties are competing with distressed sales on the market which were believed to be offered at yields in excess of 10%; · many purchasers perceived that the market would soften even further and therefore are adopting a wait and see approach; · there is a need to respond to prospective purchasers "where necessary at lower sales prices in order to encourage them to further increase their offers". It was open to his Honour to reject Chiminello's explanation of the 1 May 1990 facsimile as not truly expressing his view but as "just softening up the vendor" and trying to extract instructions for a counter-offer. His Honour was critical of Chiminello's retreat from his contemporaneous expressions of his view of the market noting that it reflected "little credit" in a professional man who advanced it in sworn evidence. His Honour concluded that Chiminello believed that what he said in his letter of 1 May was a true and fair description of the market. Heerey J added - "as in fact it was". It also accorded with a practice adopted by Richard Ellis during June 1990 to add a note in letters relating to market value warning that forced sales were creating difficulties in relation to realisable market values for property. His Honour found that view to have been arrived at within Richard Ellis by June 1990. On 2 May Chiminello sent a facsimile to Dr. Chu, a prospective purchaser who made an offer at a yield of 11.5% (which would result in a sales price of about $11.2 million) which stated that Richard Ellis had been specifically advised by the vendor to respond to Dr Chu's offer by offering the Coles Myer building for $14 million on a cash sale. He added that he believed that Dr Chu was in an "excellent negotiating position at this particular point in time, however we cannot push the vendor until such time as we can meet with you in Melbourne". Chiminello conceded that he had no instruction whatsoever from Hudson Conway to make the offer set out in the letter. However, Chiminello's "offer" carried into effect, albeit unilaterally, the advice he gave in his 1 May 1990 facsimile that lower sales prices needed to be offered to prospective purchasers to encourage them to increase their offers. Heerey J referred to Richard Ellis' difficulties in obtaining offers to buy the building and to the facsimiles of 1 May and 2 May. His Honour observed that, when it was put to Chiminello that his statement as to being "specifically advised" by the vendor to respond with an offer of $14 million was a lie, Chiminello responded: "...it could be construed as a lie. I construe it as strategy". (62 FCR 21) His Honour concluded: "However, I am satisfied that Mr Chiminello's belief at the time was that the Coles Myer building was worth something less than $14M on a cash sale." (62 FCR 21) Heerey J, in reaching that finding, clearly disbelieved Chiminello's evidence that he held no such belief. It was open to his Honour to do so. He had earlier commented adversely on Chiminello's credit in relation to his explanation of the 1 May facsimile. In respect of the 2 May facsimile Chiminello had lied to a client to procure a sale yet was not prepared to make that concession. In his facsimile to Richard Ellis' Taiwan office of 31 May, Chiminello expressed confidence that the vendor would accept an offer of $14 million. It was open to his Honour to view the facsimiles of 1 May, 2 May and 31 May as contemporaneous evidence that, in Chiminello's opinion, the likely market price of the building was no more than $14 million as he was, in effect, offering it at that price on behalf of the vendor to a prospective purchaser on the assumption that he believed the vendor would accept that, and probably a lower, price. The assumption was well founded in fact as Hudson Conway was prepared to accept from Gray & Winter a price of $13.8 million on generous vendor terms. The cash sale value would be likely to be less than $13.8 million. As at 1 May, the strenuous endeavours of Richard Ellis had failed to produce an offer or a genuine expression of interest from a purchaser in buying the property for a price above about $11.2 million. Heerey J had the advantage, denied to this Full Court, of seeing and hearing Chiminello give his evidence. While the transcript enables us to read what the witnesses said it is no substitute for seeing and hearing them when issues of credit arise. The transcript does not enable us to form an impression which would be anywhere near as accurate as that arrived at by a trial Judge on such issues. In the circumstances set out above, it was clearly open to his Honour, as the trial Judge, to reject Chiminello's evidence. At various times Richard Ellis' submissions were put to the Court as if it were hearing the matter at first instance. The principle to be applied was stated in Devries v Australian National Railway Commission (1993) 177 CLR 472 at 479 where Brennan, Gaudron and McHugh JJ said: "More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge 'has failed to use or has palpably misused his advantage' or has acted on evidence which was 'inconsistent with facts incontrovertibly established by the evidence' or which was 'glaringly improbable'." None of these circumstances has been shown in the present case. Further, we are satisfied that the probabilities and the contemporaneous documentation relied upon by his Honour amply support his findings of fact in relation to Chiminello. There are additional reasons for finding that the valuation contained in the 31 May letter was misleading and deceptive. The letter is drafted to purport to be an expert's opinion as to a current market value of $14.8 million for a cash sale expressed by an independent valuer having no particular experience in respect of the sale of the building after "careful consideration has been given to the relevant evidence to arrive at this figure.". Yet it is apparent from the letter and Chiminello's calculations that the valuation did not have regard to Chiminello's particular experience, being "relevant evidence", which led his Honour to conclude that Chiminello's opinion was that the current market value was less than $14 million. In our view a pattern of half truths emerges from Chiminello's evidence and the letters of 1, 2 and 31 May. The 1 May letter was said by him to be just a softening up to obtain a counter offer but, even if it had been, it was also his contemporaneous expression of opinion as to current market conditions. The 2 May letter was said to be a strategy but, even so, the offer in it was also a lie. The 31 May letter purported to be an independent expression of current market value after considering all relevant evidence but that was not so as it did not consider or reveal Chiminello's and Richard Ellis' particular experience with the property as agent for the vendor which led them to the view that the "amount the property was most likely to fetch if sold on the open market" (Banque Bruxelles SA at 221) on a cash sale would be less than $14 million. These matters call to mind the observation of Chambre J in Tapp v Lee (1803) 3 Bos & Pul 367 at 371, 127 ER 200 at 203, (cited in Krakowski at 575): "Fraud may consist as well in the suppression of what is true, as in the representation of what is false. If a man, professing to answer a question, select those facts only which are likely to give a credit to the person of whom he speaks, and keep back the rest, he is a more artful knave than he who tells a direct falsehood." It was contended that his Honour erred in law in making a finding as to dishonesty without having the degree of satisfaction appropriate to such a serious allegation: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 361 per Dixon J. In some cases involving serious allegations, such as criminal conduct, fraud or moral wrongdoing, the judicial approach has been that a Court "should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct" see: Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 171. Although his Honour did not express his findings in relation to Chiminello in terms of being "clearly satisfied" or their equivalent, we are satisfied that the reasons, read as a whole, show that he did not lightly make these findings and, in making them, had the requisite degree of satisfaction. His Honour's additional finding of absence of reasonable grounds follows from the reasons given for the finding of the absence of an honest belief by Chiminello in the value he stated in the letter. That is so as the particular experience of Richard Ellis and Chiminello, which led his Honour to find that Chiminello believed the value of the property to have been less than $14 million, affords reasonable grounds for arriving at the opinion that the current market value on a cash sale was not $14.8 million. Put another way, the particular experience of Richard Ellis and Chiminello was such that they did not have reasonable grounds for arriving at the opinion that the current market value for a cash sale was $14.8 million. In the circumstances of the present case, it was correct for his Honour to place appropriate emphasis on the particular experience of Richard Ellis in relation to the market for the building as relevant to whether its belief was held honestly and on reasonable grounds. Accordingly, in our view, the challenge to his Honour's findings of fact against Chiminello and Richard Ellis on the misrepresentation in the 31 May letter is without foundation and fails. A precise articulation of the misleading and deceptive conduct engaged in by Richard Ellis in respect of the letter is important to the claim by certain of the investors under s 75B of the TPA that Hudson Conway and Amadio were persons involved in the contravention by Richard Ellis of s 52 of the TPA. In our view, the evidence accepted or findings of fact made by his Honour in relation to the 31 May letter establish that the contravention of s 52 by Richard Ellis was constituted by it: · expressing an opinion as to value which was not held honestly or on reasonable grounds; · falsely representing that the opinion was that of an independent expert valuer based on all relevant evidence. Cumulatively, the contravening conduct purported to give the valuation credibility and reliability which, if the true facts were known, it did not have. Further, the false representation referred to above resulted from the failure by Richard Ellis to disclose that it was the vendor's agent and that, in giving its valuation, it was disregarding its particular experience over eighteen months in the market for the property being valued. In the result, the letter did not make a full or fair disclosure of the facts which were material to enable investors or their advisers to make a properly informed decision as to its credibility and reliability: cf Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 467. Although his Honour's conclusion on the contravention by Richard Ellis was not articulated in the precise manner set out above, the contravention, as so formulated, was in substance pleaded against Richard Ellis and put as part of the investors' case at trial. Criticism was also made in relation to his Honour's statement of the legal principles applicable to the causes of action found against Richard Ellis in negligence and under s 52. We are unable to accept that any error of law or fact was made at first instance in respect of these matters. His Honour's statement and application of principle in respect of the negligence claim were consistent with the similar analysis in analogous circumstances in Australian Breeders Co-operative (supra) at 521-526 per Wilcox and Lindgren JJ. In substance, the findings of fact to which we have referred led to the attribution of liability on the basis of the well established legal principles set out in his Honour's reasons as applied to the facts found. Accordingly, subject to the issue of reliance and causation to which we return later, we are satisfied that the challenge to his Honour's findings of liability against Richard Ellis is not well-founded. 6.4 Liability of Hudson Conway and Amadio The Case against Hudson Conway and Amadio His Honour did not set out his findings concerning Hudson Conway and Amadio in relation to the 31 May letter in a discrete section of his reasons. However, the basic finding was that, by authorising Richard Ellis to send the 31 May letter to Gray & Winter for use in the marketing of the building, Hudson Conway and Amadio were persons involved in the misleading and deceptive conduct of Gray & Winter in using the letter and therefore were liable for loss and damage under s 82 of the TPA. As it is contended that his Honour's findings went beyond the case pleaded or put by the applicants at trial it is necessary to consider the pleadings. The case pleaded against Hudson Conway and Amadio in respect of the 31 May letter was inextricably, but inelegantly, bound up with the case pleaded against Richard Ellis. The pleading is somewhat convoluted and rolls up the different causes of action pleaded against Richard Ellis, Hudson Conway and Amadio over some twelve pages of the Amended Statement of Claim. Doing the best one can in these circumstances, the gravamen of the case alleged against Hudson Conway and Amadio may be summarised as follows: · Hudson Conway and Amadio authorised Richard Ellis to send the 31 May letter to Gray & Winter knowing and intending that it would be produced to potential purchasers as an independent valuation to justify the proposed purchase price of $14.835 million; · by reason of their particular experience with the property Richard Ellis, Hudson Conway and Amadio did not believe that the property had a market value of $14.835 million; · the letter was sent and the valuation was arrived at without having regard to, or disclosing, the particular experience of the parties in respect of the marketing of the property or that it was a valuation by the agent of the vendor and therefore not independent; · Richard Ellis sent the letter of valuation as agent for Hudson Conway and Amadio; · accordingly, Richard Ellis, Hudson Conway and Amadio engaged in misleading and deceptive conduct in contravention of s 52 of the TPA and Hudson Conway and Amadio were also persons involved (within the meaning of s 75B of the TPA) in the Richard Ellis contravention; · certain investors, who relied upon the letter in becoming members of the syndicate which purchased the property, have suffered loss and damage; · as a consequence, Hudson Conway and Amadio are liable for the loss and damage suffered by these investors. As it appears to be correct that a case of involvement by Hudson Conway and Amadio was not pleaded or put in relation to the contravention of Gray & Winter, we turn first to consider whether the case pleaded against Hudson Conway and Amadio has been made out. In our view the following conclusions can be reached on the basis of his Honour's findings, the undisputed contemporaneous documentation and the terms of the 31 May letter which were read out to and approved by Rafaniello before it was sent to Gray & Winter. 1. Hudson Conway and Amadio authorised Richard Ellis to send the 31 May letter to Gray & Winter. All parties knew and intended that the letter would be produced as an independent valuation to potential members of a purchasing group being put together by Gray & Winter to purchase the building pursuant to an option granted by the vendor. Hudson Conway and Amadio, but not Richard Ellis, were aware that the nominal purchase price under the option was $14.835 million but the true price to them was $13.8 million because of the acquisition fee. 2. The 31 May letter purported to be an opinion of an independent expert which valued the building at $14.8 million after consideration of all relevant evidence. 3. Hudson Conway and Amadio were aware that the potential purchasers to whom the letter would be likely to be shown would include persons who were not professional investors nor knowledgeable concerning the state of the Melbourne commercial property market at that time. Richard Ellis had no reason to hold a contrary view. 4. The letter was likely to be presented to, and treated by, the persons to whom it was to be shown, as an independent expert opinion by a leading Melbourne firm of real estate agents and valuers. 5. Richard Ellis, Hudson Conway and Amadio were aware that: (a) the best offer they had been able to achieve on the open market after eighteen months effort was $11.2 million; (b) the marketing history of the property and the uncertain and deteriorating state of the property market at the time afforded no reason to expect that the property was likely to fetch $14.8 million on a sale on the open market; (c) the letter was not written by an independent valuer but was written by the agent for the vendor in the hope or expectation that it might yield a sale by the vendor to Gray & Winter's group of investors and, in turn, a commission to Richard Ellis; (d) if any of the matters set out in (a), (b) and (c) above were disclosed or taken into account in the letter that would tend to discourage, rather than encourage, investors from proceeding with the purchase. 6. Hudson Conway and Amadio (but not Richard Ellis) were aware that: (a) having failed to sell the property after eighteen months they, as a willing, prudent, but not anxious vendor, had granted an option to sell the property for an effective price of $13.8 million on generous vendor terms; (b) to achieve a sale at $13.8 million they had agreed, in addition to the agent's commission of up to $200,000 payable to Richard Ellis, to pay $1.035 million to Gray & Winter as an "acquisition fee" to package the property as an investment to a syndicate to be promoted by that firm. 7. From the point of view of Hudson Conway and Amadio, a valuation of $14.8 million was inherently likely to be attractive to the potential purchasers as it would appear to them that, notwithstanding the $1.035 million acquisition fee, the investors were still buying the property at its current market value. As the true sale price to Hudson Conway was $13.8 million the real situation was that the valuation would tend to encourage potential purchasers to pay over $1 million more than the price at which Hudson Conway and Amadio were ready, willing and able to sell the property. 8. From Richard Ellis' point of view, the valuation was only authorised by its principals Hudson Conway and Amadio after they were satisfied that it exceeded the price at which they were prepared to sell. 9. The letter would not have been sent by Richard Ellis but for Rafaniello's approval and authorisation given on behalf of Hudson Conway and Amadio.

Were Hudson Conway and Amadio involved in the contravention by Richard Ellis? Under s 82 of the TPA a person who suffers loss or damage by conduct of another person in contravention of s 52 may recover the loss or damage by action against that other person or any person involved in the contravention. Section 75B relevantly provides that a reference to a person involved in a contravention shall be read as a reference to a person who "has been in any way directly or indirectly, knowingly concerned in, or party to, the contravention". Since Yorke v Lucas (1985) 158 CLR 661 it has been accepted that a person will not satisfy the definition unless that person's involvement or participation in the contravention has been with knowledge of the essential facts constituting the particular contravention in question. Although counsel for Hudson Conway and Amadio sought to play down Rafaniello's role in relation to the 31 May letter it was accurate, in our view, for Heerey J to conclude that Rafaniello had authorised it to be sent to Richard Ellis in the form it was in and that, as a result of that authorisation, it was sent by Richard Ellis for the purpose of being passed on to Gray & Winter to assist in their marketing of the proposed syndicate. In the present case we have found that the facts constituting the contravention of s 52 by Richard Ellis were as follows. The letter expressed an independent opinion as to the value of the Coles Myer building which, to the potential investors to whom it was to be shown, gave a false and misleading impression of the current market value of the building on a cash sale as it: · expressed an opinion which was not held honestly or on reasonable grounds; · falsely represented that the opinion was that of an independent valuer based on all relevant evidence. We are satisfied that his Honour found that Rafaniello had knowledge of these facts. As a result of the particular experience of Hudson Conway, Amadio and Richard Ellis with the marketing of the Coles Myer building, Rafaniello knew all of the facts which would result in the letter conveying a false picture or impression to potential investors. These facts are set out in detail in paragraphs 1-7 above. In particular, it is implicit in his Honour's findings that Rafaniello knew that there could be no reasonable basis for Richard Ellis believing that the value of the building was $14.8 million. There is ample evidence to support that conclusion. At that time, Hudson Conway's view of the best price the building would fetch on the open market was $13.8 million on vendor terms. Chiminello's view was that the best price was no more than $14 million on a cash sale. Whilst it may be superficially attractive to contend that neither knew of the other's view in these terms, the truth is that both companies not only had extensive general experience in marketing real estate, but they also had their own particular experience in respect of the building. The views they formed broadly coincided, not by accident, but by reason of that experience. Indeed it was that factor and the documentation which reflected the contemporaneous views and conduct of the parties in that regard upon which his Honour relied, amongst other things, in forming an adverse view of the evidence and credibility of Chiminello and Rafaniello. The present case is analogous with the situation that arose in Sutton v A J Thompson Pty Ltd (in liq) (1987) 73 ALR 233 which concerned an accountant's involvement in misleading conduct of a vendor of a business. The accountant had presented misleading financial accounts of the business at a meeting with the purchasers when he was taken to have been aware that the figures were unrealistically optimistic and would convey the false impression of an excellent gross profit margin. The Full Court (Forster, Woodward and Wilcox JJ) held (at 242-3) that the requirements of s 75B were satisfied as the accountant was an intentional participant with full knowledge of the essential elements of the contravention as he "knew in fact that the figures in which he concurred would convey a false picture". In the present case, we are satisfied, on his Honour's findings of fact, that when Rafaniello authorised the letter of 31 May he knew that it would convey "a false picture" in relation to the valuation contained within it. Heerey J concluded that Rafaniello had knowledge of all of the particular facts constituting the breach and, in particular, that to the knowledge of Hudson Conway the opinion of Chiminello was not held honestly and on reasonable grounds. Hudson Conway submitted that there was not only no evidence to support his Honour's findings against Rafaniello, but that Rafaniello's belief as to Chiminello's opinion (whether on grounds of dishonesty or an absence of reasonable grounds) was not put to him in cross-examination as was required by the rule in Browne v Dunn (1893) 6 R 67. There was some force in the Browne v Dunn submission as the substance of the evidence given by Rafaniello, which was not seriously challenged, was that: · he did not deviate from his asking price of around $15.5 million which he was prepared to recommend; · Hudson Conway's option to Gray & Winter for $13.8 million did not affect the asking price he would recommend and it did not conflict with Richard Ellis' valuation of $14.8 million; · basically he did not really apply his mind to the 31 May letter although he did wish to ensure that the figure was not less than the price at which Hudson Conway was agreeing to sell the property. However, as has been pointed out recently by Tamberlin J in Raben Footwear Pty Ltd v Polygram Records Inc (1997) 145 ALR 1 at 14 and by Heerey J in Australian Competition & Consumer Commission v J McPhee & Son (Australia) Pty Ltd (Federal Court of Australia, 26 February 1998, unreported) at 34 the rule in Browne v Dunn is ultimately one of procedural fairness. Heerey J said at 34: "An essential element of the rule - and one which was very much present in Browne v Dunn itself - is that the impugned witness has had no notice on the point on which his or her evidence is subsequently attacked." and at 34-35: "In the present case there was an elaborate statement of claim with extensive particulars - so much so that counsel for the respondents in the earlier strikeout application complained of it being a 'play script'. Prior to trial the Commission served detailed witness statements. These largely comprised direct evidence of meetings and telephone conversations in which the various respondents participated. The respondents could be under no illusion as to the case sought to be made against them. They had every opportunity to give such evidence as they wished in order to meet that case." In the present case Hudson Conway and Amadio were on notice that the case pleaded against them was that neither they nor Richard Ellis believed the market value of the property to have been $14.8 million. Extensive witness statements were served. Counsel for the investors cross-examined Rafaniello about the inconsistency between Hudson Conway's granting an option for $13.8 million and his evidence that his asking price remained around $15.5 million. In substance, Rafaniello's evidence was that he gave little or no thought to the 31 May letter at the time. In these circumstances, we do not accept that Hudson Conway and Amadio were not on notice that the issue of Rafaniello's belief and state of mind in respect of the value of the building was not an issue at the trial. Ultimately, it was a matter for his Honour as to whether he accepted Rafaniello's evidence which was to be assessed on the balance of probabilities having regard to all of the other evidence including the contemporaneous documentation. In such circumstances, as Heerey J said in J McPhee at 35, counsel for the investors was not required, when cross-examining, to debate with Rafaniello the various competing probabilities which might arise from the evidence. Whilst it is true that his Honour did not deal with Rafaniello's credit as a discrete issue, it is fairly clear from his Honour's reliance on the particular experience of Hudson Conway and Richard Ellis, to which he referred, that he was implicitly rejecting Rafaniello's evidence as to his belief and state of mind in relation to the market value of the building. It was open to his Honour not to accept Rafaniello's evidence on these matters. The same observation can be made, but with greater force, on the presence or absence of reasonable grounds for the valuation. It was open to Heerey J to conclude that, for the reasons given by his Honour, and, particularly, the experience of Richard Ellis and Hudson Conway with the property, it was apparent to Rafaniello and Chiminello that neither had reasonable grounds for believing that the value of the building on a cash sale was $14.8 million. We are also of the view that, reading his Honour's reasons as a whole his Honour did not lightly arrive at his findings against Rafaniello. We repeat our earlier observations in respect of the disadvantage of an appellate court on issues of credibility. We are not satisfied that his Honour erred on that issue. In these circumstances, his Honour's findings amply support a conclusion that Hudson Conway and Amadio were persons involved in the contravention of s 52 by Richard Ellis.

Did Hudson Conway breach s 52? There are substantial grounds for concluding that, in any event, on the facts found by Heerey J, Hudson Conway and Amadio also breached s 52 by authorising the valuation to be sent by Richard Ellis to Gray & Winter. Whilst it is true that Hudson Conway and Amadio made no misrepresentation as to value to the investors, misleading and deceptive conduct does not necessarily require misrepresentation. As was said by Lockhart J (with whom Burchett and Foster JJ agreed) in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 at 555: "Misleading or deceptive conduct generally consists of representations, whether express or by silence; but it is erroneous to approach s 52 on the assumption that its application is confined exclusively to circumstances which constitute some form of representation." Also, as we later repeat, s 52 turns its attention to "conduct": see Nescor Industries Group Pty Ltd v MIBA Pty Ltd (1997) 150 ALR 633 at 638-639. As we are satisfied that the case pleaded against Hudson Conway and Amadio under ss 75B and 82 has been established and that their appeal on this ground fails, it is unnecessary to pursue this aspect of the matter further.

6.5 Reliance and Causation His Honour dealt with reliance and causation at 62 FCR 166-168. His Honour's statement and application of principle is consistent with, and supported by, the decisions in Australian Breeders Co-operative (supra) at 527-530 and MGICA (supra) at 358 where reliance by third parties upon a valuation for the purpose of making an investment decision was considered. As was said by Lindgren J in MGICA at 358: "The opinions and the implied representations in the report to which I referred earlier were, moreover, regarded objectively, of a kind calculated to influence MGICA's decision whether to grant the mortgage insurance. Therefore a fair inference of fact arises that MGICA was induced to do so by them. The authorities show that it is not fatal to a claim of reliance that a witness does not give express and direct evidence of reliance." Heerey J found (at 62 FCR 166-8) that: "The Richard Ellis' letter of 31 May, conveying as it did an expert opinion by a purportedly independent expert, was also likely to induce investors to invest and did, I find, operate as an inducement to the Huntley McArdle & Glass clients who saw or were told of it." and: "There must have been something which caused these applicants, intelligent and hard-working people who had been successful in their own fields of endeavour to make a sudden leap into the Melbourne commercial property market. Once it has been established that there was negligence and misleading and deceptive conduct on the part of the respondents in connection with matters which objectively would be likely to operate as an inducement for such an investment, I find it difficult to see how it could be argued that such negligence and misleading and deceptive conduct was not at least a cause of the applicants' decision to invest." Ultimately, reliance and causation are questions of fact. The findings his Honour made in respect of reliance and causation in respect of the 31 May letter were clearly open on the evidence and, in particular, the evidence given by Messrs Turner, Gordon and Dean which his Honour accepted. For these reasons the appeals of Richard Ellis, Hudson Conway and Amadio in respect of the 31 May letter are to be dismissed. We would add that appeals by other respondent debtors raised issues of reliance and causation similar to those raised by Nevett Ford, Richard Ellis, Hudson Conway and Amadio. Those appeals also fail, inter alia, on reliance and causation essentially for the same reasons as the appeals by those respondent debtors have failed. 7. GRAY & WINTER AND JAMES GRAY Damages were awarded against Gray & Winter in favour of each of the group of partners described in Schedules B to M inclusive. Damages were awarded against James Gray in favour of the Deans (Schedule B), the Turners (Schedule C) and the Hendersons (Schedule E). Gray & Winter and James Gray have appealed from the whole of the orders made against them including the orders for damages. From what has been said already, it is obvious that the major parties involved in the scheme to sell the Coles Myer building as discussed in the prescribed interest section of these reasons were Amadio, Hudson Conway and Gray & Winter. James Gray, it will be remembered, is not a solicitor but was employed by Gray & Winter. He and Winter each agreed to participate as partners with respect to two 1/20th shares but neither was an applicant at the trial. In his summary of findings (62 FCR at 217), the trial Judge, after referring to the basis of liability against Amadio and Hudson Conway with respect to the investment scheme said: "Gray & Winter in promoting this investment scheme were not acting as solicitors and did not owe a solicitor's duty of care to the applicants. However on ordinary principles of negligence they owed a duty of care to the applicants. Loss was reasonably foreseeable and there was sufficient proximity. They are liable for the following statements which were negligent as well as being misleading and deceptive within the meaning of the Trade Practices Act and Fair Trading Acts: (i) the market value of the building was at least $14.835 million; (ii) rent and capital value would increase; (iii) there would be no problems with re-finance in June 1993; (iv) a share could be sold with no further liabilities." The evidence against Gray & Winter and the findings and conclusions made by the trial Judge are set out at length and in detail in his Honour's reasons for judgment. The facts involving the participation of Gray & Winter in promoting the investment scheme are set out by the trial Judge (62 FCR at 21-22). His Honour, at 128 to 133, discussed agency and sub-agency issues relating to Hudson Conway and Gray & Winter as well as Bird Cameron and Gray & Winter. The contractual and tortious duties of care owed by Gray & Winter are set out at 133 and their breach of those duties is discussed at 146 and elaborated upon in the following pages in the discussions relating to Bird Cameron, Huntley McArdle & Glass, Nevett Ford, Metzke & Allan and Richard Ellis. The evidence related to conduct in contravention of s 52 of the TPA and the corresponding State Acts commences at 157. This aspect of the application occupied a major part of the hearing of the trial. The issues of reliance and causation are discussed commencing at 166. As with several other appellants Gray & Winter's appeal was pursued on most grounds irrespective of their individual merit. At the outset it is appropriate to say that we are not persuaded that any error was made by his Honour in coming to the conclusions he did with respect to the liability of Gray & Winter. Heerey J found that the applicants, in deciding to invest in the Coles Myer building, relied upon one or more of the four representations referred to in the summary of findings. His Honour's conclusions were based on a detailed analysis of the evidence. We are satisfied that the conclusions were reasonably open on the evidence and that his Honour enjoyed the advantage, which the appellate court does not have, of hearing the evidence given by the witnesses and seeing them give that evidence. Obviously in such circumstances the appeal by Gray & Winter and James Gray, which is based primarily on challenges to his Honour's findings of fact, confronts significant difficulties. In substance the appellants challenged his Honour's finding that Gray & Winter owed and breached a duty of care to the applicant investors. They contended that: · Gray & Winter fully and accurately informed the applicant investors of all matters relevant to the proposed investment; · the investors were fully aware of the risks confronting them in making the investment and (save for the Greens and the Lees) received and relied upon independent advice from their own accountants and their own business judgment as to whether they should undertake those risks; · in all the circumstances the investors did not rely on the representations of Gray & Winter. His Honour found that the breach of duty and misleading and deceptive conduct on the part of Gray & Winter in promoting the investment arose as a consequence of the four representations to which we have referred. His Honour also found that the representations were either false or made without reasonable grounds. Each of those findings was made after a consideration of the extensive evidence before his Honour on those matters. Earlier in these reasons we set out why we regarded the statement that the building had a market value of $14.8 million at the relevant time as misleading and deceptive. Gray & Winter was aware that the vendor was content to sell the building on generous vendor terms for $13.8 million. His Honour also found (at 62 FCR 130 and 133) that: · Gray & Winter conveyed the four representations to the accountants knowing and intending that they would in turn pass them on to prospective investors; · the sole purpose of informing the accountants about the scheme was to enable them to recruit investors on the basis of information provided by Gray & Winter; · to the extent the information was passed on by the accountants that was the intended and probable result of Gray & Winter's conduct and that that conduct was therefore actionable by the applicants who relied on the representations; · Gray & Winter, on ordinary principles of negligence, owed a duty of care in relation to each of the statements they made to the applicants and to their accountants for the purpose of having those statements passed on to the applicants; · there was a forseeability of loss if the statements were to be relied upon, and sufficient proximity; · the statements were made with the intention that the applicants rely on them. Not only were the conclusions his Honour arrived at open on the evidence but in our view they were compelled by that evidence. There was no basis in law or in fact for the contention that representations made to the accountants to be conveyed to their clients or to induce their clients to invest cannot be treated as representations made to the clients or as constituting misleading conduct. In these circumstances his Honour was correct in concluding (62 FCR 146) that the statements in question were misleading, amounted to misrepresentation and were also negligent and made in breach of the duty of care owed by Gray & Winter to the applicants. A detailed challenge was made to his Honour's finding of reliance by the individual applicants on the representations made by Gray & Winter. The difficulty with the challenge is that his Honour's conclusions were based upon his impression of the applicants and their evidence. It was on the basis of that evidence that his Honour found that the applicants had made out their case on reliance and causation. His Honour discussed reliance and causation in relation to the applicants at 62 FCR 166 to 168. As already pointed out, we are satisfied that the principles of law stated by his Honour were correct and that the facts found by him were reasonably open on the evidence. In particular, findings by his Honour concerning the applicants' reliance on the representations of Gray & Winter and on the advice of the accountants were findings based upon the evidence that were open to his Honour to make. No error has been demonstrated in relation to them. On the question of contribution his Honour placed Gray & Winter together with the accountants (other than Bird Cameron Geelong) at Level I being the highest level of contribution. His Honour explained the reason for doing so (at 62 FCR 202) as follows: "On Level I I would place Gray & Winter who instigated and marketed the scheme and the accountants (other than Bird Cameron Geelong) without whose recommendation such of the applicants as were their clients would never have invested. The accountants were quite negligent in not adverting to the obvious hazards of the scheme and its inappropriateness for their clients. The non-disclosure of the commission played a significant role. That is something for which Gray & Winter are also responsible. They prepared the instruction letter which was misleading on this question." In our view his Honour was clearly correct in the conclusions which he reached as to contribution and culpability insofar as Gray & Winter were concerned. The other issue arising on this aspect of the appeals relates to the fact that Winter and Mr James Gray each took up a full 1/20th interest in the partnership so as to ensure all of the interests were taken up by 29 June 1990. The venture, as proposed, could only proceed if all the interests were taken up prior to the end of the financial year. As a consequence of those matters his Honour made the following findings (at 62 FCR 240): "I agree that the Gray & Winter interests, including Mr James Gray and Mr Winter were, as I have already found, active participants in conduct which breached the prescribed interest provisions. The unlawful scheme they helped to promote was the same one in which they also invested. The opportunity for their hoped-for profit only arose because the law had been breached by their wrongful conduct. The scheme could not work for them unless 18 other "shares" were sold by the same illegal promotion as that in which they engaged. They cannot be considered in their capacity as investors only, unsullied by their participation as promoters. This means that the Court cannot grant them positive relief. Mr James Gray and Mr Winter cannot obtain an order for the recovery back of moneys paid because they are in pari delicto." We have already pointed out in our discussion relating to the prescribed interest provisions that the provisions were breached by Gray & Winter's offer of the investment to the public. In these circumstances we are in no doubt that his Honour's refusal to grant the positive relief sought by Winter and Mr James Gray at trial was correct. In the result neither Winter or Mr Gray had any further liability under the mortgage and guarantees but they were not entitled to recover by way of restitutionary relief or otherwise any monies paid by them as investors notwithstanding that they were compelled to re-transfer their interest in the building. These conclusions followed from his Honour's findings of illegality on the part of Gray & Winter and Winter and Mr James Gray being in pari delicto. No error of law or fact has been demonstrated in relation to the conclusions or the findings upon which they were based. Insofar as the appeals raised or adopted grounds relied upon by the other appellants those grounds have not been made out for the reasons given in respect of those grounds on the other appeals. The appeal by Gray & Winter will be dismissed with costs. It is noted that by paragraph 25 of Heerey J's orders any judgment against Gray & Winter includes a judgment against Garrick Lewis Gray and Michael Frederick Winter. Orders for damages against James Gray were also made in favour of the Deans, the Turners and the Hendersons. The part performed by James Gray with respect to the investment scheme, insofar as it affected those three groups of investors, is discussed by the trial Judge in the passages already referred to in these reasons. We are not persuaded that his Honour was in any way in error in coming to the conclusions he did. The appeal by James Gray will also be dismissed with costs. 8. BIRD CAMERON Most of the investors in the investment scheme were introduced to the scheme by one or other of two firms of accountants, Bird Cameron and Huntley McArdle & Glass Pty Ltd. The accountancy practice of Bird Cameron was conducted by a company BPM Pty Ltd with its headquarters in Perth. At the relevant time it had some thirty-eight branches in cities and towns throughout Australia including Ballarat and Geelong in Victoria and Millicent and Port Lincoln in South Australia. Under paragraph 27 of the orders, any judgment against Bird Cameron - Ballarat includes a judgment against the following persons: (i) BPM Pty Ltd; (ii) John Albert Mayne; (iii) Terrence Robert Rodoni; (iv) Phillip Brian Auer. Under paragraph 28 of the orders, any judgment against Bird Cameron - Geelong includes a judgment against the following persons: (i) BPM Pty Ltd; (ii) Peter Allan Landers; (iii) Andrew William Werzbowzki. Damages were awarded against the Bird Cameron interests in favour of the following groups of partners: Schedule & Group Name of respondents E, the Hendersons BPM Pty Ltd Bird Cameron - Ballarat H, the Haarsmas BPM Pty Ltd Daryl Lynch I, the Schoemans BPM Pty Ltd Daryl Lynch J, the Arthursons BPM Pty Ltd Daryl Lynch K, the Phelps BPM Pty Ltd Daryl Lynch L, the Tranters BPM Pty Ltd Joseph Korczak M, the Trengoves BPM Pty Ltd Bird Cameron - Geelong Daryl Lynch was an accountant engaged by Bird Cameron at its Port Lincoln office and was involved in relation to the Haarsmas, the Schoemans, the Arthursons and the Phelps investing in the scheme at Port Lincoln and Millicent in South Australia. Joseph Korczak was a professional member of the staff of Bird Cameron at Millicent. In his summary of findings on liability the trial Judge in relation to the liability of the Bird Cameron interests, said (62 FCR 217-218): "Bird Cameron owed to those of the applicants who were their clients a duty to exercise the care, skill and diligence of a reasonably competent accountant in giving investment advice concerning the Coles Myer building investment scheme. They breached that duty by failing to warn their clients of the inherent risk of the investment scheme arising from its extremely high gearing and its total dependence on substantial and uninterrupted growth in capital and rental value. Because of its high degree of risk and requirement for large and continuing contributions, the scheme was quite inappropriate for persons in the particular personal and financial circumstances of Bird Cameron's clients. Bird Cameron made no adequate inquiries as to the state of the Melbourne commercial property market and relied virtually entirely on assurances by Gray & Winter who, to Bird Cameron's knowledge, stood to earn over a million dollars in fees if all shares in the investment were taken up. Bird Cameron implicitly represented to its clients that each of the persons involved in the promotion of the scheme was reliable and of good repute. This was misleading and deceptive because at the time Mr Garrick Gray was disqualified under s 562A(3) of the Companies (Victoria) Code from acting as a director of a company on the ground that he had taken part in the management of failed companies. Also Mr Gray had been convicted by a magistrate for issuing securities without a prospectus although on appeal to the County Court the charges were adjourned without conviction. With one exception the Bird Cameron accountants failed to disclose to their clients that they would receive a commission of $10,350 for each client who invested in the scheme. The exception is Mr Peter Landers of Bird Cameron Geelong who not only disclosed to his client the proffered commission but declined to take it and charged, on a time basis, a much lower amount." Bird Cameron has not appealed against the finding of liability and damages but the findings are relevant to the appeals of Huntley McArdle & Glass and Mr Glass which we next consider. Other aspects of the orders are the subject of cross-appeals by Bird Cameron in relation to SGIO. These will be considered later. 9. HUNTLEY McARDLE & GLASS PTY LTD AND ROBERT HUGH GLASS Damages were awarded against Huntley McArdle & Glass Pty Ltd in favour of the groups described in Schedules B, C and D being the Deans, the Turners and the Gordons respectively. In addition, damages were awarded against Robert Hugh Glass in favour of the Deans, the Turners and the Gordons. Mr Glass was an accountant engaged in the activities of Huntley McArdle & Glass Pty Ltd. He was involved in a further or particular way. Apart from dealing with the three clients of the company who entered into the scheme, Mr Glass also became a partner in the scheme. He was not an applicant but claimed relief by way of cross-claim. In his summary of findings, the trial Judge, after dealing with Bird Cameron, said (62 FCR 218): "Huntley McArdle & Glass owed the same duty to their clients and breached it in essentially the same ways. They also failed to disclose the commission of $10,350 for each of their clients who invested. The claim of Mr Robert Glass of that firm that his family company Wintarni Pty Ltd became a guarantor as a consequence of misleading and deceptive conduct of Gray & Winter is not made out." Huntley McArdle & Glass and Robert Hugh Glass both appealed from the judgment and orders made by Heerey J insofar as they related to them. Huntley McArdle & Glass did not appear on the appeal but Mr Glass appeared in person. Written submissions were filed on behalf of the firm and Mr Glass. The appeals related essentially to findings of fact which in our view were open to his Honour on the evidence. His Honour found that the breaches of duty and representations which had been established against Bird Cameron were established for essentially the same reasons against Huntley McArdle & Glass. We have considered the written submissions and are satisfied that the challenges to his Honour's fact findings suffer from the same difficulties to which we have referred in relation to the appeal by Gray & Winter and James Gray. There is little point in setting out the detail of the findings. Save for one matter to which we shall shortly refer we are satisfied that his Honour made no error of law or fact in relation to them and in coming to the conclusion he did with respect to liability. Mr Glass sought to appeal in his own right on the basis of his decision to acquire one half of a 1/20th share in the partnership. Mr Glass claimed that his decision to acquire his share and to cause his family trust company Wintarni Pty Ltd to execute a joint and several guarantee, was based on misleading and deceptive conduct on the part of James Gray. His Honour concluded (at 62 FCR 218) that, as a matter of fact, that claim was not made out. However, Mr Glass also claimed that he was entitled to the same relief as the applicants in respect of his one half share as a result of the breach of the prescribed interest provisions to which he was not a party. His Honour dealt with Mr Glass's claim as an investor (at 62 FCR 241) as follows: "Because no insurance indemnity issue was before the Court in connection with Huntley McArdle & Glass it has not been necessary to consider the commissions received by that firm. However they now become relevant to the claim by Mr Glass as investor. There is no distinction to be made between these commissions and those received by Bird Cameron. These were equally secret commissions corruptly received in contravention of the criminal law. Mr Glass was actively involved in obtaining them. Indeed, in contrast to the Bird Cameron employees, he benefited personally through his interest as a principal in his firm. That being so, his position as to recovery back from Amadio of moneys paid is the same as Mr James Gray and Mr Winter. His position, and that of his company Wintarni, as to liability on the mortgage and guarantee, is also the same. Amadio cannot enforce the mortgage and guarantee against them. Mr Glass is also a cross-claimant against Hudson Conway, Gray & Winter and Richard Ellis. He seeks by way of damages for negligence and misleading and deceptive conduct the amounts which he has paid under the scheme thus far ($76,495). For the reasons already discussed in relation to Gray & Winter his role as investor cannot be separated from his role as active participant in the promotion of the scheme. His claim fails for illegality." It was common ground between all of the parties to the appeal that there was no allegation or pleading against Mr Glass or his accounting firm that they had been involved in corruptly receiving secret commissions in contravention of the criminal law in relation to investment made in the scheme by their clients. It was also common ground that the question of the illegal receipt of secret commissions by the firm or Mr Glass had not been raised as an issue at the trial prior to the findings made at 62 FCR 241 by the trial Judge in relation to those matters. We accept that his Honour was correct in his view that the fact that the secret commissions were not alleged or pleaded does not preclude the Court from having regard to their illegality in relation to the issue of relief. However, it does not follow that the Court can or ought do so without prior notice to the parties against whom such a finding might be made in order to afford those parties the opportunity of addressing the Court as to why the findings ought not be made and, if they are to be made, what consequences follow. That did not occur in respect of Mr Glass. Accordingly, to that extent his Honour erred in making findings in relation to secret commissions received by Mr Glass and then refusing the relief he sought in reliance upon those findings. Mr Glass's appeal must be allowed, in part, on that ground. Normally, that would have the consequence of the matter being remitted back to the trial Judge to afford Mr Glass an opportunity to be heard on the issue of secret commissions. However, in all the circumstances we do not consider that that is the appropriate course in the present case as we have formed the view, contrary to that formed by the trial Judge, that irrespective of the secret commissions issue, Mr Glass's investment in the scheme stands in a very different position to that of Mr Gray and Mr Winter. In our view Mr Glass's role as an investor can be separated from his role as a participant in the promotion of the scheme in that, unlike Messrs Winter & Gray, he acquired his one half share in the belief that it was a good investment and not by reason of the need to make that investment to ensure that all twenty shares in the scheme were fully taken up in order to enable the scheme to proceed. We are also of the view that Mr Glass's decision to invest is separate and discrete from the issue of the commissions he was to receive in respect of clients who did invest. The effect of paragraph 1(b) of the orders made by Heerey J is that Mr Glass's interest in the land was to be re-transferred to Amadio. That order was restitutionary and, absent disqualifying circumstances, ought to attract the same restitutionary entitlement to repayment of the excess of interest paid over rent received that the other investors have received as a consequence of the orders made for them to re-transfer the land. Because of Mr Glass's separate and discrete role as an investor we have concluded that there are no relevant disqualifying circumstances in relation to Mr Glass and accordingly, he is entitled to the same restitutionary relief as the other investors. However, as pointed out above, we accept that his Honour correctly dismissed Mr Glass's claim for misleading and deceptive conduct with the consequence that his appeal on that ground must fail. Mr Glass's appeal is allowed to the extent that it relates to his entitlement as an investor to receive restitutionary relief. Otherwise the appeals of Huntley McArdle & Glass and Mr Glass are to be dismissed. As Huntley McArdle & Glass did not appear it is appropriate to make no order as to costs on its appeal. In all the circumstances and, in particular, as none of the respondents to the appeals opposed the ground on which Mr Glass has succeeded, it is also appropriate to make no orders as to costs on his appeal. Amadio and Hudson Conway did oppose Mr Glass's entitlement to restitutionary relief but in doing so they relied on the grounds, which we have rejected, put forward by them against all of the investors.

METZKE & ALLAN 10.1 Liability Metzke & Allan were chartered accountants carrying on practice in Shepparton. The firm was engaged by Gray & Winter to prepare cash flow spreadsheets in relation to the Coles Myer building. The cash flow spreadsheets were prepared by the firm utilising software specifically developed by it using its skill as accountants. The retainer of Metzke & Allan in relation to the cash flow spreadsheets was on the express basis that the firm would not be verifying information contained in the spreadsheets and that its name was not to be associated with the documents. The spreadsheets prepared by Metzke & Allan pursuant to the retainer were included in the Gray & Winter brochure under the description "Cash Flow". The spreadsheets indicated that the rent and capital value of the Coles Myer building would rise each year for the term of the lease. The cash flow's assumptions were that: · the future rent increases would result in increases in line with CPI; and · projected CPI increases for the balance of the term would be at 8.5%. The capital value of the Coles Myer building was then calculated on a cash flow based on the rental (as increased) at a capitalisation rate of 9%. Metzke & Allan made no enquiries as to the validity of the assumptions, which were set out in the spreadsheets, driving the cash flow. The firm received a fee of $1,500 plus disbursements for the preparation of the cash flow. The applicants initially argued that Metzke & Allan owed them a duty to investigate, and satisfy itself as to, the accuracy of the facts asserted and of the assumptions on which the financial data set out in the spreadsheets were based. During the course of the trial the applicants' claims against Metzke & Allan were settled. However, other parties made cross-claims against Metzke & Allan which were pursued. As a consequence his Honour was required to determine those cross-claims, inter alia, for the purposes of contribution. In dismissing the cross-claims his Honour found: · any duty Metzke & Allan owed to the investors was limited by the terms of their express arrangement with Gray & Winter merely to generate cash flows using the given assumptions without any obligation to verify the information supplied and with the specific agreement that Metzke & Allan's name was not to be used in relation to the cash flows; · Metzke & Allan were under no duty to advise potential investors on the validity of the assumptions used in the cash flows; · in the light of the specific and limited retainer, which was accepted from Gray & Winter, Metzke & Allan did not breach any duty of care to the applicants or to Gray & Winter or to any other of the respondents. In the course of explaining his reasons for arriving at that conclusion (62 FCR 155-156) his Honour said: "There is no suggestion that the cashflow which Metzke & Allan produced was arithmetically defective, or that the assumptions it adopted, such as the assumed CPI rate, were on their face patently absurd. Since Metzke & Allan prepared the cashflows on the assumption, which I find to be reasonable in the circumstances, that they would only be shown to potential investors who were advised by competent accountants, there was no obligation on Metzke & Allan to investigate the validity of the assumptions and, in effect, adopt the (unpaid) role of accountants advising investors. Mr Allan was asked in cross-examination whether he had intended that potential investors in the Coles Myer scheme would read the Metzke & Allan cashflow. His answer was: 'Only after explanation from their accountants. It's my experience that most people reading that document would find it very difficult to understand what it meant. It's a document that is an aid to a qualified accountant that would help him discuss with his client what the implications of the investment are.' That seems to me a reasonable description of the function of the Metzke & Allan cashflow. In itself it was a useful and relevant document. An investor would be concerned with the future prospects of the building as an investment. This depended very largely on rental increases. There is a logical enough connection between CPI and market rent since office rental accommodation is a commodity whose nominal value is going to be affected by, amongst other things, the decline in purchasing power of money as measured by the CPI. There is not of course a controlling or mathematically measurable relationship, but CPI is nonetheless relevant. So I think Metzke & Allan were quite entitled to take the view that a competent accountant could use the cashflow and say to a client that one indicator of possible rental increase is CPI and that if the CPI increased broadly along the lines it had over the past ten years, the rent could increase as shown in the cashflow. The fact that the accountants in this case did not go on to point out to their clients the other risks and imponderables which made the cashflow unsafe to use in isolation, is not in my opinion something to be sheeted home to Metzke & Allan." (Emphasis in original) After referring to the Rules of Ethical Conduct of the Institute of Chartered Accountants and, in particular, the rule relating to reports on profit forecasts his Honour concluded (at 62 FCR 157): "...an accountant can prepare or assist a client in the preparation of forecasts without becoming associated with such forecasts, that is to say being ostensibly linked or connected with them. I think that is what happened here...". Finally, in his summary of findings his Honour said in respect of the claim against Metzke & Allan (62 FCR 218): "Metzke & Allan owed a duty of care to the applicants but the extent of that duty was limited by the terms of the retainer they accepted from Gray & Winter. Metzke & Allan did not owe the applicants a duty to investigate the validity of the assumptions underlying the cashflow they prepared. Accordingly Metzke & Allan were not negligent and are not liable on any cross-claim for contribution by other respondents." and at 62 FCR 241: "No case has been made out by any other respondent that Metzke & Allan were guilty of misleading and deceptive conduct. They prepared the cashflow as requested by Gray & Winter and on the terms of their retainer from that firm. The cashflow was in itself not inaccurate in any relevant respect. The damage it caused came about entirely as a result of the negligence and misleading and deceptive conduct of Gray & Winter, Bird Cameron and Huntley McArdle & Glass in failing to advise, adequately or at all, as to the risks inherent in the assumptions on which the cashflow was based." The respondent debtors, in challenging his Honour's conclusions in relation to Metzke & Allan criticised, inter alia, his Honour's: · reliance on the terms of the retainer of Metzke & Allan in rejecting the claims for breach of duty and for misleading and deceptive conduct by Metzke & Allan; · failure to find that the cash flow contained confident and unqualified statements without any disclaimer; · failure to conclude that in those circumstances Metzke & Allan had put into circulation in trade and commerce negligent and misleading and deceptive statements for which they were liable, when relied upon by investors. In our view the criticisms are misconceived. The authorities cited by his Honour (62 FCR 142) demonstrate that the retainer influences the nature and scope of the duty which arises. Also whilst, in one sense, it might be correct to say that the terms of the retainer cannot be determinative of whether a person has engaged in negligent or misleading and deceptive conduct they are clearly relevant to characterising the conduct engaged in. In our view that is how his Honour approached the retainer in the present case. Metzke & Allan, pursuant to its retainer, did no more than provide cash flow spreadsheets based upon the assumptions stated in them. The provision of that information was based on the assumption by Metzke & Allan, found to be reasonable by his Honour, that they would be shown to potential investors who were advised by competent accountants. It is clear that that was the purpose for which the spreadsheets were prepared, and the basis upon which they were provided, by Metzke & Allan. In these circumstances his Honour was satisfied that if the accountants failed to give competent advice, including failing to point out the relevant risks and imponderables, or if the spreadsheets were otherwise misused by Gray & Winter those matters cannot be sheeted home to Metzke & Allan as they formed no part of its conduct. Although allegations in relation to a contravention of s 52 of the TPA are often pleaded in terms of representations it is important to recall that the statute turns its attention to "conduct": see Nescor Industries Group Pty Ltd v MIBA Pty Ltd (1997) 150 ALR 633 at 638-639. Thus, in the present case, the terms of the retainer of Metzke & Allan assist in identifying and properly characterising the conduct engaged in by it. In our view, no error has been demonstrated in relation to his Honour's approach to this issue. The second major criticism related to whether the assumptions were stated in a misleading way. Particular criticisms were made as to the form in which the assumptions were stated and the failure to explain the basis for determining rental increases of 8.5% in accordance with the CPI or the assumed future capitalisation rate of 9%. Various other criticisms were made as to the failure to show the acquisition fee, to identify sources of information and to provide variable assumptions. There are two answers to this criticism. The first is that it gives to the spreadsheets a function they were not intended to, and did not, have. As his Honour found, the cash flow was not in any way arithmetically defective nor did it fail to identify the assumptions it adopted. Further, as his Honour also found, the assumptions were not on their face patently absurd. In these circumstances we are of the view that his Honour was clearly correct in finding that the cash flow was not, as such, misleading or deceptive. In our view the real criticism being made related to the manner in which the cash flow was used or explained by the accountants or Messrs Gray & Winter. In that regard, as we have already said, in the circumstances of the present case that conduct cannot be sheeted home to Metzke & Allan. The second answer relates to the expected use of the document. The document was provided by Metzke & Allan for the use of accountants who were advising clients as to the investment. In those circumstances the documents contained the assumptions necessary for that advice to be given. Insofar as questions may be raised as to the validity or reliability of the assumptions, on the facts of the present case, those matters were peculiarly the subject of the expertise of accountants considering such documents. It was quite open to those accountants, on the face of the documents, to recognise the assumptions made and to raise with potential investors the risks that those assumptions may not be realised. It was not the function of Metzke & Allan to advise the investors in relation to those matters. That was the task committed to and undertaken by others. The main attack on Metzke & Allan related to its conduct in distributing cash flow spreadsheets which contained unjustifiably confident and unqualified statements without any disclaimer of responsibility for them. As pointed out above we do not regard the provision, by Metzke & Allan, of the spreadsheets as misleading or deceptive conduct. The real issue in that regard is whether Metzke & Allan were passing on misleading information supplied by Gray & Winter and thereby were themselves engaging in misleading conduct. The principle in such circumstances was stated in Yorke v Lucas (1985) 158 CLR 661 at 666: "It is, of course, established that contravention of that section does not require an intent to mislead or deceive and 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: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228; 18 ALR 639 at 647; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197; 42 ALR 1 at 5. 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." See also MIBA Pty Ltd v Nescor Industries Group Pty Ltd (1996) 141 ALR 525 at 538-542 and on appeal Nescor Industries Group Pty Ltd v MIBA Pty Ltd (supra) at 637-639. In our view there was an implied disclaimer on the part of Metzke & Allan in relation to any belief in the truth or falsity of the information contained in the cash flow spreadsheets. Not only did the firm agree with Gray & Winter that it was preparing the spreadsheets on that basis but it also took the additional step of ensuring that its name was not used in association with it. In these circumstances the conduct of Metzke & Allan in providing the cash flow spreadsheets to Gray & Winter for use upon the express basis that Metzke & Allan's name was not to be used in association with them in our view constitutes an implied disclaimer in the terms discussed in Yorke v Lucas. Put another way Metzke & Allan passed on the information in the cash flow spreadsheets "for what it is worth". Accordingly, for the above reasons the appeals in relation to his Honour's finding that there was no breach of duty and no misleading and deceptive conduct on the part of Metzke & Allan must fail and are to be dismissed with costs.

10.2 Costs Quite separate issues were raised in respect of the costs orders made in relation to Metzke & Allan. In his final orders Heerey J ordered that all of the respondent debtors (other than Nevett Ford and Richard Ellis) were to pay Metzke & Allan's costs of the whole proceedings, and on an indemnity basis after 1 March 1995, being fourteen days after Metzke & Allan made their first offer of settlement to the respondents. Costs orders for the proceeding were also made against Nevett Ford and Richard Ellis on a solicitor/client basis as that was all that was sought by Metzke & Allan. The orders for indemnity costs have been appealed by the parties against whom those orders were made. During the course of the hearing Heerey J raised with the respondents the cost consequences that might follow if they did not seriously consider whether they wished to persist with their claims after Metzke & Allan had settled with the applicants. His Honour, referring to authority, stressed the importance of parties acting reasonably when considering sensible offers of compromise aimed at removing a party from extensive and expensive litigation. It was with that background that his Honour made the orders for indemnity costs substantially on the grounds that: · Metzke & Allan had made realistic and reasonable without prejudice (save as to costs) offers to the respondents to settle their claims against it on terms which were substantially less advantageous to it than the result subsequently achieved by Metzke & Allan; · Metzke & Allan, who on any view had a strong case, adopted a realistic approach to settlement on sensible commercial terms; · the relevant respondents had displayed an unreasonable reluctance to face up to reality by failing to accept any of Metzke & Allan's offers. His Honour's third set of reasons for judgment contained a detailed discussion of the principles to be applied by the Court in relation to costs. That discussion and the review of the authorities contained in it was cited with approval by the Full Court in Hannpost Pty Ltd v Mita Copiers Australia Pty Ltd (1996) 67 FCR 416 at 431 per Branson J (with whom Sheppard and Spender JJ agreed). The principles stated by his Honour accord with the principles stated subsequently in Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 in which a Full Court considered the principles applicable to orders for indemnity costs. The principles were stated at 156-157 by Cooper and Merkel JJ as follows: "(1) Section 43 of the FCA confers an absolute and unfettered discretion on the Court to make orders as to costs but the discretion must be exercised judicially. (2) In order to exercise the discretion judicially the following principles have been accepted by the Court as applicable: (a) the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course; (b) the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course; (c) while the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs than on a party and party basis." and at 158: "The generality of the criteria for departing from the usual rule ensures that the discretion to depart from the rule can be exercised whenever the Court is of the view that after applying the criteria to the facts of the particular case, it is just to do so." For the reasons given by him, his Honour was satisfied that it was just to make the orders for indemnity costs in favour of Metzke & Allan. Although criticism was made of his Honour's approach to the facts and of an alleged failure by his Honour to appreciate the difficulties confronting particular respondents, such as Hudson Conway, Amadio and Nevett Ford, in respect of the offers we are not satisfied that the criticisms have any validity. In particular, it has not been shown in the circumstances detailed by his Honour that the orders for indemnity costs have fallen outside the ambit of his Honour's legitimate discretion as to costs: see Hannpost at 431 per Branson J. It was argued that conditional offers should not have been treated by his Honour as Calderbank offers for the purpose of ordering indemnity costs. It is to be emphasised that the costs discretion is broad and is to be exercised in circumstances that will vary considerably from case to case. Whilst the criteria used in analogous circumstances will be of assistance it is simply wrong, as the appellants sought to do, to use such criteria as rules or tests governing the exercise of the discretion. Thus, an "imprudent" refusal or a "plainly unreasonable" refusal to accept an offer of settlement might, having regard to all the circumstances of the case, warrant the making of an order for indemnity costs if it is "just" to do so: cf MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 707 at 710-711. However, such circumstances merely offer examples of where indemnity costs are ordered. Likewise, in some situations a conditional offer may be less likely to attract the Court's discretion to order indemnity costs than others. Much will depend upon the reasonableness of the offer and of the reasonableness of the conduct of the other party in refusing it having regard to all the circumstances of the case. We add one further observation. Orders for indemnity costs often arise as a result of the trial Judge's evaluation of facts and circumstances of which the express findings are, inherently, in summary form. An appellate court must exercise considerable caution in approaching such an evaluation: see Biogen Inc v Medeva plc [1997] RPC 1 at 45 per Lord Hoffmann. The caution is particularly pertinent in the present case. Heerey J commenced his reasons on the issue of costs with the following observation: "...[T]here are some matters which need to be kept firmly in mind throughout any consideration of costs. This was a long, complex, demanding and expensive trial, one of the longest, if not the longest, since this Court was established 20 years ago. The respondents (other than Metzke & Allan) right up until judgment maintained a united front against the applicants and the Walkers and refused offers of settlement which were less beneficial to the applicants than the judgment finally obtained. With the exception of Richard Ellis in the cases of some of the applicants, the applicants and the Walkers obtained against each respondent the relief they were seeking. This was a hard-fought case which the applicants and the Walkers won. Intricate examinations of detail for the purposes of costs allocation should never lose sight of that underlying truth." Obviously, in such circumstances the appellants had an onerous task of persuading an appellate court that his Honour's orders fell outside the ambit of his legitimate discretion. It is unnecessary to pursue this aspect further as we are satisfied that no error of principle or fact was made by his Honour in ordering indemnity costs in favour of Metzke & Allan.

10.3 $300,000 - On Account of Costs or Damages? An issue was briefly raised as to whether his Honour erred in treating $300,000 received by the applicants in settlement of their claim against Metzke & Allan as being received on account of costs rather than in reduction of loss and damage. It is unnecessary to say more than that we are not satisfied that it was not open to his Honour to arrive at that conclusion or that he erred in doing so.

THE TERREY CLAUSE Detailed submissions were made by several parties in relation to the construction of the Terrey clause. The contest related to whether his Honour was correct in concluding (62 FCR 168) that Terrey's liability under the mortgage was limited to his interest in the land or whether the liability was limited to 1/20th of the liability for principal and interest due under the mortgage. As the issue only requires determination in the event that the mortgage was found to be enforceable it is unnecessary to determine it. However, insofar as the issue might be relevant to questions of costs and the appeal of Nevett Ford, and as we have formed a clear view on the matter, we indicate that contrary to the view of his Honour, the clause restricted Terrey's liability to 1/20th of the principal and interest due under the mortgage. In arriving at that view, we have accepted the submissions of Amadio and Hudson Conway in relation to the interpretation of the clause.

DAMAGES AND CONTRIBUTION The appeals by Amadio and Hudson Conway relating to the prescribed interest issues are to be dismissed. In addition, the orders referred to in Schedules B to M of the orders of 2 April 1996 include orders that the applicant investors be paid damages by the respondents named in conformity with the provisions contained in the Schedules. The Schedules included provisions that Amadio pay to each investor restitution in a specified amount plus interest in a specified amount. The restitutionary payments were essentially the excess of interest paid under the mortgage over rent received. Damages, plus interest, were awarded in each case against the respondents named in the Schedules. The damages included the quantum of the restitutionary payments and other outgoings paid by the applicant such as commissions, stamp duty etc. Where applicable, there was a common provision to the effect that the total amount that the investors could recover was limited to the sum of the amount of the damages and interest. The effect of the provision was to treat the restitutionary payments to be made by Amadio, for practical purposes, as paid on account of the damages awarded against all relevant respondents including Amadio. Notwithstanding that outcome we have held that Amadio and Hudson Conway are not entitled to contribution in respect of the restitutionary payments. The named respondents were jointly liable for the total amount of damages and interest awarded in each case, but other orders provided for contribution between respondents. It will be helpful to give a summary of each Schedule with respect to contribution and damages.

1. Schedule B, the Deans. (a) Judgment for Bactbuild against Amadio for restitution in the sum of $182,028 plus interest in the sum of $59,224. It will be remembered that Bactbuild purchased two 1/20th shares in the scheme. (b) Judgment for Lonihire against Amadio for restitution in the sum of $182,028 plus interest in the sum of $59,224. It will be remembered that Lonihire purchased two 1/20th shares in the scheme. (c) Judgment for Bactbuild for damages in the sum of $294,590 plus interest in the sum of $97,090 against the debtors named therein. (d) Judgment for Lonihire in the same amounts described in paragraph (c) above, against the same debtors. (e) Paragraph 5 in the Schedule is set out as an illustration of the limitation on recovery of the total amounts where this was relevant in each of the Schedules. The order will be described as the limitation order. Paragraph 5 provided: "5. Order that the amount which each of Bactbuild Pty Ltd and Lonihire Pty Ltd may recover pursuant to paragraphs 1-4 hereof is limited, in each case, to the sum of $294,590 plus interest of $97,090." (f) The remaining paragraphs (6, 7 and 8) dealt with contribution between the debtors with respect to the damages and costs and contribution between respondents with respect to costs. It is noted that Amadio and Hudson Conway are debtors with respect to damages. The order for restitution is not subject to contribution.
2. Schedule C, the Turners. (a) Judgment for Garkat against Amadio for restitution in the sum of $91,014 plus interest in the sum of $29,612. (b) Damages for Garkat in the amount of $152,840 plus interest in the sum of $48,545 against the same debtors as in Schedule B. (c) The limitation order. (d) The contributions and costs paragraphs with the same effect as Schedule B.
3. Schedule D, the Gordons. (a) Judgment for Mr Henry Gordon against Amadio for restitution in the sum of $45,507 plus interest in the sum of $14,806. (b) Damages for Mr Gordon in the amount of $76,495 plus interest in the sum of $24,272 against the same debtors (except James Gray) as in Schedules B and C. (c) The limitation order. (d) The contributions and costs paragraphs with the same effect as Schedule B.
4. Schedule E, the Hendersons. (a) Judgment for Mr Russell Henderson against Amadio for restitution in the sum of $91,014 plus interest in the sum of $29,612. (b) Damages for Mr Henderson in the amount of $152,990 plus interest in the sum of $48,545 against the debtors Gray & Winter, James Gray, Nevett Ford, BPM Pty Ltd and Bird Cameron - Ballarat. (c) The limitation order. (d) The contributions and costs paragraphs but with respect to damages contribution between the five debtors only. It is noted that Amadio and Hudson Conway are not debtors and are not subject to contribution with respect to restitution and damages.
5. Schedule F, Joseph Green (deceased) and his representative. (a) Judgment for Mr Green against Amadio for restitution in the sum of $91,014 plus interest in the sum of $29,612. (b) Damages for Mr Green in the amount of $152,990 plus interest in the sum of $48,545 against the debtors Gray & Winter and Nevett Ford. (c) The limitation order. (d) The contributions and costs paragraphs but with respect to damages, contribution is limited to between the two debtors only with the same effect as in Schedule E.
6. Schedule G, Barbara Lee. (a) Judgment for Barbara Lee against Amadio for restitution in the sum of $91,014 plus interest in the sum of $29,612. (b) Damages for Ms Lee in the amount of $152,990 plus interest in the sum of $48,545 against the debtors Gray & Winter and Nevett Ford. (c) The limitation order. (d) The contributions and costs paragraphs but with respect to damages, contribution is limited to between the two debtors only with the same effect as in Schedule E.
7. Schedule H, the Haarsmas. (a) Judgment for Leo Haarsma against Amadio for restitution in the sum of $91,014 plus interest in the sum of $29,612. (b) Damages for Mr Haarsma in the amount of $152,990 plus interest in the sum of $48,545 against the debtors Gray & Winter, BPM Pty Ltd, Daryl Lynch and Nevett Ford. (c) The limitation order. (d) Contribution and costs paragraphs but contribution with respect to damages is limited to between the four debtors with the same effect as in Schedule E.
8. Schedule I, the Schoemans. (a) Judgment for Dick and Judith Schoeman against Amadio for restitution in the sum of $91,014 plus interest in the sum of $29,612. (b) Damages for Mr and Mrs Schoeman in the amount of $152,990 plus interest in the sum of $48,545 against the debtors being the four mentioned in Schedule H. (c) The limitation order. (d) Contribution and costs paragraphs but contribution with respect to the damages is limited to the four debtors with the same effect as in Schedule E.
9. Schedule J, the Arthursons. (a) Judgment for John and Suzanne Arthurson against Amadio for restitution in the sum of $91,014 plus interest in the sum of $29,612. (b) Damages for Mr and Mrs Arthurson in the amount of $152,990 plus interest in the sum of $48,545 against the debtors being the four mentioned in Schedule H. (c) The limitation order. (d) Contribution and costs paragraphs but contribution with respect to damages is limited to the four debtors with the same effect as in Schedule E.
10. Schedule K, the Phelps. (a) Judgment for Ackina against Amadio for restitution in the sum of $91,014 plus interest in the sum of $29,612. (b) Damages for Ackina in the sum of $152,990 plus interest in the sum of $48,545 against the debtors being the four mentioned in Schedule H. (c) The limitation order. (d) Contribution and costs paragraphs but contribution with respect to damages is limited to the four debtors with the same effect as in Schedule E.
11. Schedule L, the Tranters. (a) Judgment for Thomas Tranter and Pauline Tranter against Amadio for restitution in the sum of $91,014 plus interest in the sum of $29,612. (b) Damages for Mr and Mrs Tranter in the amount of $152,990 plus interest in the sum of $48,545 against the debtors Gray & Winter, BPM Pty Ltd, Joseph Korczak and Nevett Ford. (c) The limitation order. (d) Contribution and costs paragraphs but contribution with respect to damages is limited to the four debtors with the same effect as in Schedule E.
12. Schedule M, the Trengoves. (a) Judgment for Marican against Amadio for restitution in the sum of $91,014 plus interest in the sum of $29,612. (b) Damages for Marican for damages in the amount of $145,540 plus interest in the sum of $46,181 against the debtors Gray & Winter, BPM Pty Ltd, Bird Cameron - Geelong and Nevett Ford. (c) The limitation order. (d) Contribution and costs paragraphs but contribution with respect to damages is limited to the four debtors with the same effect as in Schedule E. The final orders did not deal with the issue of priority as between the restitutionary payments and payment of damages awarded in favour of the applicants. It was contended by Amadio that, as the restitutionary payments substantially reduced the damages payable, the damages should be paid first. It was said that to do otherwise was unjust to Amadio and would confer a windfall benefit on the respondents whose wrongdoing was, on any view, a substantial cause of the loss suffered. There is some force in Amadio's contention but it fails to deal with the nature of the inter-related restitutionary orders which required the investors to re-transfer the Coles Myer building to Amadio and required Amadio to make the restitutionary payments to the relevant investors. In principle, if not in form, the re-transfer is to be conditional upon the making of the restitutionary payments. As stated earlier in these reasons the restitutionary relief was granted in favour of Amadio, inter alia, for the reason that it is able substantially to restore the investors to their former position by making the requisite restitutionary payments. Accordingly, in our view the re-transfer and the restitutionary payments are inter-dependent obligations. Further, whilst there might arguably be some unfairness in a result in which Amadio bears the major burden of the loss, we have pointed out earlier in these reasons that that is dictated by: · public policy considerations arising from the consequences of the breach of the prescribed interest provisions in the present case; · discretionary factors which militated against ordering contribution if the Court had the power to do so; and · the nature of the restitutionary relief granted in the present case. The above considerations have led us to conclude that, as a matter of principle, the restitutionary payments are to be made upon the re-transfer and are, as we shortly explain, treated as payments in reduction of the damages payable to the applicants. Accordingly, in our view his Honour was correct in refusing to require that the damages claim be paid first or that the damages reduce the restitutionary payment rather than vice versa. However, one other issue of principle does arise from his Honour's orders. As observed earlier in these reasons the applicants' restitutionary claims and claims for damages against Amadio, at least in so far as they relate to the same loss (which was successfully contended by Amadio to be limited to interest paid less rent received) are alternative claims. In respect of those claims the applicants had a choice between two alternative and inconsistent remedies. They could claim redress for that loss either in the form of compensation, that is, damages for tort or breach of s 52, or in the form of restitution. In such circumstances the applicants must elect, when applying for judgment against Amadio, as to which remedy they will have in respect of the particular claim: see United Australia Ltd (supra) at 18-19, 30, 34; Tang Man Sit (supra) at 521-522 and Registrar-General v Behn (1980) 1 NSWLR 589 at 597-598. In the present case the applicants can be treated as having made their election in favour of restitutionary relief against Amadio in respect of that loss. Accordingly, they were not entitled to a judgment for damages against Amadio in respect of the restitutionary payments. Consequently, as against Amadio, the judgments in favour of the applicants are to be reduced by the amount of the restitutionary payments ordered to be paid by it. However, the applicants' claims for damages against Amadio in respect of the other losses which were not the subject of the restitutionary payments, as pointed out above, were successfully argued by Amadio to be beyond the ambit of the restitutionary relief: see 62 FCR 232. In these circumstances it is appropriate to treat the remedies against Amadio in respect of the other losses for breach of s 52 and for negligence as cumulative and not alternative remedies: see United Australia Ltd (supra) at 20, 31 and 51; Tang Man Sit (supra) at 522 and Behn (supra) at 597-598. Accordingly, the damages are to be reduced by the amount of the restitutionary payments when made. His Honour's limitation orders provided for that reduction. We would add that having regard to how this aspect of the appeal was argued it is not necessary for us to express any view as to whether the restitutionary payments were, in principle, to be limited to the interest paid less rent received. Our conclusion is of no avail to the other respondents, including Hudson Conway, against whom no restitutionary relief was awarded. The authorities to which we have referred establish that as against those respondents the remedies of the applicants for breach of s 52 and for negligence are cumulative and not alternative remedies. Amadio's appeal is to be allowed in part in that the damages Amadio is required to pay are to be reduced by the amount of the restitutionary payments actually paid. However, that outcome is of little practical consequence and ought not to result in any favourable costs order as Amadio failed, in substance, in its appeals. That finally brings us to the question of the contribution, as between the respondent debtors, to damages. His Honour considered contribution at 62 FCR at 200-203. Each of the appeals by the respondent debtors against the damages ordered by Heerey J has failed. Various respondents contended that his Honour overstated their role, understated that of others and consequently arrived at a wrong percentage apportionment. Questions were also raised as to the nature and width of the power to order contribution. Since the conclusion of argument a Full Court has carefully considered the Court's power to order contribution in claims arising out of a breach of s 52 of the TPA: see Bialkower v Acohs Pty Ltd (supra) at 538-544.. The Court concluded that s 23B of the Wrongs Act 1958 (Vic), (or its statutory equivalent in other states), a procedural provision which is picked up by s 79 of the Judiciary Act 1903 (Cth), confers a broad power on the Court to order contribution for claims which include breach of s 52. Their Honours (at 545) said: "Heerey J's decision in Amadio is in our view correct on this point." In our view it was for his Honour to evaluate the percentage apportionment which was "just and equitable having regard to the extent of that person's responsibility for the damage": see s 24(2) of the Wrongs Act. His Honour did so on the basis of his evaluation of the relevant facts and circumstances. We have already explained the need for caution for appellate court intervention in relation to such an evaluation. It has not been shown that any error was made by his Honour. No issue as to quantum arose other than in relation to tax benefits which we considered in relation to the restitutionary payments. For the reasons there expressed no discount should be given for such benefits in relation to the damages ordered. It was also contended that his Honour erred in not taking into account contributory negligence of the applicants as a defence to the claims under s 52. We are satisfied that his Honour was correct in concluding that no such defence is available under the Act nor can damages awarded be reduced on this basis. The facts giving rise to a contributory negligence claim may be relevant to issues of reliance and causation but cannot otherwise negate, or afford a defence to, the statutory cause of action under s 52. The appeals relating to damages and contribution fail and are to be dismissed.

COSTS OF THE TRIAL In his Honour's third set of reasons for judgment costs were ordered to be paid in favour of the applicants, on an indemnity basis, by all respondents (other than Richard Ellis and Metzke & Allan) as from 1 June 1995 being the date on which his Honour found it "was reasonable for the [applicants'] offer contained in the letter of 17 May 1995 to have been accepted". His Honour ordered the indemnity costs primarily on the ground of the non acceptance by the relevant respondents of the offers made by the applicants which were more favourable to those respondents than the outcome of the proceedings Heerey J found that in the present case it was reasonable for the applicants to make an offer which was conditional on all respondents accepting it. His Honour pointed out that a respondent who wished to accept the offer could serve on the other respondents a Calderbank letter setting out a reasonable basis for contribution and stating that it wishes to accept the applicants' proposal. That did not occur. It has not been shown that the costs orders of his Honour were not a proper exercise of his Honour's discretion in the circumstances of the present case. It is unnecessary to restate the matters set out for rejecting the appeal against indemnity costs in relation to Metzke & Allan. Simular considerations have led us likewise to reject the appeal of the respondent debtors on indemnity costs ordered against them in favour of the applicants. Whilst there was some force in the contentions of Hudson Conway, Amadio and Nevett Ford that the orders for indemnity costs against them were not warranted we are not persuaded that the orders against them fell outside the scope of his Honour's discretion or were otherwise unjust in all the circumstances. Appeals were also brought against his Honour's refusal to decide the question of costs on an issues basis and to decline to discount costs incurred in relation to issues on which the applicants failed. His Honour adopted a broad brush approach to costs on the basis that, as so many issues were inter-related, costs should follow the event. Heerey J sought to alleviate some aspects of that approach by an apportionment of liability for costs which he had the discretion to do under s 43 of the Federal Court of Australia Act 1970 (Cth). These matters were within his Honour's discretion and we have not discerned any error by his Honour in refusing the applications of the respondent debtors on those issues. Accordingly, the appeals on costs issues are to be dismissed.

SGIO APPEALS Introduction SGIO's "Accountant's Professional Indemnity Insurance" policy indemnified, amongst others, Bird Cameron, Bird Cameron Partners, partners in the Bird Cameron firms from time to time and BPM Pty Ltd practising as Bird Cameron (which entities and individuals will be referred to compendiously as "Bird Cameron") during certain periods including the period 30 June 1992 to 30 June 1993. The notice of claim relevant to the indemnity sought under the policy in respect of the matters arising in the present proceeding was given on 10 July 1992. The indemnity under the policy related to claims against Bird Cameron by reason: "...of any act error or omission whether of acts, facts, law or otherwise or breach of contract between the Assured Firm and its clients whenever and wherever the same was or may have been committed or alleged to have been committed on the part of the Assured Firm or their predecessors in business or any person now or heretofore employed by the Assured Firm or their predecessors in business or hereafter to be employed by the Assured Firm during the period of this Policy is [sic-presumably "in"] or about the conduct of any professional business conducted by or on behalf of the Assured Firm or their predecessors in business." The policy defined "professional business" as follows: "The words 'professional business' are understood to apply to advice given or services performed of whatsoever nature undertaken by or on behalf of the Assured Firm provided always that any fee accruing for such work shall inure to the benefit of the Assured Firm, or alternatively if work is done without fee, that such work is undertaken in the name of or on behalf of the Assured Firm. ... Professional business is deemed to include but not be limited by the guidelines of the Ethical Pronouncements and/or the Code of Professional Conduct (as constituted from time to time) of the Australian Society of Accountants and/or the Institute of Chartered Accountants in Australia." The "professional business" of Bird Cameron was that of "chartered accountants". The advice given and services performed by Bird Cameron in or about the conduct of their professional business as chartered accountants included accountancy, taxation and investment advice to clients. The main issues arising on SGIO's appeal against the decision of Heerey J, upholding Bird Cameron's right to indemnity under the policy, are whether the claims in respect of which the indemnity was to apply: · occurred in the course of Bird Cameron's professional business; · fell within para (e) of the exclusions from the indemnity granted under the policy ("exclusion (e)").

14.1 Professional Business In order to obtain the indemnity provided under the policy, Bird Cameron was required to establish that the claims made had been by reason of an act, error or omission in or about the conduct of their professional business as chartered accountants. SGIO argued before his Honour, and on appeal, that the failure of Bird Cameron: · to disclose the agreement with Gray & Winter for the payment of a commission of 1.5% (ie $10,350) of the purchase price for each 1/20th interest purchased by a client introduced by Bird Cameron; · to make any investigation of the investment scheme proposed by Gray & Winter or assess its worth, statements or assumptions; · to advise any of the investors to seek independent legal or accounting advice; indicated that the role of Bird Cameron was that of an entrepreneur rather than an accountant. SGIO supported its submissions by referring to the paucity of evidence relating to any investigation carried out by the partners or employees of Bird Cameron in respect of the investment scheme. His Honour (at 62 FCR 205) observed that this approach of SGIO: "...confused two quite separate issues, namely whether on the one hand professional work was done competently or ethically and on the other hand whether the work done was professional work." After considering the evidence relied upon by SGIO his Honour (at 62 FCR 206) concluded: "All the Bird Cameron personnel had previously acted as accountants for their respective clients and had given at least general accounting and taxation advice and in some cases investment advice. There was an established retainer of accountant and client and it was within the scope of that retainer to bring to the client's attention possible investments, and in particular those which might have a tax benefit." Accordingly, his Honour rejected SGIO's contention that the conduct, the subject of the claims under the policy, was not conduct engaged in, or omitted to be engaged in, in the course of the professional business of Bird Cameron as chartered accountants. The conclusion arrived at by his Honour was clearly open on the evidence. In these circumstances it is difficult to accept the submission of SGIO that, in the present case, Bird Cameron and the relevant partners and employees were, in reality, acting outside their professional business activities as chartered accountants in introducing the scheme, as they did, to their clients. The documentation explaining the investment scheme proposed by Gray & Winter to Bird Cameron and their clients involved detailed tax, cash flow and financial projections. The introduction of the scheme by Bird Cameron was made to the clients of their professional business of giving accounting, taxation and investment advice. Further, the evidence clearly supports the conclusion of his Honour (at 62 FCR 146) that Bird Cameron not only introduced clients to the scheme but did so "with a recommendation, at least implicit and usually explicit, that the client invest". In any event, even if there is some commercial or non-professional aspect to Bird Cameron's role in recommending the investment that conduct was inextricably intertwined with their role as an accountant and their business or profession as accountants: see Drayton v Martin (1997) 67 FCR 1 and on appeal (sub nom) HIH Casualty and General Insurance Ltd v FAI General Insurance Co Ltd (1997) 9 ANZ Insurance Cases 61-376; and Solicitors Liability Committee v Gray at 195. In these circumstances, his Honour was clearly correct in concluding that the claims made were by reason of acts, errors or omissions in or about the conduct by the Bird Cameron entities of their professional business of chartered accountants. The appeal on this ground must fail.

14.2 Exclusion (e) The policy contained the following provision in relation to exclusions: "This policy shall not indemnify the Assured Firm against claims made upon the Assured: (a) by or on behalf of any person, firm or corporation named in this Policy as an Assured; (b) by or on behalf of any person operated or controlled by the Assured or by any employees, nominees or trustees of the Assured and in which the assured or any member of the Assured's family has a direct or indirect financial interest; (c) by any person advised or induced by the Assured or employees of the Assured to invest in or lend money to any person being a person referred to in the preceding sub-clause or to any person named as the Assured under this Policy; or (d) by any member of the Assured's family. (e) arising out of the provision by the Assured of any advice, inducement, recommendation, endorsement or opinion regarding the investment of interest, capital or personal endeavour in an investment facility or service in which the Assured or any member of the Assured's family has a direct or indirect control or financial interest. The term 'financial interest' as used in the exclusion shall be deemed to exclude any nominal financial interest in a corporation listed on a Stock Exchange being a member of Associated Australia Stock Exchanges. For the purpose of this general exclusion, the following words or expressions shall have the following meanings: "Person" shall include any incorporated or unincorporated entity. "Family" shall mean the Assured's spouse, any of the Assured's children. "Nominal Financial Interest" shall be deemed to be less than 10% of the issued capital in a public company." (Emphasis added)

14.3 The Parties' Submissions on Exclusion (e) Before Heerey J, SGIO contended, inter alia, that exclusion (e) applied. Plainly, the claims made upon Bird Cameron arose out of the provision of their advice, recommendation, endorsement or opinion (which are referred to compendiously as "the recommendation") regarding the investment of capital. The real issue was whether the investment of capital was: "in an investment facility or service in which the Assured has a direct or indirect...financial interest." SGIO contended that the investment scheme the subject of the recommendation included syndication by the formation of a partnership of twenty 1/20th shares, acquisition by the partnership of the Coles Myer building, the financing of the acquisition and provision for the on-going management of the investment all for the purpose of enabling the investors to enjoy the tax benefits and profits expected to be gained from it. These arrangements, so it was said, constituted a "facility or service" in relation to an investment without which the acquisition could not have proceeded. SGIO then submitted that the investment facility or service so described was one in which Bird Cameron had a direct or indirect financial interest. In that regard SGIO relied on the agreement of Bird Cameron with Gray & Winter for the payment of $10,350 for each 1/20th interest acquired by a client introduced by Bird Cameron and the fees Bird Cameron was expected to earn for the management and accounting work it was to perform on behalf of the partnership. His Honour did not accept the submissions of SGIO. Consistently with the conclusions at which Heerey J arrived in relation to the prescribed interest provisions, his Honour concluded that the investment of capital made on 29 June 1990 was in the Coles Myer building and not in a partnership. On that basis, his Honour concluded that such an investment was not an investment in a facility or service. His Honour then concluded that Bird Cameron did not have a direct or indirect interest in the Coles Myer building. Accordingly, his Honour found that exclusion (e) was not applicable. Although it was not necessary for his Honour to consider the meaning of "financial interest" in relation to exclusion (e), he did so in relation to SGIO's reliance on exclusions (b) and (c). In that context, his Honour accepted Bird Cameron's contention that "financial interest" means an interest of a proprietary nature. In explaining that conclusion his Honour (at 62 FCR 209) said: "Consistent with this is the exclusion of a 'nominal financial interest', defined to be less than 10 per cent of the issued capital of a listed company. The language of par (b) refers to a 'person' (defined to include 'any incorporated or unincorporated entity') 'in which the assured ... has a direct or indirect financial interest'. The expression 'in which' suggests an interest of ownership or part ownership in the 'person' itself. SGIO's argument would require the paragraph to be read as though it said 'or from whose business the assured will or might derive some financial benefit'. SGIO's construction would catch an accountant who advised a client about the acquisition of a company in the (quite reasonable) expectation that if the company was acquired the accountant would do its accountancy work." In its appeal against his Honour's conclusion in relation to exclusion (e), SGIO contended that it was not realistic to view the scheme as merely an investment "in" a building without reference to the structure of the investment. It then contended that the investment, including the partnership, financing and management arrangements, was such that none of the individual investors would have been able to participate in it without those arrangements. The arrangements, it was said, not only facilitated the investment of capital by each investor but was indispensable to it. SGIO then relied on the commission and the management and accounting fees payable to Bird Cameron in the event that its clients acquired shares in the proposed investment "facility or service" in order to demonstrate that it was a facility or service in which Bird Cameron had a direct or indirect financial interest. Bird Cameron contended that his Honour was clearly correct in concluding that the investment was an investment in a building and not in a "facility or service". Their Senior Counsel pointed to the fact that the capital was invested solely to acquire an interest in the building and contended that it was only after that investment that the investors obtained and undertook any rights and obligations under the Coles Myer partnership. In that regard, considerable reliance was placed upon the finding of the trial Judge that the Coles Myer partnership only came into existence after the acquisition of the building. Bird Cameron submitted that the mere prospect of them earning commission and management and accounting fees did not constitute a "financial interest" in an investment facility or service irrespective of whether the investment in question had been treated as an investment in the building or an investment in the partnership.

14.4 Investment Facility or Service At the outset, in order to determine whether there was an investment of capital in an "investment facility or service", it is necessary to characterise the investment made by the investors on the recommendation of Bird Cameron. It is appropriate to start with the investors' standard form letter of instruction to Gray & Winter in relation to the acquisition of the Coles Myer building. The first paragraph of the letter was as follows: "I confirm the instructions from Bird Cameron Accountants for you to acquire the above building for a partnership including the undersigned for $17,072,000 including the costs set out below and to arrange a vendor loan on my behalf for an amount of $16,264,764 for 3 years at 14% per annum on security of a first mortgage of the property and joint and several guarantees of all the partners." In the body of the letter the investor undertook to pay all relevant costs certified "by the Management Committee of the Partnership" and also authorised solicitors to be instructed on behalf of the partnership "to act in the conveyance of the property and the mortgages". Prior to the acquisition it was made clear to investors that a Management Committee was to be established for the partnership and that that Committee would attend to all day-to-day accounting and administrative matters required to be dealt with on behalf of the partnership. The investors were led to believe that accountants from Bird Cameron would, in general, constitute the Committee. We accept, as Heerey J found, that Gray & Winter was offering investors the opportunity to acquire a 1/20th share (or two or more shares, or a fraction of a share) in the Coles Myer building in shared ownership with a management structure such as a partnership as a necessary adjunct to the co-ownership scheme. However, as we have pointed out earlier in these reasons, other integral parts of the investment offered involved the syndicated acquisition of the Coles Myer building by a partnership, vendor financing of the acquisition by a loan of $16.265 million (to be secured by a mortgage and associated guarantees) with six months prepaid interest and ongoing management and accounting services to be provided for the partnership. In distinguishing the scheme from certain co-ownership and residential unit cases which have been held not to have contravened the prescribed interest provisions, we have already observed that, in the present case: · the investors acquired an interest in a partnership which held the building for the benefit of the partners and the sub-partners for profit; · the partners were jointly and severally liable for the principal sum borrowed to enable the acquisition of the building with rights of contribution (and where applicable, of subrogation) between all of the parties (ie partners, sub-partners and guarantors and their respective interests); · the partners' respective interests in the building were to be held subject to the obligations of the co-owners as partners and sub-partners and not separately or solely for the benefit or at the will or direction of each of the co-owners. Contrary to his Honour's finding against the existence of a partnership on 29 June 1990 we have concluded that: · it was a common intention of the parties that a partnership between the investors would come into existence for the acquisition of the property; · in accordance with that common intention the investors acquired the Coles Myer building as partners on 29 June 1990. When the above matters are considered, the trial Judge's conclusion that the investment was in a building is only partly correct. In our view, SGIO was correct in its submission that, in the present case, the characterisation of the investment cannot be made without reference to the structure within which it was made. The investors invested their capital in an investment which had the characteristics described above. In substance, those characteristics enabled the partnership to acquire the Coles Myer building for a purchase price of $14.835 million (which, for each 1/20th interest was $741,750), prepay six months interest of about $1.138 million (ie about $56,900 for each interest) and pay other costs and expenses in excess of $1.1 million, all for an initial capital contribution to the partnership for each 1/20th share of $40,500. It is in that context that the issue of whether the capital was invested by the partners in an "investment facility or service" is to be considered. The principle of construction to be applied to an exclusion clause was stated by the High Court in Darlington Futures Limited v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510: "[These] decisions clearly establish that the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity." The exclusion clause (of which exclusion (e) forms part) or its equivalent has received some judicial consideration. In C E Heath Underwriting & Insurance (Australia) Pty Ltd v Campbell Wallis Moule & Co Pty Ltd [1992] 1 VR 386 at 390 Brooking J commented on the "uncertain scope" of exclusion (e). More recently, an almost identical clause was considered by a Full Court of this Court in Australian Breeders Co-operative Society Ltd v Jones and Others (supra) at 554-558 per Wilcox and Lindgren JJ and at 562-564 per Lee J. Wilcox and Lindgren JJ (at 558) observed that the clause was "poorly expressed". Lee J (at 561) considered the exclusion clauses to be an amalgam of the work of more than one draftsperson with a lack of consistency which resulted in "substantial uncertainty as to the intended scope" of exclusion (e). In Australian Breeders Co-operative a number of issues similar to those which have arisen in the present case were considered. In that case eighteen investors were induced to invest in a thoroughbred horse breeding venture or syndicate as part of a tax avoidance and profit-making scheme. Two of the persons who actively promoted the venture were partners of an accounting firm which was the principal author of the Private Offer Memorandum distributed to persons interested in the venture to induce them to invest. Claims, including breach of the prescribed interest provisions, were made by investors against, amongst others, the accounting firm. The accounting firm held a contract of insurance almost identical to the contract of insurance the subject of the present case. In so far as exclusion (e) was concerned, the only relevant difference was that there was excluded from the definition of a financial interest "any financial interest of less than 10% of the issued capital in a company or less than 10% of the value of any other enterprise". Save for a question in Australian Breeders Co-operative as to whether the two accountants held less than 10% of the value of the relevant enterprise, the other issues considered by the Court in that case are of direct relevance to the issues arising under exclusion (e) in the present case. At first instance Davies J concluded that the venture was not "an investment facility or service" saying: "The crucial issue is whether the venture was 'an investment facility or service', words which are not technical terms. They refer to a structure or service which facilitates or assists investment and therefore to a structure or service of an ongoing nature. An investment broker would be one example. An investment trust in which units could be taken up and sold from time to time may be another. There are many possibilities. But the First Trinity Park Stud Breeding Venture did not facilitate or assist investment. Its sole concern was taxation and the purchase, breeding and sale of bloodstock. The venture was a one-off tax avoidance and profit-making scheme, not an on-going structure or service which facilitated investment. It follows that exclusion (e) did not apply." On appeal, counsel for the insurer contended that the term "investment facility or service" extended to: "any enterprise, concept, activity, relationships or transactions that had a substantial use or purpose in promoting, co-ordinating, carrying out or managing investment transactions or activities". After discussing the particular details of the horse breeding venture and, in particular, the management facility offered to investors in respect of the venture, counsel for the insurer submitted that: "At a practical level, therefore, the venture offered the prospect of facilitating the applicants' individual investments, providing them with a service in relation to the management of the property that they acquired, and providing them with expertise in relation to the breeding and sales activities that were essential to the common enterprise that the venture contemplated." The response of Wilcox and Lindgren JJ (at 556) to that submission was as follows: "As we have said, the response of opposing counsel to this submission was essentially that made by Davies J: the venture was not of an ongoing nature, it did not facilitate or assist investment because its 'sole concern was taxation and the purchase, breeding and sale of bloodstock. The venture was a one-off tax avoidance and profit-making scheme, not an on-going structure or service which facilitated investment'. However, with respect, we find this reasoning unpersuasive. Neither 'facility' nor 'service' implies permanency; some facilities and services are extremely short-term. The venture was to be 'on-going' for a period of five years; many an investment broker or investment trust does not survive as long. More centrally, Davies J thought the venture 'did not facilitate or assist investment' because its 'sole concern was taxation and the purchase, breeding and sale of bloodstock'. However, a bloodstock breeding venture is a form of investment; perhaps more risky than some, but an investment nonetheless. It is true this particular venture was tax-driven, in the sense that investors would not have been likely to enter the syndicate if it had not offered substantial taxation advantages. But that is not unusual; taxation advantages are a major consideration in many contemporary investment decisions. Counsel for ABCOS quote dictionary definitions of 'facility'. They take from the Macquarie Dictionary 'something that makes possible the easier performance of any action' and from the Shorter Oxford Dictionary 'the fact or condition of being easy or easily performed'. They say '(t)he venture here did not make investment easier or more easily performed for the investors'. We disagree. It would have been difficult, if not impossible, for the investors to have gone into the horse breeding business as individuals; most, if not all, would have lacked the necessary combination of capital, expertise and time. There were advantages to them in pooling their resources and engaging a knowledgeable manager. Moreover, there was an advantage in pooling horses, and so averaging risk. The venture made this form of investment easier than it would otherwise have been." We respectfully agree with all of the observations of their Honours. The investment scheme in the present case may equally be described as a "one-off" tax avoidance and profit-making scheme, albeit one which involved an ongoing investment in a tenanted building rather than in the purchase, breeding and sale of bloodstock. Clearly the words "investment facility or service" do not embrace any investment; the investment must be one which involves a "facility or service". Accordingly, if the investment involved no more than acquisition of an interest in a building, then we would be in agreement with the conclusion of Heerey J that it did not constitute an investment facility or service. However, as pointed out above, to characterise the investment in the present case as merely an investment in a building is an incomplete and therefore, to that extent, an inaccurate characterisation. We have already set out why that is so. In the present case we also draw upon the appearance in exclusion (e) of the term "service", as well as "facility". The term "service" has a wide meaning: the Macquarie Dictionary relevantly defines it to include "an act of helpful activity". In the present case, as in Australian Breeders Co-operative, it would have been difficult, if not impossible, for the individual investors to have acquired their investment as individuals, without the "facility" or "services" made available to them in relation to it. Most, if not all, of the investors lacked the necessary combination of capital, access to the financing facility and, to a lesser extent, to the administrative and management skills required to syndicate the investment in the form it took. Again, as in Australian Breeders Co-operative, the advantages to the individual investors were in pooling their resources, using their resources to obtain the necessary financing and enabling both of those matters to be achieved using a carefully prepared legal infrastructure which included the partnership, sub-partnership and guarantee arrangements. That infrastructure enabled the acquisition of a 1/20th share of a building acquired for a purchase price (in respect of that share) of $741,750 and the prepayment of interest and payment of other costs, all upon payment of a capital contribution of only $40,500. Each partnership interest also enjoyed the benefit of an immediate tax deduction on 29 June 1990 of $58,596. It is also of relevance that each such interest was acquired within days, at most weeks, after the investment had been brought to the investors' attention. Plainly, the investment scheme proposed to the investors made the particular form of investment easier than it would otherwise have been as a result of the facilities and services offered by the promoters of it. Accordingly, for the above reasons we have concluded that the investment scheme in the present case was "an investment facility or service" as defined in exclusion (e). In Australian Breeders Co-operative, Lee J dissented in the result on exclusion (e) but his Honour's dissent was based on the question of whether, in calculating the 10% threshold for a financial interest, the interests of the different partners of the accounting firm were to be aggregated or were to be treated separately. That is not an issue that arises in the present case. Otherwise, there is nothing in the judgment of Lee J to suggest any disagreement by his Honour with the analysis of Wilcox and Lindgren JJ of the proper construction of exclusion (e). Indeed, it appears that, save on the issue of aggregation of interests for the purpose of the 10% threshold, Lee J was otherwise in agreement with the analysis of Wilcox and Lindgren JJ.

14.5 Direct or Indirect Financial Interest The other criterion in issue between the parties in the present case is whether the Bird Cameron entities had a direct or indirect financial interest in the investment facility or service. The issue of the temporal connection between the financial interest and the recommendation was also considered in Australian Breeders Co-operative. Wilcox and Lindgren JJ (at 557) considered whether the word "has" in exclusion (e) speaks at the time of the provision of the advice, inducement, recommendation, endorsement or opinion; at the time of the making of the investment, at both of those times, or at the time of the making of the claim. Their Honours' conclusions were stated (at 557) as follows: "...the competing submissions were that the word 'has' means 'had at the time of the provision of the advice' on the one hand, and 'had at the time of the making of the investment' on the other. It was put that, if the former is correct, exclusion (e) does not apply here because neither McDonald nor Farrow had any interest in the enterprise at the time McDonald spoke: the enterprise had not then been established. On the other hand, it was put that if the word 'has' means 'had at the time of the making of the investment', both McDonald and Farrow had interests as at that time, since all investments were made simultaneously. We are of the view that the word 'has' means 'had at the time when there was an "effective" or "operative" giving of the advice'. This view is supported by a purposive construction and by the presence of the word 'inducement'. In the present case, what McDonald said was never withdrawn and continued to be effective down to 30 June 1989 when the investments were made." We respectfully agree with their Honours' analysis: see also Lee J at 563-4. Indeed, any other conclusion would have the capricious and anomalous result of exclusion (e) having no operation in relation to prospective investments, as at the time when the advice had been given, the investment had yet to be made. When regard is had to the purpose of the exclusion (ie, to relieve the insurer from liability when a conflict of interest arises) the relevant period must clearly be when the advice is "effective and operative". Such an approach is consistent with the law's approach to a representation being continuing and operative until the contract induced by it has been concluded: see Chitty on Contracts - General Principles (27th ed, 1994) at para 6-013. A contrary construction would be inconsistent with the object of the exclusion and would result in a limitation which, in our view, was not intended by the parties and is not required by the words of the clause. Exclusion (e) requires that the financial interest be in the investment facility or service. That was not in issue in Australian Breeders Co-operative as the two partners of the accounting firm had a significant proprietary interest in the scheme. Was the investment facility or service in which clients of Bird Cameron invested their capital one "in which" Bird Cameron had a direct or indirect financial interest at the date on which the advice was effective or operative? On that date, being 29 June 1990, the financial interest which the Bird Cameron entities had in the investment facility or service was: · an entitlement of $10,350 for each 1/20th share in the investment facility or service acquired by clients on their recommendation; · the expectation of receiving management fees for managing the partnership venture; · the expectation of receiving professional accounting fees for providing accounting services on behalf of the partnership. The phrase "direct or indirect financial interest" is of wide import. The purpose of the exclusion is relevant to the width the phrase might have. Similar words have long been employed in legislation prohibiting a member of a local council from voting on a matter in which the councillor has a direct or indirect pecuniary or financial interest. In Nutton v Wilson (1889) 22 QBD 744 at 747 Lord Esher MR said that such provisions are intended to prevent such persons "from being exposed to temptation, or even to the semblance of temptation.". And Lord Justice Lindley said (at 748): "To interpret words of this kind, which have no very definite meaning and which perhaps were purposely employed for that very reason, we must look at the object to be attained. The object obviously was to prevent the conflict between interest and duty that might otherwise inevitably arise." In Brown v Director of Public Prosecutions [1956] 2 All ER 189 at 192 Donovan J described the object of the relevant provisions as: "...clearly to prevent councillors from voting on a matter which may affect their own pockets and therefore may affect their judgment." In a similar context a "direct or indirect pecuniary interest" was said by Gowans J in Downward v Babington [1975] VR 872 at 880 to arise in the following circumstance: "...a councillor should be held to have a pecuniary interest in a matter before the council if the matter would if dealt with in a particular way, give rise to an expectation which is not too remote of a gain or loss of money by him." In Attorney-General, ex rel Anka (Contractors) Pty Ltd v Legg (1979) 39 LGRA 399 at 402 McLelland J referred to Downward and suggested that another way of putting the matter was to say that: "...there is a pecuniary interest if there is a reasonable likelihood or expectation of appreciable financial loss or gain." It is against that background that we turn to exclusion (e). The purpose of an exclusion like that in (e) was described in Australian Breeders Co-operative by Wilcox and Lindgren JJ (at 558) as to "guard against the danger that advice may be compromised". Lee J (at 563) described the apparent purpose as: "...to permit the insurer to limit its exposure under the policy by denying the insured an indemnity against claims where the competent conduct of the business of the insured firm, or the observance of fiduciary duties, may be compromised by the preferment of personal interests above those of a client, the risk of claims against the firm being increased thereby." Lee J (at 563) also observed that it must have been the intention of the parties that exclusion (e) would apply to: "events likely to cause a marked increase in the risk the insurer had accepted under the policy...". Consistently with the purposes outlined above, there appears to be at least three ways of defining a relevant financial interest for the purpose of exclusion (e). The first and narrowest view, which was contended for by Bird Cameron and which appealed to Heerey J in relation to exclusion (b), confines the interest to a proprietary interest. The second and widest is in the Downward sense, namely that the interest is such that it can give rise to an expectation, which is not too remote, of a "gain or loss of money". The third and intermediate view is that the interest is an entitlement to an interest sounding in money or money's worth, whether enforceable or not, arising as a result of an agreement, arrangement or understanding. In relation to the third view, given the purpose of the exclusion, it is not appropriate to confine entitlement to a legal or equitable entitlement as enforceability, as such, has little practical relevance to the exposure to temptation against which conflict of interest provisions seek to protect. A proprietary interest is both narrower than, and different in quality from, a financial interest: see Attorney-General for Victoria v Keating [1971] VR 719 at 723. A proprietary interest pertains to property or ownership. A financial interest pertains to money or money's worth. If the parties had intended that the interest in exclusion (e) should be limited to a proprietary interest then they could have said so. Further, limiting exclusion (e) to a proprietary interest would: · exclude a non-proprietary pecuniary interest which has long been accepted as giving rise to a conflict of interest; · include a proprietary interest which, as such, may give rise to a conflict of interest, but need not necessarily do so, in relation to the particular investment facility or service. Finally, whilst it may be apt to refer to a proprietary interest in terms of a legal person or entity (such as in exclusion (b) or in relation to property) it is less apt to do so in relation to a "service or facility". We do not regard the definition of a "Nominal Financial Interest" for the purpose of the exclusions as of assistance on this issue as it merely states that a particular proprietary interest is not to constitute a financial interest. For these reasons we do not regard an "interest" in exclusion (e) as limited to a proprietary interest. Applying the principles of construction referred to in Darlington Futures, it is, in our view, appropriate to construe the term "financial interest" as used in exclusion (e) as applying to an entitlement to a financial interest in the third sense to which we have referred. Although it is open to conclude that "financial" interest could also have been used in the Downward sense, the narrower interpretation based on "entitlement" is, in our view, to be preferred in relation to an exclusion clause in an insurance policy. Such an approach is consistent with both the object of the clause and its construction contra proferentem in case of ambiguity. It is consistent with the object in that the clause is intended to apply in circumstances where cover would otherwise have been expected. In these circumstances an exclusion clause inserted by an insurer, which has the effect of removing the right of indemnity which the insured would otherwise obtain but for the exception, should not arise unless the circumstances relied upon are material to the increase in the risk which the insurer has accepted: see Australian Breeders Co-operative at 563-4 per Lee J. Perhaps putting the matter another way, any increase in the risk based on mere expectation, rather than entitlement, would not have been intended by the parties to be a sufficient or material increase in the risk so as to relieve the insurer from all liability. That is particularly so with professional indemnity insurance where an expectation of increased professional fees would be common, but would be unlikely to have been intended by the parties to relieve the insurer from all liability. It would follow from the foregoing that the mere expectation by Bird Cameron of management and accounting fees as a result of the venture proceeding would not constitute a direct or indirect financial interest in the venture. The evidence discloses that, although there was a reasonable likelihood or expectation of financial gain from the management of, and the provision of accounting services for, the partnership venture, prior to the date on which the recommendation became effective or operative being 29 June 1990, there was no agreement, arrangement or understanding conferring any entitlement to perform management or accounting services for the partnership. The commission stands in a very different situation. It was agreed between Gray & Winter and Bird Cameron from the outset that a commission of $10,350 was to be payable in respect of each 1/20th share taken up by persons who were clients of Bird Cameron. The commission was provided for in the standard letter of instruction, albeit that the commission was referred to as "Accounting Fees". It was to be paid out of the capital of the partnership. The invoices sent by Bird Cameron in respect of the fee referred to it, in one instance, as "Success fee on Cole [sic] Myer building" and in another as "Fees for arranging 1/20th share in Coles Myer project". In the events that occurred three investors were introduced into the scheme by Bird Cameron, Millicent, one investor by Bird Cameron Geelong, one investor by Bird Cameron, Ballarat, four investors by Bird Cameron, Port Lincoln and one investor by Bird Cameron, Chatswood. As a result of its role in recommending the scheme, Bird Cameron became entitled to, and received, commission of $103,800 which was paid out of the partnership capital of $809,700. In our view, Bird Cameron's entitlement to commission, to be paid out of the partnership capital in the event that all twenty interests were subscribed for, for introducing clients to take up a share in the investment facility or service has the consequence that that facility or service was one in which Bird Cameron had a direct or indirect financial interest. The interest was in the facility or service as it became an entitlement upon the client (and the other investors) investing capital, and therefore acquiring a share, in the facility or service. The provision that the commission was to be paid out of the capital invested by the parties in the facility or service upon the investments being fully subscribed suggests that the interest may have been one which was direct rather than indirect. For these reasons, the entitlement to commission falls within exclusion (e) with the consequence that SGIO is relieved from liability in respect of the claims for which indemnity has been sought. Although the commission received extended beyond the claims the subject of the indemnity sought, that is of no consequence to the proper characterisation of Bird Cameron's entitlement to commission which was payable in respect of all of the investors introduced by it. It was Bird Cameron's financial interest in the creation of the investment facility or service that resulted in exclusion (e) applying in the present case. Accordingly, SGIO has succeeded on its appeal.

14.6 Other Matters SGIO also appealed against the trial Judge's refusal of its application for leave to amend its defence to raise an additional claim relating to the non-disclosure to SGIO of the payment of secret commissions to Bird Cameron in respect of its clients who invested in the venture. In our view no error by his Honour in the exercise of the discretion has been demonstrated. As SGIO has succeeded under exclusion (e), it is unnecessary to say more than that SGIO has not established the requisite injustice to it by reason of the refusal of leave to amend. The application to amend was, without explanation, made late in the proceeding and after the applicants' evidence had been given with a consequential risk of prejudice to the applicants and Bird Cameron if the amendment had been permitted. In the circumstances, it is not surprising that his Honour refused the leave sought without calling upon Bird Cameron. It was also open to SGIO to renew its application at the conclusion of the evidence but it did not do so. Bird Cameron cross-appealed against the finding by his Honour that it had failed to disclose to its clients that the firm would receive a commission of $10,350 for each client investing in the scheme. The one exception was Bird Cameron Geelong. As a consequence of that finding his Honour excepted from the indemnity granted under the policy, commissions of $67,275 payable in respect of the claims for which indemnity was sought. As we have concluded that the Bird Cameron entities are not entitled to indemnity under the policy by reason of exclusion (e) it is not necessary to consider the cross-appeal as there is no entitlement to indemnity under the policy. For the reasons set out above SGIO's appeal is to be allowed. The orders that are appropriate are: · paragraph 23 of the orders made by the trial Judge and the orders made in Schedule P be set aside; · Bird Cameron's cross-claims against SGIO be dismissed with costs; · Bird Cameron pay SGIO's costs of the appeal; · Bird Cameron's cross-appeal be dismissed.

COSTS OF THE APPEALS We have a number of concerns as to the culture, that appears to have developed in the present litigation, of all points being taken. In many instances the ingenuity of the point taken bore little relationship to its merit. The extraordinary complexity of the facts and law relevant to the determination of the particular appeals and cross appeals and the inter-relationship of the issues of fact and law in relation to those appeals were such that, in general, the Court was required to rely upon the judgment of the parties and their counsel as to the manner in which each appeal was conducted. Although we have concerns at the length of and costs involved in the appeals and cross appeals we have concluded, as the trial Judge did, that costs should follow the event. There were numerous challenges by notice of contention and cross appeal to findings of Heerey J. As the appeals have largely failed it has not been necessary to consider all of the issues raised on the contentions and cross appeals. However, our view was that in general they lacked merit and were likely to fail. Rather than apportion costs by reference to the different appeals and cross appeals we have concluded that a broad brush approach is required. In all of the circumstances, including the lack of merit on many issues raised by the applicants' cross appeals we have concluded that the respondent debtors, other than Metzke & Allan, Mr Glass and Huntley McArdle & Glass, should pay 80% of the applicants' costs of the appeals and cross appeals. As between the respondents liable to pay costs there should be an apportionment similar to that ordered by Heerey J but based on the share of the time afforded to those appellants in the hearing of the appeals. Thus, if the appellants liable for costs addressed, in total, for ten days then an appellant addressing for two out of the ten days will have a 20% apportionment for the costs liability of the appeals and cross appeals. Although there may be a degree of arbitrariness in such an apportionment in our view it appropriately reflects the manner in which the burden of costs should be borne. Metzke & Allan stands in a different position. The appeals against orders made in its favour were unsuccessful. It should recover its costs in respect of those appeals from the parties which appealed against the judgment of Heerey J in relation to Metzke & Allan. Those parties should be liable for the costs, as between themselves, in equal shares. The costs of SGIO's appeal are discrete and are to be the subject of the separate orders which we have already set out.

SUMMARY OF OUTCOMES The appeals of Amadio have been allowed in part. Amadio is entitled to have the amount of damages payable by it reduced by the amount of the restitutionary payments ordered to be paid by it. The appeal of Mr Glass has been allowed in part. Mr Glass is entitled to an order that he receive the entitlement to a restitutionary payment that the applicants, as investors, are to receive upon the re-transfer of their interests in the Coles Myer building to Amadio. The appeal of SGIO has been allowed with costs. The claims made by Bird Cameron for indemnity under its professional indemnity policy are to be dismissed with costs and certain other consequential orders are appropriate by reason of the application of clause (e) of the exclusion clauses in that policy. All of the other appeals and cross appeals are to be dismissed with an order that the respondent debtors, other than Huntley McArdle & Glass and Mr Glass, pay 80% of the applicants' costs of the appeals and cross appeals. The burden of the liability for costs is to be apportioned between the respondent debtors as set out in these reasons for judgment. The appeals in relation to Metzke & Allan are to be dismissed with costs.

ANNEXURE A Parties to Trial Proceedings

1. Applicants RUSSELL FRASER HENDERSON First Applicant NOELENE MARIE HENDERSON Second Applicant HENRY ARNOLD GORDON Third Applicant PHYLLIS CAROLINE GORDON Fourth Applicant BACTBUILD PTY LTD (ACN 006 146 247) Fifth Applicant LONIHIRE PTY LTD (ACN 006 152 254) Sixth Applicant HAROLD FRANCES DEAN Seventh Applicant KATHLEEN MARY DEAN Eighth Applicant W S & H F DEAN PTY LTD (ACN 005 263 696) Ninth Applicant WILLIAM STANLEY DEAN Tenth Applicant NANCY JEAN DEAN Eleventh Applicant MAX JOSEPH GREEN Twelfth Applicant ROBIN MONDS GREEN Thirteenth Applicant BRIAN JOSEPH GREEN Fourteenth Applicant GINA KATHLEEN GREEN Fifteenth Applicant BARBARA LEE Sixteenth Applicant ASSKA PTY LTD (ACN 006 375 524) Seventeenth Applicant GARKAT PTY LTD (ACN 006 342 258) Eighteenth Applicant GARY LESLIE TURNER Nineteenth Applicant DARYL WAYNE TURNER Twentieth Applicant TURNBROSS PTY LTD (ACN 005 407 349) Twenty-first Applicant LEO FRANCIS HAARSMA Twenty-second Applicant JANETTE ANNE HAARSMA Twenty-third Applicant MATTHEW PETER HAARSMA Twenty-fourth Applicant DICK JACOBUS SCHOEMAN Twenty-fifth Applicant JUDITH SCHOEMAN Twenty-sixth Applicant JOHN PAUL GERRARD ARTHURSON Twenty seventh Applicant SUZANNE LOVITT ARTHURSON Twenty-eighth Applicant ACKINA PTY LTD (ACN 009 940 007) Twenty-ninth Applicant IVAN DOUGLAS PHELPS Thirtieth Applicant GAVAN PHELPS Thirty-first Applicant CLIFFORD PHELPS Thirty-second Applicant THOMAS TRANTER Thirty-third Applicant PAULINE TRANTER Thirty-fourth Applicant MARICAN PTY LTD (ACN 006 880 244) Thirty-fifth Applicant RONALD FREDERICK TRENGOVE Thirty-sixth Applicant LEONIE TRENGOVE Thirty-seventh Applicant BRETDAR PTY LTD (ACN 006 060 813) Thirty-eighth Applicant FIFTH VARONA PTY LTD (ACN 005 298 537) Thirty-ninth Applicant

2. Respondents AMADIO PTY LTD (ACN 008 638 408) First Respondent GRAY & WINTER (A FIRM) Second Respondent NEVETT FORD (A FIRM) Third Respondent BPM PTY LTD (ACN 008 787 219) Fourth Respondent BIRD CAMERON - BALLARAT (A FIRM) Fifth Respondent BIRD CAMERON - GEELONG ( A FIRM) Sixth Respondent HUNTLEY McARDLE & GLASS PTY LTD Ninth Respondent MICHAEL FREDERICK WINTER Tenth Respondent JAMES WILLIAM GRAY Eleventh Respondent MICHAEL DAVID TERREY Twelfth Respondent PAUL ROBERT CONNELL Thirteenth Respondent ERNST CLYDE RUTT Fourteenth Respondent JOHN ALBERT MAYNE Fifteenth Respondent DARYL LYNCH Sixteenth Respondent JOSEPH KORCZAK Seventeenth Respondent PETER ALLAN LANDERS Eighteenth Respondent WILLIAM ERNEST BALCAM Nineteenth Respondent ROBERT HUGH GLASS Twentieth Respondent HUDSON CONWAY LIMITED Twenty-first Respondent METZKE & ALLAN (A FIRM) Twenty-second Respondent RICHARD ELLIS (VICTORIA) PTY LTD Twenty-third Respondent BIRD CAMERON PARTNERS (A FIRM) Twenty-fourth Respondent

ANNEXURE B Orders made by Trial Judge The Court orders and declares as follows: 1. (a) Declare the Mortgage and the Guarantee described in Schedule A and each of them are unenforceable. (b) Order that the land described in Certificate of Title Volume 4867 Folio 343 ("the land") be re-transferred by the registered proprietors of the land (being the persons named in Schedule Q annexed to these Orders) to Amadio and to effect such re-transfer further order that: (i) each registered proprietor of the land execute an Instrument of Transfer in favour of Amadio of the whole of his, her or its interest in the land; (ii) in the event that any registered proprietor of the land fails to execute the said Instrument of Transfer in favour of Amadio in accordance with paragraph (i) by 23 April 1996, it is further ordered pursuant to Order 37 Rule 3 of the Rules of the Federal Court that a Registrar of this Court sign the said Instrument of Transfer on behalf of that registered proprietor; and (iii) on or before 23 April, 1996, Amadio execute an Instrument of Discharge of the Mortgage in dealing number R13468W and file the same with the Registrar of Titles in Melbourne. 2. Order that the operation of the declaration and the orders contained in paragraph 1 hereof be stayed until 23 April 1996. 3. Judgment for Harold Francis Dean, Kathleen Mary Dean, William Stanley Dean, Nancy Jean Dean, Bactbuild Pty Ltd, Lonihire Pty Ltd and W.S & H Dean Pty Ltd (collectively "the Deans") in accordance with Schedule B. 4. Judgment for Gary Leslie Turner, Daryl Wayne Turner, Turnbross Pty Ltd and Garkat Pty Ltd (collectively "the Turners") in accordance with Schedule C. 5. Judgment for Henry Arnold Gordon, Phyllis Caroline Gordon, Bretdar Pty Ltd and Fifth Varona Pty Ltd (collectively "the Gordons") in accordance with Schedule D. 6. Judgment for Russell Fraser Henderson and Noelene Marie Henderson (collectively "the Hendersons") in accordance with Schedule E. 7. By consent, order that Perpetual Trustees Tasmania Limited of 68 Best Street, Devonport in the State of Tasmania be appointed as a person to represent the Estate of Max Joseph Green, deceased, pursuant to Order 6 Rule 15 of the Rules of the Court. 8. Judgment for Perpetual Trustees Tasmania Limited (as representative of the Estate of Max Joseph Green, deceased), Robin Monds Green, Brian Joseph Green and Gina Kathleen Green (collectively "the Greens") in accordance with Schedule F. 9. Judgment for Barbara Lee and Asska Pty Ltd (collectively "Lee") in accordance with Schedule G. 10. Judgment for Leo Francis Haarsma, Janette Anne Haarsma and Matthew Peter Haarsma (collectively "the Haarsmas") in accordance with Schedule H. 11. Judgment for Dick Jacobus Schoeman and Judith Schoeman (collectively the Schoemans") in accordance with Schedule I. 12. Judgment for John Paul Gerrard Arthurson and Suzanne Lovitt Arthurson (collectively "the Arthursons") in accordance with Schedule J. 13. Judgment for Ivan Douglas Phelps, Gavin Phelps, Clifford Phelps and Ackina Pty Ltd (collectively "the Phelps") in accordance with Schedule K. 14. Judgment for Thomas Tranter and Pauline Tranter (collectively "the Tranters") in accordance with Schedule L. 15. Judgment for Ronald Frederick Trengove, Leonie Trengove and Marican Pty Ltd (collectively "the Trengoves") in accordance with Schedule M. 16. Order that the Cross-claim by Hudson Conway Limited and Amadio Pty Ltd be dismissed with cost in accordance with these Orders. 17. In respect of Cross-claims by any Respondent against any other Respondent, judgment for contribution in accordance with Schedules B to M. 18. (a) Order that there be a stay of execution under the judgments contained in Schedules B to P until 23 April 1996. (b) Direct that any application for a further stay of execution together with any affidavits in support be filed and served on or before 15 April 1996. (c) Direct that any affidavits in opposition to a further stay be filed and served on or before 19 April 1996. (d) Direct that any application for a further stay be returnable on 22 April 1996 at 10.15 am. 19. Order that the costs of the Applicants of this proceeding and of the Cross-claim against them by Hudson Conway Limited and Amadio Pty Ltd be taxed: (a) on a party-party basis up to and including 31 May 1995; (b) thereafter on the basis that such costs are to include all costs except insofar as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the Applicants will be completely indemnified for their costs; and (c) in accordance with the directions set out in Schedule N hereof. 20. In respect of the taxation of the costs of the Applicants in accordance with paragraph 19 hereof: (a) certify that this was a proceeding in which it was appropriate and reasonable for the Applicants to retain three Counsel; (b) direct that the fees of Counsel for the Applicants be taxed on the basis of a daily fee, the proper amount of such fee to be determined by the Taxing Officer. 21. In respect of the Cross-claims made by any respondent against Metzke & Allan, judgment for Metzke & Allan in accordance with Schedule O. 22. Order that, save as ordered in paragraphs 17 and 21 hereof, Cross-claims as between Respondents be dismissed with no order as to costs. 23. In respect of the Cross-claim by BPM Pty Ltd and others against SGIO Insurance Limited, judgment in accordance with Schedule P. 24. Order that the moneys held by BPM Pty Ltd in the Coles Myer Building Partnership Account (amounting to $371,827.01 as at 4 January 1996) and any interest accrued thereon be paid forthwith by BPM Pty Ltd to Amadio Pty Ltd. 25. Declare that in these Orders, any judgment against Gray & Winter includes a judgment against the following persons: (i) Garrick Lewis Gray (ii) Michael Frederick Winter. 26. Declare that in these Orders, any judgment against Nevett Ford includes a judgment against the following persons: (i) Peter Russell Wilson (ii) Francis Joseph Vagg (iii) Arthur Paul Stephens (iv) David Francis Stratton (v) Philip Harry Brewin (vi) Andrew Thomas Lumb (vii) Peter Gilchrist Lumb (viii) David Keith Llewellyn (ix) Gavin Joseph Burns 27. Declare that in these Orders, any judgment against Bird Cameron - Ballarat includes a judgment against the following persons: (i) BPM Pty Ltd (ii) John Albert Mayne (iii) Terrence Robert Rodoni (iv) Phillip Brian Auer 28. Declare that in these Orders, any judgment against Bird Cameron - Geelong includes a judgment against the following persons: (i) BPM Pty Ltd (ii) Peter Allan Landers (iii) Andrew William Werzbowzki. 29. Order that the time within which any party may appeal against any of the foregoing Orders and Declarations be extended to 28 days from the date hereof. 30. Order that the Applicants' claims against Bird Cameron Partners and William Ernest Balcam be dismissed with no order as to costs.

SCHEDULE A THE INSTRUMENTS 1. Instrument of Mortgage registered in the Office of Titles no. R13468W whereby Michael David Terrey and others mortgaged to Amadio Pty Ltd the land described in the Instrument of Transfer ("the Mortgage"). 2. Instrument of Guarantee and Indemnity dated 29 June 1990 whereby Noelene Marie Henderson and others jointly and severally guaranteed to Amadio Pty Ltd the obligations of Michael David Terrey and others under the Mortgage ("the Guarantee").

SCHEDULE B JUDGMENT FOR THE DEANS AND FOR CONTRIBUTION BETWEEN THE RESPONDENTS 1. Judgment for Bactbuild Pty Ltd against Amadio Pty Ltd for restitution in the sum of $182,028 plus interest in the sum of $59,224. 2. Judgment for Lonihire Pty Ltd against Amadio Pty Ltd for restitution in the sum of $182,028 plus interest in the sum of $59,224. 3. Judgment for Bactbuild Pty Ltd for damages in the amount of $294,590 plus interest in the sum of $97,090 against the following persons and each of them. (i) Amadio Pty Ltd (ii) Hudson Conway Limited (iii) Gray & Winter (iv) James William Gray (v) Huntley McArdle & Glass Pty Ltd (vi) Robert Hugh Glass (vii) Nevett Ford (viii) Richard Ellis (Victoria) Pty Ltd (hereinafter called "the debtors"). 4. Judgment for Lonihire Pty Ltd for damages in the sum of $294,590 plus interest in the sum of $97,090 against the debtors and each of them. 5. Order that the amount which each of Bactbuild Pty Ltd and Lonihire Pty Ltd may recover pursuant to paragraphs 1-4 hereof is limited, in each case, to the sum of $294,590 plus interest of $97,090. 6. Order that the debtors may recover contribution from each other in respect of their liability pursuant to paragraphs 3 and 4 hereof in the following proportions: (i) Amadio Pty Ltd and Hudson Conway Limited - 15% (ii) Gray & Winter, Garrick Lewis Gray, Michael Frederick Winter and James William Gray - 31% (iii) Huntley McArdle & Glass Pty Ltd and Robert Hugh Glass - 31% (iv) Nevett Ford - 8% (v) Richard Ellis (Victoria) Pty Ltd - 15% 7. Order that the taxed costs of the Deans of the proceeding be paid by the debtors and each of them except Richard Ellis (Victoria) Pty Ltd such costs to be taxed in accordance with paragraph 19 of these Orders. 8. Order that the debtors (except Richard Ellis (Victoria) Pty Ltd) may recover contribution from each other in respect of their liability for the costs of the Deans and any interest thereon in the following proportions: (i) Amadio Pty Ltd and Hudson Conway Limited - 25% (ii) Gray & Winter, Garrick Lewis Gray, Michael Frederick Winter and James William Gray - 35% (iii) Huntley McArdle & Glass Pty Ltd and Robert Hugh Glass - 35% (iv) Nevett Ford - 5%

SCHEDULE C JUDGMENT FOR THE TURNERS AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for Garkat Pty Ltd against Amadio Pty Ltd for restitution in the sum of $91,014 plus interest in the sum of $29,612. 2. Judgment for Garkat Pty Ltd for damages in the amount of $152,840 plus interest in the sum of $48,545 against the following persons and each of them: (i) Amadio Pty Ltd (ii) Hudson Conway Limited (iii) Gray & Winter (iv) James William Gray (v) Huntley McArdle & Glass Pty Ltd (vi) Robert Hugh Glass (vii) Nevett Ford (viii) Richard Ellis (Victoria) Pty Ltd (hereafter called "the debtors"). 3. Order that the amount which Garkat Pty Ltd may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $152,840 plus interest in the sum of $48,545. 4. Order that the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 2 hereof in the following proportions: (i) Amadio Pty Ltd and Hudson Conway Limited - 15% (ii) Gray & Winter and James William Gray - 31% (iii) Huntley McArdle & Glass Pty Ltd and Robert Hugh Glass - 31% (iv) Nevett Ford - 8% (v) Richard Ellis (Victoria) Pty Ltd - 15% 5. Order that the taxed costs of the Turners of the proceeding be paid by the debtors and each of them except Richard Ellis (Victoria) Pty Ltd in accordance with paragraph 19 of these Orders. 6. Order that the debtors except (Richard Ellis (Victoria) Pty Ltd) may recover contribution from each other in respect of their liability for the costs of the Turners and any interest thereon pursuant to paragraph 5 hereof in the following proportions: (i) Amadio Pty Ltd and Hudson Conway Limited - 25% (ii) Gray & Winter and James William Gray - 35% (iii) Huntley McArdle & Glass Pty Ltd and Robert Hugh Glass - 35% (iv) Nevett Ford - 5%

SCHEDULE D JUDGMENT FOR THE GORDONS AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for Henry Arnold Gordon against Amadio Pty Ltd for restitution in the sum of $45,507 plus interest in the sum of $14,806. 2. Judgment for Henry Arnold Gordon for damages in the amount of $76,495 plus interest in the sum of $24,272 against the following persons and each of them: (i) Amadio Pty Ltd (ii) Hudson Conway Limited (iii) Gray & Winter (iv) Huntley McArdle & Glass Pty Ltd (v) Robert Hugh Glass (vi) Nevett Ford (vii) Richard Ellis (Victoria) Pty Ltd (hereafter called "the debtors"). 3. Order that the amount which Henry Arnold Gordon may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $76,495 plus interest in the sum of $24,272. 4. Order the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 2 hereof in the following proportions: (i) Amadio Pty Ltd and Hudson Conway Limited - 15% (ii) Gray & Winter - 31% (iii) Huntley McArdle & Glass Pty Ltd and Robert Hugh Glass - 31% (iv) Nevett Ford - 8% (v) Richard Ellis (Victoria) Pty Ltd - 15% 5. Order that the taxed costs of the Gordons of the proceeding be paid by the debtors and each of them except Richard Ellis (Victoria) Pty Ltd in accordance with paragraph 19 of these Orders. 6. Order that the debtors (except Richard Ellis (Victoria) Pty Ltd) may recover contribution from each other in respect of their liability for the costs of the Gordons and any interest thereon pursuant to paragraph 5 hereof in the following proportions: (i) Amadio Pty Ltd and Hudson Conway Limited - 25% (ii) Gray & Winter - 35% (iii) Huntley McArdle & Glass Pty Ltd and Robert Hugh Glass - 35% (iv) Nevett Ford - 5%

SCHEDULE E JUDGMENT FOR THE HENDERSONS AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for Russell Fraser Henderson against Amadio Pty Ltd for restitution in the sum of $91,014 plus interest in the sum of $29,612. 2. Judgment for Russell Fraser Henderson for damages in the amount of $152,990 plus interest in the sum of $48,545 against the following persons and each of them: (i) Gray & Winter (ii) James William Gray (iii) Nevett Ford (iv) BPM Pty Ltd (v) Bird Cameron - Ballarat (hereafter called "the debtors"). 3. Order that the amount which Russell Fraser Henderson may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $152,990 plus interest at $48,545. 4. Order the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 3 hereof in the following proportions: (i) Gray & Winter and James William Gray - 44.4% (ii) BPM Pty Ltd and Bird Cameron - Ballarat - 44.4% (iii) Nevett Ford - 11.2% 5. Order that the taxed costs of the Hendersons of the proceeding be paid by the debtors, Hudson Conway Limited and Amadio Pty Ltd and each of them in accordance with paragraph 19 of these Orders. 6. Order that the debtors, Hudson Conway Limited and Amadio Pty Ltd may recover contribution from each other in respect of their liability for the costs of the Hendersons and any interest thereon pursuant to paragraph 5 hereof in the following proportions: (i) Amadio Pty Ltd and Hudson Conway Limited - 15% (ii) Gray & Winter and James William Gray - 40% (iii) Bird Cameron - Ballarat and BPM Pty Ltd - 40% (iv) Nevett Ford - 5%

SCHEDULE F JUDGMENT FOR THE GREENS AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for Perpetual Trustees Tasmania Limited (as representative of the Estate of Max Joseph Green, deceased) against Amadio Pty Ltd for restitution in the sum of $91,014 plus interest in the sum of $29,612. 2. Judgment for Perpetual Trustees Tasmania Limited (as representative of the Estate of Max Joseph Green, deceased) for damages in the amount of $152,990 plus interest in the sum of $48,545 against the following persons and each of them: (i) Gray & Winter (ii) Nevett Ford (hereafter called "the debtors"). 3. Order that the amount which Perpetual Trustees Tasmania Limited (as representative of the Estate of Max Joseph Green, deceased) may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $152,990 plus interest in the sum of $48,545. 4. Order that the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 2 hereof in the following proportions: (i) Gray & Winter - 80% (ii) Nevett Ford - 20% 5. Order that the taxed costs of the Greens be paid by the debtors, Hudson Conway Limited, Amadio Pty Ltd and each of them in accordance with paragraph 19 of these Orders. 6. Order that the debtors, Hudson Conway Limited and Amadio Pty Ltd may recover contribution from each other in respect of their liability for the costs of the Greens and any interest thereon pursuant to paragraph 5 hereof in the following proportions: (i) Hudson Conway Limited and Amadio Pty Ltd - 15% (ii) Gray & Winter - 80% (iii) Nevett Ford - 5%

SCHEDULE G JUDGMENT FOR LEE AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for Barbara Lee against Amadio Pty Ltd for restitution in the sum of $91,014 plus interest in the sum of $29,612. 2. Judgment for Barbara Lee for damages in the amount of $152,990 plus interest in the sum of $48,545 against the following persons and each of them: (i) Gray & Winter (ii) Nevett Ford (hereafter called "the debtors"). 3. Order that the amount which Barbara Lee may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $152,990 plus interest in the sum of $48,545. 4. Order that the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 2 hereof in the following proportions: (i) Gray & Winter - 80% (ii) Nevett Ford - 20% 5. Order that the taxed costs of Lee be paid by the debtors, Hudson Conway Limited, Amadio Pty Ltd and each of them in accordance with paragraph 19 of these Orders. 6. Order that the debtors, Hudson Conway Limited and Amadio Pty Ltd may recover contribution from each other in respect of their liability for the costs of Lee pursuant to paragraph 5 hereof in the following proportions: (i) Hudson Conway Limited and Amadio Pty Ltd - 15% (ii) Gray & Winter - 80% (iii) Nevett Ford - 5%

SCHEDULE H JUDGMENT FOR THE HAARSMAS AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for Leo Francis Haarsma against Amadio Pty Ltd for restitution in the sum of $91,014 plus interest in the sum of $29,612. 2. Judgment for Leo Francis Haarsma for damages in the amount of $152,990 plus interest in the sum of $48,545 against the following persons and each of them: (i) Gray & Winter (ii) BPM Pty Ltd (iii) Daryl Lynch (iv) Nevett Ford (hereafter called "the debtors"). 3. Order that the amount which Leo Francis Haarsma may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $152,990 plus interest in the sum of $48,545. 4. Order that the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 2 hereof in the following proportions: (i) Gray & Winter - 44.4% (ii) BPM Pty Ltd and Daryl Lynch - 44.4% (iii) Nevett Ford - 11.2% 5. Order that the taxed costs of the Haarsmas of the proceedings be paid by the debtors, Hudson Conway Limited, Amadio Pty Ltd and each of them in accordance with paragraph 19 of these Orders. 6. Order that the debtors, Hudson Conway Limited and Amadio Pty Ltd may recover contribution from each other in respect of their liability for the costs of the Haarsmas and any interest thereon in the following proportions: (i) Hudson Conway Limited and Amadio Pty Ltd - 15% (ii) Gray & Winter - 40% (iii) BPM Pty Ltd and Daryl Lynch - 40% (iv) Nevett Ford - 5%

SCHEDULE I JUDGMENT FOR THE SCHOEMANS AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for Dick Jacobus Schoeman and Judith Schoeman against Amadio Pty Ltd for restitution in the sum of $91,014 plus interest in the sum of $29,612. 2. Judgment for Dick Jacobus Schoeman and Judith Schoeman for damages in the amount of $152,990 plus interest at $48,545 against the following persons and each of them: (i) Gray & Winter (ii) BPM Pty Ltd (iii) Daryl Lynch (iv) Nevett Ford (hereafter called "the debtors"). 3. Order that the amount which Dick Jacobus Schoeman and Judith Schoeman may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $152,990 plus interest in the sum of $48,545. 4. Order that the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 2 hereof in the following proportions: (i) Gray & Winter - 44.4% (ii) BPM Pty Ltd and Daryl Lynch - 44.4% (iii) Nevett Ford - 11.2% 5. Order that the taxed costs of the Schoemans be paid by the debtors, Hudson Conway Limited, Amadio Pty Ltd and each of them in accordance with paragraph 19 of these Orders. 6. Order that the debtors, Hudson Conway Limited and Amadio Pty Ltd may recover contribution from each other in respect of their liability for the costs of the Schoemans and any interest thereon pursuant to paragraph 5 hereof in the following proportions: (i) Hudson Conway and Amadio Pty Ltd - 15% (ii) Gray & Winter - 40% (iii) BPM Pty Ltd and Daryl Lynch - 40% (iv) Nevett Ford - 5%

SCHEDULE J JUDGMENT FOR THE ARTHURSONS AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for John Paul Gerrard Arthurson and Suzanne Lovitt Arthurson against Amadio Pty Ltd for restitution in the sum of $91,014 plus interest in the sum of $29,612. 2. Judgment for John Paul Gerrard Arthurson and Suzanne Lovitt Arthurson for damages in the amount of $152,990 plus interest at $48,545 against the following persons and each of them: (i) Gray & Winter (ii) BPM Pty Ltd (iii) Daryl Lynch (iv) Nevett Ford (hereafter called "the debtors"). 3. Order that the amount which John Paul Gerrard Arthurson and Suzanne Lovitt Arthurson may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $152,990 plus interest in the sum of $48,545. 4. Order that the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 2 hereof in the following proportions: (i) Gray & Winter - 44.4% (ii) BPM Pty Ltd and Daryl Lynch - 44.4% (iii) Nevett Ford - 11.2% 5. Order that the taxed costs of the Arthursons be paid by the debtors, Hudson Conway Limited, Amadio Pty Ltd and each of them in accordance with paragraph 19 of these Orders. 6. Order that the debtors, Hudson Conway Limited and Amadio Pty Ltd may recover contribution from each other in respect of their liability for the costs of the Schoemans and any interest thereon pursuant to paragraph 5 hereof in the following proportions: (i) Hudson Conway and Amadio Pty Ltd - 15% (ii) Gray & Winter - 40% (iii) BPM Pty Ltd and Daryl Lynch - 40% (iv) Nevett Ford - 5%

SCHEDULE K JUDGMENT FOR THE PHELPS AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for Ackina Pty Ltd against Amadio Pty Ltd for restitution in the sum of $91,014 plus interest in the sum of $29,612. 2. Judgment for Ackina Pty Ltd for damages in the sum of $152,990 plus interest at $48,545 against the following persons and each of them: (i) Gray & Winter (ii) BPM Pty Ltd (iii) Daryl Lynch (iv) Nevett Ford (hereafter called "the debtors"). 3. Order that the amount which Ackina Pty Ltd may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $152,990 plus interest in the sum of $48,545. 4. Order that the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 2 hereof in the following proportions: (i) Gray & Winter - 44.4% (ii) BPM Pty Ltd and Daryl Lynch - 44.4% (iii) Nevett Ford - 11.2% 5. Order that the taxed costs of the Phelps be paid by the debtors, Hudson Conway Limited, Amadio Pty Ltd and each of them in accordance with paragraph 19 of these Orders. 6. Order that the debtors, Hudson Conway Limited and Amadio Pty Ltd may recover contribution from each other in respect of their liability for the costs of Ackina Pty Ltd and any interest thereon pursuant to paragraph 5 hereof in the following proportions: (i) Hudson Conway and Amadio Pty Ltd - 15% (ii) Gray & Winter - 40% (iii) BPM Pty Ltd and Daryl Lynch - 40% (iv) Nevett Ford - 5%

SCHEDULE L JUDGMENT FOR THE TRANTERS AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for Thomas Tranter and Pauline Tranter against Amadio Pty Ltd for restitution in the sum of $91,014 plus interest in the sum of $29,612. 2. Judgment for Thomas Tranter and Pauline Tranter for damages in the amount of $152,990 plus interest at $48,545 against the following persons and each of them: (i) Gray & Winter (ii) BPM Pty Ltd (iii) Joseph Korczak (iv) Nevett Ford (hereafter called "the debtors"). 3. Order that the amount which Thomas Tranter and Pauline Tranter may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $152,990 plus interest in the sum of $48,545. 4. Order that the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 2 hereof in the following proportions: (i) Gray & Winter - 44.4% (ii) BPM Pty Ltd and Joseph Korczak - 44.4% (iii) Nevett Ford - 11.2% 5. Order that the taxed costs of the Tranters be paid by the debtors, Hudson Conway Limited, Amadio Pty Ltd and each of them in accordance with paragraph 19 of these Orders. 6. Order that the debtors, Hudson Conway Limited and Amadio Pty Ltd may recover contribution from each other in respect of their liability for the costs of the Tranters and any interest thereon pursuant to paragraph 5 hereof in the following proportions: (i) Hudson Conway and Amadio Pty Ltd - 15% (ii) Gray & Winter - 40% (iii) BPM Pty Ltd and Joseph Korczak - 40% (iv) Nevett Ford - 5%

SCHEDULE M JUDGMENT FOR THE TRENGOVES AND FOR CONTRIBUTION BETWEEN RESPONDENTS 1. Judgment for Marican Pty Ltd against Amadio Pty Ltd for restitution in the sum of $91,014 plus interest in the sum of $29,612. 2. Judgment for Marican Pty Ltd for damages in the sum of $145,540 plus interest in the sum of $46,181 against the following persons and each of them: (i) Gray & Winter (ii) BPM Pty Ltd (iii) Bird Cameron - Geelong (iv) Nevett Ford (hereafter called "the debtors"). 3. Order that the amount which Marican Pty Ltd may recover pursuant to paragraphs 1 and 2 hereof is limited to the sum of $145,540 plus interest in the sum of $46,181. 4. Order that the debtors may recover contribution from each other in respect of their liability pursuant to paragraph 2 hereof in the following proportions: (i) Gray & Winter - 58% (ii) BPM Pty Ltd and Bird Cameron - Geelong - 28% (iii) Nevett Ford - 14% 5. Order that the taxed costs of the Trengoves of the proceeding be paid by the debtors, Hudson Conway Limited, Amadio Pty Ltd and each of them in accordance with paragraph 19 of these Orders. 6. Order that the debtors, Hudson Conway Limited and Amadio Pty Ltd may recover contribution from each other in respect of their liability for the costs of the Trengoves and any interest thereon pursuant to paragraph 5 hereof in the following proportions: (i) Hudson Conway and Amadio Pty Ltd - 15% (ii) Gray & Winter - 40% (iii) BPM Pty Ltd and Bird Cameron - Geelong - 40% (iv) Nevett Ford - 5%

SCHEDULE N DIRECTIONS AS TO TAXATION OF COSTS OF APPLICANTS In taxing the costs of the Applicants pursuant to paragraph 19 of these Orders, the Taxing Officer shall: (a) identify any costs or expenses which can be attributed to individual Applicants ("specific costs") and deduct them from the total taxed costs of the Applicants; (b) reduce the balance of the total taxed costs of the Applicants by the sum of $300,000 to allow for the earlier contribution towards those costs by Metzke & Allan; (c) divide the said reduced balance of the total taxed costs of the Applicants ("the group costs") into thirteen shares; (d) certify that the Deans are entitled to recover from the Respondents in accordance with Schedule B hereof costs being their respective specific costs (if any) and a two-thirteenth share of the group costs taxed in accordance with the Order set out in paragraph 19 of these Orders. (e) certify that the Turners, the Gordons, the Hendersons, the Greens, Lee, the Haarsmas, the Schoemans, the Arthursons, the Phelps, the Tranters and the Trengoves and each of them are entitled to recover from the Respondents in accordance with Schedules C to M hereof costs being their respective specific costs (if any) and a one-thirteenth share of the group costs taxed in accordance with the Order set out in paragraph 19 of these Orders.

SCHEDULE O JUDGMENT FOR METZKE & ALLAN AND FOR CONTRIBUTION BETWEEN OTHER RESPONDENTS 1. Judgment for Metzke & Allan on the Cross-claims (as amended) brought against it by the following persons: (1) BPM Pty Ltd, Bird Cameron - Ballarat, Bird Cameron - Geelong, John Albert Mayne, Daryl Lynch, Joseph Korczak, Peter Allan Landers, William Ernest Balcam and Bird Cameron Partners and each of them (collectively "Bird Cameron Cross-Claimants"). (2) Huntley McArdle & Glass Pty Ltd and Robert Hugh Glass and each of them. (3) Amadio Pty Ltd and Hudson Conway Ltd and each of them. (4) Richard Ellis (Victoria) Pty Ltd (5) Nevett Ford (6) Gray & Winter, Garrick Lewis Gray, Michael Frederick Winter and James William Gray and each of them (collectively "Gray & Winter Cross-Claimants"). [The abovenamed cross-claimants are hereafter collectively called the "Cross-Claimants".] 2. The Cross-claim by Metzke & Allan against the Cross-Claimants and each of them is dismissed with no order as to costs. 3. The Cross-Claimants pay the costs of Metzke & Allan for the whole of the proceedings against Metzke & Allan, such costs to be taxed and paid on the following basis: (1) By all Cross-Claimants, on a party/party basis up to and including 1 March 1995. (2) By all Cross-Claimants except Richard Ellis (Victoria) Pty Ltd and Nevett Ford, on an indemnity basis from and including 2 March 1995 except any costs of an unreasonable amount or which were unreasonably incurred so as to, subject to the above exceptions, completely indemnify Metzke & Allan for its costs. (3) By Richard Ellis (Victoria) Pty Ltd and Nevett Ford, on a solicitor/client basis from and including 2 March 1995. 4. Order that the Cross-Claimants may recover contribution from each other in respect of their respective liabilities for the party/party costs of Metzke & Allan to and including 1 March 1995 and in respect of an amount equal to the solicitor/client costs of Metzke & Allan from and including 2 March 1995, and any interest thereon, in six equal proportions, as follows: (1) Bird Cameron Cross-Claimants and each of them. (2) Huntley McArdle & Glass Pty Ltd and Robert Hugh Glass and each of them. (3) Amadio Pty Ltd and Hudson Conway and each of them. (4) Richard Ellis (Victoria) Pty Ltd (5) Nevett Ford (6) Gray & Winter Cross-Claimants and each of them. 5. In respect of the difference (if any) between the amount of solicitor/client costs taxed under paragraph 3(3) above and the amount of indemnity costs taxed under paragraph 3(2) above, order that the Cross-Claimants except Richard Ellis (Victoria) Pty Ltd and Nevett Ford may recover contribution from each other in respect of their respective liabilities for those extra costs, and any interest thereon, in four equal proportions, as follows: (1) Bird Cameron Cross-Claimants and each of them. (2) Huntley McArdle & Glass Pty Ltd and Robert Hugh Glass and each of them. (3) Amadio Pty Ltd and Hudson Conway and each of them. (4) Gray & Winter Cross-Claimants and each of them.

SCHEDULE P ORDERS AS BETWEEN THE BIRD CAMERON PARTIES AND SGIO INSURANCE LIMITED A. DECLARE THAT: 1. In relation to the claims of Russell Fraser Henderson, Noelene Marie Henderson, Leo Francis Haarsma, Janette Anne Haarsma, Matthew Peter Haarsma, Dick Jacobus Schoeman, Judith Schoeman, John Paul Gerrard Arthurson, Suzanne Lovitt Arthurson, Ackina Pty Ltd, Ivan Douglas Phelps, Gavan Phelps, Clifford Phelps, Thomas Tranter, Pauline Tranter, Marican Pty Ltd, Ronald Frederick Trengove and Leonie Trengove ("the Bird Cameron Applicants") and Phillip John Walker, Judith Ann Walker and Metzke & Allan, the amount of the excess under the policy of insurance dated 4 December, 1992 is $640,000.00 "costs inclusive". 2. Of the liability of BPM Pty Ltd trading as Bird Cameron ("Bird Cameron") and Bird Cameron-Ballarat to the Bird Cameron Applicants for damages, the sum of $67,275 representing commissions received is not payable by SGIO Insurance Ltd. 3. The sum insured under the policy of insurance is $10 million.

B. ORDER THAT SGIO Insurance Ltd - 1. (a) Subject to Bird Cameron and Bird Cameron-Ballarat bearing $67,275 in respect of their liability for damages to the Bird Cameron Applicants, (other than Marican Pty Ltd, Ronald Frederick Trengove and Leonie Trengove), and Phillip John Walker and Judith Ann Walker: (i) indemnify each of Bird Cameron, Bird Cameron Partners, Bird Cameron-Ballarat, Bird Cameron-Geelong, Peter Allan Landers and William Ernest Balcam in respect of any liability, pursuant to any order or judgment made against it, him or they in these proceedings, to the Bird Cameron Applicants, or any of them, to Phillip John Walker and Judith Ann Walker and to Metzke & Allan, whether for damages, costs or interest; (ii) pay the amount of any such order or judgment and the interest accrued and accruing thereon to the Bird Cameron Applicants, to Phillip John Walker and Judith Ann Walker and to Metzke & Allan as the case may be; (b) pay, on an indemnity basis, so much of the costs as exceed $640,000 ofBird Cameron, Bird Cameron-Ballarat, Bird Cameron-Geelong and Peter Allan Landers incurred in defending the Bird Cameron Applicants' claims, the claim of Phillip John Walker and Judith Ann Walker and any cross-claim made in this proceeding by or against it, him or them other than the cross-claim against SGIO Insurance Ltd. PROVIDED THAT any liability of SGIO Insurance Ltd pursuant to this Order shall not exceed the sum insured of $10 million plus costs, charges and expenses as provided for in the policy of insurance. 2. Pay the taxed costs of each of Bird Cameron, Bird Cameron Partners, Bird Cameron-Ballarat, Bird Cameron-Geelong, Peter Allan Landers and William Ernest Balcam of their cross-claim against SGIO Insurance Ltd.

SCHEDULE Q THE REGISTERED PROPRIETORS MICHAEL DAVID TERREY RUSSELL FRASER HENDERSON HENRY ARNOLD GORDON BACTBUILD PTY LTD LONIHIRE PTY LTD JAMES WILLIAM GRAY MAX JOSEPH GREEN BARBARA JANE LEE GARKAT PTY LTD LEO FRANCIS HAARSMA DICK JACOBUS SCHOEMAN JUDITH SCHOEMAN JOHN PAUL GERRARD ARTHURSON ACKINA PTY LTD PAUL ROBERT CONNELL THOMAS EDWARD TRANTER ERNEST CLYDE RUTT MARICAN PTY LTD MICHAEL FREDERICK WINTER I certify that this and the preceding two hundred and twenty four (224) pages are a true copy of the Reasons for Judgment herein of the Court

Counsel for Amadio & Hudson Conway Pty Ltd: Mr K Hargraves QC and Mr K Lyons

Solicitors for Amadio & Hudson Conway Pty Ltd: Corrs Chambers Westgarth

Counsel for the Respondents: Mr E N Magee QC with Mr R Smith and Mr I H Percy

Solicitor for the Respondents: Anthony Kelly & Associates

Counsel for Michael Terrey: Ms J E Richards

Solicitors for Michael Terrey: Wilmoth Field & Warne

Counsel for Gray & Winter and James Gray: Mr A N Bristow

Solicitors for Gray & Winter and James Gray: Garrick Gray & Co

Counsel for Nevett Ford: Mr P O'Callaghan QC and Mr P G Cawthorn

Solicitors for Nevett Ford: Middletons Moore & Bevins

Counsel for Bird Cameron: Mrs Sue Crennan QC and Mr D M Clarke

Solicitors for Bird Cameron: Barker Gosling

Counsel for Metzke & Allan: Mr M Shatin QC and Mr M A Robins

Solicitors for Metzke & Allan: Maddock Lonie & Chisholm

Counsel for Richard Ellis Pty Ltd (now called Dunyack Pty Ltd):

Solicitors for Richard Ellis (Pty Ltd (now called Dunyack Pty Ltd):

Counsel for SGIO Insurance Ltd: Mr J Middleton QC and Mr C M Caleo

Solicitors for SGIO Insurance Ltd: Phillips Fox

Mr R Glass: Represented himself

Dates of Hearing: 3, 4, 5, 6, 7, 11, 12, 13, 14, 17, 18, 19 and 20 March 1997

Date of Judgment: 14 July 1998