Angas Securities Limited v Valcorp Australia Pty Ltd

Witnesses 17 The applicants called Mr Hower, Mr Morton and Ms Gaetjens. 18 Mr Hower has been a director of Angas and its chief executive officer since it was incorporated in March 2000. In 2004 he was appointed as managing director of Angas, although his duties did not change. He is a member of Angas' credit committee and audit risk management committee. Mr Hower has been a director of Barker since it was incorporated in September 2003 and he is a member of that company's credit committee. Barker was established by the directors of Angas to fill a gap for customers of Angas. KWS was incorporated in May 2005 and Mr Hower has been the sole director and secretary of the company since that date. 19 Mr Hower was subjected to a long and searching cross-examination. At times he was very cautious and on other occasions he did not have the ready knowledge of financial matters which his evidence-in-chief suggested that he would have. Nevertheless, I had ample opportunity to observe him in the witness box and at no time did I think he was trying to mislead the Court. As it transpired there was only one area of direct conflict between his evidence and Mr Taormina's evidence and that concerned an event which is not decisive of the issues in this case. 20 Mr Morton retired from Angas in July 2008. Prior to that, and from Angas' incorporation, he was a director of the company and chairman of its credit committee. He was also a director and member of the credit committee of Barker. He was plainly an honest witness and I accept his evidence. 21 My conclusions as to Ms Gaetjens' veracity and reliability are set out in the section of these reasons dealing with the valuation. 22 The respondent called one witness and that was Mr Taormina. My conclusions as to his veracity and reliability are also set out in the section dealing with the valuation.

Issues 23 A number of issues arise. It is convenient to address the matter by first considering the position of Angas and then Barker and KWS may be considered together. 24 Angas claims that the respondent contravened s 52 of the Trade Practices Act 1974 (Cth) ('Trade Practices Act') and s 56 (now deleted) of the Fair Trading Act 1987 (Cth) ('Fair Trading Act'), breached the terms of the retainer between it and the respondent and breached a duty of care it owed to Angas. In relation to each of these causes of action it is necessary to examine the respondent's valuation report and, speaking generally for the moment, determine if it fell below the standard to be expected of a reasonably competent valuer. As far as the claims in contract and tort are concerned, there is also an issue as to the effect, if any, of certain qualifications or disclaimers in the valuation report. 25 The next issue is the extent of Angas' reliance on the valuation report, having regard to the fact that the report was provided after what the respondent contends was an offer by Angas to provide a loan to the Opies. The respondent contends that all that happened as a result of the respondent's valuation report was that the offer was increased by $228,000. 26 The next issue is whether any loss or damage suffered by Angas should be reduced by reason of contributory negligence on the part of Angas or because there was a concurrent wrongdoer. The alleged concurrent wrongdoers are the Opies. One of the allegations of contributory negligence is put by the respondent in the alternative as a failure to mitigate. 27 There are a number of issues in relation to Angas' claim for loss or damage. The first issue is whether the respondent should be held liable for that part of the loss or damage attributable to a fall in the market. The second issue is whether Angas is entitled to recover loss of opportunity damages, being the interest and other fees it claims it would have made had it been able to lend the moneys to other borrowers. The third issue is whether Angas can recover interest under s 51A of the Federal Court of Australia Act 1976 (Cth) ('Federal Court of Australia Act') from 6 April 2010 on that part of its claim that was in fact met by a payment from its insurer on that day. 28 A number of these issues also arise in the case of Barker and KWS. However, there is not a complete overlapping of issues. Barker and KWS make no claim in contract against the respondent. There is an issue as to whether the respondent owed a duty of care to Barker and KWS in relation to the valuation report. They were not parties to the contract of retainer, and as will be seen, the valuation report was clearly directed to Angas and for its benefit. They claim that a duty of care arose by reason of the events which took place on 27 November 2007. The respondent denies that, saying that by then it was too late for a duty of care to arise because Barker and KWS could not show any reliance on the valuation report. The question of interest with respect to moneys for which there has been an insurance payment does not arise in the case of Barker and KWS as they did not receive any insurance moneys.

The Facts 29 I will deal with the facts in chronological order, except for the facts relevant to contributory negligence which I will deal with separately. 30 In July 2007 the Opies had loans with La Trobe Investment Services Australia Pty Ltd, La Trobe Capital and Mortgage Ltd, and some private lenders. I will refer to the La Trobe companies as La Trobe. The loans were secured by mortgages over the property. The total amount owing was in the order of $2.55 million. I note that on settlement of the loans in December 2007 the amount paid out was in the order of $2.659 million. 31 The Opies were looking to refinance their loan facilities with La Trobe. 32 On 9 July 2007, the Opies, through Mr Fimeri, made an application to Angas for loan finance. The Opies wished to borrow $2.76 million in order to discharge existing liabilities in relation to the property of $2.55 million. The application stated that Mr Opie was under pressure from La Trobe as their loan had expired. The purpose of the loan was said to be to 'refinance home' and the security offered was a registered first mortgage over the property. The application included a valuation report from Savills (SA) Pty Ltd ('Savills') of the property. The date of that valuation was 18 May 2007 and the valuation was $3.25 million. The valuation was prepared on instructions from Mr Opie and was carried out by a Mr Tim Trnovsky. The Savills valuation was admitted in evidence but the author of the valuation was not called as a witness. The loan sought by the Opies was approximately 85 per cent of the valuation of the property by Savills. 33 On 7 August 2007 Mr Morton examined the application by the Opies. He was prepared to recommend a loan by Angas and Barker of an amount not exceeding 75 per cent of a check valuation to be conducted by the respondent. He suggested that the respondent be advised that Angas and Barker were going to lend 75 per cent on the property. He suggested that the loans be approved subject to signed and dated joint statements of position which would include 'all worth including any equities in companies', the assignment of the Savills valuation and the establishment of servicing capacity. Mr Morton made a note to the effect that in the application Mr Opies' income was stated to be $250,000 and that this should be established by documentary proof. He made the observation that amount alone would not be sufficient to service the debt. 34 On 8 August 2007, the credit committee of Angas and Barker approved a loan up to 75 per cent of the value of the property and based on a check valuation by the respondent. On 9 August 2007, each of Angas and Barker sent a letter to the Opies and on 17 August 2007 KWS also sent a letter to them. The letters are based on a standard form letter apparently used by each of the three companies. 35 The letter from Angas makes an 'offer' to lend the Opies the sum of $2.112 million for a term of 12 months. The letter states that the loan is to be secured by a first registered mortgage over the property and that it is subject to the obtaining of an independent valuation with the loan to value ratio not to exceed 65 per cent of the sworn valuation of all primary security properties. The offer was subject to a number of general and special conditions. For present purposes the following special conditions are important: 5.4 Savills' valuation report dated 18/5/2007 to be satisfactory and assigned to Angas Securities for mortgage purposes. 5.5 Our panel valuer Valcorp to conduct a check valuation and cost to be for your account. Maximum Loan to Value Ratio is not to exceed 65% of this valuation. 5.8 You are to provide loan statements or written advice from current mortgagee/private lenders (caveatees) to confirm debt level and satisfactory conduct of account. All existing encumbrances are to be discharged at settlement. 5.9 You are to provide signed and dated joint Statement of Position to include all assets as well as any equity in companies. Application from broker states that Kent Opie is CEO of a company known as HR3D Pty Ltd and he is one of numerous shareholders through his company CMAH Pty Ltd, however, ASIC search reveals that this company was deregistered 13/5/2007. Please provide details to clarify. 5.10 Servicing capacity is to be established. In this regard, borrowers are to provide copies of most recent tax returns and company financials (if any) to demonstrate serviceability. Kent Opie's income is stated at $250,000 pa which alone would not be sufficient to service Angas Securities and Barker Mortgages loans. Letter from your accountant is to be provided to confirm that both the Angas and Barker loans are serviceable within your cash flow. 36 The letter of offer states that it lapses at 5.00 pm on 16 August 2007. It also states the following: Please note this letter is not an agreement or contract to provide the funds and enter into this transaction. No such agreement or contract between us and the borrower is created until formal security documents have been executed by both parties and no obligation to advance the funds is created until all the terms and conditions have been satisfied, searches and inquiries completed and all of the lender's requirements have been met. 37 The letter from Barker 'offers' a loan of $325,000 for a term of six months. The letter states that the loan is to be secured by a second registered mortgage over the property. Again, the offer is said to be subject to the obtaining of an independent valuation with Angas' and Barker's loans combined not to exceed 75 per cent of the sworn valuation of all primary security properties. There are special conditions which are in similar terms to the special conditions attached to the offer from Angas with the addition of the following: 5.4 Any advance under this offer is conditional on and subject to the acceptance and drawdown of the first mortgage loan offer from Angas Securities Limited. 38 Again, the offer is expressed to lapse at 5.00 pm on 16 August 2007. 39 The letter from KWS 'offers' a loan of $130,000 for a term of six months. The letter states that the loan is to be secured by a third registered mortgage behind the first registered mortgage to Angas and the second registered mortgage to Barker. Again, the offer is said to be subject to an independent valuation being obtained, and, in this case, Angas', Barker's and KWS' loans combined are not to exceed 79 per cent of the sworn valuation of all primary security properties. The special conditions are in similar terms to those in the case of Angas and Barker with the addition of the following: 5.4 Any advance under this offer is conditional on and subject to the acceptance and drawdown of the first mortgage loan offer from Angas Securities Limited and second mortgage loan offer from Barker Mortgages Pty Ltd. 40 The offer provides that it is to lapse at 5.00 pm on 23 August 2007. 41 The total amount 'offered' by the applicants was $2.567 million. The Opies were seeking $2.76 million and said that they had liabilities to their existing lenders of $2.55 million. 42 On 24 August 2007, Mr Fimeri, on behalf of the Opies, wrote to Angas indicating that the Opies were seeking to borrow more funds than they had been offered by the applicants. The letters of 'offer' were not accepted by the Opies and they lapsed. 43 At some point, the respondent's proposed role changed from providing a check valuation to providing a full valuation report. 44 On 26 September 2007, Ms Esther Yong, assistant lending manager of Angas, sent the following email to Mr Taormina: Savills' valuation report dated 18/5/07 is attached. In terms of our discussions please proceed to inspect the property and value on behalf of Angas Securities Ltd the above property on the basis of Fair Market Value for First Mortgage Purposes. You have advised your cost of $800 - which includes GST and it is our understanding that Kent Opie will hand you a cheque for this amount when you attend to the inspection of the property this afternoon. 45 Mr Taormina inspected the property on 26 September 2007. He then prepared his valuation report in which he expressed the opinion that the fair market value of the property for mortgage security purposes as at the date of inspection was $3.6 million. He also expressed the opinion that: On a forced sale basis the property would be 'readily saleable' within a normal marketing period of say eight weeks and could be expected to warrant only a marginally reduced value of say $3.2 million. 46 Mr Taormina also expressed the following opinion: We advise the specific and market related risks associated with the mortgage lending on the property on a rating of 1-5 ranging from a low risk (1) to a high (5) risk rating has been determined at 2.0 within a normal marketing period for a property of this nature of say 10-12 weeks. 47 In section 9 the valuation report contains a number of statements under the heading 'Qualifications'. The relevant statements for the purposes of this case are as follows: This report is for the use of and may be relied upon only by party to whom it is addressed. No other party is entitled to use or rely on the whole or any part of the contents of this report and Valcorp shall have no liability to any party who does so. This valuation is prepared on the assumption that the Lender who relies on this valuation report (and no other) has complied with its own prudential lending guidelines, as well as prudent finance industry lending practices. Further, this valuation is only valid if the lender providing the finance uses a prudent loan-to-valuation ratio (LVR). The valuer accepts no liability whatsoever if prudent lending practices fail to be strictly observed and/or if the lender relies solely on this valuation, and no other criteria, to advance funds. 48 It seems that the respondent provided its certificate of valuation to Angas on or about 5 October 2007. 49 The respondent's valuation report stated that it had been prepared under instructions from Angas and could be relied upon for mortgage security purposes. 50 In October 2007 further letters of 'offer' were sent to the Opies by Angas, Barker and KWS. Angas and Barker sent their respective letters of offer on 16 October 2007 and KWS sent its letter of offer on or about 19 October 2007. 51 Angas offered to provide a loan of $2.34 million which was 65 per cent of the valuation; Barker offered a loan of $360,000 which was 10 per cent of the valuation, and KWS offered a loan of $180,000 which was 5 per cent of the valuation. The total amount to be lent by the applicants was 80 per cent of the valuation. 52 Angas' letter dated 16 October 2007 was in a number of respects similar to its August letter. It contained a number of special conditions of which the following are important: 5.5 You are to provide loan statements or written advice from current mortgagee/private lenders (caveatees) to confirm debt level and satisfactory conduct of account. All existing encumbrances are to be discharged at settlement. 5.6 You are to provide signed and dated joint Statement of Position to include all assets as well as any equity in companies. Application from broker states that Kent Opie is CEO of a company known as HR3D Pty Ltd and he is one of numerous shareholders through his company CMAH Pty Ltd, however ASIC search reveals that this company was deregistered 13/5/2007. Please provide details to clarify. 5.7 Servicing capacity is to be established. In this regard, borrowers are to provide copies of most recent tax returns and company financials (if any) to demonstrate serviceability. Kent Opie's income is stated at $250,000 pa which alone would not be sufficient to service Angas Securities and Barker Mortgages loans. Letter from your accountant is to be provided to confirm that both the Angas and Barker loans are serviceable within your cash flow. 53 The respective letters from Barker and KWS are in similar terms save that the Barker offer is subject to the Angas offer proceeding and the KWS offer is subject to both the Angas and Barker offers proceeding. 54 As with the August letters, the October letters state that they lapse on a certain date. They also provide that once accepted by the borrower the acceptance cannot be withdrawn or revoked without the lender's consent. To this point one may view the offers as conditional offers with conditions which may become conditions subsequent. However, as with the August letters the letters conclude with a statement that there is no agreement or contract until formal security documents have been executed and all terms and conditions satisfied. I need not determine the exact legal status of the 'offers'. For present purposes it is sufficient to say that the lender could withdraw if the special conditions were not satisfied. 55 On 6 November 2007, the Opies signed each of the letters of offer indicating that as borrowers and guarantors they accepted the offers. On 21 November 2007, the Opies signed a separate loan agreement with each of the applicants. In each loan agreement there was a provision dealing with events of default which was in the following terms: 12. Events of default Each of the following constitutes an event of default for the purposes of this Loan Agreement:- 12.10 If in the reasonable opinion of the Lender there is any change in the financial condition of the Borrower or the Guarantor which may materially adversely affect the availability of the Borrower or the Guarantor to meet their respective obligations to the lender. 56 In addition, there was a clause in the following terms: 16. Entire agreement … 16.3 Any special or other conditions set out in the Letter of Offer shall be incorporated into this Loan Agreement. Should any inconsistency occur then the Letter of Offer shall prevail. 57 Mr Paul McCarthy is a member of the credit committee of Angas. In late November 2007, he received information that he considered would lead the credit committee to question the respondent's valuation of the property of $3.6 million. As a result, the credit committee asked Mr Taormina to attend a meeting at the offices of Angas. The meeting was held on 27 November 2007. Present from Angas were Mr Morton, Mr McCarthy and Mr Hower. Mr Hower's note of the meeting is as follows: Fred's view is unchanged from the report that he did for the three incoming mortgagees and believes that if the market was tested that the price would achieve greater than $3.3 million and if market over a normal period $3.6 million and possibility higher. We believe the credit committee has given the valuer every opportunity to find an error or potentially fault his valuation and the valuer, Fred, who has been a valuer of Angas Securities since inception and is known to the writer for in excess of 15 years, stands by his valuation. Fred Taormina as a sign of good faith has assigned his valuation to all three mortgagees being: Angas Securities Limited Barker Mortgages Pty Limited KWS Capital Pty Limited 58 Mr Morton, whose evidence I accept, said that at the meeting on 27 November 2007 he told Mr Taormina that he thought the valuation high and that - We have been asked to lend money to the maximum amount and we do not want to unless the valuation can be sustainable. 59 The same day Messrs Morton, McCarthy and Hower signed a diary note to the following effect: Further to Diary Note by Matthew Hower, dated same, we will proceed to settlement on the following basis: ­ Fred Taormina of Valcorp will provide a letter to Angas Securities extending liability to cover Angas Securities Limited, Barker Mortgages Pty Ltd and KWS Capital Pty Ltd loans in respect of his valuation report dated 26/9/2007 of the property at Apartment 33, 7 Patawalonga Frontage, Glenelg North. ­ Angas loan to be Lloyds insured. 60 Mr Taormina signed a letter dated 27 November 2007 to Mr Hower of Angas which was in the following terms: Further to your request of 27 November 2007, we advise our valuation report dated 26 September 2007, of the abovementioned property, may be relied upon by Angas Securities Limited, Barker Mortgages Pty Limited and KWS Capital Pty Limited for mortgage security purposes. We recommend this letter be read in conjunction with our full report which has been previously supplied. If you have any queries about this matter please do not hesitate to contact the undersigned. 61 There was a factual dispute about whether the assignment of the valuation was mentioned at the meeting or in a conversation after the meeting. Mr Hower said the former and Mr Taormina said the latter. Mr Morton was unable to assist in the resolution of the issue. I do not find it necessary to choose between the two versions because their evidence on this topic did not reflect adversely on either of them and the critical point is that the respondent stated at this time that its valuation report could be relied on by each of the applicants. 62 On 27 November 2007 Ms Opie signed a memorandum of mortgage in favour of each of the applicants. The loans were drawn down the following day. 63 The loan from Angas to the Opies was for a period of 12 months with a low rate of interest (that is, non default interest) of $19,500 monthly in advance. The loan included prepayment of interest of $33,426.64. That covered a period until some time in the second half of January 2008. 64 The loan from Barker to the Opies was for a period of six months with interest to be paid in advance for the term of the loan. That interest was paid. 65 The loan from KWS to the Opies was for a period of six months with interest to be paid in advance for the term of the loan. That interest was paid. 66 The interest due to Angas under its loan was pre-paid to a time in January 2008. The first payment of interest due in January 2008 was paid by the Opies, albeit late. There was default associated with the second payment of interest in February 2008 and a Notice of Demand was issued by Angas on Ms Opie on 15 February 2008. A Notice of Default and Intention to Sell in accordance with s 55A of the Law of Property Act was served on Ms Opie by Angas on 25 February 2008. Angas issued proceedings in the Supreme Court and by 20 May 2008 there was a Warrant of Sale in the hands of the Sheriff of South Australia. Angas did not take possession of the property. It had been advised by Mr Opie that he was trying to sell the property and that land agents, Toop and Toop, had been engaged for that purpose. Angas decided to see if that process would result in the sale of the property. In early September, Angas received a bank cheque for $40,000 from the Opies and agreed to give them further time to 9 December 2008 'to sell or refinance'. Angas took possession of the property on 11 December 2008. In December 2008, Taplin Glenelg prepared an appraisal report for the property in which they recommended a sale by public auction as the best method of sale. On 4 July 2009 Angas signed a contract to sell the property for a price of $1.75 million with a deposit of only $25,000 and a settlement date of 4 November 2009. The sale of the property in fact settled on 10 December 2009. 67 Angas received the amount of $1,686,971.47 on the settlement of the contract. Barker and KWS did not receive any proceeds from the settlement of the contract. Each of Angas, Barker and KWS claims a loss of principal and consequential loss. The consequential loss consists of the loss of the opportunity to earn interest and other fees on the funds. 68 Angas had insurance against the possibility of default on the loan. On 6 April 2010, the insurer made a payment to Angas of $597,627. Initially, the respondent contended that that amount should be deducted from any damages awarded to Angas. It does not press that contention. For its part, Angas accepts that it could not recover loss of opportunity damage with respect to those moneys. However, it contends that it can recover interest on those moneys under s 51A of the Federal Court of Australia Act. 69 I turn now to the facts relevant to the plea of contributory negligence. 70 Angas has an Operations Manual dealing with lending and loans management. The Operations Manual current at the time of the loan to the Opies was admitted in evidence. It is an internal document and it sets out certain mortgage parameters including a maximum loan to valuation ratio of 70 per cent in the case of residential land and the need for a current valuation from a licensed valuer. It states that a loan is not to be for a period in excess of one year without express board approval. It states that once a formal valuation is obtained by Angas from its panel valuer, the final loan amount may if necessary be reduced to keep within the maximum loan to valuation ratio set by the credit committee. Clause 2.4 sets out what are called loan approval criteria and it is in the following terms: The basic criteria for a loan to be approved are:- 2.4.1 First mortgage security; 2.4.2 External cash-flow to generate better than 1.25 x Interest cover is preferred but not essential. (Pre-paid interest is sometimes drawn-down as part of the loan proceeds); 2.4.3 A signed valuation from our panel valuer and relative to our brief; 2.4.4 Signed or audited financials; 2.4.5 Personal (signed) Statements of Position of borrower(s) /guarantor(s); 2.4.6 Guarantees from Directors and from any Associated Companies as required by the Credit Committee; 2.4.7 Provision of 'Family Tree' if applicable; 2.4.8 Satisfactory credit reference; 2.4.9 Minimum up front application fee payable on acceptance of loan approval; 2.4.10 Transaction must fall with the scheduled Loan to Valuation Ratio (LVR); 2.4.11 Maximum term 12 months in most instances (with discretion to lend up to 3 years); 2.4.12 Insurance Certificate of Currency in name of owner. Angas Securities Limited must be noted as Mortgagee. The period of cover must be for a term acceptable to the Credit Committee. 2.4.13 Cost of site visit by Angas Securities director to inspect prime security to be met by borrower; 2.4.14 Cost of any legal documentation to be met by borrower; 2.4.15 Cost of valuation to be met by borrower; 2.4.16 Photographs of subject property to be held on file (preferred but not essential); 2.4.17 Approval, including rate, to hold for period set by Credit Committee (usually 7 days). 71 The Operations Manual also makes provision for the information that is to be collated for the purpose of submission to the credit committee: 3.1.13 General information concerning the Applicant. Supporting documentation attached to the application can vary depending on the security type being offered and the purposes of the funds. However, the proposal should include: • signed/dated Assets and Liability Statements from all individuals (whether borrowers or guarantors); • Family Tree for all companies involved; • Financial Statements (including Profit and Loss Account) for all companies involved; • confirmation of any relevant historical issues; • evidence of satisfactory conduct from current lender (if re-finance is proposed). 72 Clause 3.1.17 deals with servicing and repayment of the loan, and it provides: As a lender for short duration terms Angas Securities is primarily concerned with security rather than loan serviceability. Whilst LVR is crucial to any loan application, all details as to servicing the loan should be included in the Proposal. If the assets are not income producing and there is no external source of regular cash-flow then Angas Securities will usually require substantial or total prepayment of interest at draw down. The proposal must specify how the applicant proposes to repay the loan at the conclusion of the term, for example, sale of the property, re-finance and so on. 73 Finally, the Operations Manual contains a clause dealing with what are called credit assessment criteria. It is in the following terms: 3.6 Credit Assessment Criteria The decision on whether to provided credit will take account of a range of factors including: • loan purpose • employment stability • applicant's income and expenditure • credit history • applicant's accumulation of wealth These factors are a discretionary element of the loan approval process. They are over and above the LVR and security considerations which are mandatory issues. 74 Mr Hower said that Angas' primary concern was the asset, and their secondary concern was serviceability of the loan and the borrower's ability to repay the principal. He accepted that Angas seeks to satisfy itself of the wherewithal of the borrower. 75 Mr Opie's plan as advised to Angas was to rollover Barker and KWS to the end of the Angas loan and then 'roll over any balance into an API (or similar) long term mortgage loan'. 76 In their application to Angas for loan funds, the Opies stated as follows: Kent is also CEO of a company known as HR3D which is a technology company that has developed a software package that has been launched over the past year and has recently been awarded contracts in UK and France as well as very strong interest from USA. His income from this source is $250,000 per annum. Potential income from the sale of technology is expected to be in the many millions of dollars. 77 In accordance with the special conditions set out in the October letters, Mr Fimeri wrote to Angas on behalf of the Opies enclosing various documents. In the first document, Mr Opie states that CMAH Pty Ltd is to be reinstated. In the second document, Mr Opie outlines the history of his loans with La Trobe. In cross-examination Mr Hower agreed with the suggestion that Mr Opie's letter dealing with his payment history with La Trobe was not so much evidence of a satisfactory payment history as an explanation of why there had not been a satisfactory payment history. The documentation included an unsigned statement of the liabilities and assets of the Opies as at October 2007. The liabilities total $2.745 million and the assets include the property valued at $3.6 million and a $3 million asset referred to as 'HR3D'. There is also an email from a chartered accountant which contains the following advice: The consulting income received by the KCO Investment Trust for the year ended 30 June 2007 per the business activities statements lodged was $387,200 GST inclusive. Kents [sic] taxable income per his 2006 income tax return was $nil. Finally, there was a document from HR3D in which a person described as Executive Director Operations (Mr E Haver), states: I wish to confirm that Kent Opie is employed on a full-time basis by HR3D Pty Ltd for a remuneration of $275,000 per annum. Mr Opie has been in the employ of HR3D for a period of 2 years. Please do not hesitate to contact me if you have any further questions regarding the above. 78 It seems that a little later the Opies provided a second personal assets and liabilities statement. The document purports to show their assets and liabilities as at 12 November 2007. Their liabilities are shown as $2.73 million and their assets are shown as $18.07 million. The principal change is in the value of HR3D. The 'Shares HR3D' are said to be worth $14 million. 79 The above then are the facts, except for the facts relating to the applicants' loss of opportunity claim. It is more convenient to set those facts out when discussing that claim. 80 I turn now to address the issues in dispute in the proceeding. I do so primarily in the context of the applicants' claims under the Trade Practices Act and Fair Trading Act. However, my conclusions also apply to Angas' claims in contract and tort and Barker and KWS' claim in tort. There is an additional issue in the case of those claims and that is the effect of the qualifications or disclaimers in the valuation report.

The Valuation Report 81 The valuation report contained advice and opinions expressed by Mr Taormina on behalf of the respondent. The statements in the valuation report conveyed various representations to the reader about that advice and those opinions and the work which had been done in order to formulate them. The applicants' pleas about the representations conveyed by the valuation were not seriously disputed by the respondent. I find that the valuation report conveyed the following representations to the reader: 1. that the advice and opinions it contained were based on reasonable grounds; 2. that the advice and opinions were the product of due care and skill; 3. that the advice and opinions were not outside of the range of latitude properly to be allowed to a valuer; 4. that the advice and opinions were based on the methodology which would be applied by a proper qualified valuer exercising all reasonable skill, diligence and competence, and care pursuant to its retainer; and 5. that the valuation was suitable for mortgage securities purposes. 82 The applicants rely on a number of matters in support of their case that these representations were misleading or deceptive. Twelve matters were alleged by the applicants in paragraph 31 of their Further Amended Statement of Claim: 31. The Valuation and the Further Advice were prepared negligently, and conveyed to Angas, Barker and KWS in breach of a duty of care and in breach of the Retainer in that: 31.1 the valuation opinion contained in the Valuation and the Further Advice incorrectly overstated the fair market value of the Property for mortgage security purposes as at the Valuation Date to be $3,600,000.00 when in fact it was not more than $2,500,000.00; 31.2 the valuation opinion in the Valuation and the Further Advice incorrectly overstated the forced sale value of the property as at the Valuation Date at $3,200,000.00, when in fact the forced sale value was significantly less than its fair market value of $2,500,000.00; 31.3 the advice that the specific and market related risks associated with mortgage lending on the Property represented a low risk was given without appropriate basis, when in fact the Angas Loan, the Barker Loan and the KWS Loan which were secured by the Property were of high risk; 31.4 Valcorp took into account sales which were not relevant or comparable in preparing the Valuation, in that sales of apartments in the city and North Adelaide areas were not comparable sales. 31.5 Valcorp failed to [properly] take into account the sales evidence from properties in the Glenelg locality. 31.6 Valcorp applied a rate per square metre basis from comparable sales which was inconsistent with sales in the Glenelg locality. 31.7 Valcorp used a methodology of comparing properties on a rate per square metre basis without regard to comparison of such sales in toto; 31.8 Valcorp failed to take into account that there was an oversupply of apartments for sale in the Glenelg locality at that time; 31.9 Valcorp failed to take into account that demand for apartments within the Glenelg locality was weak, and that apartments were being sold for prices representing a discount of 10% to 20% from the initial sale price; 31.10 Valcorp failed to recognise that the comparable sales relied upon for the purpose of the Valuation related to properties that were listed for sale over an elongated marketing campaign in the order of 12 months; 31.11 Valcorp negligently concluded that the Property was comparable to the larger penthouse apartment within the "Air" complex at Eastwood, when it was not comparable; 31.12 Valcorp negligently concluded that the Property should be valued at a rate around the uppermost level rate per square metre derived from apartment sales whether coastal or city. 83 The 'Further Advice' referred to in the above pleading is the advice given by Mr Taormina on 27 November 2007 (see [60] above). The allegations set out above are also pleaded as the particulars of the acts of negligence or lack of reasonable care comprising the breaches of the terms of the retainer between Angas and the respondent and of the duty of care. 84 The applicants' pleas as to the alleged contraventions of the Trade Practices Act and the Fair Trading Act are similar to the applicant's pleas in MGICA (1992) Ltd (formerly MGICA Ltd) v Kenny & Good Pty Ltd (1996) 140 ALR 313 ('Kenny and Good') at 355-357. Ultimately, the trial judge in that case found that the valuer had contravened s 52 of the Trade Practices Act and the equivalent section of the Fair Trading Act in New South Wales. The case went on appeal but not on this point (Full Court: Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 77 FCR 307; High Court: Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413. 85 Two general matters may be mentioned at the outset. First, the applicants submit that I should conclude that the valuation was negligently prepared because of the gross disparity between the stated value of $3.6 million and what they contend to be the true value of the property at that time, namely, $2.4 million. No doubt that approach may be adopted once the true value of the property is ascertained. In that regard, I refer to the remarks of Lindgren J in Kenny and Good at 335-337. That approach is open to me here, but I do not need to adopt it because I have been able to conclude on various grounds that the valuation was prepared without reasonable care. Secondly, there was a brief reference by counsel for the applicants to the fact that the respondent had not called independent valuation evidence and that this should engage the process of reasoning referred to in Jones v Dunkel (1959) 101 CLR 298 ('Jones v Dunkel'). The applicants submit that I should infer that the respondent has been unable to obtain any independent valuation that would support its valuation. There is no evidence either way as to whether the respondent has approached any independent experts. It is not necessary for me to pursue this issue because I have been able to reach a clear conclusion without relying on the process of reasoning referred to in Jones v Dunkel. 86 I start by identifying the key aspects of the respondents' valuation report. 87 Mr Taormina states in the valuation report that it has been prepared under instructions from Angas and could be relied upon by Angas for mortgage security purposes. Mr Taormina then sets out a definition of 'market value'. There is no dispute about the appropriateness of the definition. Mr Taormina then sets out details of the property, the statutory land use controls with respect to it, its location, site entitlements and improvements. 88 The important part of Mr Taormina's valuation report appears in Section 8 under the heading 'Valuation considerations'. Mr Taormina expresses the opinion that there is 'increased momentum' for high-density residential accommodation within multi-storey complexes. This 'trend' had been most concentrated and even more magnified in beachside/coastal areas, where water views can be provided, and in the city centre. 89 Mr Taormina refers to the conversion of buildings to residential complexes and gives as examples the Queen Victoria Hospital complex, the Hotel Adelaide at North Adelaide and the ETSA Tower on Greenhill Road, Eastwood. He refers to the advantages in terms of views of upper level penthouse apartments. He refers to the uniqueness of the property and the fact that it has a high level of finishes, fixtures and services. He states that he considers that the most 'comparable evidence' were the apartments in Glenelg Holdfast Shores (although these were inferior) and apartments in 'other landmark buildings of this nature throughout Adelaide'. 90 Mr Taormina states that he has also had regard to: 1. off-the-plan contract sales of the redevelopment of the Hotel Adelaide. The redevelopment was known as 'Place on Brougham'; and 2. sales of smaller complexes and one-off Esplanade homes in Glenelg South and Brighton where views of the foreshore are provided. 91 Mr Taormina sets out a schedule of 'comparable sales'. There are 23 sales in the schedule and they are of apartments in complexes in Eastwood (Air Apartments), Colley Terrace, Glenelg, Glenelg North, Holdfast Promenade, Glenelg and the Adelaide city area. The earliest sale date is November 2006 and the latest date is September 2007. 92 The sale prices range from $3.9 million to $1.01 million; the area in square metres ranges from 382 square metres to 174 square metres; and the dollar rate per square metre ranges from $10,400 per square metre to $5,248 per square metre. Sales of two penthouse apartments in the Air Apartments are included the first is apartment 134, 220 Greenhill Road, Eastwood, which sold in January 2007 for $2.7 million. The area of that apartment was 382 square metres and the rate per square metre was $7,068. The other apartment was apartment 139 which sold in February 2007 for $3.9 million. The area was 375 square metres and the rate per square metre was $10,400. 93 Mr Taormina states that the 'most comparable' sales included the two penthouses under construction in Place on Brougham. After describing the development he refers to each penthouse as having an area of some 500 square metres with an extra 250 square metres of terraced area featuring a lap pool and wet bar. He states that he understands the apartments to be under contracts for about $3.8 million. He then refers to the Air Apartments and the evidence generally. 94 Mr Taormina expresses the opinion that the property is superior to much of the evidence he analysed. He states that when viewed in its entirety the sales evidence suggested that the property warranted a value of at least the mid $3 millions 'when applying an appropriate rate per square metre of equivalent floor'. 95 Mr Taormina states that the evidence suggested that the property was about on a par with the larger penthouse apartment within the Air Apartments. By that he meant apartment 139, although in fact apartment 134 is physically larger. He said that adopting a rate around the uppermost level of the prevailing range of say $10,450 square metres gave an implied value rounded of $3.6 million. In fact, the figure of $10,450 square metres was $50 per square metre more than the top of the range in his schedule of comparable sales. 96 Mr Taormina fixed a fair market value for the property of $3.6 million. He also fixed a forced sale value of $3.2 million, saying that the property would be readily saleable within a normal marketing period of say eight weeks, and could be expected to warrant only a marginally reduced value. He also expressed the opinion about the specific and market-related risks associated with mortgage lending on the property which I have set out above (at [46]). 97 This then is a summary of the respondent's valuation. 98 Before turning to consider the specific criticisms of Mr Taormina's valuation report, I must address the Savills valuation report and the two witnesses who gave valuation evidence. 99 In its closing submissions the respondent asked me to place a good deal of weight on the Savills valuation report. I do not think that it is proper to do so. The valuation date in the Savills valuation report is some months before the valuation date which is relevant in this case. The precise qualifications of Mr Trnovsky are unknown and I do not know whether Mr Trnovsky continues to hold the opinions expressed in the report. Furthermore, I have not had the advantage of seeing him in the witness box. 100 Ms Joanne Gaetjens was qualified to express the opinions which she did. She is an associate member of the Australian Property Institute and is a certified practising valuer. She is an associate director and senior valuer at Southwick Goodyear Pty Ltd. She holds a Bachelor Business Property (Valuation) Degree conferred by the University of South Australia in 1998. She had given evidence on previous occasions. Ms Gaetjens has valued in excess of 8,000 residential properties, including apartments. I consider that Ms Gaetjens was an honest witness. On occasions she was more defensive in cross-examination than I would have expected from an expert witness who had given evidence previously, but that did not affect my overall assessment of her as a witness upon whom I could rely. 101 Mr Taormina gave evidence in support of his valuation. He is also a certified practising valuer. He holds a Bachelor of Applied Science in Valuation. He has had many years experience as a valuer. He had difficulty confining himself to the question he was asked and in some of his long answers he was at pains to try to justify his valuation. His evidence concerning the differences between the two penthouses in the Air Apartments was not persuasive and his evidence about the areas of the apartments at Place on Brougham was unsatisfactory. I prefer the evidence of Ms Gaetjens to that given by Mr Taormina. 102 Ms Gaetjens' report is divided into two parts. The first part contains her valuation of the property as at 26 September 2007 and the second part contains her criticisms of Mr Taormina's valuation. 103 Ms Gaetjens provides her comments on the market in September 2007. She expresses the opinion that the apartment market within the Glenelg foreshore was considered to be oversupplied. Ms Gaetjens referred to evidence that in the market there was a thinning of trading volumes, declining prices and extended settlement periods. Ms Gaetjens discusses the sales of apartments in other developments in the locality, including Holdfast Promenade, 'Platinum on the Beach' and 'The Moorings' complex. 104 Ms Gaetjens then refers to sales of apartments in the city, the Air Apartments, the Queen Victoria Hospital and Place on Brougham. Her conclusion is that save for Glenelg, where the apartment market was suffering from an oversupply of stock, the residential market including the residential apartment market continued to show high levels of demand. Ms Gaetjens considered the seaside apartment market at Glenelg to be saturated. 105 Ms Gaetjens adopts the 'Direct Comparison Method' of valuation and refers to four comparable sales being apartment 37, 31 Colley Terrace, Glenelg (February 2007), apartment 65, 3 Holdfast Promenade, Glenelg (April 2007), unit 5, 4 North Esplanade, Glenelg North (March 2007) and unit 15, 9 Holdfast Promenade, Glenelg (June 2007). Ms Gaetjens expresses the view that given the non-generic nature of the property it was appropriate that the evidence as a whole be weighed, and that rates per square metre were no more than 'a useful indication'. 106 Ms Gaetjens considered other sales evidence from the Glenelg Foreshore area. She also noted the sales of apartments or penthouses at Air Apartments and Place on Brougham. She said that those properties were considered to be in significantly superior locations and that one would expect them to trade at a significant premium over the subject property. 107 Ms Gaetjens considered that the value of the property fell within a range of $2.3 million and $2.5 million. She adopted the mid point of that range. That implied, she said, an overall rate of $7,310 per square metre. Ms Gaetjens expressed the view that the forced sale value of the property was $1.8 million because this equated with a reduction in price of approximately 25 per cent and is 'considered fair and reasonable for the subject property on a forced sale basis within this location and price range as at the date of valuation'. 108 Ms Gaetjens' major criticisms of Mr Taormina's valuation are as follows. 109 First, she said that the apartment market was in a state of oversupply with declining values, decreasing trading volumes and longer marketing periods being experienced. Contrary to Mr Taormina's statement, the apartment market had been in a state of decreasing momentum for some years in the Glenelg location. The higher prices and active sales in Place on Brougham were inconsistent with experiences in the Glenelg area. The apartment market in the Glenelg area was separate from the apartment market in North Adelaide, Eastwood and the central business district of Adelaide. The sales in those areas were in a different market sector and were of 'limited comparability'. 110 Secondly, Ms Gaetjens refers to Mr Taormina's reliance on the sales of apartments in Place on Brougham and Air Apartments. The figures Mr Taormina quotes in relation to the penthouses in Place on Brougham support a rate per square metre of $7,600 or less if the 250 square metres of terraced area is taken into account. As to the two penthouses in the Air Apartments, Mr Taormina had chosen as his most comparable sale the high-priced one without providing a convincing reason for doing so. 111 Thirdly, Mr Taormina had placed too much weight on the rates per square metre approach without considering adequately the points of similarities and differences with comparable sales. 112 Fourthly, Mr Taormina had ignored the prices achieved within the Glenelg foreshore area including apartments and adopted a rate of 20-40 per cent more than those rates. 113 Fifthly, Mr Taormina had adopted a rate of $10,450 per square metre which is higher than any of the sales which he identified as comparable. 114 Sixthly, Mr Taormina's valuation was $1.075 million or approximately 42 per cent more than had ever been achieved for an apartment within the location of Glenelg North, Glenelg or Glenelg South. 115 Ms Gaetjens gives her reason for disagreeing with Mr Taormina's forced sale value (see [107] above. 116 The respondent criticised Ms Gaetjens' valuation report on a number of grounds. First, it was said that she had impermissibly used hindsight in that she had taken into account sales after the valuation date and she had taken into account the effects of the global financial crisis. Ms Gaetjens used one sale which was under contract but had not settled as at the valuation date. That is not a reason to reject her valuation report if it is otherwise soundly based. There is nothing to suggest that she impermissibly took into account the effects of the global financial crisis. Secondly, it was said that she miscalculated the implied rate per square metre in her valuation. That is correct; her rate per square metre appears to be based on a value of $2.5 million rather than $2.4 million. However, that error does not cause me to doubt the correctness of her opinions. Thirdly, it was submitted that her valuation was inconsistent with the comparable sales she identified. I reject that criticism and I accept Ms Gaetjens' evidence as to the differences between the property and the comparable sales and the reasons why it was inappropriate to simply calculate value by the rate per square metre approach. 117 In their closing submissions the applicants condensed their particulars (see [82] above) into five areas in which they said the respondent's valuation fell below the standard to be expected of a reasonably competent valuer. The five areas identified overlap in the sense that an error in one respect is, or leads to, an error in another respect. 118 The first alleged error relates to the methodology adopted by Mr Taormina. It is said he erred in adopting a rate per square metre analysis rather than the Direct Comparison Method. The valuation of a property by the 'Direct Comparison Method' involves an analysis of recent comparable sales and a comparison of those sales with the subject property having regard to various attributes or features such as location, building features and characteristics, general presentation and other improvements. Those attributes or features have the potential to affect value. The two processes (if indeed there are two) overlap in the sense that the 'more comparable' the sales identified as comparable sales are the less need there will be for adjustments for differences. 119 It is possible to calculate from comparable sales the rate paid per square metre for the properties. That rate can be of some assistance in determining the value of the property to be valued. In the case of properties used for industrial, retail or office purposes it may be a particularly useful guide to value. That is because in the case of those uses other factors such as location will, generally speaking, be of less significance to the purchasers of such properties. In the case of residential properties the properties are less likely to be homogeneous and the rate per square metre analysis is likely to be of less assistance. 120 The proper valuation method for the valuation of the property was the Direct Comparison Method. That was Ms Gaetjens' evidence and Mr Taormina agreed. The rate per square metre analysis may be used as a check or guide where the Direct Comparison Method has been properly applied. Error might arise if the rate per square metre analysis is applied instead of the Direct Comparison Method. Error might arise if the Direct Comparison Method is not applied properly and then the rate per square metre analysis is applied without a proper foundation. Mr Taormina said that he applied the Direct Comparison Method. I am not persuaded that he did not attempt to do that, but he erred in applying that method and then he applied the rate per square metre analysis without a proper foundation. Mr Taormina erred because he did not identify the proper comparable sales and because he failed to identify Glenelg (including Glenelg, Glenelg South and Glenelg North) as a separate market. 121 The second alleged error relates to the rate per square metre actually adopted by Mr Taormina. The applicants' submission is that the primary sale relied on by Mr Taormina according to his report was the sale of apartment 139 at the Air Apartments and that it should have been excluded from his list of comparable sales. It was, to use the term used in the evidence, an 'outlier'. Another term is an anomalous sale, that is to say, one outside an apparent range of values where the reasons for the apparent aberration are unexplained. The applicant submits that the sale was an anomalous sale for two reasons. First, it was anomalous when compared with the sale price achieved for apartment 134. There was a difference of $1.2 million. Secondly it was anomalous because the price achieved in January 2007 of $3.9 million was considerably more than the price of $2.317 million achieved on a sale of the same apartment in January 2006. As part of the investigations Ms Gaetjens carried out she made some inquiries about the different prices achieved for apartments 139 and 134. The highest it can be put is that there might have been substantial improvements made to apartment 139. 122 Mr Taormina offered various explanations for the two matters identified by the applicant. He said that the price differences between apartments 139 and 134 might be explained by the superior views offered by apartment 139. The differences between the sale prices for apartment 139 might be explained by the fact that the sale in January 2006 was pursuant to a contract signed some years earlier. I did not find his explanations at all persuasive. Even if he took those matters into account in September 2007 they were insufficient to remove the doubts attending the sale of apartment 139. Mr Taormina should not have relied on the sale of apartment 139 as the most comparable sale as there was enough to suggest that it was an anomalous sale. In my opinion, a reasonably competent valuer would have reached that conclusion. 123 Removing the sales evidence in relation to apartment 139 is very significant in terms of Mr Taormina's valuation. If regard is had only to the rate per square metre analysis for present purposes and Mr Taormina's schedule of comparable sales is considered, the average rate per square metre for apartments above 250 square metres in area in the Glenelg area is $6,109 and for all areas is $6,861. If all apartments above 200 square metres in area are taken into account, the corresponding figures are $6,127 and $7,068 respectively. This is significantly less than the rate applied by Mr Taormina. 124 Mr Taormina referred to the sales of two apartments in Place on Brougham in his valuation report. They were not referred to in his schedule of comparable sales, presumably because the sales had not settled. In his valuation report, Mr Taormina said of the apartments in Place on Brougham the following: Each penthouse is to have some 500 sq m of living area with an extra 250 sq m of terraced area featuring a lap pool and wet bar. We understand these are under (now dated) contracts for about $3.8 million. 125 When it was pointed out to Mr Taormina in cross-examination that those figures, even leaving the terraced area out of account, implied a rate per square metre of $7,600, he initially said that this was a 'typo' and that he meant to say 500 square metres 'all up'. The agent had given him figures which were 'roughly' correct. Then he said he had worked on figures of 450 to 430 square metres. That gave a range for the rate per square metre of $8,444 - $8,837. Eventually, he said that he performed calculations at the time based on an area of 365 square metres. He accepted that there were no workings or calculations to this effect on his file. I found Mr Taormina's evidence on this topic unsatisfactory. 126 It seems that in fact one of the apartments with a mean equivalent area of 410 square metres subsequently settled for $4.1 million, implying a rate per square metre of $10,105.60. This sale does not support Mr Taormina's valuation report because, for reasons I will now give, it is not a comparable sale. 127 The third, fourth and fifth alleged errors can be dealt with together. The third alleged error is that Mr Taormina placed most weight on sales which were not comparable sales. Those sales were the sales of the two apartments in Air Apartments and the two apartments in Place on Brougham. The fourth alleged error is that Mr Taormina failed to recognise that the Glenelg area was a different market sector from those outside Glenelg. The fifth alleged error is that Mr Taormina failed to recognise that apartments in Glenelg were part of a falling market. 128 Mr Taormina proceeded on the basis that there was one market and he certainly did not proceed on the basis that the market for apartments in Glenelg was falling. On the contrary, he proceeded on the basis that there was increased momentum in the market for high-density residential accommodation within multi-storey complexes such as the property particularly 'in beachside/coastal where water views can be provided or in the city centre'. 129 I am satisfied, based on the evidence of Ms Gaetjens, that the third, fourth and fifth errors are made out and that a reasonably competent valuer would, on proper investigation, have reached the following conclusions. First, whilst in general terms the Adelaide residential market had, as at 26 September 2007, experienced buoyant conditions for a number of years, the apartment market in the Glenelg foreshore area was considered to be oversupplied. The declining market was characterised by a thinning of trading volumes, extended marketing periods and a decrease in prices. Secondly, the maximum sale price achieved for an apartment in the Glenelg area up to the date of the valuation was $2.526 million for an apartment purchased off the plan in September 2006 in the 'Platinum on the Beach' complex. I accept the evidence of Ms Gaetjens that this sale took place in considerably superior market conditions. Thirdly, in contrast to the Glenelg market, the market for apartments in the central business district of Adelaide and the eastern fringe areas continued to exhibit growth and some very significant prices were achieved (for example, the sale of the apartment in Place on Brougham at $4,143,297). Fourthly, there were two distinct features of the Glenelg area. First, sales above $2.5 million were extremely rare to the date of valuation and, secondly, the residential apartment market was suffering the effects of an oversupply. Finally, an apartment in Place on Brougham, North Adelaide, could not be considered highly comparable with an apartment on the Patawalonga Frontage. 130 The sales Mr Taormina placed greatest reliance on were not comparable sales. Mr Taormina should have prepared his valuation on the basis that the most comparable sales were in the Glenelg area. 131 Based on the evidence of Ms Gaetjens, I find that the market value of the property as at 26 September 2007 was $2.4 million. Furthermore, I find the errors made by Mr Taormina would not have been made by a reasonably competent valuer. 132 The representations made in the valuation were misleading or deceptive. The valuation report was prepared negligently and without due care and skill.

RelIAnce 133 The respondent submits Angas is not entitled to recover any of the loss and damage it claims because Angas has failed to prove the case it advances, namely, that had the respondent not engaged in misleading or deceptive conduct it would not have lent any moneys to the Opies. In other words, the respondent submits that Angas had alleged but failed to prove a no-transaction case. Allied to this submission is a submission that even if there had been no misleading or deceptive conduct a transaction would have taken place in accordance with the August letters. 134 The steps in the respondent's submission are that I should first find that the Opies were very anxious to refinance. Secondly, I should find that all three applicants had made offers to provide loans in August 2007 before the respondent had prepared its valuation and that those offers were based on the Savills valuation. Thirdly, I should find that if the respondent's valuation report, which formed the basis of the October offers, had not been prepared the Opies were sufficiently anxious to refinance that they would have accepted the August offers. 135 I accept that the Opies were very anxious to refinance. One of the La Trobe companies had taken court action against them and it is clear I think, that their relationship with La Trobe had broken down. 136 However, I do not accept the other steps in the respondent's submission. It seems to me that the proper assumption as a matter of law is that the valuation report was prepared but that it did not contain any representations which were misleading or deceptive. In that event, and having regard to my earlier finding about the true value of the property, the valuation report would have contained a valuation of the property at $2.4 million. A loan to value ratio of 80 per cent would have resulted in the applicants offering to lend the Opies a total of $1.92 million. That would not have been accepted by the Opies who were seeking $2.76 million, with $2.55 million to go to La Trobe and other private lenders. The loans to the Opies which were discharged on the settlement which in fact took place totalled approximately $2.659 million. Nor as a matter of fact is it proper to assume that the respondent's valuation would not have been prepared. The August 'offers' were subject to at least a check valuation by the respondent and a declaration by the applicants that each of them would lend no more than the appropriate loan to value ratio where the value was that provided by the respondent. 137 In my opinion, the proper inference is that had the respondent not engaged in conduct that was misleading or deceptive no loan to the Opies would have been made by Angas. 138 The respondent also contended that in the absence of Mr Opie and Mr Fimeri I could not find that the Opies would not have accepted a lesser sum than the sum that was ultimately offered. I do not accept that submission. The findings I have made seem to me to be clear inferences having regard to the evidence I have identified. 139 Subject to one matter, this conclusion also applies in the case of the respective loans made by Barker and KWS. The one matter is a submission made by the respondent to the effect that Barker and KWS did not rely on the valuation report. The submission is that they were committed to provide the loans prior to any alleged reliance on the valuation report. It was said that Barker and KWS were committed to provide the loans on or about 21 November 2007 whereas the first time they could be said to have relied on the valuation was on or about 27 November 2007. 140 The applicants' pleadings are clear that in the case of the claims by Barker and KWS in tort, the allegation is that the duty of care arose on or about 27 November 2007. The pleading in relation to their claims under the Trade Practices Act and Fair Trading Act are not as clear, although the pleading is open to the construction that the applicants allege that the respondent made representations to Barker and KWS prior to 21 November 2007. 141 No doubt because of the shared directorships between the companies, Barker and KWS knew of the respondent's valuation. However, the question is whether as a matter of law the respondent made representations for the purposes of the Trade Practices Act and Fair Trading Act prior to 27 November 2007. I do not think that it did. The respondent's valuation report makes it perfectly clear in its introduction and qualifications that it may be relied on by Angas and no other person. 142 The question then becomes whether Barker and KWS relied on the respondent's valuation report for the purposes of proceeding with their loans. I accept that the letters of 'offer' and loan agreements had been signed by the Opies before the meeting of 27 November 2007 and the letter of the same date. However, had the respondent given the correct advice on 27 November 2007, that is to say that the true value of the property was $2.4 million, I find the Barker and KWS loans would not have proceeded. I say that because each of the loan agreements incorporates the special conditions and other conditions in the letters of 'offer' and a significant revision in the valuation report would have triggered the loan to valuation ratio condition (section 3) and possibly others such as section 4.3 and section 10.

Contributory negligence 143 The respondent contends that any damages awarded to the applicants should be reduced on account of their contributory negligence. 144 Under s 82 (1B) of the Trade Practices Act the question is whether the applicants' loss or damage was partly a result of the applicants' failure to take reasonable care. The issues then are whether the applicants failed to take reasonable care and whether that failure was a cause of their loss or damage. If so, the Court is to reduce the damage to the extent it considers just and equitable having regard to the applicants' share in the responsibility for the loss or damage. Subsection 7(2) of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) ('Law Reform Act') uses different terminology - the 'claimant's harm', 'partly by contributory negligence', 'just and equitable having regard to the extent the contributory negligence contributed to the harm' - but neither party suggested that the subsections involved different legal tests. I will proceed on that assumption that they do not involve different legal tests. 145 The notion of contributory negligence does not require detailed explanation. In Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALR 529, the High Court said (at 532-3): The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, i.e. of the degree of departure from the standard of care of the reasonable man (Pennington v Norris (1956) 96 CLR 10 at 16) and of the relative importance of the acts of the parties in causing the damage: Stapley v Gypsum Mines Ltd [1953] AC 663 at 682; Smith v McIntyre [1958] Tas SR 36 at 42-49 and Broadhurst v Millman [1976] VR 208 at 219, and cases there cited. It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance. 146 The particulars of contributory negligence pleaded by the respondent are as follows: 1. Angas failed to carry out proper due diligence or adequate assessment or consideration in accordance with its Lending Manual of the means and ability of the Opies to repay any principal loan, interest and other charges. 2. Barker failed to carry out any due diligence or adequate assessment or consideration other than that undertaken by Angas. 3. KWS failed to carry out any due diligence or adequate assessment or consideration other than that undertaken by Angas. 4. The applicants failed to consider properly the risk assessment analysis contained within the subject valuation. 5. The applicants failed to realise sufficiently promptly that the Opies would default (the respondent repeats here 1, 2 and 3 above) and the fact (so it is alleged) that the Opies did not at any time make any regular payments from the date of the respective loans to the date upon which Angas took possession. 6. The applicants failed to act sufficiently promptly to exercise their rights as mortgagees after it became apparent that the Opies would default and, in particular, the applicants omitted to exercise their registered mortgage rights and failed to take possession of the property and control the sale process as soon after 7 May 2008 as was practicable, and, in any event, by the end of the first week of June 2008. 7. The applicants relied solely on the valuation. 8. The applicants accepted an amount upon the sale of the property which was below its market value at the time of sale. 147 A number of preliminary observations may be made about these particulars. First, as to paragraphs 2 and 3, it is not in dispute that such inquiries, assessment and consideration as were carried out were carried out by Angas. Barker and KWS relied on Angas and carried out no additional inquiries, assessment or consideration. The respondent's case is that what Angas did was insufficient for all of them, whereas the applicants contend that it was sufficient for all of them. Secondly, paragraph 4 was not pressed by the respondent and must in any event be rejected on the evidence. Thirdly, as to paragraph 7, although I find that the applicants failed to exercise reasonable care to protect themselves from harm in various respects, it cannot be said on the facts that they relied solely on the valuation report as they had various other pieces of information. Fourthly, paragraph 8 was not pressed by the respondent and, in any event, there is no evidence to support it. 148 In essence then, there is the allegation in paragraph 1 of a lack of due diligence or adequate assessment or consideration before the loans were drawn down, and the allegations in paragraphs 5 and 6, which I would read as allegations of a failure to act promptly after the loans had been drawn down. From the submissions that were put it appears that the thrust of the allegation in the two paragraphs is that contained in paragraph 6. In summary, there is an allegation of pre-transaction contributory negligence and an allegation of post-transaction contributory negligence. In the first case, the respondent must show that a cause of the applicants' entry into the loan transactions was the applicants' contributory negligence and in the second case the respondent must show that a cause of the applicants' loss or damage was their contributory negligence. 149 As to the post-transaction contributory negligence, the respondent puts an alternative case that the relevant acts or omissions by the applicants amounted to a failure to mitigate, or acts or omissions which increased the applicants' loss and damage. 150 Angas considered itself to be a reasonably prudent lender. It held itself out to potential investors as a reasonably prudent lender. I refer to the summary of Prospectus No 8 set out in paragraphs [4]-[6] above. The content of the obligations it assumed in the Prospectus related to the security for the loans it made and the serviceability of the loans by the borrowers. As far as the security for the loans is concerned, the obligation related to the type of security, the proper valuation of the security and the determination of appropriate loan to valuation ratios. In this case there is no suggestion that Angas failed to act as a reasonably prudent lender as far as the security for the loan to the Opies is concerned. 151 As far as the serviceability of the loans is concerned, the obligation relates to the ability of the borrower to service the loan, that is to say, to pay interest and other charges payable to the lender. The content of that obligation may be affected by two things. First, it may be affected by a circumstance such as the pre-payment of interest. In this case there was a pre-payment of interest to Angas but only to mid to late January 2008. Secondly, it may be affected by the market in which the lender operates. In this case Angas does not operate in the same market as a traditional bank. That may mean that it is entitled to take greater risks than a traditional bank. Mr Hower said that Angas viewed the security as the principal consideration and serviceability as a secondary consideration. That may or may not describe properly the content of the obligation as to serviceability. The important point is that there was an obligation on Angas to make a proper assessment of serviceability. Indeed it held out to its investors in its prospectus that it would do so. 152 A question then arises as to what a proper assessment of serviceability requires in this particular case. No evidence was put before the Court from an independent expert as to what a proper assessment of serviceability requires. However, there is evidence at a general level and at a specific level of what a proper assessment required in the circumstances of this case. That evidence is from Angas itself and that is a good starting point: St George Bank Ltd v Trimarchi [2004] NSWCA 120 at [44] per Mason P (with whom Sheller JA and Cripps AJA agreed). At a general level, there are statements in the Prospectus and the provisions of Angas' own Operations Manual. At a specific level, there are the special conditions relevant to serviceability referred to in the October letter from Angas and indeed from Barker and KWS. 153 The respondent approached the question of contributory negligence by emphasising Angas' failure to make inquiries about serviceability and its failure to make inquiries of the previous lender, La Trobe. For reasons I will give I find that Angas failed to make adequate inquiries about serviceability. The other aspect, namely, the failure to make adequate inquiries of the previous lender, is established but is of less importance because it is not clear what those inquiries would have revealed. Nevertheless, it is important as part of the context for reasons I will give. 154 The respondent included as part of its written closing submissions a schedule setting out various respects in which it alleged Angas failed to comply with its own Operations Manual (referred to by the respondent as the Lending Manual) or failed to insist on the performance of the conditions in its October letter. The matters in the schedule fall into three broad categories, namely, a failure to make or pursue inquiries which arguably would have led Angas to refuse to make the loan, a failure to follow formal procedures Angas had specified for itself, and a failure to meet certain standards. The first category is the important one because I am of the view that had the inquiries been made the loan would not have been made. The complaints in the second category are not in themselves acts of contributory negligence and the complaints in the third category are not such that I could infer that had they not been present Angas would not have made the loan. 155 It is clear that in August 2007 Angas was of the view that, on the material provided to it, the Opies did not have the capacity to service the loan. That remained its view until at least late October 2007. Those findings are established by Mr Morton's memorandum dated 7 August 2007 (see [33] above) and the special conditions in both the August and October letters. 156 In my opinion, three matters occurred in November 2007 which would have heightened the concern of a reasonably prudent lender, not allayed it. The first is the revaluation of Mr Opie's interest in HR3D. That interest was said to be worth $14 million not long after it had been said to be worth $3 million. That was an extraordinary change. As I understood him, Mr Hower said that he ignored the HR3D asset. Perhaps he was entitled to do that, but he was not entitled to ignore the change in asserted values. That suggested that none of the information provided by the Opies could be relied upon and it called for further inquiry by Angas. Secondly, the company through which Mr Opie held his interest in HR3D was deregistered and that was known to Angas. Mr Opie said that he would re-register the company but when Angas conducted a further search on 27 November 2007 the company had still not been re-registered. Thirdly, the letter from Mr Opie about his payment history with La Trobe raised more concerns than it answered and Mr Hower seemed to accept as much (see [77] above). 157 In the context I have described, Angas received a letter or email from Mr Opie's chartered accountant stating that the consulting income received by the KCO Investment Trust for the year ended 30 June 2007 'per the Business Activity Statements lodged' was $387,200 GST inclusive and Kents [sic] taxable income per his 2006 income tax return was $nil. Angas also received a letter from HR3D containing the statement referred to in paragraph [77] above. 158 The letter from the chartered accountant raises a number of question. Those questions included questions about the details of the trust and the distributions it made. There was a question as to why Mr Opie's income in 2006 was nil and a question of how he earnt both the consulting income and the salary referred to in the letter from HR3D. 159 As far as the letter from HR3D is concerned there is no evidence that an income of $275,000 as compared with $250,000 was sufficient to service the Angas loan. In any event, having regard to all the circumstances, the letter could not possibly be sufficient to support the view that further inquiries were unnecessary. 160 I do not think Angas (and therefore, having regard to the way the case was argued, Barker and KWS) made sufficient inquiries about the Opies' ability to service the loans or formed a proper assessment of that matter. All the information they did receive reinforced the need to make further inquiries. 161 The failure to make proper inquiries and form a proper assessment will only be relevant in terms of contributory negligence if those failures were a cause of the applicants' loss and damage. The applicants submitted that it has not been established that any further inquiries would have made a difference. I do not accept that submission. It is true that I do not have any direct evidence of the Opies' financial position. However, I think I can draw an inference on the balance of probabilities from the fact that the Opies went into default almost immediately that upon proper inquiry they would never have been able to establish an ability to service the loan. The applicants have been guilty of contributory negligence. As I have said, the failure to make inquiries of the La Trobe group overlaps with the first particular of contributory negligence. In so far as it is different, I do not think that it adds anything. 162 I turn now to consider the alleged post-transaction acts of contributory negligence. The relevant facts are set out above (at [66]). 163 It is certainly true that Angas showed no great urgency in its attempts to sell the property. However, it seems to me that the respondent faces two significant hurdles in establishing that Angas' conduct amounted to contributory negligence or a failure to mitigate. First, the respondent was not able to identify with precision a point in time or an act where the conduct of Angas fell below the standard to be expected of a reasonably prudent mortgagee exercising its powers upon default by the mortgagor. I am not prepared to say it was necessarily imprudent to leave the sale of the property in the hands of the mortgagor in circumstances where a reputable agent had been appointed and steps towards sale were being carried out. Secondly, and more importantly, there is no evidence of the value of the property between May 2008 and July 2009 other than the Taplin appraisal. The difficult and it seems to me insurmountable hurdle for the respondent is that I am not able to say that at a particular point in time, Angas' imprudent conduct caused or contributed to any part of the loss or damage it ultimately sustained. I reject the respondent's submission that Angas was guilty of post-transaction contributory negligence or a failure to mitigate. 164 Based on Angas' pre-transaction contributory negligence, I would apportion responsibility for the applicants' loss and damage 75 per cent to the respondent and 25 per cent to the applicants.

Concurrent wrongdoer provisions 165 The respondent claims that if it is liable its liability is apportionable under s 87CD of the Trade Practices Act or s 8 of the Law Reform Act. The other wrongdoers identified by the respondent are the Opies. 166 Section 87CD relevantly provides: (1) In any proceedings involving an apportionable claim: (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss; and (b) the court may give judgment against the defendant for not more than that amount. … (3) In apportioning responsibility between defendants in the proceedings: (a) the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law; and (b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings. 167 Section 8 of the Law Reform Act relevantly provides: (1) If a defendant's liability on a claim for damages is apportionable, the liability is limited under this section. (2) If the limitation applies, the defendant's liability is limited to a percentage of the plaintiff's notional damages that is fair and equitable having regard to - (a) the extent of the defendant's responsibility for the harm; and (b) the extent of the responsibility of other wrongdoers (including wrongdoers who are not party to the proceedings) whose acts or omissions caused or contributed to the harm. (3) For the purpose of subsection (2) - (a) 2 or more wrongdoers who are members of the same group are to be treated as a single wrongdoer; and (b) if the plaintiff was guilty of contributory negligence, that contributory negligence will be brought into account as wrongdoing and a percentage assigned to it; and (c) if 2 or more wrongdoers are each entitled to the benefit of a limitation of liability under this section (for some reason other than that they are members of the same group), the aggregate percentage assigned to them cannot exceed - (i) if there is no contributory negligence on the plaintiff's part - 100%; or (ii) if there is contributory negligence on the plaintiff's part - 100% less a percentage representing the extent of the plaintiff's responsibility for his or her harm. 168 The respondent claims that the Opies were concurrent wrongdoers or wrongdoers within these provisions and that they were partially responsible for any loss or damage suffered by the applicants. In its closing submissions the respondent put its case on the basis that the Opies owed a duty of care to the applicants or at least to Angas and that they breached that duty by providing false information about their net asset position to Angas. This is a reference to their representation about the value of the HR3D shares. This argument must fail because there is no clear evidence that Angas relied on the evidence about the Opies' net asset position or at least the value of the shares in HR3D in deciding to make the loan. Furthermore, although it gave rise to an obligation on the applicants to make further inquiries, there is no clear evidence before me that the information was false. 169 Before leaving the topic of apportionment, I should mention that after the evidence had been called but before closing submissions the respondent applied to amend its Further Amended Defence to allege that as far as the claims of Barker and KWS were concerned Angas was a concurrent wrongdoer or wrongdoer. The factual basis of the proposed plea was that Angas owed a duty of care to Barker and KWS to carry out proper due diligence or adequate assessment and consideration in accordance with its Lending Manual of the means and ability of the Opies to repay any principal loan, interest and other charges. The plea was that the duty of care arose because Angas knew that each of Barker and KWS was relying on it to perform the acts said to comprise the duty of care. I heard submissions on the application and then refused it. I said that I would deliver reasons for my decision as part of my final reasons. 170 The respondent said that the proposed plea was coming forward at such a late stage because of counsel's oversight. That was accepted by the applicant without the need for affidavit evidence. 171 There are a number of difficulties with the proposed plea both in terms of whether it is arguable, bearing in mind the fact that the governing minds of Barker (Messrs Hower and Morton) and KWS (Mr Hower) were also part of the governing mind of Angas, and in terms of whether it is properly particularised. However, I decided to refuse the application because it seemed to me that there was a substantial prospect that the applicants would have conducted their cases differently had the proposed plea been in the Defence from the outset. There was no suggestion of reopening the case at the time of the application and even if there had been I would not have allowed such a course because it was too late to do so. In the circumstances, I refused the amendment because of the prospect of substantial prejudice to the applicants. In doing so, I had regard to the principles discussed in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.

Fall in Market Value 172 The shortfall in the recovery of each applicant's loan is as follows: Angas $ Amount lent 2,340,000 Amount recovered (ignoring expenses of sale) 1,750,000 Shortfall 590,000

Barker $ Amount lent 360,000 Amount recovered Nil Shortfall 360,000

KWS $ Amount lent 180,000 Amount recovered Nil Shortfall 180,000

173 These figures are approximate and it is sufficient for present purposes to proceed on the basis that the loss claimed with respect to the shortfall in the recovery of the loans is in the order of $1.1 million. 174 The respondent contends that the applicants' loss in terms of the non-recovery of their respective loans is limited to the difference between the moneys lent and the moneys which would have been lent had the true value of the property been known. In other words, the respondent contends that it is not to be held responsible for a decline in the value of the property due to a decline in the market. 175 As I have already said, I find that the true value of the property was $2.4 million. On the respondent's submission and treating the applicants as one entity for present purposes the amount which would have been lent, having regard to the true value of the property, would have been $1.92 million compared with the amount which was lent of $2.88 million. The difference is $960,000 and if the respondent's submission is correct the applicants' damages would be limited to that amount. The difference between the applicants' approach and that of the respondent is in the order of $140,000, that is to say, the difference between $1.1 million (shortfall in recovery of the loans) and $960,000. 176 In support of its argument the respondent relied on the approach taken by McHugh J in the High Court decision in Kenny and Good. That case raised a question as to whether a negligent valuer could be held liable for loss caused to a lender or mortgage insurer where part of the loss was caused by a fall in the value of the property because of a decline in the market. In the course of his reasons, McHugh J said (at 431 [35]): Speaking generally, the valuer is liable only for such losses as a reasonable person would regard as flowing naturally from the negligent valuation or which are of a kind that should have been within the valuer's contemplation. In the absence of a contrary undertaking or special circumstances, the aggrieved party cannot recover any part of the difference between the true value of the property and the price recovered at the time of the sale. The aggrieved party's damages are confined to the difference between the price paid for the property and the price that would have been paid on the basis of a true valuation together with such expenses and other losses that were sufficiently likely to result from the breach of duty to make it proper to hold that they flowed naturally from the breach of duty or that they were within the reasonable contemplation of the parties to the valuation contract or arrangement. In the case of money lent on a valuation, the damages are confined to the difference between what was lent and what would have been lent on the true value of the property together with such expenses and other losses that were sufficiently likely to result from the breach of duty to make it proper to hold that they flowed naturally from the breach of duty or that they were within the reasonable contemplation of the parties to the contract or arrangement. In either case, losses do not include the consequences of subsequent market declines. 177 It is important to note that in Kenny and Good the relevant report recommended 'the property as suitable security for investment of trust funds to the extent of 65 per cent of our valuation for a term of 3-5 years' and that an additional amount could safely be advanced on the property 'in the event that mortgage protection insurance is effected'. 178 All five Justices dismissed the appeal and that had the effect of upholding the award of full damages in favour of the mortgage insurer and against the valuer. Four of the Justices placed considerable emphasis on the fact that the report contained the recommendation and statement set out in the previous paragraph (McHugh J 439-440 [59]-[60], Gummow J 446-447 [81]-[83], Kirby and Callinan JJ at 456 [116] and 458 [122]. In fact, McHugh J and Kirby and Callinan JJ specifically made the point that the case was not one which was appropriate for the determination of the question of general principle of whether a negligent valuer could be held liable for a fall in the value of the property because of a decline in the market because it could be decided on the basis of the recommendation (at 430-431 [35]; 458 [122]). 179 The observation of McHugh J would seem to be obiter dicta and although Gummow J appears to support the observations (at 446 [80]) it is not clear that a majority of the Court supported them. Before leaving the High Court decision in Kenny and Good, I record the fact that no detailed submissions were made to me about possible differences between the common law tests (contract and tort) of remoteness or causation and the test under the Trade Practices Act or Fair Trading Act (Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 510 per McHugh, Hayne and Callinan JJ; Henville v Walker (2001) 206 CLR 459 at 489-490 [96] per McHugh J). 180 The Full Court of this Court in Kenny and Good (Kenny and Good Pty Ltd v MGICA (1992) Ltd (1997) 77 FCR 307) in upholding the award against the valuer also placed weight on the recommendation and statement in the valuer's report. 181 I have considered whether, as in Kenny and Good, there is anything in this case which indicates that the respondent made a representation or warranty or statement as to the value of the property, not only at the time of the valuation but also for a period thereafter (at 440 [60]-[61] per McHugh J) or that it had assumed as between it and the applicants the responsibility to address that matter (at 446 [80] per Gummow J). 182 The relevant facts are as follows. Before he did his valuation, Mr Taormina knew of Barker and KWS as well as Angas. He knew that the three applicants were in a different category from banks and that they lent at higher interest rates than banks. He knew that their customers were more likely to default and that often the loans made by the applicants were short term loans. He knew that KWS charged very high interest rates. 183 In his valuation report, Mr Taormina not only valued the property as at 26 September 2007 but he also gave a forced sale value and a rating concerning the specific and market-related risks associated with mortgage lending on the property. Those matters are very significant in terms of what the valuation report represented or warranted, either expressly or inferentially. I think the second matter in particular amounts to an implied representation that whatever the market did there was a low risk that the mortgagee would not recover its loan moneys in full. It seems to me that this is sufficient to bring this case within the type of case considered by the High Court in Kenny and Good. 184 In the circumstances, it is not necessary for me to consider whether the same conclusion should be reached based on the meeting held on 27 November 2007. However, that meeting does reinforce the conclusion I have already reached. What Mr Taormina learnt from that meeting was that Angas and Barker thought that the valuation was very high and wanted reassurance as to his opinion and advice, and that they were proposing to lend, as Mr Morton put it, the maximum amount. It seems that at the meeting, or shortly thereafter, Mr Taormina was asked and did assign the valuation to Angas, Barker and KWS. 185 When all of these circumstances are considered, it seems to me that this case is similar to Kenny and Good and that the applicants are not precluded from recovering the full amount of the loss which they sustained on the loans. The more general question of principle which the respondent sought to agitate does not, in the circumstances, need to be addressed.

Quantum of direct loss 186 The direct loss or damage of each applicant is that part of its loans that were not recovered as well as some expenses of Angas associated with holding the property. On the basis that their case is a no-transaction case, the applicants have credited their claim for loss or damage with payments of interest received from the Opies. Angas claims direct loss or damage of $627,244.89, Barker direct loss or damage of $324,000 and KWS direct loss or damage of $162,000.

Loss of opportunity damages 187 In addition to those claims, each applicant claims damages for the loss of a commercial opportunity to have lent the money elsewhere and earnt interest and other fees thereon. 188 Angas' loss of opportunity claim is limited to the period from 27 November 2007 to 6 April 2010. Angas claims that during that period it would have lent the money to another borrower and would have earnt interest thereon at a rate of 13.53 per cent. On 6 April 2010, Angas received an insurance payment of $597,627. As I have said, initially the respondent argued that such an amount should be deducted from any damages awarded to Angas. However, it now accepts that such an approach would be contrary to existing authority. For its part, Angas accepts that it cannot claim loss of opportunity damages in respect of this amount after 6 April 2010. However, it does claim interest under s 51A of the Federal Court of Australia Act on all of its direct loss since 6 April 2010. 189 The respondent claims that Angas is not entitled to interest on the sum of $597,627 after 6 April 2010. It claims that Angas has had those moneys and has been able to earn interest on them and that unlike the principal sum the insurer has no right to be subrogated to a claim for interest. 190 It follows from the above that there are two issues in the case of Angas. First, is it entitled to loss of opportunity damages from 27 November 2007 to 6 April 2010 and, secondly, is it entitled to interest on a principal amount which includes the sum of $597,627 from 6 April 2010 to the date of judgment. 191 The issues in relation to Barker and KWS are more straightforward. Those companies claim loss of opportunity damages from 27 November 2007 to the date of judgment, in the case of Barker at an interest rate of 22.67 per cent, and in the case of KWS at an interest rate of 23 per cent. 192 All three applicants claim, in addition, a loss of opportunity to earn interest and a loss of opportunity to earn other fees such as application, documentation and inspection fees. 193 All three applicants claim in the alternative to damages for loss of opportunity, interest for the relevant periods under s 51A of the Federal Court of Australia Act. There is a practice note which provides a guide as to the appropriate rate for an award of interest under s 51A(1) and a calculation of the relevant amounts has been put before me (Practice Note CM 16 ̶ Pre-judgment Interest, dated 28 June 2010). 194 The guiding case as to the relevant principles where a claim is made for damages for the loss of a commercial opportunity is Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 ('Sellars'). Where a claim is made for the loss of a commercial opportunity, the Court must, before it awards damages in respect of such a claim, be satisfied on the balance of probabilities that a commercial opportunity of some value was lost. Once that is done the Court assesses the value of the opportunity by reference to the degree of probabilities or possibilities (at 355 per Mason CJ, Dawson, Toohey and Gaudron JJ; at 368 per Brennan J (as his Honour then was)). In that case, the High Court held that the trial judge was correct to make an award of damages in favour of the applicant for the loss of an opportunity to proceed with an alternative commercial transaction which had a 40 per cent chance of proceeding to settlement. 195 In Tabet v Gett (2010) 240 CLR 537, Kiefel J (with whom Hayne and Bell JJ agreed) referred to Sellars and said (at 581 [124]) that providing an opportunity provides a substantial and not merely a speculative prospect of acquiring a benefit, it can be regarded as of value and therefore as loss or damage. 196 The issue of the Court's approach to a claim for a loss of commercial opportunity in a situation very similar to the present case came before the Full Court of this Court of which I was a member, after I had reserved my judgment in this proceeding. Judgment has been handed down in that matter (La Trobe Capital & Mortgage Corporation Limited v Hay Property Consultants Pty Ltd [2011] FCAFC 4 ('La Trobe v Hay') and I received written submissions from the parties as to the effect of the decision in La Trobe v Hay in terms of the issues in this proceeding. 197 All members of the Court in La Trobe v Hay overturned the trial judge's decision rejecting the lender's claim for loss of opportunity damages and held that such an award should have been made. The fact that a lender could not adduce evidence of a particular transaction foregone because of the loans in issue was not fatal to a claim for loss of opportunity (Finkelstein J at [96]; Jacobson and Besanko JJ at [113]). Although the evidence of Mr Gidman in that case was very general it was sufficient to establish a loss of commercial opportunity of some value (Finkelstein J at [96]; Jacobson and Besanko JJ at [115]). Finkelstein J said that the value of the lost opportunity could be calculated mathematically and he used a formula ([97]-[102]) which was also used by Jacobson J and myself ([116]). 198 In so far as the respondent submits that the applicants' respective claims for lost opportunity must fail because of the fact that none of them adduced evidence of a particular transaction foregone, that submission must, on the authority of La Trobe v Hay, be rejected. 199 In support of their claim, the applicants relied on the evidence of Mr Hower. He expressed the opinion that the demand for loans exceeded the funds available and that had the moneys not been lent to the Opies they would have been lent to another borrower. More particularly, the effect of his evidence was as follows. 200 Loan applications were received by Mr Hower or by the lending staff at Angas. All loan applications were reviewed by him. He said that on average in August 2007, he would receive between five and ten loan applications or proposals every day. 201 Angas had a credit committee and if Mr Hower considered an application had merit, could conform to Angas' lending criteria and Angas had funds available or likely to be available, then he would circulate the application to members of the committee. Applications without merit or with merit but which were not successful were not retained. 202 Under its trust deed Angas was required to maintain a liquidity reserve of 5 per cent. In addition, the board of directors of Angas required reserve funds to be maintained as follows: 1. 18 March 2008 to 21 May 2008: an additional amount of $12 million; 2. 22 May 2008 to 30 June 2009: an additional amount of $10 million; 3. 1 July 2009 to 30 September 2009: an additional amount of $7.5 million; and 4. 1 October 2009 to 18 April 2009: an additional amount of $5 million. 203 Mr Hower produced Angas' Liquidity Reports, its Weekly Statistics Reports, details of interest earnt on liquid funds and a schedule showing at particular dates details of loan applications pending before the board of Angas with letters of offer issued and accepted, and letters of offer issued but not yet accepted. Mr Hower said that from his examination of the financial records of Angas and his knowledge of the lending opportunities available to Angas for the period from November 2007, Angas has at all times since November 2007 had a substantial demand for its loan funds. He said that in his role as a member of the Angas credit committee, he is aware of opportunities for Angas to make loans on its usual terms which have not been able to be taken by Angas as it did not have sufficient funds available. 204 Mr Hower gave similar evidence in relation to Barker and KWS. He produced the monthly financial statement produced by the Barker Performance Trust No 2 for the period from November 2007 to February 2010. Mr Hower said that at all times since November 2007, Barker has had a surplus demand for its loan funds and that there had been repeated opportunities for Barker to make loans on its usual terms which have not been able to be taken by Barker as it did not have sufficient funds available. He expressed the same opinion in relation to KWS and the superannuation funds (M&T Superannuation Fund and RVH Superannuation Fund) for which it has been trustee. 205 Mr Hower said that the demand for loans increased significantly after the effects of the global financial crisis led to a tightening of liquidity by a majority of lending organisations such as Australian banks. That was in mid-2008. 206 Angas always had a prospectus on issue and advertised on the radio for the subscription of further funds. I mention at this point that I agree with counsel for the applicants that this is fairly powerful evidence in support of a perception by Angas that there was a strong demand for loans. 207 Mr Hower explained how Angas managed its lending so that it could meet or satisfy the demands for loans. It did so by managing the settlement process or by deferring loan approvals. I accept that evidence. 208 Mr Hower said that Angas had incurred two bad debt expenses since its incorporation in 2000, being a debt of $25,000 in about 2006 and a debt of $391,000 in about 2007. Barker had incurred a bad debt expense in about 2008 of $3,500 and KWS has not incurred any bad debt expenses. 209 The respondent mounted a strong challenge to Mr Hower's evidence. It submitted, correctly, that the applicants had not identified any particular loan application which had been refused because of an absence of funds. It submitted, again, I think, correctly, that although Mr Hower and Mr Morton suggested that documentation in relation to unsuccessful applications had been destroyed, they each admitted under cross-examination that there may be electronic information concerning unsuccessful applications. The respondent submitted that there was no evidence that Angas or Barker had insufficient funds during the relevant period. Between 30 November 2007 and 18 March 2008 Angas had $10 million more in surplus funds than Mr Hower originally thought because he had made an error about the prudential limit during that period. Furthermore, it is correct, as the respondent submitted, that from time to time Angas was prepared to allow its prudential fund to fall below the limit fixed by the board. 210 It is also true that Mr Hower was unable to answer some questions about the figures produced in connection with Barker. I mention at this point that an argument was put that KWS had not advanced the moneys, but rather they were advanced by the Hower Corporation. On the whole of all the evidence, I reject that argument. 211 The respondent also submitted that in expressing his opinions, Mr Hower had not taken into account profits made by the various entities. That appears to be correct. Furthermore, those profits in the case of Angas were used to make alternative investments, including the acquisition of a retail mortgage business (API business). That was done from its operating income which meant the funds were not otherwise available for lending. However, I do not think one can infer from this that demand did not exceed supply in terms of loans. Angas is a significant business and no doubt had to consider and implement a range of corporate strategies and plans. Mr Hower also agreed that it was Angas' practice to pay dividends annually. 212 In addition to pointing to these aspects of the evidence, the respondent submitted that in any event any claim for loss of use of moneys by the applicants should be limited to their loss of profits and should not include the cost of the money (that is, the money they pay to investors). I reject that submission. I think that the applicants' answer to that submission is correct. The applicants have in fact incurred the cost and it is a sunk cost. They are not precluded from recovering it. 213 The respondent also submitted that even if the applicants overcome the first hurdle, a substantial allowance should nevertheless be made for the prospect of any alternative loan itself becoming a bad debt. It referred to the fact that Angas' prospectus (number 9) showed that as at 30 June 2007 past due loans were 15.71 per cent of the loan book and that of those loans a substantial proportion had been due for longer than six months. As at 30 June 2008, the percentage was 6.67 per cent and the vast majority of those loans had been outstanding for over a year. The respondents asked me to infer that interest also would have been accruing on those overdue loans. I draw that inference. However, I do not think any of this takes the respondent very far. The fact is Mr Hower gave evidence of the actual bad debts and I see no reason not to accept that evidence. 214 I have considered this matter carefully. I am satisfied on the balance of probabilities that each of the applicants lost a commercial opportunity of some value. Their businesses were successful ones and there was considerable demand for loans, particularly after the global financial crisis began to take effect. The value of the opportunity must be considered by reference to the probabilities or possibilities. Adopting the formula used by the Court in La Trobe v Hay I would allow 5 per cent for the risk of default (that is, integer C) and 80 per cent for the probability of realising the opportunity (that is, integer P). This takes into account the possibility that an alternative transaction may not have been entered into at the same time and for the same period. Integer M is based on the figures provided by the applicants (which will need to be updated) and in the case of Angas is $662,245.10, in the case of Barker is $236,249.97, and in the case of KWS is $119,844.49. On my calculations this means that the loss of opportunity damages for each applicant by way of foregone interest are as follows: Angas 28 November 2007 - 6 April 2010 $503,306.28 Barker 28 November 2007 - 14 February 2011 $179,549.99 KWS 28 November 2007 - 14 February 2011 $91,081.81

215 The applicants submit that if their loss of opportunity damages are reduced for the contingency that the postulated alternative loan would not necessarily have been for the equivalent period, then I should award interest under s 51A of the Federal Court of Australia Act for that period where it was assumed that there would not have been an alternative loan. For example, if I reduced the award to 80 per cent of the period then I should order interest on the moneys under s 51A for 20 per cent of the period. I reject that submission. The assumption behind an award for the loss of the opportunity to earn interest on an alternative loan is that the moneys are held by the innocent party to be used for alternative loans. That is the basis upon which the award is made and to take the approach advocated by the applicants would be inconsistent with that approach.

Angas' claim for interest under section 51A of the Federal Court of Australia Act 1976 (Cth) from 6 April 2010 216 Angas' claim for interest is made under s 51A(1) of the Federal Court of Australia Act which is in the following terms: 51A Interest up to judgment (1) In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either: (a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or (b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest. 217 The purpose of an award of interest under s 51A is compensatory: see Spangaro v Corporate Investment Australia Funds Management Ltd (No 2) [2003] FCA 1363 at [2] per Finkelstein J; HK Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795 at [5]-[7] per Finn J. In Wenkart v Pantzer [2010] FCA 866 at [129] Flick J identified a secondary purpose for an award of interest, namely, 'to provide a discouragement to respondents form delaying the conclusion or settlement of the proceedings'. At the same time, the award of interest is not punitive: Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 at [408] (Lander J). 218 It is well-established that interest should not be awarded in respect of damages for pre-trial economic loss where a plaintiff has been in receipt of workers' compensation payments which replaced the lost earnings: Batchelor v Burke (1981) 148 CLR 448 at 455. On the face of it, Angas' receipt of the insurance moneys is to be treated in the same way. Angas relied on Evans v Port of Brisbane Authority (1992) Aust Torts Reports 81-169 and New South Wales v Davies (1998) 43 NSWLR 182, where the receipt of a lump sum superannuation payment and a 'hurt on duty' allowance paid pursuant to s 10 of the Police Regulation (Superannuation) Act 1906 (NSW) respectively were not taken into account to reduce the interest to which the plaintiffs were entitled. However, those payments were of a different nature to workers' compensation payments which specifically replace lost earnings and insurance moneys which replace the lost principal. If the first applicant is entitled to retain an award of interest for the period from 6 April 2010 to the date of judgment it would be over-compensated and I would not award interest under s 51A. However, Angas submits that notwithstanding the absence of an express clause in the insurance contract for the repayment of interest to the insurer, there is an implied term that the insurer's right of subrogation includes interest. It relies on the decision in H Cousins & Co Ltd v D & C Carriers Ltd [1971] 2 QB 230, where the Court of Appeal considered whether the interest awarded in respect of a period after the insurers had settled with the insured could be claimed by the insurers by subrogation. Widgery LJ said (at 241-3): That the court has power to award interest in respect of the full period seems to me to be clear, though the exercise of its discretion will depend on whether the interest remains in the plaintiffs' pocket or can be claimed by the insurers. … It is therefore pertinent to inquire what term, if any, is to be implied in a contract of insurance in regard to the ultimate destination of interest awarded under the Law Reform (Miscellaneous Provisions) Act 1934. It seems to me that the answer to the officious bystanders' query would be: 'Of course the assured may retain interest accruing prior to the date of settlement by the insurers but thereafter such interest must go to the insurers'… I think that such a term was necessary to give business efficacy to the contract now in question. 219 It seems to me that similar reasoning can be applied in this case and that the term advanced by Angas satisfies the test for the implication of a term set out in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283. The insurance contract between Angas and its insurer does not contain an entire contract clause. I think that it is necessary to imply the term advanced by Angas in order that the insurer may have the full benefit of being subrogated to the insured's claim against a third party on settlement of the claim. The insurer has been deprived of the interest on its moneys and it is obvious that if Angas receives interest in respect of that period the insurer will be entitled to the return of the interest along with its principal. Angas would therefore not be entitled to retain interest in respect of the period from 6 April 2010 were such interest awarded. A question not settled in the authorities is whether it is relevant to the discretion to award interest not only that the applicant for interest has a legal obligation to return it to its insurer, but that this will in fact occur. There is no evidence before me to suggest whether or not the insurer will seek to recover the interest. However, the interest should be awarded 'unless good cause is shown to the contrary' (s 51A(1)). As the insurer has a legal right to recover any interest awarded, there seems no reason to assume it will not. It would be an unfortunate outcome if the insurer did not and Angas were to be over-compensated but ultimately it seems to me better that the insurer, which is entitled to the money, should have the opportunity to recover it. The respondent must bear the burden of any doubt. Accordingly I will award interest to Angas under s 51A of the Federal Court of Australia Act.

The Claims in Contract and Tort 220 The respondent owed duties in contract and tort to Angas and a duty in tort to Barker and KWS. It submitted that the duties were affected by the qualifications or disclaimers in its valuation report. The relevant qualifications or disclaimers are set out above (at [47]). I think the statement about the prudent loan to valuation ratio can be put to one side because there is no suggestion that any of the applicants did not use a prudent loan to valuation ratio. The statement about the valuer accepting no liability if the lender relied solely on the valuation, and no other criteria, to advance funds can also be put to one side. The applicants' inquiries may have been insufficient as I have found, but I do not think it can be said that the applicants relied solely on the valuation. 221 That leaves for consideration the statement that the valuer accepts no liability whatsoever if prudent lending practices fail to be strictly observed. I will refer to this as the relevant statement. The statement that the valuation is prepared on the assumption that the lender who relies on the valuation report (and no other) has complied with its own prudential lending guidelines, as well as prudent finance industry lending practices, does not add anything. There is no suggestion that in expressing his opinions about value Mr Taormina relied on any information about lending guidelines or practices. He prepared a valuation of the property without regard to lending guidelines or practices. 222 The respondent submitted that the qualifications or disclaimers gave rise to a duty of care owed by the applicants to the respondent. I reject that submission. The applicants have their damages reduced for contributory negligence, but they did not owe an independent duty of care to the respondent. The respondent submitted that the qualifications or disclaimers modified the duty of care it owed to the applicants. Precisely how it did so was never clearly articulated. The respondent submitted that the qualifications or disclaimers operated as contractual terms placing obligations on Angas. For example, the respondent submitted, as I understood it, that Angas owed it a contractual duty to comply with prudent lending practices. I reject that submission. I am unable to see how it can be inferred from the objective circumstances that there was a contractual promise by Angas to the respondent that it would comply with prudent lending guidelines or practices. In any event, breach of such a promise would not relieve the respondent of the consequences of a breach of its obligations. 223 It seems to me that if the relevant statement has any operation at all it is as an exemption clause. The submissions on this topic were very brief, perhaps because it was not suggested that the relevant statement affected the respondent's liability under the Trade Practices Act or the Fair Trading Act (Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592). A number of issues arise. First, there is an issue as to whether Angas had notice of the relevant statement such that it became a term of the contract. The valuation report was sent to Angas some time after the retainer was entered into, but the respondent sought to rely on previous dealings between Angas and the respondent and evidence given by Mr Hower and Mr Morton in cross-examination. There are of course a number of cases on this question (see, for example, Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197; Hardchrome Engineering Pty Ltd v Kambrook Distributing Pty Ltd [2000] VSC 359; eBay International AG v Creative Festival Entertainment Pty Ltd [2006] FCA 1768; Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749). Secondly, there is an issue as to the proper construction of the clause. Again, there are a number of authorities dealing with the proper construction of exemption clauses (see, for example, Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Alderslade v Hendon Laundry Ltd [1945] 1 KB 189; Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642; Commissioner for Railways (New South Wales) v Quinn (1946) 72 CLR 345. 224 I do not propose to address these issues in the absence of full submissions from the parties. I do not need to call the parties back because liability under the Trade Practices Act and Fair Trading Act has been established.

Conclusion 225 Each of the applicants has established its case under the Trade Practices Act and the Fair Trading Act. There must be a reduction of the loss and damage by 25 per cent for contributory negligence. The claims for interest and loss of use of moneys must be updated to the time of judgment. 226 I will hear the parties as to this matter, costs and any other matter. I certify that the preceding two hundred and twenty-six (226) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.