BAIYAI PTY LTD v GUY

Baiyai Pty Limited - Appellant/Cross-Respondent PARTIES: Gregory Guy - Respondent/Cross-Appellant Lyndell Joy Humphrey - Second Cross-Respondent

COUNSEL: M Bradford - Appellant D L Davies SC with J Oakley - Respondent

SOLICITORS: Booth Brown Samuels & Olney - Appellant Ebsworth & Ebswroth - Respondent

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40700/07

BEAZLEY JA GILES JA HANDLEY AJA

BAYAI PTY LIMITED (ACN 077514544) v GREGORY GUY CATCHWORDS

VALUATION - value of land - offer by intending purchaser admissible.

VENDOR AND PURCHASER - Vendor not willing & able to perform contract - not entitled to recover price. HEADNOTE

A former client brought an action in the District Court against the solicitor who acted for it in a conveyancing transaction which culminated in a transfer of title without receipt of the balance of purchase money expressed in "trade" dollars. The Trial Judge found for the client and awarded damages and interest of $147,444.00 based on the loss of the value of the land at the date of settlement. The client appealed, challenging the findings that the land was worth $165,000 at the relevant date and that the client had failed to mitigate its loss. The solicitor cross-appealed challenging the findings on causation and quantum. Held: (1) the Judge's decision on the value of the land at the relevant date could not be disturbed; (2) the decision to reduce the client's damages because it had failed to mitigate its loss by abandoning its action to recover the balance of the purchase price was erroneous. The balance of the purchase price in "trade" dollars was only payable when the vendor had repaid a loan from the purchaser and the vendor had never been ready, willing and able to perform this obligation. The client's damages should therefore be increased by $28,500.00, the amount deducted by the Trial Judge for the failure to mitigate; (3) the cross-appeal failed because the Judge's finding on causation was correct.

(1) Appeal allowed in part; (2) Judgment of the District Court for $147,444 and costs in favour of the first plaintiff against the third defendant set aside except as to costs; (3) Order that there be substituted judgment in favour of the first plaintiff against the third defendant for $198,990 inclusive of pre-judgment interest with affect from 8 August 2007; (4) Cross appeal dismissed; (5) Respondent and cross appellant to pay twenty five per cent of the appellant's costs of the appeal and cross appeal.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40700/07

BEAZLEY JA GILES JA HANDLEY AJA

1 April 2009 Judgment BAYAI PTY LIMITED (ACN 077514544) v GREGORY GUY 1 BEAZLEY JA: I agree with Handley AJA. 2 GILES JA: I agree with Handley AJA. 3 HANDLEY AJA: The appellant was the vendor of country land which it transferred to the purchasers on 15 January 1999. It sued the solicitor who acted for both parties for negligence and breach of fiduciary duty and recovered damages and pre-judgment interest assessed at $147,444.

4 The contract of sale was entered into on 3 December 1998 (blue 1/305). The property comprised 52.826 hectares of river flats near Dubbo and the purchase price was expressed to be $290,000 with a deposit of $5,000. Completion was fixed for 16 December. Under the special conditions (1/309) the purchasers were liable for the whole of the rates for the 1998/99 year and the vendor's legal costs, including the costs of discharging its existing mortgage. Mr and Mrs Dan Pogson were the purchasers.

5 The contract was varied by a memorandum on 14 January 1999, signed by Ms Humphrey and Mr Dan Pogson (1/379). Mr Pogson agreed to lend Ms Humphrey, who owned and controlled the vendor company, the sum of $50,000 to enable an existing mortgage on the property to be discharged. In return, Ms Humphrey was to release "the titles" to the purchasers "without our paying 285,000 trade dollars". Mr Pogson promised to release the 285,000 trade dollars to Ms Humphrey "simultaneously to her repaying the $50,000 to me". On the same day, the same parties entered into a separate loan agreement (1/374) which provided that $30,000 was lent until 8 March 1999 without interest, and $20,000 was lent until 19 February without interest. "[A] penalty rate" of 18% per annum was then payable monthly in arrears.

6 It has been common ground that the first memorandum varied the contract of sale although Ms Humphrey was not stated to be acting for the vendor, and Mr Pogson was not stated to be acting for his wife. The sale was completed on the amended terms on 15 January.

7 Although the original contract provided for payment of the balance of purchase money in cash, the parties had agreed before contracts were "exchanged" that the property would be sold for 300,000 trade dollars, later reduced to 290,000 trade dollars (red 67).

8 The trial judge (Rolfe DCJ) made findings about the nature of trade dollars which were not challenged (red 63/4): "The evidence establishes that 'trade dollars' is a type of bartering tool used by persons or corporations for the acquisition or disposal of property. It either forms part or the whole of the purchase and/or sale price of the property purchased and/or sold. In order to 'acquire' trade dollars, it seems that it is necessary to join or use an organisation which puts sellers who are prepared to receive trade dollars in touch with purchasers who are able to provide trade dollars and vice versa. It would seem that these organisations can put a 'trade dollar value' on an item of property or part thereof, or allow the party which owns the property to do so." 9 Ms Humphrey had trade dollar accounts with four such organisations (red 65).

10 Ms Humphrey (or the vendor) intended to use the trade dollars from the sale of the subject property to acquire strata office units in Pitt Street, Sydney from a vendor who was prepared to sell them for $300,000 in cash and 300,000 trade dollars.

11 She planned to borrow on the security of the units the cash component of the price plus the $50,000 needed to pay off the mortgage on the subject property and settle the transactions at the same time (black 173). She received, signed, and returned to the proposed vendor a contract for the purchase of these units but the transaction did not proceed and the sale of the subject property was settled without reference to this purchase.

12 The owner of the Pitt Street units withdrew from the proposed sale at the end of January 1999 (blue 1/254). The failure of the Pitt Street transaction deprived Ms Humphrey of the intended source of funds for the repayment of the loan of $50,000. It was never repaid and interest began to accrue at the penal rate. Mr Pogson refused to hand over the trade dollars, and Ms Humphrey found herself without the property, without the purchase price, and with a debt attracting this high rate of interest .

13 She and the vendor brought proceedings in the District Court against the purchasers and the solicitor. She sued the purchasers for rescission of the loan contract, damages for fraud and 290,000 trade dollars. She sued the solicitor for damages or equitable compensation for breach of fiduciary duty and negligence.

14 The claim against the Pogsons was settled on the second day of the trial (red 115). They agreed to pay the plaintiffs $35,000 for their legal costs and the parties agreed not to sue each other. As a result Ms Humphrey was released from her obligation to repay the loan of $50,000 with interest, and the purchasers were released from their obligation to pay 285,000 trade dollars. The action continued against the solicitor.

15 In a lengthy reserved judgment the trial Judge found that the solicitor had been negligent and he awarded the vendor the value of its land at the date of settlement less a deduction for its failure to mitigate its loss. The Judge found the $35,000 payable under the settlement with the purchasers was a reasonable figure for the plaintiffs' costs of the action against the purchasers and that has not been challenged. He continued: "There is no reason why the Court should not infer that the company would have recovered the equivalent of 285,000 trade dollars from the Pogsons. After all, this was the balance of the purchase price that was due by them to the company. It ought to be taken into account. " 16 He found that in 1998-1999 a trade dollar was worth 10c in cash and deducted $28,500 from the damages for the vendor's failure to mitigate its loss. 17 The Judge found that the vendor lost the subject property when it was transferred to the purchasers. He assessed its value at $165,000 and deducted $50,000 for the mortgage and $5,000 for the deposit. Those deductions were not challenged. 18 The vendor appealed, challenging the findings that the land had a market value of $165,000, that it had failed to mitigate its loss, and that $28,550 should be deducted from its damages. The solicitor cross appealed, challenging the findings on liability, and quantum.

The market value of the land 19 Miss Humphrey was a dealer in real estate. In 1996 her company, the appellant purchased "The Angle" which included the subject land. The purchase price was $720,000 and she provided $145,000 in cash and the rest was borrowed, in part on a first mortgage over "The Angle", and in part on a mortgage over another property. It also borrowed $40,000 as vendor finance to cover stamp duty, legal costs and other expenses. This loan was later paid off from the proceeds of a second mortgage for $50,000 over "The Angle". 20 Ms Humphrey had no plan for the repayment of these monies (red 61), and soon found herself in financial difficulties which continued until the sale of the subject property. She progressively sold off the cattle and sheep, the water rights, and parts of "The Angle" to reduce the mortgage debt. 21 In March 1998 what was left of "The Angle" was put up for public auction in three lots, one of which was the subject property (blue 1/65). None were sold. However, in May 1998 the "house" block and the small block were sold and on settlement the first mortgage was paid off. 22 The appellant was left with the subject property and the mortgage for $50,000. In August 1998, a Mr and Mrs Searle agreed informally to purchase the property for $165,000 and payment of some of the vendor's expenses. A contract was issued on these terms but the sale did not proceed. The offer was evidence of the value of the land: MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451, (2004) 63 NSWLR 167 CA, 181-5. 23 The vendor called evidence from three valuers. The Judge rejected all three valuations and found that the price of $165,000 agreed informally with Mr and Mrs Searle was the market value of the property. His reasons were as follows: "[164] In the case of Mr Kelly, his evidence does not assist the Court in its determination because his approach was based not on what the then current market value of the Property was but what the value of the Property was assuming the highest and best use.

[165] Mr Gibson arrived at his valuation by looking at sales of properties at Mudgee and Narromine. In my assessment, these were not comparable sales and so Mr Gibson's opinion is flawed.

[166] Mr Phippen's valuation is of more assistance, but again, the opinion is based on two presumptions, one, that certain road works would be carried out and secondly, that certain easements would be granted. In my opinion, these presumptions were not justifiable in the circumstances and therefore infect the figure arrived at. As well, Mr Phippen did not sufficiently or accurately identify the comparable sales to which he referred and this casts doubt on the adequacy and reliability of his approach. I therefore do not accept his opinion either.

[167] In the circumstances, there is no reason why the Court should not assess the market value of the property at $165,000. This was the amount Mr and Mrs Searle were prepared to pay the Company to purchase the Property from it in August 1998 in an arms length transaction. Mr and Mrs Searle decided not to go ahead in September or October 1998 because the Company wanted them to pay some of its costs. Accordingly, I assess the Company's damages in the amount of $165,000, being the market value of the Property in January 1999, the Court inferring that there was no real shift in the market between August 1998 and January 1999." 24 The appellant challenged these findings and invited the Court to accept the valuation of Mr Gibson. Mr Kelly 25 This valuer assessed the market value of the property at $294,000. His written valuation (blue 1/277) stated that he had assessed each of the six lots individually "as instructed" (1/279) and this reflected the highest and best use of the property. His assumptions included the grant or dedication of easements for access, and that "the cost to establish and maintain any road access ... would need to be clarified." The existing means of access were dirt tracks (black 133) and he agreed that it would be necessary to put in a road (black 134). He noted (1/280) that it would not be easy to obtain permission to erect a dwelling on any of the lots. He also noted (1/283) that there was only a limited market for small acreage if any dwelling had to be ancillary to intensive agriculture because this was not viable on any of the lots in isolation but they could be attractive to an adjoining owner or recreational user. 26 The five sales he regarded as comparable were for larger lots from 10 to 32 hectares, four of which had residential building entitlements. The fifth lot, part of "The Angle", had a water allocation, superior access, and less risk of flooding. Mr Kelly concluded that these sales showed "a range of between $70,000 and $110,000 for small acreage close to Dubbo". 27 These comparables do not appear to be a reliable guide to the value of the six separate lots in the subject property which varied from 8.3 to 7.2 hectares with no water or building rights, with a flood risk, and without access over sealed roads. 28 A more fundamental objection is that the valuation was intended to be relevant to the assessment of what the vendor lost on 15 January 1999 when she transferred the land in globo to the Pogsons without any clarification of the access, or of the cost of establishing and maintaining road access. The vendor had never attempted to market the property as six separate lots and lacked the financial capacity to improve the physical access. Turner v Minister for Public Instruction [1956] HCA 7, (1956) 95 CLR 245 establishes that land in globo must not be valued as sub-divided without substantial adjustments for the costs and risks of a sale in sub-division. Mr Kelly made no such adjustments. 29 He disregarded the result of the attempted sale by auction in March 1998 when the highest bid for the subject property was $120,000 (black 140) and said nothing about the Searles' offer to purchase it for $165,000 which the vendor informally accepted in August 1998. Mr Kelly valued the property at $294,000, 78% more than the Searles were prepared to offer. 30 In any event the vendor was not "the willing but not anxious seller" assumed by this valuer (1/279). Ms Humphrey was in financial difficulties and in a hurry. A valuation based on assumptions that the vendor was not anxious and could market the property in six lots was not a reliable guide to the value of what it lost on 15 January 1999. The Judge's decision to reject the valuation evidence of Mr Kelly cannot be disturbed.

Mr Gibson 31 Mr Gibson valued the property at $312,000 (blue 1/238). He assumed that the vendor was willing but not anxious (1/227), and that the highest and best use was as a small farming and grazing property (1/230, 234). However he thought that there may be benefit from "potential redevelopment and sale of individual allotments". He assumed an extensive marketing period (1/234). 32 He referred to four "comparable" sales (1/235), but one was at Mudgee and another at Narromine, and for that reason the Judge rejected his valuation. Cross examination of Mr Gibson provided ample support for this finding (black 224-6, 228, 229-30). Although he assumed that the highest and best use was for a small farming and grazing property he did not know whether 50 hectares was a viable unit (black 221). He thought there was potential for redevelopment despite the problems with zoning, flooding, and access (black 223-4). 33 Mr Gibson knew that the highest bid at the auction was $120,000. He first said that this was not relevant, then admitted that it was, and then said its relevance was minimal (black 227). He knew of the Searles' offer but considered that it was not very significant (black 228). His valuation was nearly double that offer. 34 His assumptions that the vendor was willing but not anxious, that there was potential for redevelopment and sub-division, and that the vendor could wait during an extended marketing period provide further support for the Judge's decision to reject this valuation, and in my judgment that decision cannot be disturbed.

Mr Phippen 35 This valuation was made in June 1998 for mortgage purposes (blue 1/407). Mr Phippen, who valued the property at $270,000, assumed that the vendor was not acting under compulsion (ditto), that the six lots could be sold individually (1/406), and his valuation was subject to the creation of easements over the access lots (1/411, 413). He also assumed that a water licence could be obtained "by making application to the Water Resources Commission" (1/413). Although the land "was pretty much in ... an in globo state, undeveloped, unserviced" (black 189) he valued the six blocks separately (black 190) subject to the provision of easements and permanent access roads (black 190, 191, 194). He did not take into account the absence of a permanent water allocation and assumed this could be obtained (191). 36 He did not live or practice in the district and retained a local valuer to identify and analyse comparable sales (black 189, 192-3). This material which had been annexed to his original valuation (blue 1/405, 413-4) was no longer available (black 192-3). He could not recall whether he had been informed that the highest bid for the subject property at the auction in March 1998 was $120,000 (black 193). 37 The Judge relied upon a number of these matters but his decision to reject this valuation is also supported by the valuer's assumption that the vendor was not acting under compulsion, that a water license could be obtained on application, and the separate valuations of the six blocks. The mortgagee would not have been amused to discover that the property had been passed in at a public auction three months before the valuation when the highest bid was $120,000, less than half this valuation.

Conclusion on value 38 In my judgment the Judge's decision on the value of the property was correct. Mitigation 39 The Judge held that the vendor should have recovered 285,000 trade dollars from the Pogsons and by giving up its right to these dollars it failed to mitigate its loss. He therefore deducted $28,500 from its damages, holding that in 1998-9 a trade dollar was worth 10 cents in cash. The appellant challenged both findings. 40 Under the contract of sale, as amended on 14 January 1999, the obligation of the Pogsons to deliver 285,000 trade dollars to Ms Humphrey (sic) was to be performed "simultaneously to her repaying the $50,000 to me" (para [3]). The reference to Ms Humphrey may be a misdescription of the vendor that did not alter the party entitled to the trade dollars. However it may have operated as an assignment of the vendor's chose in action to Ms Humphrey. In either event, the obligation of the purchasers to deliver the trade dollars, and Ms Humphrey's obligation to repay the loan were "concurrent and mutually dependent obligations ... to be performed interchangeably": Foran v Wight [1989] HCA 51, 168 CLR 385, 396 per Mason CJ, and to the same effect 417, 433, 450-1, 455. 41 The vendor and Ms Humphrey were not entitled to sue for the 285,000 trade dollars as a quasi-debt until Ms Humphrey had repaid the loan of $50,000 and interest. Neither were they entitled to specific performance of that obligation, or damages for its breach, unless Ms Humphrey was ready, willing and able to repay the loan: Foran v Wight (above) at 385, 396-8, 402-3, 430-1, 437, 451, 452. 42 Ms Humphrey never did tender or offer to tender the $50,000 and interest due to the Pogsons, and she did not say in evidence that she was willing and able to make such a payment. In cross examination she said that she could have paid the $50,000 in 2003, after she sold a property in Little Bay (black 185-6), but she could never pay that amount and the interest (black 205). 43 Accordingly the vendor and Ms Humphrey had no right to the trade dollars as a quasi-debt, no right to damages for loss of the bargain or failure to deliver, and no right to specific performance. In settling the action against the Pogsons, on the terms they did, the vendor and Ms Humphrey did not fail to mitigate their damage. Their claims under the contract of sale were unsustainable: Cf Pilkington v Wood [1953] Ch 770. To this extent the appeal must be allowed and, subject to the cross appeal, the award of damages should be increased by $28,500. 44 It is not necessary to determine the cash value of the trade dollars at the relevant date for the purposes of the appeal, but it was not 1998-1999 when the contract was entered into and title was transferred, but would have been 2007 when the vendor and Ms Humphrey abandoned their rights to the trade dollars. The cross appeal 45 The solicitor's cross appeal challenged the findings on causation and took a pleading point. It also raised alternative arguments on quantum based on characterising the vendor's loss as a loss of the purchase money in trade dollars, an alleged failure to prove causation and a different failure to mitigate. Decision on liability 46 The Judge accepted the uncontradicted evidence of Mr Neville Moses that the solicitor failed in his duty to the vendor and Ms Humphrey by not advising her to get independent advice (red 105), and by not checking to ensure that the draft contract reflected the real transaction between the parties (red 107). The solicitor was also in breach of duty because he did not ask Ms Humphrey about the amount owing under the registered mortgage, take any steps to inform himself on that topic (red 108), or ask her how she proposed to pay it off. 47 The Judge found that if the solicitor had asked appropriate questions about the mortgage Ms Humphrey would have told him that the purchase money was really payable in trade dollars which she proposed to use to purchase the Pitt Street units, and she intended to borrow on their security to pay off the mortgage over the subject property (red 108). The Judge found that if the solicitor, or an independent solicitor, had been told about Ms Humphrey's plans she would have been advised about the Pitt Street transaction, and the solicitor would have received instructions (109): "... that contracts should not be exchanged except on the basis that settlement would be tied in with, or subject to the settlement of, the purchase of the Pitt Street units. This would not have been acceptable to the Pogsons because the evidence makes it abundantly clear they were under pressure from their bank to clear the overdraft. In such a scenario it would have been inevitable that contracts would not have been exchanged; the transaction would simply not have proceeded." 48 Prima facie the solicitor's breaches of duty caused the vendor to exchange contracts with the Pogsons in an unamended form. 49 The vendor could not use the trade dollars to discharge the mortgage, and had no other means of paying it off on completion without a contemporaneous settlement of the purchase of the Pitt Street units. In the result the vendor lost the land and the balance of the purchase price. 50 There were further breaches of duty in January 1999. 51 The Judge found that the vendor lost the market value of the land on the transfer of title (red 113) but in my judgment the land was lost on the exchange of contracts in December, and it was the purchase money that was lost on the transfer. 52 The memorandum signed by Ms Humphrey on 14 January 1999 varied the contract of sale (para [3]), and made the purchase price payable in trade dollars. The vendor did not particularise a claim that, if properly advised by the defendant, or an independent solicitor, it could and would have rescinded the contract with the Pogsons in January or February 1999, and there are obvious difficulties with any such claim because it was not itself ready, willing and able to complete.

Proof of causation for loss of land 53 The Judge's findings of breach of duty prior to the exchange of contracts and consequential damage were challenged on causation grounds. There was no direct evidence from Ms Humphrey about how she would have reacted to the advice she should have received. The Judge accepted her evidence that, if so advised, she would have taken independent advice (red 105) and that her financial difficulties would not have prevented her from doing this. Those findings cannot be disturbed. 54 The findings about the independent advice she should have received are firmly based on the evidence of Mr Moses and cannot be disturbed. The critical findings that are challenged are the inferences, quoted above, (para [45]) about the probable reaction of Ms Humphrey to proper advice and the attitude of the Pogsons to a request that the contracts for the sale of the subject property and the purchase of the Pitt Street units be made interdependent. 55 The absence of direct evidence from Ms Humphrey does not undermine the inference drawn by the Judge as to her probable reaction to such advice. The two transactions were already linked in her mind, and since she could not pay off the mortgage in any other way advice that the transactions be made interdependent would have been compelling. 56 Inferences from the surrounding circumstances, other objective facts, and the probabilities may be a more reliable guide on questions of causation than ex post facto evidence from an interested party: Seaton v Burnand [1900] AC 135, 140; Cackett v Keswick [1902] 2 Ch 456, 463-4; Rosenberg v Percival ([2001] HCA 18, 205 CLR 434, 443-4. 57 The exploration of the interdependence requirement with the Pogsons and the vendor of the Pitt Street units would have delayed the exchange of contracts. The vendor of the Pitt Street units withdrew from the transaction with Ms Humphrey at the end of January 1999 (blue 1/254), and it is a reasonable inference that he would have been reluctant to commit himself to an exchange with an interdependent settlement while he was considering his own position. He had been keeping his options open, sitting on the contract for the sale of the Pitt Street units that Ms Humphrey had signed and returned early in December 1998 (blue 1/192). 58 In my judgment the inferences which support the Judge's conclusion that if Ms Humphrey had received proper advice the sale to the Pogsons would not have proceeded were well open on the evidence and cannot be disturbed. The pleading point 59 The cross appellant's pleading point was the alleged failure of the plaintiff's to include in their statement of issues a clear allegation that the solicitor was negligent because he failed to ensure that the sale of the subject property was linked to the purchase of the Pitt Street units. 60 The claim that the contracts should have been interdependent was made in the amended statement of claim filed on 17 July 2006 (red 7 para [24] (eiii), (h)); and was supported by the affidavit of Mr Moses of 16 January 2006 (blue 1/211). The trial did not start until March 2007. 61 Mr Davies SC, leading counsel for the cross appellant, referred to the plaintiffs' revised statement of issues (red 20) handed up at the start of the fourth day of the trial (black 166). However their earlier statement of issues, found in the District Court file, contained the allegations in par 6(d), (g) and (h) which referred to the vendor's capacity to discharge the mortgage, and its plans for doing this. 62 The pleading point was without substance. Vendor's failure to repay loan 63 The vendor's failure to mitigate its loss that was upheld by the Judge was based on the settlement with the Pogsons on the second day of the trial. Mr Davies submitted that there had been an earlier failure by the vendor to mitigate its loss or there was a gap in its proof of causation because it did not repay the Pogson loan during the eight years or more before the trial. 64 Ms Humphrey was cross examined at some length about her property dealings during this period but she maintained that she was never able to repay the loan and the accrued interest that Mr Pogson insisted on receiving (black 185-6, 205). 65 The onus of proving causation is on the plaintiff but the onus of proving a failure to mitigate is on the defendant. The defendant did not establish that the vendor was able to pay off the loan with interest and Ms Humphrey said she could never have done this. She could have repaid the principal after completing the sale of the property at Little Bay in 2003 (black 185-6, 205), but Mr Pogson wanted the interest as well and she said this was unworkable (black 205). The Judge did not make a finding on this question but this Court is not entitled to find, contrary to her evidence, that she could have repaid the loan with interest at some stage.

Conclusion 66 There was also a half hearted challenge to the award of $1 as nominal damages in favour of Ms Humphrey. The solicitor's point was that the retainer was with the vendor not Ms Humphrey so that the only duty to her lay in tort and the award of nominal damages could not be supported. The point was sufficiently disposed of during oral argument. 67 The final point related to the costs of the vendor's valuation evidence. Its case on this issue almost totally failed at the trial because all three valuations were rejected for one reason or another. The submission was that the defendant should have had an order for the costs of the time spent on this evidence, or at the very least the vendor should have been deprived of those costs. The Judge's order that the vendor have the costs of the trial was well within his discretion and in view of the substantial verdict it cannot be disturbed. 68 The argument on the appeal occupied the first day and part of the second, with the balance being taken up by the cross appeal. The appeal failed except on a narrow issue relating to mitigation and the cross appeal wholly failed. In these circumstances the respondent cross appellant should pay one quarter of the combined costs of the appeal and cross appeal. The following orders should be made:

(1) Appeal allowed in part; (2) Judgment of the District Court for $147,444 and costs in favour of the first plaintiff against the third defendant set aside except as to costs; (3) Order that there be substituted judgment in favour of the first plaintiff against the third defendant for $198,990 inclusive of pre-judgment interest with affect from 8 August 2007;

(4) Cross appeal dismissed; (5) Respondent and cross appellant to pay twenty five per cent of the appellant's costs of the appeal and cross appeal. **********

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.