City Pacific Ltd (in liq) v CBRE - [2021] NSWSC 456 - NSWSC 2019 case summary — Zoe

NSWNSWSC

City Pacific Ltd (in liq) v CBRE

[2021] NSWSC 456

Supreme Court of NSW|2019-09-05|Before: Walton J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2019-09-05

Before

Walton J

Catchwords

[2014] FCAFC 65 Adelaide Bank Limited v DTS Property Services Pty Ltd [2008] NSWSC 1328 Amadio Pty Ltd v Henderson (1998) 81 FCR 149
[1997] FCA 1405 Australian Competition and Consumer Commission v TPG Internet Pty LTD (2013) 250 CLR 640
[2013] HCA 54 Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345
[2012] HCA 17 Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291

Source

Original judgment source is linked above.

Catchwords

[2014] FCAFC 65 Adelaide Bank Limited v DTS Property Services Pty Ltd [2008] NSWSC 1328 Amadio Pty Ltd v Henderson (1998) 81 FCR 149[1997] FCA 1405 Australian Competition and Consumer Commission v TPG Internet Pty LTD (2013) 250 CLR 640[2013] HCA 54 Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345[2012] HCA 17 Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291[2013] HCA 1 Gould v Vaggelas (1985) 157 CLR 215[2001] HCA 52 HTW Valuers (Central QLD) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640[1990] HCA 31 Lloyd v Grace, Smith & Co [1912] AC 716 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705[2001] NSWCA 305 MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313[1996] FCA 766 Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 O3 Capital Pty Limited v WY Properties Pty Limited (2016) 49 WAR 517[2016] WASCA 82 Perre v Apand Pty Ltd (1999) 198 CLR 180[2012] FCAFC 31 Roads & Traffic Authority of NSW v Dederer (2007) 234 CLR 330[1992] HCA 55 Winnote Pty Ltd v Page (2006) 68 NSWLR 531

Judgment (143 paragraphs)

[1]

ne Pty Ltd [1983] 3 NSWLR 221 Commercial Banking Co of Sydney v R H Brown & Co (1972) 126 CLR 337 Coris and Investments Ltd v Druce & Co [1978] 2 EGLR 86 Derring Lane Pty Ltd v Fitzgibbon (2007) 16 VR 563; [2007] VSCA 79 Dunn v Hanson Australasia Pty Ltd (2017) 12 ACTLR 138 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liquidation) [2001] FCA 1628 Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd (1997) 148 ALR 271; [1997] FCA 788 Genworth Financial Mortgage Insurance Pty Limited v Hodder Rook & Associates Pty Limited [2010] NSWSC 1043 Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1 Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75 Hann Nominees Pty Ltd v National Australia Bank Ltd [2000] FCA 454 Hawkins v Clayton (1988) 164 CLR 539 Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 HTW Valuers (Central QLD) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613 I & L Securities Pty Limited v R S Melloy Pty Limited [2002] QSC 306 Interchase Corporation Ltd v ACN 010 087 573 Pty Ltd [2003] 1 Qd R 26 Israel v Foreshore Properties Pty Limited (in liq) (1980) 30 ALR 631 Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999)199 CLR 413; [1999] HCA 25 Kestrel Holdings Pty Ltd v APF Properties Pty Ltd (2009) 260 ALR 418 Khoury v Coffey Projects (Australia) Pty Ltd [2015] NSWCA 371 Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70; [1990] HCA 31 Lloyd v Grace, Smith & Co [1912] AC 716 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313; [1996] FCA 766 Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 O3 Capital Pty Limited v WY Properties Pty Limited (2016) 49 WAR 517; [2016] WASCA 82 Perre v Apand Pty Ltd (1999) 198 CLR 180; [1999] HCA 36 Pine River Pty Ltd v Scorda [2001] WASC 105 Propell National Valuers (WA) Pty Ltd v Australian Executor Trustees Limited (2012) 202 FCR 158; [2012] FCAFC 31 Roads & Traffic Authority of NSW v Dederer (2007) 234 CLR 330; [2007] HCA 42 Robinson v 470 St Kilda Road Pty Ltd (2018) 263 FCR 572 Ross v Cook [2009] NSWSC 671 Ryan Wealth Holdings Pty Ltd v Baumgartner (2018) 131 ASCR 236; [2018] NSWSC 1502 Salomon v Salomon & Co Ltd [1897] AC 22 Segal t/as Segal Litton & Chilton v Fleming [2002] NSWCA 262 Singer & Friedlander Ltd v John D Wood & Co [1977] 2 EGLR 84 Spencer v Commonwealth of Australia (1907) 5 CLR 418 Ta Ho Ma Pty Ltd v Allen [1999] NSWCA 202 Tepko Pty Ltd v Water Board (2001) 206 CLR 1; [2001] HCA 19 Tomasetti v Brailey (2012) 91 ATR 531 Trade Credits Ltd v Baillieu Knight Frank (NSW) Pty Ltd (1985) Aus Torts Rep 69 Wallace v Kam (2013) 250 CLR 375 Wardley Australia Limited v Western Australia (1992) 175 CLR 514; [1992] HCA 55 Winnote Pty Ltd v Page (2006) 68 NSWLR 531; [2006] NSWCA 287 Texts Cited: C Lockhart, The Law of Misleading or Deceptive Conduct (2019, 5th ed, Lexis Nexis Butterworths) K Mason, J W Carter and G J Tolhurst, Mason and Carter's Restitution Law in Australia (2008, 2nd ed, LexisNexis Butterworths) Category: Principal judgment Parties: City Pacific Ltd (in liq) (First Plaintiff) Martha Cove Marina Pty Ltd (in liq) (Second Plaintiff) CBRE (V) Pty Ltd (First Defendant) Christopher Nicodimou (Second Defendant) Representation: Counsel: J C Giles SC with B G Curtin (Plaintiffs) D A Lloyd SC with V Bulut (Defendants)

[4]

OVERVIEW

The plaintiffs' claim arose out of valuation reports, prepared by the defendants of Lot S17 (also known as stage S6 and 2H, being initially 239 and subsequently 233 marina berths) ("the Marina"), which formed part of the Martha Cove Development on the Mornington Peninsula in Victoria. (The Marina was also interchangeably referred to in documentation and by the parties as "the Martha Cove Property", "Lot S17" and "the Marina lot"). The reports also contained valuations of the following properties: Lots S22, S23 and S24 on Plan of Subdivision 435310J, which were part of the Martha Cove Development (collectively, "the Other Properties"). However, the valuations of the Marina are what were in issue in the present proceedings.
Three valuation reports were prepared with respect to the Marina and the Other Properties, namely: 1. the "Valuation Report prepared for City Pacific Limited of Martha Cove Marina & Commercial Centre", dated 18 May 2006, and provided by CBRE to City Pacific on 30 June 2006 ("the June Valuation"); 2. the "Valuation Report prepared for MCD (Aust) Pty Ltd ("MCD") on behalf of Indigo (Martha Cove Harbour Precinct Land Owner) Pty Ltd of Martha Cove Marina & Commercial Centre", dated 30 January 2007, and provided by the Indigo Group to City Pacific on or about 16 March 2007 ("the Indigo Valuation"); and 3. the "Valuation Report prepared for MCD (Aust) Pty Ltd ("MCD") on behalf of Indigo (Martha Cove Harbour Precinct Land Owner) Pty Ltd of Martha Cove Marina & Commercial Centre", dated 30 January 2007, and provided by the Indigo Group to City Pacific on 26 June 2007 ("the Amended Indigo Valuation").
The relevant valuations for the purposes of the plaintiffs' claim were the June Valuation and the Amended Indigo Valuation (which shall hereinafter be referred to as, collectively, "the valuations"). I shall return to the contents of those valuations, and the entities mentioned therein, below.
The Marina has never been transferred to Martha Cove and the vendor has failed to repay any of the Martha Cove Property Monies. Consequently, Martha Cove has been unable to repay the debt it owed to City Pacific.
The plaintiffs contended that the valuations: 1. failed to adopt an appropriate valuation methodology for a freehold marina lot and grossly overvalued the Marina. The valuations were prepared on a gross realisation of individual leasehold berths basis which did not provide advice of market value of the Marina; 2. were prepared and published in breach of the duties owed to the plaintiffs and constituted misleading or deceptive conduct; and 3. were not the product of due care and skill, did not have a reasonable basis and consequently conveyed misleading or deceptive representations.
The plaintiffs also contended that, in reliance on the valuations and associated representations: 1. City Pacific entered into and exercised its rights under a Put and Call Option Deed dated 29 June 2007 ("the Put and Call Option") containing a nomination right to buy (in the event Martha Cove, its wholly owned subsidiary and nominee, exercised the call option) the Marina for a price well in excess of the true value of the Marina; 2. Martha Cove entered into a Contract of Sale with ILO dated 8 October 2007 ("the Contract of Sale"), to purchase the Marina, and paid a total of $11.1 million ("the Martha Cove Property Monies") to or at the direction of the vendor in part consideration for the Marina; and 3. City Pacific provided Martha Cove the money for payments towards the purchase of the Marina and to pay the Martha Cove Property Monies.
In an agreed glossary of terms provided by the parties, the Martha Cove Property Monies were said to have comprised of the following separate payments: 1. $2.1 million paid on 29 June 2007 ("the Call Option Fee"); 2. $2 million paid on 10 October 2007 ("the Further Deposit"); and 3. $7 million paid on 28 November 2007. (The three separate payments that comprised the Martha Cove Property Monies were referred to throughout the proceedings as the First, Second and Third Payment, respectively. I will variously use the above shorthand expressions to describe the Martha Cove Property Monies throughout this judgment).
I will return to the circumstances of those payments in the context of the factual background.
The plaintiffs submitted that, but for the conduct of the defendants, they would not have entered into those abovementioned agreements and paid the Martha Cove Property Monies.
If they had known the true value of the Marina, City Pacific would not have paid to the benefit of Martha Cove those monies, and Martha Cove would not have paid those moneys to the vendor.
Broadly, the plaintiffs' claim had then two elements: 1. a claim in misleading and deceptive conduct; and 2. a claim in negligence. Adopting the terms of the parties, hereinafter, I will refer to those claims as the "Representation Case" and "Duty Case", respectively.
In summary, the defendants' position was that the plaintiffs' Duty Case and Representation Case failed at every stage of the relevant inquiries to be made by the Court. That is: 1. the defendants did not owe any duty to the plaintiffs when preparing the Amended Indigo Valuation; 2. the duty owed by the defendants to City Pacific with respect to the preparation of the June Valuation was not breached. If a duty of care was owed in preparing the Amended Indigo Valuation, that duty was not breached; 3. none of the representations pleaded were misleading or deceptive; 4. there was no reliance by the plaintiffs on the June Valuation or Amended Indigo Valuation in their decision to pay the Martha Cove Property Monies; 5. the plaintiffs did not demonstrate that any breach of duty or misleading and deceptive conduct caused any of the pleaded loss; 6. the plaintiffs have failed to mitigate their loss and damage; 7. the plaintiffs' pleaded claims are statute barred; and 8. the claims were not maintainable pursuant to s 601FS of the Corporations Act 2001 (Cth).
The defendants further contended that, if the plaintiffs were to overcome each of those hurdles, the damages should be reduced by 100%, or close to that figure, on account of contributory negligence or the concurrent wrongdoing of the directors, Philip Sullivan, Director of City Pacific and Martha Cove, and James Finucan, Director of Martha Cove.

[23]

The Plaintiffs Individual Role(s) James Finucan Director and Company Secretary of Martha Cove from 20 July 2006 to the date of the hearing. Company Secretary of City Pacific from 1 August 2006 to the date of the hearing. General Counsel of City Pacific from about 2006 to 2008. Robert Friggi Manager Commercial Lending - Victoria of City Pacific in about September 2007. Matt Gillam Assistant Lending Manager of City Pacific from about 8 August 2005 to July 2006. Lending Manager of City Pacific from about July 2006 to November 2008. Will Hattingh Development Executive of City Pacific in about November 2007. Steven Johnstone Corporate Treasury Manager of City Pacific from about 2007. Steve Mackay Group Executive - Administration of City Pacific from about 2005 to 2007. Company Secretary of City Pacific between 12 July 2001 and 1 August 2006. Executive Director of IPC from about 2006 to 2008. Managing Director and Company Secretary of IPC from about 2007 to 2008. Director of IPC from 17 February 2005 to 5 October 2012. Steve McCormick Group Executive - Property Development Finance of City Pacific from about July 2006 to July 2009. Director of City Pacific from 20 June 2008 to 27 July 2009. Adam Purss Chief Financial Officer of City Pacific from about 2006 to 2008. Garry Sladden Group Executive - Operations at City Pacific in about 2007. Phillip Sullivan Director of IPC between 17 February 2004 and 16 September 2005. Director of Martha Cove between 5 July 2006 and 5 December 2008. Director of City Pacific between 8 August 1997 and 12 November 2008. Managing Director and Chief Executive Officer of City Pacific from about 2006 and 2008. Angela Tinson Solicitor for City Pacific and Martha Cove from about 2006 to 2009. Peter Trathen Director of City Pacific from 16 September 2005 to 20 June 2018.

[33]

THE EVIDENCE

The evidence in the proceedings was voluminous and primarily consisted of the following documents: 1. Amended Evidentiary Statement of Simon Cathro, Liquidator of the plaintiffs, dated 4 July 2017 (Ex 7); 2. Supplementary Evidentiary Statement of Simon Cathro dated 6 July 2018 (Ex 8); 3. Part E of the Court Book, which consisted of 12 volumes, described as a "chronological bundle", and included material from 11 June 1999 through to 17 June 2019 (Ex 9); 4. Defendants' Tender Bundle (Ex 10); 5. Joint Key Documents Bundle (Ex 11); 6. Affidavit of Douglas Robert Lane dated 5 July 2018, together with exhibit DLR-3 (Ex 12); 7. Affidavit of Douglas Robert Lane dated 19 February 2019, together with exhibit DLR-4 (Ex 13); 8. Affidavit of Michael Wright dated 5 October 2018, together with exhibit MW-1 (Ex 14); 9. Affidavit of Michael Wright dated 5 October 2018, together with exhibit MW-1 (Ex 15) (notwithstanding the repeated date and exhibit description, Ex 14 and 15 were two different documents); 10. ANZ Valuation Guidance Note 2: "Valuations for Mortgage Loan Security Purposes" (Revised February 2006) (Ex 16); 11. Affidavit of Robert Gordon dated 4 October 2018, together with exhibit RG-1 (Ex 17); and 12. Affidavit of Robert Gordon dated 2 August 2019, together with exhibit RG-2 (Ex 18A).
At the hearing Mr Lane, Mr Wright and Mr Gordon, the expert witnesses, provided oral evidence via concurrent evidence. I will turn to a summary of the expert evidence in the course of my considerations after setting out the factual background.
In considering the lay evidence given by each party, it is important to bear in mind the respective positions of the parties. The plaintiffs are in liquidation and bring these proceedings by their liquidator, Mr Cathro. Mr Cathro has put in evidence of the documents available to him. The plaintiffs did not call any of their former officers. As was common ground, and stated by counsel for the defendants on a number of occasions, Mr Cathro in his capacity as liquidator of City Pacific had sued some of those officers in separate proceedings. Jones v Dunkel has no application to the position of the plaintiffs, the former directors and employees of City Pacific are not in the same camp as the companies in liquidation: see, by analogy, Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345 at [254] and [265] (per Heydon J).
On the other hand, Mr Nicodimou was available and was not called by the defendants. I accept the submissions of the plaintiffs that the Court should not draw any inference favourable to the defendants as to what Mr Nicodimou may have said orally regarding the valuations or how it was that he came to adopt a particular valuation methodology.

[35]

Introduction

During the course of proceedings the parties were requested to identify agreed facts and to crystallise factual matters that were in dispute. In relation to agreed matters, there was produced, at an earlier stage, an agreed statement of facts. Later in the proceedings, a document was prepared which set out, in part, those parts of the plaintiffs' written submissions providing a factual background with respect to which the defendants agreed.
As to the disputed matters, the defendants response to the plaintiffs factual submissions contained notations as to some factual issues which was supplemented by a more substantial document, from the defendants, setting out nine factual controversies. The plaintiffs objected to that document on the basis it did not conform with the agreement reached between the parties to identify the parties' positions with respect to the factual background by reference to the plaintiffs' written submissions and also because the document did not properly represent all relevant factual controversies.
The following discussion of the factual background proceeds upon the large measure of agreement as to the factual background, which agreement conforms with the Court's view of the evidence, together with the resolution of factual controversies (except to the extent those controversies are dealt with in the consideration section of this judgment). In adopting that approach, I proceeded upon the basis that, regardless of the disconformity of the document produced by the defendants with arrangements entered at the final day of hearing, the Court should grapple with those issues so far as they represented, as they did, various factual contests over which the parties joined issue in the course of the proceedings. In other words, regardless of the form of the document and its timing, the issues raised were squarely before the Court and should be dealt with, although the document does not deal with all of the factual controversies laying between the parties. Those broader range of issues are also addressed in the following discussion, albeit in the context where the utility of the approach earlier envisaged by the Court was diminished to some degree by the approach adopted by the defendants.

[37]

The Draft Valuation

On about 10 March 2006, Mr Nicodimou provided Mr Sullivan of City Pacific with a copy of a draft valuation of a number of properties within the Martha Cove Development, including the Marina. The draft valuation was titled: "A Valuation Report prepared for City Pacific Limited Of Stages 2A - H, S7, S8 & 3, 4A-C, 5, 6, Martha Cove Safety Beach VIC 3004" ("the draft valuation") and dated 9 February 2006.
In s 1.1 of the draft valuation, the defendants recorded the instructions they had received from City Pacific dated 27 February 2006, being, relevantly, to assess the "Current Market Value 'As Is'" and the "Gross Realisation 'As if Complete'" of the Marina for "first mortgage security purposes". Section 1.1. is extracted below: 1.1 Instructions We refer to written instructions received from Mr Matt Gillam, City Pacific Limited, dated 27 February 2006 requesting us to undertake a valuation of the freehold interest of the subject property for first mortgage security purposes. Specifically we are to assess the following: 1. Current Market Value "As Is" acknowledging the permit, approved plans, pre-sales and Quantity Surveyor verification of Costs (Rider Hunt) and the Gross Realisation "As if Complete" for each Stages 2A-H, 57, S8, 3 and Stages 4A-C, 5, 6. We enclose herewith a copy of the Letter of Instruction, refer Appendix I. (The "copy of the Letter of Instruction" was not annexed with the draft valuation).
The draft valuation responded to express instructions to value the Marina on a gross realisation basis.
At some stage prior to 25 May 2006, Marina Cove became the registered proprietor of the Marina and the Other Properties. As earlier mentioned, City Pacific was the ultimate parent company of Marina Cove.
On about 28 April 2006, Marina Cove provided various documents to Mr Neilsen at IPC, including feasibility reports for the Marina and Other Properties, in connection with a proposed sale of those properties to the Indigo group. The defendants disputed the relevance of this fact to the proceedings, but did not appear to dispute its occurrence.
It is apparent that it was anticipated that the purchase by the Indigo group was to be funded by a loan by City Pacific in its capacity as responsible entity of the CPMT. In the events which occurred, Marina Cove also provided vendor finance. Although that is part of the factual setting, the vendor finance does not inform the analysis. The purchaser repaid Marina Cove in about August 2007.

[38]

The Letter of Instruction for the June Valuation: The Valuation Retainer

By letter dated 25 May 2006, addressed to Mr Nicodimou, City Pacific engaged CBRE to provide a valuation report in respect of the Marina and the Other Properties for mortgage security purposes in accordance with "City Pacific Limited Valuation Guidelines" ("the Valuation Retainer"). The Valuation Retainer expressly stated that the valuation report was to be relied upon by City Pacific and PTQ as custodian for the CPMT.
The purpose of the valuation, expressly stated in the letter, was that City Pacific was considering funding, by loan, the acquisition by an Indigo group company of the Marina and Other Properties. The following facts are not controversial: 1. the letter expressly referred to a valuation for mortgage security purpose (the "re" of the letter); 2. the letter stated that the valuation be of, inter alia, the Marina, drawing no distinction between the Marina and the Other Properties in terms of that which was to be valued; and 3. the letter stated that the valuation was to be "as is".
At the outset, the Valuation Retainer stated: It is essential that you use and undertake procedures, processes, enquiries and examinations that would reasonably be expected of a registered valuer to determine market value of the property. City Pacific Limited will place considerable reliance on your valuation in assessing whether the loan proceeds. [Emphasis added.]
As to that initial instruction, the plaintiffs contended that the reference to "procedures, processes, enquiries and examinations that would reasonably be expected of a registered valuer to determine market value of the property" is informed by the API Practice Standards and the expert evidence before this Court. Reference, in that respect, was made to Practice Standard 1, in particular, para 4.0, which is extracted below: 4.0 SALE IN ONE LINE OR SINGLE TRANSACTION Where a valuation is undertaken of multiple properties in one development the sum of individual values must not be reported as the value of the development, but if aggregated must be reported as the total gross realisation. A Sale In One Line valuation must be based on the assumption of a single transaction for the total holding or a sale in one line to one buyer.
The effect of that standard, it was correctly submitted, "is that a gross realisation analysis is not to be stated as a valuation of separate properties". That requirement, it was further contended by counsel for the plaintiffs, was consistent with the suggestion ultimately made by Mr Wright that a gross realisation might be an integer in a valuation, but otherwise tells one little or nothing about the market value of a property. That evidence is extracted below (T112.48-115.20): GILES: Just coming back to paragraph 39 and the valuation of May 2006, do you accept that the valuation of May 2006 was not a valuation of a freehold interest in lot S17? WITNESS WRIGHT: I do agree. GILES: Do you also agree that it did not express the market value of the 239 lots if traded in one line? WITNESS WRIGHT: Correct. GILES: And one would say the same about the 2007 valuation. That is, it was not a valuation of a freehold interest in lot S17? WITNESS WRIGHT: That's right. GILES: And it did not tell you what the market value of the then 233 berths were if sold in one line? WITNESS WRIGHT: That's right. GILES: And that's because if sold in one line you would not expect the market value to equate to the sum of 239 individual sales? WITNESS WRIGHT: Correct.
That conclusion also follows as the definition of market value which was adopted in substance reflecting the well-known Spencer v Commonwealth of Australia (1907) 5 CLR 418 ("Spencer") definition at 431-432 (per Griffith CJ).
Returning to the Valuation Retainer, the following "special instructions" were also included: Special Instructions relating to the Valuation are: • Include a copy of these instructions (including Valuation Guidelines and Report Content Requirements) in each report provided. • We are seeking an 'as is' valuation only. • Assessment of values must exclude GST. • The report must be signed or counter-signed by a Director or Officer of your Company authorised by your current professional indemnity policy.
The Valuation Retainer incorporated a copy of the City Pacific Limited Valuation Guidelines (which included "the Report Content Requirements") (collectively, "the Valuation Guidelines"). An extract of those guidelines appears below:
Immediately following that table was a further table described as "Valuation Report Content where applicable". It included additional guidelines with respect to the content of the report and including, inter alia, the following categories: 1. Land and Title Details; 2. Environment and other Special Risks; 3. Improvements; 4. Market Commentary; 5. Valuation Rationale; and 6. Determination of Valuation and Summary.
Next to the heading, "Valuation Rationale", the following guidelines relevantly appeared: • The valuer must use the most appropriate method of valuation showing adequate substantiation and compliance with the relevant API Practice Standards and API Guidance Notes … • The valuation rationale is to be supported by at least one check method. The reasons as to why one method of valuation is deemed to be most reliable should be provided…
Next to the heading, "Determination of Value and Summary", the following guideline relevantly appeared: • Comment on the ability of the property to hold its value over a period of 3-5 years
On 1 June 2006, Mr Nicodimou sent an email to Mr Gillam, then the Assistant Lending Manager at City Pacific, providing details of the valuations for the Marina and the Other Properties. That email stated: Matt please find attached assessments for Meinstock and Barton. In relation to the Retirement Site as per the valuation report. The assessment of 7,500,000 is GST exclusive and assumes approval for 150 units and a land size of 6.2 hectares. Please let me know if these details vary. Can you provide me with the Contracts of Sale for the retirement site to Grande Pacific and the Contract to Indigo for Stages 2H, S7 & S8. In relation to the Commercial S7 and S8 I have assessed the value for the retail at $10,000,000 based on the finished product. We did not do a land value for• this part. Please call to discuss this. In relation to the 239 berths the "completed" value of these leasehold berths was assessed at $26,185,000. The GST exclusive figure will be $23,804,545 and the 44 condos villa lots (as if complete) were assessed at $8,800,000 inc GST so the GST exclusive figure is $8,000,000. I am assuming that Indigo are buying the completed berth and condo lots not the land? Please note that if the information in the valuation report is now not current, ie planning etc, then the above numbers will vary particularly for the Mariner Berths and commercial and aged care. Please call to discuss the above. [Emphasis added.]
On 1 June 2006, Mr Gillam responded by an email to Mr Nicodimou, which stated: Thanks Chris. Mienstock and Barton numbers look ok. In direct response to your queries (in the order you have sent through below); Retirement Site - As it stands at present your assumption of 150 units and land size is correct. This is in the process of being varied but as it stands right now this is correct. The retirement site price will be $7.5M plus GST. Contracts - are currently being prepared for Grande Pacific and Indigo. Unavailable to get to you at present. Commercial land - For the Retail portion the land price is $3M plus GST. Indigo are buying the completed berths and condo lots - you are correct. [Emphasis added.]
Later that day, Mr Nicodimou responded by an email to Mr Gillam, which stated: Ok Matt, therefore all is satisfactory. Or do you need me to assess a land value for the retail? Can you confirm the land area please.
A factual dispute arose as to the effect of Mr Gillam's emails with Mr Nicodimou upon the instructions given to the defendants via the Valuation Retainer.
In support of that finding the defendants contended: 1. That the effect of those communications was that the relevant interest to be valued was the leasehold interest in the Marina; that the leasehold interest was to be valued on a gross realisation basis; and that the Marina was to be valued "as if complete" rather than "as is". 2. That the basis of preparation alleged by the defendants should have been obvious to any sophisticated reader of the June Valuation, such as City Pacific. 3. Further, it was contended that "the plaintiffs' expert accept[ed] that this email changed the instructions given to the defendants, to require them to value the [Marina] on a completed berth basis".
For the following reasons, I do not accept that the email exchange between Mr Gilliam and Mr Nicodimou in June 2006 constituted a change of instructions set out in the Valuation Retainer: 1. The June Valuation stated that it was prepared on the basis of the instructions contained in the Valuation Retainer (see s 1.1 of the June Valuation, extracted below). Any reader, sophisticated or otherwise, is entitled to understand that the June Valuation was prepared on the stated basis, namely, on the instructions attached and act on that on that basis. If the communications between Mr Gillam and Mr Nicodimou did alter the basis on which the June Valuation was to be prepared, it would be misleading for the valuation not to expressly and clearly refer to any changes to the Valuation Retainer brought about by those communications. 2. To the extent the expert evidence can go to this issue, in cross-examination the defendants did not take Mr Lane or Mr Wright, the valuation experts retained by each party, to any of the references to market value in either the June Valuation (or the Amended Indigo Valuation). To the extent the experts could make comment on what the email correspondence meant (noting the expert cannot properly do so because it not being a topic of expertise and the communications were incomplete as the telephone conversations referred to are not proved and may inform the meaning) the cross-examination miscarried by not referring to market value. 3. Whilst Mr Nicodimou communicated with Mr Gillam and Mr McCormick in early June 2006 about the June Valuation (and, as set out below, again in June 2007 about the Martha Cove Development and the Amended Indigo Valuation), the defendants failed to call Mr Nicodimou. The defendants served an affidavit sworn by Mr Nicodimou, and there was no reason not to call him. In those circumstances, the plaintiffs' contended that Jones v Dunkel (1959) 101 CLR 298 applies. I accept that it should be inferred that Mr Nicodimou could not give any evidence consistent with the defendants' theory that the basis on which they were instructed to value of the Marina was changed by instruction (at least beyond a suggestion of "as if complete" rather than "as is"). 4. To the extent it is open to suggest that the defendants' instructions changed by reference to the communications between Mr Gillam and Mr Nicodimou, it is important to note the extent to which they changed. Those communications may justify a change in instructions from an "as is" to an "as if complete" valuation, however, they would not explain any change in instructions from valuing the freehold interest in the Marina to the leasehold interest. The opposite is true: the email from Mr Gillam dated 1 June 2006 only refers to the "completed berths". Further, those communications do not justify a change from market value to a gross realisation value, and the evidence is that gross realisation tells one little or nothing about market value. The gross realisation value of the Marina may be an integer in a discounted cash flow analysis if a valuer was to assume a business model of selling leases on a long term basis, but it does not itself tell one anything about market value.

[42]

Factual Controversy: Conversations (if any) between Mr Nicodimou and Mr Gillam between 26 and 29 June 2006

The plaintiffs contended that between 26 and 29 June 2006, in connection with the proposed sale and finance of the Marina and the Other Properties, Mr Gillam and Mr Nicodimou exchanged emails and had discussions pursuant to which Mr Gillam requested that the assessment of market value and the valuation for the Marina and Other Properties be increased.
Conversely, the defendants submitted that there was no evidence before the Court as to the contents of any discussions between Mr Nicodimou and Mr Gillam. The Court can only proceed, it was submitted, on the basis of the contents of the emails which were in evidence. Those emails are extracted below.
On 26 June 2006 at 6.08pm, Mr Nicodimou sent an email to Mr Gillam, which stated: Hi Matt, got your phone message. I will look into further over night, but I can move the S17 (239 berths) to $20,845,000 ex GST which is $22,929,000 inc GST. The original figure of $26,185,000 was inclusive of GST. I have reviewed the figure down as a result of the higher outgoings that you sent me as compared with my evidence. Also I have moved the commercial centre value up from $10,000,000 up to $12,500,000 which now gives a land value of $2,500,000. Last time I did not report a land value, just an as [sic] if complete value, based on a build out for the commercial. I also noticed that S17 does include some waterside houses. If the S17 figure is still a problem then I can always apportion the value a bit differently so more goes towards S17 (ie inc some the waterside apaprtments [sic]). PS the apportionment of uses to each Lot is roughly mine as you did not have a map or PS for each Lot. Let me know of your thoughts. [Emphasis added.]
On 27 June 2006 at 9.03am, Mr Gillam responded by email to Mr Nicodimou, which stated: I'll give you a call mid morning if that's ok Chris - I've just got a couple of pressing matters to attend to before I can get my head back into this! The main thing I'll be wanting to know is where the original figure of $23.8 exc came into play as that is what we were counting on/relying on to get us over the line. I'll discuss with you in an hour or so. [Emphasis added.]
Later on 27 June 2006 at 1.36pm, Mr Gillam sent a further email to Mr Nicodimou ("the Further 27 June 2006 Email"), which stated: Hi Chris, Further to this; The total value we need to achieve is $34,800,000 exclusive of GST. This can be apportioned in any manner but this is a critical figure [Original emphasis]. The contract suggests all parcels are being sold under this figure but this is to be expected given the relationship we have with the Indigo Group, hence the Vendor Finance arrangement being undertaken by Marina Cove Pty Ltd. The purchase price exclusive of GST is $30,473,000 with GST of $1,252,172.88 on top of this. Contract prices were set a reasonable time ago and whilst they are arms length, they have been discounted. The commercial land apportionment could be raised if you are comfortable with an overall value of $12,500,000. A land content of $4,000,000 would not be unreasonable? I assume there would have had to have been a land content included in an 'as if complete' value of $9,090,909 exc GST? CPPM had originally assumed from a land/building split - $3,000,000/$6,090,909. Would this then allow you to place a figure of $22,000,000 exc GST on the Marina berths without compromising your evidence to any severe degree? Give me a call to discuss in need. [Emphasis added.]
In my view, notwithstanding the absence of viva voce evidence from either Mr Nicodimou or Mr Gillam (noting that neither were called to give evidence in these proceedings), it may be plainly inferred that the two men were engaged in discussions between 26 and 29 June 2006, which included verbal conversations not captured in the above email exchange. That conclusion is supported by the content of the above emails, in particular, the repeated references to "phone message" and "give me[/you] a call", which features in each email. That said, as to the nature and contents of any conversation had, it may only be inferred that the it connected to the issues raised in the emails. No further conclusions are available on the evidence before the Court. As such, the weight to be put on the fact of such conversations is limited.

[44]

The Significance of the Further 27 June 2006 Email

The plaintiffs advanced the following submissions as to the significance of the Further 27 June 2006 Email: 1. While it does not reflect well on Mr Gillam's competence (he appears more interested in the deal rather than value), he was not the decision maker. That Mr Gillam was not the decision maker only emphasised the need for a valuation which accorded with instructions, and the instructions recorded in the valuation. 2. The email informed Mr Nicodimou of the relationship between City Pacific and the purchaser. That relationship was one foundation of Mr Wright's evidence (in the "Reply Report" referred to below) to the effect that he thought it usual that the purchaser had the June Valuation, and demonstrates that acting reasonably the defendants ought to have expected that the Amended Indigo Valuation would be shared with City Pacific.
In contrast to the first contention, the defendants relied on the course of correspondence between City Pacific and Mr Nicodimou between 25 May 2006 (the date of the Valuation Retainer) and when the June Valuation was completed as evidencing a change in instructions.
In reply to that contention that plaintiffs submitted: 31. There are numerous problems with that theory, and this email demonstrates one of those problems. Directing attention to higher outgoings to the Marina owner is prima facie inconsistent with a valuation involving tallying up potential sale prices of long-term leases. Taking outgoings into account is a proper analysis, either of capitalising net income or a discounted cashflow. The present point is that this correspondence does not convey the meaning for which the defendants contend.
Further, even if the Court accepted the defendants' submission, the plaintiff submitted, such a fact would not diminish the plaintiffs' case for the following reasons: 1. The June Valuation was expressly stated to be in response to the instruction contained in the Valuation Retainer. A reader of the June Valuation may reasonably have understood that statement to be accurate. One reason why a valuation usually incorporates the letter of instruction (in this case, the Valuation Retainer) is so that a reader is left in no doubt as to the basis of the valuation. Put another way, publication of the valuation conveys that the valuation was prepared in accordance with the attached instructions and not on some other basis. 2. Taken at its highest the correspondence might be understood as consistent with an "as if complete" valuation rather than an "as is" valuation. The correspondence does not contemplate: 1. something other than a market valuation; or 2. a valuation of the individual berths rather than the freehold Marina lot. As already identified, the communications are consistent with the proper approach to valuation using capitalised income or a discounted cash flow (see the 26 June 2006 email, extracted above, referring to taking outgoings into account). 1. There appears to have been telephone conversations between Mr Gillam and Mr Nicodimou. As mentioned above, Mr Nicodimou was to give evidence in the defendants' case but chose not to. No inference should be drawn in the defendants' favour. Instead, it may be readily inferred that instructions were not expressly altered. Afterall, had Mr Nicodimou given evidence it may be expected that he would (whether in chief or in cross-examination) give evidence about, inter alia: 1. why the Valuation Retainer was attached to the June Valuation if instructions had been changed; 2. the use he was making of costs in his valuation exercise; and 3. his conversations with Mr Gillam. In his public examinations, Mr Nicodimou gave evidence that: 1. he had prepared the June Valuation in accordance with the Valuation Retainer (see examination before Senior Deputy Registrar Bellach on 9 May 2016); 2. that he had taken the costs into account in his valuation exercise (see examination before Senior Deputy Registrar Brown on 11 May 2016); and 3. that he did in fact have conversations with Mr Gillam (see examination before Senior Deputy Registrar Brown on 11 May 2016).
In my view, the course of correspondence does not permit, for the reasons advanced by the plaintiffs in their reply submissions, a change of instructions. With that finding includes a consideration of whether or not Mr Gillam had such authority and/or capacity to make such variations.

[46]

Introduction

Section 1.1 is extracted below: 1.1 Instructions We refer to written instructions received from Mr Matt Gillam, City Pacific Limited, dated 25 May 2006 requesting us to undertake a valuation of the leasehold and freehold interest of the subject property for first mortgage security purposes. Specifically we are to assess the following: 1. Current Market Value "As Is" acknowledging the permit, approved plans for each Stages Lot Si 7 (As If Complete), Lot S23, Lot S22 and S24 on Plan of Subdivision PS435310J (Stages S7, SS, 2H, S6). We enclose herewith a copy of the Letter of Instruction, refer Appendix I.
The definitions of "Market Value", "Gross Realisation" and "As If Complete" adopted in the June Valuation appear at s 1.6, see below: 1.6 Market Value Definition The Australian Property Institute (API) has adopted the international definition of Market Value, namely: "Market Value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion". We also provide the following definition of 'Gross Realisation' and 'As if Complete' which are in accordance with the API Guidelines: "Gross Realisation at the date of valuation is the sum of the Market Values of the individual units which a property can achieve over a specified selling period, assuming an orderly sole, between willing buyers and willing sellers, in arms length transactions, after proper marketing, wherein the parties acted knowledgeably, prudently and without compulsion." "The Value 'As If Complete' assessed herein is the Market Value of the proposed improvements as detailed in the report on the assumption that all construction has been satisfactorily completed in all respects at the date of this report. The valuation reflects the valuer's view of the market conditions existing at the date of the report and does not purport to predict the market conditions and the value at the actual completion of the improvements because of the time lag. Accordingly, the 'As If Complete' valuation must be confirmed by a further inspection by the valuer, initiated and instructed by the lender, on completion of improvements. The right is reserved to review, and if necessary, vary the valuation in this report if there are any changes in relation to the project itself or in the properly market conditions and prices."

[52]

The Disclaimers

Two disclaimers appeared in the June Valuation, which attracted significant controversy in the context of the parties' respective cases vis-à-vis reliance (particularly in the context of the Amended Indigo Valuation, which will be set out below). The relevant disclaimers are found on page vi and s 1.4 of the valuations.
The disclaimer on page vi appears next to the heading "Assumptions, Disclaimers, Limitations & Qualifications". It is extracted below: Assumptions, Disclaimers, Limitations & Qualifications: This valuation report is provided subject to the assumptions, qualifications, limitations and disclaimers detailed throughout this report which are made in conjunction with those included within the Assumptions, Qualifications, Limitations & Disclaimers section located at the beginning of this report. Reliance on this report and extension of our liability is conditional upon the reader's acknowledgement and understanding of these statements. This valuation is for the use only of the party to whom it is addressed and for no other purpose. No responsibility is accepted to any third party who may use or rely on the whole or any part of the content of this valuation. The valuer has no pecuniary interest that would conflict with the proper valuation of the property. The assessment of the individual values assumes the development is completed to a satisfactory standard as at the date of valuation having regard to market evidence existing at the time, and does not purport to represent values at any future point in time. [Emphasis added.]
Section 1.4 is also described as a disclaimer. Under the heading, "Extension of Liability & Confidentiality", the following appears: This report may only be relied upon by City Pacific Limited, The Public Trustee of Queensland ACF the City Pacific Mortgage Trust for first mortgage security purposes. This confidential document is for the sole use of persons directly provided with it by CB Richard Ellis. Use by, or reliance upon this document by anyone other than City Pacific Limited, The Public Trustee of Queensland ACF the City Pacific Mortgage Trust is not authorised by CB Richard Ellis and CB Richard Ellis is not liable for any loss arising from such unauthorised use or reliance. This document should not be reproduced without our prior written authority.
I will return to the plaintiffs' contentions as to the alleged misleading and deceptive representations within the June Valuation at a separate juncture in the context of a consideration of the relevant issues in dispute.

[53]

Sale of the Marina to Indigo

On about 29 June 2006, a proposal in relation to the Indigo Loan Facility was prepared. The proposal was titled: "Proposal - Variation/Extension of Loan". An extract of that proposal appears below:
That proposal referred to a valuation date of 18 May 2006 and a property value of $34.8 million, which details correspond with the June Valuation. That proposal adopted the June Valuation. Further, City Pacific at that stage, it was contended, was expressly acting in reliance on the June Valuation.
The sale of the Marina and Other Properties occurred, financed by City Pacific as responsible entity for the CPMT and by vendor finance from Marina Cove. On the same day, the sale of the Marina and Other Properties occurred, financed by City Pacific as responsible entity for the CPMT and by vendor finance from Marina Cove. A number of documents were executed effecting the sale of the Marina and the Other Properties, including: 1. contract of sale for the sale of the Marina to ILO for a purchase price of $21,203,000 (excluding GST), including the Berth Infrastructure Payment of $3,251,728.82 (excluding GST); 2. contract of sale for the sale of the Other Properties to IHPO for a total purchase price of $9,270,000 (plus GST). (It may be noted that whilst the presence of different buyers is part of the factual narrative to these proceedings, that fact is of no significance to the outcome of the ultimate issues in dispute).
On 30 June 2006, a number of documents effecting the Indigo Loan Facility and the Indigo Mezzanine Facility and associated security were also executed, including: 1. a mortgage given by ILO to PTQ over the Marina; and 2. a mortgage given by IHPO to PTQ.
The effect of those transactions, when completed, relevantly was that ILO acquired the Marina, funded by PTQ as custodian of the CPMT. Marina Cove provided mezzanine finance, secured by a second ranking mortgage.
As to the issues concerning the operation of s 601FS of the Corporations Act 2001 (Cth) vis-à-vis the rights, obligations and liabilities of former responsible entities, I will return to those contentions at a separate juncture in the context of the consideration of the issues in dispute.

[54]

Indigo Valuation

By early 2007, ILO was looking to sell or refinance the Marina.
By letter of instruction dated 14 February 2007, MCD on behalf of the Indigo group engaged CBRE "to update the Valuation for Martha Cove Activity Centres for the Marina Lot S17 and the apartments at Lots S22, and 24 to reflect Current Market Value "As Is" acknowledging the permit, approved plans for each Lot S17, Lot S23, Lot S22 and S24 on Plan of Subdivision PS435310J (Stages S7, S8, 2H, S6 of the Martha Cove Master Plan" ("14 February 2007 Letter").
That letter of instruction is extracted in full below: Dear Chris Re: Martha Cove Activity Centre Revision of Land Valuation Commission Confirmation MCD Australia on behalf of Indigo Group, confirm your commission to update the Valuation for Martha Cove Activity Centres for the Marina Lot S17 and the apartments at Lots S22, and 24 to reflect Current Market Value "As Is" acknowledging the permit, approved plans for each Lot S17, Lot S23, Lot S22 and S24 on Plan of Subdivision PS435310,1 (Stages S7, S8, 2H, S6 of the Martha Cove Master Plan)". We request that you proceed with the completion of this report and issue a draft copy to our offices via email as soon as possible. We agree to reimburse you upon the completion and issue of this report for the agreed fee of $25,000 plus GST. We trust the above is concise and await your report. Yours faithfully MCD (Aust) Pty Ltd Bart O'Callaghan Victorian Manager
On 16 March 2007, Mr Nicodimou provided MCD with a valuation report in response to the above instructions, and which expressed an opinion as to market value as at 30 January 2007. That valuation report was titled: "A Valuation Report prepared for MCD AUSTRALIA ON BEHALF OF INDIGO (MARTHA COVE HARBOUR PRECINCT LAND OWNER) PTY LTD Of "Martha Cove Marina & Commercial Centre" Lot S17, Lot S23, Lot S22 and S24 on Plan of Subdivision PS435310J "Martha Cove" Safety Beach VIC 3936" and dated 30 January 2007 ("the Indigo Valuation"). The relevant letter of instruction is extracted below: Dear Mr O'Callaghan, Valuation Report - City Pacific Land Portfolio Lot S17, S23, S22, S24, on PS435310J, Martha Cove In accordance with instructions received, we enclose 2 bound originals and a PDF version on CD of our valuation report in relation to the abovementioned property, together with our account for professional fees to the agreed amount. Please note our terms of payment are 14 days net. We thank you for this instruction and if we can be of further assistance, please do not hesitate to contact us. Yours sincerely CB Richard Ellis (V) Pty Ltd Chris Nicodimou
In light of the contentions raised by the plaintiffs in these proceedings, it is necessary to set out particular aspects of the Indigo Valuation.
The Indigo Valuation was divided into seven broad areas: 1. Introduction; 2. Site Details; 3. Property Description; 4. Market Commentary; 5. Sales Evidence for "As Is " Values; 6. Valuation Rationale; and 7. Contact Details.
The Indigo Valuation valued the Marina (namely, Lot S17) at $27.7 million GST exclusive on a "Gross Realisation - As if Complete" basis. The date of valuation was 30 January 2007.
The client listed on the Indigo Valuation was "MCD Australia on behalf of Indigo (Martha Cove Harbour Precinct Land Owner) Pty Ltd".

[62]

Factual Controversy: Mr Nicodimou's knowledge of the relationship between City Pacific and the Indigo Group in 2007

As to Mr Nicodimou's knowledge of the relationship between City Pacific and the Indigo Group as at 2007, the plaintiffs relied upon their submissions with respect to Mr Nicodimou's knowledge as at 2006 and, furthermore, the content of the letter of instruction dated 14 February 2007. Turning to the letter, the plaintiffs highlighted the first line of the letter, which stated: "MCD Australia on behalf of Indigo Group, confirm your commission to update the Valuation for Martha Cove Activity Centres for the Marina Lot S17…" (emphasis added). It was contended that such words confirm that it was expressly communicated to Mr Nicodimou that it was the Indigo Group that engaged CBRE to provide a valuation of the Marina.
Additionally, in consideration of this controversy, Mr Nicodimou's appreciation for a relationship may also be inferred by the subject line of his letter address to MCD: "Valuation Report - City Pacific Land Portfolio".
In written submissions, the plaintiffs also submitted: 44. … Objectively the defendants also knew that the Indigo group had the June Valuation, as that which was requested was an "update" of that valuation. Further, the requested valuation, sought by the landowners, was for mortgage lending purposes which objectively meant that IHPO was likely to share the valuation with counterparties to proposed transactions. For IHPO to do so was consistent with market practice, as demonstrated by Mr Wright's evidence, being that a valuer would expect IHPO was likely to share the valuation with counterparties to possible transactions involving the land.
The relevant part of Mr Wright's evidence at the hearing, relied upon in the preceding submission, is extracted below (see T109.35-110.31): GILES: In that circumstance you're telling his Honour it's not surprising that the May 2006 valuation had been passed from one to the other? WITNESS WRIGHT: Correct. GILES: That's something which, in your experience in the industry occurs? WITNESS WRIGHT: Yes. GILES: That is, related entities, even if on the other side of transactions, will share valuations? WITNESS WRIGHT: Yes. GILES: That's something that you've seen happen in the industry quite often? WITNESS WRIGHT: Yes. GILES: You've seen that happen with your reports? WITNESS WRIGHT: Yes. GILES: And as an expert valuer, you would expect when you publish a report that it may well be shared by the address with, amongst others, the counterparty to the transaction? WITNESS WRIGHT: Yes. GILES: And you would expect the counterparty to the transaction to rely upon it? WITNESS WRIGHT: I can't say. GILES: But you'd certainly expect the counterparty to the transaction to read it? WITNESS WRIGHT: Yes. GILES: If you were doing a valuation for a borrower which is expressed to be for mortgage purposes, you would expect the borrower to share that with the lender? WITNESS WRIGHT: Yes. GILES: And you would expect that the lender may rely upon it? WITNESS WRIGHT: Yes.
Turning to the position of the defendants, with respect to the same, they repeated there earlier submission with respect to the evidence of Mr Nicodimou's knowledge of the relationship as at 2006, namely, there was no evidence that CBRE was told of the nature or extent of the relationship but "merely of the existence of a relationship with the Indigo Group, whatever that label actually means".
In light of my earlier finding, I accept that Mr Nicodimou had knowledge of the relationship between City Pacific and the Indigo Group. Further, I accept that Mr Nicodimou must have or should have understood the instructing relationship as existed in exchange above.

[65]

Establishment of Marina Trust and purchase of the Marina

From about May 2007, City Pacific began investigating the possibility of setting up a Marina Trust to buy various marinas, including the Marina. As to City Pacific's knowledge of the value of the Marina, at that time, the plaintiffs contended such knowledge was derived from the June Valuation. It was further contended that neither of the defendants had told City Pacific that the June Valuation was other than a valuation at market value, or that it was other than a valuation which expressed an opinion that the Marina would hold value, as expressly requested, over the 3 to 5 years from mid-2006 (the time of the June Valuation). I will return to this issue below, in the context of representations made by the defendants.
In June 2007, City Pacific and representatives of the Indigo Group began negotiating an option for the proposed Marina Trust to buy the Marina for approximately $30 million. That appears to be the price ILO was prepared to negotiate.
On 13 June 2007, Mr Kelly, CFO of the Indigo Group, sent an email to Mr Nicodimou providing information in relation to a valuation of the Marina ("the 13 June 2007 Email"), which was in the following terms: Hello Chris, Attached is the following: • Some comments on the points we discussed briefly on the phone about what is being valued, and what functions / capabilities were required to have a marketable marina and be able to effectively sell various lease products. Also some commentary about extra lengths that have been achieved through some reconfiguration and reclassification of marina berths; • A lease sales forecast set out in the cashflow worksheet in the attached All Sales Master file; and • Outline of the marketing strategy for selling the leases. By tomorrow I expect to be sending you: • Comment from the marina operator supporting the attached lease sales projections from the marina; • Engineer certification regarding the minor reconfiguration and reclassification of the berths; • Lawyer signoff regarding the minor reconfiguration and reclassification of the berths. Would you please give me a call re likely timing of completion of a draft valuation. We really need to have the valuation completed by 22 June. Thanks for your help. Michael
The email attached an excel spreadsheet, which consisted of several "worksheets". The file was titled: "Martha Cove Marina All Sales Master" ("the All Sales Master file"). Whilst express reference was made to a "cashflow worksheet" within the All Sales Master file, the file consisted of the following spreadsheets (or worksheets): 1. Residential Sales Target Tracker; 2. Sales / Rental Status by Volume; 3. Allocations by Stage ("the Allocations sheet"); 4. Martha Cove Marina Cashflow; 5. Summary of Martha Cove Marina Offerings (current as at June 2007) ("the Offering Model"); 6. Analysis of Offerings (GST exclusive); and 7. Base Rates for Mono Hull Marina Berths. (The All Sales Master file formed part of Ex 9. In light of the size of the individual spreadsheets, they are not extracted in this judgment, but I have had read and had regard to the same).
I accept that the All Sales Master file was provided to Mr Nicodimou. The file included information with respect to, inter alia, cashflow, berth configurations and lease terms. The plaintiffs contended that upon a comparison of the data in the Allocations sheet and the Offering Model with ss 3.1, 5.2 and 5.2.1 of the Amended Indigo Valuation, information from that spreadsheet was incorporated into that valuation. That submission is further supported by reference to para 7.1 of Lane Reply Report (which I will return to below).
As to that contention, the defendants submitted, there is no evidence before the Court as to when the information recorded in the Amended Indigo Valuation, namely, at ss 3.1, 5.2 and 5.2.1, was provided to CBRE for the first time. Further, it was submitted, that the email from Mr Kelly only draws Mr Nicodimou's attention to the "cashflow" tab of that spreadsheet document. That submission refers to the second bullet point in Mr Kelly's email: "A lease sales forecast set out in the cashflow worksheet in the attached All Sales Master file".
In light of the fact that the All Sales Master file was provided to Mr Nicodimou on 27 June 2007, in his capacity as an employee of CBRE, I accept that to be the date upon which CBRE was first alerted to the information in the spreadsheet. To the extent that the information was then, in turn, incorporated into the Amended Indigo Valuation, I also accept 27 June 2007 as the first instance at which that information was communicated to CBRE.
On 24 June 2007, Angela Tinson, City Pacific's solicitor, sent the following email to Mr Finucan of City Pacific: Jimmy, You had mentioned on Friday that the Indigo Marina deal had also changed - to a put and call option? Is this still going ahead, and if so, please can you provide details of the deal, such as: - when is the option exercisable; option term of 12 months - is there an option fee payable. $3m which is to be released to the vendor Regards Angela Tinson
That same day, Mr Finucan replied by copying in Mr Sullivan (Director of Martha Cove with Mr Finucan) and Mr Mackay of IPC.
On 25 June 2007, Mr Mackay forwarded the email chain, including Ms Tinson's email of 24 June 2007, to Adam Purss, the CFO of City Pacific. On that same day, in reply to the email of Mr Mackay, copying in Mr Finucan, Mr Purss sent the following communication: Steve, Can you also have a quick look at this proposal re Indigo. The new Trust being created will enter into an option to acquire the Marina Cove Marina from Indigo Group. Fee of $3m is payable to enter into the option with the fee to be released to the vendor. The purchase price will be $27m, excluding the option fee. Thanks, Adam
On 25 June 2007 at 4.07pm, Terry Lambert, ILO's solicitor sent an email to Angela Tinson, City Pacific's solicitor, regarding sale of the Marina (Mr Kelly was also copied into the email). The subject of the email was "Indigo (Martha Cove Marina Land Owner) Pty Ltd proposed sale to Indigo Pacific Capital Ltd - Marina Lot (S17), Martha Cove - 'Subject to Agreement'". That email is extracted below: Dear Angela, I act for the proposed Owner/Seller and I understand that you will be acting for the proposed Grantee/Buyer, Indigo Pacific Capital Ltd. I am instructed that our client has agreed to grant to your client an option to purchase the property upon the following terms: - Sale/Purchase Price - $30 million (exclusive of GST); Option Period - A period of 7 days after the date of the Option Agreement; Non-refundable option fee/deposit (if the option is validly exercised) to be paid on the signing of the Option and to be released immediately to the Owner - $3 million; Option Agreement to be signed and dated no earlier than 30 June 2007; GST on Contract The Sale Price is GST exclusive. GST-free Going Concern exemption to apply failing which the margin scheme will apply to the sale and the Buyer will pay to the Seller at settlement in addition to the sale price, the GST equivalent amount due on the supply evidenced by the sale Settlement - 30 days after the date of exercise of the option. Regards, Terry Lambert Solicitor
Relevantly, the proposed sale price was "$30 million (exclusive of GST)". On that same day at 4.15pm, Ms Tinson forwarded Mr Lambert's email onto City Pacific representatives: Mr Rob Donaldson and Mr Finucan. The contents of that email may be briefly stated: "Rob/Jimmy, Please see below from Indigo's solicitors. Please can you confirm the terms are as you had agreed - is the sale to IPC Ltd?".
Later that evening at 8.11pm, Ms Tinson sent a further communication in relation to the email of Mr Lambert to Mr Donaldson and Mr Finucan. That email is extracted below: Jimmy/Rob, Now that I have started drafting the documentation required for this transaction, I note that the below details (particularly in relation to timing) are quite different to what you had previously instructed. Please can you confirm as soon as possible when the call option must be exercised by (previously I had understood it to be 12 months, below it suggests 7 days with settlement to follow 30 days later). Is there also a put option (so that the Vendor can require the sale to be effected) and if so, how long after the call option period expires will the put option period expire. Below it suggests that the Option must be signed no earlier than 30 June - I had understood that you wanted it signed by 30 June, and as 30 June is a Saturday we would have anticipated this to mean 29 June. We look forward to your further instructions tomorrow ... I'm off to get some sleep before we get back into it! Regards Angela Tinson
On 26 June 2007 at 8.11am, Mr Finucan forwarded Ms Tinson's email (of 8.11pm) and Mr Lambert's email (setting out the proposed terms of the option) onto to Mr Purss and Mr Mackay. The email was brief and read: "Please consider the below emails and advise the correct position in respect to this matter".
On 26 June 2007 at 8.24am, Mr Purss replied to the Mr Finucan's email and copied in Mr Johnstone. That email is extracted below: As I understand it, the sale will be to CPL as Trustee for the Trust (in the process of being established), not IPC. We need sufficient time to establish the Trust, prepare appropriate documentation & get at least 50 unitholders into the Trust prior to settling any acquisitions. This will avoid double duty on advice of Sean Robertson. To allow for this I suggest a minimum of 6 months as the term of the option although we will work towards being able to settle sooner. 7 day option period with 30 day settlement is impossible. Will need to be signed 29 June.
That same day, at 8.36am, Mr Johnstone replied to Mr Purss' email. That reply is extracted below: I agree, we need more time to conduct our due diligence. I am lead [sic] to believe a valuation has been prepared for the Indigo marina, does anyone have access to this as I require it urgently? Steve J
At 8.39am, Mr Purss sent a further email to Mr Kelly, which stated: We understand there is a new valuation of the Martha Cove Marina. Can you please send us a copy asap this morning so we can continue with our processes in relation to the acquisition. (Mr Johnstone, Mr Finucan and Mr Mackay were copied into that email).
At 4.12pm, Ms Tinson provided a reply to Mr Lambert's email, on behalf of City Pacific, which is extracted below: Terry, Subject to further instructions from my client, please find attached draft Put and Call Option and Contract of Sale for the Martha Cove Marina. With regard to your note below that the documents cannot be signed prior to 30 June 2007 - please can you confirm that they can actually be signed on 29 June 2007 (Friday). Please note that Michael and Jason contacted me directly this morning with regard to how the documentation would be set up, and we discussed the fact that Indigo will need to provide us with copies of all documentation which they wish the purchase to be subject to such as subleases, marina management agreement, acquafest agreement for review and annexure to the Contract of Sale. Regards Angela Tinson
The terms proposed by Mr Lambert (in the email dated 25 June 2007) were not agreed and were not accepted by City Pacific. It was not controversial that at least in part those terms were subject of negotiation and variation.
On 26 June 2007 at 1.40pm, Mr Kelly sent an email to Mr Purss a valuation report prepared by CBRE, which valued the Marina at $27.3 million ("the 26 June 2007 Email"), which stated: Adam, Intermediate marina valuation update as discussed. Note that this valuation only considered the first round of leases and not lease renewals or the additional marina lengths that would arise under our proposed reconfiguration (net extra 184 metres).
The plaintiffs contended that the valuation report attached to the 26 June 2007 Email was the Amended Indigo Valuation. I now turn to that valuation and the factual controversies in that respect.

[66]

The Amended Indigo Valuation

The Amended Indigo Valuation was also prepared by the defendants, and the date of valuation is stated to be "30 January 2007" and in response to MCD's letter of instruction dated 14 February 2007. It contains very few changes to the Indigo Valuation. Notwithstanding an acceptance by the defendants that both the Indigo Valuation and the Amended Indigo Valuation were produced by the defendants, the defendants contended that "the evidence before the Court does not permit the Court to conclude with any level of confidence which of the Indigo valuations was prepared first". For reasons that I will set out below, I have found that the Indigo Valuation was produced first and the Amended Indigo Valuation second.
On the plaintiffs' case, which I accept, the Amended Indigo Valuation was not a fresh valuation report prepared by the defendants but rather merely some amendment made to the Indigo Valuation. It bares the same title and date of valuation as the Indigo Valuation, and makes reference to the same letter of instruction from MCD dated 14 February 2007 (that appears in at Appendix I of the Indigo Valuation). The plaintiffs submitted that "very few changes" are incorporated into the Amended Indigo Valuation save for "the valuation is adjusted reflecting the changed configuration referred to in Mr Kelly's 13 June email". The bulk of the paragraphs remain the same and, most notably, as already mentioned, the client and date of the valuation remained unchanged.
For the purpose of these plaintiffs' claim, the relationship between the Amended Indigo Valuation and the June Valuation is of greater significance. Following an outline of the relevant components of the Amended Indigo Valuation, I will return to the principal factual controversy, namely, the characterisation of the Amended Indigo Valuation as an update of the June Valuation.
Under the heading "Valuation Summary", the valuation for the Marina was provided on a "Gross Realisation 'As If Complete'" basis: $27.3 million.
The client listed on the Amended Indigo Valuation was "MCD Australia on behalf of Indigo (Martha Cove Harbour Precinct Land Owner) Pty Ltd". CBRE charged $25,000 (plus GST) for the valuation.

[72]

We have adopted a total assessment value of $38,300,000 excluding GST.

It may be noted that the valuation amount of the Marina (namely, Lot S17) is represented inconsistently throughout the Amended Indigo Valuation as either $27.3 million or $26 million. In particular, both ss 5.2.1 and 6.2 describe the valuation by reference to an "As If Complete" basis but include the two different amounts. The $27.3 million figure is the arithmetically correct figure: the source of the $26 million figure is not apparent.
As to the differences between the Indigo Valuation and the Amended Indigo Valuation, the plaintiffs appropriately relied upon the summary appearing in the expert report of Mr Lane dated 18 February 2019 ("the Lane Reply Report") at para 7.1, as an accurate reflection of the differences, which is extracted below: 7.1 In response to paragraph 5.1 of your instruction I have reviewed Mr Nicodimou's further valuation dated 30 January 2007 at tabulation 212 of your briefing folder, (I D;MAR.704,011,3038), and note that it has some minor differences when compared with another version of the same report, and which was provided in your original briefing material at tabulation 3 (Reference CBR.001.001.0163). Part E, E-3385 I summarise the minor differences as follows; (i) Change in Appendix (page iii). (ii) Change in valuation in original report from $27.7M, down to $27.3M in subsequent report (page VI). (iii) Change in tabulation of berth configuration, but very minor (page 17). (iv) The four bar chart (residential new supply), at page 26 of the original report, has been repositioned to page 27 of the subsequent report. (v) Clause 5.2 Marina berths (leasehold), first paragraph changes description with regard to option terms (page 31). (vi) The table summary headed 'Conclusion-Berths "As if complete", in the original report changes to conclude a value from $27.7M in the original report down to $27.3M in the subsequent report (page 34). I further note, that in the subsequent report, the value reported in respect of Lot S17 at $27.3M on a GST Exclusive basis at page vi and again at clause 5.2.1 at page 34, is in contrast, being higher than the lower figure of $26M exclusive of GST reported at clause 5.5 in the same report at page 36 and again at clause 6.2 page 37. This difference in reported figures appearing at the front of the report in contrast to the rear, is not a difference which appeared in the original report wherein the figures at the front and the rear of the report were held the same at $27.7M.
Whilst the defendants do not dispute that differences between the Indigo Valuation and the Amended Indigo Valuation are summarised in para 7.1 of the Lane Reply Report, the defendants contended, albeit without development, that the differences are not limited to the opinion evidence of Mr Lane. Further, it was submitted that the evidence before the Court does not permit the Court to conclude with any level of confidence which of the Indigo valuations was prepared first. As earlier mentioned, I have rejected that submission.

[73]

The Disclaimers

Two disclaimers within the Amended Indigo Valuation attracted significant controversy in the context of the parties' respective cases vis-à-vis reliance. The relevant disclaimers are found on page vi and s 1.4 of that valuation.
The disclaimer on page vi appears next to the heading "Assumptions, Disclaimers, Limitations & Qualifications". It is extracted below: Assumptions, Disclaimers, Limitations & Qualifications: This valuation report is provided subject to the assumptions, qualifications, limitations and disclaimers detailed throughout this report which are made in conjunction with those included within the Assumptions, Qualifications, Limitations & Disclaimers section located at the beginning of this report. Reliance on this report and extension of our liability is conditional upon the reader's acknowledgement and understanding of these statements. This valuation is for the use only of the party to whom it is addressed and for no other purpose. No responsibility is accepted to any third party who may use or rely on the whole or any part of the content of this valuation. The valuer has no pecuniary interest that would conflict with the proper valuation of the property. The assessment of the individual values assumes the development is completed to a satisfactory standard as at the date of valuation having regard to market evidence existing at the time, and does not purport to represent values at any future point in time. (It shall hereinafter be referred to as "the first disclaimer").
Section 1.4 is also described as a disclaimer. Under the heading, "Extension of Liability & Confidentiality", the following appears: This report may only be relied upon by Indigo (Martha Cove Harbour Precinct Land Owner) Ry Ltd for first mortgage security purposes. This confidential document is for the sole use of persons directly provided with it by CB Richard Ellis. Use by, or reliance upon this document by anyone other than Indigo (Martha Cove Harbour Precinct Land Owner) Pty Ltd is not authorised by CB Richard Ellis and CB Richard Ellis is not liable for any loss arising from such unauthorised use or reliance. This document should not be reproduced without dour prior written authority. (It shall hereinafter be referred to as "the second disclaimer").
As to the first disclaimer, the plaintiffs submitted: The first disclaimer is contractual, unilaterally framed and cannot extend to a non-contracting party (City Pacific and Martha Cove) particularly when the defendants were on notice that the valuation was to be used by third parties (the valuation is not to be characterised as a meaningless exercise, particularly as CBRE charged $25,000 plus GST for the valuation): BT Australia at 236-7. [Footnotes omitted.]
As to the second disclaimer, the plaintiffs submitted: The second disclaimer (E-3967 par 1.4) demonstrates that point. It does limit use of the valuation to use by an identified company for first mortgage security purposes. In circumstances in which that identified company owned only part of the land and was not a lender, that sentence is to be understood as being a permission to use the valuation by providing it to lenders for the purpose of obtaining finance (and the lender relying on it, otherwise the permitted use is contentless). The second sentence is to the same effect, and the third takes content from the earlier sentences, and is in any event to be construed as a contractual limitation between addressee and valuer. The final sentence demonstrates the contractual effect of the disclaimer. It is a promise (consistently with the first and second sentences) by the addressee only to use and reproduce the Amended Indigo Valuation for the permitted purpose. Breach of that promise will mean CBRE has a claim for damages against the addressee, for breach of contract, but does not affect the otherwise misleading character of the Amended Indigo Valuation or the duty assumed in all of the circumstances.
I will return to the submission advanced by the parties as to the effect of those disclaimers in the consideration of the issues in dispute.

[74]

Contact with Nicodimou

On 25 June 2007, Mr Gillam and Mr Nicodimou exchanged emails regarding "an indicative rate p/sqm" for the land in the Marina. The exchange, which consists of a series of short emails sent and received within a relatively short time frame, is outlined below: 1. At 3.23pm, Mr Gillam sent the following message to Mr Nicodimou: We have some Commercial Waterfront land of approx 2.2Ha, no retail that we will eventually get revalued 'officially'. In the meantime I need to pick your brains! I need an indicative rate p/sqm off you please...? Are you able to give me a very rough figure? 1. At 3.22pm (it is unclear why the timing of the latter received email appears to have be sent prior), Mr Nicodimou sent the following message to Mr Gillam: "Matt where in Martha Cove is it and what is going on it and does it have approval?". 2. At 3.28pm, Mr Gillam sent the following message to Mr Nicodimou: At this stage it has approval as marina hardstand and 200 berth dry dock facility (stack). It is Stage 3 at Martha Cove. 1. At 5.49pm, Mr Nicodimou sent the following message to Mr Gillam: As long as it is in the UGB portion of stage 3 it should be $150-200 per sqm.
On 26 June 2007 at 8.41am, Mr Gilliam forwarded his 25 June 2007 email exchange with Mr Nicodimou to the following City Pacific representatives: Ms Amanda Aitken, Mr Johnstone and Mr Donaldson; together with the following message: Guys, Nicodimou's response below...remember we did say rough...his figures equate to anywhere between $3.3 and $4.4M...! Bear in mind the last time Stage 3 was valued the 200 berths alone were valued at $15,000 each (200 x $15,000 = $3M), not including any of the surrounding land so I would be leaning towards a figure of around $4M. Happy to hear your thoughts. Cheers, Matt Gillam
On 27 June 2007, Mr McCormick sent an email to Mr Nicodimou with the subject line "Please ring me asap". In the email he stated: "[n]eed to talk to you asap, can you ring me this arvo please". The plaintiffs contended that plainly the conversation was about valuing the Marina. There is no other reason apparent from the evidence and Mr Nicodimou has not given evidence to contradict that inference. It may be inferred that he could say nothing to the contrary. Whilst I accept that, if such a conversation eventuated, the inference sought to be drawn by the plaintiffs appears to be sound, the plaintiffs have not pointed to any evidence to support a basis for finding that Mr Nicodimou did, in fact, make a subsequent telephone call to Mr McCormick upon receipt of the email. As such, little weight can be attached to that specific inference.

[75]

Factual Controversies: Amended Indigo Valuation

At this juncture I turn to deal with three factual controversies with respect to the Amended Indigo Valuation. They are as follows: 1. when CBRE prepared or published the Amended Indigo Valuation and when it was provided to MCD; 2. whether Mr Nicodimou admitted to having known that the Indigo Valuation or the Amended Indigo Valuation would be provided to and relied on by City Pacific; and 3. whether the Amended Indigo Valuation was an "update" of the June Valuation.
Turning to the alleged timing of the Amended Indigo Valuation, the plaintiffs contended that the Amended Indigo Valuation was prepared and, subsequently, provided by CBRE sometime after the 13 June 2007 email. That submission is supported by a comparison of the information included and attached to that email, which included information as to berth configurations and lease terms, which same information, it was contended, appeared in ss 3.1, 5.2 and 5.2.1 of the Amended Indigo Valuation. Particular attention was given to the Excel spreadsheet (see tabs "Allocations" and "Offering Model") attached to the email.
As to the issue of the date of preparation or publication, in written submissions the plaintiffs' submitted: 241. … Further, to the extent the date of preparation or publication is relevant, the evidence is that the Amended Indigo Valuation was published some time after 16 March 2007 (the date of publication of the Indigo Valuation), and therefore it was less than 6 months old at the time of reliance. That is because, as explained above, the Amended Indigo Valuation relied on the more current berth layout. Further, there is evidence that suggests that the Amended Indigo Valuation was in fact published in June 2007 albeit by reference to a value as at 30 January 2007, and was therefore less than 1 month old at the time of reliance. The evidence is that Mr Nicodimou prepared the Amended Indigo Valuation in mid-June 2007 by reference to changes to the Marina after the valuation date of 30 January 2007.
As to the same, the defendants submitted: 86. The submission made by the plaintiffs that the Amended Indigo Valuation was "published" in June 2007 (at PWS [241]) ought be rejected. First, there is no evidence to point (one way or another) when the Amended Indigo Valuation was provided to MCD and, indeed, whether it was provided before the Indigo Valuation. Second, whilst further information was provided by Mr Kelly (Indigo Group) to Mr Nicodimou on 13 June 2007, including information about "extra lengths", contrary to the plaintiffs' submission, the extra lengths were not reflected in the Amended Indigo Valuation - and so much is clear from Mr Kelly's email to Mr Purss (which attached the Amended Indigo Valuation), which stated that the valuation did not consider "the additional marina lengths". In any event, the Amended Indigo Valuation is clearly stated to be valuing the property as at 30 January 2007, irrespective of when it was "published". Reliance on that valuation some 5 to 9 months later is not reasonable on the authorities. [Footnotes omitted.]
In reply, the plaintiffs contended: 48. …Even if the defendants' contention that "extra lengths" were not reflected in the Amended Indigo Valuation is correct, it does not alter the fact that the information provided by Mr Kelly regarding berth configurations and lease terms in the Excel spreadsheet attached to his email (see tabs "Allocations" at Ex 9, tab 205, E3896-05, "Summary Offering" at Ex 9, tab 205, E3896-09 and "Offering Model" at Ex 9, tab 205, E3896-10) was included in sections 3.1, 5.2 and 5.2.1 of the Amended Indigo Valuation (see Ex 11, tab 16, E3976 and E3990-E3993). That is, some of the new information was included leading to the inference (about which Mr Nicodimou could have given evidence) that the Amended Indigo Valuation was prepared in June 2007 after the date of the email to which reference has been made.
In my view, the reply submission of the plaintiffs above is factually correct and in its terms should be accepted. Thus, whilst it is true that the value of the property was valued at 30 January 2007, the Amended Indigo Valuation was prepared in June 2007.
As to when the valuation was provided to MCD, the defendants' contended that there was no evidence before the Court as to when the Amended Indigo Valuation was provided by CBRE to MCD, save that it must have been provided by or before the 26 June 2007 Email. The defendants' further submitted that there is no evidence before the Court as to when the information recorded in the Amended Indigo Valuation, at ss 3.1, 5.2 and 5.2.1 was first provided to CBRE. As earlier set out, the defendants submitted that the 13 June 2007 Email only drew Mr Nicodimou's attention to the "Cashflow" worksheet of the attached file "Martha Cove Marina All Sales Master".
Prior to turning to my conclusions, in that respect, I turn to consider the principal controversy concerning the characterisation of the Amended Indigo Valuation as an "update" of the June Valuation.
The defendants contended that the Court would not accept the Amended Indigo Valuation as an "update" but rather an entirely separate valuation. In support of that contention, the defendants submitted: 1. The only reference to the Amended Indigo Valuation being an "update" (of anything) is in MCD's letter of instruction to CBRE. However, there is not a "skerrick" of evidence that this letter was provided to City Pacific in June 2007, or ever. Indeed, in requesting a copy of the valuation from the Indigo Group, Mr Purss states, "We understand there is a new valuation of the Martha Cove Marina". 2. It is obvious that the June Valuation was clearly not an exercise in futility. The June Valuation was obtained and presumably relied upon by City Pacific to enter into the 2006 transaction - which is irrelevant on the pleaded case on reliance and loss. The Amended Indigo Valuation was obtained (and paid for) by the Indigo Group, being the vendor for the 2007 transaction which, at the time it was sought (February 2007) did not even contemplate City Pacific being the purchaser or the other side of the transaction. City Pacific did not come onto the scene until late June 2007, well after the Amended Indigo Valuation was sought by MCD or provided by CBRE. 3. By mid to late 2007, the June Valuation, which identified the date of valuation as 18 May 2006, was clearly stale. This was so at least because: 1. the June Valuation and the Amended Indigo Valuation actually valued different properties because of the improvements between June 2006 and June 2007, and 2. the Amended Indigo valuation valued the freehold and leasehold interests.
During closing submissions, counsel for defendants advanced the following supplementary submission: It is frequently said by our friends that this was an update. That's not stated in the valuation. It is stated in the letter of instruction, but it doesn't help the plaintiffs here. In any event, how could it be an update, I ask rhetorically. I will just tell your Honour where the passages are in the relevant documents, if it would help. It cannot be an update because the June 06 valuation in the section "Development Timeline" said that infrastructure has been built but not much else with the marina births. The amended Indigo valuation talks about at an advanced state of construction. It is actually valuing the land in a completely different state. It can't be to the reasonable reader of the amended Indigo valuation an update of the earlier valuation. It is a new valuation about what was there at the time the valuation was prepared.
The section being referred to by the defendants is s 3.2 of the valuations. Whilst extracted earlier in this judgment, for convenience and ease of comparison, a relevant extract from each report appears below: June Valuation - 3.2 Development of Martha Cove is well advanced with the waterway complete up to Precinct 2A. At the time of inspection much of the infrastructure associated with Stage 2 was underway with some internal roads complete. The revetment wall associated with Precincts S6 and 2H were under construction. Amended Indigo Valuation - 3.2 Pursuant to the above development program development of Martha Cove is well advanced with the waterway complete up to Precinct 2G. At the time of inspection much of the infrastructure associated with Stages 1 and 2 was complete with internal roads complete. The revetment wall associated with Precincts S6 and 2H is also complete which includes the Inland Harbour comprising the 233 leasehold berths.
In reply to the defendants' written submissions, the plaintiffs submitted: 7. … the defendants' contend that the plaintiffs' were not entitled to treat the Amended Indigo Valuation as an "update" of the June Valuation because: (a) the only reference to the Amended Indigo Valuation being an "update" is in MCD's letter of instruction dated 14 February 2007; and (b) there is no evidence that this letter was provided to City Pacific in June 2007 or ever (DCS 25(g), 54, 67(i), 69, 71). This contention is wrong in point of fact and should not be accepted. In his email to Mr Purss dated 26 June 2007, Mr Kelly, a representative of the instructing party, referred to the attached Amended Indigo Valuation as an "update" (Ex 11, tab 16, E3959), a description which accurately reflected the instruction letter. The defendants' contention is wrong, but it may be added that the significance of this point depends on how it is deployed. As the defendants knew (from the instruction letter) that the Amended Indigo Valuation was an "update", it cannot affect duty. Nor can it affect the question of limitation periods. While it might have gone to reliance or contributory negligence, due to Mr Kelly's accurate description of the valuation as an "update" the point goes nowhere.
In light of the evidence before the Court, I make the following findings: 1. By letter dated 14 February 2007, MCD on behalf of the Indigo group engaged CBRE to "update" the June Valuation. 2. Following the production of the Indigo Valuation, which was provided to MCD on 16 March 2007, amendments were made to that valuation report. 3. Over the course of June 2007, negotiations occurred with respect to the sale of the Marina. 4. Towards the end of those negotiations, a "marina valuation update" was provided via email to Mr Purss by Mr Kelly on 26 June 2007. In the context of correspondence set out above, I find that the valuation produced, which contained updates, was the Amended Indigo Valuation. 5. Before the Court is an updated version of the June Valuation, described as the Amended Indigo Valuation. The Amended Indigo Valuation is, in my view, properly described as an "update", as the updated report was predicated upon the June Valuation. Whilst the clients are different, CBRE were commissioned to produce the Amended Indigo Valuation as an "update" to an earlier valuation (namely, the June Valuation). The subject matter of the report, namely, the Marina (and the Other Properties), remained the subject of valuation by Mr Nicodimou. Much of the report remains unchanged from the Indigo Valuation, save for particular components identified above. I accept the expert evidence of Mr Lane, who outlined the differences at para 7.1 of his second expert report. 6. As to the contention that in light of the more "advanced state of construction", which is referred to in s 3.2 of the Amended Indigo Valuation, the Amended Indigo Valuation cannot be accepted as an update of the June Valuation but only a new valuation, I reject that contention. The development timeframe that appears in both valuations at s 3.2 concerns the same "subject development". An amendment based upon newer or recent information available at a different date of valuation, falls well within the realm of an update. As to the impact of that update upon the plaintiffs' case vis-à-vis reliance, I will return to the defendants contentions, in that respect, within the consideration section of this judgment including the issue of the valuations being stale.
In these respects, I consider the Amended Indigo Valuation to be an update in that the Amended Indigo Valuation derived directly from the June Valuation and the nature of the changes were more in the nature of refinements or updates to the June Valuation.
Thus, I accept the nature of the differences between the June Valuation and the Amended Indigo Valuation, putting aside contentions as to errors at this stage, may be properly categorised as "updates".
As mentioned above, I accept that the Amended Indigo Valuation included information that was first made available to Mr Nicodimou on 13 June 2007 (via the All Sales Master file attached to that email). The sum of those findings support the conclusion that the updated valuation attached to the 26 June 2007 email to MCD attached the Amended Indigo Valuation. I make that finding.
At this juncture, it may also be noted that the valuation attached to the 26 June 2007 email did not include the appendices referred to therein. As such, the letter of instruction referred to in s 1.1 of the Amended Indigo Valuation was not included in the attachment. However, the contents of that letter, in my view, are reflected in both covering email attaching the valuation, together with s 1.1 of the valuation.

[76]

Whether Mr Nicodimou admitted to having known that the Indigo Valuation or the Amended Indigo Valuation would be provided to and relied on by City Pacific

As to whether Mr Nicodimou "admitted" to having known the Indigo Valuation or the Amended Indigo Valuation would be provided to and relied upon by City Pacific, in the absence of Mr Nicodimou being called in these proceedings, the plaintiffs relied upon his evidence in earlier public examinations.
The plaintiffs, in this respect, relied upon transcript from a public examination conducted on 9 May 2016 in matter number 2015/371848 (T44.4-44.24), which is extracted in part below: Q. Did you understand that this valuation was to be prepared and relied upon by the first mortgagee? A. Privilege. This valuation is prepared for first mortgage security basis so therefore, yes. Q. Anyone who provided any funds by way of a first mortgage to Indigo Pacific could rely upon this valuation? A. Privilege. Not anybody. As it states in the extension of limiting liability and confidentiality, it's a confidential document for the use of the persons directly provided with it. Use or reliance upon this document by anyone other than Indigo is not authorised by CB Richard Ellis. Q. But if it was provided for the purposes of securing a first mortgage to purchase a property, it could be relied upon by them? A. Privilege. The process is that that first mortgagee would have to come to CB Richard Ellis and request an extension. That's what that is saying. It's not an open invitation for first mortgagees across the country. Q. Who did you understand the first mortgagee to be? A. Privilege. I don't - as best as I can recall, and as confident as I can state in this valuation report, it may be City Pacific. It may be someone else that Indigo perhaps might be seeking mortgage funds from on a first mortgage basis. I cannot answer that.
The plaintiffs further relied upon transcript of a public examination conducted on 11 May 2016 in matter number 2015/371848 (T40.7-40.34), which follows: Q. As at May 2007 had you had any discussions with officers of City Pacific and officers of Indigo as to the value of the marina? A. Privilege. I was preparing a valuation for them. Q. Your answer to my question, yes? A. Privilege. My valuation report is the spoken report of my value. Q. As at May 2007 did you have discussions with officers of City Pacific and 15 Indigo as to the value of the marina? A. Privilege. I cannot recall the dates, the times of any discussions with them, other than to say I provided a valuation report. Q. At any stage prior to providing your valuation, did you advise of officers of City Pacific and officers of Indigo, that the value of the marina was $27.7 million? A. Privilege. I cannot recall dates and times of any conversations that we had, I'm sorry. Q. Having read through your email, that's set out at the bottom of page 2495, is it more likely than not that you did have such a conversation at that time in relation to the value being 27.7? A. Privilege. It seems as though there were potentially discussions, as to related only to the value, I can't draw that conclusion. I can't come to that 30 conclusion, I'm sorry. Q. But is it possible that there were discussions with officers of City Pacific and Indigo in relation to the value being 27.7 as at May 2007? A. Privilege. It may well be possible.
Conversely, the defendants contended that the above transcript passages, as relied upon by the plaintiffs, did not provided an accurate depiction of the evidence of Mr Nicodimou. The height of Mr Nicodimou's evidence, it was contended, was that City Pacific "may" be the first mortgagee, or that it "may" have been someone else that the Indigo Group might be seeking to mortgage funds from.
In my view, the evidence relied upon by the plaintiffs is relevant to whether or not Mr Nicodimou had conversations with City Pacific representatives and, for that matter, representatives of the Indigo Group with respect to valuations of the Marina and Other Properties. However, it does not rise to the extent of an admission, in particular, a specific admissions vis-à-vis the valuations provided to a separate client of CBRE, namely, MCD, that was not City Pacific.

[77]

Whether, in the lead up to signing the Key Terms Agreement on or about 29 June 2007, Mr Nicodimou corresponded with Mr Gillam and Mr McCormick regarding the Marina.

As to the factual controversy vis-à-vis whether in the lead up to signing the Key Terms Agreement (set out below) on or about 29 June 2007, Mr Nicodimou corresponded with Mr Gillam and Mr McCormick regarding the Marina, the plaintiffs relied upon the above email correspondence from 25 to 27 June 2007 (extracted above).
Whilst accepting the existence of the emails, the defendants contended both groups of emails were exchanged regarding the "Martha Cove Development", as opposed to "the Marina" specifically. Further, it was submitted there was no evidence before the Court as to whether that telephone call, requested by the 27 June 2007 email, took place or, if it did, the substance of that call. As to that latter submission, I repeat my finding set out earlier with respect to the same.
As to the differentiation sought to be drawn by the defendants between the Martha Cove Development and the Marina, in my view, it does not advance the position of the defendants very far. As stated at the outset of the judgment, the Marina forms part of the Martha Cove Development; which is not a controversial statement.
Thus, in the broad, I accept that in the lead up to the signing of the Key Terms Agreement, which I will turn to below, Mr Nicodimou had engaged in correspondence with Mr Gillam. The contents of the 25 June 2007 emails with Mr Gillam provide insight as to the substance of part of those discussions, which, as identified by the respective parties, focused more broadly upon the Martha Cove Development (as opposed to the Marina specifically). However, as to the content of any discussion with Mr McCormick with respect to the same, in the absence of evidence of a phone call or a reply to the 27 June 2007 email, there is not enough material before the Court to reach a conclusion as to the nature of telephone conversation sought to be had with Mr Nicodimou by Mr McCormick (if it ever, in fact, eventuated). However, the inference is available that Mr McCormick was seeking to discuss an issue with respect to the Martha Cove Development with Mr Nicodimou.

[78]

Agreement to Purchase the Marina

As mentioned above, on 26 June 2007, Ms Tinson sent an email to Mr Lambert attaching a draft Put and Call Option Deed and Contract of Sale for the Marina. Ms Tinson forwarded that email and its attachments to Mr Donaldson, Mr Finucan, and Mr Sullivan of City Pacific and to Mr Mackay of IPC.
On about 28 June 2007, City Pacific prepared a short due diligence report ("the due diligence report"). The report twice referred to the $27.3 million valuation. The relevant extracts appear below: Martha Cove Marina Development Stage 2H Based on the asking price of $30,000,000 plus acquisition cost and allowing for the assumptions made, the yield on the investment in year 1 is 2.25% excluding and trustee and management fees. In year 2, with improved assumptions on berth fees and occupancy rates and including fees to trustee and management, the yield increases to 6.85% and 7.84% in year 3. The yields are based on the assumptions being realistic and achievable in the given time frame. Staged 2H has been fully developed with over 2900 metres of marina, it has 233 berths varying in length form 9 metres to 30 metres and has the capacity to provide fuel sales. Based on the marina being fully leased it has a valuation from CBRE of $27,300,000 plus GST. (Please see attached) Many assumptions have been made to come up with the above value, These assumptions require further research to confirm they are achievable. The concerns and risks are that the asset has no occupancy and the time frame to achieve the assumptions is uncertain. Although the marina currently is unoccupied, it needs no further development and is a turn key operation. The yield once fully operational and the said assumption achieved will need to be significantly higher than average to compensate for the lower yield in the formative years of establishing the business. … Assumptions & Facts • The asset currently has zero occupancy and the time it will take to achieve the desired occupancy levels is uncertain.. • Based on an independent valuation the marina is valued $27,300,000. … [Emphasis added.]
The plaintiffs submitted, correctly in my view, that an analysis of City Pacific's due diligence report supports the following factual conclusions: 1. City Pacific sought a copy of the Amended Indigo Valuation. That conclusion, it was submitted, is supported by the reference to "an independent valuation" and, in particular, the repeated reference to the valuation provided in the Amended Indigo Valuation, namely, $27.3 million. 2. Further, by reliance upon that valuation, it may be inferred that City Pacific understood the Amended Indigo Valuation to be a valuation of the Marina at $27.3 million despite the incorrect figure which appears in places in the valuation (being a reference to the valuation of $26 million, which also features in that report). 3. The language of the due diligence report also is to the effect that City Pacific understood it to be a valuation of "market value" of the Marina, not an exercise of tallying up the payments by lessees that might be expected for leases of each berth. Reference, in this respect, was made to the language: "[b]ased on the marina being fully leased it has a valuation…". Read alone that language shows an understanding of the valuation to be market value on the identified assumption. Further, so much is beyond argument once the context is understood, context being demonstrated by the feasibility report attached to the due diligence report. The purchase was not based on realising all the leasehold interests, but ultimately for a marina fund which would own and operate the Marina. The total amount to be achieved selling and then leasing long term leases was not only irrelevant to, but was inconsistent with that business model.
I will return to the parties submissions vis-à-vis the issue of reliance in my consideration of the issues in dispute.

[79]

Key Terms Agreement

On 29 June 2007, Mr Finucan on behalf of City Pacific and Lawrence Truce on behalf of ILO signed a letter containing the key terms of the sale and purchase of the Marina for $30 million ("the Key Terms Agreement"), and City Pacific paid the Call Option Fee of $2.1 million to or at the direction of ILO as required by the Key Terms Agreement.
As at the time of the Put and Call Option Agreement, drafting of some of the minor parts of the Contract for Sale of the Marina had not yet been completed. As such, by a letter dated 29 June 2007, addressed to Mr Sullivan, Managing Director of City Pacific, Mr Truce sought confirmation as to the "the major terms" of the contract, which appear below: Sale Price: $30,000,000.00 plus of GST if applicable Deposit: $ 2,100,000.00 (we acknowledge that the call option fee would form the deposit) Residue: $27,900,000.00 plus of GST if applicable Payment of Residue: within 7 days after the Day of Sale.
Mr Finucan provided confirmation on behalf of City Pacific by signing the letter. At this juncture, the defendants sought that the Court note the following about the sale price of $30 million: 1. it "reflected the indicative price given on 25 June 2007, [which was] before the Amended Indigo Valuation was provided to City Pacific (by Indigo)"; 2. it was "$2.7 million greater than the valuation in the Amended Indigo [Valuation]"; and 3. it was "$7.5 million greater than the valuation in the June Valuation". Whilst those facts do not appear, on their face, to be controversial, it is not entirely clear how such facts assist the defendants' case.
On 3 July 2007, Ms Tinson sent an email to representatives of City Pacific attaching, inter alia, the draft Put and Call Option Deed and Contract of Sale for the Marina, and sought instructions on changes requested by "Indigo" (this reference, it may accepted, was a reference to ILO). In written submissions the plaintiffs noted that the Put and Call Option was in fact executed later than it was dated. However, it was submitted that the circumstances did not impact upon the resolution of the issues in dispute. I accept that submission. On 9 July 2007, Mr Purss sent an email to Mr Sullivan summarising his understanding of the agreement with ILO for the purchase of the Marina. That email is extracted below: Phil, In summary, my understanding of the Martha Cove Marina transaction with Indigo Group is as follows, subject to my view relating to holding/operating costs below: Sale price: $30m, no GST as a going concern Contract Date: 29 June 2007 Deposit: $2.1m, paid 29 June Settlement: 100 days from contract date My view on holding/operating costs etc: • Indigo meet holding/operating costs until settlement • Funds received on long term leases are adjusted for at settlement on a pro rata basis, ie, if Indigo sold a 20 year lease 6 months prior to settlement, CPL receive cash relating to the remaining 19.5 years of the lease. Please advise your thoughts on the above & will instruct Gadens to flow through the appropriate changes to the agreements. Regards, Adam Purss
Later that day at 3.43pm, Mr Purss forwarded the Amended Indigo Valuation to Mr Garry Sladden of City Pacific (namely, he forwarded Mr Kelly's email of 26 June 2007, which I have earlier found attached the Amended Indigo Valuation).
Mr Sladden replied to Mr Purss' email at 6.49pm. His email consisted of a series of comments with respect to the Amended Indigo Valuation, which are extracted below: Comments: 1. There is an open ended assumption that the entire market for marina berths at MC is for 15-20 years leases. No mention made of a normal marina operation. 2. In the comparative analysis, no comments made on (a) how long it took to sell the leases off or (b) what costs should be allowed for in marketing/selling them off. Did it take 6 months, 12 months or 5 years? 3. Martha Cove has averaged 0.75 berth sales per month. This equates to a total sales period of 310 months to sell out the project, which equals 25+ years. 4. Mirvac - Docklands - only 47% sold and over what period of time and at what holding costs? 5. Pier 35 - only 53% sold off - over what time frame etc? 6. CBRE have adopted the same valuation for a 20 metre berth at Mirvac Docklands ($250K) for the MC 20 metre berth, nearly an hour+ away, with no discount for distance, convenience etc etc. 7. The MC valuation is based on a retail end value in today's dollars, with absolutely no comment on demand, holding costs, sales/marketing costs, staffing for a marina - i.e. who will actually manage the marina facilities? 8. Where is the value proposition for a Marina Trust? It should be an operating asset, and it demand outstrips supply, we re-price accordingly. 9. If we ran a spreadsheet and matched a few assumptions into it i.e. - (a) selling off 20 years leases or (b) running it as a marina (monthly leases etc), what would the numbers look like? 10. If the MC marina was compared to a completed, but vacant commercial building, I doubt that we would be paying the retail valuation costs as though it was fully leased to A grade tenants over 10 years + options. GS
At this juncture, it may be noted, the defendants contended that the observations made by Mr Sladden "challenged the assumptions made in the Amended Indigo Valuation, and noted the costs not considered in the Amended Indigo Valuation". Similarly, the plaintiffs observed that Mr Sladden's comments were in part critical of the Amended Indigo Valuation. However, the plaintiffs contended that the criticisms made by Mr Sladden do no amount to a "disregard" of the report. I accept the submission of the plaintiffs in that respect. Thus, this evidence is relevant when considering the plaintiffs' case as to City Pacific's reliance on the Amended Indigo Valuation.

[80]

The Put and Call Option Deed

On 17 July 2007, City Pacific and ILO exchanged revised drafts of the draft Put and Call Option Deed. On about 23 July 2007, City Pacific and ILO executed the Put and Call Option Deed, and inserted the effective date of the document, being 29 June 2007.
The Put and Call Option, relevantly, provided: 1. In consideration of City Pacific paying a call option fee of $2.1 million to ILO, ILO granted City Pacific (or its nominee) (see cl 9.1) an option to purchase the Marina (cl 2). City Pacific irrevocably released the Call Option Fee to ILO but if the call option was validly exercised, the Call Option Fee became the deposit payable by the purchaser under the contract (cll 4.1-4.2). 2. City Pacific was entitled to exercise the call option at any time until 5.00pm on the call option expiry date, being the day 100 days after the date of the Put and Call Option (cl 3.1). 3. At the time of exercise of the call option, ILO and City Pacific were deemed to have entered into a contract for sale of land for the sale of the property on the terms of the attached contract and promised to immediately exchange copies of that agreement. Failure to exchange was not to affect the validity of the contract created by the exercise of the option and the contracts were deemed to have been exchanged at the time of exercise of the option (cl 7). 4. City Pacific could nominate a person to exercise the call option (cl 9.1). On nomination, all references in the Put and Call Option and Contract for Sale to City Pacific were to be taken as references to the nominee. The effect was that the option fee, as deposit, was taken as between ILO, City Pacific and the nominee (Martha Cove) to be a payment for Martha Cove's benefit.
The plaintiffs also contended that "payment of the option fee and the entry into the Put and Call Option was in reliance on the June Valuation as updated by, and also in reliance on, the Amended Indigo Valuation". I will return that issue.
On 8 August 2007, Ms Tinson sent an email to Mr Finucan attaching a revised draft contract of sale for the Marina, and sought instructions on changes requested by Indigo.
On 7 September 2007, Mr Purss sent an email to Robert Friggi at City Pacific, copying Mr Johnstone, attaching a number of documents including the Amended Indigo Valuation and the Put and Call Option Deed. The email stated: "[a]ttached is a val[uation] dated Feb 07 & the acquisition agreement regarding the Martha Cove Marina which CPL will acquire from Indigo Group… Steve J is liaising with CBA who we expect will put forward a term sheet, but we were also hoping that you may be able to source funding through your contacts". The plaintiffs submitted: "That the valuation was being circulated is consistent with reliance by City Pacific and Martha Cove". Again, I will return to that issue.
On 25 September 2007, Mr Johnstone sent an email to Mr Mackay, stating, "I have received a copy of the valuation of Martha Cove Marina done on Indigos behalf by CBRE … We have a meeting tomorrow with CBA to discuss funding for the marina acquisition. They have requested the appendices attached to the valuation". As to the provision of the Amended Indigo Valuation to the Commonwealth Bank of Australia, the plaintiffs contended: "City Pacific provided the valuation to the CBA because it thought the valuation was of market value and reliable" and, thus, rely upon that correspondence as further evidence of City Pacific's reliance upon the Amended Indigo Valuation (which submissions I will return to below). As to the subsequent provision of the appendices, the defendants contended there is no evidence before the Court that they were ever provided in answer to the request. It is true that the Court was not directed to any evidence with respect to the provision of appendices, however, such evidence would not advance the position of either the plaintiffs or the defendants, nor is any finding required. It is unnecessary to make such a finding. Again, the plaintiffs contended this provides further evidence of City Pacific's reliance on the Amended Indigo Valuation.
On 2 October 2007 at 8.59am, Mr Purss sent an email to Mr McCormick, Mr Johnstone, Mr Finucan and Mr Sullivan titled "Martha Cove Marina". That email stated: Settlement of the Martha Cove Marina purchase from Indigo is due next week. We are in the process of sourcing funding from CBA but they require a new valuation & have a substantial list of additional information, meaning the finance won't be through in time for settlement. In order to effect settlement, Martha Cove Marina Pty Ltd, the 100% sub of CPL which will acquire the Marina will have to take over the existing CPMT debt on the Marina (currently $18m), then be refinanced via CBA in due course. I have $10m in my CPL cashflow to make up the difference between the CPMT debt & settlement amount, but this is subject to getting the remainder of the $30m CPL investment back from CPMT beforehand.
Later that day, Mr Purss sent an email to Mr Kelly requesting certain information in relation to the Marina to enable City Pacific to progress its funding of the purchase of the Marina. That email stated: So we can progress our funding of the Martha Cove Marina acquisition can you please provide the following information in relation to the Marina as soon as possible: Schedule of all berths leased to date, name, berth details, including price (GST exclusive), term, commencement date, expiry date, date of receipt of funds Copies of all lease agreements Details of revenue from any other marina related services Certificate of Compliance for the berths? Is there capacity to provide fuel from stage 2H? If so, please provide the Environmental Management Plan.
On 5 October 2007, Mr Kelly responded to Mr Purss and provided some of the information requested, which included, inter alia: 1. a spreadsheet titled "Martha Cove Harbour Committed Berth List" (dated 4 July 2007); 2. a copy of legal advice received by the Indigo Group "in relation to the terms of any future lease or licence of a berth to ensure that there is no complaint received from any lessor or licensee or any exposure to any liability resulting from non compliance with the Australian Standards" (dated 13 June 2007); and 3. a "pile capacity review" of Martha Cove Harbour dated 13 June 2007.
As to the relevance of the October 2007 correspondence, the plaintiffs submitted: 68. … Those emails demonstrate the start of the delay in completion, a delay which ultimately proves that, in the particular circumstances of the dealings between Martha Cove and ILO, and more generally between the City Pacific group and the Indigo group, the parties dealt without precise reference to their respective contractual rights and obligations, with the consequence that Martha Cove's loss did not arise on exchange.

[83]

Further payment to ILO

On 2 November 2007, Mr Purss sent an email to Mr Finucan, Mr Johnstone, Mr McCormick and Will Hattingh of City Pacific stating that City Pacific (meaning Martha Cove the contracting party) would not be in a position to complete as bank finance had not been obtained, and that the CBA and the valuer (namely, CBRE) were waiting on information from ILO. That email stated: I confirm that we will not be in a position to settle the Martha Cove Marina transaction next week due to the following: We are yet to receive all requested information from Indigo Group to enable calculation of settlement adjustments, including copies of certain lease agreements, confirmation of settlement dates of certain leases, details and supporting information of holding costs required to be adjusted for at settlement; and Bank finance is not yet available as both the bank and valuer have been very tardy in this instance despite repeated follow up. The valuer has indicated that the valuation will not be available prior to 9 November. Given the bank will require at least 2-3 weeks for the documentation process I suggest settlement be delayed until 30 November at the earliest.
On 22 November 2007, Mr Johnstone and Mr Purss exchanged emails regarding obtaining finance from CBA for the purchase of the Marina. In reply to an enquiry from Mr Purss on that date, concerning an update as to progress with CBA on the Martha Cove Marina debt, Mr Johnstone stated: Mark at CBA came into meet with me yesterday afternoon to discuss all the immediate financing requirements and where we stand. 1. Martha Cove Marina: Mark will have a copy of the valuation today which will come in at just over $25m. He has informed me that they may lend to $13m which is going to leave us well short on our estimates. Can we possibly provide indigo with a further payment to buy more time and have CBRE revisit the valuation with input from Steve Mackay etc. 2. CP1: Mark has informed me that he has been given a[n] approval to provide CP1 with a $12m facility, to increase this would require approval much further up the chain of command. The person that needs to approve a larger amount is currently away and won't be back in the office until the 3rd of Dec. 3. Breakwater. I have made contact with St George and they are coming in to discuss next week. Will is providing me with some numbers as the marina currently stands and forecasts based on stage 2 & 3. What are your thoughts?
On the same day, Mr Purss and Mr McCormick exchanged further emails regarding the need for City Pacific to withdraw $13 million from its cash reserves with CPMT to settle the purchase of the Marina. After Mr McCormick indicated that it would take time for CPMT to meet the withdrawal request, Mr Purss stated: "We can probably delay Martha Cove Marina settlement, but will still need to stump up with $7.5m for them".
On 23 November 2007, Mr Curran from CBA sent an email to Mr Johnstone at City Pacific which attached a valuation of the Marina prepared for CBA. Mr Johnstone forwarded the email from Mr Curran and the valuation to Mr Purss, Mr Hattingh and Mr Mackay. The email from Mr Johnstone stated: Please note the valuation of $25.3m has excluded the sale of 14 berth leases by Indigo. The net purchase price will need to be adjusted to reflect these berth sales, the valuation will then be more in line with the purchase price.
On about 23 November 2007, it was agreed with ILO that Martha Cove would make a further part payment of $7 million to ILO on account of the purchase price for the Marina.
On 28 November 2007, City Pacific paid a total of $7 million to or at the direction of ILO in part payment of the purchase price for the Marina.

[84]

Factual Controversy: The entity that agreed to pay a further deposit of $7 million to ILO on 28 November 2007

Notwithstanding a Joint Statement of Fact that "City Pacific" paid the further amount of $7 million, a dispute remained as to which entity agreed to pay the deposit.
The plaintiffs contended that on about 23 November 2007, Martha Cove and ILO agreed that Martha Cove would make a further part payment of $7 million to ILO on account of the purchase price for the Marina. The plaintiffs relied on an email correspondence chain between Mr Kelly to Mr Purss, dated 27 November 2007, which relevantly stated: Hi Adam, Further to the meeting that Phil and Steve had with Laurie and Mitch last Friday, I'm just confirming the amounts and timing of payments out of part proceeds from the marina sale to fund specific settlements. Would you please pay $4.2m into the following account so that it is cleared funds in the account by Thursday morning.… Would you please pay $0.985111 into the following account so that it is cleared funds in the account by Thursday morning.… I understand that you and Steve have already organized for payment of approx $1. 815 m of the marina related proceeds to be paid to Link Market Services by 28 November. Would you please confirm by email that all is in hand. Thanks very much for your help. Regards, Michael.
In reply to Mr Kelly's email, Mr Purss "confirm[ed] the funds will be transferred tomorrow".
The plaintiffs further relied upon the correspondence between Mr Mackay to Ms Carla Avery, on 28 November 2007. At 9.14am, Ms Avery sent the following communication: Hi Steve $7M is coming into Indigo to cover the below payments from CPL and then the funds are being sent from Indigo. Can you let me know how I should treat this in IPC's accounts. I know the $1.815 just gets coded to Dividends but I wasn't sure about the $7M, $4.2M & the $0.985M. Thanks Kind Regards Carla Avery
In reply to that email at 10.22am, Mr Mackay sent the following: Hi Carla, It's a total of $7 million made up of the $4,200,000 plus $1,815,000 plus $985,000. The $7 million received is to be treated as a repayment of the Martha Cove Marina loan. The $985,000 is a loan to Indigo Palm Beach and the $4,200,000 is a loan to Indigo Bourke Street. Regards, Steve Mackay
On the plaintiffs' case, City Pacific made the payment on behalf of Martha Cove. It was further submitted: 76. … That payment reflects the ex-contractual dealings of the parties, and the contingencies which continued to govern their dealings. Further, the payment, from the perspective of Martha Cove being towards the purchase price, would have been repayable had the Contract of Sale been terminated (there being a total failure of consideration for the payment) and loss was contingent on whether the sum was repaid by ILO or the sale completed or, as came to be contemplated, on-sale to a third party took place. From the perspective of City Pacific its right was against Martha Cove and loss only accrued once Martha Cove failed to make good that obligation, in effect when it did not pay if called on to do so.
The defendants underscored that the above email exchanges are dated 27 and 28 November 2007. The defendants contended that the email of 28 November from Ms Avery to Mr Mackay records that the payments will be from "CPL", which ought be taken as a reference to City Pacific.
Whilst I accept the reference to "CPL" is a reference to City Pacific, that fact does not reduce the effect of the submissions of the plaintiffs. I accept that City Pacific made the payments but did so on behalf of Martha Cove.

[95]

June Valuation - Issues 1 and 2

As to representations made in the context of the June Valuation (Issue 1), the position of the plaintiff is that by providing the June Valuation on 30 June 2006, CBRE and Mr Nicodimou made the following representations to City Pacific: 1. City Pacific (and its subsidiaries) could rely on the June Valuation in order to determine whether to make an investment in relation to the Marina, including by way of a loan to fund the purchase of the Marina. 2. The Marina was worth the value ascribed to it in the June Valuation and that this represented the market value of the property. 3. The June Valuation was based on reasonable grounds and was a reliable opinion of the value of the Marina. 4. The opinion as to the value of the Marina reasonably could be relied upon for the purpose of deciding whether to make an investment in relation to the Marina, including by way of a loan to fund the purchase of the Marina. 5. The June Valuation had been conducted in accordance with the Valuation Retainer, including City Pacific's valuation guidelines enclosed with the Valuation Retainer. 6. The defendants had exercised reasonable skill, care and diligence in undertaking the June Valuation and in expressing the opinions in the June Valuation. (Those six alleged representations shall hereinafter be referred to, collectively, as "the Valuation Representations").
The defendants admit the Valuation Representations were made, save for the representations listed above at (1) and (5).
As to whether the Valuation Representations were misleading or deceptive or likely to mislead or deceive (Issue 2), the plaintiffs submitted that the Valuation Representations were misleading because the June Valuation was not: 1. based on reasonable grounds; 2. a reliable opinion of the value of the Marina; and 3. the product of due care and skill.
The defendant contended, with reliance upon its defence to the duty case (specifically the question of breach), that the Valuation Representations were neither misleading or deceptive or likely to mislead or deceive. In further support of that position, the defendant submitted that the June Valuation plainly set out the basis upon which the valuation was provided. The plaintiffs have adduced no reliable expert evidence that the June Valuation was defective. They have adduced no lay evidence that a reasonable person in the position of the plaintiffs would have been misled by the clear statements in the valuation.

[96]

Amended Indigo Valuation - Issues 3 and 4

Turning to representations made in the context of the Amended Indigo Valuation (Issue 3), the plaintiffs' position is that by providing the Amended Indigo Valuation, CBRE and Mr Nicodimou made the following representations: 1. the market value of the Marina was not less than the value provided in the June Valuation; 2. the June Valuation was based on reasonable grounds and was a reliable opinion of the value of the Marina; 3. the Amended Indigo Valuation was based on reasonable grounds and was a reliable opinion of the value of the Marina; 4. the opinion as to the value of the Marina in the Amended Indigo Valuation and/or the June Valuation could be relied upon for the purpose of deciding whether to make an investment in relation to the Marina, including by way of a loan to fund the purchase of the Marina or the purchase of the Marina; 5. the defendants had exercised reasonable skill, care and diligence in undertaking the June Valuation and in expressing the opinions in the June Valuation; and 6. the defendants had exercised reasonable skill, care and diligence in undertaking the Amended Indigo Valuation and in expressing the opinions in the Amended Indigo Valuation. (Those six representations shall hereinafter be referred to as "the Continuing Representations").
The plaintiffs also contended that by providing the Amended Indigo Valuation, CBRE and Mr Nicodimou made two further representations: 1. the value of the Marina had increased from the valuation in the June Valuation; and 2. the Market Value of the Marina as at 30 January 2007 was $27,300,000, (Those two representations shall hereinafter be referred to as "the Market Value Representations").
As to whether the Continuing Representations and/or the Market Value Representations were misleading or deceptive or likely to mislead or deceive (Issue 4), the plaintiffs contended they were. The plaintiffs position, in that respect, was that the two groups of representations were misleading because the June Valuation and the Amended Indigo Valuation were not: 1. based on reasonable grounds; 2. a reliable opinion of the value of the Marina; and 3. the product of due care and skill.
The defendants deny that they made any of the Continuing Representations or Market Value Representations to the plaintiffs. Further, as to the contention that such representations were misleading and/or deceptive, the defendants relied upon its submissions vis-à-vis the June Valuation (in particular its submissions dealing with the question of breach). It was also submitted that the Amended Indigo Valuation plainly set out the basis upon which the valuation was provided.

[100]

Reliance and Causation

The parties positions as to the issues of reliance and causation were made jointly under the heading "Representation and duty cases". Each issue referred to the conduct set out in paras 31-37 of the FASOC, which the plaintiffs allege was "caused by breaches and contraventions". For convenience, those paras are extracted below: Conduct caused by breaches and contraventions 31. City Pacific, in reliance on: a. all material parts of the June Valuation; and/or b. the Amended Indigo Valuation; and/or c. the Valuation Representations; and/or d. the Continuing Representations; and/or e. the Market Value Representations, entered into an agreement with ILO, by which: f. ILO granted to City Pacific (or its nominee) an option (Call Option) to purchase the [Marina]; and g. City Pacific agreed to pay to ILO (or to fund its nominee Martha Cove Marina to pay to ILO) from 30 July 2007 to the Call Option Expiry Date an amount equal to the Holding Costs less Revenue, as those terms were defined in the Deed. Holding Costs was expressly defined to include interest incurred on all loans, including the Indigo Loan Facility, attributable to funding ILO's ownership of the [Marina]. (Put and Call Option Deed (Deed)). 32. On or about 29 June 2007, City Pacific (on behalf of Martha Cove Marina). paid to ILO or, alternatively, IPC as agent for ILO, $2,100,000 pursuant to clause 2 of the Deed or, alternatively, the agreement referred to in paragraph 31 above (Call Option Fee). 33. On or about 8 October 2007, in reliance on: a. all material parts of the June Valuation; and/ or b. all material parts of the Amended Indigo Valuation; and/ or c. the Valuation Representations; and/ or d. the Continuing Representations; and/ or e. the Market Value Representations, Mr Philip Keith Sullivan and Mr James Timothy Finucan on behalf of City Pacific and Martha Cove Marina executed, pursuant to the Deed or, alternatively, the agreement referred to in paragraph 31 above, a Call Option Nomination Notice and a Notice of Exercise of Call Option whereby Martha Cove Marina, m, nominee for City Pacific, irrevocably exercised the Call Option over the [Marina] (Call Option Exercise Notice). 34. Upon the exercise of the Call Option by way of the Notice of Exercise of Call Option, the Call Option Fee became the deposit for the acquisition of the [Marina] pursuant to clause 4.2 of the Deed or, alternatively, the agreement referred to in paragraph 31 above. 35. On or about 10 October 2007 City Pacific (on behalf of Martha Cove Marina) paid an additional $2,000,000 to ILO and/or IPC (as agent for ILO) as a further deposit and / or as part of the consideration for the acquisition of the [Marina] (Further Deposit). 36. On or about 28 November 2007 City Pacific (on behalf of Martha Cove Marina) paid an additional $7,000,000 to ILO and/ or IPC (as agent for ILO) in consideration for the acquisition of the [Marina]. 37. The Call Option Fee, the Further Deposit and the $7,000,000 payment were paid as part consideration for the acquisition of the [Marina] (collectively, the Martha Cove Property Monies).
For completeness, the defendants response to those paras, is also extracted below: 31. Deny the paragraph. 32. In relation to paragraph 32: (a) Admit that City Pacific on or about 29 June 2007 paid to ILO, or alternatively, IPC as agent for ILO, $2,100,000, comprising payment of the Call Option Fee; (b) Deny the balance of the paragraph. 33. Deny the paragraph. 34. Admit the paragraph. 35. In relation to paragraph 35: (a) Admit that City Pacific on or about 10 October 2007 paid an additional $2,000,000 to ILO and/or IPC (as agent for ILO) as a further deposit and/or as part of the consideration for the acquisition of the [Marina]; (b) Do not admit the balance of the paragraph. 36. In relation to paragraph 36: (a) Admit that City Pacific on or about 28 November 2007 paid an additional $7,000,000 to ILO and/or IPC (as agent for ILO) in consideration for the acquisition of the [Marina]; (b) Do not admit the balance of the paragraph. 37. Admit the paragraph.

[110]

Relevant Principles

The principles of liability for misleading and deceptive conduct are, for present purposes, the same for each statutory provision relied upon by the plaintiffs and are discussed in Ryan Wealth Holdings Pty Ltd v Baumgartner (2018) 131 ASCR 236; [2018] NSWSC 1502 ("Baumgartner") as follows (at [574]-[575]): [574] Section 42 of the FTA (NSW) (like its TPA analogue) is contravened if the acts, omissions, statements and/or silence of the defendant, taken as a whole and considered in light of all relevant circumstances, are misleading or deceptive or are likely to mislead or deceive: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 ("Campbell") at [102], Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 ("Butcher") at [104]. Conduct is misleading if it induces, or is capable of inducing, error (Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198; Rhone-Poulenc Agrochomie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 490-491; Campbell at [25]; Butcher at [111]), and is likely to mislead or deceive where there is a real (or not remote) chance or possibility that the conduct will have that effect (Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87). [575] Whether conduct has a tendency to lead into error is an objective question of fact to be determined on the basis of the conduct of the defendants as a whole viewed in the context of all relevant surrounding facts and circumstances: Campbell at [102], citing Butcher at [109]. The inquiry is an objective one, the focus being on the objective tendency of the conduct to induce an erroneous assumption on the part of a hypothetical individual, but taking into account the respective positions of the parties, including such matters as their knowledge of each other from previous dealings and their respective familiarity with the subject matter: Sutton v AJ Thompson Pty Ltd (In Liq) (1987) 73 ALR 233 at 240. The objective nature of this inquiry means that a finding that conduct is misleading or deceptive is not avoided merely because a plaintiff could, by proper inquiries, have discovered the misleading or deceptive conduct: Butcher at [111]; Henjo Investments Ply Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546.
Conduct is misleading or deceptive, or likely to mislead or deceive, if it has a tendency to lead into error. Thus, there must be a sufficient causal link between the conduct and the error on the part of persons exposed to it: Australian Competition and Consumer Commission v TPG Internet Pty LTD (2013) 250 CLR 640; [2013] HCA 54 ("TPG Internet") at [39]. It is at that stage of the enquiry that the conduct of, or the carelessness of the person or persons to whom the representation is made is taken into account. As was stated in TPG Internet (at [39]): [39] Whether speaking of representations to the public at large or in negotiations between parties of equal bargaining power and competence, the quoted observations in Puxu and Miller go to the characterisation of conduct as misleading or deceptive.
Conduct is misleading or deceptive, or likely to mislead or deceive, if it has a tendency to lead into error. That is to say there must be a sufficient causal link between the conduct and error on the part of persons exposed to it. It is in that sense that it can be said that the prohibitions in ss 52 and 18 were not enacted for the benefit of people who failed to take reasonable care of their own interests.
The question of characterisation as to whether conduct is misleading is logically anterior to the question whether a person has suffered loss or damage thereby. Characterisation of the conduct generally requires consideration of whether the impugning conduct viewed as a whole had a tendency to lead a person into error. Questions of carelessness are relevant to that question of characterisation: TPG Internet at [49].
Having regard to the observations of the High Court in Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45; [2000] HCA 12 at [102]-[103], the plaintiffs' submission that the causal connection to which attention is directed is complex going beyond a "but for" analysis may be accepted.
Section 52 of the Trade Practices Act 1975 (Cth) ("TPA") is not confined to conduct which is in intended to mislead or deceive. A corporation could contravene the section even though it acted reasonably and honestly: Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1 at [9] (per French CJ, Crennan and Kiefel JJ).
A valuer acting with due care and skill must employ an accepted and appropriate valuation methodology, and cross check that method with an alternative method: Singer & Friedlander Ltd v John D Wood & Co [1977] 2 EGLR 84 ("Singer") at 85 (per Watkins J). Accordingly, a valuer may be negligent or engage in misleading conduct if he or she uses an incorrect or inappropriate valuation methodology: Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd (1997) 148 ALR 271 ("Flemington"). The first step in analysing whether a particular valuation methodology is appropriate is to consider how a valuation of the kind contemplated is to be undertaken: Flemington at 285-6 ( per Lehane J). To those propositions it may be added that when a valuer is instructed to carry out a valuation for mortgage purposes, the valuer should consider the value of the property on a forced sale basis: Coris and Investments Ltd v Druce & Co [1978] 2 EGLR 86 at 91 (per Gibson J). The methodology adopted was inconsistent with those requirements.
The plaintiffs' submission addressed principles applicable to representations made to a third party. These issues did not concern the June Valuation as the Valuation Representations were made to City Pacific. However, the principles are applicable to the Amended Indigo Valuation where City Pacific was not the addressee of the valuation.
In that context some general principles may be stated as follows: 1. A valuer can be found reliable for misleading conduct to a third party who receives and relies upon a valuation, even though not the addressee. In APF Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 2) [2007] FCA 1561 ("APF Properties") (per Heerey J), a valuer, who was retained by an accountant, was held liable to the clients of the accountant who had received the valuation from the accountant and suffered loss by purchasing farming properties in reliance on the valuation. The letter of instruction from the accountant did not disclose that the report was being requested on behalf of any other person or that the accountants were acting as an agent. Heery J, from whose decision an appeal was allowed but not on this subject issue (see Kestrel Holdings Pty Ltd v APF Properties Pty Ltd (2009) 260 ALR 418 ("Kestrel Holdings")), stated the relevant principles as follows at [253]-[254]: [253] As already mentioned there was evidence that in the discourse of valuers of North West Coast rural properties (and perhaps of similar properties elsewhere in Tasmania) the term "croppable land", or synonyms such as "land available for cropping", extends to infrastructure such as dams and roadways and a homestead and curtilage. The rationale is said to be that such infrastructure is essential for the running of a cropping property and/or that the land occupied by the infrastructure would be suitable for cropping if not so occupied. [254] In my opinion, "croppable land" is an ordinary, non-technical English term which means land on which crops can be grown, or as Mr Armstrong would say, land "that you can drive a tractor over and crop" (see [219] above). If valuers use the term in the idiosyncratic sense suggested when analysing and comparing sales for valuation purposes, then, as long as like is compared with like, perhaps no great harm is done. But to the outside world, and in particular those contemplating the purchase of a farm as a unit of economic production, the quantity of crop which may be anticipated depends essentially on the area of land on which crops may be grown. (See all also Amadio Pty Ltd v Henderson (1998) 81 FCR 149 ("Amadio") and Australian Breeders Co-operative Society Ltd v Jones (1997) 26 ASCR 26 ("Australian Breeders Co-operative Society") at 58-59 (per Wilcox and Lindgren JJ)). 1. Those considerations as to liability for misleading conduct are in addition to and independent of the question of liability in negligence. In Amadio, APF Properties and Australian Breeders Co-operative Society the valuer was held liable for misleading conduct independently of liability in negligence. In other words, the liability does not depend on a finding of the existence of a duty of care owed to a third party. The liability derives from the provision of an opinion as to value that was not held on reasonable grounds (see Amadio at 235-239 and APF Properties at [351]-[355]).
In my view, those conclusions are consistent with the statutory prohibition on engaging in misleading and deceptive conduct which is not dependant on concepts such as the assumption of responsibility. In this case, I have noted that the defendants, in any event, were on notice that City Pacific and its subsidiaries would or may receive and rely on the Amended Indigo Valuation.
In ABN Amro Bank NV v Bathurst Regional Council (2014) 309 ALR 445; [2014] FCAFC 65 ("ABN Amro"), the Full Federal Court held that ABN Amro's agency, Standard & Poors and a bank, ANB Amro, which created the relevant product, were liable to certain Capital Councils for misleading conduct in relation to the rating, publication and dissemination of investment ratings, despite the fact that neither the ratings agency nor the Bank dealt with the Councils. It was sufficient to ground liability in misleading conduct for the misleading ratings to be published and disseminated to a class of investors which included the Councils: ABN Amro at [754]-[773], [1304]-[1308] and [1361]-[1367].
Finally, I turn to the question of disclaimers as a matter of principle. The defendants' relied upon, inter alia, the disclaimer in s 1.4 of the Amended Indigo Valuation and correctly contended that a disclaimer of that kind cannot simply be ignored: BT Australia Ltd v Raine & Horne Pty Ltd [1983] 3 NSWLR 221 ("BT Australia") at 235 (per Wootten J).
However, attention should be directed to the observation of the full Federal Court in ABN Amro at [771] as follows: [771] Next, as with the claim in tort, it is necessary to consider the separate communication of the disclaimers. A reasonable person would not understand the various disclaimers to have the consequence that the rating could not be relied on. As the facts reveal (see [72]-[93] above), LGFS read the documents it had prior to subscribing for the Rembrandt notes - the Surf presentation, the term sheets, the ratings letters and the pre-sale report. A reasonable person would understand that the rating was an opinion as to creditworthiness held out to be carefully formed, and having a reasonable basis. That reasonable person would not understand the disclaimer to render the rating an exercise in futility, or an opinion with no reliable content: see [602]-[613] above. S&P's submission that a reasonable person would understand the disclaimer to "effectively negate" the conduct which was misleading is rejected. As LGFS stated, if the conduct is negated, it would also "effectively negate" the rating.
An evaluation will ordinarily embody an implied representation that it is the product of a reasonable application of the valuer's skills (see MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 at 355-357 ("MGICA") (per Lindgren J); Australian Breeders Co-operative Society at 59-60; Amadio at 223-224).
The disclaimer does not, again as a matter of general principle, 'effectively negate' the representation conveyed by a valuation, to a reader, that the valuation is prepared with due care and skill; ABN Amro at [717]. Similarly, even though the alleged victim of misleading conduct ordinarily must prove actual reliance upon a breach, the mere presence of a disclaimer executed a plaintiff will not defeat a finding of reliance which is otherwise supported by the evidence (See the discussion in Colin Lockhart, The Law of Misleading or Deceptive Conduct (2019, 5th ed, Lexis Nexis Butterworths) at 446 [10.20]).
I will return to the question of reliance but the plaintiffs' submission to the effect that, if there is a limitation on the extent of conduct which may be characterised as misleading, the limitation does not exclude reliance with respect to which the defendants were on notice has substance. So too is the proposition that the evidence in the present matter does not exclude the ordinary position that the disclaimer will not effectively negate the representation conveyed by a valuation to the reader and the valuation is prepared with due care and skill.
I note at this junction that the defendants contended that any reliance by City Pacific on the Amended Indigo Valuation in the light of the disclaimer in s 1.4 of that valuation was not reasonable because City Pacific obtained or used the valuation as a purchaser not as a mortgagee. I shall in due course reject that submission as in my view, City Pacific obtained the valuation in the capacity as the existing and potential future lender or potential investor in the Marina. Relevant to that conclusion is my finding that the amended indigo valuation was prepared as an update of the June valuation As I will discuss, and as submitted by the plaintiff, there was a known contemplation of a transaction, the transaction would involve City Pacific at least as the existing lender. However, on the facts of this case and in the light of its ongoing involvement with the broader development; City Pacific had been provided with the June valuation of which the Amended Indigo Valuation was an update and City Pacific's reliance on the Amended Indigo Valuation was within the reasonable contemplation of the parties given that sharing the valuations was both an expected and a known fact between the parties: Ta Ho Ma Pty Ltd v Allen [1999] NSWCA 202 ("Ta Ho Ma") at [4]-[5] and [9].

[111]

Issue 1 - Did CBRE and Mr Nicodimou make the representations conveyed by the June Valuation (the Valuation Representations) alleged in para 28 of the FASOC?

The plaintiffs alleged that, by providing the June Valuation, the defendants made the Valuation Representations (as defined in para 28 of the FASOC), and that those representations were misleading or deceptive in contravention of s 52 of the TPA, s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act"), or s 18 of the Australian Consumer Law ("ACL") (each contains the same prohibition but apply to conduct in relation to different subject matter).
I accept the submission of the plaintiff that the relevant prohibition for the purpose of these proceedings is that contained in s 12DA of the ASIC Act for the following reasons: 1. Section 12DA of the ASIC Act differs from the operation of s 52 of the TPA by specific reference to misleading of deceptive conduct in relation to financial services. 2. Section 12BAA(7)(k) of the ASIC Act provides that the definition of "financial products" includes credit facilities. It was submitted that the definition of credit facilities includes loans as per the Regulations referred to in the ASIC Act. 3. Section 12BAB(1) of the ASIC Act defines "financial service" as including the provision of product advice. The provision of "financial product advice", as per s 12BAB(5)(a) of the ASIC Act, includes a recommendation or a statement of opinion that is intended to, or objectively will, influence the acquisition or disposal of financial products.
Ultimately, the prohibition that applies does not inform the analysis. Section 12DA is a prohibition on a "person" engaging in conduct of the identified quality, and consequently applies to each of the defendants. The defendants also admitted that, if the TPA creates the prohibition which applies, then Mr Nicodimou is subject to the extended application of that Act because he communicated (engaged in the relevant conduct) by telephone and email attracting the extended operation of the TPA (beyond corporations) by s 6 of the TPA.
The plaintiffs alleged relevantly that, by providing the June Valuation, the defendants made the Valuation Representations as follows: 1. City Pacific (and its subsidiaries) could rely on the June Valuation in order to determine whether to make an investment in relation to the Marina, including by way of a loan to fund the purchase of the Marina; 2. the Marina was worth the value ascribed to it in the June Valuation and that this represented the market value of the Marina; 3. the June Valuation was based on reasonable grounds and was a reliable opinion of the value of the Marina; 4. the opinion as to the value of the Marina reasonably could be relied on for the purpose of deciding whether to make an investment in relation to the Marina, including by way of a loan to fund the purchase of the Marina; 5. the June Valuation had been conducted in accordance with the Valuation Retainer, including the Valuation Guidelines; and 6. the defendants had exercised reasonable skill, care and diligence in undertaking the June Valuation and in expressing the opinions in that valuation.
The defendants admitted the above representations were made, except the representations in sub-paras (1) and (5) above, but denied that the representations were misleading or deceptive. The defendants' stance as to subparagraphs (1) and (5) are mentioned in the Joint Statement provided by the parties (earlier set out). However, in the defendants' closing submissions, the defendants' accepted the June Valuation conveyed the pleaded representations.
In any event, the representation in subpara (1) above flows from the fact that the June Valuation was provided for mortgage security purposes. As for the representation in subpara (5) above, the provision of the June Valuation in response to the Valuation Retainer, including the Valuation Guidelines, without specifically qualifying any of their opinions given in response to the Valuation Retainer, represented, in my view, that the June Valuation had been conducted in accordance with the Valuation Retainer, including the Valuation Guidelines. That conclusion also follows from s 1.1 of the June Valuation, which expressly stated that the valuation was prepared in accordance with the attached letter of instructions.

[112]

Issue 2 - Were the Valuation Representations misleading or deceptive or likely to mislead or deceive?

The defendants recognised, in this respect, that the essential point of difference between the parties was whether there was a departure from the exercise of reasonable care by the defendants to adopt an "as if complete" gross realisation methodology in valuing the Marina (the defendants' case is that there was very little difference between the issues of breach of duty of care and the question of whether representations were misleading or deceptive).
From this point, the defendants advanced two primary submissions: 1. The expert evidence was central to the determination of Issue 2 (and other issues). It was submitted Mr Lane's evidence for the plaintiffs' should not be accepted. In the absence of reliable evidence from Mr Lane, the Court essentially is invited by the plaintiffs to review the valuations itself and form a view as to whether a party in the position of City Pacific would have been misled. It was submitted the Court does not have the benefit of any evidence led by the plaintiffs of anyone who was, in fact, misled by the valuations. 2. The June Valuation and the Amended Indigo Valuation plainly set out the basis upon which the valuation was provided. That is, the methodology adopted was precisely the methodology which City Pacific (in the case of the June Valuation) - a highly sophisticated and experienced party - asked to be adopted in the amended instructions provided on 1 June 2006. It is, therefore, unsurprising that in providing an "update" (i.e. the Amended Indigo Valuation), the same methodology was adopted.
Thus, as to the essential difference between the parties, as the defendants described it, the defendants' broadly submitted that the June Valuation did precisely what it said it was going to do - provide an "as if complete" gross realisation value for Lots S22, S23 and S24. It was submitted that the client, City Pacific, by what it had asked for in the email exchange between Mr Gillam and Mr Nicodimou on 1 June 2006, altered the instructions given in the letter dated 25 May 2006. City Pacific was a highly sophisticated party which, particularly in light of the evidence of the draft valuation, knew precisely what was conveyed by the June Valuation. There was no evidence led by the plaintiffs to the contrary, and it is for the plaintiffs to prove that the defendants breached the duty they owed to City Pacific. It may also be noted that the plaintiffs contended the June Valuation was obtained by City Pacific for the purposes of the 2006 transaction, as set out above. No loss is pleaded as a result of that transaction.
In order to sustain those propositions, the defendants contended: 1. There is no duty on the part of an advisor "to advise his client, or the person to whom he owes a duty of care, what the client or that other person already knows": Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628 ("Fitzwood") at [175]. 2. The contemporaneous documents, most particularly the email exchange between Mr Nicodimou and Mr Gillam on 1 June 2006 referred to above, clearly establish that Mr Gillam was perfectly well aware that the Marina was to be valued on an "as if complete" basis. Mr Gillam was not unsophisticated - at the time he was the Assistant Lending Manager of City Pacific and City Pacific was a diversified financial services company and the responsible entity of four managed investment schemes which provided finance, investment products and services with a strong focus on the property sector operating through three business units. During the 2006 financial year, City Pacific's property development and management division maintained a direct or indirect involvement in a $2 billion plus pipeline of major leisure oriented property projects in high growth regions on the eastern seaboard. As was properly conceded by Mr Lane (with whom Mr Wright agreed on this issue), City Pacific had a high degree of sophistication. 3. The June Valuation itself made it clear that the Marina was valued on a gross realisation as if complete basis: see for example page vi of that valuation. A distinction was clearly drawn in the valuation itself between the approach to the valuation of Lots S22, S23 and S24 on an "as is" basis, and the valuation of the Marina on a gross realisation as if complete basis. 4. Related to point (2) above, the plaintiffs have elected to call no evidence from the officers of City Pacific to answer the obvious inference available from the documents - that City Pacific knew and understood exactly the methodology adopted in the June Valuation with respect to the Marina
Finally, and in a sense in the alternative, it was submitted by the defendants that an "as if complete" gross realisation valuation does give some indication as to market value for three reasons: 1. the methodology adopted was clearly available based on the relevant ANZ Valuation Guidance Notes, Note 1 and Note 2. Based on Mr Lane's admissions in cross-examination, his criticism of the June Valuation was based on a misunderstanding and ought be rejected; 2. the "as if complete" gross realisation methodology is expressly (and correctly) defined under the "Market Value Definition" section in the June Valuation; and 3. Mr Lane properly conceded that: 1. the gross realisation may not tell the reader everything about market value, but it nonetheless tells a reader information that might allow them to make that assessment; 2. the gross realisation valuation is an integer that one might need in order to conduct an assessment of market value, if that is the methodology being adopted; and 3. a sophisticated client, such as City Pacific, may have information at its disposal which would allow it to use the gross realisation "as if complete" value to arrive at its own view about market value.
As earlier mentioned in the summary of the positions of the parties, the essential position of the plaintiffs as to the Valuation Representations was that they were misleading because the June Valuation was not: 1. based on reasonable grounds; 2. a reliable opinion of the value of the Marina; and 3. the product of due care and skill.
It may also be noted that the plaintiffs correctly submitted that s 12DA of the ASIC Act was a prohibition on a person engaging in conduct of the identified quality and, consequently, applied to each of the defendants. The plaintiffs submitted that if the TPA creates a prohibition which applies, then Mr Nicodimou is subject to the extended operation of that Act because he communicated (engaged in the relevant conduct) by telephone and email, thus attracting the extended operation of the TPA (beyond Corporations) by s 6 of the TPA.

[113]

Mr Lane

It is appropriate to commence consideration of the representation case of the parties, in this respect, by assessing the expert evidence.
The defendants' case with respect to Issue 2 proceeds upon the basis that there is little difference between the issues of breach of duty of care and the issues of whether representations were misleading or deceptive. The defendants also contended that expert opinion was central to the determination of this (and other issues). However, it was contended that the expert opinion of Mr Lane should not be accepted (and, therefore, the plaintiff had failed to discharge their onus with respect to the representation case). The challenge to the expert opinion of Mr Lane by the defendants was based upon the following contentions: 1. in forming his opinion, Mr Lane was not provided with or did not understand critical information, including the email exchanges between Mr Gillam and Mr Nicodimou on 1 June 2006, nor the February 2006 valuation; 2. Mr Lane did not know, and was not told, of the sophistication of City Pacific or, indeed, the business of City Pacific; 3. in criticising Mr Nicodimou's methodology, Mr Lane had regard to numerous guides, publications and information which post-dated Mr Nicodimou's valuation. In cross-examination, Mr Lane properly conceded that it is of fundamental importance, in preparing reports of the kind he prepared, to only take into account material that was available to the valuer. Mr Lane did not do so and his error in this regard is critical; and 4. in light of the above, Mr Lane's evidence and his critique of Mr Nicodimou's methodology should be rejected.
I do not accept those criticisms of Mr Lane's evidence. I do not consider the defendants have succeeded in challenging Mr Lane's evidence. I generally prefer Mr Lane's evidence to Mr Wright's evidence, except to the extent that Mr Wright made concessions consistent with Mr Lane's evidence.
As will be discussed below, these criticisms need to be understood, in part, in the light of my finding that both the Valuation Representations and the Continuing and Market Value Representations are expressed as identifying market value, including by reference to instructions to perform a market valuation (in contradistinction to a gross realisation approach). To that may be added my overall favourable impression of Mr Lane's evidence, directed as it were to practical and common sense approach to the evaluation question.
Turning, however, to the particular criticisms, I will discuss below that the 1 June 2006 email exchange does not refer to the valuation of the leasehold interest in the Marina or the provision of the gross realisation value. As already discussed, there is a conflation in the defendants' case of concepts of "as if complete" and "gross realisation". Further, as I will discuss, the June Valuation contains the express statement as to the effect that it is provided with accordance to the written instructions attached to the valuation and is a market valuation. Further, as I will find below, the defendants overstated the relevance of the draft valuation which was provided on a wholly different set of instructions relating to the Marina than the June Valuation. As to the sophistication of City Pacific, I accept the submission of the plaintiffs that it was entitled to take that expression of expert opinion in the June Valuation as accurate and without "second guessing the valuation".
The defendants do not clearly identify the relevant post-valuation material which Mr Lane is said to have taken into account or how that material is said to effect his reports so as to make them erroneous.
Mr Lane's evidence was that the berth rental evidence used by him in the Lane Report was "virtually the only source of rental evidence" and the date range of the evidence (concerning Patterson Lakes Marina and Anchorage Marina) was reasonably considered of assistance and relevance. Further, I accept the submission that for the plaintiffs that Mr Lane was entitled to use post-valuation date data, at least to the extent that it formed the basis for an opinion as to value at a point time: Propell National Valuers (WA) Pty Ltd v Australian Executor Trustees Limited (2012) 202 FCR 158; [2012] FCAFC 31 ("Propell") at [5] (per Stone J) and [81] (per Collier J). Further, Mr Lane appropriately observed that it is reasonable to have regard to subsequent evidence for the reason that the market was not moving quickly. In that, I accept his evidence that he adopted an acceptable valuation practice.

[114]

Mr Wright

It is true, as the plaintiffs submitted, that Mr Wright made a number of concessions, some of which have been earlier referred to in this judgment. The list prepared by the plaintiffs in this respect is, in my view, correct. That list is as follows: 1. Mr Wright conceded that it was his experience in the valuation industry, and his expectation, that valuation reports were shared between related entities and counterparties to proposed transactions, even if those parties were on the other side of a transaction, and that those counterparties would read those valuations. Further, Mr Wright accepted that, if he was preparing a valuation for a borrower which is expressed to be for mortgage purposes, he would expect the borrower to share the valuation with the lender and for the lender to rely on the valuation. 2. Mr Wright conceded that neither the June Valuation nor the Amended Indigo Valuation tells the reader anything about the current market value of the Marina (despite, it may be interpolated, being expressed as doing so) because those reports adopt the gross realisation approach, and do not take into account the time period over which berths are sold or the costs associated with such sale. That passage of Mr Wright's evidence was follows: GILES: Do you also agree that it did not express the market value of the 239 lots if traded in one line? WITNESS WRIGHT: Correct GILES: And one would say the same about the 2007 valuation. That is, it was not a valuation of a freehold interest in lot S17? WITNESS WRIGHT: That's right. GILES: And it did not tell you what the market value of the then 233 berths were if sold in one line? WITNESS WRIGHT: That's right. GILES: And that's because if sold in one line you would not expect the market value to equate to the sum of 239 individual sales? WITNESS WRIGHT: Correct. GILES: One reason for that is you would not expect 239 individual sales to happen at the same time? WITNESS WRIGHT: Yes. GILES: What you would expect is, if 239 berths were to be, whether they were sold or leased, that would occur over a period of time? WITNESS WRIGHT: Yes. GILES: And if you were valuing those 239 berths to be sold in one line you'd have to take into account the holding costs, time cost and money? WITNESS WRIGHT: Yes. GILES: And perhaps many other costs? WITNESS WRIGHT: Yes. … GILES: Does that mean that you do accept that the 2006 report does not tell one anything about the market value of lot S17? WITNESS WRIGHT: Not that I can see. GILES: Similarly, the 2007 report, which in fairness I should let you have a look at, which is behind tab 7, that's at page E3960, that report tells the reader nothing about the current market value of lot S17 as at the date of that report, does it? WITNESS WRIGHT: Correct. 1. Mr Wright explained that in order to ascertain the market value of the Marina either in 2006 or 2007, his primary valuation methodology would be the direct comparison methodology, but Mr Wright conceded that there were "limited" comparable sales of marinas in 2006, and none in 2007. 2. Mr Wright conceded that in order to ascertain the market value of the Marina either in 2006 or 2007, the capitalisation methodology was an appropriate methodology, at least as a check method, because one class of potential buyers would be investors who would be interested in the likely income and costs of the Marina. 3. Mr Wright conceded that Yarra's Edge and Pier 35, which he regarded as comparable to the Marina, enjoy a superior location from a valuation perspective. Mr Wright acknowledged that, in using those two marinas as comparable, the valuation of the Marina would need to be reduced to reflect that fact. 4. Mr Wright accepted that a valuer using freehold berth sales to value leasehold berths would need to discount the freehold prices and, if the freehold sale was associated with a house and land package, the valuer have to be careful to apportion the purchase price.
Beside from those concessions, there were, however, significant difficulties with the reports in the evidence of Mr Wright.
In the Retrospective Report, for the period leading up to the first valuation date of 25 May 2006, Mr Wright relies on 62 pre-sales in the Marina as comparable sales. Mr Wright appears to have taken those sales from: 1. the table appearing on page 29 of the extract from the CBRE valuation report dated 8 May 2007 ("the CBRE valuation"), referred to at paragraph 75 of his report; and 2. the excel spreadsheet dated 2 May 2007, attached to the email from Peter Trathen to Mr Nicodimou dated 4 May 2007, referred to at paragraph 75 of Mr Wright's report.
The excel spreadsheet contained details of 62 contract sales comprising 67 berths in Stage 1 and 2D of the Martha Cove Development. There were 66 sales of properties with attached berths in Stage 1, including 5 dual berth purchases. There was one sale in Stage 2D (berth 462). Neither of those stages are located within the Marina. The excel spreadsheet does not identify whether those sales were leasehold or freehold, however each of the berth sales was attached to the sale of a house and land package.
Section 5.6 of the CBRE valuation demonstrates that the sales referred to in the table appearing on page 29 of that report are sales of freehold berths. For example, on page 29, immediately above the table, reference is made to the sale of "freehold marina berths" in the Martha Cove Development ranging in price from $76,000 (9 metre berth) up to $200,000 (15 metre berth). Those sales are contained in the table. The sale of the 9 metre berth appears in the table against Lot 39 and the sale of the 15 metre berth appears in the table against Lot 43.
The June Valuation and the Amended Indigo Valuation each refer to there being only approximately a dozen leases of berths in the Marina being entered into.
In paragraphs 84-95 of the Retrospective Report, Mr Wright also referred to "Leasehold Marina Berth Sales in the Subject Property", calculating 57 berth sale prices on rates per metre for different berth lengths. The sales referred to in those paragraphs are taken from Table 2 on pages 20-23 of the Retrospective Report (which is drawn from the material referred to in paragraph 112 above). For example: 1. the 9 metre marina berth sale referred to in paragraph 93 is berth 13 in Table 2, which is in turn Lot 39 in the table referred to on page 29 of the CBRE valuation, and in the excel spreadsheet which records a price of $76,000 (being 9 x $8,444); and 2. the 14 metre marina berth sale referred to in paragraph 94 is berth 58 in Table 2, which is in turn Lot 49 in the table referred to on page 29 of the CBRE valuation and in the excel spreadsheet which records a price of $160,000 (being 14 x $11,429).
There is real substance in the plaintiffs' criticism of Mr Wright's evidence regarding the 62 pre-sales, at least insofar as Mr Wright assumed that those sales were within the Marina. Mr Wright's assessments proceeded upon the basis that the sales were of leasehold interests within the Marina. The evidence reveals, however, that the sales were freehold berths wholly or substantially sold as part of a home or land package and outside the Marina located within the broader Martha Cove Development. Mr Wright used those sales to criticise Mr Lane for not relying on the sales as comparable sales for his valuation.
The correction of this erroneous approach would necessarily require Mr Wright (as he conceded) to reconsider the valuation because a freehold berth is likely to have a higher value than a leasehold berth and if a freehold berth was sold as part of a house and land package, the value attributed to the berth may not be reflective of what the berth would sell for itself.
Further, in the Retrospective Report, for the period after the first valuation date but before the second valuation date of 30 January 2007, Mr Wright relies on 6 berth pre-sales within the "subject property" as comparable sales, as follows: 1. 2 leasehold marina berth sales, being berth number 51 and 462; and 2. 4 marina berth sales associated with house and land packages.
However, berth number 51 is not within the Marina, and involves the sale of a freehold berth, not a leasehold berth. Berth 51 appears against Lot 14 in Stage 1 of the Martha Cove Development in the excel spreadsheet. Berth 462 is associated with a house and land package in Stage 2D of the Martha Cove Development. Further, the 4 marina berth sales referred to by Mr Wright are associated with house and land packages and are referred to in the table on page 31 of the CBRE valuation (also including berth 51, which Mr Wright had double counted). The sales figures referred to in the excel spreadsheet and in the CBRE valuation involve the sale of freehold berths outside the Marina, not leasehold berths in the Marina.
As Mr Wright's reports proceeded on a false assumption, the weight that may be attributed to them is significantly reduced.
Similar problems arose with respect to other berth sales relied upon by Mr Wright in the Yarra's Edge and Pier 35 marinas as comparable sales. He did not explain why those marinas or berth sales within those marinas were, in fact, comparable but rather assumed they were so. It would appear that Mr Wright conceded that the Yarra's Edge and Pier 35 locations were superior to the Marina and some adjustment would need to be made in that respect. I do not accept Mr Wright's evidence as credible that Pier 35 was, on the evidence, an inferior property.
Finally, I accept the plaintiffs' submission that Mr Wright's evidence ultimately does not disclose his reasoning for moving from comparable sales data to his adopted values. He does not properly explain how he used the purported comparable sales data to arrive at his concluded values. For example, in the Retrospective Report, Mr Wright adopted a value for the Marina as at 25 May 2006 reflecting a rate of $7,542 per metre, and a value for the Marina as at 30 January 2007 reflecting a rate of $10,026 per metre. I agree with the submission of the plaintiffs that this failure meant that the Court is unable to properly determine how Mr Wright had used the comparable sales data which was the foundation for his adopted valuation methodology: Bone v Wallalong Investments [2012] NSWSC 137 at [28] (per McDougall J) (see also Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2004] WASC 85 at [78] (per Pullin J)).

[115]

Mr Gordon

The defendants relied on the evidence of Mr Gordon, a professional expert witness. Mr Gordon prepared an expert report dated 4 October 2018 ("the Gordon Report"), and a supplemental report dated 2 August 2019 ("the Supplemental Gordon Report"). The Supplemental Gordon Report largely corrects a substantial number of errors in the Gordon Report and does not advance the analysis.
In the Gordon Report, Mr Gordon addressed six questions. His answers to questions 1 to 3, relating to the Indigo Loan Facility and the Indigo Mezzanine Facility, are not relevant to the proceedings and can be ignored. Following the Court's rulings on evidence on the balance of the report, Mr Gordon's answer to question 4, paras 137-139 of Question 6 and his concluding opinion at paras 140-142 remain in evidence.
In answer to Question 4, Mr Gordon failed to identify and apply any meaningful standard or criteria of reasonableness or prudence against which to assess the conduct of City Pacific. Mr Gordon's answer to that question went no higher than a series of conclusory statements about the conduct of City Pacific. Further, in cross-examination, when Mr Gordon was asked to identify that standard or criteria, he was unable to do so. For the same reasons, Mr Gordon's evidence in paras 137 to 139 and his conclusions in paras 140 and 141 are problematic. In Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, Heydon JA observed (at [59]) that the prime duty of experts in giving opinion evidence is to "furnish the trier of fact with criteria enabling evaluation of the validity of the expert's conclusions". Without an identifiable standard of reasonableness, Mr Gordon's evidence can attract little weight.
Finally, Mr Gordon's opinion in paras 2 and 141 that City Pacific's conduct caused it to suffer loss is not a proper matter for expert evidence and should also be given little weight: Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291 at [28] (per Austin J).
In my view, Mr Gordon's evidence attracts little weight.
From this starting point, reference may then be made to aspects of Mr Lane's oral evidence, which I accept as part of his expertise, as a pre-cursor to returning to the resolution of Issue 2. Those aspects are as follows: 1. Mr Lane's evidence was that the leasehold gross realisation approach adopted by Mr Nicodimou in the June Valuation and the Amended Indigo Valuation did not inform the reader of the market value of the Marina. In Mr Lane's opinion, the leasehold gross realisation approach gave the reader an estimate of the total price that may be obtained for the leasehold berths, however, it failed to inform the reader of the costs that must be incurred in order to achieve that figure. Those costs were legal costs, holding costs, the cost of risks and other costs such as time, value of money or interest. 2. Mr Lane pointed out that Pier 35 (a marina relied on by Mr Nicodimou as providing broadly comparable sales evidence but considered by him and Mr Wright to be inferior) was a superior marina, and not comparable to the Marina, because Pier 35 is located on the Yarra River just outside the Melbourne CBD and in a protected waterway, whereas the Marina is well outside Melbourne and not within a protected waterway. In accepting Mr Lane's statement in this respect, I have had regard to the fact that Mr Lane essentially spent his career working in Victoria and that the market in Victoria was different to that in NSW. 3. Mr Lane explained that he used a capitalisation approach instead of a comparable sales approach because he did not find adequate comparable sales in Victoria (Pier 35 being sufficiently different). Further, Mr Lane pointed out that, in his opinion, it was not appropriate to consider the sale of marinas in other states, such as NSW, because the warmer weather conditions in those states enable a longer boating season and, therefore, marinas in those states attract greater demand and are not comparable.
It follows from Mr Lane's evidence and Mr Wright's concession that the capitalisation approach adopted by Mr Lane was an appropriate way to value the Marina (even if Mr Lane preferred, himself, a discounted cashflow approach). On the evidence, that conclusion is available having regard to the absence of sufficient comparable sales, the fact that the gross realisation method sheds little or no light on market value and from the fact that one class of potential buyers of the Marina would be investors who were interested in the likely income and costs of the Marina.
Mr Lane's evidence as to the reason why the Marina should have been valued using the capitalisation approach is now further instructive in this respect: 1. City Pacific's instructions to value the Marina for first mortgage security purposes required the defendants to value the Marina on a "freehold" basis, and not a "leasehold" basis as assumed by the defendants. This is because, from a mortgagee perspective, the only security available was the freehold title to the Marina (that reasoning applies equally to a purchaser). At the time of valuation, the Marina was held as a single asset in a single title and, in the event of a mortgagee sale, could only be sold as a single lot, there otherwise being no individual titles for the proposed leasehold berths. While there was a proposal to sell the berths on a leasehold basis, very few berths had been sold on that basis, and the ownership of those that had still rested with the freehold owner (with the freehold value reflecting the small leasehold encumbrance). In those circumstances, I accept the submission of the plaintiffs the major consideration for the defendants should have been its freehold value. 2. A freehold valuation involved valuing the Marina on the assumption it was offered for sale as a single property, "on a physically completed, ready for use basis, but at the relevant valuation dates notionally vacant and still to commence operations". 3. Based on those assumptions, the value of the Marina was dependent on its income generating capacity and, therefore, the capitalisation methodology was the appropriate valuation methodology. 4. Mr Lane noted that the capitalisation approach was supported by industry literature and was the only approach that he had ever used to value a marina. In 40 years of valuing marinas, Mr Lane had never been instructed to value a marina using the leasehold gross realisation method, particularly for first mortgage purposes.
Proceeding from that analysis, I have come to the view that the June Valuation was not based on reasonable grounds and was not a reliable opinion of the value of the Marina and is not the product of due care and skill.
The reasons for those conclusions may, in the light of the foregoing analysis, be briefly stated: 1. The Valuation Guidelines specified that the defendants were to provide an opinion on the market value of the Marina, even though the defendants had to exercise their professional judgment in selecting the appropriate methodology to apply to determine market value. Further, the Valuation Retainer required the defendants to determine the current market value of the Marina. No alternative instructions are provided in that retainer. The June Valuation does not disclose a limitation on that obligation and required a valuation of market value. Hence, a gross realisation methodology does not provide an appropriate valuation of market value. 2. In the circumstances of the valuations undertaken by the defendants in this case, the valuer's selection of the appropriate methodology was to be approached from the perspective of a mortgagee in possession. The evidence discloses that the June Valuation (and the Amended Indigo Valuation) was expressly required for first mortgage security purposes and, in that light, the valuer was expected to give specific attention to the mortgagee's position in relation to the property and the remedies available to him in the event of default of the mortgagor. 3. Mr Lane's evidence was that the leasehold gross realisation method adopted by the defendants was inappropriate in that light because the value derived by using such an approach did not reflect the situation that would be faced by a mortgagee in possession of the Marina, as such, as a mortgagee is unlikely to be in a position to conduct an orderly sale of each berth over an extended period. In short, the mortgagee may be required to offer the whole Marina for sale as a single entity. 4. It follows that the gross realisation approach is inadequate because the value of the Marina would be a critical consideration and that methodology does not inform the reader adequately of value. Mr Nicodimou's approach left out consideration, in that light of future net realisation, holding costs, the time value of money and an allowance for risk as earlier discussed. The limitations of the gross realisation methodology are exaggerated over a 3-5 year period because the methodology cannot reliably assess value over that period. 5. The limitations of the leasehold gross realisation methodology extended to individual sales of the respective berths in the Marina because the recipient of the valuation, if limited only to information on the value of the proceeds from upfront leasehold sales would have insufficient information on which to base an assessment of the freehold owner's obligations and financial responsibilities, particularly with respect to operating and maintaining a Marina and the commercial obligations of leaseholders. The essential shortfall in that respect is an inability to assess the value of the encumbered freehold. The valuation does not reflect the vulnerability of the Marina operation or the risk that the owner or the mortgagee would be left to meet vis-à-vis ongoing expenses of maintaining and operating the Marina. This much is clear from Mr Lane's evidence. I accept the submission of the plaintiffs that Mr Nicodimou's approach, in failing to identify the period of time over which the realisation were assumed, exacerbated the deficiency. 6. Mr Lane's evidence was that the leasehold gross realisation methodology was inappropriate because, in undertaking a direct comparison method, the proper approach was to compare Marinas on a "whole of property" basis and not a berth by berth basis. As at the relevant times, there were no comparable marinas which had recently been sold which could have been compared to the Marina on a direct comparison basis. As I have earlier noted, I accept Mr Lane's evidence as to the appropriateness of the capitalisation methodology. 7. There are two further deficiencies in the June Valuation report: 1. First, I accept the submission of the plaintiffs that the June Valuation fails to cross check the methodology adopted with an alternative methodology including on a forced sale basis. The terms of the Valuation Retainer required an alternative valuation with the consequence of the failure to perform a check valuation disclosed a want of due care and skill. 2. Secondly, Mr Lane's evidence is that CBRE and Mr Nicodimou grossly overvalued the market value of the Marina as at the valuation date of 18 May 2006. Mr Lane concluded that, as a result of adopting an incorrect methodology, CBRE ascribed a value to the Marina that was twice the figure that should have been reported, and was misleading. It follows that the defendants' valuation of $22.5 million was grossly excessive, and well outside the maximum tolerable range of value that could be reached by a reasonably competent valuer. This also demonstrates the defendants' conduct was misleading.
Before turning to my ultimate conclusion, it is appropriate to note that the Marina was overvalued by the defendants, even if the defendants' methodology was found appropriate. Using the capitalisation approach, Mr Lane concludes that the market value of the Marina as at 18 May 2006 and 30 June 2006 was $10.3 million. Using the leasehold gross realisation approach, the defendants valued the Marina at $22.5 million as at 18 May 2006. By way of comparison, the defendants' valuation is 118.4% greater than the value arrived at by Mr Lane. On the basis contrary to his primary opinion that the gross realisation approach could not be used, Mr Lane also valued the Marina using the leasehold gross realisation approach. Using that approach, Mr Lane concluded that the market value of the Marina as at 18 May 2006 was only $18.21 million, and not $22.5 million as reported by the defendants. By way of comparison, the defendants' valuation is 23.5% greater than the value arrived at by Mr Lane using the same valuation methodology.
Although relevant to later sections of this judgment, it may be observed that gross overvaluation, unless explained, is strong evidence of negligence: Trade Credits Ltd v Baillieu Knight Frank (NSW) Pty Ltd (1985) Aus Torts Rep 69 at 529-30 ("Trade Credits"); MGICA at 336-7 (per Lindgren J); Hann Nominees Pty Ltd v National Australia Bank Ltd [2000] FCA 454 at [26]-[29] (per the Full Court). Further, as stated by Lindgren J in MGICA at 357, the propounding of an expert valuation may amount to misleading or deceptive conduct if it is "so far removed from the true value… as to be misleading or deceptive".
Before concluding this issue, I propose to turn to some particular issues raised by the defendants in their submissions as to duty of care and in particular the breach thereof, so far as they bear upon the issue.
The defendants contended that it was not a departure from the exercise of reasonable care by the defendants to adopt an "as if complete gross realisation" methodology in valuing the Marina because the methodology adopted was requested by Mr Gillam in an email exchange he had with Mr Nicodimou on 1 June 2006 (it was contended, this changed all of the instructions given in a letter of instruction dated 25 May 2006) and City Pacific was a highly sophisticated party which, in the light of the draft valuation, knew precisely what was conveyed in the June Valuation.
I accept the submission of the plaintiffs that the defendants' approach in this respect conflates two different concepts. There is a relevant difference between the concept an "as if complete" valuation and the concept of a "gross realisation" analysis. As earlier mentioned, there were indications of a communication with Mr Nicodimou consistent with an "as if complete" valuation but the evidence does not allow for a finding that he was instructed to adopt a gross realisation assessment for market value. In short, I do not consider that there, as earlier stated, was any instruction by Mr Gillam that Mr Nicodimou was to value the leasehold interest in the Marina or to provide a gross realisation value.
A further difficulty with this contention by the defendants was the terms of the June Valuation itself. As I have mentioned, the valuation contained express statements to the effect that it was provided in accordance with the written instructions attached to the valuation and that it provided a market valuation. As I have found, the valuation achieved neither outcome. Mr Gillam was not the sole recipient of the valuation nor the ultimate decision maker. Again, as earlier mentioned, City Pacific was a large corporation where many people other than Mr Gillam were likely to rely upon the June Valuation. I do not consider the June Valuation should be considered other than in its own terms, that is, within the four walls of the valuation given by the defendants.
The defendants did place some reliance upon the draft valuation. As earlier mentioned, the instructions for the draft valuation were to assess both "current Capital Market Value 'As Is'" and "gross realisation 'As If Complete'" for Stages 2A-H, 57, S8, 3 and Stages 4A-C, 5, 6. This stands in contradistinction to the instructions for the June Valuation and the Amended Indigo Valuation. In those cases, no reference was made to the valuation of the Marina on a gross realisation basis. Rather than the draft valuation giving rise as to the defendants' submissions as to a basis upon which it may be known or implied that the June Valuation was based on a gross realisation methodology, the distinction between the draft valuation and the June Valuation, in my view, underscored that the June Valuation would have been understood differently by City Pacific. The draft valuation correctly drew a distinction between market valuation and a gross realisation analysis.
Further, as earlier mentioned, in the June Valuation, the defendants expressly identified that the opinion expressed was of market value. The Valuation Guidelines defined "market value" broadly in line with the definition of that concept as articulated in Spencer. Those same guidelines instruct the defendants to determine the market value using the most appropriate method of valuation showing adequate substantiation and compliance with the relevant API Expected Practice CE Standards and API Guideline notes. The Valuation Guidelines made it clear that the defendants were being asked to provide an opinion on the market value of the Marina.
Nor do I accept that Mr Lane conceded that the email exchange of 1 June 2006 changed the instructions given to Mr Nicodimou as he did not give that evidence.
The defendants disputed that a gross realisation valuation does not reveal anything about market value. As I have observed that contention is inconsistent with the opinion of Mr Lane and Mr Wright. As to the contention that the relevant ANZ Valuation Guidance notes support the use of a gross realisation methodology in providing a market valuation of the Marina, it must be observed that, in Guidance Note 1, the only reference to gross realisation methodology was in para 4.21 which deals with the valuation of multiple properties in one development. In contrast, there is no reference to gross realisation methodology in Guidance Note 2 which deals with valuations for mortgage and loan security purposes. In any event, Guidance Note 1 expressly states that "the valuation of multiple properties in one development should be completed on the basis of a single transaction or sale in one line to one buyer". The note proceeds to indicate that the gross realisation approach should incorporate an appropriate discount to reflect the costs incurred in realising the proceeds from the sale of individual properties such as market and sale costs, holding costs, and profit and risk factors. As earlier observed, Mr Nicodimou did not apply these discounts and in the June Valuation (or for that matter, the Amended Indigo Valuation), which represents a lack of due care. (Mr Lane conceded that in preparing the Lane Report, he did not refer to section eight of Guidance Note 1 and Guidance Note 2, which refer to "as if complete" valuations but that concession appears to be of little significance as he was concerned with the question of the validity of the gross realisation methodology and not a distinction between "'as is" and "as if complete" valuations).
Finally, it was submitted by the defendants that definitions were incorporated in the June Valuation as to both "gross realisation" and "market value". However, that definitional approach says nothing about the fact that it was the opinion as to market value, also defined in the valuation, that was requested and, perhaps more importantly, stated as what was being provided by the defendants in the valuation.
It follows that the question posed in Issue 2 should be answered in the affirmative.

[116]

Issue 3 - Did CBRE and Mr Nicodimou make the representations conveyed by the Amended Indigo Valuation (the Continuing Representations and the Market Value Representations) alleged in paragraphs 28A and 28B of the FASOC?

Turning to whether the defendants made the Continuing and Market Value Representations, the defendants relied upon their case vis-à-vis duty (to which I will return to more comprehensively when considering Issues 8-11 below).
Broadly speaking, the defendants contended that they did not owe a duty of care to the plaintiffs in preparing the Amended Indigo Valuation. The defendants, in that respect, relied upon the following factual premises that were said to distance the plaintiffs from the defendants: 1. the valuation was requested by MCD on behalf of the Indigo Group; 2. ILO was the "owner" of the Marina, as opposed to a "lender" or prospective "purchaser"; 3. the valuation was not addressed to the plaintiffs; 4. the plaintiffs do not allege that the defendants provided the valuation to them; and 5. the valuation was provided to City Pacific by the Indigo Group - and not the defendants.
I note before some turning to other factors of the defendants case that, whilst it is not contentious that ILO was the owner of the Marina, the plaintiffs submitted that the Amended Indigo Valuation was requested by IHPO, the owner of the Other Properties, not ILO, the owner of the Marina. It was contended, in that respect, the defendants' submissions proceeds upon a false premise.
The defendants further contended that the Court should not make the following findings as "there is no evidence" to sustain the following factual conclusions: 1. the defendants knew when the valuation was commissioned or prepared that the plaintiffs had any interest as potential purchasers of the Marina; 2. it may be inferred that CBRE or Mr Nicodimou knew that the report had been or would be provided to City Pacific; 3. the letter of instruction from MCD to CBRE was ever provided to City Pacific; and 4. the plaintiffs paid for it or ever asked for it to be assigned to them.
The defendants also contended that no duty was owed because: 1. the Amended Indigo Valuation was prepared in February 2007; and 2. at that time: 1. the defendants did not know or should not have known that the plaintiffs were members of a class of persons who might reasonably rely on the valuation; and 2. the defendants did not know or should not have known that it was likely that the plaintiffs would rely on the valuation to enter into the transaction of the kind that the plaintiffs entered into.
Those contentions should be rejected, for the following reasons: 1. As to the time of preparation, as earlier found, the Amended Indigo Valuation was prepared in about June 2007, not February 2007. 2. The defendants also contend that no duty was owed because the Amended Indigo Valuation was stale by October and November 2007 because of the presence of disclaimers. I will later reject those contentions, the Amended Indigo Valuation was not stale.
The real issue appears to be whether the Continuing Representations pleaded at para 28A(b), (c), (e) and (f) of the FASOC were made when the Amended Indigo Valuation was addressed to someone other than the plaintiffs and the valuation contained the disclaimers.
The evidence makes clear that the Amended Indigo Valuation was not addressed to the plaintiffs. However, in the circumstances of this matter, the plaintiffs should be found to have received the representations as third parties for the following reasons: 1. CBRE had been asked to "update" the June Valuation, showing that it was based on the June Valuation and objectively was to be understood as an update of the June Valuation which was addressed to City Pacific. 2. I infer that a valuation addressed to a borrower, for mortgage security purposes, is to be used by the borrower in dealing with counterparties at least including potential lenders. In his public examination, Mr Nicodimou admitted that he knew that the Indigo Valuation or the Amended Indigo Valuation would potentially be provided to and relied on by City Pacific. Thus, the defendants' assumption of responsibility goes beyond the addressee. In point of fact, IHPO was given the June Valuation (otherwise it could not ask for an "update") and City Pacific was given the Amended Indigo Valuation. Those actions were consistent with the evidence of Mr Wright as to known market practice. 3. City Pacific was the then financier of IHPO and ILO and necessarily to be involved in any transaction involving the Marina. 4. The defendants were aware of the relationship between City Pacific and the Indigo Group, having been told that fact in June 2006. Combining those facts, the defendants were on notice that City Pacific may rely on the valuation. That approach accords with Australian authority.
In light of the factual findings earlier made in this judgment, in my view, the defendants knew or were on notice that City Pacific (and its subsidiaries) would or may receive and rely on the Amended Indigo Valuation.
I shall turn to particular considerations regarding the Continuing Representations and the Market Value Representations.

[119]

Issue 4 - Were the Continuing Representations and/or the Market Value Representations misleading or deceptive or likely to mislead or deceive?

Overall, the following propositions advanced by the plaintiffs are sound with respect to the Amended Indigo Valuation as to both forms of representations made (and, it may be noted, apply equally to the June Valuation; noting the sections on the Amended Indigo Valuation below, correspond to the equivalent section in the June Valuation): 1. The valuation is expressly said to be as to "market value" (see s 1.1); explained (see ss 1.6, 6.1 and 6.2 (I do not consider the reference to the "Summary of Assessed Values" in s 5.5 alters that conclusion). 2. The valuation, without explanation, combined different conceptual bases for different parts of the property. The Marina was valued on a gross realisation basis while the Other Properties were valued conventionally (see s 5.5, ss 6.1 and 6.2).The reader was entitled to understand the integers to reach a total value were all of the same general character and all, in the circumstances, to be market value. 3. Gross realisation does not represent present value. Nor does it represent value over the next three to five years as was required. 4. The valuation approach is inconsistent with API Standard 1 paragraph 4.0, the letter of instructions and "market value" as defined in the valuation and the expert evidence.
As I have found, the Amended Indigo Valuation was based on and "updated" the June Valuation. In my view, the contraventions identified in relation to the June Valuation should result in a finding that the defendants engaged in misleading conduct in relation to the Amended Indigo Valuation with respect to the Continuing Representations. My earlier findings with respect to a failure to adopt an appropriate valuation methodology and a failure to explain and cross-check the methodology apply with equal force here. Further, for the same reasons as provided earlier, and having regard to Mr Lane's evidence, the defendants grossly overvalued the market value of the Marina as at the valuation date of 30 January 2007. Mr Lane concluded that, as a result of adopting an incorrect methodology, CBRE ascribed a value to the Marina that was twice the figure that should have been reported or, at the very least, was misleading (I have earlier discussed why the Marina was overvalued, even if the defendants methodology was appropriate).
One further matter should be mentioned in this respect concerning the Inland Harbour sales. In s 5.2 of the Amended Indigo Valuation, the defendants relied on nine reported leasehold sales within the Inland Harbour Marina. However the defendants failed to explain and identify appropriate enquiries as to whether those sales constituted appropriate or reliable comparable sales evidence, and the Amended Indigo Valuation failed to provide any or any comparative commentary on those reported sales.
As to the Market Value Representations I accept the submission of the plaintiffs that the representations were misleading or deceptive or likely to mislead or deceive because the value of the Marina had not increased from the valuation in June and because the market value of the Marina as at 30 January 2007 was not $27.3 million (or, as otherwise appeared in the representations, $26 million).
I would answer the question raised by Issue 4 in the affirmative.

[121]

Relevant Principles

Before addressing the duty case, it is convenient to address the proper law governing the plaintiffs' negligence case in relation to both the June Valuation and the Amended Indigo Valuation. It is common ground between the parties that the law of Victoria governs these claims and, in particular, the Wrongs Act 1958 (Vic). That issue only arises in relation to the tort claim, the misleading conduct claims arises under Commonwealth legislation.
In the present case, the defendants' alleged negligence has several interstate elements, as follows: 1. the Marina was located in Victoria; 2. the defendants were located in Victoria, prepared the valuations in Victoria and communicated those valuations from Victoria; and 3. the plaintiffs were located in Queensland and received and acted on the valuations in Queensland, although that last proposition depends on the level of generality at which the concept of "acted on" is described. While the actions were directed by people located in Queensland, and importantly the payment of money was directed from Queensland the Marina which was acquired was located in Victoria.
In Baumgartner, the Court summarised the principles that are applicable in deciding the proper law where a tort has several interstate elements (at [861]-[863]): [861] In John Pfeiffer, the High Court decided that the law of the place of the commission of the tort (or lex loci delicti) should be applied as the law governing all questions of substance to be determined in a proceeding arising from a tort which has interstate elements. The Court further decided that laws that bear upon the existence, extent or enforceability of remedies, rights and obligations should be characterised as substantive and not as procedural laws (at [102]). These include the application of any limitation period, whether barring the remedy or extinguishing the right and all questions about the kinds of damage, or amount of damages that may be recovered: John Pfeiffer at [100]. [862] Hence, the lex loci delicti will determine the law that is applicable to the plaintiff's negligence claim. So much was common ground between the parties. [863] The common law test for determining the place of the tort is "to look back over the series of events … and ask … where in substance did this cause of action arise?": Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 at 468; Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 ("Voth") at 567; Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575; [2002] HCA 56 ("Dow Jones") at [43]. This approach has been described as ascertaining, in a common sense way, what is the place of "the act on the part of the defendant which gives the plaintiff his cause for complaint": Jackson v Spittall (1870) LR 5 CP 542 at 552, see also Voth at 567.
The Court continued (at [872]): [872] In this case, the consequences of the conduct, which I will discuss further below, were felt in NSW rather than where the defendants acted in Victoria. However, Voth stands as authority for the following propositions that were advanced by the plaintiff (which are reflected in the above passages): (1) In cases of negligence, where some quality of the defendants' conducts is critical, it is usually very important to look at where the defendant acted and not where the consequences of the conduct were felt: see also Chubb Insurance Company of Australia Ltd v Moore (2013) 302 ALR 101; [2013] NSWCA 212 ("Chubb") at [151] and M Davies, A S Bell and P L G Brereton, Nygh's Conflict of Laws in Australia (LexisNexis Butterworths, 9th ed, 2014) at [20.12]. (2) It is necessary to determine where the essential acts and omissions occurred that initiated the complaint and underpin the allegations made. The essential enquiry is to where, in substance, the act or omission giving rise to the complaints took place: Voth at 567-569, cited for this proposition in Dow Jones at [43] and Chubb at [151]. The focus is not on all elements of the claim or cause of action, or where the cause of action became complete: Dow Jones at [43]; Chubb at [151].
Applying the above principles to the present case, although the June Valuation and the Amended Indigo Valuation were received and acted on in Queensland, the essential act or omission that initiated the plaintiffs' claims was the preparation of the valuations. The preparation of those valuations took place in Victoria and, therefore, the law of Victoria applies to the plaintiffs' negligence claims. This conclusion is reinforced by the location of the Marina valued. This means that questions of breach of duty and causation are governed by the law of Victoria.

[122]

Issue 5 - Did CBRE and Mr Nicodimou owe one or both of City Pacific and Martha Cove a duty of care?

The plaintiffs' submissions as to whether CBRE and Mr Nicodimou owed a duty of care with respect to the June Valuation may, in light of the foregoing analysis, be readily accepted.
The defendants admitted that CBRE owed a duty to City Pacific in relation to the June Valuation. They also admitted that Mr Nicodimou owed a duty, although the content of that duty was subject to some likely immaterial dispute. However, as they deny owing a duty to City Pacific and Marina Cove in relation to the Amended Indigo Valuation, it is convenient to here identify why the admission of a duty is correct.
The starting point is the principles governing the imposition of a duty of care in relation to the provision of information or advice. The authorities recognise that the duty is imposed in relation to prevention or avoidance of economic loss, and that care is taken in imposing a duty to avoid economic loss. In ABN Amro, the Full Court summarised the applicable principles as follows (at [573]-[578]) (some internal references omitted): [573] … First, for there to be a duty to exercise reasonable care in making a statement or giving advice: (1) the speaker must realise, or the circumstances must be such that the speaker ought to have realised, that the recipient of the information or advice intends to act on that information or advice in connexion with some matter of business or serious consequence; and (2) the circumstances must be such that it is reasonable in all the circumstances for the recipient to seek, or to accept, and to rely upon the utterance of the speaker… [574] In respect of the second limb, the nature of the subject matter, the occasion of the interchange, and the identity and relative position of the parties as regards knowledge (actual or potential) and relevant capacity to form or exercise judgment will all be included in the factors which will determine the reasonableness of the acceptance of, and of the reliance by the recipient upon, the words of the speaker: Tepko at 16-17 [47]. It is important to recognise that the list is not exhaustive. [575] Second, proof of the criteria at [573] and [574] above establishes an assumption of responsibility or known reliance (or the converse, vulnerability), sufficient for a duty to be imposed. [576] Additional, but related, points about the criteria … should be noted. A duty of care is imposed whether the information or advice is given in response to a request or volunteered... [577] Further, a duty is also imposed where the information and advice is communicated to an identifiable class of people if the criteria identified in Tepko are established: Esanda Finance at 252 (Brennan CJ) and 302 (Gummow J) … It is not necessary that the person making the statement know the identity of the persons who may rely on it and suffer loss... Next, the fact that the person making the statement or giving the advice has some special expertise is consistent with (although not always necessary for) the imposition of the duty... [578] … [C]entral to the analysis required by the identified criteria is the purpose for which the statement is made or the advice is given. A recipient of information or advice is owed a duty by the speaker if (a) that recipient is part of a class to whom the statement or advice is directed and (b) reliance on the statement or advice by a member of the class is consistent with the substance of the purpose for which the statement is made or advice given...
The Wrongs Act, which governs the negligence claims, does not affect the common law rules in relation to duty (subject to certain particular rules and defences which have no application to the present case), breach and causation, and therefore the above principles are applicable in determining duty.
Consequently, the principles identified in ABN Amro apply. The June Valuation was requested and provided on an occasion on which the criteria identified in Tepko Pty Ltd v Water Board (2001) 206 CLR 1 ("Tepko") and applied in ABN Amro in the passage cited are satisfied. At common law a duty is owed. (I note that the defendants made reference to the judgment of Brennan CJ in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at 252, but ultimately I have approached the question of duty and negligent misstatement trough the prism of Tepko).
That duty was owed by Mr Nicodimou as well as by CBRE. An employed valuer may also owe a personal duty of care to the recipient of a valuation provided by his or her employer. Under Australian law, it is not necessary for an employed valuer to have assumed some personal responsibility before a duty of care will be imposed: Propell at [113]-[115] (per Collier J, with Stone J agreeing); Interchase Corporation Ltd v ACN 010 087 573 Pty Ltd [2003] 1 Qd R 26 at [9] (per McMurdo P) and [77] (per McPherson JA).
For these reasons, I answer Issue 5 in the affirmative.

[123]

Issue 6 - What was the content of the duty of care?

A valuer's liability in contract will be governed by the terms of the valuer's retainer, including the instructions given to the valuer. That contract, similarly, informs the duty in tort.
The content of a valuer's duty of care is informed by the instructions given to the valuer: Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 ("Kenny & Good") at [58] (per McHugh J) and [116] (per Kirby and Callinan JJ). Those instructions can include instructions to comply with particular guidelines or practice standards, such as the API Guidelines: Genworth Financial Mortgage Insurance Pty Limited v Hodder Rook & Associates Pty Limited [2010] NSWSC 1043 at [53] (per Einstein J).
A valuer may owe a duty of care to a person on whose account, or for whose benefit and use, it prepares a valuation. The standard of care imposed is that of the ordinary skilled person exercising and professing to have the skills of the valuer performing such work: Adelaide Bank Limited v DTS Property Services Pty Ltd [2008] NSWSC 1328 at [5] (per McDougall J). Irrespective of whether a valuer's duty arises in tort or contract, the valuer's duty is to take reasonable care as a trained professional valuer to give a reliable informed opinion on the open market value of the land in question at the date of valuation: I & L Securities Pty Limited v R S Melloy Pty Limited [2002] QSC 306 ("I & L Securities") at [134] (per Ambrose J).
The significance of the breach of retainer is not that a separate claim is pursued for breach of contract. As time runs from breach in a contract case it is accepted that the contract claim is statute barred. Rather, the retainer informs duty and breach of the retainer informs the inquiry as to breach of duty in relation to the June Valuation.
Under the terms of the Valuation Retainer, admitted on the pleadings, CBRE made at least four relevant promises. 1. CBRE promised to perform a market valuation. 2. CBRE promised to provide "at least one check method" in support of its primary valuation rationale or methodology. 3. CBRE promised to include a "statement of suitability of security for Mortgage purposes". 4. CBRE promised to "comment on the ability of the property to hold its value over a period of 3-5 years".
Those provisions constitute the answer to the Issue 6 as they constitute the relevant content of the duty of care with respect to the June Valuation.

[124]

Issue 7 - Did CBRE or Mr Nicodimou breach the duty of care?

The defendants' case as to breach of duty, as earlier noted, substantially overlapped with the case brought with respect to misleading and deceptive conduct. Nonetheless, and without repeating the earlier references to the defendant's case, the primary proposition advanced by the defendants, in this respect (apart from contending that it was not correct to say that a gross realisation valuation tells one little or nothing about market value), was as follows: 1. There is no duty on the part of an advisor "to advise his client, or the person to whom he owes a duty of care, what the client or that other person already knows": Fitzwood at [175]. 2. The contemporaneous documents, most particularly the email exchange between Mr Nicodimou and Mr Gillam on 1 June 2006 (referred to above), clearly establish that Mr Gillam was perfectly well aware that the Marina was to be valued on an "as if complete" basis. Mr Gillam was not unsophisticated - at that time he was the Assistant Lending Manager of City Pacific. City Pacific was a diversified financial services company and the responsible entity of four managed investment schemes which provided finance, investment products and services with a strong focus on the property sector operating through three business units. During the 2006 financial year, City Pacific's property development and management division maintained a direct or indirect involvement in a 3. $2 billion plus pipeline of major leisure oriented property projects in high growth regions, on the eastern seaboard. As was properly conceded by Mr Lane (with whom Mr Wright agreed on this issue), City Pacific had a high degree of sophistication; 4. The June Valuation itself made it clear that the Marina was valued on a gross realisation as if complete basis: see for example page vi of that valuation. A distinction was clearly drawn in the valuation itself between the approach to the valuation of Lots S22, S23 and S24 on an "as is" basis, and the valuation of the Marina on a gross realisation as if complete basis. 5. The plaintiffs have elected to call no evidence from the officers of City Pacific to answer the obvious inference available from the documents - that City Pacific knew and understood exactly the methodology adopted in the June Valuation with respect to the Marina.
The standard of care and breach of duty of care are governed by s 48 of the Wrongs Act.
The starting point for determining breach of duty is to identify the relevant risk of harm: Roads & Traffic Authority of NSW v Dederer (2007) 234 CLR 330; [2007] HCA 42 at [59] (per Gummow J).
In the present matter, there was no real dispute that, when the June Valuation was provided to City Pacific, the defendants knew or ought to have known that there was a risk that City Pacific would suffer harm including economic loss if they failed to exercise care and skill in the preparation of the June Valuation. In any event, the defendants knew or ought to have known that the risk of one or more of the plaintiffs would make a financial investment in relation to the Marina based on a perceived higher value than the true value of the Marina, to pay monies under the investment and not be able to recover all of those monies.
That conclusion follows from the fact that the loss to City Pacific arose from a transaction analogous to lending money to Martha Cove, lending specifically being in the contemplation of CBRE and Mr Nicodimou. More broadly, the nature of the plaintiffs' business, which was ultimately an investment business, whether in debt or equity, would result in the same conclusion.
By derivation from the findings as made in relation to the June Valuation with respect to the representation case, I conclude that there was a breach of duty by the defendants in relation to the June Valuation. That consideration commences with the following: 1. CBRE promised to perform the market valuation but did not do so in the June Valuation, despite the language of the valuation; 2. CBRE promised to provide, at least one "check method" in support of its primary valuation rationale or methodology. The June Valuation failed to include any check method in support of the leasehold gross realisation methodology adopted by CBRE to value the Marina. 3. The communications between Mr Gillam and CBRE did not absolve CBRE from its obligation to (a) adopt an appropriate methodology and (b) include a check method and explain why the leasehold gross realisation methodology was the most reliable. I also accept the submission of the plaintiffs that CBRE's promise to provide at least one check method extended to each separate property within the subject property because the different parts of the property were of a different character with possibly different appropriate methodologies. Further, CBRE's whole of site cross check did not, in my view, represent an appropriate check method for the whole of the site because the Marina was a different type of property which was to be used for different purposes than the Other Properties. 4. The CBRE failed to include in the June Valuation a statement of suitability for security for mortgage purposes. 5. CBRE promised to comment on the ability of the property to hold its value for a period of 3-5 years but did not do so in the June Valuation.
Overall, I find: 1. the June Valuation was provided to City Pacific the defendants knew or ought to have known that there was a risk that City Pacific would suffer harm including economic loss if they failed to exercise reasonable care and skill in the preparation of the June Valuation; 2. the defendants knew or ought to have known of the risk that one or more of the plaintiffs would make a financial investment in relation to the Marina based on a perceived higher value than the true value of the Marina, to pay monies under that investment and not be able to recover all of those monies; 3. the loss to City Pacific arose from a transaction analogous to lending money to Martha Cove (payment for the benefit of Martha Cove with an attached obligation for Martha Cove to repay), lending specifically being in the contemplation of CBRE and Mr Nicodimou; and 4. the defendants owed a duty in the terms alleged, and breached that duty for the same reasons the June Valuation was misleading.
It follows the defendants breached their duties by failing to take precautions against the above risks.
I accept the submission of the plaintiffs that that conclusion is not diminished by the passage of time. The valuation was agreed to be provided as forward looking and was intended to contain an opinion expressed over a 3-5 year timeframe. Thus, the defendants assumed responsibility and owed a duty of care in relation to expressing value as at the date of valuation and also an opinion as to whether the Marina would hold value over a 3-5 year period.
This case may be distinguished from Ta Ho Ma because the terms of Valuation Retainer were such that the valuation was not one that went stale after 6 months (see Ta Ho Ma at 8).
I do not accept the defendants' contention that the June Valuation could not be relied upon approximately one year later. The defendants assumed responsibility for which they are paid. As was stated in Kenny & Good at [87] (per Gummow J), the defendants took on an obligation, limited only by the contracted period, of expressing an opinion which retained validity. There was no express condition which would limit that obligation.
I would answer Issue 7 in the affirmative.

[125]

Issue 8 - Did CBRE and Mr Nicodimou owe one or both of City Pacific and Martha Cove a duty of care?

For a duty to a third party recipient to be recognised, the valuer must know that the third party was a member of a class of person who might reasonably rely upon the valuation: see for example Kestrel Holdings at [94]; Tepko at [47]. Further, it is plain that this must be known at the time the valuation is prepared.
Further, as noted above, it is settled that it would be unreasonable to hold a valuer liable for reliance on a stale valuation: Ta Ho Ma at 25-26. As with the June Valuation, the Amended Indigo Valuation stated: 1. "This valuation report is provided subject to the assumptions, qualifications, limitations and disclaimers detailed throughout this report…"; and 2. Under "Assumptions, Disclaimers, Limitations & Qualifications", it stated, Valuation Subject to Change: Premise 1 - Real estate values vary from time to time in response to changing market circumstances and it should, therefore, be noted that this valuation is based on available information as at the date of valuation. No warranty can be given as to the maintenance of this value into the future. It is, therefore, recommended that the valuation be reviewed periodically.
The defendants submitted that the Amended Indigo Valuation was prepared by the defendants in response to a request by MCD to Mr Nicodimou bearing a date 14 February 2007 (the contents of that request being unknown to the plaintiffs). The valuation was dated 30 January 2007. It was submitted that the letter of instruction made it clear that MCD was acting on behalf of the Indigo Group. As noted, there was no evidence to suggest that, at the time the defendants were asked to prepare that valuation, they had in contemplation that the plaintiffs were in the position of a prospective purchaser or might rely upon the valuation for their own purposes.
It was also contended, in the circumstances, that there was no basis to recognise a duty on the part of the defendants to a person in the position of the plaintiffs. The interest of the vendor was very different to the interest of a potential purchaser. Recognition of a duty owed by a valuer retained by a vendor to a prospective purchaser, it was contended, was likely to impose an impossible burden on the valuer.
The defendants further submitted that the Amended Indigo Valuation was stale by October and November 2007. The defendants contended that the Amended Indigo Valuation was said to be valuing the property as at 30 January 2007. To the extent that the Amended Indigo Valuation was an "update" to the June Valuation, the June Valuation included the same premise regarding the absence of any warranty as to the maintenance of the value of the property.
The defendants then advanced the following submission in their written submissions: 72. The difficulties for the plaintiffs with the case are exemplified by a number of things, not least of all FASOC 27C. In that sub-paragraph, the plaintiffs allege that when the defendants submitted the Amended Indigo Valuation they knew or ought to have known that it would be provided to City Pacific and that City Pacific would rely upon it, because the defendants "knew that the Amended Indigo Valuation would be relied upon by IHPO (as borrower) for first mortgage security purposes, and that this could include providing the valuation to an existing or future lender and / or investor, including but not limited to City Pacific (and its subsidiaries)". But at the time the valuation was prepared, Marina Cove had advanced some funds to the Indigo Group already and City Pacific had advanced no funds - the funds were advanced by the PTQ. It is inconceivable to suggest that it would have been reasonable for the defendants to contemplate at the time of preparing the Amended Indigo Valuation that City Pacific (and its subsidiaries) would be relying upon the valuation for any purpose, or that it would be a future purchaser, or that City Pacific, in circumstances where it had caused PTQ to advance over $27,000,000 to acquire the Marina Cove Property and the other properties, was a potential future purchaser. 73. That is to say, the class of persons for which City Pacific was a member in the 2006 transaction (being the responsible entity which caused PTQ to advance over $27,000,000 to acquire the Marina Cove Property and the other properties), is a very different class of persons for which City Pacific was a member in the 2007 transaction (being a purchaser).
It was submitted by the defendants that the authorities made clear that it is the class of persons rather than the particular person that needs to be identified and to whom the plaintiffs must prove the defendants owed a duty: Ta Ho Ma at [16]-[20]. In that matter, the judgment drew attention to the question of the status and poor position of the party who may assert reliance on the valuation. It was submitted that in the present case the class on which City Pacific and Martha Cove belonged was purchaser of the property. It had not been suggested that either of them belonged to a different class, even though City Pacific belonged to a different class in 2006 with respect to an unrelated transaction.
Thus, it was submitted that there is a second element which is critical to the question of whether a duty was owed, namely, whether the valuer knew or should have known that it was likely to lead the plaintiffs to enter into the transaction of the kind that the plaintiffs entered into. The statements of principle in Ta Ho Ma, which are plainly correct and in any event binding, are to the effect that one of the central issues is the class to which City Pacific belongs, and reasonable foreseeability on the part of the valuer about the nature of the transaction entered into.
It is apparent from these submissions, and as earlier discussed, that the question of duty arising in relation to the Amended Indigo Valuation differs from the June Valuation in that the relevant question is whether a duty was owed by the defendants (or either of them) to City Pacific and Martha Cove in relation to the opinions expressed in that valuation, notwithstanding that the Amended Indigo Valuation was not addressed to City Pacific or Martha Cove. The relevant principles in that respect were discussed earlier in this judgment.
A valuer may owe a duty of care to a third party recipient of a valuation, even in the absence of any contractual relationship. However, as was stated in Kestrel Holdings at [94], the duty of care is recognised to exist where the valuer actually knows or ought to have known that the person in question would rely upon the valuation so prepared. That issue does not probe into the subjective knowledge of the particular recipient or the purpose to which the valuation would be put but rather is an objective formulation. That is not to suggest that the subjective knowledge does not enter the equation. There is a further requirement that a finding of a duty of care be reasonable in all of the circumstances. The subjective knowledge, actual potential or indirect potential of the valuer is a relevant consideration in determining reasonableness.
In my view, it was reasonable in all the circumstances for the plaintiffs to rely upon the Amended Indigo Valuation having regard to the nature of the valuation, the circumstances in which it was provided, the expertise of the defendants and the fact that the defendants held themselves out as expert valuers and were engaged as such.
The following factual premises deriving from my earlier factual analysis directly bears upon that conclusion and the further conclusion I will reach below: 1. The defendants held themselves out as valuers of commercial property with the necessary knowledge skills and experience to carry out commercial valuations. 2. The defendants had a long standing relationship with City Pacific. CBRE had been on City Pacific's panel of valuers since at least December 2005. Further, from about early 2006, the defendants had been engaged by City Pacific specifically to value the Marina for first mortgage security purposes. 3. At the time the defendants provided the Amended Indigo Valuation to IHPO in June 2007, Mr Kelly of the Indigo Group had communicated with Mr Nicodimou about the valuation of the Marina (afterwards, the Amended Indigo Valuation was prepared consisting of various changes earlier discussed); CBRE had been asked to update the June Valuation such that it was based on the June Valuation. It may be inferred that the valuation addressed to a borrower for mortgage security purposes would be used by the borrower in dealing with counterparties at least including potential lenders. 4. Further, I accept the submissions advanced by the plaintiffs that, at the time the defendants provided the Amended Indigo Valuation to IHPO in June 2007, the defendants: 1. knew that IHPO owned the Other Properties, but ILO owned the Marina (from the title search referred to on page 12 of the valuation); 2. knew that City Pacific was the existing financier of both the Marina and the Other Properties (from the results of the title searches referred to on page 13 of the valuation), and in any event by reason of the June Valuation and related dealings; 3. knew, or ought to have known, from the instructions to "update the Valuation for Martha Cove", that City Pacific had provided the June Valuation to IHPO and that IHPO required the defendants to update that valuation; 4. knew that IHPO's purpose in obtaining the Amended Indigo Valuation was for first mortgage security purposes and recorded that fact in the report. To do so, IHPO or ILO had to provide the Amended Indigo Valuation to prospective lenders; and 5. knew that IHPO would rely on the Amended Indigo Valuation for first mortgage security purposes in respect of both the Marina and the Other Properties and that this could include providing the valuation to ILO and to an existing or future lender or mortgagee, including City Pacific. 1. As earlier discussed, Mr Wright accepted that valuation reports were shared between related entities and counterparties, even if those parties were not on the same side of the transaction and that those counterparties would read those valuations. He also accepted that, if he was preparing a valuation for a borrower which is expressed to be for mortgage purposes, he would expect the borrower to share the valuation with the lender and for the lender to rely on the valuation. It may be noted in that respect that Mr Lane gave evidence that it would be usual for a purchaser to instruct the valuer to prepare a valuation for first mortgage security purposes but it would not be usual for a vendor to give such instructions. 2. As earlier mentioned, in the period leading up to signing the Key Terms Agreement, Mr Nicodimou did, in fact, correspond with Mr McCormick and Mr Gillam regarding the valuation of the Martha Cove Development. In mid-2007, Mr Nicodimou spoke to officers of City Pacific about the valuation of the Marina. Mr Nicodimou also admitted that it "seems as though there were potentially discussions" with City Pacific in which he expressed an opinion as to value. 3. The Amended Indigo Valuation was requested by IHPO, the owner of the properties, not ILO, the owner of the Marina. 4. In relation to the submission by the defendants that there was no evidence that the letter of instruction from MCD to CBRE was ever provided to City Pacific, the plaintiffs are correct to submit, as previously found, that the plaintiffs knew, having been told by Mr Kelly when he provided the Amended Indigo Valuation, that the Amended Indigo Valuation was an update of the June Valuation.
In that light, I reject the contention by the defendants that no duty was owed and that the defendants did not know and should not have known that it was likely that the plaintiffs would rely on the valuation to enter into the transaction of a kind that the plaintiffs entered into.
My particular reasons for that conclusions are as follows: 1. As to the time of preparation of the Amended Indigo Valuation was prepared in about June 2007, not February 2007. 2. The Amended Indigo Valuation was prepared for a particular reason, as I have mentioned, as an update to the June Valuation. City Pacific had been provided with and permitted to rely on the June Valuation of which the Amended Indigo Valuation was an update. Further, the prospective transaction would at least involved City Pacific as existing lender. Thus, City Pacific's reliance on the Amended Indigo Valuation was within the reasonable contemplation of the parties given, as earlier found, the sharing of valuations was both expected and a known fact between these parties. Ultimately, it was foreseeable the class of persons of whom City Pacific is a part, would rely upon an update of the June Valuation.
As I have earlier discussed and will further deal with, the disclaimers have no contractual significance to City Pacific and Martha Cove as they were not parties to the contract to prepare the Amended Indigo Valuation. In any event, in the light of the defendants' knowledge as to the likely use of the Amended Indigo Valuation and that it was prepared by a reputable firm for award, the disclaimers did not negative, in my view, the duty to exercise reasonable care in preparing the valuation.
I answer the question raised by Issue 8 in the affirmative.

[127]

Issue 10 - Did CBRE or Mr Nicodimou breach their duty of care?

The defendants contended that their submissions as to the absence of a duty apply with equal force to the question of breach. It was submitted that in that respect the case that there was a breach of duty in the preparation of the Amended Indigo Valuation should be rejected.
The defendants further contended that the plaintiffs' case for breach based upon the Amended Indigo Valuation was adversely affected by their inability to identify the risk of harm or the reasonable precautions that should have been taken in a case where the valuation was commissioned and prepared for the party on "the other side of the transaction".
The plaintiffs' correctly contended that the defendants breached their duties by failing to take precautions against the identified risk of harm (see FASOC at paras 27E and 27F). They relied upon their contentions as to the Continuing Representations and the Market Value Representations.
I also agree with the plaintiffs' response to the defendants' submission as to a failure to identify the risk or reasonable precaution because the valuation was commissioned and prepared for the party "on the other side of the transaction", proceeded on a false premise that the Amended Indigo Valuation was commissioned and prepared by the owner/vendor for the Marina.
In light of the above finding that the defendants did owe the plaintiffs a duty of care, and having regard for the otherwise conflation in the plaintiffs' case of the representation case and the duty case with respect to the Amended Indigo Valuation, it follows that my earlier conclusions with respect to the Continuing Representations and the Market Value Representations apply with equal force in answer to this issue. In that light I find the defendants breached their duties by failing to take precautions against the identified risks of harm per the pleadings in the FASOC at paras 27E and 27F (which were manifest in the findings as to the Continuing Representations and the Market Value Representations).
I answer Issue 10 in the affirmative with respect to both CBRE and Mr Nicodimou.

[128]

Issue 11 - Is CBRE or Mr Nicodimou entitled to rely on the disclaimer in the Amended Indigo Valuation to excuse either or both of them from liability?

As earlier mentioned, the defendants relied upon the disclaimer set out in
s 1.1.4 of the Amended Indigo Valuation. They contended that this reliance was not based in contract but related to the duty question. That was posed in terms of an issue: would the defendants owe a duty to someone outside those identified in the disclaimer clause in the valuation?
It was contended that the Amended Indigo Valuation could not be relied upon unless the "third party" sought and obtained authorisation and that consideration is relevant to both the duty question and reasonable reliance.
Again, as earlier mentioned, the defendants relied upon BT Australia.
The defendants' contended that, even if the plaintiffs' submission that an inference can be drawn that the defendants intended that, in addition to IHPO, the Amended Indigo Valuation to be used by and relied on by ILO and City Pacific were accepted (a proposition resisted by the defendants), that had no effect in the present circumstances. City Pacific did not obtain (nor use), to the extent that it was used, the Amended Indigo Valuation in 2007 as a mortgagee in the 2006 transaction. As earlier mentioned, it was contended that the plaintiffs' obtained the report in circumstances where they were a member of a different class, namely, purchaser.
I have earlier discussed various considerations with respect to misleading conduct and breach.
I agree with the submissions of the plaintiffs that the first disclaimer is contractual, unilaterally framed and cannot extend to a non-contracting party (namely, City Pacific and Martha Cove), particularly when the defendants were on notice that the valuation was to be used by third parties (the valuation is not to be characterised as a meaningless exercise, particularly as CBRE charged $25,000 plus GST for the valuation: BT Australia at 236-7.
There is merit in the plaintiffs' submission as to the second disclaimer. The first and second sentences limit use of the valuation to use by an identified company for first mortgage security purposes. In circumstances in which that identified company owned only part of the land and was not a lender, that sentence must be understood as being a permission to use the valuation by providing it to lenders for the purpose of obtaining finance. That must extend to the lender relying on it, otherwise the permitted use is contentless. The third sentence is a contractual limitation between addressee and valuer.
I also accept the submission of the plaintiffs that the final sentence demonstrates the contractual effect of the disclaimer. It is a promise (consistently with the first and second sentences) by the addressee only to use and reproduce the Amended Indigo Valuation for the permitted purpose.
It follows that breach of that promise will mean CBRE has a claim for damages against the addressee, for breach of contract, but does not affect the otherwise misleading character of the Amended Indigo Valuation or the duty assumed in all of the circumstances.
As to the misleading conduct, I have found that the defendants were aware or were on notice that the Amended Indigo Valuation would be read and relied upon by City Pacific. In those circumstances the Amended Indigo Valuation disclaimers do not effectively negate the representations conveyed by a valuation, to a reader, that the valuation is prepared with due care and skill.
As to the question of reliance, to which I will next turn, I accept the proposition advanced by the plaintiffs that a disclaimer is unlikely have the consequence that the opinion expressed in the valuation is to be understood to be other than the product of due care and skill. This has the consequence that the disclaimer does not negative reliance. Nor do the disclaimers operate to exclude the valuer's liability for misleading or deceptive conduct: Derring Lane Pty Ltd v Fitzgibbon (2007) 16 VR 563 at [23] (per Ashley JA, with Buchanan JA and Kellam AJA agreeing). The same conclusion arises with respect to the question of unreasonableness. A disclaimer of the kind here in question cannot avoid the prohibitions in the ASIC Act and the TPA.
I do not consider BT Australia assists the defendants' contentions in this respect. The third sentence of the disclaimer on page vi, impliedly accepts responsibility for the use of the valuation by IHPO but not for its use for any other person. The fourth sentence disclaims responsibility to any third party. In the light of the defendants' knowledge that IHPO proposed to use the valuation, in essence, to raise money, thus potentially affecting the rights of ILO and its mortgagee City Pacific, the fourth sentence should be read as not disclaiming responsibility for damage to a third party by the very use of the valuation by IHPO for which the defendants in the third sentence impliedly accepted responsibility. That approach conforms, in my view, with the reasoning in BT Australia. In particular, Wootten J's construction of the equivalent of the third and fourth sentences of the four disclaimers are consistent with the above construction. His Honour observed (at 236): I turn to the proper construction of the disclaimer. To repeat, it was contained in a clause which in full read: "This report is for the use only of the party to whom it is addressed and for no other purpose, and no responsibility is accepted to any third party for the whole or part of the contents of this report." The clause falls into two parts. The first part impliedly accepts responsibility for the use of the valuation by BT, but not for its use for any other purpose; the second disclaims responsibility to any third party. Raine & Horne argued that the present case was simply one in which third parties, namely the third plaintiffs, sought to fix it with responsibility to them for the contents of the valuation of June 1977, and that this was expressly denied by the second part of the clause. BT on the other hand emphasized that the first part of the clause stated that the report was for the use of BT, and that it was known to Raine & Horne that the use which BT proposed to make of it was in its capacities of investment manager of certain superannuation funds and trustee of the property trust to determine the value of the fund, and hence of units, thus affecting the rights of unit holders such as the third plaintiffs. In the light of this common knowledge shared by BT and Raine & Horne of the proposed use of the valuation, BT argued that the second part of the clause must be understood as disclaiming responsibility to any third party suffering damage by reason of the third party using the valuation, but not as disclaiming responsibility for damage resulting to a third party by the very use of the valuation by BT for which Raine & Horne in the first part of the clause impliedly accepted responsibility. This use, to the knowledge of Raine & Horne, was used by BT in discharging its duties to third parties so that they, rather than BT, would in the nature of things be the likely sufferers from an incorrect valuation. In my view this is a reasonable reconciliation of the two parts of the clause. The wide interpretation of the second part contended for by Raine & Horne would, in the circumstances, mean that Raine & Horne was accepting no real responsibility at all for its valuation, despite the fact that it was providing the valuation as a matter of contractual obligation in the course of its business for a negotiated fee, and despite the fact that the first part of the clause itself contemplated that Raine & Horne would be responsible for the valuation in so far as it was used by BT. The disclaimer clause was unilaterally framed and inserted by Raine & Horne, and if it was intended to disclaim responsibility for the consequences of its use for the very purpose for which it was obtained, it was reasonable to expect Raine & Horne to say so in clear words.
It follows that I do not consider that CBRE and Mr Nicodimou were entitled to rely upon the disclaimer in the Amended Indigo Valuation to excuse either or both of them from liability.
I answer the questions posed by Issue 11 in the negative.

[129]

Reliance and Causation

Before turning to the issues with respect to reliance and causation, I will deal with some general topics. These topics are canvassed in Issues 12, 13 and 14. Each issue referred to the conduct set out in paras 31-37 of the FASOC, which the plaintiffs allege was "caused by breaches and contraventions". For convenience, those paragraphs are extracted below: Conduct caused by breaches and contraventions 31. City Pacific, in reliance on: a. all material parts of the June Valuation; and/or b. the Amended Indigo Valuation; and/or c. the Valuation Representations; and/or d. the Continuing Representations; and/or e. the Market Value Representations, entered into an agreement with ILO, by which: f. ILO granted to City Pacific (or its nominee) an option (Call Option) to purchase the Martha Cove Property; and g. City Pacific agreed to pay to ILO (or to fund its nominee Martha Cove Marina to pay to ILO) from 30 July 2007 to the Call Option Expiry Date an amount equal to the Holding Costs less Revenue, as those terms were defined in the Deed. Holding Costs was expressly defined to include interest incurred on all loans, including the Indigo Loan Facility, attributable to funding ILO's ownership of the Martha Cove Property. (Put and Call Option Deed (Deed)). 32. On or about 29 June 2007, City Pacific (on behalf of Martha Cove Marina). paid to ILO or, alternatively, IPC as agent for ILO, $2,100,000 pursuant to clause 2 of the Deed or, alternatively, the agreement referred to in paragraph 31 above (Call Option Fee). 33. On or about 8 October 2007, in reliance on: a. all material parts of the June Valuation; and/or b. all material parts of the Amended Indigo Valuation; and/or c. the Valuation Representations; and/or d. the Continuing Representations; and/or e. the Market Value Representations, Mr Philip Keith Sullivan and Mr James Timothy Finucan on behalf of City Pacific and Martha Cove Marina executed, pursuant to the Deed or, alternatively, the agreement referred to in paragraph 31 above, a Call Option Nomination Notice and a Notice of Exercise of Call Option whereby Martha Cove Marina, m, nominee for City Pacific, irrevocably exercised the Call Option over the Martha Cove Property (Call Option Exercise Notice). 34. Upon the exercise of the Call Option by way of the Notice of Exercise of Call Option, the Call Option Fee became the deposit for the acquisition of the Martha Cove Property pursuant to clause 4.2 of the Deed or, alternatively, the agreement referred to in paragraph 31 above. 35. On or about 10 October 2007 City Pacific (on behalf of Martha Cove Marina) paid an additional $2,000,000 to ILO and/or IPC (as agent for ILO) as a further deposit and / or as part of the consideration for the acquisition of the Martha Cove Property (Further Deposit). 36. On or about 28 November 2007 City Pacific (on behalf of Martha Cove Marina) paid an additional $7,000,000 to ILO and/ or IPC (as agent for ILO) in consideration for the acquisition of the Martha Cove Property. 37. The Call Option Fee, the Further Deposit and the $7,000,000 payment were paid as part consideration for the acquisition of the Martha Cove Property (collectively, the Martha Cove Property Monies).
Overall, the defendants contended that the plaintiffs had not established factual reliance or, if they had, any such reliance was not reasonable.
The parties divided their cases with respect to reliance as between the June Valuation (Issue 12) and the Amended Indigo Valuation (Issue 13). Issue 14 dealt with the issue of causation and concerned each of Issues 12 and 13. I shall now to each of those three issues in turn.

[130]

Issue 12 - Did City Pacific and/or Martha Cove rely on the June Valuation and the Valuation Representations in engaging in the conduct alleged at one or more of paras 31-37 of the FASOC?

The defendants stated at the outset of their submissions two propositions of principle which may be readily accepted, namely: 1. the plaintiffs must prove that that they relied on the June Valuation (for the 2007 transaction) as a matter of fact: Lloyd v Grace, Smith & Co [1912] AC 716; Briess v Woolley [1954] AC 333; Commercial Banking Co of Sydney v R H Brown & Co (1972) 126 CLR 337; and 2. if the plaintiffs establish factual reliance, they also must establish that their reliance upon the June Valuation (for the 2007 transaction) was reasonable: Tepko at [47].
As to the principles of reasonableness, Gleeson CJ, Gummow and Hayne JJ stated in Tepko as follows (at [47]): [47] The statement of principle by Barwick CJ in Mutual Life & Citizens' Assurance Co Ltd v Evatt regained vitality after the consideration in Shaddock of the reasoning of the majority in the Privy Council in the Evatt litigation. In his judgment, Barwick CJ referred to various features of the special relationship in which the law will import a duty of care in utterance by way of information or advice. They were restated by Brennan J in San Sebastian Pty Ltd v Minister. Two of the points made by Barwick CJ are of immediate significance for this appeal. The first is the statement that: … the speaker must realize or the circumstances be such that he ought to have realized that the recipient intends to act upon the information or advice in respect of his property or of himself in connexion with some matter of business or serious consequence. The second is that: … the circumstances must be such that it is reasonable in all the circumstances for the recipient to seek, or to accept, and to rely upon the utterance of the speaker. The nature of the subject matter, the occasion of the interchange, and the identity and relative position of the parties as regards knowledge actual or potential and relevant capacity to form or exercise judgment will all be included in the factors which will determine the reasonableness of the acceptance of, and of the reliance by the recipient upon, the words of the speaker. [Footnotes omitted.]
The defendants submissions then traversed some factual areas previously the subject of discussion in this judgment, which for convenience I will briefly summarise: 1. It would be unreasonable to hold a valuer liable for reliance on a stale valuation. The valuation may be stale after six months (Ta Ho Ma at 25-26) but may be shorter such as in the present case when the property value was under construction. A sophisticated client would not rely upon a valuation that is more than a year old where the property being valued is being developed. The June Valuation did not state that the value of the property would hold for 3-5 years. 2. By mid to late 2007, the June Valuation, which identified the date of valuation as 18 May 2006, was clearly stale. This was so because: 1. the June Valuation and the Amended Indigo Valuation actually valued different properties because of the improvements between June 2006 and June 2007; and 2. the Amended Indigo Valuation valued the freehold and leasehold interests. To the extent that City Pacific relied on the June Valuation in 2007 (which has not been proved), such reliance was plainly unreasonable. 1. Further, it is no answer to the defendants' case, as the plaintiffs submitted, that the June Valuation was not stale in mid-2007 because the letter of instruction from City Pacific, under "Valuation Report Content where applicable", sought "comment on the ability of the property to hold its value over a period of 3-5 years". The June Valuation did not state that the value of the property would hold for 3-5 years. To the contrary. 2. The defendants contended that the Court should not accept that the Amended Indigo Valuation was an update of the June Valuation such that the two valuations would be read together and relied upon together. I have earlier rejected that contention. 3. As to notions of futility it was submitted that it is obvious that the June Valuation was clearly not an exercise in futility. The June Valuation was obtained and presumably relied upon by City Pacific to enter into the 2006 transaction - which is irrelevant on the pleaded case on reliance and loss. The Amended Indigo Valuation was obtained (and paid for) by Indigo Group, being the vendor for the 2007 transaction which, at the time is was sought (February 2007) did not contemplate City Pacific being the purchaser or the other side of the transaction. City Pacific did not come onto the scene until late June 2007, well after the Amended Indigo Valuation was sought by MCD or provided by CBRE. I have earlier rejected that contention. 4. The defendants contend that any reliance was not reasonable. Mr Gordon gave opinion evidence which is heavily critical of the conduct of the plaintiffs in June-November 2007. The plaintiffs have adduced no expert evidence in answer to Mr Gordon's opinion evidence. Mr Gordon's evidence is that the conduct of City Pacific between June and November 2007 was imprudent and unreasonable. That is the antitheses of reasonable reliance.
As to factual reliance with respect to the June Valuation, the Valuation Retainer and Valuation Guidelines contained an express acknowledgment by the defendants that City Pacific would place reliance on the June Valuation. As I have earlier discussed, in my view, the Amended Indigo Valuation was an update of the June Valuation and was not responsive to fully detailed instructions. The plaintiffs did not cease relying on the June Valuation merely because they were provided the Amended Indigo Valuation and, in my view, again, they were entitled to proceed upon the basis that the two valuation reports should be read together.
As previously discussed, the June Valuation did not become stale as contended for by the defendants, because the plaintiffs contracted with the defendants to provide a valuation over a period of 3-5 years. The Amended Indigo Valuation was an update of the June Valuation such that the June Valuation continued to speak to the valuations after the provision of the June Valuation. In those circumstances, City Pacific was not prevented from relying upon the June Valuation as a matter of fact merely because the purchase price under the Put and Call Option was greater than the June Valuation.
As I have previously noted the fact that the June Valuation and the Amended Indigo Valuation were stated to be for first mortgage purposes did not prevent Martha Cove reasonably relying upon the valuation for the purposes of purchasing the Marina. The test for market value did not apply differently if the valuation was for a purchaser rather than a mortgagee (see Spencer at 431-432). In any event, all other things being equal, a valuation for mortgage purposes will be conservative and, therefore, probably lower than one for a purchaser: APF Properties at [194] and [346].
To the extent it was suggested by the defendant that reliance was unreasonable because the approach required was not to determine market value for the Marina, I reject the defendants' contentions. I will deal with that issue further with regard to the Amended Indigo Valuation.
Further, the reports in various places assert that the valuation is of market value of the Marina. In the absence of a clear warning that the assessment undertaken was not that requested and not of a market value the plaintiffs were entitled to take those statements at face value namely a statement of market value without analysis of the reasoning.
Overall, I consider that the plaintiffs' reliance on the June Valuation (and, as I will come to it, the Amended Indigo Valuation) was reasonable, as I have previously noted, having regard to the nature of the valuations, the circumstances in which they were provided, the expertise of the defendants and the fact that they held themselves out to be expert valuers. In the result, I answer Issue 12 in the affirmative.

[131]

Issue 13 - Did City Pacific and/or Martha Cove rely on the Amended Indigo Valuation and the Continuing Representations and the Market Value Representations in engaging in the conduct alleged at one or more of paras 31-37 of the FASOC?

The defendants contended that the plaintiffs could not establish factual reliance with respect to the Amended Indigo Valuation, notwithstanding that they provided an opinion that the Marina was valued at $27.3 million (exclusive of GST) in order to pay the Call Option Fee to secure the right to enter a contract to acquire the Marina for $30 million.
The defendants also contended that the plaintiffs' reliance upon the due diligence report and the payment on 10 October 2007 (namely, the further deposit, which was the Second Payment of the Martha Cove Property Monies) were misplaced. Four reasons were stated in this respect: 1. it is not known who prepared that document, for what purpose, nor to whom it was disseminated. The plaintiffs elected to call no evidence to elucidate these matters; 2. at its highest, the document merely refers to the Amended Indigo Valuation (twice); 3. immediately after the Amended Indigo Valuation is referred to for the first time, the document states, "Many assumptions have been made to come up with the above value. These assumptions require further research to confirm they are achievable. The concerns and risks are that the asset has no occupancy and the time frame to achieve the assumptions is uncertain"; and 4. the document lists the following, under "Risks", "There is no independent valuation or industry assessment of revenue expectations".
In this context it was submitted that these factors tell against a proposition that City Pacific relied upon the Amended Indigo Valuation to enter into the Put and Call Option on the next day before any further research was undertaken.
As to reasonableness, it was contended that it was not reasonable to rely on a valuation of about $27 million to acquire the right to acquire a property of $30 million, and further, by the time of the exercise of the option in October 2007, the Amended Indigo Valuation was eight months old and was stale. The same contention was made with respect to the November 2007 payment (being a reference to the Third Payment of the Martha Cove Property Monies).
It was further contended that the plaintiffs' submission that the Amended Indigo Valuation was published in June 2007 should be rejected. I have earlier indicated my rejection of the defendants' submissions in that respect.
The defendants' repeated the contention the plaintiffs belong to a class of purposes who is a purchaser.
Nextly, it was submitted that to the extent a Jones v Dunkel inference might be available (a proposition that was denied), it was submitted that the only inference that could be drawn is that the evidence of Mr Nicodimou would not have assisted the defendants' case.
Lastly, it was contended that the plaintiffs had elected to adduce no oral evidence of factual reliance with respect to the Amended Indigo Valuation.
I have earlier partially dealt with factual reliance in context in dealing with the factual background, particularly in the context of the agreement to purchase the Marina. CBRE was recompensed because it knew or intended that people would reply upon its opinions expressed in its valuations such that reliance might be readily inferred: Gould v Vaggelas (1985) 157 CLR 215 at 236 (per Wilson J) and 250 (per Brennan J). It may be reasonably inferred that City Pacific relied on the valuations in entering into the Key Terms Agreement and entering into and exercising its rights under the Put and Call Option and paying the First, Second and Third Payments (namely, the Martha Cove Property Monies) on behalf of Martha Cove. Martha Cove relied on the valuations in entering into the Contract of Sale and making those payments to ILO.
I do not consider that that assessment is weakened because the purchase price was about 10% above the express market value, as that was the price that ILO demanded and the valuation showed that price to be within the range of value. Further, City Pacific intended to borrow to fund the acquisition and needed a reliable known market value to obtain finance.
Those conclusions comfortably establish a basis for factual reliance by the plaintiffs with respect to the Amended Indigo Valuation. However, that conclusion may be reached by reference to relevant correspondence which has each been substantially referred to in the factual background as follows: 1. on 25 June 2007, Mr Johnstone requested Mr Mackay to provide a copy of the Amended Indigo Valuation "urgently"; 2. on the same day, Mr Gillam corresponded with Mr Nicodimou regarding the value of the Martha Cove Development; 3. on 26 June 2007, Mr Purss requested and received from Mr Kelly a copy of the Amended Indigo Valuation, specifically for the purpose of considering it in the context of the acquisition of the Marina; 4. on 27 June 2007, the day after receiving the Amended Indigo Valuation from Indigo, and two days before signing the Key Terms Agreement, Mr McCormick contacted Mr Nicodimou to discuss the Amended Indigo Valuation in connection with City Pacific's proposed purchase of the Marina; 5. on 28 June 2007, City Pacific prepared a due diligence report for the acquisition of the Marina that twice refers to the amount set out in the Amended Indigo Valuation; 6. on 9 July 2007, Mr Sladden raised with Mr Purss a number of points regarding the Amended Indigo Valuation; 7. on 7 September 2007, Mr Purss provided the Amended Indigo Valuation to Mr Friggi for the purpose of Mr Friggi sourcing funding for the acquisition of the Marina; and 8. on 25 September 2007, Mr Johnstone asked Mr Mackay to provide him with the appendices to the Amended Indigo Valuation, following a request from CBA in connection with City Pacific's application for funding.
Nor do I consider the plaintiffs' reliance on the due diligence report was misplaced. The document was prepared by City Pacific for a proposed investment in the Marina, including because it attached to a facility study for City Pacific's proposed Marina Trust. It may be readily inferred that it was provided to decision making officers of City Pacific. Further, the document actually refers to the valuation figure from the Amended Indigo Valuation. The fact that the report may contain a critique of the Amended Indigo Valuation does not detract from those inferences but rather adds force to them.
As to the question of reasonableness, the fact the Amended Indigo Valuation was stated to be for first mortgage purposes does not prevent Martha Cove reasonably relying upon the valuation for the purpose of purchasing the Marina. As I have earlier noted, all things being equal, the valuation for mortgage purposes would be conservative and, hence, more likely to be lower than one for a purchaser: APF Properties at [194] and [346].
As earlier observed, the suggestion by the defendants that reliance was unreasonable because it was obvious from the valuations the approach was not to determine market value of the Marina has been rejected. With some measure of repetition, I accept the contention of the plaintiffs, in this respect, which are of real substance and summarised below: 1. The defendants were requested, in the instructions attached to the valuations, to undertake a market valuation. A reader of the reports should not be taken to assume that an expert simply did not perform the task required at least without expressly explaining that what the expert had done was not that which the instruction required. 2. The reports in various places assert (wrongly) that the valuation was of market value of the Marina. Those statements are to be taken at face value. 3. To express a combined value of the Marina and the Other Properties, Mr Nicodimou, in the reports, added the market value of the Other Properties to the expressed value of the Marina. To come to a sum based on adding together market values based on different assessments is illogical. A reader is not to be taken to understand such an error was made. 4. A reader is entitled to go to the conclusion, the statement of market value without analysis of the reasoning, absent a clear warning that the assessment undertaken was not that requested, and not a market value. 5. That City Pacific had previously received an assessment based on gross realisation does not advance the argument. That is because, in contrast to the instruction for the subject valuations, the instructions for that prior valuation specifically required a gross realisation valuation
Finally, I do not consider that the Amended Indigo Valuation was stale. If the correct date to measure reasonable reliance from is the date of the valuation, then the decision to enter the Put and Call Option and make the First Payment was less than six months after the valuation date. The valuation was also expressed to be (by reference to the letter of instruction) an "update" of the June Valuation, which City Pacific knew to speak to a period of 3-5 years from the valuation date (a standard term of valuations obtained by City Pacific). Further, as I have earlier found, the Amended Indigo Valuation was in fact published in June 2007, albeit by reference to a value as at 30 January 2007, and on that basis was less than one year old at the time of reliance.
I answer Issue 13 in the affirmative, but note that in doing so that I consider both City Pacific and Martha Cove relied upon the Amended Indigo Valuation and the Continuing Representations and Market Value Representations.

[132]

Issue 14 - Was the conduct referred to in issue 12 and 13 (and the subsequent loss of the Martha Cove Property Monies) caused by any misleading conduct or breach by CBRE or Mr Nicodimou?

Causation in negligence is to be approached by reference to s 51 of the Wrongs Act. That analysis invokes consideration of both factual causation and the scope of liability.
It is appropriate at this juncture, and in the light of the latter discussion of contributory negligence and damages, to briefly recap some of the central factual considerations as follows: 1. On 25 May 2006, the Valuation Retainer was entered into between City Pacific and CBRE. 2. On 22 June 2006, City Pacific offered the Indigo Loan Facility. 3. Between 26 and 29 June 2006, Mr Gillam requested Mr Nicodimou increase the assessment of market value and the valuation of the Marina and the Other Properties. On 27 June 2006, Mr Gillam emailed Mr Nicodimou indicating that he needed to achieve a valuation figure for the Marina and the Other Properties of $34.8 million. 4. On 30 June 2006, the June Valuation was forwarded to Mr Gillam. On the same day, a proposal in relation to the Indigo Loan Facility was prepared. 5. On 16 March 2007, the Indigo Valuation was provided by Mr Nicodimou to MCD. 6. In June 2007, negotiations for an option for the proposed Marina Trust to buy the Marina for $30 million began. On 25 June 2007, ILO sent via their solicitor an email to City Pacific setting out terms for an option to purchase the Marina. 7. On 26 June 2007, City Pacific received the Amended Indigo Valuation, which was understood to constitute a valuation of $27.3 million (as at 30 January 2007). On the same day, a draft Put and Call Option and Contract for Sale of the Marina were provided to City Pacific. 8. On 29 June 2007, ILO and City Pacific executed the Key Terms Agreement, whereupon the Call Option Fee was paid (a deposit of $2.1 million, which was the First Payment of the Martha Cove Property Monies). 9. On 2 October 2007, it is clear from internal communications within City Pacific that City Pacific was sourcing funds from CBA who required a new valuation. 10. On 8 October 2007, City Pacific nominated Martha Cove as its nominee under the Put and Call Option, Martha Cove exercised the call option and entered into the Contract for Sale to buy the Marina for $30 million. This involved the payment of a $4.1 million deposit. On 10 October 2007, City Pacific on behalf of MCD paid the further deposit of $2 million (the Second Payment of the Martha Cove Property Monies). 11. On 28 November 2007, City Pacific on behalf Martha Cove, paid a total of $7 million to ILO (the Third Payment of the Martha Cove Property Monies), as part payment of the purchase price on the Marina. 12. During 2008, City Pacific and ILO joined together to pursue the sale of the Marina to ASP. 13. On 28 August 2009, liquidators were appointed to City Pacific, and on 23 October 2009, liquidators were appointed to Martha Cove. The Contract of Sale was not terminated. At that stage the money payable by Martha Cove to City Pacific remained outstanding. 14. On 20 May 2015, ILO transferred the Marina to Denarke Pty Ltd for a purchase price of $12,946,693. The Martha Cove Property Monies were never repaid, and have been lost. ILO is now deregistered, and it is admitted that ILO and Martha Cove are incapable of repaying those monies.
It is reasonably clear that, at least the primary position of the plaintiffs, so far as a case in tort is concerned, is a "no transaction case" deriving from the defendants' overvaluation of the security provided in the case of City Pacific as lender and the inappropriate valuation methodology (although the claim for damages is also pursued in the alternative with respect to specific individual payments made by the plaintiffs).
The plaintiffs contended that they would have not entered into the Key Terms Agreement or entered into or nominated Martha Cove under the Put and Call Option but for the negligent overvaluation (I have found breach of duty in that respect). There was a disparity between the true value of the Marina (on the expert evidence, I have accepted, at namely, $10.3 million) and the values represented in the June Valuation of $25.5 million and the Amended Indigo Valuation of $27.3 million.
The plaintiffs called no witness evidence to the effect that neither of the plaintiffs would have entered into and exercised their rights under the respective contracts if the true value of the Marina was known. Nor is there such evidence as to the exercise of rights under the contracts which resulted in City Pacific funding the purchase of the Marina or Martha Cove contracting to purchase it. The circumstances of the absence of such evidence (vis-à-vis the position of the potential witness) was discussed earlier in this judgment and do not stand against the Court nonetheless drawing an inference with respect to that question.
In my view, a strong inference may be drawn and one particularly related to the question of causation (also when seen in the light of any findings regarding reliance) that that is exactly the decision the plaintiffs would have taken if they had known the true (market) value of the property.
It is also clear that, at least in early October 2007, before exercising the call option and entering into the Contract of Sale, Martha Cove intended either to obtain finance from the CBA to complete the acquisition of the Marina, or to assume ILO's debt under the Indigo Loan Facility and refinance that debt with the CBA after the acquisition. The plaintiffs also knew that the CBA required a "new valuation" in connection with that finance. However, in those circumstances, in my view, the value of the Marina reported in the June and Amended Indigo Valuations was significant to Martha Cove's ability to raise funds to acquire the Marina, even if the question of contributory negligence may well arise in the context of the Third Payment.
I find that if the defendants properly (that is, with due care and skill) performed the function they were engaged to and paid to perform, and reported the true value of the Marina, Martha Cove and City Pacific would have known finance could not be obtained, would not have entered into any of the above contracts, and City Pacific would not have made any payment on behalf of Martha Cove as part of the purchase price.
Fundamentally, the defendants contend that the plaintiffs had failed to identify the reasonable precautions which the defendant had failed to take. In any event, it was contended that the plaintiffs could not establish causation having regard to the principles stated by the High Court of Australia in Wallace v Kam (2013) 250 CLR 375 at 385-387. It was contended that the damage alleged to have been suffered by the plaintiffs in advancing the funds in their capacity as purchaser of the Marina in June, October and November 2007, was remote from any breach of duty in relation to the June Valuation.
However, the reasonable precautions are precisely those pleaded by the plaintiffs and are specifically relevant to the issue of causation (and its resolution in favour of the plaintiffs). Further, the Martha Cove Property Monies (namely, the First, Second and Third Payments) are not remote (as I have discussed) from the Amended Indigo Valuation (co-extensive as it is with the June Valuation). City Pacific acted in the capacity of an existing and potential future lender.
Thus, the defendants' wrongdoing "materially contributed" to the plaintiffs' loss. This is sufficient to demonstrate causation. Each of the payments were made in reliance on and the wrongful conduct materially contributed to those payments being made. City Pacific would not have otherwise paid any of the three payments comprising the Martha Cove Property Monies on behalf of Martha Cove.
As for the First Payment ($2.1 million paid on 29 June 2007), the reliance on the valuation resulted in entry by City Pacific into the Key Terms Agreement (or the then existing draft Put and Call Option incorporating the Key Terms Agreement) and payment of the Call Option Fee, which became part of the deposit, as required by the express terms of that agreement. Similarly, the entry by City Pacific into the Put and Call Option, the nomination of Martha Cove and simultaneous exercise of the call option and entry into the Contract of Sale led to the Second Payment ($2 million paid on 10 October 2007) being made on behalf of Martha Cove. That payment was required by the terms of the Contract of Sale which then required a $4.1 million deposit. As for the Third Payment ($7 million paid on 28 November 2007), it was submitted by the plaintiffs, that the Third Payment was made to preserve the transaction in circumstances where it was still thought to be commercially sound and was made to address concerns as to delayed completion. It is sufficient for the purposes of establishing causation that the plaintiffs acted to preserve the transaction in reliance, in substance, upon the valuations (although the taking of that step raised questions for the purposes of contributory negligence).
As to the scope of liability, the defendants effectively relied upon remoteness. However, it should be first commented that causation proceeds on the hypothesis of duty and breach, and once a duty is owed by the defendants, as I have found, it is difficult to see how scope of liability can apply to protect a negligent professional who is paid for the production of a report, from liability of breach and factual causation have been as in this case, been established.
Finally, liability for misleading or deceptive conduct is to be determined, in my view, based on findings of reliance.

[135]

Issue 15 - Is any cause of action relied on by the plaintiffs time-barred by any limitation period?

It is convenient to recap the positions of the parties, albeit with some repetition, in this respect.
As to whether any cause of action relied on by the plaintiffs was time-barred by any limitation period (Issue 15), the plaintiffs answered no. However, that answer was qualified by the following statement: "however, the analysis differs for City Pacific and Martha Cove and it is possible that the answer to this question differ for each plaintiff".
The defendants contended that the plaintiffs' claims are time-barred because the plaintiffs first suffered loss more than 6 years before the proceedings were commenced on 27 August 2015. In that respect the defendants relied upon s 5 of the Limitation of Actions Act 1958 (Vic), and/or s 263(2) of the Australian Consumer Law, and/or ss 12GF(2) and 12GM(5) of the ASIC Act and/or s 82 of the TPA and/or s 1041I(2) of the Corporations Act.
The defendants' position is thus, that both plaintiffs are impacted by a time-bar in light of limitation periods. In this respect, the defendants provided a detailed outline of their position, which is set out below: 1. The claim is statute-barred based on the pleaded allegations. If the plaintiffs are entitled to depart from the pleaded case on this issue, despite abandoning their amendment application, the claim is still statute-barred. 2. As in Winnote at 543, the Court should look to "the substance of the matter and not the formal framework that may have been artificially erected by the plaintiff in an endeavor to gain juridical advantage". 3. The substance of the matter is that City Pacific paid over money either directly or via its subsidiary Martha Cove at various times in mid to late 2007 for the purpose of acquiring the property. The High Court of Australia stated in Astonland at 654-655 that in such circumstances time commences to run "the day after entering the contract… or the day after completing that contract". 4. In accordance with the decisions in Winnote and Astonland, time commenced to run from when the plaintiffs paid money for the purpose of acquiring the right to purchase the Marina, or from when they entered into the contract to do so.
The defendants bear the onus of establishing that actual and measurable loss first occurred outside the limitation period: Segal t/as Segal Litton & Chilton v Fleming [2002] NSWCA 262 at [27] (per Hodgson JA; Handley JA and Young CJ in Eq agreeing). Importantly, there must be objective evidence of loss having occurred prior to the limitation date, not only the risk of loss: Wardley Australia Limited v Western Australia (1992) 175 CLR 514 ("Wardley") at 529; Winnote at [41] (per Mason P).
In Wardley, the plurality of the Hight Court said (at 527): When a plaintiff is induced by a misrepresentation to enter into an agreement which is, or proves to be, to his or her disadvantage, the plaintiff sustains a detriment in a general sense on entry into the agreement. That is because the agreement subjects the plaintiff to obligations and liabilities which exceed the value or worth of the rights and benefits which it confers upon the plaintiff. But, as will appear shortly, detriment in this general sense has not universally been equated with the legal concept of "loss or damage". And that is just as well. In many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired. To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust. Moreover, it would increase the possibility that the courts would be forced to estimate damages on the basis of likelihood or probability instead of assessing damages by reference to established events.
It was emphasised in authorities, particularly Astonland and Kenny & Good, that in order to ascertain when measurable loss and damage was suffered, it is necessary to enquire as to what was the interest that was infringed by the negligent act. Davies J in Ross v Cook [2009] NSWSC 671 ("Ross") conveniently summarised the principles with respect to transactions involving the advance of monies secured by mortgage in reliance on a valuation (at [31]): [31] I do not agree with these submissions. When properly analysed, the decisions in HTW Valuers on the one hand and Kenny & Good and Wardley on the other hand sit comfortably together based on the principles discussed, particularly in Wardley but also in Kenny & Good. What was emphasised in those two cases was the need to enquire what the interest was that was infringed by the negligent act. In relation to a mortgage, as Gaudron J makes clear at [16] in Kenny & Good, the interest that a mortgagee seeks to protect by obtaining a valuation is that it should be able to recoup by the sale of the property the amount owing under the mortgage, and it is the interest in recoupment that is infringed by breach of the duty. That is why the relevant enquiry is the time when recoupment is rendered impossible. That may be as early as default but it may be at a much later time because the default is merely a hiccup along the way.
The defendants accepted that, in a conventional case brought against a valuer by a lender who has advanced a loan secured by mortgage, the relevant enquiry for the purpose of determining when measurable loss and damage is suffered is when it was the interest of the lender was infringed, which is when "recoupment is rendered impossible".
The defendants contended that this case is far removed from a conventional case brought against a valuer by a lender who has advanced a loan secured by mortgage. From this foundation point, the defendants made a number of contentions as follows: 1. As is clear from the allegations in FASOC paras 31-37, this is not a case where it is alleged that the Martha Cove Property Monies were loan monies, much less loan monies secured by mortgage. The present case, as made plain by the allegations made by the plaintiffs in those pleaded paragraphs, is that the interest infringed is the interest of City Pacific and/or Martha Cove in their capacity or capacities as purchaser. The allegations made by the plaintiffs are that the monies paid in June 2007, October 2007 and November 2007 were paid by City Pacific (on behalf of Martha Cove) as part payment for the "acquisition" of the Marina. The pleading characterises those payments precisely in that way - in consideration for the acquisition of the Marina. 2. There is not a single contemporaneous documentary record supporting the notion that there was a loan by City Pacific to Martha Cove. Critically, a "loan" was not pleaded in the FASOC. The plaintiffs were correct to apply to amend the pleadings to plead the loan - an application which was ultimately abandoned. A "loan" is a fundamentally different transaction and one which does not arise on the FASOC. 3. Indeed, the plaintiffs in the pleading contend that the Call Option Fee became part of the deposit for the acquisition of the Marina and that the payment of the $2 million on 10 October 2007 was "a further deposit". The $7 million payment on 28 November 2007 was "in consideration for the acquisition of the Martha Cove Property" (namely, the Marina). No allegation was made that a loan was advanced by the plaintiffs to any interest.
From those contentions, the defendants argued, when properly considered, the relevant principles in this case concern when measurable loss and damages suffered by purchasers of real property who have incurred expense in acquiring the real property at an under value (based on the propositions in Ross at [33]-[34]). It was contended that in the present case, the question of when measurable loss or damage was suffered by the plaintiffs is unaffected by the fact that the transaction did not complete. On the plaintiffs' case, they paid the Call Option Fee in June 2007 to acquire the right to purchase a property at what they allege is a gross overvalue. That constitutes immediate and measurable loss and damage.
There was a further component to the defendants submissions with respect to this issue. It is convenient to extract those submissions: 121. Further, in exercising the rights under the Deed in October 2007, they became bound to enter into a contract to purchase the marina berths for the consideration of $30,000,000. At that time, they became bound to complete that purchase. Not only did they become bound to complete that purchase, they paid very considerable monies as part of the acquisition costs - $11.1M. The plaintiffs' case is that the true value of the Martha Cove Property was very considerably less than the $30,000,000 purchase price - around 1/3 of that amount. On that case, they suffered measurable and immediate loss upon the payment of the Call Option Fee on 29 June 2007, and upon the exercise of the rights and payment of $2,000,000 on 10 October 2007, and the further payment of $7,000,000 in November 2007. They also suffered measurable loss and damage by the payment of legal fees in relation to the Deed and the contract. 122. The decision of the Court of Appeal of New South Wales is decisive on this point, against the plaintiffs' case. In Winnote v Page, Winnote, as a consequence of negligent advice by its solicitors, entered into a mining lease in 1988. It later emerged that the rights it acquired in doing so were very considerably less than was thought. Winnote's case was that measurable loss and damage was not suffered until much later, when it became aware of the inferior rights it had acquired. Mason P said (at [43]) that: "This argument lies uncomfortably with the submission made many times in a non-limitation context that the negligence caused Winnote to acquire 'lemon' namely the real property lease." 123. Mason P held that this was not a contingent loss case of the type discussed in Wardley, and that there was "clearly demonstrable 'actual' damage suffered in 1988": at [44]. Mason P cited with approval the decision of the Court of Appeal of New South Wales in Scarcella v Lettice (2000) 51 NSWLR 302. In that case, a solicitor retained to act on a land purchase negligently failed to detect that there was a defect in title. The purchase occurred in 1982, but the problem was not discovered until 1994. The Court of Appeal held that the claim in negligence was statute-barred because damage had accrued on acquisition of the property, because the true value of the property on the date of acquisition was less than the amount paid. In that case, Handley JA said (at [24]): "The general principle is that time runs from when the cause of action is complete, whether or not this is discovered or discoverable".
Reference was also made to the observations of Mason J in Winnote at [59]-[61], as follows: [59] Of course, a defendant wishing to show that the negligently induced "transaction" caused immediate actual loss of a measurable kind has to establish that proposition. But sometimes this can be "self-evident" (Wardley at 528 per Mason CJ, Dawson J, Gaudron J, McHugh J) or "clear beyond argument" (Moore & Co at 279 per Bingham LJ See also per Neill LJ at 277.). [60] The present is such a case, in my opinion. From the outset, Winnote got significantly less than it should have, in consequence of the solicitors' 1988 negligence. The "goods were damaged" to use Lord Walker's terms. This is demonstrable when one compares the rights secured under the RPL with the rights that ought to have been secured under mining tenements from the outset. The former instrument was legally worthless as later events demonstrated. As Mr Gageler SC put it during argument in this Court, the rights secured by the RPL "were of a dramatically inferior kind" (CA Tr p 24). [61] Entry into the RPL and onto the land also prejudiced Winnote from the outset. There was measurable damage, albeit that the assessment exercise would have been a difficult one had Winnote got the matter to court in 1989-90. In October 1988 Winnote paid FS $3,650 for professional costs in drafting the RPL. Further substantial costs were paid in August 1989 for legal services provided by FS and FM in relation to obtaining the lease (J105-6). On 21-22 August 1989 Winnote paid Mr Sadler $7519 on account of royalties and $5305 on account of his costs (Blue 14/3403, 3417. Orange 533), these being obligations imposed by the RPL. The royalties were paid for peat that was not Mr Sadler's to sell. In truth, Winnote had exposed itself to a claim in conversion by the true owner of the peat, ie the Crown in right of Victoria. All of these were items of wasted expenditure that did not produce any proven commensurable value (see Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 81-2 and 107).
The plaintiffs contended that similar circumstances arose here, as the plaintiffs paid money to solicitors with respect to the Put and Call Option, paid the Call Option Fee, lost the use of the funds paid over to Indigo and paid all of those monies to acquire the right to purchase the Marina, on their case, as earlier mentioned, at a gross overvalue.
It is on these premises that the defendants contended time commenced to run with respect to the losses pleaded by both plaintiffs on 29 June 2007. Time expired 6 years after the cause of action accrued, and that is well before the date on which these proceedings were commenced.
The defendants also advanced this defence on a further (and, it would appear, alternative) basis, which commenced with two further propositions: 1. Martha Cove was the nominated purchaser of the Marina. In City Pacific exercising the rights under the Put and Call Option in October 2007, Martha Cove became bound to enter into a contract to purchase the marina berths for the consideration of $30 million. Its loss accrued that that point, and its claim must therefore be statute barred. 2. City Pacific was the purchaser of the Marina and exercising the rights under the Put and Call Option in October 2007, it (through its nominated wholly owned subsidiary, Martha Cove, which was entirely financially reliant upon it) became bound to enter into a contract to purchase the marina berths for the consideration of $30 million. Its loss accrued at that point, and its claim must, therefore, be statute barred.
From this starting point it was contended that, if the Court were to treat "the monies paid by City Pacific in truth [as being] characterised as a loan of some kind", in that event, it was contended that it would be necessary to consider when the amendments introduced by the Amended Statement of Claim took effect.
Again it is convenient to extract the defendants submissions in this respect which were as follows: 129. When leave was granted to the plaintiffs to file the ASOC in December 2017, the question of the date upon which those amendments would take effect was reserved. That question turns upon an analysis of the amendments introduced by the ASOC and then the proper construction and application of s.65(2)(c) Civil Liability Act (NSW) 2005.55 130. The ASOC is at tab B4 of Volume 1 of the Court Book. It is plain from a review of the amendments introduced that the entire cause of action based on the Amended Indigo Valuation was introduced by those amendments. The case until then had been based entirely on the June Valuation. There cannot be any serious doubt that the ASOC introduced [or] added "a new cause of action" within the meaning of s.65(2)(c), being the case based on the Amended Indigo Valuation. 131. The next issue is whether the cause of action based on the Indigo Valuation "arises from the same (or substantially the same) facts as those giving rise to the cause of action" pleaded in the Statement of Claim, as noted based on the June Valuation. This involves a comparison between the allegations in the Statement of Claim and the ASOC: Riverina Wines Pty Ltd v Tetra Pak Marketing Pty Ltd [2007] NSWSC 1014 at [38]. 132. The meaning of the words "substantially the same" in this context has been considered by a number of cases in this Court and in the Federal Court of Australia: see for example Riverina Wines; New Cap Reinsurance v Reasuguros Alianza Sa [2004] NSWSC 787; Clasul Pty Ltd v Commonwealth of Australia [2014] FCA 1133; Voxon Pty Ltd v Telstra Corporation Ltd (No 7) [2017] FCA 267. In Voxon, Perram J said this (at [28]): To this Voxson rejoined that the inquiry thrown up by the 'substantially the same facts' test is not a narrow one, citing Clasul Pty Ltd v Commonwealth [2014] FCA 1133 at [41]- [51] per Gleeson J. Her Honour there collected the relevant authorities. Various judicial parsings of the expression were referred to: what was called for was a 'fairly broad brush comparison', did the amendments invoke 'a new set of ideas' or was what was involved 'a new story'. The same authorities also make clear that 'substantially the same facts' does not mean 'the same facts'. 133. The defendants submit that the cause of action based on the Amended Indigo Valuation introduced in December 2017 plainly invoked a new set of ideas and a new story. It was a different valuation; it involved the valuation of property in substantially different condition to the June Valuation; it was commissioned by a different party; if it was relied upon by the plaintiffs it was relied upon by them in a different capacity to the capacity in which City Pacific relied upon the June Valuation; and as a consequence of the foregoing, the reliance and causation cases were entirely different. 134. Accordingly, the time when the amendments introducing the case based on the Amended Indigo valuation take effect is December 2017. That being so, the plaintiffs' causes of action are still time barred, even if the plaintiffs are permitted to run a case characterising the payments by City Pacific as loan monies. That is so because on any view of the plaintiffs' case, City Pacific was aware from 23 October 2009 that Martha Cove was placed into liquidation and that it would not be able to complete the sale (or "repay the debt") if the plaintiffs' argument is permitted to be run: see PWS [280]. 135. Even on that new case, pleaded by the plaintiffs, time expires on 23 October 2015 and the cause of action is time barred.
A cause of action for damages for negligence or contravention of s 52 of the TPA and cognate statutory provisions accrues on the date when damage is first suffered: Hawkins v Clayton (1988) 164 CLR 539 at 587-588; Wardley at 525. Where loss is suffered on the happening of (or the failure of) a contingency loss is not suffered until that contingency occurs.
I accept the submissions of the plaintiffs' that, in determining the type of loss, the Court should have regard to the following principles: 1. The concept of financial or economic loss or harm is wide enough to comprehend a variety of circumstances or contingencies some of which may be indirect and difficult to identify or measure: Perre v Apand Pty Ltd (1999) 198 CLR 180 at [6] (per Gleeson CJ). 2. When loss or damage is suffered may depend upon a number of factual contingencies, not the least of which is the precise nature of the representation and the plaintiff's reliance upon it: Khoury v Coffey Projects (Australia) Pty Ltd [2015] NSWCA 371 at [3] (per Baston JA). 3. The kind of economic loss which is sustained and the time when it is first sustained depend upon the nature of the interest infringed and, perhaps, the nature of the interference to which it is subjected. With economic loss, as with other forms of damage, there has to be some actual damage. Prospective loss is not enough: Wardley at 527. 4. Risk of loss is not itself a category of loss, and that, if a plaintiff enters a contract which exposes the plaintiff to a contingent loss or liability, that plaintiff "sustains no actual damage until the contingency is fulfilled and the loss becomes actual: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at [46] (per the Full Court) applying Wardley. 5. In the case of a mortgagee or mortgage insurer who has advanced funds in reliance on a negligent valuation, "the time that loss occurs (and hence the time when the tort is complete) is when recoupment is rendered impossible. In the case of a mortgage transaction, that will occur when it is reasonably ascertainable that sale will result in a loss. At the earliest it will be when default occurs and, at the latest, when the property is sold": Kenny & Good at 425 (per Gaudron J). 6. In general terms, in a case involving a loan of moneys, damage will be sustained and the cause of action will accrue only when recovery can be said, with some certainty, to be impossible: Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613 at [32] (per French CJ, Hayne and Kiefel JJ).
In this case the plaintiffs' claim damages for economic loss. In determining the character of that loss for the purposes of dealing with the defence, I consider the following to be established on the evidence and available at law: 1. City Pacific and Martha Cove were separate entities and, therefore, should be treated as such: Salomon v Salomon & Co Ltd [1897] AC 22. 2. City Pacific sued to recover the amount it paid to the benefit of Martha Cove; an amount Martha Cove is required to pay or repay to City Pacific. I consider that the case, in that respect, is available on the pleadings and represents the substance of the case brought by the plaintiffs (as is the following conclusion). 3. City Pacific paid the Martha Cove Property Monies on behalf of Martha Cove. The same persons caused City Pacific to pay the money and Martha Cove to enter the various contracts. The payments were made with Martha Cove's knowledge and, in my view, implicitly, by a request. Thus, Martha Cove was indebted to City Pacific in the amount of the Martha Cove Property Monies: see K Mason, JW Carter and G J Tolhurst, Mason and Carter's Restitution Law in Australia (2008, 2nd ed, LexisNexis Butterworths) at [116]; see also Israel v Foreshore Properties Pty Limited (in liq) (1980) 30 ALR 631 at 634-635; O3 Capital Pty Limited v WY Properties Pty Limited (2016) 49 WAR 517; [2016] WASCA 82 at [74]-[77] (per Newnes and Murphy JJA and Mitchell J). 4. City Pacific made the payments to benefit Martha Cove. I accept the submission of the plaintiffs that it made the payments to reserve Martha Cove's property, namely, the right to buy the Marina. I also accept the plaintiffs submission that Martha Cove thereby became subject to an enforceable obligation to reimburse City Pacific.
These considerations stand in contradiction to the defendants contention that City Pacific sued in the capacity of purchaser and not a lender or creditor (a submission that has been repeated in many parts of the defendants' submissions).
In order to further attend to that consideration, it is necessary to again consider some issues of principle. Whilst it is true that loss arising from a loan will generally arise not earlier than default and typically only on sale of a security for a loss and an effective exhaustion of the covenant to repay, those circumstances do not arise because the transaction is a loan. Rather the circumstances arise because the loan is contingent until the security is sold and the covenant to repay exhausted. I accept the submissions of the plaintiffs, based as they are on the judgment of the High Court in Wardley, that where the loss is that a plaintiff pays money it is entitled to recover, the contingency is non-recovery regardless of the character of the right to recoup. It is the contingency of non-recoupment and when that contingency occurs to which attention should be directed. Thus, to refer to the decision of Davies J in Ross at [31], the relevant question is when recoupment is rendered impossible as it is then that time starts running in a relevant sense. In circumstances in which there is an effective contingency to the obligation, the categorisation as purchaser does not assist in a relevant sense.
When the substance of the obligations and transactions are looked at in the present matter as required in Winnote at [64], I consider that the plaintiffs should be treated, as observed above, as separate legal entities with different rights and liabilities as separate corporations. The proposition advanced by the defendants that City Pacific sues in the capacity as a purchaser (rather than a lender) is erroneous as the contractual documentation relating to the purchase of the Marina shows Martha Cove as the purchaser and not City Pacific. This follows from the fact that City Pacific nominated Martha Cove to purchase the Marina and Martha Cove exercised the Call Option and entered into the Contract of Sale as earlier found in this judgment.
The position of Martha Cove is different; it did contract to buy the Marina. The analysis of the loss of time question should, therefore, be treated differently as between it and City Pacific. It was submitted that the contract was entered into in circumstances where the parties "dealt ex-contractually" and ultimately there was never completion but that does not relevantly alter the character of Martha Cove's involvement or loss.
That brings to consideration the time of loss. Turning firstly to City Pacific in the light of that aforementioned analysis, I do not consider that City Pacific's claim is time-barred for the following reasons: 1. Martha Cove's payment of its obligation to City Pacific was dependent on contingencies. Loss was only suffered when the contingency occurred that meant that the debt would not be repaid or the obligation discharged. Repayment was only unavailable once the Marina was sold to a third party and ILO was unable to repay the Martha Cove Property Monies to Martha Cove (meaning Martha Cove could not repay City Pacific), or at least when the contract was terminated (which is the same time, as the contract was not apparently terminated before sale to the third party). It was only then that time started to run in 2015. 2. I note that the plaintiffs advanced an alternative submission that, at the earliest, the contingency only occurred when Martha Cove was placed in liquidation on 23 October 2009, which was less than 6 years prior to the commencement of the proceedings. It is strictly not necessary for me to rule on that submission in the light of conclusion I have otherwise reached. However, I would accept the submission in the alternative. 3. Further, I do not accept the defendants' alternative submission as the case based on the Amended Indigo Valuation only taking effect in December 2017, principally because I reject the defendants' characterisation of the cause of action based upon the Amended Indigo Valuation as set out in the extract from the defendants' written submissions as para 133 (extracted earlier in this judgment). This judgment is replete with findings to the contrary. Further, s 65(2)(c) of the Civil Procedure Act 2005 (NSW) (the lex fori applies to procedural rules) has operation. Looked at in the broad, as is required by the authorities identified by the defendants, the claim arises out of the same or substantially the same facts. The transaction that formed the basis of the claim always included the purchase of the Marina by Martha Cove, and payment by City Pacific. The case was consistently that the defendants had negligently and misleadingly valued the Marina. The June Valuation was always pleaded as the basis for the same causes of action now relied on. Reliance on that valuation in purchasing the Marina and paying funds for the purchase was pleaded. The loss claimed has never been materially amended. The later Amended Indigo Valuation was necessarily in issue, at least in an evidentiary sense. The addition of the Indigo Valuation in the 2017 amendments did not change the character of the factual matrix. A fortiori the express addition of the Amended Indigo Valuation, an amendment that, because of s 65(3) of the Civil Procedure Act, had effect from the date the proceedings were commenced.
The analysis is different and considerably more difficult in the case of Martha Cove. Where a claimant is misled into buying a property for more than its true value at the time of the contract, the claimant usually suffers loss on exchange of contract: Astonland at [15] and [28] (per Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ). However, there is authority for the proposition that in such a situation, the claimant does not suffer loss until the purchase is settled and the claimant has parted with its money: Pine River Pty Ltd v Scorda [2001] WASC 105 ("Pine River") at [115]-[118] (per Steytler J).
The plaintiffs sought to distinguish Astonland from the present case. It was submitted that it is implicit in the High Court's statement of principle that completion of the relevant contract had, in fact, taken place. The present case it was submitted was different. In the present case, unlike Astonland, the Contract of Sale did not complete. It was submitted not only did the Contract remain executory, but neither party sought to issue a notice to complete or to terminate the Contract at any time. In fact, ILO did not seek to terminate the Contract until it did so in effect by selling the Marina in 2015.
The plaintiffs also made the following contentions: 285. In the present case, Martha Cove and ILO dealt with each other on a basis beyond the terms of the Contract of Sale. These dealings took the form of mutually agreeing to extend the time for completion of the Contract of Sale in late 2007; joining together in an attempt to sell the Marina to ASP in 2008; and refraining from taking any steps to issue a notice to complete or to terminate the Contract of Sale, including following the request for repayment of the Martha Cove Property Monies in June 2009. 286. Again, unlike Astonland, the effect of that conventional dealing was to import into the Contract of Sale and the payment of the Martha Cove Property Monies a contingency. That contingency was the refinance of the Indigo Loan Facility or effecting the sale of the Marina to a third party. This contingency did not occur until ILO sold the Marina in 2015.
Whilst the plaintiffs refer to authority for the proposition that the claimant does not suffer loss until the purchase is settled and the claimant has parted with its money: Pine River at [115]-[118] (per Steytler J), in my view, the defendants contentions so far as they concern Martha Cove, as a purchaser, amply demonstrate why the distinctions sought to be drawn, in this respect, cannot be sustained. Further, in my view, the case of Martha Cove is not relevantly distinguishable from Astonland. I do not consider the statements of principle therein necessarily revolve around the completion of a contract having taken place or that the absence of the termination of the contract in this matter is a particularly relevant distinction.
I do not consider that the cause of action by City Pacific was time-barred by any limitation period with respect to Martha Cove. However, the cause of action by the second plaintiff, Martha Cove, is time barred, under the statutory provisions specifying limitation periods which are referred to at the outset of the discussion of this issue.

[137]

(a) Mitigation

The defendants submissions in this respect were relatively short and dependent upon the evidence of Mr Gordon. Those submissions are extracted below: 136. The plaintiffs have an obligation to mitigate their loss in both tort and the statutory causes of action: Richardson v Schultz (1980) 25 SASR 1 at 19; Hellyler Drilling Co v MacDonald Hamilton & Co Pty Ltd (1983) 51 ALR 177 at 192. The plaintiffs "cannot be said to have really incurred any loss which might have been avoided by his taking such steps as a reasonably prudent man in his position would have taken to avoid further loss to himself": Sherson & Associates v Bailey (2001) Aust Torts Rep 81-591 at [77]. 137. The reasonable steps which ought to have been taken plaintiffs to avoid the loss are those stated by Mr Gordon. Mr Gordon identifies the imprudent steps that were taken by City Pacific, including:56 (a) Entering into a binding financial commitment without sufficient funding; (b) Agreement to a larger than normal contract deposit; (c) Allowing the release of deposit funds to a vendor; (d) Delaying the settlement of a financial contract without adequate documentation; and (e) Payment of $7 million outside of the terms of a contract without documenting the basis of that payment. 138. By failing to take (obvious) steps "as a reasonably prudent man in his position would have taken", the plaintiffs cannot be said to have incurred the pleaded loss. 139. There was no challenge to the substance of Mr Gordon's opinion and the Court ought to accept his expert opinion, which is plainly correct.
I do not consider those submissions can be sustained for two reasons.
First, I have found that Mr Gordon's evidence should be given little or no weight. Secondly, I agree with the submissions of the plaintiffs that it is difficult to conceptualise what the plaintiffs should have done once the various payments had been made.
In terms of failure to mitigate, the evidence discloses that the plaintiffs acted with the object of avoiding loss including by keeping the purchase on foot and attempting on-sales of the Marina.

[138]

(b) Contributory negligence

The defendants written submissions with respect to this submission were as follows: 140. If there is any liability, the defendants allege that the plaintiffs are guilty of contributory negligence. The matters set out above in respect to the failure to mitigate defence are repeated. 141. As is made plain by s 63 of the Wrongs Act, the Court may make a reduction of 100% if the Court thinks it just and equitable to do so, with the result that the claim for damages is defeated. As pleaded in the Defence at [46], should the Court (notwithstanding the above submissions) find that liability has been established, it would be appropriate for the Court to reduce the damage by 100% on the basis of the plaintiffs' conduct, such is the cavalier nature of their behaviour and the causal potency of their failures. 142. The relevant principles regarding apportionment are well known having been stated by the High Court in Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492 at 494.
Reference should also be made in this respect to some other aspects of the defendants' submissions as follows: 34. On 28 November 2007, the plaintiffs allege that "City Pacific (on behalf of Martha Cove Marina) paid an additional $7,000,000 to ILO…in consideration for the acquisition of the Martha Cove Property": FASOC [35]. That payment was not required under the Deed or the contract. That is, this part of the consideration was paid before completion where City Pacific had no contractual obligation to make the payment. 35. At the time the decisions were being made by City Pacific to pay the Martha Cove Property Monies, on 3 October 2007, the officers of City Pacific knew that the Indigo Group was in serious financial difficulty, because they were told that "Indigo Pacific is also going to run into a hole of about $2.5 million". … 49. The plaintiffs' pleaded case on factual reliance on the June Valuation appears at FASOC [31]-[36]. The reliance on the June Valuation pleaded at FASOC [31]-[36] is, with respect, a most adventurous case. That case appears to involve the following propositions: … (d). City Pacific relied upon the June Valuation (from 2006) in late June 2007, which as noted above included a representation that the value of the Martha Cove Property was $22,500,000 exclusive of GST, to enter into the Put and Call Option Deed (the Deed) with ILO; (e). that Deed involved City Pacific having the option to require ILO to enter into contract to sell the Martha Cove Property for the sum of $30,000,000, that is, $7,500,000 more than the June Valuation figure; (f). the June Valuation was not only relied upon to enter into that Deed, but also to pay the Call Option Fee of $2,100,000, the $2,000,000 on 10 October 2007 as a "further deposit" to ILO, and on 28 November 2007 to pay over an additional $7,000,000 to ILO in part consideration for the acquisition of the Martha Cove Property, which sum was not legally required under the Deed or the contract … [Footnotes omitted.]
In reply, the plaintiffs made the following submissions: 72. This is addressed at paragraph 288 of the PCS and at paragraphs 140-142 of the DCS. 73. A preliminary observation should be made. In advancing contributory negligence - including the extravagant submission of a 100% reduction for contributory negligence - the defendants face the usual difficulty faced by a professional, paid for his or her skill and expertise, who has acted negligently or engaged in misleading conduct. The defence is in effect that the plaintiffs engaged in a culpable want of care by relying on the defendants' opinion: see Astley v Austrust Limited (1999) 197 CLR 1 at [30]. The defence amounts to a contention that the plaintiffs acting carefully should not have relied on the defendants' opinion, which is a rarely apt finding. In the present circumstances of providing funds for the acquisition of the Marina (City Pacific) and in buying the Marina (Martha Cove) there is no reason why they should not have relied on the defendants' opinion as to value which was the critical consideration. 74. This defence is also based on the evidence of Mr Gordon and should be rejected for the same reasons given in paragraph 70 above. There are further difficulties in the defendants' reliance on Mr Gordon. His opinions (to the extent that descriptor is appropriate) are directed to facts and matters that did not ultimately cause the loss. It was the value of the Marina which meant that the plaintiffs suffered loss. To take an example, seeking finance after the contract was entered only matters because the Marina did not have the expected value, and consequently the CBA would not provide finance. The examples can be multiplied. 75. The defendants also make two other points which appear to be directed at the issue of contributory negligence. Firstly, at paragraphs 34 and 49(f) of the DCS, the defendants contend that the Third Payment (of $7 million) was not required under the Put and Call Option or the Contract of Sale. The significance of that payment is addressed at paragraphs 76 and 262-263 of the PCS. Those payments were made to preserve the purchase which, consistent with the Amended Indigo Valuation, was, it is to be inferred, thought to be worth preserving. Those payments were not an example of contributory negligence, rather they are the consequence of on-going reliance on the valuations. 76. Secondly, at paragraph 35 of the DCS, the defendants contend that an email dated 3 October 2007 (Ex 11, tab 21A, E5132) suggests that, at the time the decisions were being made by City Pacific to pay the Martha Cove Property Monies, the officers of City Pacific knew that the "Indigo Group" was in serious financial difficulty. However, the email does not advance the analysis, and the defendants carry the onus of proof. In point of fact, the email refers to IPC ("Indigo Pacific"), and not to ILO or IHPO (ie, "Indigo Private"). As pointed out in paragraph 18 of the PCS, IPC had no ownership interest in ILO or IHPO. It follows that the email does not throw any light on the financial circumstances of ILO and IHPO, or City Pacific's knowledge of those circumstances. 77. The contributory negligence defence should fail. Alternatively, a just and equitable allocation of responsibility and loss is that any reduction for contributory negligence should be a small percentage of the loss suffered by the plaintiffs' reliance on the misleading or negligent valuations.
During the course of oral submissions, counsel for the defendants sought to rely upon a report titled: "City Pacific Limited: Due Diligence Observations", dated August 2007 ("Due Diligence Observations Report"). The report was produced by Equity & Advisory Limited. That document formed part of Ex 10 and was subject to objections concerning admissibility, which I will turn to below.
The defendants contended that the Due Diligence Observations Report was relevant to the issue of contributory negligence, as well as the issues of causation and concurrent wrongdoer, for the following reasons: 1. The document was commissioned by City Pacific. 2. The document is dated August 2007, which date is before the $2 million advance (paid in October 2007) and the $7 million advance (paid in November 2007). 3. An extract at page 26 was highlighted as a pertinent example, as the author of the report broadly identifies "the transaction under consideration here is commercially risky". Nextly, the author deals with the aspects of this very transaction subject to that proposition.
It is useful to set out the passage relied upon by the defendants. Section 6 of the report is titled "Observations and Issues Requiring Resolution". Next to the heading, "Martha Cove and 'Cashless' Profits", the following observations appeared on page 26: • We have significant concerns relating to the transactions completed in the days prior to 30 June 2006 and 30 June 2007 at Martha Cove. These sales were completed at a discount to feasibility market value and on generous vendor financed terms. Accordingly, the "market" value and depth of demand for Martha Cove real estate has been difficult to ascertain. • The circular nature of the year end vendor financed transactions is commercially risky. CPL and CP1 have recognised profit in circumstances where CPMT and Marina Cove Pty Ltd have provided 100% of the funding. The CPMT Marina Cove loan is "repaid" but in reality the loans have only transferred to another non-related party who has not yet serviced the loan. CPMT recognises ongoing profit from interest revenue in circumstances where Marina Cove Pty Ltd is paying the interest of behalf of the acquirer to the Mortgage Trust. Some of these vendor financed loans have been repaid in part or in full however the Group has financed the majority of the "profit" recognised on Martha Cove. This creates significant risk when the group is forced to raise equity or borrow funds to pay interest, tax and dividends on these "cashless" profits. • This project must be proactively managed to ensure that the previous purchasers "complete" their vendor financed acquisitions. This will require a significant marketing effort this summer, as well as the commencement of the Martha Cove Town Centre. Unless the project develops its own momentum this year from lot by lot sales there is a risk that the original feasibility will not be achieved. • Whilst the property market remains strong and capital growth is greater than the interest, tax and holding costs incurred, the cycle of these transactions can continue notwithstanding audit scrutiny. However, if the market turns such that this cycle is broken, the financial fall-out will be both fast and significant. Competent due diligence of CPL has revealed the extent of these transactions and raised questions as to the quality and extent of the maintainable earnings of the Company.
Whilst not referred to by the parties, for completeness, the following recommendations immediately followed those observations: • Once again, the FY08 results of CP1 are conditional upon sales at Martha Cove. The Company must immediately develop strategies which are successfully implemented to ensure that the remaining lots at the development are sold on a commercial basis. • There must be accountability for the future development of Martha Cove. Currently at least four executive are "responsible" for its success but none are accountable. • Furthermore, Grocon's role in respect of the development is also uncertain.
Counsel for the defendants submitted the Due Diligence Observations Report, on the evidence, was commissioned and received before the plaintiffs "parted" with most of the money telling them that their conduct is commercially risky. It was contended that such evidence supported the contributory negligence defence and further, that the defence "is so significant in this case as to defeat the plaintiff's claim is one of a number of the legal issues which is affected by this".
The document was tendered as a business record under s 69(5) of the Evidence Act 1995 (NSW). The foundation for admissibility vis-à-vis that provision was contended to be found at page 3 of the Due Diligence Observations Report, which sets out the circumstances in which the document came to be prepared. Relevantly, the following introductory remarks appear at page 3: • Equity & Advisory Limited (Equity & Advisory) was appointed as commercial advisor to City Pacific Limited (CPL) following unsolicited expressions of interest by MFS Limited (MFS) to make a take-over offer for some or all of the shares or assets of CPL. • This presentation provides a summary of Equity & Advisory's observations following the facilitation of due diligence for MFS. • The presentation is intended to provide a framework which will improve CPL's shareholder value. In our opinion as a result of unfunded financing obligations, CPL is in a precarious financial position.
The defendants submitted: "If your Honour is satisfied that the person preparing the business record would have sufficient knowledge of the matters then it remains an exception to the hearsay rule and is admissible". Counsel for the defendants further submitted: LLOYD: It is a document that's prepared, no doubt, to address some concerns that someone within the City Pacific Group had about the way that they were conducting themselves at this time. Frankly, with what your Honour knows about the conduct in this transaction, whoever decided to commission this analysis certainly had the right idea because Mr Gordon's report is scathing, and rightly so, in our submission. I don't want to stray into those areas; we have dealt with them in writing. They are my submissions about the admissibility.
It was noted that its admissibility was challenged by reference to s 79 of the Evidence Act.
In reply to those contentions as to admissibility, counsel for the plaintiffs contended: My learned friend says he gets within section 69(5) because the author of this report knew it may be inferred. We don't even know who the author of the report is. We don't know what material he had. I, of course, take the point that Lithgow City Council, I accept there is a debate about how far it goes, would rule this out because it is opinions anyway. But now I've heard how it is enunciated, there is the further problem that one does not know who this person was or what they knew to base the opinions on. It should be rejected for that reason as well.
As to the relevance of the information on page 3 of the Due Diligence Observations Report, counsel for the plaintiffs submitted it does not cure the problem identified in the above submission. This is because, notwithstanding the reference to Equity & Advisory Limited, there is no evidence of fact as to the specific author.
In reply to that submission, counsel for the defendants briefly returned to the due diligence report that was tendered without objection and relied upon by both parties, as it suffered the same problem, namely, an absence of author. As such, it was submitted: If your Honour was to rule that it is inadmissible on that ground, the same would apply to the due diligence report that our friends place much store on at tab 17 of the joint bundle. It is a document without an author. It cannot be a good point about business records that just because there is not a name down the bottom. In a sense, we don't mind, our document is not the most momentous one in the case. It has some relevance. I just draw it to your Honour's attention that if your Honour was to reject it on the ground of a lack of identified authorship, the due diligence document behind that tab falls into the same category. We don't know who wrote that.
Not wishing to re-agitate an earlier ruling of the Court, counsel for the defendants confirmed their position with respect to the due diligence report: LLOYD: … If your Honour was to reject tab 5 of exhibit 10, I make the submission that it would follow, not that I would make any application to revisit the admissibility of tab 17, but that your Honour would give it little weight for the same reasons.
The Due Diligence Observations Report is plainly a business record, that is evident on its face. By reference to page 3 of the document, I accept that the document was commissioned by City Pacific for the specific purpose of conducting a due diligence assessment of the corporation in response to an unsolicited take-over offer by another entity. No issues were raised as to the authenticity of the document. Nor were any argument advanced as to prejudice. I accept that the document was authored by an agent of Equity & Advisory Limited, however, no further specificity as to identity of the person or person(s) that authored the report was provided. The evidence is not tendered as to the veracity or validity of the opinions expressed but as to the publication of those opinions at a point in time when reviewed in the context of other evidence bearing upon the position adopted by the plaintiffs at or about the time of the publication of that document. The absence of a specific author does not defeat its admissibility.
Whilst the document is admissible, the weight it attracts is necessarily impacted by the absence of evidence as to the precise means and manner by which the document was communicated to City Pacific and to whom the document, and the information therein, was disseminated to within City Pacific. It is true that the document casts several observations and includes recommendations, however, there is also no evidence before the Court as to how the information was used. It attracts very little weight then with respect to the issue of causation. It is relevant to the question of contributory negligence.
Neither party suggested the appropriate approach to contributory negligence was dependent upon which cause of action succeeded. In any event, I have found that both causes of action in the present matter have been made out.
In those circumstances, I propose to rely upon the statement of principles in Baumgartner at [931]-[941]: [931] No doubt that judgment attracted attention because the appeal arose out of the determination of a claim for damages for negligence and misleading and deceptive conduct brought by the trustee of a SMSF (for the benefit of a Dr Bear and his wife) against the respondent who was an accountant auditing the accounts of that fund. It was alleged at first instance that the respondent had breached his duty of care and engaged in misleading and deceptive conduct by failing to qualify the audit reports as to the possibility that the assets described in the fund's financial statements as "cash" may not be recoverable as they, in fact, concerned unsecured loans to a company associated with a friend of Dr Bear's. The decision below also concerned a statement in the audit reports to the effect that the financial statements presented fairly the financial position of the fund and the results of its operations and its cash flows. [932] Like this matter, the judgment of Macfarlan JA (with whom McColl AP and White JA agreed) proceeded upon the basis that neither of the parties had suggested the appropriate approach to contributory negligence was dependent upon which cause of action succeeded. As a result, his Honour derived the relevant principles for the determination of the matter from the principles applicable to an action at law for damages for negligence. In the broad, I propose to adopt the same approach drawing substantially from his Honour's description the relevant principles and, in part, from his reasoning as to contributory negligence. [933] His Honour initially directed attention (as did the defendants in this matter) to s 9 of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 5R(1) of the Civil Liability Act as well as the judgment of the High Court in Astley v Austrust Ltd (1999) 197 CLR 1; [1999] HCA 6 ("Astley"). Those passages of the judgment in Cam & Bear were as follows (at [80] and [81]): [80] Section 9 of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW) provides that if a claimant for damages in a negligence action is guilty of contributory negligence, its damages are to be "reduced to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage". Section 5R(1) of the Civil Liability Act 2002 (NSW) ("the CLA") provides that the principles applicable to determining whether a defendant has been negligent also apply to determining whether a claimant has been contributorily negligent in failing to take precautions against the risk of harm to the claimant. Section 5R(2) stipulates that the relevant standard is that of a reasonable person in the position of the claimant and is to be applied on the basis of what the claimant knew or ought to have known at the time. [81] In Astley v Austrust Ltd (1999) 197 CLR 1; [1999] HCA 6 at [23], the majority justices referred to earlier decisions suggesting that "contributory negligence cannot be made out in circumstances where the very purpose of the duty owed by the defendant was to protect the plaintiff's property". They proceeded however at [29] and [30] to hold that there was no rule that apportionment legislation did not operate in such circumstances. As an example, they said that "a plaintiff who carelessly leaves valuables lying about may be guilty of contributory negligence, calling for apportionment of loss, even if the defendant was employed to protect the plaintiff's valuables". Their Honours stated that, whilst there was no "absolute rule", the "duties and responsibilities" of the defendant were to be taken into account in determining whether, and to what extent, the plaintiff was guilty of contributory negligence. Their Honours found that the plaintiff in that case, a public trustee company, had been guilty of contributory negligence (in failing to inquire whether certain borrowings and interest could be repaid), notwithstanding that that subject matter fell within the defendant solicitors' retainer to provide advice to the plaintiff. Their Honours did not proceed to quantify the extent of the plaintiff's responsibility for its own loss as their Honours held that contributory negligence was not available as a defence in light of the statutory provisions (since amended) applicable in the circumstances of that case. [934] It is convenient to refer to a passage of the judgment in Astley in the present context (at [30]) where the majority (per Gleeson CJ, McHugh, Gummow and Hayne JJ): [30] A finding of contributory negligence turns on a factual investigation of whether the plaintiff contributed to his or her own loss by failing to take reasonable care of his or her person or property. What is reasonable care depends on the circumstances of the case. In many cases, it may be proper for a plaintiff to rely on the defendant to perform its duty. But there is no absolute rule. The duties and responsibilities of the defendant are a variable factor in determining whether contributory negligence exists and, if so, to what degree. In some cases, the nature of the duty owed may exculpate the plaintiff from a claim of contributory negligence; in other cases the nature of that duty may reduce the plaintiff's share of responsibility for the damage suffered; and in yet other cases the nature of the duty may not prevent a finding that the plaintiff failed to take reasonable care for the safety of his or her person or property. Contributory negligence focuses on the conduct of the plaintiff. The duty owed by the defendant, although relevant, is one only of the many factors that must be weighed in determining whether the plaintiff has so conducted itself that it failed to take reasonable care for the safety of its person or property. [Footnote omitted.] [935] In Cam & Bear, Macfarlan JA then turned to the provisions of s 5R(2)(a) of the Civil Liability Act as follows (at [83]): [83] In considering contributory negligence, s 5R(2)(a) (quoted in [80] above) requires regard to be had to how a reasonable person "in the position of" the claimant would have acted. There is no doubt that this provision permits the application of the common law principle stated in Rogers v Whitaker (1992) 175 CLR 479 at 487; [1992] HCA 58 that "the standard of care to be observed by a person with some special skill or competence is that of the ordinary skilled person exercising and professing to have that special skill". The extent to which it allows or requires a plaintiff's disabilities to be taken into account when considering contributory negligence has however been the subject of discussion (see for example Boral Bricks Pty Ltd v Cosmidis (No 2) (2014) 86 NSWLR 393; [2014] NSWCA 139 at [87]-[88]; T & X Company Pty Ltd v Chivas [2014] NSWCA 235 at [48]-[56]; (2014) 67 MVR 297, in each case per Basten JA, referring in particular to Joslyn v Berryman (2003) 214 CLR 552; [2003] HCA 34 at [32]-[39] per McHugh J). [936] In the consideration of Cam & Bear, it is worth noting that both parties accepted that the standard of care required in an assessment of whether a plaintiff has failed to take reasonable care is that of a "reasonable person in the position of the plaintiff… on the basis of what the plaintiff knew or ought to have known at the time": see T & X Company Pty Ltd v Chivas [2014] NSWCA 235 at [4] (per Beazley P). [937] In the application of those principles, Macfarlan JA commenced by reviewing some of the particular circumstances of that matter which resonate in the present case. His Honour stated (at [84]): [84] The issue does not arise in the present case as Dr Bear did not have any relevant disability. Certainly, he lacked any special expertise in financial matters but that simply results in it being necessary to treat him as a person of ordinary capabilities in considering the standard of care he ought to have attained. I add that the appellant, correctly, did not contend that it was not responsible for any default on the part of its directors. No doubt, it was so responsible, either because the directors were effectively acting as the company itself or the directors were persons for whom the appellant was vicariously liable (see Daniels v Anderson (1995) 37 NSWLR 438 at 570). [938] Further, Macfarlan JA held (at [89]): [89] In making an apportionment based on a plaintiff's contributory negligence, the Court must consider "the degree of departure from the standard of care of the reasonable man" and "the relative importance of the acts of the parties in causing the damage" (Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 [ALR 529 at 532-3]). [939] The reference by Macfarlan JA to Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALR 529 ("Podrebersek") at 532-533 is extracted below: 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, ie 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. [940] The plaintiff also relied upon the following passage from Polon at [877] (per Hall J): [877] In determining contributory negligence, a comparison is required of the degree of fault or culpability on the part of each of the parties. That consideration occurs in the context of a comparison between the lack of care of one party with the lack of care of the other and then a determination, having assessed the culpability and the causal potency of the relevant acts, of the degree of contributory negligence on the part of the plaintiff: see Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALR 529 at 523; Ghunaim v Bart [2004] NSWCA 28 per McColl JA at [71]. As the High Court observed in Podrebersek, it is the whole of the conduct of each negligent party in relation to the circumstances of the case that must be subjected to comparative examination. [941] In Daniels v Anderson, Clarke and Sheller JJA observed (at 568): The role of the auditor … will, almost certainly, be relevant in considering questions of apportionment and it may be appropriate, in particular circumstances, to make a finding that it is just and equitable that, for instance, the auditor bear all the damages despite the fault of the client.
In my view, the acts of the defendants in causing damage in the present matter are, for the reasons given earlier in this judgment, significant. That consideration needs to be borne steadily in mind in drawing a comparison between that lack of care (or misrepresentation) and, as I have considered to be the case, a lack of care of by the plaintiffs who, in my view, share part of the responsibility for the damage occasioned with respect to the Third Payment.
Thus, central to the consideration of contributory negligence is the Third Payment made by the plaintiffs. By the time of the making of the Third Payment, the plaintiffs acting carefully must have been possessed of real doubts regarding the advice received through the June Valuation and the Amended Indigo Valuation and were otherwise possessed of information which, at least, required greater care before making the Third Payment.
Significantly, the plaintiffs pleaded that the Third Payment was made to ILO "in consideration for the acquisition of the Martha Cove Property". In written submissions, it was contended the payments were made to preserve the purchase having regard to the worth established by the Amended Indigo Valuation. However, that payment was not required under the Put and Call Option or the Contract for Sale. I agree with the submission of the defendants that this part of the consideration was paid before completion where City Pacific had no contractual obligation to make the payment and when the surrounding circumstances would have called for greater care. There was no documentation explaining the basis for the taking of this step.
Further, the Due Diligence Observations Report emphatically identified the risk associated with the transactions of this kind. It is clear that further finances were being sourced in the period leading to the Third Payment, with a precursor to such funds being provided by the CBA to City Pacific being subject to receipt of a "new" valuation. The surrounding circumstances, in particular, the steps taken by City Pacific in making the Third Payment, notwithstanding concerns raised in internal correspondence about the valuation and the processes associated with the transaction, exhibit the conduct identified as both "commercially risky" and concerning on the part of City Pacific within the Due Diligence Observation Report.
I find no contributory negligence on the part of the plaintiffs with respect to the First and Second Payments of the Martha Cove Property Monies. Those payments do not attract, in my view, these issues.
Having regard to the above considerations, I find contributory negligence with respect to the loss occasioned through the Third Payment. Having regard to the significance of the defendants' duties and the representations made by them, I nonetheless consider that as to the loss occasioned with respect to the Third Payment the loss should be apportioned 60% to the plaintiffs and 40% to the defendants.

[139]

Issue 17 - What, if any, effect does proportionate liability legislation have on any orders for damages which the Court may make against one or more of the defendants?

The defendants' primary position was that Phillip Sullivan and James Finucan were concurrent wrongdoers, although they accepted that the concurrent wrongdoers defence overlapped with the contributory negligence defence to the extent that the actions of Mr Sullivan and/or Mr Finucan, through the principles of attribution, the actions of the plaintiffs.
The alternative submission of the defendants involved reliance upon the concurrent wrongdoer defence to the extent that the actions of Mr Sullivan and/or Mr Finucan involved breaches by them of their obligations to one or other or either of the plaintiffs. It was said that this defence was set out in the commercial list statements and the evidence of Mr Gordon.
I accept the contentions of the plaintiff that, to the extent the defence is raised, it is unsustainable for a number of reasons. This is because: 1. the actions of Mr Sullivan and Mr Finucan are the actions of the plaintiffs and the proportionate liability provisions relied on by the defendants do not apply to require or permit apportion of liability between a company and its officers or employees: see Robinson v 470 St Kilda Road Pty Ltd (2018) 263 FCR 572, following Dunn v Hanson Australasia Pty Ltd (2017) 12 ACTLR 138 and Tomasetti v Brailey (2012) 91 ATR 531; 2. the defendants have failed to identify, much less lead any credible evidence to prove, the basis of the defence; 3. to the extent the defendants rely on the Commercial List Statement, that document is not in evidence and in any event the allegations in that document are not capable of constituting admissions by either of the plaintiffs: Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 85-6 (per Mason CJ and Brennan J) and 98 (per Gaudron and McHugh JJ); and 4. Mr Gordon's evidence has been given little or no weight.
It follows that the answer to Issue 17 is that proportionate liability legislation does not have an effect on any orders for damages the Court will make against one or more of the defendants.

[140]

Issue 18 - Is the cause of action brought by the first plaintiff maintainable in light of s 601FS Corporations Act 2001 (Cth)?

Section 601FS of the Corporations Act provides as follows: (1) If the responsible entity of a registered scheme changes, the rights, obligations and liabilities of the former responsible entity in relation to the scheme become rights, obligations and liabilities of the new responsible entity. (2) Despite subsection (1), the following rights and liabilities remain rights and liabilities of the former responsible entity: (a) any right of the former responsible entity to be paid fees for the performance of its functions before it ceased to be the responsible entity; and (b) any right of the former responsible entity to be indemnified for expenses it incurred before it ceased to be the responsible entity; and (c) any right, obligation or liability that the former responsible entity had as a member of the scheme; and (d) any liability for which the former responsible entity could not have been indemnified out of the scheme property if it had remained the scheme's responsible entity.
The defendants contended that the cause of action brought by the first plaintiff is not maintainable. It was submitted that on the evidence, (at least) $9 million of CPMT funds was advanced by City Pacific for the acquisition of the Marina. It was submitted that when City Pacific advanced the Martha Cove Property Monies, it did so in its capacity as a responsible entity of the CPMT. Reliance was placed on the evidence of Mr Cathro that City Pacific's principal activity was to act as the responsible entity of three registered managed investment schemes, one of which was CPMT (it was then contended by the defendants that City Pacific was replaced as reasonable entity of the fund by Trilogy Funds Management Limited on 25 June 2009 such that the rights of City Pacific become the rights of Trilogy Funds Management Limited as at that date).
It was contended that the evidence did not show that City Pacific used its own funds to pay the Martha Cove Property Monies but rather the payment of $2 million on the 7 October 2007 was transferred from CPMT and the further payment of $7 million on 7 November 2007 was "redeemed" from CPMT to cover "MCM Settlement".
It was contended, therefore, that City Pacific did not have standing to bring the claim against the defendants as they did not suffer the pleaded loss.
The factual contest between the parties in this respect revolves around the defendants establishing on the evidence that the claims, the subject of the proceedings, were part of CPMT's scheme property for the purposes of 106FS of the Corporations Act. This is because it is only the scheme property to which section 106FS applied.
The evidence reveals that City Pacific carried on various businesses, some in its own right and some as the responsible entity for various managed investment schemes. So much is clear from the City Pacific's annual report for the year 30 June 2007. Further, PTQ held the property of CPMT so that investments undertaken by City Pacific were not done as responsible for CPMT.
The separation of City Pacific's financial affairs between transactions in its own account and as responsible entity of the CPMT are illustrated through City Pacific's bank accounts which were managed both in its own name and on behalf of its managed entities including CPMT. The evidence revealed the existence of separate bank accounts for that purpose in the CBA, the issuing of separate account statements for each of the accounts as well as the issuing of a report entitled "Diamond Cash Management - Statement Report" which reported on a number of these accounts in one document but with a separation relevant to the separate financial transactions.
To return to the role of PTQ as custodian of the CPMT, PTQ would periodically withdraw money from the CPMT funds account and deposit that money in the CPMT redemptions account. When CPMT acted on a redemption request from a unit holder, or investor in the fund, it would transfer the proceeds of the redemption of the unit holder or investor from the CPMT redemption fund.
With that background in mind, attention may then be directed specifically to the payment of Martha Cove Property Monies by City Pacific.
On 29 June 2007, City Pacific made the First Payment of $2.1 million from a "cash deposit account" operated by City Pacific. That account was operated separately to accounts held by City Pacific on behalf of CPMT.
On 10 October 2007, City Pacific made further payment (the Second Payment of $2 million) from the City Pacific cheque account, which was operated by City Pacific for its own purposes.
Previously, on 28 September 2007, PTQ had withdrawn these funds from the CPMT funds account and deposited them into the City Pacific cheque account.
In my view, it is clear that the aforementioned withdrawal and deposit constituted proper payment by PTQ to City Pacific in its own right.
Next, reference may be made to an email to Mr McCormick sent to Mr Purss entitled "CPL Cash from CPMT". That email demonstrates that City Pacific invested in the CPMT and, on that particular occasion, redeemed part of its investment. I agree with the submission of the plaintiffs that, in part, the defendants submission proceeded on the premise that City Pacific made no investments in CPMT, but this email stands to the contrary.
On 28 November 2007, City Pacific redeemed part of its investment in CPMT and directed PTQ to make the Third Payment directly to ILO (or IPC on behalf of ILO) from the proceeds of that redemption that were deposited into the CPMT redemption account. On that date, the following transactions occurred: 1. PTQ withdrew $8.5 million from the CPMT funds account and deposited those funds in the CPMT redemptions account; and 2. PTQ withdrew $7 million from the CPMT redemptions account with the description "City Pacific Limit City Pacific CLE" .
In City Pacific's transaction detail ledger dated 11 December 2007, the Third Payment of $7 million is recorded as being "[f]unds redeemed from CPMT to cover MCM Settlement".
In addition, the Martha Cove Property Monies are recorded in: 1. City Pacific's balance sheet included in City Pacific's board reporting papers for December 2007; and 2. City Pacific's audited balance sheet included in its 2008 Annual Financial Report.
In my view, the aforementioned analysis of the evidence establishes that City Pacific used its own money to fund Martha Cove and did not pay the Martha Cove Property Monies in its capacity as responsible entity of the CPMT. Ultimately, the transactional ledger and balance sheets record the Martha Cove Property Monies as an investment by City Pacific in respect of Martha Cove.
In this light, Issue 18 should be answered in the affirmative.

[141]

Issue 19 - What, if any, damages should be awarded to the plaintiffs?

In the FASOC, the plaintiff relevantly claimed the following relief: 1. damages under s 82 of the TPA; and/or s 236 of the Australian Consumer Law; alternatively, 2. damages pursuant to s 12GF of the ASIC Act; 3. damages pursuant to s 1041I of the Corporations Act; 4. general damages; 5. interest pursuant to s 100 of the Civil Procedure Act; 6. costs; and 7. interest on costs pursuant to s 101(4) of the Civil Procedure Act.
Having established the causes of action in damages for tort and under s 52 of the TPA and its analogues, damages may be awarded to put the plaintiff in the position they would have been in if the relevant wrongs had not occurred.
With respect to misleading and deceptive conduct, the appropriate approach to damages in this case is to identify what the plaintiffs have suffered by way of prejudicial disadvantage in consequence of altering their position by reason of the breach of the relevant statutory provisions as I have found: Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [132] (per McHugh J). In any event, the measure of the plaintiffs' loss at law and under statute are in this case relevantly identical.
The case for damages in this respect focused upon: 1. the First Payment to ILO as required by the Key Terms Agreement; 2. the Second Payment to ILO on 2 November 2007 as required by the Contract of Sale; and 3. the Third Payment to ILO in part payment of the purchase price for the Marina on 28 November 2007 by City Pacific on behalf of Martha Cove.
The position of the plaintiffs with respect to damages was stated thus. Recognising that the plaintiffs cannot recover twice, the Court should award City Pacific or Martha Cove damages in the total amount of $11.1 million (being the total of the First, Second and Third Payments), or alternatively in the amount of one or more of those payments (that is $2.1 million paid on 29 June 2007; $2 million paid on 10 October 2007; and $7 million paid on 28 November 2007). In each case, the plaintiffs also claim interest, costs and interest on costs.
The basis upon which the claims were made in that respect were correctly and succinctly expressed. The Martha Cove Property Monies had been lost and ILO was deregistered. Martha Cove is incapable of paying the Martha Cove Property Monies to City Pacific. It was claimed, therefore, that damages should primarily represent the sum of the First Payment, Second Payment and Third Payment, as earlier mentioned, in the total amount of $11.1 million.
The plaintiffs also claimed interest on each of the separate amounts comprising the Martha Cove Property Monies calculated from the date of payment or, alternatively, the date of accrual of the cause of action to the date of judgment. The plaintiffs also claim costs and interest on costs.
Having regard to my conclusion as to reliance and causation, the damages in the matter should be calculated on the loss occasioned for the Martha Cove Property Monies as adjusted in accordance with my findings as to contributory negligence.

City Pacific Ltd (in liq) v CBRE

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