COPPING & ORS v ANZ MCCAUGHAN LTD & ORS No. SCGRG 90/2493 Judgment No. 5995 Number of pages - Procedure - damages [1997] SASC 5995 - SASC 1997 case summary — Zoe

[233]

Gibbs J, in a dissenting judgment, stated the rule more narrowly and gave examples of occasions and circumstances in which a sealed order had been varied. He said at 539: "It is a well-settled rule that once an order of a court has been passed and entered or otherwise perfected in a form which correctly expresses the intention with which it was made the court has no jurisdiction to alter it: In re Suffield and Watts; Ex parte Brown; In re Swire; Mellor v Swire; Preston Banking Co v William Allsup & Sons; Woods v Sheriff of Queensland; Ivanhoe Gold Corporation Ltd v Symonds; MacCarthy v Agard; Arnett v Holloway. The rule rests on the obvious principle that it is desirable that there be an end to litigation and on the view that it would be mischievous if there were jurisdiction to re-hear a matter decided after a full hearing. However, the rule is not inflexible and there are a number of exceptions to it in addition to those that depend on statutory provisions such as the slip rule found in most rules of court. Indeed, as the way in which I have already stated the rule implies, the court has the power to vary an order so as to carry out its own meaning or to make plain language which is doubtful, and that power does not depend on rules of court, but is inherent in the court : Lawrie v Lees; Thynne v Thynne. Further, it has been held that a court may amend a part of a judgment or an order which is "not the operative and substantial part": Pearlman (Veneers) S.A. (Pty) Ltd v Bernhard Bartels; such an amendment, which may be far from being merely formal in its effect, could, as Singleton LJ pointed out in Thynne v Thynne, only be made under the inherent jurisdiction. Similarly the rule that a court may review an order made ex parte has been said to be "a rule of natural justice" (Woods v Sheriff of Queensland) or "an elementary rule of justice" (Owners of the s.s. "Kalibia" v Wilson) and this can only mean that the power is traceable to the inherent jurisdiction. Moreover, it has been held that in certain cases circumstances occurring since the judgment may warrant the making of a supplemental order: Preston Banking Co v William Allsup & Sons and see Prestney v Corporation of Colchester and this seems to be another example of the inherent power."

[375]

The Statement of Claim is deficient in its particulars. It does not identify the causal link between the misrepresentation and the damage. It also sometimes refers to the plaintiffs as having entered into the transaction and sometimes Perball Pty Ltd as the party which entered into the transaction and suffered loss. In fact it was only the appellant Perball Pty Ltd which entered into the offshore loan transaction. Mr Tilmouth argued that as the first Full Court had found that the appellant Perball Pty Ltd was induced to enter into the contract by the negligent mis-statement of the respondent the measure of damages to which his client Perball Pty Ltd was entitled ought to be assessed upon the basis of restoring the appellant to the position in which the appellant was before the appellant was induced to enter into the contract. The object of tortious damages is "to place the plaintiff in the position he would have been but for the commission of the tort": Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1; per Mason Wilson & Dawson JJ at 13; State of South Australia v Johnson (supra). However it was not the appellants case at trial or even on appeal that but for the misrepresentation the appellant or appellants would have done nothing. That was not the way the appellant Perball Pty Ltd sought to have damages assessed at trial. Indeed the appellant sought to have damages assessed upon the basis that it would have, but for this representation, re-financed by borrowing on-shore, which borrowings it would have been capable of servicing. Contrary therefore to the primary submission made by Mr Tilmouth the appellant sought damages upon the basis that it was entitled to the difference between what this transaction ultimately cost the appellant and what it would have cost the appellant assuming it had re-financed on-shore. If that was the correct measure, approached that way, the appellant needed to establish on the balance of probabilities that it would have and could have re-financed on-shore, and could have serviced the on-shore borrowings without the need to sell land. In the end, of course, the appellant failed because the learned trial judge concluded that the appellant would not have re-financed on-shore. Implicit in His Honour's findings is the finding that the appellant would have entered into a similar transaction to that which it did enter into with the same disastrous consequences when the Australian dollar weakened against the Swiss franc.

[424]

The House of Lords has recently had to consider the measure of damages in deceit in Smith New Court Securities Ltd v Citibank [1996] UKHL 3; (1996) 3 WLR 1051. In response to a submission that "the measure of damages is, in general, the difference between the contract price and the true open market value of the property purchased, valued as at the date of the contract of purchase", Lord Browne - Wilkinson (with whom Lord Keith of Kinkel, Lord Mustill, and Lord Slynn of Hadley, agreed and Lord Steyn did not disagree) observed that with the exception that the true market value could be assessed by reference to subsequent events, this was the law as laid down in a series of cases decided at the end of the nineteenth century. His Lordship then dealt with a number of cases which had commented upon the usual rule including Potts v Miller and Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647 saying that Dixon J loyally applied the old inflexible rule but "was plainly unhappy with it." His Lordship specifically approved Doyle v Olby (Ironmongers) Ltd (which Gibbs CJ had also approved in Gould v Vaggelas and which the Court had approved in South Australia v Johnson) and said: "Doyle v Olby (Ironmongers) Ltd establishes four points. First, that the measure of damages where a contract has been induced by fraudulent misrepresentation is reparation for all the actual damage directly flowing from (i.e. caused by) entering into the transaction. Second, that in assessing such damages it is not an inflexible rule that the plaintiff must bring into account the value as at the transaction date of the asset acquired: although the point is not adverted to in the judgments, the basis on which the damages were computed shows that there can be circumstances in which it is proper to require a defendant only to bring into account the actual proceeds of the asset provided that he has acted reasonably in retaining it. Third, damages for deceit are not limited to those which were reasonably foreseeable. Fourth, the damages recoverable can include consequential loss suffered by reason of having acquired the asset.

Parties

Applicant/Plaintiff:

# COPPING & ORS

Respondent/Defendant:

ANZ MCCAUGHAN LTD & ORS No. SCGRG 90/2493 Judgment No. 5995 Number of pages - Procedure - damages \[1997\] SASC 5995

Legislation Cited (8)

Limitation of Actions Act 1936

Misrepresentation Act 1972

Supreme Court Act 1935

Misrepresentations Act 1971

Limitation of Actions Act 1936

Misrepresentation Act 1972

Supreme Court Act 1935

Misrepresentations Act 1971

Cases Cited (41)

COPPING & ORS v ANZ MCCAUGHAN LTD & ORS No. SCGRG 90/2493 Judgment No. 5995 Number of pages - Procedure - damages [1997] SASC 5995 (21 March 1997)

Limitation of Actions Act 1936 s48; Misrepresentation Act 1972s7; Supreme Court Act 1935s50(2); Supreme Court Rules r2.01, 3.04, 46.04, 55.12, 84.12, 95.02, 95.05, referred to. Smith v New South Wales Bar Association [1992] HCA 36; (1992) 176 CLR 256; Autodesk Inc v Dyason and Others (No. 2) [1993] HCA 6; (1993) 176 CLR 300; Bailey v Marinoff [1971] HCA 49; (1971) 125 CLR 529; Gamser v Nominal Defendant [1977] HCA 7; (1977) 136 CLR 145; University of Wollongong v Metwally (No. 2) (1985) 59 ALJR 481; FAI General Insurance Co Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268; Goodwin v Southern Tablelands Finance Co Pty Ltd (1968) 42 ALJR 309; Commonwealth Bank of Australia v Forshaw (1990) 55 SASR 247; Devlin v Collins (1984) 37 SASR 98; Pooraka Holdings Pty Ltd v Participation Nominees Pty LtdRCT [1989] SASC 1802; (1989) 52 SASR 148; Wentworth v Woollahra Municipal Council [1982] HCA 41; (1982) 149 CLR 672; State Rail Authority of New South Wales v Codelfa Construction Pty Ltd [1982] HCA 51; (1982) 150 CLR 29; State of South Australia v Johnson (1982) 42 ALR 161; Doyle v Olby (Ironmongers) Ltd [1969] EWCA Civ 2; [1969] 2 QB 158; Royscot Trust Ltd v Rogerson [1991] EWCA Civ 12; [1991] 2 QB 297; Gates v City Mutual Life Assurance Society LtdRCT (1986) 160 CLR 1; Gould v Vaggelas (1985) 157 CLR 215; McAllister v Richmond Brewing Co (NSW) Pty Ltd [1942] NSWStRp 17; (1942) 42 SR (NSW) 187; Potts v Miller [1940] HCA 43; (1940) 64 CLR 282; Kizbeau v W G & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281; Clark v Urquhart; Stracey v Urquhart [1930] AC 28; Smith New Court Securities Ltd v Citibank NA [1996] UKHL 3; (1996) 3 WLR 1051, applied.

The object of an award of damages in tort is, generally, to restore the plaintiff to the position in which the plaintiff would have been placed if the wrongful act had not been committed: South Australia v Johnson (1982) 42 ALR 161 at 169-170 Gibbs CJ, Mason, Murphy, Wilson and Brennan JJ; Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at 13 Mason, Wilson and Dawson JJ; Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60 at 63 Mason CJ, Dawson, Toohey and Gaudron JJ. The significance of this proposition emerges in part from the contrast between the object of an award of damages in contract and an award of damages in tort. In contract the wrong is the breaking of the contract, and damages are assessed on the basis that the contract was performed. In tort, putting things generally, the wrong is a "... failure to leave him [the plaintiff] alone ...."; McGregor on Damages (14th ed) para 573. To be more specific, in the case of a misrepresentation which induces the plaintiff to enter into an agreement, the wrong is the loss resulting from the change of position which the misrepresentation induces.

When a misrepresentation causes a plaintiff to acquire property or to enter into a transaction, the measure of damages in deceit and in negligence has been said to be the difference between what the plaintiff paid and the value of what the plaintiff received by way of property or under the transaction: Potts v Miller [1940] HCA 43; (1940) 64 CLR 282 at 297 Dixon J: South Australia v Johnson (supra) at 170; Gates (supra) at 12.

However, this principle is no more than an application of the fundamental principle that damages are intended to compensate for the loss or expenditure incurred by the plaintiff in consequence of an alteration of position induced by the relevant inducement: Potts v Miller (supra) at 297; Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647 at 650 Dixon J; Gates (supra) at 12.

There is some support for this approach in English law in relation to the tort of deceit. Smith New Court Securities Limited v Citibank N.A. [1996] UKHL 3; [1996] 3 WLR 1051 dealt with an acquisition of shares induced by a fraudulent misrepresentation. But for the misrepresentation, the plaintiff would not have purchased the shares in question. Unbeknown to both plaintiff and defendant, a third party had perpetrated a fraud on the company in which the shares were purchased, so that the value of the shares at the time of acquisition was a good deal less than the then market value, although this was not known at that time. The question was whether the plaintiff could recover only the difference between the price and the value at the time of purchase, or the difference between the price and the true value as it ultimately appeared, although that greater loss was attributable not to the misrepresentation by the defendant but to the fraud perpetrated on the company by the third party. In other words, on whom was to fall the risk of a decline in the value of the shares purchased, being a decline attributable to an event extraneous to the fraudulent misrepresentation upon which the plaintiff's cause of action was based? The trial judge held that that risk should fall on the defendant, but the Court of Appeal held that it should fall on the plaintiff. The House of Lords restored the decision of the trial judge. Their Lordships relied heavily on the reasoning of the Court of Appeal in Doyle v Olby (Ironmongers) Limited [1969] 2 KB 158. Lord Browne-Wilkinson said (at 1058-1059): "... The measure of damages where a contract has been induced by fraudulent misrepresentation is reparation for all the actual damage directly flowing from (ie caused by) entering into the transaction."

For that proposition he relied upon the decision of the House of Lords in Banque Bruxelles S.A. v Eagle Star Insurance Co Ltd [1996] UKHL 10; [1996] 3 WLR 87. He recognised that there were limits to the reach of the proposition advanced by him. Referring to the case at hand he said (at 1078): "In these circumstances Smith [the plaintiff] was truly locked into the transaction by reason of the fraud perpetrated on it. And the causative influence of the fraud is not significantly attenuated or diluted by other causative factors acting simultaneously with or subsequent to the fraud. The position would have been different if the loss suffered by Smith arose from a subsequent fraud. That would be a case like the misrepresented horse in Cockburn CJ's example in Twycross v Grant 2 CPD 469, 544-545, where the buyer plainly cannot recover the value of the horse if it subsequently catches a disease and dies."

The remarks of the Court in Kizbeau Pty Ltd v W G & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281 are consistent with the approach taken by the House of Lords: see 291. But it again has to be noted that that is a case in which the misrepresentation lead to the purchase of a business and lease of premises and so it was, once again, a true valuation case.

The House of Lords' decision in Banque Bruxelles (supra) has been considered in detail by Lindgren J in MGICA v Kenny & Good [1996] FCA 766; (1996) 140 ALR 313. That was a case in which damages were claimed for loss suffered by the plaintiff as a result of it granting mortgage insurance in respect of a mortgage relying upon a valuation which was found to be a negligent overvaluation. It is important to note that this is a case on which there was a finding that, had the valuation been properly carried out, the plaintiff would not have provided mortgage insurance in respect of the relevant transaction. This was not a case in which it could be said that the result of the negligence was only to cause the plaintiff to insure for a greater sum than that for which it otherwise would have insured. The value assigned to the property by the defendant was $5.5m. The true value was found by the judge to be of the order of $3.9m to $4m. The advance insured by the plaintiff was the sum of $3.575m. It followed that if the security had been realised at about the time of the loan and of the insurance, there would have been no loss. The judge found expressly (365.30) that "... the whole of the loss in fact suffered can be viewed as having been caused by the subsequent fall in the market."

(1992) 176 CLR 256

(1993) 176 CLR 300

(1971) 125 CLR 529

(1977) 136 CLR 145

(1985) 59 ALJR 481

(1988) 165 CLR 268

(1968) 42 ALJR 309

(1990) 55 SASR 247

(1984) 37 SASR 98

(1989) 52 SASR 148

(1982) 149 CLR 672

(1982) 150 CLR 29

(1982) 42 ALR 161

(1986) 160 CLR 1

(1985) 157 CLR 215

(1940) 64 CLR 282

(1995) 184 CLR 281

(1982) 42 ALR 161

(1991) 172 CLR 60

(1952) 87 CLR 647

(1984) 157 CLR 215

(1982) 42 ALR 161

(1996) 140 ALR 313

(1992) 176 CLR 256

(1971) 125 CLR 529

(1989) 52 SASR 148

(1982) 150 CLR 29

(1985) 157 CLR 215

(1940) 64 CLR 282

(1991) 171 CLR 506

(1975) 13 SASR 9

(1995) 63 SASR 523

COPPING & ORS v ANZ MCCAUGHAN LTD & ORS No. SCGRG 90/2493 Judgment No. 5995 Number of pages - Procedure - damages [1997] SASC 5995

At a glance

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Judgment (636 paragraphs)

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Legislation Cited (8)

Cases Cited (41)

COPPING & ORS v ANZ MCCAUGHAN LTD & ORS No. SCGRG 90/2493 Judgment No. 5995 Number of pages - Procedure - damages [1997] SASC 5995 (21 March 1997)