Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd

INDEX INTRODUCTION [1] - [3] FACTUAL HISTORY [4] - [13] THE CLAIMS AGAINST ROYAL [14] - [20] THE FINDINGS OF THE TRIAL JUDGE [21] GROUNDS OF APPEAL [22] - [27] APPEALS GROUNDS 1 TO 6 - THE CREDIBILITY FINDINGS [28] - [94] The trial judge's approach [28] - [31] The arguments [32] - [39] General principles on appeal [40] - [44] Whether the trial judge erred [45] - [94] APPEAL GROUNDS 8, 10 AND 11 - THE TRIAL JUDGE'S FINDING ABOUT THE VALUE OF THE PROPERTY [95] - [132] The Appellant's Submissions [96] - [101] The respondent's submissions [102] - [103] Reasoning [104] - [132] APPEAL GROUND 7 - RELIANCE UPON THE FURTHER RE-AMENDED STATEMENT OF CLAIM [133] - [160] The Appellant's Submissions [141] - [144] The respondent's submissions [145] - [147] Reasoning [148] - [160] APPEAL GROUND 9 - A NON-DISCLOSURE CASE IN THE CLOTHING OF RELIANCE [161] - [182] The Appellant's Submissions [168] - [170] The respondent's submissions [171] - [174] Reasoning [175] - [182] CONCLUSION [183]

On Appeal from a Single Judge of the Federal Court of Australia

ABRAHAM GILBERT SAFFRON AS THE EXECUTOR OF THE ESTATE OF DOREEN SAFFRON

Introduction 1 In November 1998, Cordelia Holdings Pty Ltd ("Cordelia") entered into land and building contracts for the purchase of an office building at 12 Victoria Avenue in Perth and its conversion into what was described as a "boutique hotel" ("the property"). Cordelia entered into these contracts (which we will refer to as the "land and building contracts") with a view to on-selling the property before settlement was due. The works were, however, completed earlier than expected and the company was unable to settle in accordance with the terms of the contracts. It became involved in a dispute with the vendor of the land, KPG Pty Ltd ("KPG") and the building company, Keywest Constructions Pty Ltd ("Keywest"). Those disputes were resolved in November 1999 by the making of a facility agreement ("the settlement") under which Cordelia and its related companies, Vendomatic Pty Ltd ("Vendomatic") and Getum Pty Ltd ("Getum") would pay for the acquisition and works on revised terms. Cordelia sought to on-sell the property but was unsuccessful. The original contracts were then terminated by KPG and Keywest. The property was eventually sold in November 2000 for $6 million. 2 In the meantime, in June 2000, Cordelia and its related companies, Vendomatic and Getum, together with its principal Mr Abraham Saffron, commenced proceedings against the vendors and the builder. They sued the real estate agent involved, Newkey Investments Pty Ltd, which traded under the name Royal International (WA) ("Royal"), alleging negligence and breach of fiduciary duty and also misleading and / or deceptive conduct arising out of misrepresentations by its principal, Mr Morrone. They also sued upon what is said was a falsely high valuation of the development prepared by Royal in July 1999. KPG and Keywest cross-claimed for payment of moneys due under the settlement. The proceedings between Cordelia and its related companies and the vendor and builder were settled after the commencement of the trial. The proceedings continued against the agent, Royal. They were dismissed with costs. 3 Cordelia, Vendomatic and Getum and Mr Saffron now appeal against the decision dismissing their claim against the agent. The appellants take issue with the trial judge's findings about the credibility of Mr Saffron and his alleged reliance upon the representations and the valuation. They also take issue with his Honour's findings about the true value of the property. The appeal concerns in part the application of settled principles with respect to the approach to be taken by an appeal court in reviewing findings of fact and, in particular, findings of credibility made by a trial judge. It also raises a question about the learned trial judge's approach to the valuation of the property, whether his Honour erred in that approach, and whether any error made any difference to the outcome of the case.

Factual History 4 Over a period of some fifty years Mr Abraham Saffron established an extensive and diverse commercial and property enterprise which he has controlled and managed. He was described by the trial judge as "…a very shrewd, practical and highly intelligent businessman" (at [57]). Three of Mr Saffron's companies are named as appellants in these proceedings. They are Cordelia, Vendomatic and Getum. Mr Saffron is an appellant personally and as executor of the estate of his late wife, Doreen Saffron, who died on 3 September 1999. The proceedings leading to this appeal arise out of his dealings, through the three companies, with a real estate agent, Mr Charles Morrone. As mentioned above, Mr Morrone, together with his partner Mr Ross, traded as a real estate agent and valuer, through the respondent, Newkey Investments Pty Ltd, under the name of Royal. Mr Morrone had acted as agent for Mr Saffron's companies in transactions as far back as 1988. They had become close friends and when Mr Saffron was not in Perth, they spoke frequently by telephone. The present proceedings reflect the breakdown of that relationship with claims of misrepresentation, negligence, misleading and deceptive conduct and breach of fiduciary duty levelled at Mr Morrone by Mr Saffron. 5 Background events leading up to the land and building contracts are relevant. On 12 December 1996 KPG (then Broadoak Holdings Pty Ltd) purchased the property for $1.98 million. On 25 September 1997, KPG entered into an agreement to sell the building to City Inn Pty Ltd ("City Inn") for $3 million. At about the same time KPG's related corporation, Keywest, entered into an agreement with City Inn to convert the building to a boutique hotel for $8 million. Royal was the selling agent. 6 Arcadia Securities Pty Ltd ("Arcadia"), which is a related company of Cordelia, agreed on 7 November 1997 to purchase the property from City Inn for $4.5 million. City Inn agreed with Arcadia to carry out refurbishment of the property into a boutique hotel for $8 million. The acquisition and refurbishment contracts ("the Arcadia contracts") therefore involved a total consideration of $12.5 million. However, City Inn was unable to complete the acquisition of the building itself from KPG and that contract was terminated in July 1998. The Arcadia contracts did not proceed. 7 On 9 November 1998, Cordelia entered into a building contract with Keywest under which Keywest was to construct a hotel on the premises for $8.5 million. On 10 November 1998, Cordelia agreed with KPG to purchase the land for $3 million. Settlement of the land contract was conditional upon practical completion of the building works. A deposit of $250,000 was payable under the land contract. The balance of the purchase price and the consideration under the building contract was to be paid upon practical completion of the building works. Mrs Saffron guaranteed Cordelia's obligations under the two contracts. Getum became a co-guarantor to the extent of $750,000. Its obligation was secured by a first mortgage over real property in Adelaide. 8 Although, as the primary judge found, the parties contemplated that the building works would take about a year to complete, practical completion was claimed much earlier than anticipated. With practical completion came the obligation upon Cordelia to pay the balance of the moneys due under the land and building contracts. This gave rise to a dispute between Cordelia, KPG and Keywest in or about July or August 1999. KPG and Keywest contended that the building works were in a state of practical completion. Cordelia disagreed. It was not in a position to complete the land and building contracts. It argued, inter alia, that KPG and Keywest had repudiated the land and building contracts and that they were at an end. 9 In the meantime, on or about 5 July 1999, Royal prepared a valuation of the property for the appellants ("the Royal valuation"). It valued the property at $13 million on the basis that the hotel was completed. The person who prepared the valuation was Mr Ross, a fifty per cent shareholder in Royal and a co-director of that company with Mr Morrone. 10 The disputes between Cordelia, KPG and Keywest were resolved by negotiations in November 1999. Pursuant to the settlement, Cordelia acknowledged that $11,425,000 was due and payable immediately to KPG and Keywest under the land and building contracts. KPG and Keywest would advance that sum to Cordelia which would pay them interest at an agreed rate until 30 June 2000, when Cordelia would pay all moneys due. Vendomatic and Getum executed mortgages over property in Sydney and Adelaide by way of security for Cordelia's compliance with the settlement. The agreement was also supported by a personal guarantee from Mr Saffron. 11 Cordelia sought to on-sell the property. It received a number of offers but for one reason or another none of these resulted in a completed sale. An auction was held on 3 May 2000 at which no real bids were made. Default notices were served on Cordelia by KPG and Keywest on 2 June 2000 under the terms of the land and building contracts. The two companies gave notice of their intention to terminate those contracts. Further notices were served on 6 June 2000. There was another unsuccessful auction. Eventually, in November 2000, KPG sold the property for $6 million. 12 These proceedings were commenced on 30 June 2000by Cordelia, its related companies and Mr Saffron seeking, inter alia, rectification of the settlement with KPG and Keywest. Those two companies cross-claimed for payment of moneys due under the agreement, being $7,862,160.80 after allowing for the proceeds of the sale of the property in November. Also named as respondents were Colliers Jardine (WA) Pty Ltd ("Colliers Jardine") and Mr Morrone's company, Royal. 13 The trial of the action commenced on 2 April 2002. On 15 April 2002, ten days into the trial, the appellants settled the action against KPG and Keywest on terms contained in a deed of compromise and release. They agreed to pay KPG and Keywest $6,500,000 by instalments, to be fully paid by 31 December 2003. Interest on the balance outstanding from 1 January 2003 was also to be paid. In addition, Getum assigned the rents of its real property in Adelaide to KPG and Keywest. The settlement of the case against KPG and Keywest was reflected in orders made by the primary judge on 15 April 2002 dismissing the claims against the two companies. His Honour also awarded judgment on the cross claim in the amount of $6.5 million inclusive of interest and costs. Vendomatic and Getum were ordered to deliver up possession of their Sydney and Adelaide properties respectively to KPG and Keywest. The application against Collier Jardine was dismissed on the following day with costs in an agreed amount. The proceedings thereafter continued against Royal.

The Claims Against Royal 14 The claims against Royal were set out in the re-amended statement of claim as it stood at the commencement of the trial. 15 The appellants alleged that Royal had engaged in misleading or deceptive conduct in contravention of the Trade Practices Act 1974 (Cth) ("Trade Practices Act") and the Fair Trading Act 1987 (WA) by reason of representations made to Mr Saffron by Mr Morrone in October 1997 ("the first Royal representations") and February 1998 ("the second Royal representations") and by the preparation and presentation of a valuation of the property by Royal on 5 July 1999 ("the Royal valuation"). 16 The first Royal representations, said to have been made at the office of Royal, were set out in the following terms in the re-amended statement of claim: "5. In about October 1997, at Royal's offices at Hay Street, West Perth, Mr Morrone as director of and for Royal:- 5.1 informed Mr Saffron orally that City Inn Pty Ltd (City Inn) proposed to develop a hotel (the Hotel) on land at 12 Victoria Avenue, Perth (the Land); 5.2 informed Mr Saffron orally that City Inn owned the freehold of the Land; 5.3 suggested to Mr Saffron orally that Arcadia should make a contract with City Inn for the purchase of the Land; 5.4 suggested to Mr Saffron orally that a term of the proposed contract should be that Arcadia would settle the contract when the Hotel was complete; 5.5 represented to Mr Saffron orally that when the Hotel was complete, the Land, and the improvements thereon would have a value of, in the order of, $15,000,000 to $16,000,000; 5.6 represented to Mr Saffron orally that the purchase of the Land and the Hotel was a bargain at the price of $12,500,000; 5.7 represented to Mr Saffron that the Hotel could be completed by about August 1998 and that by that date Royal would be able to on-sell the Land and improvements thereon on behalf of Arcadia for about $16 million. (the First Royal Representations)." 17 The second Royal representations, as set out in the re-amended statement of claim, were contained in subparagraphs 11.5 and 11.6. They should be read in their context in paragraph 11, which was in the following terms: "11. In or about February 1998, at Royal's offices at Hay Street, West Perth, Mr Morrone as director of and for Royal:- 11.1 informed Mr Saffron orally that City Inn did not own the freehold of the Land; 11.2 informed Mr Saffron orally that KPG owned the freehold of the Land; 11.3 suggested orally that Mr Saffron, or a company related to him should make a contract for the purchase of the Land from KPG; 11.4 suggested orally that Mr Saffron, or a company related to him, should enter a building contract with Keywest, by which Keywest would refurbish an existing office building and create the Hotel on the Land; 11.5 did not withdraw or otherwise amend the representations referred to in paragraphs 5.5 or 5.6 or 5.7 and thereby by necessary implication repeated and affirmed each of them. 11.6 stated to Mr Saffron orally that:- 11.6.1 there was a lot of interest in the Hotel; 11.6.2 he then had buyers willing to pay $14 to $15 million for the Hotel; 11.6.3 when the Hotel was complete the Land and the improvements thereon would have a value of, in the order of, $16 million; and 11.6.4 that Royal would be able to sell the Land and improvements thereon on behalf of Cordelia by the time the Hotel was complete. (the representations referred to in paragraphs 11.5 and 11.6 are referred to as the Second Royal Representation[s])." 18 The Royal valuation put the value of the property at $13 million on the basis that the hotel was completed. 19 Each of the pleaded representations was said to have been made negligently in breach of a duty of care which was said to arise both at common law and as an incident of a fiduciary relationship between Mr Saffron and Mr Morrone. The represented value of $15 million to $16 million was said to be grossly in excess of the likely value of the property when complete. The likely value was said to be in the order of $7 million. 20 The appellants claimed that, in reliance upon the first Royal representations, Arcadia entered into the 7 November 1997 agreement with City Inn. They further alleged that, in reliance upon the second Royal representations, Cordelia entered into the land and building contracts of 9 and 10 November 1998. The appellants said that they each relied upon the second Royal representations and the Royal valuation when they entered into the settlement with KPG and Keywest in 1999. The settlement of the action against KPG and Keywest in April 2002 was made to mitigate their losses which they had incurred by their entry into the land and building contracts and the settlement (of 1999). It is not necessary for present purposes to set out the defences as these emerge by reference to his Honour's findings.

The Findings of the Trial Judge 21 The findings made by his Honour which are relevant to this appeal may be extracted and summarised as follows: 1. Mr Saffron was a very shrewd, practical and highly intelligent businessman. He had established an extensive and diverse commercial and property enterprise which involved dealing with real estate agents at various times. He was the controller of that enterprise, managed it and made its major decisions [57]. 2. Mr Saffron did not rely upon Mr Morrone's oral representations [57]. 3. Mr Saffron was prepared to, and did, swear to the truth of some material parts of his witness statement which were false [58]. 4. It would not be safe, generally, to rely on Mr Saffron's evidence unless it was inherently likely or corroborated by reliable documentary evidence or other reliable evidence [73]. 5. Mr Morrone had a reasonably good memory but was on occasion prepared not to tell the truth in the witness box [77]. 6. Mr Morrone's evidence was to be approached in the same manner as Mr Saffron's, i.e. it was not to be relied upon unless it was inherently likely or corroborated by reliable documentary evidence or other reliable evidence [80]. 7. None of the first Royal representations (except that set out in paragraph 5.6 in the statement of claim) was made [83], [84], [87], [88], and [104] - [106]. 8. The representation in paragraph 5.6 of the amended statement of claim had no significance because its only alleged consequence initially was Arcadia's entry into the 1997 contract, which was never completed. Its potential significance depended upon whether it formed part of any subsequent conduct which was a cause of the appellants, or any of them, acting to their detriment as pleaded [107]. 9. Mr Saffron did not regard the representation that the purchase of the property was a bargain at the price of $12.5 million (the representation set out in paragraph 5.6) as a statement of any importance and did not rely on it [105]. 10. As to the second Royal representations, his Honour was not satisfied that in February or March 1998 Mr Morrone told Mr Saffron that there was a lot of interest in the property, that he had buyers willing to pay $14 to $15 million for it, and that when complete the property would have a value in the order of $16 million. He found that those representations were not made [118]. 11. Mr Morrone told Mr Saffron that Royal would be able to sell the property by the time the hotel was complete but this was not, on the face of it, an assurance or commitment to that effect [118]. 12. In about October 1998, Mr Morrone telephoned Mr Saffron and said that he had some parties interested in buying the property if Mr Saffron did not want to proceed [120]. 13. The essence of the trial judge's findings about the second Royal representations was that in about October 1997 Mr Morrone represented to Mr Saffron that the purchase price of the property was a bargain at the price of $12.5 million. In or about February 1998, Mr Morrone said that the respondent would probably be able to sell the property on behalf of Cordelia by the time the hotel was complete, without giving any assurance or commitment to that effect. Later, probably in October 1998, Mr Morrone told Mr Saffron that he had some parties interested in buying the property if Mr Saffron did not want to proceed [123]. 14. The second Royal representations were not, as alleged, repeated over the period of seven months from February 1998 [122]. 15. His Honour did not accept that Mr Saffron relied upon those of the representations that he found had been made. Those representations did not induce Cordelia to enter the land and building contracts or Mrs Saffron to sign a personal guarantee [124] - [125]. 16. His Honour found that the sales reports dated 10 and 25 June 1999, which contained an asking price of $16.5 million, did not constitute a repetition of the second Royal representations [141]. He further found that Mr Saffron did not rely upon Mr Morrone's statement of the asking price in his sales reports when entering into the settlement in November 1999 [145]. 17. Mr Saffron's purpose in obtaining the Royal valuation was to use it in order to obtain finance to complete the purchase of the property [156]. 18. Mr Hughes, a valuer, was of the opinion that the property (with the hotel built) was worth $7 million at the time of the Royal valuation [173]. 19. The critical reasons for the difference between the Royal valuation (at $13 million) and Mr Hughes' valuation were differences in the respective valuers' assessments of projected room and occupancy rates and discount rates on cash flow [182] - [184]. 20. Mr Ross, who prepared the Royal valuation, did not carry out the valuation with the skill and care of a reasonably competent valuer [185]. 21. In consequence, Royal breached the implied term in its retainer and its common law duty of care to Cordelia. In preparing and presenting the valuation, Royal engaged in conduct which was misleading and deceptive [185]. 22. However, Mr Hughes' assessment of projected room rates and occupancy rates (and hence room yields) for the property was not done with the skill of a valuer undertaking a task of that nature either [199]. Moreover he adopted a discount rate which a reasonably prudent valuer would not have adopted [202]. 23. Mr Hughes' valuation was too low [211]. 24. A reasonably skilled valuer exercising reasonable care would have placed a value of about $10 million on the property as at 5 July 1999 [217]. 25. Mr Saffron did not rely upon the Royal valuation when he and his companies, Vendomatic and Getum, entered into the settlement. This finding was based upon an explicit admission to that effect at trial [220] - [221]. 26. In any event Mr Saffron and the other applicants should not be permitted to rely on the amendment to their re-amended statement of claim, which introduced reliance on the Royal valuation as a ground for misleading and deceptive conduct and negligence, due to the late nature of the amendment and the substantial change it made to their case [229] - [230]. 27. Even if the applicants were permitted to rely on the amendment, it was clear that Mr Saffron wanted the Royal valuation in order to obtain finance at a time when he was exposed to the risk of Cordelia breaching the land and building contracts [218] - [237]. If the valuation had come in at about $10 million he would have wanted a higher valuation to show to would-be financiers. He would have put the valuation aside and not paid for it as it would not have suited his purposes [237] - [238]. 28. Mr Saffron would, therefore, have acted no differently in relation to entering into the settlement if the Royal valuation had shown a value of about $10 million [240]. 29. Mr Saffron and Mr Morrone dealt at arm's length in relation to the acquisition of the property. Any statements made by Mr Morrone with a view to achieving the sale of the property did not have a status other than as statements. Both parties were well aware of that [271]. 30. Although it was clear that there was a fiduciary relationship between the parties in the context of Mr Morrone's management of certain of Mr Saffron's properties and businesses [280], previous transactions in which Mr Saffron acquired property or businesses involved Mr Morrone or Royal acting as agent for the vendor. No fiduciary relationship evolved, therefore, in the context of the acquisitions, notwithstanding that there was a series of such transactions [284]. 31. Royal acted as KPG's agent in relation to the acquisition of the property, a fact of which Mr Saffron was well aware. KPG and Keywest paid Royal $100,000 for its services in connection with the sale to Cordelia [285]. 32. Even if, contrary to the previous finding, Royal could be said to have acted as Mr Saffron's agent in the acquisition of the property, that in itself would not give rise to a fiduciary relationship [286]. 33. When Arcadia and subsequently Cordelia acquired the property there was no other pre-existing fiduciary relationship between the appellants and Royal, nor was one created by the circumstances in which the acquisitions took place [287]. 34. There was no relation of confidence between Mr Saffron and Mr Morrone to point to the existence of a fiduciary relationship in the context of the acquisition of the property. They were businessmen dealing at arm's length and Mr Saffron knew that Royal owed duties to the vendors to achieve a sale and that its financial interests lay in that direction [289].

Grounds of Appeal 22 The grounds of appeal, as they were set out in the original notice of appeal, were as follows: "1. His Honour erred in fact and in law in that:- 1.1 having found there was nothing in Mr Saffron's demeanour to cause him to reject his evidence; 1.2 having made no finding that Mr Saffron's recollection was vague or unsatisfactory or any similar finding; 1.3 he nonetheless rejected Mr Saffron's evidence on the bases of:- (a) an inference that, because Mr Saffron, an elderly but successful businessman, who was perceived to be "astute" or "shrewd", did not rely on statements made to him by others (or the advice of others) but, in effect, made up his own mind; (b) certain inconsistencies which His Honour erroneously perceived in Mr Saffron's evidence which, when all the evidence was considered, were not inconsistencies at all; (c) two other inconsistencies in Mr Saffron's evidence which, when the evidence was viewed overall, were of little significance. 2. His Honour erred in fact and law in:- 2.1 having found that parts of the First and Second Royal Representations were made; 2.2 failing to find the First and Second Royal Representations amounted to misleading conduct in contravention of s 52 of the Trade Practices Act. 3. His Honour erred in holding that the relationship between Mr Saffron and Mr Morrone (the Respondent's alter ego) was an 'arm's length' relationship and, accordingly, that Mr Saffron was not likely to rely on what Mr Morrone told him when:- 3.1 it was common ground that:- (a) the two men were personal friends; (b) the two men had enjoyed a relationship over many years; (c) the two men were in daily, or almost daily contact in person or by telephone in relation to matters of business; (d) Mr Morrone was then acting and had acted for Mr Saffron in many capacities including that of agent, authorised cheque signatory, property manager, and project manager (for various of Mr Saffron's companies); and (e) Mr Morrone regarded Mr Saffron as a 'client' who he introduced to real estate or development projects; 3.2 it was also common ground that Mr Morrone was an expert in, and held himself out as being an expert in, Perth CBD hospitality properties, when Mr Saffron was not. 4. His Honour erred in placing great significance on the fact that in September 1999 (when a dispute arose) Mr Saffron complained about the representations on which causes of action were grounded when, at that time, it appeared unlikely that Mr Saffron or the First, Second, Third or Fifth Applicants would suffer loss as a consequence of Mr Saffron's reliance on those representations. 5. His Honour erred in that:- 5.1 having decided that Mr Morrone was an evasive and unsatisfactory witness; 5.2 having decided that he could not rely on Mr Morrone's evidence unless it was inherently likely or corroborated by reliable documentary or other reliable evidence; 5.3 he nonetheless made findings consistent with the Respondent's case, notwithstanding that Mr Morrone had given unsatisfactory and inconsistent accounts of the material conversations or events and without attaching any weight to the fact that he (Mr Morrone) had done so; and 5.4 he made findings which were not supported by Mr Saffron's, Mr Morrone's or any other evidence. 6. His Honour erred in attaching no significance to, or weight to, the fact that the Respondent had advanced false cases, which ascribed to Mr Saffron reasons or purposes in purchasing the Hotel (which he did not have) when it was an appropriate inference from the fact those cases had been advanced that Mr Morrone knew full well that the representations relied on had been made and that Mr Saffron had relied on them. 7. His Honour erred in holding that, notwithstanding the Appellants had amended the Statement of Claim without opposition during the course of the trial, they were not permitted to rely on the amendments made because this denied the Respondent procedural fairness. His Honour so held in circumstances where:- 7.1 the Respondent was on notice of the Appellants' case and did not oppose the amendments when moved; 7.2 contrary to His Honour's finding's, Mr Saffron's witness statements served prior to trial provided the factual basis for the amendment; 7.3 had the Respondent wished to cross examine Mr Saffron further in relation to the matters raised by the amendment it could have done so. 8. His Honour erred in fact and law in holding that a fair value of the Hotel in July 1999 was $10 million, when there was no evidence of or basis for that valuation. 9. His Honour erred in holding that Mr Saffron would have ignored the Respondent's negligent and/or misleading valuation of the Hotel when:- 9.1 there was a fair inference of reliance; 9.2 there was no basis upon which to consider that Mr Saffron would (as His Honour found he would) have rejected an appropriate valuation of the Hotel out of hand; and 9.3 for Mr Saffron to reject the valuation and yet provide further substantial security for his obligations to purchase the Hotel would, far from being "shrewd and astute" have been an irrational (and almost absurd) business decision." 23 The appellants' submissions characterised the appeal as giving rise to four questions. 1. Whether the learned trial judge erred in making findings based on credibility that the appellants, through Mr Saffron, did not rely upon the representations that his Honour found Mr Morrone to have made when entering into the land and building contracts. Further, and if such was the case, did his Honour also err in failing to make any finding whether those representations were misleading, deceptive or negligent (Grounds 1 to 6). 2. Whether the learned trial judge erred in valuing the property at about $10 million (Ground 8). 3. Whether the learned trial judge erred in refusing to allow the appellants to rely on the claim that the respondent failed to disclose the true value of the property when it provided the Royal valuation, by holding that Mr Saffron had given no evidence about how he would have acted had he been told that the true value was $7 million or $10 million when in fact his unchallenged evidence-in-chief was that he would have terminated the land and building contracts had he known the value was less than $11.5 million (Ground 7). 4. Whether the learned trial judge erred in finding that Mr Saffron would have ignored a valuation of about $10 million and would have given further security to the vendor in a falling market as happened, when such a finding would be glaringly inconsistent with his Honour's finding that Mr Saffron was a very experienced property developer and a shrewd businessman (Ground 9). 24 Ground 8 was the only ground which attacked his Honour's finding about the value of the property in July 1999. It did so on the limited basis that there was no evidence of, or basis for, a finding that the value was about $10 million. In the course of argument on the first day of the appeal it became clear, however, that senior counsel for the appellants was putting his case upon the wider ground that his Honour's finding of value was wrong on the evidence and that he had not given adequate reasons for departing from the view expressed by the appellants' expert witness, Mr Hughes. This having been pointed out by the Court, an additional ground of appeal was proposed in the following terms: "10. His Honour erred in failing to give reasons or adequate reasons for valuing [the property] at $10 million in that His Honour failed to: 10.1 make findings consistent with the expert and other evidence as to the room rate, occupancy rate and average discount rate which were appropriate to support the valuation of $10 million; 10.2 give reasons or adequate reasons for rejecting the expert evidence of value of $7 million or about the figure given by Mr Hughes and supported, as to methodology on the discounted cash flow by Mr Boys; 10.3 did not have regard to the facts that the Centra sale price was not consistent with the value of the [property] being $10 million; and 10.4 analyse the Starboot price correctly in that if the [property] was worth $8 million or more Starboot would have not been able to realise any profit on its investment." 25 At the commencement of the second day of the hearing of the appeal, counsel for the appellants sought leave to rely upon a further ground of appeal as follows: "11. His Honour erred in fact and in law in valuing the [property] at $10 million when its value on the evidence was $7 million or thereabouts." 26 Senior counsel for the respondent opposed the proposed amendments. He observed that the case put before the trial judge did not require his Honour to arrive at a true value for the land. Nothing turned upon its actual value because: 1. the question before his Honour was whether the valuation was misleading or deceptive or likely to mislead or deceive or was negligently prepared because the value of the property was considerably less than $13 million advanced in the valuation; 2. the loss and damage claimed as set out in the particulars of loss and damage comprised the following: · $904,000 paid by Arcadia pursuant to the 1997 Arcadia contract (deposit to Royal of $250,000) and to KPG under the settlement of November 1999 (interest payments and a lump sum of $250,000); · $6,500,000 paid by the appellants pursuant to the settlement of April 2002 ("the April 2002 settlement"); · interest paid, pursuant to the April 2002 settlement, from 1 January 2003; · pre-judgment interest; · rental assigned, pursuant to the April 2002 settlement, by Getum for the lease of its Adelaide premises; and none of these items turned upon the actual value of the land. 27 The proposed additional grounds of appeal were not liable to give rise to any prejudice to the respondent. Their merits were, in effect, fully argued at the appeal. In the circumstances it is appropriate that leave be granted to amend the notice of appeal to include the two additional grounds. The grant of that leave, however, involves no conclusion on the substantive question whether the actual value of the land had any bearing upon the outcome of the case.

The trial judge's approach 28 During the course of the trial, the judge received lengthy evidence from both Mr Saffron and Mr Morrone, and his Honour's findings as to their credibility were of course directly relevant to his consideration of whether any and which of the Royal representations were made and whether Mr Saffron had, in reliance upon any of them, suffered any loss.

29 The trial judge stated that he held reservations about the evidence of both Mr Saffron and Mr Morrone. In considering Mr Saffron's evidence, his Honour said that there was nothing in his demeanour or oral evidence which initially led him to think that Mr Saffron was deliberately seeking to mislead the court, but towards the end of the trial he started to have substantial doubts about accepting his evidence. His Honour said (at [56]-[57]): "While Mr Saffron was giving evidence there was nothing in his demeanour or in the content of his oral evidence (save for the matters to which I refer below) which at that stage led me to think that he was deliberately seeking to mislead the Court on what had transpired between him and the respondent. However, towards the end of the trial I started to have substantial doubts about accepting Mr Saffron's evidence. Even then I was inclined to accept the possibility that Mr Saffron (as witnesses sometimes do) had, at some stage fairly late in the piece, convinced himself that Mr Morrone did make the First Royal Representations. Now, after an intensive examination of the evidence, and the submissions (including about 180 pages of written closing submissions) I am less inclined to accept that possibility, and my doubts about accepting his evidence on this and other issues in the case are far more substantial. One major difficulty I have with Mr Saffron's evidence arises as follows. My observation of him in the witness box over such a long time gave me the impression that he was a very shrewd, practical and highly intelligent businessman. There was evidence to similar effect, including some in answers on that matter from Mr Saffron himself. There was also evidence that, over some fifty years, Mr Saffron had established an extensive and diverse commercial and property enterprise which involved dealing with real estate agents at various times. He was not only the controller of that enterprise, but managed it and made the major decisions. Despite Mr Saffron's repeated assurances of continuous reliance upon what he said were Mr Morrone's oral representations, I do not believe that he did so rely. I return to that subject below. I formed the impression, and I so find, that Mr Saffron was not telling the truth about this alleged reliance upon his part on the matters which he said had been orally represented to him by Mr Morrone. That impression and finding caused me to have serious doubt about accepting other aspects of Mr Saffron's evidence, and, in particular in the present context, whether all of the representations, said to constitute the First Royal Representations had in fact been made. There were other difficulties in accepting Mr Saffron's evidence on this (and other issues on which the veracity of his evidence depends). I now turn to some of those." 30 The trial judge then set out five examples of what he saw as inconsistencies between Mr Saffron's witness statement and the evidence given at the trial, noting that there were other examples of lesser inconsistencies which he did not refer to in his judgment. After taking into account those matters, his Honour said (at [73]): "… I decided that it would not be safe, generally, to rely on Mr Saffron's evidence unless it was inherently likely or corroborated by reliable documentary evidence or other reliable evidence." 31 In considering Mr Morrone's evidence, his Honour said that he had doubts about accepting much of it also. He found Mr Morrone to be an evasive and unsatisfactory witness, and noted that Mr Morrone had sworn to the truth of parts of his witness statement which, in cross-examination, he claimed or admitted were untrue. In consequence, the trial judge concluded that he should treat Mr Morrone's evidence generally in the same manner as Mr Saffron's evidence - that he would not rely on it unless it was inherently likely or corroborated by reliable documentary evidence or other reliable evidence. The trial judge applied this approach to all aspects of Mr Saffron's and Mr Morrone's evidence, including the first and second Royal representations and the Royal valuation. It was not suggested that this approach itself was unorthodox and the respondent pointed out that it resembled that adopted by Tamberlin J in Effem v Lake Cumbeline (1999) 161 ALR 599 (at 603).

The arguments 32 The appellants did not appeal against the trial judge's finding that only some of the first and second Royal representations had been made. They limited their appeal on credibility issues to the trial judge's finding that there had been no reliance on the Royal representations as his Honour found them to have been made. The appellants attacked this finding of non-reliance on two principal bases. 33 They first contended that the trial judge was in error in concluding that Mr Saffron's evidence was generally not safe to rely upon. The appellants challenged this credibility finding generally but their principal point was that some of the inconsistencies perceived by the trial judge in Mr Saffron's evidence were not in fact so and they said that his Honour placed excessive weight on what were really minor inconsistencies. They further said that these errors brought into question His Honour's overall approach to Mr Saffron's evidence. 34 Secondly, and in any event, the appellants contended that the trial judge erred in the application of what he had described as the "inherently likely or corroborated by reliable documentary evidence or other reliable evidence" principle. It was submitted that his Honour's findings required acceptance of the proposition that Mr Saffron made the decision to purchase the hotel in 1998: · without advice as to the likely price achievable; · without expertise to assess its value; · without independent advice other than from Mr Morrone; · on his own assessment that Mr Morrone would on-sell it before settlement. 35 His Honour's finding was also said to require acceptance of the proposition that Mr Saffron: · would have decided not to arrange finance to fund settlement or make any preparation for operating the hotel if it could not be sold; · would have proceeded with the purchase in October and November 1999 despite knowing that the hotel was worth, on the trial judge's valuation, at least $1.5 million less than he had to pay and he would have provided a further $6 million in security for the obligations under the contract of purchase. 36 The appellants submitted that it was "glaringly improbable" that Mr Saffron would have acted in this way in the absence of Mr Morrone's representations and improbable that Mr Morrone's representation that the hotel was a bargain at $12.5 million had no influence on Mr Saffron's course of conduct which otherwise could be explained only by a total lack of business acumen. Mr Morrone had introduced Mr Saffron to the purchase of the property. Before Cordelia entered into the land and building contracts Mr Saffron had instructed Mr Morrone to on-sell the property for $16.5 million. Mr Morrone had said he had someone interested in buying the property. Given this context, it was said to be difficult to see how Mr Morrone's silence about the $16.5 million figure was other than a representation likely to be of significance to, and relied upon by, Mr Saffron (this argument involved an inconsistency with the appellants stated approach of not challenging the trial judge's factual finding that the $15 - $16 million representations were not made, but we take these submissions simply as seeking to provide support for the appellants' view that Mr Morrone's behaviour was such as to induce reliance on Mr Saffron's part). Although his Honour found Mrs Saffron's death explained Mr Saffron's uncommercial conduct in late 1999 it could not account for his earlier conduct which, on the trial judge's findings, was just as uncommercial. 37 The appellants further submitted that upon his Honour's stated approach to the assessment of the credibility of both Mr Saffron and Mr Morrone; i.e. that he would not rely on their evidence unless it was inherently likely or corroborated by reliable documentary or other evidence, this Court was in as good a position as his Honour to make findings about reliance. It was said to be glaringly improbable that Mr Saffron did not rely upon Mr Morrone's representations. His entire course of conduct was consistent with reliance and was what one would expect in the normal course of things to arise from the relationship between the two men. Sophistication and business acumen on the part of Mr Saffron were not bases upon which to reject his evidence or to decline to draw the inference of reliance. Nor was lack of complaint. Absent reliance, his course of conduct was redolent of error or speculative risk taking. 38 Much of this detailed criticism of his Honour's findings amounted to an invitation to this Court to retry the case upon the papers and to draw inferences other than those drawn by his Honour. 39 Counsel for the respondent referred to the absence of any challenge to the findings of the trial judge that various elements of the first and second Royal representations were not made out. Nevertheless there was a direct challenge to his Honour's findings based on the credibility of Mr Saffron as to whether he relied upon the representations which his Honour found to have been made. Counsel referred to the particularly heavy onus upon an appellant to satisfy an appellate court that the trial judge erred in his findings based upon credibility. They argued that the determination of the questions which are a major subject of this appeal turn significantly upon the trial judge's assessment of conflicting testimony from witnesses who were cross-examined at length before him. A finding of fact based on the credibility of a witness was not to be set aside simply because an appellate court thinks that the probabilities of the case are against or even strongly against that finding of fact. Reference was made to Devries v Australian National Railways Commission (1993) 177 CLR 472 ("Devries") at 479; Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 62 ALR 53 ("Brunskill") at 56-57; Jones v Hyde (1989) 85 ALR 23 at 27-28 and Abalos v Australian Postal Commission (1990) 171 CLR 167 ("Abalos") at 178. It was put that the Court must be able to come to the clear conclusion that the trial judge was plainly wrong. If a decision on credibility is to be overturned, it must always been clear that its acceptability has been destroyed by the revelation of serious and demonstrable error. Counsel also referred to the subtle inference of demeanour on the trial judge's determination. It was submitted that none of the circumstances which would justify overturning a trial judge's findings of fact based on conflicting testimony and credibility of witnesses existed in the present case.

General principles on appeal 40 The duty of an appellate court to rehear a matter on appeal and to form its own conclusion on the evidence recorded at the trial is qualified where the appeal concerns findings of fact that depend upon the view taken by the trial judge of conflicting testimony. The approach in such cases differs from those in which findings depend upon inferences from uncontroverted facts (see State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 160 ALR 588 ("Earthline") at 610 per Kirby J; Dearman v Dearman (1908) 7 CLR 549 ("Dearman") at 561 per Issacs J; Brunskill at 56; Paterson v Paterson (1953) 89 CLR 212 at 219-220 per Dixon CJ and Kitto J citing Baggallay JA in The Glannibanta (1876) 1 PD 283 at 287-288). 41 In the latter case of a disputed inference from uncontroverted facts, the appeal court seems to be in as good a position as the trial judge to decide on the proper inference to be drawn (see Warren v Coombes (1979) 142 CLR 531 at 551). In the former case, the appellate court must respect the advantage that the trial judge will have had, of seeing and hearing the witnesses give their testimony. As Issacs J said in Dearman (at 561): "The mere words used by the witnesses when they appear in cold type may have a very different meaning and effect from that which they have when spoken in the witness box. A look, a gesture, a tone or emphasis, a hesitation or an undue or unusual alacrity in giving evidence, will often lead a Judge to find a signification in words actually used by a witness that cannot be attributed to them as they appear in the mere reproduction in type. And therefore some of the material, and it may be, according to the nature of the particular case, some of the most important material, unrecorded material but yet most valuable in helping the Judge very materially in coming to his decision, is utterly beyond the reach of the Court of Appeal." (See also Rosenberg v Percival (2001) 205 CLR 434 at 448 [41] per McHugh J.) 42 Although respect for the trial judge's advantage on matters of credibility does not mean that the appeal court cannot inquire into credibility findings, it does mean that (per Brennan, Gaudron and McHugh JJ in Devries at 479): "…a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge 'has failed to use or has palpably misused his advantage' or has acted on evidence which was 'inconsistent with facts incontrovertibly established by the evidence' or which was 'glaringly improbable'." (Footnotes omitted.) (See also Brunskill at 57, Abalos at 178-179 and S.S. Hontestroom v S.S. Sagaporack [1927] AC 37 at 47.) It also means that (per McHugh J in Rosenberg v Percival at 446 [27] citing Watt or Thomas v Thomas [1947] AC 484 at 488): "Ordinarily, the appellate court cannot reverse the finding of a judge unless it is satisfied that 'any advantage enjoyed by the trial judge by reason of his having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge's conclusion'." 43 In the present appeal, the caution that the Court must exercise in considering the trial judge's findings on credibility is heightened by two factors. First, unlike Earthline in which the evidence comprised a substantial body of incontrovertible documentary material as well as the oral testimony of the witnesses, the findings in this case turned principally upon the evidence of Mr Saffron and Mr Morrone. Secondly, this case also involved a lengthy trial of some 21 days, lengthy evidence-in-chief of the principal witnesses (both oral and written) and lengthy cross-examination. Of the 21 days of the trial, seven were occupied by the examination and cross-examination of Mr Saffron. This lengthy evidence was then examined in detail before the judge in substantial oral and written submissions. In these circumstances, the trial judge had his attention focused upon the evidence over an extensive period, giving his Honour ample opportunity to assess the character and credibility of the witnesses. 44 In a trial of this length and complexity, the observations of Kirby J in Earthline are also particularly apposite. His Honour said (at 619 [90]): "In such cases, the reasons given by the trial judge, however conscientious he or she may be, may omit attention to peripheral issues. They are designed to explain conclusions to which the judge has been driven by his overall impressions and considerations some of which may, quite properly, not be expressly specified."

Whether the trial judge erred in his inconsistency findings 45 The passage quoted above from [56]-[58] of his Honour's judgment shows that the first element in his reasoning involved an assessment of Mr Saffron's honesty as a witness. His Honour recorded how and why doubts about Mr Saffron's evidence emerged in his mind and led him to conclude that Mr Saffron was not telling the truth about a centrally important aspect of the case. This led his Honour to have serious doubts about other aspects of his evidence. It becomes evident, from a careful analysis of what his Honour said, that the primary driver in his finding about Mr Saffron's credibility was the overall impression he had gained from seeing and hearing Mr Saffron over the course of a lengthy trial. These are matters that go to the very heart of a trial judge's advantage over an appellate court and thus to the heart of the appellate court's necessary caution in disturbing the trial judge's conclusions. It is also apparent that the inconsistencies to which his Honour referred were only a secondary element in his reasoning, and that they operated by way of reinforcement of an impression gained by the primary process which his Honour described. This does not mean of course that the alleged errors in the inconsistency findings can be put to one side. Although only a secondary consideration, any error in relation to the inconsistencies found by the trial judge may nevertheless be of such importance to the reasoning to show that his Honour "failed to use or palpably misused his advantage". With this in mind we now turn to the particular matters relied upon by the appellants.

Inconsistency 1 - The sale price expected by Mr Saffron 46 His Honour noted (at [59]-[61]) that Mr Saffron had said in his witness statement that between June and August 1999 he believed that a sale price of about $12 - $13 million would be achieved for the property. In his Honour's opinion this was inconsistent with Mr Saffron's oral evidence that as late as the beginning of September 1999, he was still expecting a sale price of $16 million. 47 Counsel for the appellants argued that there were in fact ample circumstances to support Mr Saffron having an oscillating view about the achievable sale price of the property and that, as a result, the $12 - $13 million value mentioned in his witness statement and the $16 million value given in cross-examination were reconcilable. These circumstances were said to include: · the June 1999 joint Colliers Jardine and Royal proposal which recommended a sale price of $12 - $13 million; · the June 1999 and September 1999 Royal sales reports which listed the asking price for the property at $16.5 million on a turn-key basis; · the proposed Australian Land Investment purchase at $13 million in July 1999, which was interdependent with the sale of the Raffles Hotel for $4.75 million over its valued price, but which later fell through; · the July 1999 Royal valuation at $13 million; · the December 1999 selling agency agreement to which Mr Morrone sought Mr Saffron's consent and which included a listing price of $16 million; a consent sought despite earlier instructions from Mr Saffron in a selling agency agreement dated July 1999 to sell the property at $13 million. 48 Although these circumstances do provide support for the appellants' submission that Mr Saffron could have had an oscillating view about the sale price he might expect to receive, they do not conclude the matter because in his oral evidence Mr Saffron did say that, in September 1999, he was still expecting a price of $16 million, implying that he had held this view continuously for at least some time. He was challenged about this in cross-examination, but reaffirmed it three times. It was open to his Honour, in light of this evidence and in the light of his Honour's own assessment of it, to draw the inference that the expectation of a $16 million sale price had existed for some considerable time, even with the knowledge of a proposal and valuation pointing to a lower figure. This expectation was, however, clearly inconsistent with Mr Saffron's written statement, in which he stated that he "continued to accept that… a sale price of $12 - $13 million would be achieved." 49 In our view, therefore, the trial judge has not been shown to have been in error in identifying an inconsistency, or at least a lack of clarity, in Mr Saffron's evidence in relation to his expectations as to the achievable sale price for the property. Nor has his Honour been shown to have erred in placing some weight on this to support his existing impression of Mr Saffron's credibility.

Inconsistency 2 - The Hilton Park Tavern transaction 50 His Honour observed (at [62]-[63]) that while Mr Saffron claimed in his witness statement that he was unaware of Mr Morrone's interest in the Hilton Park tavern until he executed the contract for its purchase, Mr Saffron admitted in cross-examination that he knew of Mr Morrone's interest before he decided to buy the tavern. His Honour formed the view that the main purpose of Mr Saffron's claim to being unaware of Mr Morrone's interest was to cast Mr Morrone in a bad light. 51 The appellants did not contest this inconsistency, although they appeared to suggest that the trial judge placed too much weight on it. It is hard to see any force in that contention since, apart from anything else, a finding that a person had given earlier inconsistent evidence for the purpose of putting someone in a bad light is something to which considerable weight can legitimately be attached.

Inconsistency 3 - The Merriwa Tavern transaction 52 His Honour discussed (at [65]-[66]) the fact that whilst Mr Saffron implied, in his witness statement, that Mr Morrone had advised him in relation to his purchase of the Merriwa Tavern and negotiated on his behalf, it had emerged in cross-examination that Mr Saffron had actually instructed Mr Morrone in a detailed fashion on how to conduct the negotiations for the purchase. There were also inconsistencies in relation to Mr Saffron's account of the manner in which a decision to apply for a new liquor license had been made. 53 Once again, the appellants did not contest these inconsistencies but challenged the weight the trial judge placed upon them. We see no basis for supposing that his Honour placed undue weight on these inconsistencies and we see no substance in this challenge.

Inconsistency 4 - The Dunlop House Commission 54 In his witness statement, Mr Saffron said that he paid Mr Morrone a commission of $124,000 on the sale of Dunlop House, but his Honour found (at [67]) that Mr Saffron had in fact bargained to reduce the commission payable and had in fact paid only $110,000. 55 Counsel for the appellants argued that his Honour's finding about the final commission paid was wrong. They acknowledged that Mr Saffron had tried to bargain Mr Morrone down, but pointed to evidence that showed that, at the persuasion of Mrs Saffron, he had eventually paid Mr Morrone the full amount. The evidence to which counsel for the appellants referred was the settlement statement for the Dunlop House sale, showing that a cheque for $124,000 had been drawn in favour of Royal. They also pointed to the fact that Mr Morrone admitted in cross-examination that this settlement statement "looked correct". 56 Counsel for the respondent did not point to any evidence that would contest the conclusions to be drawn from the settlement statement that $124,000 had been paid but said that even if there were no inconsistency, the Dunlop House transaction showed that Mr Saffron was someone who looked after his own interests. 57 It does appear, therefore, that his Honour was in error in his finding on this particular aspect. Whether that error is of any consequence is entirely another matter.

Inconsistency 6 - The Wyllie Group offer 58 The last inconsistency referred to by his Honour concerned the obtaining of finance from the Wyllie Group. In his witness statement, Mr Saffron said that at a meeting on 28 October 1999 he told Mr Abrusci of Keywest that he could obtain finance from the Wyllie Group with a month. In cross-examination, however, he acknowledged that at that time he had decided not to accept an offer of finance from the Wyllie Group. The judge pointedly observed in relation to this inconsistency that it followed an earlier statement by Mr Saffron in his evidence that he did not tell lies in business. 59 The appellants did not challenge his Honour's conclusions about this inconsistency, except impliedly as to weight. Our comments in relation to inconsistencies 2 and 3 are equally applicable here.

Conclusion on whether the trial judge erred in his inconsistency findings and / or his credibility findings 60 This review of the inconsistencies in Mr Saffron's evidence found by the trial judge shows that in every instance except one the challenge to the judge's findings must fail. The one instance in which his Honour does appear to have been in error concerned a relatively minor matter. Moreover, the matter in question was taken by his Honour as no more than additional support for a conclusion as to credibility that his Honour had reached on other grounds. The error did not concern some matter of central logical importance to the finding about credibility. It was not an error about some fact vital to the resolution of the case nor was it of a nature such as to have a cascading effect upon the judge's resolution of the larger issues in the case (see Rosenberg v Percival at 448 [43] per McHugh J; Churchill v Badenochs Transport Ltd and Devine (1971) 1 SASR 63 at 64 per Bray CJ). 61 It certainly cannot be said that his Honour "failed to use or palpably misused his advantage" in this context or in placing some weight on the other inconsistencies in Mr Saffron's evidence, nor can it be said that no advantage which his Honour enjoyed "by reason of having seen and heard the witnesses" could be sufficient to explain or justify his conclusions. In light of our conclusion no case has been made out for this Court to interfere with his Honour's general approach to assessing Mr Saffron's credibility and the fact that the appellant has not demonstrated that his Honour made any error in his inconsistency findings sufficient to put in question his overall findings, the challenge to his Honour's conclusion that Mr Saffron's evidence was generally not safe to rely upon must fail.

Whether the trial judge erred in assessing whether Mr Saffron's evidence was inherently likely or corroborated by reliable evidence 62 Having found that neither Mr Saffron's nor Mr Morrone's evidence was generally safe to rely upon, his Honour analysed their evidence by reference to whether it was inherently likely or was corroborated by reliable documentary or other evidence. He concluded that it was inherently unlikely that Mr Saffron would have relied on oral representations by Mr Morrone. This was because Mr Saffron was, in the view of the trial judge, a shrewd, practical and highly intelligent businessman, with a 50 year history of controlling and managing a number of enterprises, including hotel type businesses in Perth, Melbourne and Sydney, and with experience in dealing with real estate agents. 63 It is hard to see how, on the face of it, this inference could be successfully challenged, especially since the evidence showed that Mr Saffron undoubtedly knew at all times that Mr Morrone was acting as agent for the vendors (including at the time he was also acting on behalf of Mr Saffron). 64 The appellants argue however that there was important evidence which the judge had not taken into account and which, when taken into account and given proper weight, cast a very different light on the facts and pointed to reliance as an inherent likelihood. As we mentioned above ([34]-[37]), they also argued, more generally, that it was inherently unlikely that an "astute" and "shrewd" businessman would have made the decision to purchase the property and would have managed the Cordelia contracts as Mr Saffron did, without having any independent advice or expert knowledge about the Perth CBD hotel market, unless that businessman was relying on a trusted advisor. 65 In particular, counsel for the appellants suggested that it was improbable that Mr Morrone's representations, as found by the trial judge, that the property was a bargain at $12.5 million, was good value from a purchaser's viewpoint, and that he would probably be able to on-sell the property at a higher price before settlement, and made in the context of the Dunlop House success, had no influence on Mr Saffron's course of conduct. The Dunlop House transaction, which had occurred three months before the Cordelia contracts and in which Mr Morrone played a significant part, had involved a purchase with a deferred settlement and a sale prior to the completion date that resulted in a profit of about $1 million for Arcadia with no cash outlay. The appellants submitted that Mr Saffron's conduct in relation to the property could otherwise be explained only by a total lack of business acumen - the very characteristic that the trial judge found Mr Saffron to possess in abundance. In this context, the appellants also criticised the trial judge's failure to make a finding that Mr Morrone would probably have sought to convey to Mr Saffron that this was a deal which could have a similar or better outcome than the Dunlop House transaction, despite his Honour stating that he thought this was likely. The appellants criticised this failure on the basis that such a finding would tend to support Mr Saffron's claim that he did in fact rely on Mr Morrone's representations. 66 The appellants had a further general submission; they said that the trial judge was in error in making findings broadly consistent with the respondent's case when he had found that Mr Morrone was an evasive and unsatisfactory witness. 67 In advancing these arguments, we take the appellants to have been suggesting that the trial judge's findings about reliance were contrary to the inferences that the factual matrix compelled and that they therefore could and should be overturned by this Court (see Walsh v Law Society of New South Wales (1999) 198 CLR 73 at 92 [54]). As mentioned above (at [37]), the appellants went on to submit that this Court was in as good a position as the trial judge to make findings according to the inherent probabilities and according to the presence or otherwise of appropriate corroborative material. 68 Before turning to an analysis of the general arguments that the trial judge's findings were inherently unlikely and that evidence had been overlooked by his Honour, it is convenient to deal with the contention that an appeal court is in as good a position as the trial judge to decide an issue according to the inherent probabilities and according to the presence or otherwise of appropriate corroborative material. We have referred earlier (at [41]) to the nature of the advantage that a trial judge has. Where the question in issue involves inferences about the inherent likelihood of a person relying or not relying on representations, the trial judge's advantage may be as important as it is in assessing that person's credibility as a witness. In a case such as this, the trial judge's decision about whether reliance was inherently likely would most probably have been based on the judge's assessment of what might broadly be termed the character of the person. As Lord Atkin said in Powell v Streatham Manor Nursing Home [1935] AC 243 (at 255): "…[I]n no case should [the trial judge's] advantage be more readily recognized than in cases which involve character and reputation." 69 The caution with which we must approach a review of his Honour's findings about inherent probability and / or corroboration is therefore just as great as the caution with which his direct findings about Mr Saffron's credibility needed to be approached. 70 Given this caution, the general argument that the trial judge's findings on reliance were contrary to the compelling inference to be drawn from the factual matrix of this case cannot succeed. Depending on how the argument is framed, it is equally possible to make a convincing case that it is inherently unlikely that, given his business experience, Mr Saffron relied on the advice of a real estate agent, who was at the time the agent for the vendor and not solely for Mr Saffron, as it is to make a case that it is inherently unlikely that Mr Saffron would have purchased the property had he not been relying on such advice. It is only through an in-depth appreciation of the evidence presented at trial, its subtleties and the character of the witnesses, that it would be possible to determine which of the two cases was in fact "inherently likely". As an appellate court we should not disturb the trial judge's finding as to character-based "inherent likelihood" unless it were demonstrated that the trial judge made some clear error in his assessment of the evidence. It is to the appellants' submission in this regard that we now turn.

The failure to complain 71 In holding that it was inherently unlikely that Mr Saffron relied on the Royal representations, his Honour placed weight on the fact that Mr Saffron did not complain to his solicitors about Mr Morrone's representations when he sought advice from them, in September 1999, about whether he could withdraw from the land and building contracts. His Honour also placed weight on the fact that Mr Saffron made no mention to the respondent of the alleged representations until the filing of the application on 30 June 2000. His Honour held that this was evidence that, to the extent that the representations were made, they were not relied upon. 72 This view was reinforced by his Honour's finding (at [94]) that Mr Saffron had "looked for any possible way of getting Cordelia out" of the land and building contracts, and also the fact that Mr Saffron had caused two letters of thanks to be sent to Mr Morrone in October 1999 and March 2000 in which no complaint was made about Mr Morrone's service. 73 Counsel for the appellants disputed the significance placed by the trial judge upon Mr Saffron's failure to complain to his legal advisers about the representations allegedly made by Mr Morrone as an indication of non-reliance. Counsel argued: · First, that the evidence did not show that Mr Saffron did everything possible to get out of the land and building contracts. Rather, they said it demonstrated that Mr Saffron wanted to continue with the contracts but saw the strata title issue as a real risk to the successful on-sale. In particular, counsel for the appellants emphasised the trial judge's finding (at [96]) that: "The evidence is that Mr Birmingham [Mr Saffron's barrister at the time] advised that it was open to Mr Saffron to rescind the Cordelia Contracts for the misrepresentation relating to strata titling referred to above. Mr Saffron's evidence was that he considered that advice, but decided not to act upon it."

· Secondly, that Mr Saffron would not have complained about those representations at the time, because in September 1999, when he sought legal advice, it did not appear likely that the appellants would suffer loss as a consequence of Mr Saffron's reliance on those representations. He still believed that the property would be sold for up to $16 million, and at the very least for a substantial profit, and therefore he still believed the representations to be true. · Thirdly, that Mr Saffron's failure to complain could and should have been attributed to the devastating effect of Mrs Saffron's death. Counsel noted that the trial judge considered Mrs Saffron's death to be an explanation as to why Mr Saffron did not extricate himself from the difficult position he was in the latter part of 1999, and submitted that it could also be an explanation for the lack of complaint at that time.

74 In relation to the first point, it appears that the trial judge did in fact make a mistake, but not the error that the appellants suggest. Mr Birmingham QC's "Memorandum of Advice" of 22 September 1999 shows that he advised Mr Saffron that while the misrepresentation as to strata titling may have given Cordelia the right to rescind, this right had been lost. This was because a title search in 1998 had revealed that the property was not in fact strata titled. Despite this, Cordelia had thereafter proceeded with the contracts. Mr Birmingham concluded that damages were Cordelia's only remaining available remedy. 75 Despite what appears to be a mistake, we do not see how it can be said that his Honour's overall conclusion is thereby undermined. While it may not have been conclusively established that Mr Saffron did everything possible to withdraw from the land and building contracts, it seems clear enough that he did the best he could to delay their completion. Mr Saffron's failure to complain about the Royal representations in this context is something his Honour could legitimately take into account, especially (to use his Honour's expression) as "another relevant factor" to provide additional support for his existing impression that Mr Saffron would not have relied on Mr Morrone's representations. 76 As to the second point, we have noted above (at [48]) that the evidence offers some support for the conclusion that Mr Saffron would have had an oscillating view about the sale price that he could expect to receive for the property in September 1999. Nonetheless, it cannot be said to be "glaringly improbable" that in September 1999, Mr Saffron would have had some doubt about the accuracy of the Royal representations (specifically those implying that he could sell the property for a material profit), such as to lead him to complain about them as a mechanism for stalling or avoiding the need to complete the Cordelia contracts. The trial judge's finding on this issue turned, in all probability, upon an assessment as to whether Mr Saffron was someone who would be likely to complain about the matter in issue. It is evident that the trial judge's assessment of Mr Saffron's character was that, had he been relying on the Royal representations as the trial judge found them to be made, he would have complained about them promptly when it became apparent that they might not be fulfilled. This was an assessment peculiarly within the function of the trial judge and one which there is no warrant to disturb on appeal. 77 In relation to the third point, it may of course be accepted that Mrs Saffron's death could have been an explanation for the absence of complaint. The question, however, is whether any error has been shown in the judge's failure to act on that as an explanation. Given that his Honour turned his mind to the effect of Mr Saffron's death upon Mr Saffron in relation to other matters and addressed the point in his judgment, we cannot say that the issue was ignored or given insufficient weight. His Honour's reasons are quite consistent with Mrs Saffron's death not being mentioned in this context because his Honour did not see it as affecting Mr Saffron's failure to complain when he had the opportunity to do so.

The Venus Nightclub advice 78 Counsel for the appellants also argued that the trial judge erred in failing to give any weight to the fact that Mr Saffron had acted on Mr Morrone's advice in December 1998. On that occasion Mr Morrone had advised Mr Saffron that the asking price for another of his properties, the Venus Nightclub, was too high. Upon receiving that advice, Mr Saffron had reduced the asking price and in January 1999 had achieved a sale at that lower price. Counsel for the appellants argued that this was cogent contemporaneous evidence of Mr Saffron relying and acting on Mr Morrone's advice. 79 Two points should be made. As we have already mentioned above (at [44]), in a long and complex trial, where it is impossible to refer to all the evidence, the mere failure of a judge to refer to a particular piece of evidence cannot be taken as establishing that the judge did not take that evidence into account. 80 Secondly, the nature of the relationship between Mr Saffron and Mr Morrone in relation to the Venus Nightclub and in relation to the transaction in issue in this appeal was quite different. In the former case, Mr Morrone was acting as an agent for Mr Saffron. In the latter case, at least until Mr Saffron entered into the land and building contracts, Mr Morrone was acting solely as an agent for the vendors of the property and hotel. After that date he was acting as the agent for both the vendors and Mr Saffron. Mr Saffron was therefore far more likely to rely on Mr Morrone in the former case than in the latter. 81 Whilst it cannot be said that Mr Saffron's reliance upon Mr Morrone's advice in relation to the Venus Nightclub was irrelevant, the differences in the nature of the relationship between Mr Saffron and Mr Morrone in the two transactions, the length of the trial and the complexity of the factual issues preclude a conclusion that the failure to mention the Venus Nightclub transaction is indicative of error on the part of the trial judge. The circumstance that the trial judge specifically said (at [34]) he had not overlooked the history of the various business transactions in which the two men had previously been involved serves to confirm that conclusion. 82 The comments of McHugh J in Rosenberg v Percival are particularly apposite in this context. McHugh J said (at 448 [41]): "Where a finding is based on credibility and other facts support the finding, the case would need to be exceptional before an appellate court could set aside the finding on the ground that that, judging by the transcript, the trial judge gave insufficient weight or consideration to other facts and circumstances in the case."

Mr Saffron and Mr Morrone's relationship 83 Counsel for the appellants submitted that, in the context of deciding whether or not Mr Saffron relied upon the Royal representations as found, the trial judge erred (at [68]) in characterising Mr Saffron and Mr Morrone's relationship as an "arm's length" business relationship, in which Mr Saffron backed his own business judgment. Counsel said that this finding was quite inconsistent with his later finding that (at [268]): "I also accept that Mr Morrone and Mr Saffron became close friends. That appears to be common ground" 84 It was also said to be inconsistent with the evidence of their prior business and social dealings, which counsel for the appellants argued demonstrated a relationship of trust and friendship. The evidence referred to indicated that Mr Saffron and Mr Morrone had enjoyed a long term business relationship and were close personal friends of long standing, in daily or almost daily contact, including for social reasons. The history of the relationship included Mr Morrone's representation of Mr Saffron in Western Australia in many capacities requiring Mr Saffron's trust - i.e. as a real estate agent for a significant number of transactions, as property and project manager, including for the Raffles hotel, and as a cheque signatory on Mr Saffron's company bank accounts. The distance of Mr Saffron's home base in Sydney from Perth and the fact that Mr Morrone was Mr Saffron's only advisor in Western Australia were also emphasised. 85 Counsel also drew attention to his Honour's finding (at [134]) that it was "to some extent true" that Mr Saffron had limited experience in residential hotels in Western Australia compared to Mr Morrone, who held himself out as an expert, in conjunction with the evidence which suggested that, as an elderly man, Mr Saffron increasingly relied on others more than he had previously. 86 Finally, counsel suggested that the trial judge's finding that (at [120]): "Mr Morrone telephoned Mr Saffron and said he had some parties interested in buying the Property if Mr Saffron did not want to proceed. I think that in saying this it was most likely Mr Morrone's purpose was to get Mr Saffron to sign the [land and building] … My impression of Mr Morrone is that this was the sort of salesmanship he would employ." showed that Mr Morrone intended to induce Mr Saffron to act on the faith of his representations and strengthened the argument that Mr Saffron did in fact rely on the representations that his Honour found to have been made. 87 The trial judge's supposedly inconsistent comments at [68] and [268] of his judgment must, however, be seen in their context. Although his Honour did indeed find that Mr Saffron and Mr Morrone were, in a general sense, close friends, he made a specific finding at [271] in the same context and the same part of his reasons about their relationship in respect of the property. This finding was that: "These two men, in my view, dealt at arm's length in relation to the acquisition of the Property." 88 This statement can of course stand with the findings at [68]. We are not satisfied, therefore, that there is any inconsistency in his Honour's reasoning. Although his Honour found that the two men were friends, and in relation to some of their business transactions that they placed substantial trust and reliance in one another, it did not follow that this would be the relationship in every case, and his Honour specifically found that it was not the case in relation to the land and building contracts and the settlement. 89 The findings in question cannot be countered simply by pointing to evidence suggesting that Mr Saffron was not as knowledgeable as Mr Morrone in respect of the Western Australia residential hotel market, especially when the judge had expressly referred to this. They cannot be countered either by the suggestion that Mr Saffron had begun, in his old age, to rely more upon others than he previously had. We note too that the trial judge (at [126] to [130]) set out extensive evidence indicating that Mr Saffron was the type of person who made sure that he understood a transaction before entering into it. 90 Finally, whilst it may be accepted that an intention to induce reliance may facilitate a conclusion that the intended reliance in fact occurred, that approach cannot displace the conclusion reached by the trial judge on the basis of his careful assessment of the witnesses over the course of a lengthy trial.

Royal's conduct of the trial 91 Counsel for the appellants sought to rely upon the circumstance that the respondent opened its case at the trial by ascribing to Mr Saffron motivations for the purchase of the property which the appellants said the evidence did not sustain and were false. This was said to show a consciousness on the part of the respondent that it was guilty of the conduct complained about. The ascribed motivations were not dealt with in any way by the trial judge. 92 It is sufficient to say that we see no substance in this contention. Such a serious matter cannot be made out merely from the absence of a finding on the issue in the trial judge's reasons.

Conclusion as to whether the trial judge erred in his application of the "inherently likely or corroborated by reliable documentary evidence or other reliable evidence" principle 93 It follows that the appellants have failed to show that there were any material errors in the learned trial judge's assessment of the inherent likelihood of Mr Saffron relying upon such of the representations as his Honour found to have been made. His Honour's findings were based largely upon his assessment of the witnesses during the course of a very lengthy trial and we see no basis for concluding that his Honour "failed to use or palpably misused his advantage" as the trial judge. The appellants have failed to persuade us that there is any case for disturbing his Honour's findings about credibility.

Whether the trial judge erred in failing to decide whether the Royal representations as made amounted to misleading and deceptive conduct or were negligent. 94 In Ground 2 of the grounds of appeal it was said that, having found that parts of the first and second Royal representations were made, the trial judge erred in failing to find that they amounted to misleading conduct in contravention of s 52 of the Trade Practices Act. Given his Honour's findings as to credibility and reliance he did not err in not determining the character of the representations for the purposes of s 52. Whether it would have been desirable for him to do so is another matter. Having regard to our conclusion that his findings as to credibility and reliance stand, there is no need on this appeal to visit the characterisation of the representations.

Appeal Grounds 8, 10 and 11 - The trial Judge's FINDING ABOUT THE VALUE OF THE property 95 Grounds 8, 10 and 11 all relate to the trial judge's finding that the property had a value of about $10 million. The appellants contended that his Honour erred in finding that the value of the property was about $10 million, and that his Honour failed to give reasons or adequate reasons for making that finding.

The appellants' submissions 96 The appellants submitted that the basis of the trial judge's finding that the value of the property was $10 million - $3 million more than the value arrived at by Mr Hughes - was unclear. His Honour, it was said, had used an average of the sale prices per room provided by Mr Hughes, to reach a figure of $10.275 million, which his Honour said he regarded as a "pointer" from which he could derive "some, albeit perhaps slight, assistance". Counsel for the appellants submitted that the trial judge had in effect used an averaging exercise and that this approach was fundamentally flawed. Apart from the general problems of averaging, the properties which made up the average here were of different sizes, "star ratings" and facilities. Moreover, some were sold before and some after the Asian economic crisis of 1997, which on any view had had a substantial impact on property values in Perth. Counsel submitted that since the trial judge's finding that the value of the property was about $10 million was "very close" to the result of $10.275 million derived from the averaging process, it should be concluded that the process must have been given significant weight by his Honour. 97 The appellants also submitted that the finding that the value of the property was about $10 million failed to take proper account of the effect of a discounted cashflow valuation which pointed to a value for the property of between $6 million and $7 million. 98 As we have noted, the trial judge also took into account "to a lesser extent" the offers made for the property, which his Honour had referred to in earlier parts of his reasons. The appellants submitted that here too his Honour was in error because, they said, the evidence showed quite clearly that there had been no genuine purchaser of substance for the property until late 2000 and the trial judge had ignored the two auction sales at which the property was passed in at $8.1 million and $5 million respectively, with no genuine bids. 99 The appellants also submitted that the trial judge erred in his consideration of the eventual sale of the property to Starboot for $6 million. His Honour considered that Mr Hughes' valuation did not sufficiently take into account the "distress" nature of that sale and concluded that the property was worth significantly more than the price achieved on that sale. The appellants contended that what his Honour saw as a distressed price was in truth a reflection of the reality that a value in the order of $10 million was irreconcilable with the strenuous efforts at marketing before 31 May 2000, which did not result in the sale of the property. They further submitted that the trial judge had given no weight to the fact that the property was not sold as an hotel for $6 million, but as a building with residential units, a basement and commercial units. 100 The appellants also argued that the trial judge erred in taking into account, "to some extent", the valuation of the property in 1998 by Colliers Jardine at $11.5 million. 101 Finally, counsel for the appellants contended that the trial judge had failed to give reasons or adequate reasons for rejecting the expert evidence of a value of $7 million given by Mr Hughes and supported, as to methodology, by Mr Boys.

The respondent's submissions 102 The respondent submitted that the trial judge made no error in assessing the fair value of the property at about $10 million and that in determining that figure the trial judge had done the best he could bearing in mind the evidence of the parties and the extent to which he was prepared to rely upon it. The factors his Honour considered, the respondent submitted, were reasonable and could legitimately be considered in determining a fair value for the property. 103 Counsel for the respondent also submitted that the fact that the trial judge did not accept the value placed on the property by Mr Hughes was not, without more, evidence that his Honour had failed to consider relevant matters or properly analyse the value.

Reasoning 104 The extent to which a trial judge accepts the opinion of an expert witness is, of course, within certain limits, entirely a matter for that judge. In this case, his Honour was not prepared to accept Mr Hughes' valuation of the property at $7 million for several reasons and "despite the degree to which [he] accepted [Mr Hughes'] and Mr Boys' evidence." The judge noted disapprovingly that it had emerged in cross-examination that Mr Hughes was prepared to pass off as his own parts of a valuation that had been prepared by someone else. His Honour was also concerned about the discounts Mr Hughes had applied to the sale prices per room of comparable hotels. He considered too that Mr Hughes' valuation did not take into account sufficiently the "distress" nature of the eventual sale to Starboot. 105 These findings and observations are within the margin permitted to any trial judge in consideration of the evidence of a witness and it follows that we consider that the trial judge did not err in rejecting the valuation of the property at $7 million provided by Mr Hughes. It remains for us to consider, however, whether his Honour was in error in finding that the value of the property was about $10 million. 106 There are several aspects of the trial judge's reasoning in arriving at a value of about $10 million which the appellants say are affected by error. The first is his Honour's consideration of the average sale prices per room of the hotels used by Mr Hughes, and his application of that average to the property to arrive at a figure of $10.275 million. As we have noted, the trial judge considered this to be a pointer from which he could derive some assistance. His Honour said (at [214]): "There is an indication that Mr Hughes' assessment of the Property on a sale price per room was somewhat on the low side. Mr Hughes selected five hotels for this purpose. I have already referred to the matter of the percentage adjustment which he made to the sale prices per room. But if one simply takes the average of those sale prices per room ($135,204) and multiplies that by the number of rooms in the Property (76) the resultant figure is $10.275 million. The applicants submit that the average room price over these five sales is "wholly irrelevant" and refer to various differences among those hotels and between them and the Property. That is true, but an average tends to smooth out, to some degree, such differences within the group. Although I did not place a very great deal of weight on this computation when I made the assessment referred to in paragraph 217 below, I regarded it as a "pointer" upon which I could derive some, albeit perhaps slight, assistance." 107 The difficulties which arise from the use of an averaging process were discussed by the High Court in The Commonwealth v Milledge (1953) 90 CLR 157 ("Milledge"). In that case the trial judge was given six different and widely varying valuations of a property by six professional valuers. The judge considered all the valuers to be of experience and integrity and assessed the value of the property by calculating an average of the valuations. On appeal, Dixon CJ and Kitto J said (at 160-1): "The learned judge formed a confident opinion that all six of these valuers were men of experience and integrity, and he drew no distinction amongst them in regard to soundness of judgment or otherwise. Since they differed so widely, not only in result but in approach and in choice of material, the task presented to a judge to whom they all seemed equally reliable was one which could not be satisfactorily performed in any other way than by making a critical selection of the most helpful facts from the mass of information provided by the evidence, and applying correct principles in light of the selected material. Unfortunately it does not appear from the judgment which his Honour delivered that he dealt with the matter in this way. He did not make any choice amongst the proved sales of other lands for the purpose of finding a basis for any reasoning of his own. Indeed he expressed the view, although he does not seem to have acted upon it, that the true basis for computation is not that to be found in one comparable sale, but in the average of a number, the larger the number the more acceptable the result. "Such a statistical average", he added, "will tend to eliminate the effect of the individual peculiarities (if any) of those in the transactions". We do not find it possible to give countenance to this view. Perhaps it would be safer to work from an average of several prices than from one price if the sales were substantially contemporaneous sales of parcels of land which were identical in all material respects, but it must be rarely, if ever, that a process of averaging sale prices can be anything but fallacious." [Emphasis added.] 108 Dixon CJ and Kitto J went on to observe that although the trial judge's judgment did not expressly state that he took an average of the valuations, the judge did not describe any principled, accepted method of arriving at the value of the property. Their Honours continued (at 161-2): "It is no answer to say … that the question was essentially a jury question and was so treated by his Honour. It was indeed a jury question, in the sense that it was to be decided, not by a strict adherence to precise arithmetical calculations, but by a commonsense endeavour, after consideration of all the material before the court, to fix a sum satisfactory to the mind of the court as representing the value contained in the land on 1st January 1946. But to say that the question was a jury question is not to say that it admitted of solution by accepting the opinions of all the experts as equally reliable and going through a process capable of being described as giving group consequence to the totality. The problem was not to eliminate the idiosyncrasies of the individual opinions; it was to form an estimate which really satisfied his Honour's mind as being the value of the property … on the material date." [Emphasis added.] The third member of the Court, Webb J, did not specifically consider averaging. 109 Milledge is an important case for at least two reasons. It stands as authority for the proposition that it must rarely, if ever, be other than "fallacious" to engage in a process of averaging. Secondly, the joint judgment makes it clear that a judge who has to decide an issue about value must proceed according to established principles. Bearing in mind that valuation is an area of specialist expertise, the need to proceed according to established principles can hardly be a matter of controversy. Dixon CJ and Kitto J emphasised the need to proceed according to principle when they said (at 161): "But what is worse is that it [a figure arrived at by averaging] would be a figure not arrived at by the application by the court of the established principles of valuation." A little later (also at 161) their Honours were critical of the trial judge for not evidently pursuing "the principles laid down from time to time in this Court and in the Privy Council." 110 Had the trial judge taken the figure of $10.275 million and relied upon it as the sole or principal consideration in finding that the property had a value of about $10 million, it would be pointless to contend that the finding was not infected by error. Here, however, the trial judge did not state that the valuation was arrived at by taking an average of the sale prices, but only that he regarded it as a "pointer" upon which his Honour could derive "some, albeit perhaps slight, assistance." We must therefore consider whether his Honour did, in fact, use a principled approach to form an estimate which he considered to be the value of the property, untainted by any "fallacious" process of averaging. 111 In addition to the figure resulting from the averaging process, the trial judge stated that he took into account, to varying extents, the 1998 Colliers Jardine valuation of the property at $11.5 million and the various offers that had been made for the property. His Honour also noted that Mr Hughes had not given sufficient weight to the newness of the property and the high proportion of large rooms when he assessed five "comparable" properties.

112 In respect of the Colliers Jardine valuation, the judge said (at [213]): "I take into account, to some extent, the 1998 Colliers Jardine Valuation of the Property at $11.5 million." 113 Earlier in the reasons, his Honour had referred to the valuation (at [160]): "On 28 October 1998 (i.e. less than nine months before the Royal Valuation) Colliers Jardine supplied a valuation to the "Keywest Construction Group" of the Property on the basis of completion of the hotel in accordance with architectural plans and a schedule of finishes which had been provided to them. That valuation was very detailed. It took into account the actual and expected effects of what was known as the "Asian crisis" on the Perth hotel market. Colliers Jardine valued the Property on the hotel-completed basis at $11.5 million." 114 The complete document which comprised the Colliers Jardine valuation was tendered in evidence at the trial by counsel for the appellants but it appears that there was no examination or cross-examination about it. When the document was tendered, counsel for Colliers Jardine and Royal inquired as to the basis on which it was tendered. Counsel for the appellants responded: "MR STONE: The relevance of the valuation as against Royal and KPG is that this was a contemporary valuation at $11.5 million which, on our case, is a very high-water mark, a very high-water mark of this hotel. It's directed, then, to the question of misleading conduct and falsity because, of course, Mr Morrone has advised Mr Saffron that the hotel would have a value or a sale price of 15 to 16 million dollars when complete. So that's the relevance so far as [Royal, KPG and Keywest] are concerned. So far as [Colliers Jardine] is concerned, it is a document which [Colliers Jardine] say they relied on in preparing the sales price recommendation, of which I told your Honour yesterday, dated, I think it is, 6 July 1999. It is relevant as a document which underpins that sales price recommendation. That's the relevance to the case [Colliers Jardine] is concerned." 115 The trial judge then admitted the document, observing that it was clearly admissible in respect of KPG, Keywest and, importantly, Royal. In respect of Royal, it seems that the document was tendered and accepted as admissible; first, because it was a contemporary valuation which might have been indicative of the value of the property and secondly, as going to whether Mr Morrone represented to Mr Saffron that the value of the property was in the vicinity of $15 to $16 million. In those circumstances, it was open to his Honour to consider the Colliers Jardine valuation.

116 We note that although the trial judge made a brief comment about this valuation (at [160] of his Honour's judgment, extracted above) which could be interpreted as indicative of his approval of the valuation or as indicative of his acceptance that the valuation was not negligent, misleading or deceptive, it is not clear from his reasons whether his Honour considered the approach taken by the valuer in detail, or to the same extent that he considered the approach taken by Mr Hughes and Mr Ross in their valuations. 117 Despite, however, the criticism by counsel for the appellants of the lack of detail in his Honour's judgment with respect to this point, we are not persuaded that it was inappropriate for the judge to take into account the Colliers Jardine valuation in making his finding about the value for the property. That valuation standing alone was, however, insufficient to support his Honour's conclusion that the value of the property was about $10 million, for the judge did not indicate that he adjusted it in any way to arrive at a lower value, only that he considered it as a factor which he took into account. 118 The next factor to which his Honour referred was his impression that Mr Hughes had not given due consideration to two aspects of the property. His Honour said (at [215]): "Furthermore, I formed the impression that Mr Hughes had not given sufficient weight to two aspects of the Property. The first was that the Property was new in comparison to the hotels which comprised the five hotel sales which he analysed - a factor which he acknowledged (in cross-examination) made it more attractive to customers. The second was the high proportion of large rooms in the Property. Mr Hughes did not ascertain the room sizes in the five comparable hotels, but thought that they would be "regulation minimum size" of about 19 square metres. He had the room sizes at the Property available to him because he was provided with the plans. They showed that, of the 76 rooms in the Property, 18 were 50.25 square metres in area, which Mr Hughes agreed was "spacious", 18 were 36 square metres, 36 were 26.5 square metres and there was 4 penthouses ranging from 56 to 68 square metres." 119 It is difficult to tell from his Honour's reasons whether these factors led him to reject Mr Hughes' valuation or to arrive at a value of about $10 million or both. We consider, however, that the distinction is irrelevant because although there was no error in taking into account the deficiencies in Mr Hughes' valuation in making the finding about value, those deficiencies could not be said to be sufficient to found a conclusion as to the value. Specifically, this part of the reasoning does not disclose an approach by which his Honour might have arrived at the value of about $10 million. At most, it could be said to support a valuation higher than that contended for by Mr Hughes. 120 We have also considered whether the Colliers Jardine valuation, assessed together with the deficiencies in Mr Hughes' valuation, could be said to amount to a process by which his Honour arrived at a value of about $10 million for the property. In our view, however, even assessed cumulatively, these factors are insufficient to satisfy the principle in Milledge that a trial judge must use an accepted method to satisfy his or her mind as to the value of the property at the relevant time. 121 The remaining factor that his Honour noted consisted of the offers that had been made for the property. The appellants contended that his Honour erred in taking these into account. Although it might seem logical that a bona fide offer for a property is just as good evidence of the value of the property at the moment before the contract is concluded as the moment after, as the High Court noted in McDonald v Federal Commissioner of Land Tax (1915) 20 CLR 231 ("McDonald"), there is little doubt that an offer to purchase is not to be accorded the same significance as a concluded sale, and indeed may not be admissible at all. 122 In McDonald the trial judge had to assess the value of pastoral land for the purposes of the Land Tax Assessment Act 1910-1911. One of the issues raised on appeal was the trial judge's rejection of evidence of two offers. The first offer was evidenced by a letter from the owner's agent offering to sell the property to a named person for a specified price. The offer was not accepted. The High Court held that this was not evidence in the terms that the relevant statute required, that is, evidence of the price a buyer would give under reasonable conditions. At most, the Court considered, it was evidence of the owner's belief as to the value of the land and, as such, the trial judge was correct to reject it. 123 The Court then turned to an additional ground of appeal which related to a verbal agreement to purchase the land from the appellant at a specified price. No binding contract had resulted from the verbal agreement. In considering whether evidence of this offer was admissible, the Court referred to Harris v Municipal Council of Sydney (1910) 10 SR (NSW) 860 ("Harris"), which decided that evidence of an offer to buy a property in the vicinity of the subject land was not admissible as evidence of the value of the subject land. The Court in McDonald then framed the question as follows (at 238): "We have to search for principles. On what principle is the act or opinion of a third person, manifested on some former occasion, respecting the value of other land, not on oath, not in presence of the parties, the opinion not capable of being tested by cross-examination, admissible at all to affect adversely one of the parties to the litigation?" [Emphasis added.] 124 Interestingly, although the offer in question in McDonald was an offer to purchase the subject land, the question to be addressed was framed in respect of an offer to buy land other than the subject land. The Court noted (at 239) that evidence of an actual sale of similar land was admissible "where [it] may be regarded as throwing light on the value of the subject land." The Court then considered the distinction between an offer that leads to a concluded contract and an offer that does not (at 239-240): "When the matter has reached the point of a concluded contract, there has been a definite concrete fact established, which not only evidences value, but to some extent helps to create or modify it. Where an owner has actually parted with his land for a fixed sum and a buyer has parted with his money for the land, a clear event has arisen, which, based on the ordinary instincts and impulses of human nature, indicates a consensus of opinion between two adverse parties in the community respecting the value of similar lands. … But if the negotiations do not end in a concluded bargain, the field is at once open to a multitude of other considerations before the same point of opinion is reached. Excursions into the realm of collateral circumstances would be endless. They would so add to the cost, delay and uncertainty of litigation as on the whole to render a great disservice to the cause of justice. The Court might have to inquire whether the owner or the other party really terminated the negotiations, and, if so, for what reason. Had either of the parties discovered the true worth of the property or been misinformed by some means as to its real value? Did the owner mistrust the ability of the purchaser, or did the latter find an adverse claimant to the property, or did his circumstances change, or was there a personal quarrel? Or did he learn of a still better bargain? Or… was the offer a sham on either side, or both sides? Such inquiries would render litigation intolerable, and defeat the purpose for which they were permitted." [Emphasis added.] 125 An issue here arises whether the decision of the High Court in McDonald excluding offer evidence is limited to offers to purchase similar properties in the vicinity of the subject land or whether it extends to offers to purchase the subject land itself. In McDonald, the offer under consideration was an offer to purchase the subject land. Although the discussion in the judgment was framed in terms of an offer to purchase a similar property, as in Harris, in McDonald the offer to purchase the subject land was not admitted as evidence of the value of that land. 126 In the present case, the trial judge said (at [216]): "I also take into account, to a lesser extent, the various offers that were made for the Property which I have described above. I place their significance at the lower end of the scale of weight because they did not result in sales." 127 Although this part of his Honour's judgment does not specify the offers to which his Honour was referring, he had referred to the following offers in earlier sections of his reasons: City Inn's contracts with KPG and Keywest for a total of $11 million (at [4]); Arcadia's contract with City Inn for a total of $12.5 million (at [5]); Kirk Nominees Pty Ltd's offer to purchase from KPG and Keywest for a total of $11 million (at [157]); Australian Land Investments Pty Ltd's offer to purchase from Cordelia at $13 million (at [162]); PT Risjadson Pty Ltd's offer to purchase from Cordelia at $13.5 million (at [163]); Westralian Investments Pty Ltd's offer to purchase from Cordelia at $12.5 million (at [164]); and an offer from Mr Francis Choy to Cordelia for $12 million (at [165]). In respect of some of these offers, the trial judge noted that the cheque for the deposit was dishonoured, and in others that the prospective purchaser had failed to obtain the requisite finance. 128 It seems clear to us the decision of the High Court in McDonald, as applied by single justices of the High Court in James Patrick & Co Pty Ltd v Minister of State for the Navy [1944] Argus Law Reports 254 and Gregory v Commissioner of Taxation (Cth) (1971) 123 CLR 547, is determinative as to whether it is an error to take into account evidence of offers. Whatever weight may be properly given to evidence of offers for limited or general purposes, it is clear that such evidence is not permissible as direct evidence of value. 129 Insofar as the trial judge used the evidence in that way he was, we consider, in error in doing so. To the extent that such evidence may be admissible in a general way, as to which see Wilcox J in Goold v Commonwealth (1993) 42 FCR 51 at 60 ("Goold")and Heerey J in Henderson v Amadio (No 1) (1995) 62 FCR 1 at 122, it provided an insufficient additional basis upon which a conclusion as to value might have been arrived at. Moreover, even if such evidence is used in a general way, it would only be used if it were accompanied by an assessment of relevant factors such as the genuineness of the offer and whether it was made at arm's length (see Goold at 60). In this case, his Honour's findings do not disclose a consideration of that nature and we must conclude that the evidence of offers was wrongly taken into account and did not provide support for the judge's conclusion. 130 Having now examined the various elements that his Honour did take into account, it follows from our discussion that his Honour's conclusions about value cannot stand. Whilst we appreciate that his Honour, having rejected the valuation evidence as he did, faced a difficult task we nevertheless must conclude that that general and practical approach his Honour adopted was erroneous in point of principle. 131 It is unnecessary in these circumstances to consider separately the submissions about discounted cashflow which, in any event, were not developed in argument before us. 132 Our conclusion on the valuation issues will, however, have no significance to the outcome of the appeal unless we conclude that his Honour erred in refusing to allow the appellants to rely on the re-amended statement of claim and in his alternative finding that Mr Saffron did not rely on the Royal valuation in entering into the settlement.

Appeal Ground 7 - Reliance upon the further re-amended statement of claim 133 The appellants' claims in the re-amended statement of claim about the Royal valuation were further amended during the course of the trial. On the ninth day of the hearing the parties indicated that it was expected that the appellants would reach a settlement with KPG, Keywest and Colliers Jardine, against whom they had also brought an action. On the tenth day the settlement was confirmed and on the eleventh day the appellants foreshadowed some amendments to the pleadings. On the thirteenth day of the hearing the appellants sought leave to make further amendments to the already re-amended statement of claim, and leave was granted without opposition from the respondent. We refer later in more detail to the circumstances under which the further amendments were made. 134 The pleading relating to the Royal valuation begins at paragraph 21 of the re-amended statement of claim. The appellants there alleged that on or about 5 July 1999 Royal prepared and delivered a valuation of property to Cordelia. By that valuation Royal allegedly represented to Cordelia that "the then present value of the [property] was $13 million". The valuation was said to be "conduct in trade or commerce" (paragraph 22). It was said to carry with it implied representations that, insofar as it was a statement of opinion, the opinion was genuinely held and on reasonable grounds, was the product of the exercise of due care and skill and was not outside the range of latitude normally allowed for an opinion of that sort paragraph 23). The "conduct" (apparently a reference to the preparation and presentation of the valuation) was said to be misleading or deceptive in that the value of the property when complete was substantially less than $13 million and the implied representations were not true (paragraph 24). Royal was said to have been engaged for reward to value the property (paragraph 24A), an engagement which contained an implied term that the valuation would be performed with reasonable care and skill (paragraph 24B). It was alleged that Royal performed the valuation negligently, in breach of that term (paragraph 24C). Moreover, Royal knew that Mr Saffron was likely, in reliance on the Royal valuation, to cause companies related to him to enter transactions, give commitments or grant securities in respect of the property (paragraph 24D). It was under a duty to take reasonable care not to cause Mr Saffron or any of his companies economic loss (paragraph 24E). In breach of that duty it was said to have made the valuation negligently (paragraph 24F). The re-amended statement of claim then pleaded the repetition by Mr Morrone of the second Royal representations to Mr Saffron between November 1998 and November 1999 (paragraphs 24G and 24H). Reference was made to the dispute between Cordelia, KPG and Keywest in July and August 1999 and Cordelia's assertion that KPG and Keywest had repudiated both the land and building contracts and that those contracts were at an end (paragraph 25). 135 Prior to the grant of leave to amend at the trial, paragraph 26 of the re-amended statement of claim read: "In reliance on the Second Royal Representation[s] and on the Proposal [a reference to the joint proposal on or about 6 July 1999 by Colliers Jardine and the respondent that they be appointed joint agents to sell the Property], and in the belief that the [property] had a value of in the order of $13 million, Cordelia negotiated with KPG and Keywest to settle the Disputes." 136 Paragraph 26 in the further re-amended statement of claim referred to the Royal valuation. It read: "In reliance on the Second Royal Representation[s] and on its repetition by Royal to Mr Saffron, and because the Royal Valuation did not disclose the true value of the [property], and in the belief that the [property] had a value of in the order of at least $13,000,000, Cordelia negotiated with KPG and Keywest to settle the Disputes." [Emphasis added.]

137 The amendment was said, in the appellants' written submissions on the hearing of the appeal, to reflect a paragraph in Mr Saffron's witness statement in chief which was present from the outset and which was not the subject of any cross-examination. 138 That paragraph appeared in Mr Saffron's statement dealing with a meeting held on 18 November 1999 to discuss settlement of the land and building contracts. Mr Saffron was present with Mr Chippendale, Mr Morrone and Mr Abrusci, representing KPG and Keywest. Mr Saffron said that, at the meeting, Mr Abrusci offered a six month extension on both contracts until 30 June 2000 on terms which have already been referred to in these reasons. In paragraphs 80 and 81 of Mr Saffron's statement, tendered as evidence-in-chief, he said: "80. I said I agreed. I did so because I believed that [the property] could be sold for $12-$13 million. In deciding to accept Mr Abrusci's offer I relied on the FRI report, the Colliers Report, the Royal Valuation and various statements made to me by Mr Morrone (between October 1997 and July 1999) to the effect that the value of the property was between $13 and $16 million and that Mr Morrone (and Colliers) would be able to achieve a reasonably quick sale. Mr Abrusci then said: 'My solicitors Messrs Deacon Graham & James (Deacons) will draw up a formal document to reflect the agreement reached. The document should be ready within a week.' 81. Had I known, at the time of the meeting, that the true value of the [property] hotel was less than $11.5 million I would have, in accordance with Mr Granich's and Mr Birmingham's advice, sought to terminate the contract and sue KPG and Keywest for the deposit." 139 In his reasons, the trial judge noted that until the further amendments to the re-amended statement of claim, on the thirteenth day of the trial, there had been no suggestion that if the true value of the property had been disclosed in the Royal valuation, Cordelia would not have negotiated with KPG and Keywest to settle the disputes and the appellants would not have acted to their detriment. Counsel for the appellants did not open the case on this basis, no evidence was led from Mr Saffron and, in consequence, Mr Saffron was not cross-examined on that point. The first reference to the new claim appeared, his Honour said, in the appellants' written submissions filed on 11 June 2002, where they claimed that the significance of the Royal valuation was that it failed to disabuse Mr Saffron of the belief that the property would be sold for a price at least higher than the price paid by Cordelia, and that on the basis of that belief Mr Saffron entered into the settlement. The respondent, in later written submissions, objected to the appellants being allowed to make that submission, contending that the appellants had not run their case as one in which the respondent had failed to warn the appellants that the value might be less. The question of the basis upon which the case had been put was argued by counsel for the both parties in closing submissions at the trial. 140 The trial judge concluded that, despite the grant of leave without opposition from the respondent, the appellants should not, as a matter of procedural fairness, be allowed to rely on the alternative basis contained in the amendment to establish causation of damage. His Honour regarded the alternative case that they now sought to put as involving a major change in the basis upon which they put their case on causation. He noted that Mr Saffron, who would normally have given evidence about what he would have done if the Royal valuation had disclosed the true value of the property, was not recalled to give that evidence. His Honour said that evidence of this nature was often regarded as self-serving but he considered that such evidence, when given by a credible witness, did carry great weight. His Honour referred to the appellants' argument that evidence was put on the point that Mr Saffron still trusted Mr Morrone, and that it was direct evidence going to the causation claim. He also noted that the respondent could have required Mr Saffron to be produced for cross-examination on the point. His Honour, however, rejected the submission that there was any evidence for which the respondent could be criticised for failing to seek an opportunity to cross-examine further, finding that even if the point about trust could be characterised as relevant evidence, it was "so oblique" as not to form the basis of criticism of the respondent in not requiring Mr Saffron to be called for further cross-examination on the point (at [234]). Accordingly, the appellants were not permitted to rely on the amended claim in the further re-amended statement of claim.

The appellants' submissions 141 In challenging the trial judge's conclusion counsel for the appellants argued that since the respondent's counsel did not object to the amendment, it could be inferred that, in the judgment of the respondent, he was able to meet the case raised by the amendment. Moreover, after the amendment Mr Saffron had been called for further cross-examination and the respondent had an opportunity to cross-examine him on the issue raised by the amendment. The appellants submitted that the trial judge was wrong in holding that they could not rely on an amendment, made without opposition and in circumstances where the respondent did not make any complaint about it at the time. 142 The appellants also claimed that the trial judge erred in finding that until the amendment was proposed, there had been no suggestion that if the value of the property had been disclosed in the Royal valuation, the appellants would not have acted to their detriment by entering into the settlement. Counsel referred to paragraph 81 of Mr Saffron's witness statement (quoted above). The witness statement had been put as evidence-in-chief and although Mr Saffron was examined at great length, there was no cross-examination about any of the facts asserted in that paragraph. 143 The appellants also referred to the re-examination of Mr Saffron which occurred before the amendment to the re-amended statement of claim was made. Counsel for the appellants sought to ask Mr Saffron whether anyone had suggested a valuation of $6 or $7 million to him as at November 1999. Counsel for the respondent objected to the question, and the trial judge disallowed it. Counsel for the appellant then said: "I fully accept your Honour's ruling… Can I simply say that when we come to closing submissions one of the matters we will be raising is that nobody at all cross-examined Mr Saffron on the basis that the property might be worth as little as six or seven million dollars at the time." 144 The appellants' counsel also pointed to the outline of opening submissions made at the trial in which it was said: "An important commercial consideration to Cordelia (and probably to Keywest/KPG) in reaching the settlement was that Cordelia would achieve a price on sale of the [property] equal or approximating to the Royal valuation ($13 million) or postulated by the Royal/Colliers Joint Submission sales recommendation ($12 to $13 million). It is equally self-evident that had Mr Saffron been informed of the (substantially smaller) true value of the [property], the settlement would not have occurred. Mr Saffron will give evidence to that effect." [Emphasis added.]

The respondent's submissions 145 The respondent submitted that this ground of appeal was without foundation, as the trial judge properly took into consideration the relevant matters in refusing to allow the appellants to rely upon the amendment. His Honour considered, relevantly, that the valuation was only obtained for finance purposes, that Mr Saffron's evidence was that he was relying on a much higher figure from Mr Morrone (as to the value of the property) and that Mr Saffron admitted that when he received the Royal valuation, it had no influence on him at all. 146 It was conceded that his Honour must have overlooked the relevant paragraph in Mr Saffron's witness statement, but the respondent submitted that the failure to advert to it made no difference to the outcome of the case because the case was not put before his Honour on that basis. The respondent also noted that the appellants failed to refer to that evidence in their submissions. 147 The respondent submitted that the trial judge had given an alternative basis for rejecting any inference that if the true value of the property had been disclosed in the Royal valuation, the appellants would not have entered into the settlement, and that basis was consistent with, and founded upon, his assessment of Mr Saffron's evidence. It was pointed out that the trial judge also had evidence before him that showed that Cordelia's ability to rescind the land and building contracts - the claimed alternative to entering into the settlement - was not strong and that, if there was any breach of the contracts at all, the most Cordelia had was a right to damages. The respondent submitted that in those circumstances, Cordelia had no real option but to negotiate a settlement and the trial judge was correct in refusing the appellants to rely on a claim to the contrary.

Reasoning 148 The purpose of pleadings is to ensure that the real issues in litigation are clearly defined by the parties to each other and to the court which has to hear and determine those issues. Amendments may be permitted before and in the course of the trial and sometimes even on appeal. There are necessary conditions of an amendment that it enable the real issues in the case to be defined or better defined and that the party against whom the amendment is made does not suffer unfair and undue prejudice because of it. There are other relevant factors including the efficient and expeditious management of the litigation (see Goold, Birbeck & Bacon v The Mount Oxide Mines Limited (In Liquidation) (1916) 22 CLR 490 at 517). 149 The causation case said to have been introduced by the amendment to paragraph 26 had not figured significantly in the conduct of the trial prior to the date it was made, if indeed it could be said to have figured at all in the course of a lengthy and complex trial. Paragraph 81 of Mr Saffron's statement of evidence could hardly be said to have unambiguously foreshadowed that case. It could well have been read as simply underpinning the factual assertion in paragraph 26 as it stood before the amendments. The opening submission made the point explicit but presented it almost as a corollary to the proposition that Cordelia acted upon its belief, induced by the Royal valuation, that the property was worth $13 million. 150 It is necessary to consider just what case the amendment to paragraph 26 could properly support. It was suggested in argument on the hearing of the appeal by senior counsel for the appellants that it raised a "silence case" in the sense that the pleading in paragraph 26 says that Cordelia was not disabused of its false belief. Paragraph 26 appears in the statement of claim at the end of a number of paragraphs asserting that the Royal valuation was misleading and deceptive and negligently prepared. The factual base for those two sets of allegations, as particularised, was substantially the same even though they gave rise to different causes of action at law. The causes of action were for contravention of the Trade Practices Act, breach of the implied term of Royal's retainer and breach of a duty of care constituting common law negligence. The "true value" of the property was indirectly relevant to the claim in misleading and deceptive conduct in so far as it was alleged that the value of the property was substantially less than $13 million. In each of the pleas for breach of contract and negligence a particular relied upon was that "the valuation was greatly in excess of a fair value of the [property] which was in the order of $7 million". The "true value" was relevant, in each of these claims, to the characterisation of the conduct to which they related as misleading, deceptive or negligent. 151 The case raised in paragraph 26 as it stood prior to the amendment relied upon Mr Saffron's belief in the represented value as effecting a causal connection between the conduct complained of and the loss suffered. It was not apt to raise a new characterisation of Royal's conduct. Nor, in terms, did the amendment permit the appellants to run a case that Royal had engaged in misleading or deceptive or negligent conduct by non-disclosure of the true value. There is no suggestion that Royal "knew" the true value of the property. Its opinion may have been misleading or deceptive in the statutory sense (which does not involve any suggestion of fraudulent knowledge or intention) or negligent in the common law sense relevant to its contractual and tortious obligations. But no case could properly be mounted on the foundation of paragraph 26 that there was a misrepresentation by silence or non-disclosure or a careless failure to disclose something known to Royal. This analysis perhaps highlights the artificiality of the reference to "true value" when value is a matter of professional prediction about the behaviour of prospective buyers. It is a term which has no doubt gained an independent reality as a metaphor. In the end, however, it is a matter of opinion or hypothesis. 152 Absent any pleaded case of non-disclosure it is difficult to see what proper basis there was for including non-disclosure at the point of the pleading dealing with causation of loss. On that basis it is possible to understand why counsel for the respondent would not have cross-examined upon the amendment. Absent a non-disclosure case it was little more than a corollary of what had been pleaded previously. 153 In the context of a misrepresentation case, the allegation of a failure to disclose usually indicates that a case is sought to be established on the basis of a misrepresentation by silence. Such a case was not open in the present circumstances, even on the amended pleadings. To have allowed the amendment to permit such a case to be raised would, as his Honour pointed out, be unjust for the reasons which he elaborated. It is apparent from the submission made on behalf of the appellants, to which his Honour referred in [227] of his reasons, that the appellants were seeking to mount a case on the basis that the Royal valuation "failed to disabuse Mr Saffron" of his belief. In the following paragraph [228], his Honour noted that Mr Derham QC objected to the appellants being allowed to make such a submission, because they had not run their case on the basis that the respondent had failed to warn them that the value might be less. It was in this context that his Honour made the ruling that, as a matter of procedural fairness, the appellants should not be allowed to rely upon this alternative basis. In so doing we are not persuaded that his Honour was in error. 154 We should deal briefly with the appellants' submission that because the amendment was made without opposition the respondent should be taken to have accepted that it could meet the case made by the amendment. The answer to this submission lies largely in what we have already said but close attention to the transcript also shows that the amendments appear to have been put forward in a way that was unlikely to have alerted the respondent to the case it was later sought to address. 155 Reference was made to the need to amend the pleadings on Day 10 of the trial after the proceedings against some of the respondents had been settled and the trial judge had been asked to make consent orders to give effect to that settlement. Counsel for Mr Saffron told the judge that the pleadings would now need to be looked at. He said "the effect of the commercial compromise is to limit our claim against the first respondent and we now need to plead the compromise in terms of damages." He also referred to "matters that [counsel for the respondent] raised on the first morning to be dealt with." The trial judge indicated that the pleadings should be put in order before the rest of the evidence was heard and the case was adjourned to the next day. 156 On the following day, a further re-amended statement of claim was produced to the judge. Counsel for the appellants told the judge that the settlement had radically affected the structure of the last third of the pleading. He then took the Court through the changes. When he reached the amended paragraph 26 he said by way of explanation simply: "[w]e think it reflects the evidence." 157 When asked by the trial judge for the response of the respondent to the motion to amend the re-amended statement of claim (on Day 12), counsel replied: "MR DERHAM: Your Honour, we're not seeking to contend at this stage that the amendments should not be made or that they are not capable of giving rise to the causes of action they plead, but it will be our ultimate submission, particularly in relation to the fiduciary duty matters as I indicated at the outset, that they are not sustainable in their current form, but it's as well to deal with that in final submission." 158 On the next day, Day 13, the judge made an order giving leave to amend the statement of claim. There was no opposition by the respondent, who was also given leave to amend its defence. The trial continued for another seven days. On Day 20 the hearing was adjourned until 14 June 2002 for final addresses. 159 The impression gained from the transcript - and of course the trial judge was in a very much better position than we are to form an impression about the trial - is that whilst substantial amendments to the pleadings were necessary as a consequence of the settlement, the amendment to paragraph 26 was put forward by the appellants as something of a formality and that it was not seen to be more than that by the respondent. In these circumstances the trial judge, who had the great advantage of being able to view the making of the amendment and the conduct of the parties in the context of the whole trial, was entitled to come to the conclusion that he did despite there having been no opposition to the grant of leave to amend. 160 It follows that Ground 7 does not succeed.

Appeal Ground 9 - A Non-disclosure case in the Clothing of Reliance 161 Appeal Ground 9, as explained in the appellants' written submissions, raised the question whether the trial judge erred in inferring that Mr Saffron would have ignored a valuation of $10 million or less and would have given further security to the vendor, in a falling market as happened. 162 The relevant findings of the trial judge, as identified in the written submissions, followed his ruling that the appellants could not rely upon the amendment to paragraph 26 of the further re-amended statement of claim. His Honour said (at [235]): "In case I am wrong in my conclusion about whether the applicants should be allowed to rely on this plea, I have considered whether it should be inferred that if the Royal Valuation had contained a valuation of about $10 million (on my findings), Mr Saffron would not have entered into the Settlement Documentation or caused the other relevant applicants to do so." 163 Turning to the relevant evidence and the inferences to be drawn from it, his Honour referred to Mr Saffron's admission that in negotiating and entering into the settlement the Royal valuation had no influence upon him. His Honour was not prepared to draw the inference propounded in the amended paragraph 26 that Mr Saffron and his companies would not have entered into the settlement if the true value (about $10 million as his Honour found) had been disclosed. 164 His Honour refused to draw that inference because he concluded the purpose for which Mr Saffron wanted the Royal valuation was to obtain funds which he needed fairly urgently to complete the land and building contracts. If the Royal valuation had come in at about $10 million Mr Saffron would "certainly have taken notice of that". Nevertheless, based on his Honour's impression of Mr Saffron in the witness box and how he conducted his business with Royal, his Honour considered that he would, more likely than not, have remonstrated with Mr Morrone and Mr Ross and asked for a higher valuation to show to prospective financiers. His Honour found that Mr Ross would not have acceded to such a request. His Honour concluded that Mr Saffron would have put the Royal valuation completely aside and not paid for it because it had not served his purpose. 165 His Honour acknowledged Mr Saffron's business acumen and shrewdness. On his assessment Mr Saffron would have wanted to settle the dispute with KPG and Keywest. He did not want to risk default. He was under no illusions about the situation. He was in a "very difficult commercial position which … was unexpectedly precipitated by the fact that the building works had taken far less time to complete than had been anticipated" (at [239]). The judge concluded (at [240]): "My assessment is that even if the Royal Valuation had shown a value of about $10 million, Mr Saffron would have acted no differently in relation to entering into the Settlement Documentation." 166 His Honour, having expressed that conclusion, made further reference to supporting evidence. Mr Saffron's keenness to settle in 1999 was evidenced in a memorandum prepared by his solicitor, Mr Granich, recording Mr Saffron's acknowledgement, in discussions on 22 November 1999, that there were risks in entering into the settlement but that he was prepared to take the risks and that Mr Abrusci had him where he wanted him. Mr Saffron was, as Mr Granich said, "between a rock and a hard place" (at [242]). He could not find a buyer but wanted to retain the property. 167 His Honour was puzzled that Mr Saffron did not take a more cautious approach. He said (at [243]): "I think that, in normal circumstances, Mr Saffron would have realised at some time between, say August and November 1999, that he should redouble the steps taken to obtain finance for the settlement of the [land and building contracts] and thereby secure a reasonable time in which to extricate Cordelia and Mrs Saffron from their respective financial exposures. Given his net assets and the assumption, which I make, that they had not decreased since March 1996, my assessment is that he would have been able to raise the money, had he put his mind to it." He resolved that puzzle by reference to the death of Mrs Saffron on 3 September 1999 following two weeks in hospital. This was a shattering blow to Mr Saffron. His Honour said (at [244]): "I think that that circumstance, rather than the contents of the Royal Valuation, resulted in his failure to unravel the problems into which Cordelia had descended in the latter half of 1999." He returned to his earlier conclusion thus (at [245]): "My factual finding, for the reasons set out above, is that even if a figure of about $10 million had appeared as the valuation of the Property in the Royal Valuation, Mr Saffron would still have entered into the Settlement Documentation and caused the relevant applicants to expose themselves financially or increase their financial exposure as guarantors."

The appellants' submissions 168 The appellants submitted that the uncontroverted evidence of Mr Saffron, set out in paragraph 81 of his witness statement (already discussed in relation to Ground 7), was that he would not have proceeded with the settlement had he known that the true value of the Hotel was less than $11.5 million. Since Mr Saffron was not cross-examined about this, the appellants contended, his evidence should have been accepted. 169 They also argued that the trial judge had erroneously used an admission by Mr Saffron, that the valuation of $13 million did not influence him in entering into the settlement, to find that Mr Saffron would not have acted differently had the Royal valuation shown a value of about $10 million for the property. 170 Finally, the appellants submitted that the trial judge's erroneous finding that the value of the property was about $10 million infected his further finding that even if the Royal valuation had disclosed a value of about $10 million, the appellants would still have entered into the settlement (extracted at [167] above).

The respondent's submissions 171 It was submitted for the respondent that the trial judge's finding that there was a reasonable prospect that Mr Saffron would have admitted in cross-examination that, had the Royal valuation been in the order of about $10 million, he would not have done anything differently, was supported by his Honour's findings about the credibility of Mr Saffron's evidence and there was no error in his Honour's approach. It was also submitted that the finding was supported by his Honour's reference to the facts that Cordelia had already entered into the land and building contracts at the time of the Royal valuation, that the valuation was prepared for the purpose of raising finance for Cordelia to complete the purchase of the property and by Mr Saffron's admission in cross-examination that the Royal valuation had no influence on him when he entered into the settlement. The respondent referred to evidence before his Honour which was said to establish that advice was given to Mr Saffron in September 1999 that Cordelia's ability to rescind the land and building contracts was not strong and that the "bottom line" appeared to be that if there were any breach, Cordelia would only have a right to damages. 172 The latter part of the respondent's submission referred to a memorandum from Mr Saffron's solicitor, Mr Granich, dated 10 September 1999 which reported on a conference with Mr Birmingham QC. The memorandum said, inter alia: "Ron Birmingham is going to gave [sic] us a short letter of advice on Monday. He does not see any great strength in our position. His bottom line appears to be that if there is any breach you only have the right to damages but you are still required to go ahead and settle. We will weight [sic] his letter to discuss it further." 173 Mr Saffron was cross-examined on the memorandum. He acknowledged receipt of that advice. It was put to him that he decided not to attempt to terminate the contracts because he had received legal advice but he maintained that he decided not to terminate because he trusted Mr Morrone. He said: "I did not take the advice of Mr Birmingham because I had confidence in [Mr Morrone]." 174 The respondent's submissions did not answer directly the appellants' arguments about the relevant part of Mr Saffron's witness statement. Rather those submissions relied upon the general approach of the trial judge to Mr Saffron's credibility as a witness.

Reasoning 175 His Honour's identification and discussion of the so-called "reliance" question was undertaken on the assumption that his conclusion about the amendment to paragraph 26 was wrong. His discussion makes clear, however, that the amendment to paragraph 26 was really about raising a new cause of action based upon non-disclosure rather than merely another aspect of causation. His Honour's conclusion should be considered in the light of that characterisation, which justified his refusal to permit reliance upon the amendment, even though he did not put it precisely in that way. 176 The central question here is whether the structure of his Honour's reasoning is such that the error that he made in holding that the value of the property was "about $10 million" operated to invalidate the critical conclusion that Mr Saffron did not rely upon the negligently made, misleading and deceptive valuation. 177 That conclusion was based primarily upon a finding that Mr Saffron's purpose in obtaining the valuation was to secure finance to enable him to complete the land and building contracts. Because that was his purpose, a value of about $10 million would have been discarded as too low, so his Honour found. A fortiori, on that logic, a lower value would also have been discarded. But that logic does not provide a complete answer to this ground of appeal. It may be accepted that his Honour's findings about Mr Saffron's reaction to a valuation of about $10 million should stand since they were based upon his assessment of Mr Saffron's purpose and his state of mind at the time. Although his Honour did not refer to paragraph 81 of Mr Saffron's evidence, his findings necessarily involved a rejection of that entirely self-serving passage in a written statement made by a witness whose credibility the judge found to be questionable. The fact that Mr Saffron was not cross-examined on that paragraph did not mandate its acceptance. The issue of causation was a live issue at trial. 178 The question is whether, if Mr Saffron had been appraised of a "true valuation" significantly lower than the $10 million figure that his Honour arrived at it would or could have made a difference to his decision to proceed with the settlement. We have concluded earlier that his Honour was in error in arriving at that figure. As it is no part of our function to determine what a "true valuation" might be we must consider whether something significantly less and outside the range of "about $10 million" could have made a difference. 179 Let it be assumed that, contrary to his Honour's finding, $7 million represents the lowest valuation that might be reached by the application of accepted valuation principles. Could the tender of a valuation at that level, or even at a higher level of $8 million, have made a difference to Mr Saffron's decision? The answer necessarily lies in the realm of conjecture. Notwithstanding the trial judge's findings about Mr Saffron's purpose in obtaining the valuation, his awareness of the risks associated with the settlement, his preparedness to accept those risks and his state of mind attributable to his wife's death, it cannot be assumed that the presentation of such a low valuation would not have rung warning bells in his mind. It cannot be assumed that such a valuation would not have put him on his guard and caused him to act differently. 180 His Honour's approach to the valuation he ultimately adopted therefore leaves open the possibility that he was wrong in his conclusions about how Mr Saffron would have reacted to an appropriate valuation, that is to say a valuation properly arrived at but possibly at a figure substantially lower than $10 million. The question is, what effect does that have on the outcome of the appeal? 181 Appeal Ground 9 cannot succeed on particular 9.1 having regard to his Honour's findings of fact. It can only succeed on the hypothesis that, contrary to his Honour's conclusion and our own conclusion (see discussion of Ground 7), it was open to the appellants to argue a non-disclosure case. That is clear from the hypothetical language in which particulars 9.2 and 9.3 are cast. It suffices for present purposes to say that if we are wrong in relation to Ground 7, then the appellant would be entitled to succeed on a combination of that and Ground 9. That success would occur on the limited basis that his Honour's conclusions were ultimately linked to his erroneous valuation and might have been different if a significantly lower valuation was appropriate. The possibility cannot be excluded. Given that, however, the condition upon which appeal Ground 9 is based (i.e. the success of appeal Ground 7) is not fulfilled, the appeal must also fail on this ground. 182 We should add that if Grounds 7 and 9 had succeeded and the matter were remitted to the trial judge, a further obstacle may have lain in the path of any further success by the appellants in that, according to the respondent, no damage could have resulted from the negligently prepared valuation for the reason that, in any event, Mr Saffron and his companies had no option but to proceed with the settlement. Since the point was not fully argued and it is in any case unnecessary for us to resolve, we say no more about it.

conclusion 183 It follows that the appeal must be dismissed. The appellants should pay the respondent's costs of the appeal. I certify that the preceding one hundred and eighty-three (183) numbered paragraphs are a true copy of the reasons for judgment of the Honourable Chief Justice Black and Justices French and Tamberlin.

Counsel for the Appellants: S D Rares SC with P D C Robinson

Counsel for the Respondent: D M B Derham QC with P G McGowan